Larry Irving - CFO and Treasurer Steve Waldis - President and CEO

Tom Roderick - Thomas Weisel Partners Shyam Patil - Raymond James Liz Grausam - Goldman Sachs Tom Ernst - Deutsche Bank John Bright -Avondale Partners Rich Church - Collins Stewart

Good day, ladies and gentlemen, and welcome to the fourth quarter 2007 Synchronoss Technologies Incorporated earnings conference call. (Operator Instructions) I would now like to turn the presentation over to your host for today's call, Mr. Larry Irving, Chief Financial Officer. Please proceed, sir.

Thank you, Betsy. Good afternoon and welcome to the Synchronoss fourth quarter 2007 earnings conference call. We will be discussing the results announced in the press release issued after the market closed today. I'm Larry Irving, Chief Financial Officer of Synchronoss Technologies. With me on the call is Steve Waldis, President and CEO. During this call, we will make statements related to our business that may be considered forward-looking statements under Federal Security Laws. These statements reflect our views only as of today and should not be relied upon as representing our views as of any subsequent date. These statements reflect our current views regarding the future and are subject to a variety of risks and uncertainties that could cause actual results to differ materially from expectations. For a discussion of the material risks and other important factors that could affect our actual results, please refer to our SEC filings. With that, I'll turn the call over to Steve so he can provide some color on the fourth quarter and full year results and an update on our strategic initiatives. I'll come back a bit later to provide some further details regarding our financials and forward outlook. Steve?

Thank you, Larry. Good afternoon and thank you for joining us on our call today to review our fourth quarter results, which were above our expectations and a strong finish to a record year for the company. What was most important in 2007, however, was that we validated the success and scalability of our business model, and our franchise and brand became known on a worldwide basis. We believe almost every communication service provider, both in North America and in Europe, recognize Synchronoss as the software company behind the new revolutionary activation process that will drive fixed and mobile convergence for years to come. We began the year announcing that we were going to be supporting converged service offerings and the activation of the Apple iPhone via our expanding relationship with AT&T. And we finished the year announcing that we had signed our second major North American wireless service provider. And in between these very important milestones, we added other leading services providers in the cable MSO space. As a testament to our model and our ability to drive better customer experience and lower cost for our customers, we expanded the number of transaction types we manage across almost of our customers in both cable and Voice over IP customer base. And from a long-term perspective we believe Synchronoss is well positioned to benefit from the multiple growth opportunities, including e-commerce, wireless, Voice over IP, and most importantly, the overall trend towards converged services. We are optimistic about our ability to take advantage of these and, as a result, the Synchronoss unique ConvergenceNow platform, relationships with industry leaders in each of the segments of the market, and our proven and documented ability to deliver business value at the most extreme scalability for our customers. Our goal is simple; to become the dominant transaction management platform for any device on any network around the globe. Now let's take a look at the results for the fourth quarter. We reported record revenues of $36.4 million, an increase of 79% year-over-year and above the high-end of our guidance. From a profitability perspective, we generated a record non-GAAP operating margin of 32%, leading to a non-GAAP EPS of $0.22, an increase of 69% on a year-over-year basis and also above the high-end of our guidance. On a full year basis, Synchronoss reported revenues of $123.5 million or growth of 71% year-over-year, while we delivered non-GAAP EPS of $0.77, which was 114% increase on a year-over-year basis. It's also worth pointing out that we delivered a non-GAAP operating margin of 30% for the full year 2007. That's an increase from the 22% level in 2006 and strong evidence of the leverage of our business model. Now I'd like to turn on to the details of what's driving our business momentum and why we believe we are well positioned for continued strong growth from a long-term perspective. Let me start with AT&T. During the fourth quarter, our overall relationship with AT&T generated $27.8 million in revenue, representing growth of 129% on a year-over-year basis and 4% on a sequential basis. For the full year, our AT&T weighted revenue was $94.5 million, which represented growth of 99% on a year-over-year basis. 2007 was truly a milestone year, partly reflected in a significant acceleration in the growth and the highest level in the history of our relationship with AT&T. For 2008, AT&T continues to provide focus and attention to specific growth areas, such as converged services, data services, growth in mobility, exciting new handsets and their drive into IPTV services, and further, e-commerce adoption, all providing tremendous opportunities for us for growth and expansion of our platform within the new AT&T. Just this past November, Nielsen ratings ranked AT&T.com as the fourth most visited website on Cyber Monday, November 26, 2007, ranking only behind eBay, Amazon and Wal-Mart. AT&T.com was the only communication service provider on the list. This is further validation that e-commerce will play an even more vital role in the future of leading communication service providers. And as AT&T has stated, they will continue to grow this channel by offering more converged services and will provide customers with the most easy and most powerful web experience in the industry. For Synchronoss, we are excited about those opportunities to continue to expand our success in mobility, e-commerce transactions by expanding our platform and handling more transactions across multiple lines of network services via AT&T.com. And not only are these a large set of transactions that we have to manage before, but the group itself is expected to grow significantly in 2008 and beyond. The trend is equally powerful for the enterprise customer base as well, even faster on further adoption of bundled services will be deployed, giving the AT&T enterprise customers the ability to order Voice over IP, wireless and high-speed data services. We are starting to see opportunities to increase our enterprise transactions, leading to great growth potential for Synchronoss to handle large enterprise accounts. In the past, it was only for the mobility business customers. Going forward, the opportunities include more, more services that are being bundled into both Voice over IP and high speed data services. And as AT&T stated a few back weeks ago, they will be spending more time and investments in 2008, streamlining the enterprise customer user experience, and we see this is as an opportunity to further validate our ability to directly support some of AT&T's core initiatives within the enterprise market. And finally, it's very exciting to see the projective ramp and adoption of U-verse and IPTV services at AT&T. Although these initiatives are early on, we expect to begin processing some of these transaction types by the end of 2008. Since we began our relationship with AT&T, we have expanded our relationship from the small handful of transactions to over 60 activation and customer account transactions by the end of 2007. This now includes support of large retail customers via national distribution, and we expect this trend to continue. For example, just this past quarter, we moved our first very large retail customer onto our platform, and we believe more large retailers will follow up. As pleased as we are with what we have accomplished to date, we still believe that we're only penetrated in roughly 10% of the total AT&T opportunity. And as we continue to prove our value proposition and help AT&T optimize their efficiency and customer experience, we are optimistic that we will continue to expand the use of ConvergenceNow platform across AT&T. Among the transactions that we are automating, the fourth quarter was the second full quarter of the Apple iPhone's availability, and it was the first holiday season. We are extremely pleased with the continued high-level performance that our ConvergenceNow platform has delivered relative to the activation of the Apple iPhone. And as we commented last quarter, automation rates for these transactions are exceeding even our most aggressive expectations at the outset of this relationship. We are clearly thrilled to be part of the AT&T, Apple relationship, and the high level of acceptance that has been established in such a short period of time is truly amazing. The success of the iPhone was one of the factors that led to an overall record in wireless handsets sold by AT&T in its most recent quarter. We are pleased to be part of this success, particularly when you consider the record volumes that are now going to the AT&T eCommerce channel. And as we look ahead, in previous years, we've typically seen a level of seasonality related to our consumer-driven wireless transaction flows, and we currently believe that significant increase in our consumer-related business will materially increase the seasonality in the first quarter. This will be further pronounced due to the fact that in the beginning of the first quarter of 2008, we will no longer receive premium pricing for related to certain transaction types in 2007 with superior service level agreements. These higher service level agreements were required to ensure an outstanding customer experience based upon uncertainty of volumes and the exact level of our automation rates achieved through ConvergenceNow platform. The pricing associated with these transactions were above our typical and average pricing of $7 to $10. Going into 2008, our automation rates and volumes are much better understood. And in a moment, Larry will discuss these two factors in influenced and updated outlook for 2008. For a long-term perspective, we believe there are two significant positives for our participation in the AT&T relationship. The first, the development work and business process knowledge that we gained relative to the support of brand new activation processes for handheld devices that we believe will become the standard over time. This opens up an entire new business opportunity for Synchronoss. And second, our success in such a high profile launch has helped to further increase the awareness of Synchronoss’s capabilities and value proposition and brand on a global basis. As we've stated in the past, we believe our solutions and expertise can achieve savings in the several hundreds of million of dollars for the largest communication service providers in the world, and as a result, have the potential to generate revenue in the range of $40 million to $80 million a year for Synchronoss as the accounts mature over time. Industry and competitive pressures combined with the growing awareness were significant drivers to our recently announced relationship with Sprint. With AT&T and now Sprint, we believe we have significant progress in establishing Synchronoss as the standard in the North American wireless market. We believe strongly that Sprint has a need to realize our service model on a large scale. We have the ability to transform their customer experience in various sales channels in ways that will benefit their overall business. We need to execute and improve our value at Sprint just like we have with all of our customers. And if we're successful, we believe that Sprint clearly has this type of long-term potential. From a short-term perspective, however, we have always stated that the initial timing of how new customers and transaction types will ramp can be difficult to predict, given the number of variables at the customer that are beyond our control. Our current expectation is that Sprint will begin to contribute a nominal amount of revenue in this first quarter and then ramp slowly and become a more meaningful revenue stream in the second half of the year. We are beginning to work with Sprint in the consumer group. What is very encouraging to us is the fact that we have an opportunity to deliver our service model and attend to adopt Synchronoss with the vision of dramatically improving their customer experience across multiple sales channels. This is a much broader out-of-the-gate conceptually than we have with our initial adoption of AT&T, but the important decisions still need to be made at a tactical level with respect to how they will move live into production, whether they would test channels simultaneously or serially to how long they want to test before moving transactions into production. For these reasons, the initial ramp does have a degree of variability that we do not control. That said, from a long-term perspective, we are optimistic that our relationship with Sprint will scale the significant levels based on their needing conviction to provide better customer service. It will also take another a quarter or two for us to gain improved visibility as to how the deployment will proceed, and we will update investors publicly at the appropriate time. The bottomline is that our view of Sprint is a replication of how we succeeded at AT&T, and we look forward to providing Sprint similar results in adding value to their businesses. We continue to prove our value and expand our relationship as well with other cable MSO customers and Voice over IP related customers. For example, we took additional transactions on from Comcast. We are seeing increased opportunities from Level 3, as we expected, and as a result of the expansion of our current agreement that we discussed last quarter. And while Vonage still faces legal pressures, they continue to be a good customer for Synchronoss and we continue to find additional ways to help Vonage optimize their customer experience. Collectively, our business outside of AT&T delivered sequential growth that was greater than that of our AT&T relationship and grew as a percentage of our overall business for the first time in 2007. We expect this trend to continue throughout 2008. I would like to close with some remarks on our international growth strategy. And as you recall, we accelerated our move into the international markets based roughly a year in advance due to the growing awareness of the Synchronoss brand on a global worldwide basis. In only a short period of time we have made significant progress. We have signed two system integration partnerships, Siemens and Grupo ALMA that have a high level of domain expertise and knowledge of back office systems from many of the leading tier-one service providers throughout Europe. And during the fourth quarter, these integrators successfully deployed our ConvergenceNow platform and are ready to deploy our complete platform in the tier-one communication service providers in Germany, France, UK and Spain. These partners have made financial, human capital and physical asset commitments to Synchronoss, and as a result are being selected as a strategic partner. We are excited to leverage their knowledge as we take ConvergenceNow platform to Europe. We are in active discussions with a number of major international communication service providers. However, similar to the North American market, these take time and require approval of many decision makers. Importantly, while our involvement in the Apple iPhone was a significant factor in raising Synchronoss's awareness internationally, our strategy for going after the international markets was not an Apple-centric strategy. Our strategy is to identify communication service providers that we can scale with as they adopt our entire platform to automate the growing number of converged service offerings over time, not just for one single transaction type. The volumes associated with a single transaction type would simply not make our model successfully, and so our efforts remain focused on those CSPs who wish to deploy our entire platform capabilities. Our expectations for international revenue contribution are modest in 2008. But we are pleased with the progress we are making towards our goal of establishing a reference customer to serve as an anchor tenant in Europe, similar to AT&T is for us in the United States. There are several opportunities that would fit that description very nicely in an addition a handful of other CSPs that we are currently in discussions with to determine the mutual benefits of beginning our relationship. We are in various stages of scoping working relationships, including the analysis of business processes, IT systems integration for our platform, and how to best deploy ConvergenceNow across various transaction types and channels. These decisions must be made with care and on both sides to the equation. But we see the momentum building, and we are optimistic that we'll be able to share more specifics in this area during the first half of 2008. In summary, 2007 was a tremendous year. Looking ahead, we are still at the early stages of penetrating the ultimate opportunities within AT&T. We are going live in the first quarter with our second major tier-one wireless customer, and we are encouraged by the progress we are making on our international strategy. The early stages of our new transaction types can be challenging to predict. However, we have never been more optimistic about our long-term growth potential based on the growing awareness of the Synchronoss brand on a global worldwide basis. So with that, let me turn it over to Larry to discuss our results in more detail.

Thanks, Steve. I would like to provide additional details on the fourth quarter performance in addition to our guidance for the first quarter and full year 2008. Starting with the income statement, revenues reached a record $36.4 million, which represented an increase of 79% over the fourth quarter of last year and 6% sequentially. Revenues exceeded the high-end of our guidance range of $34.8 million to $35.5 million. As Steve pointed out earlier, our growth compared to the third quarter was well balanced across AT&T, our cable MSOs and Voice over IP related customers. AT&T represented 76% of our total revenue compared to 78% in the previous quarter, and it grew 129% on a year-over-year basis and 4% on a sequential basis. There are a couple of important points relative to the growth of our revenue with AT&T. First, during 2007, we continued to see increase automation rates associated with the AT&T transactions. The impact of this results in volume growth of transactions that exceeds the associated growth of revenues. High automation rates result in a lower price per transaction for our customers and a higher gross margin for Synchronoss. We believe we are now closer to peak automation rates for many of the more mature transactions, and as such, we expect transaction volume growth to be closer to the revenue growth for a large segment of transactions we're currently working on, particularly with AT&T Mobility. Second, the fourth quarter represented the first quarter that our iPhone-related revenue was on a pure transaction basis. During the second and third quarters, we benefited from the upfront work necessary to help ensure that one of the most successful product launches in the history of the wireless industry was done so with the highest levels of quality and customer service. It is also worth reviewing the three primary drivers for the pricing of transactions for our customers. First, volume discounts. The more transactions we received for a particular period, the higher the discounts for the period. Second, the complexity of the transaction and the level of systems required to automate those transactions. And then, finally: the service level arrangements. As we discussed earlier, given the magnitude of the volume for the most publicized and successful launch in years combined with the revolutionary first-of-the-kind activation process, we not only perform significant testing of simulated transactions, but we also instituted the most stringent SOA arrangements for the launch in the recent holiday season. Given that this is one of the legs to our pricing stool, it led to premium pricing on these transactions during 2007. Revenue from our Cable MSO, Voice over IP and wireless customers outside of AT&T represented the remaining $8.6 million of our total revenue. The revenue grew 13% on a sequential basis, helping to increase the portion of revenue from relationships outside of AT&T to 24% of our revenue for the quarter, which is an increase of 22% from the previous quarter. This revenue includes wireless revenue from customers other than AT&T as well as some international revenue as a result of our international relationships that began to contribute a nominal amount of revenue in the quarter. In the future, we will also include revenue from Sprint. From a revenue mix perspective, 83% of our fourth quarter revenue came from transactions process. The remaining 17% was generated from professional and subscription services. Turning to costs and expenses, we will review our numbers both on a GAAP and non-GAAP basis. There is a reconciliation table between the two in our earnings release. Our non-GAAP results exclude stock-based compensation expense. Non-GAAP gross profit in the quarter was $21.1 million, representing a non-GAAP gross margin of 58%. This was an increase from the 55% level on the third quarter due to the mix of transactions along with continued improvement in automation rates related to both the iPhone and other AT&T Mobility related transactions. Now, let me move to the fourth quarter operating expenses. Non-GAAP research and development expenses came in at $3 million or 8% of revenue, while non-GAAP SG&A expenses were $4.9 million or 14% of revenue. Depreciation and amortization was $1.5 million, a slight increase from the $1.4 million in the previous quarter. Continued revenue growth and strong gross margins led to non-GAAP income from operations of $11.6 million, an increase of 82% on a year-over-year basis and a record margin of 32%. The company's tax rate for the quarter was 42.7%, leading to a non-GAAP EPS of $0.22, which was above our guidance of $0.20 or $0.21. The quarter's effective rate included certain discreet tax adjustments, which led to an increase in our effective tax rate, resulting in a slight impact of $0.1 per share. On a GAAP basis, including stock compensation expense of $1.1 million, the resulting GAAP income from operations and net income for the quarter was $10.5 million and $6.6 million respectively. The resulting GAAP diluted earnings per share was $0.20. Turning to our full year results, full year 2007 revenues increased 71% to $123.5 million. Our non-GAAP gross margins for the full year came in at 56% compared to 51% in 2006. Non-GAAP operating margins were also strong at 30% for the year, up from 22% in 2006. Full year non-GAAP diluted EPS of $0.77 was up $114% on a year-over-year basis. From a GAAP perspective, we reported gross margins of 55%, operating margins of 27% and diluted EPS of $0.71. Looking at our cash, total cash, cash equivalents and marketable securities totaled $95.5 million at December 31, 2007, an increase of approximately $8.1 million compared to the end of the previous quarter. Now let me turn to the guidance for the full year and the first quarter of 2008. Let me start with the full year. We currently anticipate that revenue will be in the range of $151 million to $160 million. This is an update relative to our preliminary review of revenue growth, which was had indicated would be in the mid-30% range. From a macro perspective, there is clearly a level of uncertainty regarding the economy that is evidenced from the economic indicators and commentary from companies that are consumer-focused. Although the economy is not a primary driver of our temperate revenue, it does not help our customers in 2008. From a low-level perspective, there are two primary reasons for the updated review on the year. First, we have recently been informed that certain transaction types no longer require premium SLA treatment, given that we continue to experience better than expected automation rates and minimal exception handling. It is important to note that this has resulted in exceptional levels of customer satisfaction as we continue to improve the end customer experience and service. As Steve mentioned earlier, the pricing associated with these transactions were above our typical and average transaction price of $7 to $10. It also demonstrates to our customers the flexibility of the Synchronoss model. Second, the recent volume of activations realized in the fourth quarter led us to adjust our expectations for the upcoming year. I would reiterate the point that one of the reasons for the premium SLA was the expectation of highest pricing volumes combined with the recent holiday season. It's also important to point out that we are at the early stages of relationships with companies such as Sprint, and we are making good progress against our goal of winning a flagship international carrier. In addition, we are in the early stages of newer opportunities with AT&T outside of mobility, as well as other numerous pipeline opportunities that we are pursuing, which may influence our view in 2008 at earlier point in time. This is on top of all the same programs we are currently supporting which will continue into 2008. With all of this activity there is the potential for Synchronoss to still deliver growth in the mid 30% range for the year. However, as we always do, we have shared our best estimate of 2008 based on our beliefs and the information our customers are sharing that's relative to the expected transaction volumes and timing from moving transactions over to the Synchronoss platform. Based on these discussions, we currently expect to see a sequential uptick of several million dollars in the second quarter, followed by a much stronger second half of the year as new transactions and customers ramp, in addition for the second half seasonality we expect to see in consumer-related wireless transactions. Consistent with prior practice, as we gain additional insight and from the timing of the rollout of our services and the speed with which these transactions will ramp, we will update investors at that time. From a profitability perspective, we currently expect our full year gross margins to expand to the 56% to 58% range, helping to drive record annual non-GAAP operating margins of 31% to 33%. We believe the company's attractive financial profile is evidenced by what is still a strong topline growth in non-GAAP operating margins that are now north of 30%, which is a very unique combination. We expect the annual improvements in gross and operating margins to lead to non-GAAP diluted EPS of $0.92 to $1.01. This assumes a non-GAAP tax rate of 39% and shares outstanding of approximately $34.3 million. The tax rate assumes that R&D tax credits available for the entire year, although legislation authorizing R&D tax credits beyond December 31, 2007 has yet been enacted. The absence of the tax credit would have the impact of increase in the effective tax rate. For the first quarter of 2008, we expect total revenues in the range of $30 million to $32 million, which represents growth of approximately 41% to 50% on a year-over-years basis, and non-GAAP EPS between $0.16 and $0.18. Our EPS forecast assumes a non-GAAP tax rate of 39% and 33.7 million shares outstanding. Implicit in this earnings guidance is a gross margin in the mid 50% range. Again, the non-GAAP tax rate assumes that legislation has been enacted to extend the R&D tax credit into 2008. We expect seasonality in the first quarter due to the significant increase in revenue attributed to the consumer sector of the wireless market. In addition, this is the first quarter we will no longer receive premium SLAs on certain transaction types. These SLAs were above any other transaction we support. Also, our current expectation is that Sprint will have a nominal impact in the first quarter and begin to ramp in the second quarter and much more so in the second half of the year. In summary, we have truly validated our business model in 2007. We are in the early stages of what could become very large customer relationships overtime, and we have never had a more robust pipeline of new opportunities with tier-one communication service providers as we do today. These are decisions that take time, and the earlier stages of rampant customers are the hardest to be dealt. But we are more optimistic about the company's long-term future today than any point in our history. With that, let me turn it over to Betsy to begin the Q&A.

(Operator Instructions) And the first question comes from Tom Roderick from Thomas Weisel Partners. Please proceed. Tom Roderick - Thomas Weisel Partners: Hi, gentlemen. Thanks and good afternoon.

Hi, Tom.

Hi, Tom. Tom Roderick - Thomas Weisel Partners: I'd just dive in a little bit more on the SLA, since it was certainly something you both emphasized on the call. And I want to clarify, these are certain transaction types, can you just walk through in a little bit more detail the role of the renegotiation of the existing contract with AT&T that was up at the end of 2007, the role that that renegotiation played and reclassifying certain transaction types is not qualifying for a premium price? And those transaction types, are they only relative to AT&T or they are more broader-based across multiple customers? Thanks.

Hi, Tom. This is Steve. Let me address the first part. The contract that was renewed in 2007 evergreen with all the terms and conditions, there was essentially no change to that contract. I think what we referred to on our call is that we typically on average get in the 7% to 10% range for our transactions. When customers look at our business, they look at the entire flow of the transactions, which include fallout; in other words, orders that are touched with certain staffing. And so, the automation rates were much higher than anticipated. Therefore, our ability to deliver a service with fewer people was recognized. And so, those are things that are built in to the way that we operate. The particular SLAs, I can't comment on them, because they're proprietary to the customers, but they were clearly above anything that we normally do on the process of handling such transactions. And so, to do that without an incredibly high automation rate, you obviously needed some staffing to do that. We are excited about this as we got to those rates and we got to those rates sooner than expected. Tom Roderick - Thomas Weisel Partners: So, Steve, maybe on that point, I mean you guided below your revenue range that you had previously talked about revenue growth. By your earnings here still $0.92 to $1 for the full year suggest that there is a lot of leverage inherent in the model. So, can you just walk us through the dynamics of those two?

Yes, absolutely, Tom. So, what you end up saying is, in our model -- and this is why the ability for us to have customers that continue to renew and drive business with us is all about driving costs out of our customers' business. And so, what we've essentially done in our model is by driving a higher automation rate, you are essentially giving the customer much more savings in their business, but the leverage in our model comes through pretty strong. And you can see that in what we guided to both from a profitability and gross margin perspective. That being said, from time to time in our model, if you look at all of our transactions, there has always appeared a time in the beginning where the automation rates aren't as high as they are, and over time, they get to a steady state. However, they are may be based upon each individual customer, an opportunity or desire to make that a customer's experience appears as automated as possible out of the gate. In order to do that, that puts us into more of a staffing situation to ensure that SLA. At the end of the day, I think the relationship that we've had on a lot of these transactions are exciting, because you are exactly right, at the end of the day, you are left with a highly leverageable model. Tom Roderick - Thomas Weisel Partners: Great. Last question from me here real quick is if you mentioned that the Sprint opportunity here is broader than what AT&T was initially, can you go through a little bit more detail about what broader means? Does that mean more transaction types? Does that mean more revenue exposure or more transaction exposure? Just give us a sense for what that means today, and then as you think about ramping it, what that means two years down the road?

Yes, sure, Tom. So, the level of excitement that we have in regards to this relationship, which is in its very early stages, it's typically what our customers do is look to engage Synchronoss in maybe one or two of their channels in terms of processing transactions. And so, the scope of what we are looking at and without giving any of the specifics in our relationship with Sprint is much broader in the sense that it's not looking at one individual channel, but looking in a more global perspective on how we can improve the overall customer experience regardless of channel. And so, that's a pretty significant opportunity for us. We still got to go out and prove ourselves, demonstrate (inaudible) that we know we are capable of doing, but it just seems to be a very compelling opportunity for us and one that, as Larry indicated, we want to do right and we want to ramp this appropriately. Tom Roderick - Thomas Weisel Partners: That's great. Thanks for the help.

Thanks, Tom.

And the following question comes from Shyam Patil from Raymond James. Please proceed. Shyam Patil - Raymond James: Hi, good evening, guys.

Good evening, Shyam. Shyam Patil - Raymond James: More on Sprint to follow up. Could you comment to the extent that you can on the process in terms of who you are up against -- should we still expect the 7 to 10 average transaction fee and how should we think about the relationship in the contract?

Well, we are in the very early stages, and unfortunately, we can't discuss a lot of the terms associated with the contract. But we believe that the way that we can an impact in Sprint is very similar to what we've done in AT&A in terms of putting together the full breadth of the Synchronoss' solution set. And in terms of how we are approaching and as I had said earlier, it is going to be across the channel, but unfortunately we can't get into any of the specifics around exactly where we're starting and what that'll look like. Shyam Patil - Raymond James: Okay. And then, when you look over at the Voice over IP side of your business, when you look at the '08, I guess what type of potential do you think this business has? What do you think are going to be the main drivers that kick in, in '08 versus '07?

I think in '07 and frankly even going back a little bit to '06, the consumer obviously drove a lot of that volume, and we see that continuing, maybe not at the same rapid pace. But what we see augmenting that growth significantly are two areas in VoIP. One is small business in VoIP, meaning 4 to 8-line types of services. There is not a customer that we are dealing with today that's not going after that market in 2008. And so, those are brand new transactions that we're picking up across almost all of our cable MSO customers and to an extent with some of the work that we're doing at AT&T. So, it's one factor that we'll add to the current consumer growth. And then the second is Voice over IP, obviously, for the economies of scale on what that provides is becoming the centerpiece for converged services. And so, as the various different providers bundle Voice over IP in with either wireless or high-speed data, that's another contributing factor that's there. Shyam Patil - Raymond James: And this is my last question for you, Steve. It looks like there could be an emerging trend towards more open carrier networks where handset OEMs would essentially get more power. Can you just talk about the potential opportunity for Synchronoss here, I mean how is the company's positioned? Thanks.

Yeah. One of the big drivers in our business is certainly -- and we see it in Europe, where the handset manufacturers really have a unique position. What we believe, and this has been a big growth driver for us in our ConvergenceNow platform, is our earlier generations focused on getting the networks all streamlined behind the scenes so to speak. The newer versions that we're working on really allow you to drive service creation directly into either the handset itself, and so to the extent that the handsets can become more powerful in the sense of the different features riding on different networks. And that's true both on the handset level as whether we see also, for example, on cable environment with set-top boxes in which a lot of the providers want to go to more of an end-commerce or on-demand type of provisioning directly from the set-top box. So, those are the two areas I think going forward that create new opportunities for us. And we absolutely intend to leverage that success in 2007 that we've had into 2008 and beyond.

And our next question comes from Liz Grausam from Goldman Sachs. Please proceed. Liz Grausam - Goldman Sachs: Great. I wanted to talk about the sequential trend you saw in our non-AT&T business, and if you could kind of drill down into where you're seeing particular areas of strength? And I think you may have mentioned that you actually saw some international revenue come in, and if that's just from your partners or if you've actually won some business out there already?

Yeah. The trends that we've seen, one is clear -- Liz, this is Steve – it is definite we had some international revenue come in the quarter. It was nominal but there was revenue associated. We also are seeing our Voice over IP business that really picked up some momentum towards the latter half of the year. I think that during the course of the middle of last year with some of the issues that Vonage, for example, experienced in the whole market and a lot of the legal ramifications, as that got cleared off, for lack of a better orders, began to get cleared up, we've seen the adoption rate start to increase. And then, a driver within that business certainly has been some of the headway that we're starting to make with some of our cable MSO folks like Comcast and the extension of the agreement that we have with Level 3 where we're getting more and more of those transactions as well. So it's kind of a mix match of those three areas, but we see that trend continuing. And obviously, as Larry alluded to in his discussion, as we start to bring on Sprint and they become much more meaningful in the second half of the year that will also contribute to that as well. Liz Grausam - Goldman Sachs: Great. And then, when you're looking at your revenue outlook today versus back in early November, obviously, this SLA change occurred. How much of the change in your revenue outlook was attributed directly to a pricing change? How was attributing to a pricing change that was triggered by automation rates that were substantially higher, potentially than you had expected back in November? And then, could you lair in some view on how your team is thinking about the consumer and the potentials for some volatility in the year when you think about your guidance?

Yeah, Liz, let me try to do this, and I apologize for my voice; I really have one. So when we gave some guidance back in November when we talked about where we thought the view would be in 2008, that's kind of where we head. As we had mentioned at that call it was we hadn't done the bottoms-up view. We hadn't really gotten a lot of the forecast from our customers. Since that call, we have talked to a lot of the customers. We've got some sort of view of where that's going to be. As we pointed out, when we look at pricing and we keep talking about pricing adjustment, it's really not necessarily a pricing adjustment. It's really three drivers that drive the individual price for a transaction, and one has to do with volume, the second component is complexity and the third is the service levels. We've always talked about those as the three drivers in our price. And as we mentioned, there has been a view of dropping the service level associated with certain transactions because of the automation, while the automation rates that we saw really weren't validated until we completed the fourth quarter. So, that's the kind of drivers in the revised view when we looked at 2008, is understanding where our automation rates were, the level of savings that we want to provide our customers and notably the new view for 2008.

Yeah. And if I could add to that too, Liz, when we looked at the percentage of labor mix associated with the transaction to do the handling, in order to meet an SLA, had a certain price component to it in which it had additional costs. You'll see in the leverage that we have gone forward and what we were able to achieve is such high automation rates that we could achieve the same SLA essentially without having the extra exception handling step available. So, that's how it ended up being a win-win going forward for us. Liz Grausam - Goldman Sachs: So, I guess to put it differently, was it really a pricing change that said a customer came back to you and put pressure on your pricing and you had to renegotiate a contract, or is this simply how we should expect to see running your business that when you start hitting extremely high gross margins and you hit automation rates then you are going to proactively go back to your customers and put in some of these pricing changes, and also, effectively, it looks like lifting your margins going into 2008.

No, absolutely. I mean the one way to look at it is this has always been a part of our business in the early stages with our clients. And we get a lot of questions around customers in Synchronoss and how they view us over time. The reason why we have all of our customers and they renew each year and we're not competitively priced down that path is because we've built in ways to improve their business. It just so happens to be, without giving any specifics, we had a certain transaction type that was very large. And so, that was more visible in terms of how that process went down. But this is very analogist to the way that Synchronoss model is incredibly flexible with our customers and you can go to market in a matter of a few weeks and provide an outstanding customer experience. And yet, there is still motivation from a company like us to drive automation and essentially the exception handling out of the process, so that at the end of the day, you are far better. And that ends up being, to be quite honest with you, how we get additional transactions. That's how you go from a few transactions to over 60 at AT&T and how we're doing in all of our other accounts. So, it's absolutely a part of our model. I think it was more accentuated for a couple of reasons, given the size and scope of these particular transactions in such a short period of time, but it's very much in line with the way we've been conducting business with our clients for years. Liz Grausam - Goldman Sachs: And when you think about AT&T, I think you've spoken about 10% number of the total transactions that you may touch right now and you think about evolving those customers through 2008 and 2009. One, the Unity contract, the convergence on wireless and wireline and the company has specifically spoken in their own analyst meetings about wanting to streamline their self service or their online sales service. How does Synchronoss play into that and when may we get an update on your total market potential at AT&T?

Yes, I think it plays well. It's driving these types of results into their business that allows us to get additional transaction types. We see this year the opportunity, and again, we can't get into the specifics because we are [under DA]. We're already looking at transaction types in different services that we don’t support today, and we believe that trend would continue. I think in terms of, as that becomes clearer and we get closer to moving some of these new transaction types in the production not associated with what we are doing today, we'll be able to share more about that on the call. But that is a very positive trend, and they are looking to leverage some of the success that they've had with us in some of these other opportunities. And we believe that it will go down a very similar path. Liz Grausam - Goldman Sachs: Great, thanks a lot, guys.

Thanks, Liz.

And the following question comes from Tom Ernst from Deutsche Bank. Please proceed. Tom Ernst - Deutsche Bank: Good afternoon, gentlemen. Thanks for taking the question.

Hi, Tom. How are you? Tom Ernst - Deutsche Bank: The nominal revenues you mentioned in Europe, are those from your partners or are those from end carrier customers?

Yes, the revenue that we saw was with our partners in terms of implementing that platform in Europe. So, that were the fees associated with putting that into Europe. Tom Ernst - Deutsche Bank: And that's implemented in their own environment, not for carrier customers at this point, is that correct?

That's correct. Tom Ernst - Deutsche Bank: Okay, great. And I would assume that in Q4, we're still very much in investment mode in Europe. Are those revenues enough to offset your investment? And then the same question in terms of what's embedded in your guidance for '08?

Tom, can I ask you to repeat the question again? I'm sorry. Tom Ernst - Deutsche Bank: Sure. The question is, are you spending more in Q4 in Europe at this point still than those revenues. And the same question for your guidance in 2008. Are we still in investment mode in Europe or do you expect revenue to outstrip costs?

In the fourth quarter, we are in investment mode in Europe. So, as we had mentioned early on, we are starting to put feet in the street in Europe and understanding how we could drive our business in Europe in 2008. As we go into 2008, we are expecting a contribution of revenue from Europe that is certainly not material, but certainly less than 10% of our revenue. So, as far as what investment we make to do that, it's embedded in our guidance that we provided. And that's kind of how we see it right now.

And one other point too, Tom, in terms of the partners is, first, the clarity is obviously we don't discuss our pipeline in Europe, but we have a targeted program to work with some of these very large name brand CSPs in Europe. And a lot of the integrators that work with us are really helping us enable, so that when we do get our goal of getting one of these international folks and when we talk about it publicly that we will be able to move much more quickly than we would without these implementations in play. So, there is a specific approach that we have had around specific accounts. We are pleased with the progress we are making on those accounts and we look forward to updating you guys hopefully in the first half of 2008. Tom Ernst - Deutsche Bank: Okay, great. And shifting just to follow up on previous questions, with regards to Sprint, how much opportunity have we had at this point to test our technology in the Sprint environment? And what was your performance? Are you achieving strong performance within the Sprint environment at this point? And then looking forward, anything you can share with us? You mentioned that the timing of expected revenue ramp there. What's your dependency on external technology or external services that Sprint may be rolling out. In other words, how complex is the rest what they are doing to enable what you do?

To answer your first question, Tom, we are at the very early stages of our relationship there, and we can't get into a lot of specifics of it, but I can tell you that we will have an opportunity to give you a better answer at the end of this quarter in terms of how exactly we believe we'll be deployed and what that would look like. I would say that the opportunity in terms of where we believe we can add value is pretty significant and has an opportunity for us to get there. But that being said, what we wanted to make all of you aware of is that it does take some time to navigate through that process and to make sure that although the opportunity that we think is in front of us is quite large to make sure that we attack this in a way that it makes sense that can scale as quick as we can. Tom Ernst - Deutsche Bank: And perhaps, just on the forward question, I know you can't talk about Sprint's specific plan, but can you help characterize for us your degree of uncertainty to other events or issues that Sprint has to work through in order for Synchronoss to go live, or is this entirely just a Synchronoss-focused project and the uncertainty is just with your rollout, your targeted plan for that rollout?

It is as any new client is we're learning along the way with any customer. And the only thing that I can say, Tom, in my opinion, and this is information that's public, is obviously there's a lot of issues around opportunities that Sprint wants to improve in their overall businesses, and obviously, always showing up in the top one or two is certainly the area that our platform and our services have an opportunity to influence. And so, those are the kind of global trends going into 2008 that we're excited about. We're just not at the point yet where we would get a flavor for exactly how that would roll out. We expect, as Larry indicated, to get a lot smarter in terms of that and translating that back to all of you on the call. But as I sit here today, we're giving our best guidance on where we see that developing. In terms of the opportunity, it's as big and significant as we had thought. Tom Ernst - Deutsche Bank: Okay. One final question. Larry, you mentioned a 43% non-GAAP tax rate that was hit by an adjustment and the forward guidance of 30%, would the number have been 30% this quarter if we didn't have the adjustment?

Say that one more time, Tom, the final part of your question? Tom Ernst - Deutsche Bank: How big was the adjustment this quarter?

Yeah, if you take the difference between the 42.7% and what we expect to be our effective rate is roughly 39%, it was about a penny per share. And going forward, as I mentioned in my prepared statement, we expect the effective rate in 2008 to be roughly 39%. Tom Ernst - Deutsche Bank: Okay. Thank you.

You're welcome.

And we have question from John Bright from Avondale Partners. Please proceed. John Bright -Avondale Partners: Thank you. Good evening, Larry and Steve. First, you guys talked about in your forward guidance modest contribution on the international front, and you also alluded to a flagship international carrier. How much of your guidance is built in this flagship international carrier?

John, when we look at out guidance, we take into consideration our existing customers. Again, as we have always alluded to you, we take our existing customers and we take our pipeline activity as well and we factor that, and obviously, we weigh that across the board to come up with the overall guidance that we provide. And when looking at the international market, certainly that is one of the opportunities in our pipeline that we use in providing our guidance in 2008. John Bright -Avondale Partners: So, I'm to take that you're fairly confident that you're going to get this customer, so there is some contribution from it.

We have factored a number of opportunities in our pipeline, which includes international opportunities, and we factor that into our guidance. John Bright -Avondale Partners: Got you. So then, also on your guidance for 2008, the SLAs were the primary aspect of it. How much of that, if you can break it down in any way relative 35% to, I guess, what, 26% type growth, order of magnitude, the difference there, how much of that was SLA-related, and how much of that was a concern over a slowing consumer environment?

So, in terms of putting it in percentages and that would be difficult to do, but what I will say is that we took all those areas in consideration, certainly the overall economy as a relief for the consumer. From a high level, we consider that. From a SLA perspective, as we mentioned, we factor that into the view as well. Now, I think it's important to note that we've always mentioned that our average price per transaction is in the $7 to $10 range, and going to 2008, we still expect that to be in the $7 to $10 range. It does vary between that $7 and $10, but we did factor that. And lastly, I think just as important is we looked at the volume of activity that we had in the fourth quarter. Without talking about specific transactions, we looked at that and we factored that into our guidance of 2008 as well. John Bright - Avondale Partners: On SLAs, Larry, then, are there other agreements of this nature that you have outstanding as well that might have the same dynamic take place and how unexpected was this dynamic to take place? Did you have some anticipation that this might happen?

John, I think it's a good question, and again, I just want to clarify that whole process right. As I mentioned, there's really three drives in our overall price. This is not about coming back and adjusting the price, it's more about three elements that drive the overall price for a target for a specific transaction. The first is being volumes. The more volume you put into the platform, the bigger the discount. And second is the complexity, how complex is that transaction. And the third is the service levels. Okay? All those drivers have an impact on the overall price. Now, if you change your service levels, and you can't change your services levels, it's not about revising the contract, it's about changing the specific service level you want for a specific transaction. Also, it depends upon in terms of how automated that transaction is. So the more automated a particular transaction is, the less exceptions that you need and a better predictability you have in terms of your forecasting. And so, that all is driven in the overall price. So in terms of did we foresee that? We expected certain pieces of it, but not all of it.

And the efficiency, John, if I can add, this is Steve, to it is that we have transactions today that are typically well above the $7 to $10 range. But typically when that happens, as Larry said, the factor or the complexity, there is a level of automation that may not be at its prime. And then, it's our primary job with our clients to drive that process to as highly automated as possible for two reasons, build and scale that number over time. And that's where you'll start to see the leverage in the model. John Bright - Avondale Partners: Okay. Two final questions, gentleman. One, Steve, with the Sprint turnover at the management level, you alluded to visiting a potential opportunity going forward. Have you had discussions from that standpoint of any change of urgency associated with it or is it just been steady status quo.

I can't provide any of the particulars of, John, as you would imagine, the relationship. But what I can tell you is, you certainly you can't ignore the environment that they are going to as a company. However, there hasn't been -- especially with some of the newer management that's over there, especially their new CEO is formally from AT&T -- the need to focus on areas to improve their business that I think they've been pretty open about and may fit right into our sweet spot. So on one hand we're not naïve to the fact that you can have types of changes in a business. I feel pretty good about we could be a big part of helping them grow and move forward John Bright - Avondale Partners: All right. Last question then, you mentioned in your prepared marks, I believe, Steve, you talked about the first large retail customer coming on to the platform. Can you elaborate a bit more on that and what that may mean or not mean financially?

Yes. So what's happening is one of the goals that we have had not only to expand service -- it's a good question -- to expand service types at AT&T for example, wireless mobility, Voice over IP, high-speed data, but it was to break into other channels. So, this year, there has obviously been a lot of market that's opened up with lot of third-party, I'll call it, wireless service bureau types that used to service a lot of the large retailers. And so, we have partnered with AT&T without getting into specifics of the accounts and actually driven our technology directly out to some very name brand large retailers who will then choose to interact and get the features and functionalities to the customers directly in AT&T. So, our platform has been chosen to do that. We moved our first big retailer in the fourth quarter, and we see that as a growth opportunity for us very similar to the eCommerce channel where we can go and partnership with AT&T to these other large retailers and find a way for them to have, for example, a kiosk or website in the store that deals directly to us, no different than when you are using the Apple iTunes product and you are really interacting with us behind the scene. It's a very similar concept, but it provides us, John, with a growth opportunity in new transactions. John Bright - Avondale Partners: Got you. Thank you.

Thanks, John.

And we have a question from Rich Church from Collins Stewart. Please proceed. Rich Church - Collins Stewart: Thank you. Good afternoon, guys.

Hi, Richard. How are you doing?

Hi, Richard. Rich Church - Collins Stewart: Thanks. And just a follow-up on the retail side. Is the pricing in the same range of $7 to $10 range there? Larry Irving Yes. Rich Church - Collins Stewart: Okay. Do you know, for example, what percentage of activations is through retail branches that are non-AT&T or how significant of an opportunity that distribution would be?

We think that from a longer-term perspective, it's a good growth driver to our transaction, because we don't essentially manage those transactions today. We haven't broken out obviously for NDA purposes the percentage of transactions that come from different channels. But this, to us, feels a lot like the early days with eCommerce where we had an opportunity to get in there, demonstrate that at the end of the of the day, if we can automate and drive efficiencies in the business, our customers can scale it. And there is no better proof than what we saw on Cyber Monday with AT&T about the delta between really taking a channel and taking it to the next level. And so, we believe that these retailers who sell wireless devices have a very similar need to drive a lot of transaction volume. I think where we play of that value prop is can we make those channels as efficient as powerful as the web that will in turn drive adoption rates higher. Rich Church - Collins Stewart: Okay, great. And Steve, on the comments about the macro uncertainty level, are you hearing directly from your carrier customers about this or is it more in response to what we are all seeing with Sprint?

I think that without getting into specifics, it's a combination of things, Rich. It's clearly looking forward at opportunities. I think we had a period of time when there was slight uncertainty across the board. And by the way, once the uncertainty in a market puts more cost pressures, that will help Synchronoss. And we think that gives us opportunities to grow. We potentially can grow faster. But it's the combination of those elements as well as looking at these forecasts that we've received in some high-level discussions with customers and really just taking a look at it and being prudent about looking at 2008. And it's something that as we do on every call, we absolutely will guide and update that as we see that change throughout the year. Rich Church - Collins Stewart: Okay. And then with regards to international, outside of US, are there any developments? Are you pursing efforts in Asia with service provider partners or integration partners or so far?

We have. The short answer is yes. However, I'll caveat, Rich, by saying our primary focus has been in Europe. We have really been focused on this, and it's no different than what we've done here in the US. We need to find one or two very big large anchor clients that want to deploy this platform to scale, and we are excited about the progress we are making in that regard. We are looking at opportunities in Asia-Pac as well. They are not a centerpiece of our focus, but when they come to us from an opportunistic perspective, for a lack of better word, we have been in discussions with some of those CSPs as well. But just to reiterate, we really are staying focused, and I am happy with where we are headed in that direction to achieve that first goal I stated earlier. Rich Church - Collins Stewart: And then on Clearwire, has there been any [data] elements? I think they rolled out some VoIP packages recently, and of course, they reignited discussions with Sprint. But just wondering where that relationship stands?

It's a good relationship. We continue to be a big partner. We manage all of the Voice over IP transactions related to Clearwire. So, you are absolutely right, Rich. As that business starts to expand and they get more focused around their bundles, that's a great opportunity for Synchronoss. As that becomes a centerpiece to a WiMAX deployment with the converged offer, you can imagine that would help us. So, indirectly, to the extent that they are able to move to many more markets that are much quicker and the extent that they are using Voice over IP both as a standalone and as a converged element, that would have very position impacts for us. Rich Church - Collins Stewart: Okay, great. Thanks, guys.

Thanks, Rich.

And we have time for one more question. (Operator Instructions) And we have a final question from Tom Roderick from Weisel. Please proceed. Tom Roderick - Thomas Weisel Partners: Hi, guys. Just I have a couple of quick follow-ups. First, Larry, could you just repeat what the Q1 earnings guidance was in the perimeters around that? And then second, on the issue of Sprint, you indicated that it was a little bit unclear with respect to whether they'll test simultaneously or serially with the rollout. Can you just confirm that means we should expect to see some testing revenues in the first half of the year and were there testing revenues in Q4? Thanks.

Sure. Yes, Tom, I'll go first and talk about the first quarter. We had indicated that the revenues for the first quarter would be between $30 million and $32 million. That's again 41% to 50% growth on a year-over-year basis. And we expect our non-GAAP EPS to be roughly between $0.16 and $0.18, and that's based on an effective tax rate of 39% and 33.7 million shares outstanding. Again, just to qualify around the effective tax rate, that's assuming the R&D tax, credit legislation is accrued going forward.

And then, Tom, to your second point of your question, let me answer more generically in terms of how our typical customers engage us and help you through that. What I meant by testing in serial processing is as we look at multiple channels with customers, typically they'll look at do we send a portion of a region or do we shut down a few centers and have you guys process those transactions, and then as you scale out all of those components, do we go deeper in one particular channel, say, eCommerce or wider but not as deep across multiple channels to test out different ways that we operate. And so, those are the areas that when I referred to testing meaning the customer side and how they would like to essentially deal out those transactions for Synchronoss. Tom Roderick - Thomas Weisel Partners: Okay. Thank you, guys.

Another is the process that we are in the process of working out hopefully this quarter, and we can give you guys a better update. Tom Roderick - Thomas Weisel Partners: Okay. And then just on Q4 real briefly, were there testing revenue in Q4?

No, there was not.

No. Tom Roderick - Thomas Weisel Partners: Okay, thanks.

There are no further questions. And back to you, Mr. Steve Waldis, for closing remarks.

Great. Well, I'd like to thank everybody again today for joining us, and we look forward to updating you throughout the year on the happenings at Synchronoss. Thank you very much.

Thank you for your participation in today's conference. This concludes the presentation. You may now disconnect and have a wonderful day.