Good day, ladies and gentlemen, and welcome to the First Quarter 2012 Synchronoss Technologies Earnings Conference Call. My name is Lisa, and I'll be your operator for today. [Operator Instructions] I would now like to turn the conference over to your host for today, Mr. Lawrence Irving, Chief Financial Officer. Please proceed.

Thank you. Good afternoon, and welcome to the Synchronoss First Quarter 2012 Earnings Call. We will be discussing the results announced in the press release issued after the market closed today. Again, I am Larry Irving, Chief Financial Officer of Synchronoss. With me on the call is Steve Waldis, Founder and CEO. During the 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 reflected 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 risk and other important factors that could affect our actual results, please refer to those listed in our SEC filings, including in our most recently filed annual report on Form 10-K. With that, I will turn the call over to Steve, and I'll come back a bit later to provide some further details regarding our financials and our forward-looking statements. Steve?

All right. Thank you, Larry. Good afternoon, and thanks for joining us on our call today to review our first quarter financial results, which were at or above the high end of our guidance. Over the past few years, we have focused many of our investments in enabling new e-commerce and cloud-based services to expand our long-term growth profile. We have leveraged over 10-plus years experience in and around activation by enhancing our software platform to provide many value-added services to subscribers to connect, sync and activate from the device itself as part of our value-added differentiated proposition. Now we are excited to provide updates today on further steps we are taking in 2012. There are a few key points we'll be discussing on today's call. The first is today we announced our newly enhanced cloud capabilities as part of our ConvergenceNow Plus+ platform. And as part of this announcement, we have agreed to a significant expansion of our relationship with Verizon Wireless and expanded our relationship with Vodafone. At the same time, we announced a partnership with Terremark that will dramatically expand our cloud infrastructure and hosting abilities to support tens of millions of subscribers in a virtualized cloud platform designed for scale and carry a great functionality. Now the second takeaway from today's call is an important update on our relationship with AT&T, specifically providing some more details around the new channel we are supporting and some additional investments we are making in this relationship to foster long-term growth. The third takeaway is the announcement of our acquisition of SpeechCycle, an automated voice technology to further enhance our cloud and technology platforms around the highly automated customer experience. And the final takeaway is that we are maintaining our full year revenue and profitability guidance, assuming a higher mix of revenue from our portfolio of customers outside of AT&T, including a relatively minor contribution from SpeechCycle. We believe today's announcements improve our long-term position and provide us with increased confidence in the long-term scalability of our business model. Now let me review our first quarter results at a summary level. We reported non-GAAP revenues of $64.9 million, which were at the high end of our guidance and represents 22% growth on a year-over-year basis. From a profitability perspective, we generated a non-GAAP operating margin of approximately 24%, which led to non-GAAP EPS of $0.26, which was above the high end of our guidance. Now for the first quarter, our AT&T-related revenues grew 20% on a year-over-year basis. And as we've discussed on several calls, we have been in the process of on-boarding a new channel with AT&T, and I'd like to focus here with respect to where we stand and where we're going. We have been limited in discussing the specifics of this channel as it was not only new for Synchronoss, it was a newer initiative for AT&T. Today, we can share that this is the customer care channel that supports consumer subscribers. Our strategy with this new customer care channel is to utilize the many benefits that our technology has already provided to AT&T in the existing channels that we support in order to improve the subscriber experience. Specifically, our goal is to drive high automation and a superior customer experience into what traditionally has been a very manual-intensive channel. We also saw this channel as an opportunity to further enhance our core offering so that we can gain access with the potential whole new set of channels focused on customer service and support. Now when handling transactions within customer service and care channels, a very high amount of these transactions are voice related. Now many of these transactions cannot be automated in our traditional ConvergenceNow offerings. Now based upon our analysis, we determined that we had a good opportunity to add additional voice technology, which could not only automate more transactions today but, equally as important, can automate complex voice transactions that we expect to see in the future and provide Synchronoss with a more complete offering and overall higher automation rates. And in order to accelerate our time-to-market with its advanced voice technology capabilities, we acquired privately held SpeechCycle. Now this company delivers a self-service platform capable of reducing customer care costs by managing transactions handled by live agents while at the same time enhancing the customer experience. SpeechCycle's natural language speech recognition technology is specifically tuned for the service provider environment and the types of transactions that we are handling. SpeechCycle enables self-service resolution for many calls. And when a human element is required, their technology enables the handle time to be dramatically reduced. Now SpeechCycle's technology has been tested with customers such as Charter, Cablevision and Telstra, an Australian company, and we plan to move to deploy their technology within this new care channel at AT&T in 2012. This will enable Synchronoss and AT&T to achieve our targeted automation rates and improve the overall customer experience more quickly than we had originally had contemplated. However, updated deployment strategy with AT&T will have a negative impact on our near-term revenue from this channel because the time period for high-priced manual-intensive transactions will be consolidated. In addition, there are certain voice-related transactions that we have identified that are both highly manual and not eligible for automation. And as a result, we will not be pursuing them because these types of transactions are not consistent with our business focus. We believe there are many positive developments for Synchronoss from a long-term perspective. First, while the revenue will be lower out of the gate, we still expect the new customer care channel to ultimately represent one of the largest channels we managed at AT&T and opens up new channels for future potential for Synchronoss in the customer service and support arena. Secondly, we are now putting in place an even higher level of automation than originally anticipated, and we expect the profitability of this channel to be higher than our original expectations as we deploy our new technology and realize those benefits. And third, the addition of SpeechCycle expands our technology stack that we can bring to other customers and also fits nicely into our ConvergenceNow Plus+ cloud strategy. And finally, we believe our ability to deliver a truly world-class platform for AT&T's customer care channel further strengthens our relationship. Now the investments and strategies we are making each year have yielded great results over the past 10 years, and we believe that we will continue to be able to expand our relationship going forward based on our track record of always investing ahead of the curve and delivering real business value. Now our business outside of AT&T is gaining success as it relates to our overall cloud strategy. As we've stated in the past, our goal is to be on hundreds of millions of devices as quickly as possible. As we support more and more devices and mobile commerce continues to grow at significant rates, our universe of potential transactions will grow as well. Now we are delivering a significant amount of innovation as part of this strategy. Last quarter, we announced that we're enhancing our Network Address Book, which is a critical asset with integrated social networking capabilities. Today, we are announcing that we plan to further extend our ConvergenceNow Plus+ cloud platform capability, and we intend to roll it out later in the year around multiple data classes for managing and delivering personalized content to many connected devices. Now equally important, we have also been hard at work at putting into place the infrastructure that will enable Synchronoss to scale to hundreds of millions of subscribers over time. And consistent with the focus, we announced today a partnership with Terremark. Together, we enable carriers across the globe with better leveraged cloud-based infrastructure and data center assets like storage, fiber, network and monitoring to deliver new features and applications to subscribers, and do so in a highly scalable and a high-performance manner. Now the first 2 clients to benefit from our expanding set of cloud-based features as well as a robust cloud infrastructure, will be Verizon Wireless and Vodafone. I am pleased to share that we have agreed to a 5-year relationship with Verizon Wireless that contemplates our on-device presence growing from over 40 million subscribers today to 80 million or more subscribers over the next several years. Now we entered into an agreement principle with Verizon this past quarter and are in the process of finalizing details in the coming months. But we expect the contract value to Synchronoss to be on the low end of $200 million over the 5 years. But it's also important to point out, however, that we believe we are far from done as it relates to expanding our Verizon Wireless relationship. We continue to execute against a number of deliverables on our joint product road map that are outside the scope of this new agreement, and we look forward to sharing additional regards into these details as time plays out. From a high-level perspective, we are more confident today than in any other point on our relationship that we can scale Verizon Wireless to the types of levels that we have successfully achieved at AT&T. In our expanded relationship, it's expected to provide a number of benefits for Verizon Wireless. The first will be to build a scalable cloud platform as a service that will be powered by our ConvergenceNow Plus+ platform that will be robust and support multiple device types and operating platforms to scale. The second will be to move to a virtualized cloud infrastructure that we will manage in partnership with Terremark. As a result, Synchronoss will enable a much higher level of operational integration between Verizon Wireless and Vodafone. This includes providing a common set of core intellectual property, infrastructure, architecture, as well as a common feature sets that both companies can leverage from speed-to-market with new innovative cloud-based services. And finally, this new architecture stands to drive substantial cost savings for Verizon Wireless, which we estimate is in the range of tens of millions of dollars per year at scale. Now our expanded relationship with Verizon Wireless and partnership with Terremark also furthers our relationship with Vodafone. We have proven our ConvergenceNow Plus+ -- ConvergenceNow platform in Germany, as well as our ConvergenceNow Plus+ platform in The Netherlands. With the standardized infrastructure and architecture being in place between Verizon and Vodafone, we believe there would be compelling business reasons for Vodafone to engage with Synchronoss and a growing number of operating companies in geographic locations. And although there are no guarantees, we believe the value proposition associated with our shared services cloud environment will become increasingly more powerful over time. Now it's a very exciting time for Synchronoss. We are executing against the strategy that we believe will enable Synchronoss to continue to scale revenues over the next several years. We have a highly differentiated and expanding ConvergenceNow Plus+ cloud platform that hits the sweet spot for cloud, mobile and social. We have 2 anchor clients that we have shared a vision for the importance of cloud-based services as a core strategy and to not just survive, but to thrive in the years ahead, and the growing interest among global carriers is our proven and expanding ConvergenceNow Plus+ platform. So with that, let me turn it over to Larry.

Thanks, Steve. I would like to focus my comments in 2 primary areas. First, I will review our first quarter financial results, which were in the high end or above our guidance. Second, I will review our updated guidance for 2012, which takes into consideration our current expectations for both AT&T and our broader set of customers that are the fastest-growing portion of our revenue. We believe today's set of announcements position us well to focus on our long-term objective of creating a very large growing and highly profitable company. With that overview, let me provide additional details on our first quarter financial performance. Starting with the income statement, GAAP revenues were $64.6 million for the first quarter. Non-GAAP revenues, after adding back $346,000 of deferred revenue write-downs for certain acquisitions, were $64.9 million, which was at the high end of our guidance and up 22% on a year-over-year basis. Revenue from our customer relationships outside of AT&T contributed approximately $32.3 million during the first quarter, representing 50% of our total non-GAAP revenue and year-over-year growth of 23%. The most significant contributor to our non-AT&T revenues was Verizon wireless, which again represented more than 10% of our revenue. Our AT&T-related revenue was approximately $32.6 million in the first quarter, representing approximately 50% of our total non-GAAP revenue and growth of 20% on a year-over-year basis. We expect our non-AT&T revenue to continue growing as a percentage of our revenue over the course of 2012 as we continue to expand our non-AT&T relationships, such as Verizon Wireless, combined with our updated strategy for AT&T's new customer care channel that Steve described earlier. Further on our revenue mix, 68% of our first quarter non-GAAP revenue came from recurring sources, namely transaction processing and subscription arrangements, while professional services and licenses made up the other 32%. There are 2 primary drivers for the higher percentage of revenue being driven by our nonrecurring revenues as compared to last quarter. First, the fourth quarter is seasonally stronger than the first quarter from a volumes perspective, particularly from the respect of our customer channels. Second, we have a higher mix of services revenue in the first half of 2012 as we migrate from our old Verizon arrangement, which had a subscription-based component of revenue and will convert to a higher mix of transaction revenue in the second half of 2012 and beyond as it relates to the enhanced Verizon relationship we announced today. Turning to cost and expenses. We will review our numbers both on a GAAP and non-GAAP basis. There is a full reconciliation table between the 2 in our earnings release, which can be located under the Investor Relations section of our website. Non-GAAP gross profit in the quarter was $37.5 million or a gross margin of 57.8%. This represents 150 basis points of gross margin expansion on a year-over-year basis and 100 basis points on a sequential basis. The primary driver to our improving gross margin relates to carriers adopting and scaling cloud-based services associated with the ConvergenceNow Plus+ platform and was partially offset by the new AT&T channel, which had lower margins associated with the manual processing of transactions. Non-GAAP SG&A was $7.3 million or 11% of non-GAAP revenues, down from 12% from the year ago quarter and 13% last quarter. R&D was $11.2 million or 17% of non-GAAP revenues, which compares to 16% in the year ago quarter and 14% last quarter. As expected, R&D increases -- increased as a percentage of revenue during the first quarter as a result of our acquisition of Miyowa and subsequent efforts to integrate their social networking capabilities into our ConvergenceNow Plus+ platform. In addition, we continue to execute against a broader road map of capabilities with our strategic customers, as Steve discussed. Non-GAAP income from operations was $15.3 million in the first quarter, representing growth of 27% on a year-over-year basis and an operating margin of 24%, which is up from a 23% operating margin in the year ago quarter. Our non-GAAP tax rate for the quarter was 35%, which led to a non-GAAP EPS of $0.26, up 30% on a year-over-year basis and above the high end of our guidance. The weighted average outstanding shares for the quarter was 39.3 million, up from 38.4 million shares outstanding in the year ago quarter. On a GAAP basis, first quarter gross profit was $35.9 million. Income from operations was $8.3 million, and GAAP fully diluted earnings per share was $0.14. Looking at our cash. Total cash, cash equivalents and marketable securities was $157.3 million, up $4.7 million from $152.6 million at the end of last quarter. We generated $10.1 million in adjusted cash flow from operations for the quarter. As a reminder, in order to provide a comparable year-over-year view, we adjusted our cash flow for cash earn-out payments made as part of our acquisitions in addition to the tax benefits associated with the stock option exercises. Capital expenditures were $4.9 million, up from $3.2 million in the year ago period. Capital expenditures will remain elevated for the next couple of quarters, as we further build out our infrastructure to support our new cloud initiative and significant expansion in our Verizon relationship expected over the next several years. For the full year 2012, we now expect our capital expenditures to come in at approximately 14% of revenues, which is up due to the investments we are making to support the long-term scale that we expect at Verizon and Terremark. As we have shared in the past, increases in capital expenditures and above normal expectations typically highlight our expectation of growing transaction types and volumes. Other things being equal, in 2013, we expect capital expenditures to return to our 10% of revenue or less range that we have experienced in the past. Now reflecting on our balance sheet at the end of the quarter is cash used to acquire SpeechCycle, which was $26 million at the close of the acquisition, and there is the potential for additional earn-out consideration of up to $12 million based on the achievement of the range of business objectives. With that, let me turn to the guidance, starting with the full year. We continue to target non-GAAP revenues in the range of $280 million to $290 million, representing growth of 21% to 26% on a year-over-year basis. We currently expect our revenue from AT&T to grow in the range of 5% to 10% for the year. This is lower than our initial expectation of low double-digit growth due primarily to the updated deployment plans for the new customer care channel that we have described in detail. Importantly, we continue to expect the customer care channel to not only scale over time, but to be at a higher profitability level over the long term as we embed our new voice technology and drive higher levels of automation for that channel. Our focus is to continue to drive transactions that will have the highest level of automation in gross margin prospectively. We now expect our relationships outside of AT&T to grow approximately 40% for the full year 2012. This is up from our previous expectation of growth in the mid-30% range. A few things to consider here. We're very excited about our multi-year relationship with Verizon. It is important to note that some of the impact had already been assumed in our guidance, and most of the incremental benefit from our expanded relationship is expected to occur beyond the current year. We also continue to make progress building deeper relationships with other carriers, such as Vodafone and others. We expect revenues from our cable customers to benefit by approximately $5 million to $7 million as a result of our SpeechCycle acquisition. This, combined with the slight increase in our expectations from our organic efforts outside of SpeechCycle, serves to offset the lower AT&T revenue for 2012 and support our full year guidance at levels previously shared. From a profitability perspective, we are now targeting our non-GAAP gross margins to be in the high end of our previous guidance of 60% to 61% range for 2012. As we discussed last quarter, this is above the company's original long-term target model of 55% to 60% and is already within our current long-term target model of 60% to 62%. We are still in the early stages of executing against our goal of gaining a presence on hundreds of millions of devices, and today's announcements represent an important step in achieving this goal. As our strategy plays out, we believe there is potential for further expansion in our non-GAAP gross margin, but this potential is measured in years into the future, not quarters. We now expect our non-GAAP operating margins in the range of 23% to 24% for the full year of 2012, up from our previous guidance of 22% to 23%. We continue to expect non-GAAP EPS of approximately $1.07 to $1.11, assuming a tax rate of approximately 34% and a diluted share count of approximately 40 million shares. Turning to the second quarter of 2012. We are currently targeting non-GAAP revenues in the range of $65 million to $68 million, which represents annual growth of approximately 17% to 23%. From a profitability perspective, we are targeting non-GAAP gross margins in the 61% range. We expect to generate a non-GAAP operating margin of approximately 24%, with non-GAAP EPS of approximately $0.26 to $0.27, assuming a tax rate of approximately 35% and a diluted share count of approximately 39.7 million shares. In summary, Synchronoss delivered strong first quarter results. Looking ahead, we are very excited about the expansion in our cloud-based platform, major expansion in our relationship with Verizon, closer ties with Vodafone and growing momentum from an overall perspective. In addition, we expect our new channel with AT&T to scale at a more profitable lever -- level for the long-term, and we continue to strengthen our overall relationship, including a focus on how we can continue to work on additional joint opportunities. With that, let me turn it back to the operator, and we'll begin our Q&A.

[Operator Instructions] And your first question comes from the line of Tom Roderick with Stifel, Nicolaus.

So a bunch of questions to work through here, particularly around this AT&T contract. So now you've given us some nice details into what it is. So let me ask you a dumb high-level question which is, when you talk about customer care, can you give us just some sort of an explicit use case scenario as to functionally what you're doing? And then how is this different than the existing channel you were supporting for care and telesales at AT&T?

Sure, Tom. So the traditional channels that we had supported in care were really primarily driven around direct gross ads or upgrade type of inquiries. This channel is more focus around existing customers who have support questions that may want to upgrade or do other things as a by-product of that, but it's really driven around additional service questions that they may have in around what AT&T offers.

Got it, okay. And so when you throw the wrinkle at it with SpeechCycle, maybe you could kind of talk us through the timing of that wrinkle, what drove that? I guess, from the outsiders perspective, it would strike me that perhaps part of the deployment wasn't quite going as you had planned or you needed to accelerate the deployment and throw SpeechCycle with some additional technology into the mix. But maybe kind of walk us through the thinking and logic and timing around the SpeechCycle acquisition. And then, beyond that, do they bring revenues beyond just the AT&T relationship?

Yes, Tom. It really starts, if you look at our business as a whole, right, when we try to engage a new channel, we can -- we'd like to get to 100% automation. That's not feasible for a bunch of reasons. One of the reasons at times is just there's process changes that the service providers would like to implement just because they'd like to have touch points. But the second element of it is always around some voice component that comes in no matter what you do from a transaction or processing perspective. There's a voice element to it. And ultimately, we looked at our businesses as, how can we continue to provide a good experience and increase the overall automation rates? So it became very logical that coming up with solutions to deal with voice elements of transactions into our gateway and our technology probably made sense for us to look at. So we started that process a while ago. What really drove it to fruition was obviously, as we started to ramp this particular channel, it became apparent to us that we could find a good opportunity here to solve this voice with this voice challenge but would open up what would previously not be a set of channels for us to get involved in, such as customer care, support-type of functionality that we could possibly bring the, I'd call, breadth of our solution from both our existing channels and our new voice side. And that was the second primary driver that gave us this opportunity. So net-net, we needed to put the right technology in place that could give us the opportunity to gain access to many more channels that previously we wouldn't have access to. And ultimately, it provides a much more holistic value-added solution, which is what AT&T's partners expect from us from time to time, and that's ultimately the drivers of where we ended up.

Great. Last one for me and just kind of flipping over to CN Plus. I mean, the Terremark deal seems pretty extensive in that. It seems like you kind of have unfettered international access. But as we think about the functionality that you can kind of put through that relationship and, specifically, as it relates to Verizon and then Vodafone Netherlands, should we be thinking about this as sort of a unit expansion game, meaning, primarily on the synchronization side or are there elements of the SmartMobility and social address book platform that you kind of speak -- that you guys can speak to that will be part and parcel to this relationship expansion?

Yes. Well, Tom, I obviously can't get into the specifics of the deployment schedule, so you can imagine from our end date [ph]. But I can tell you that the primary driver really is to develop a cloud-based platform that the carriers can use as a platform as a service to really take advantage of the overwhelming wealth of information that they have on their customers to provide loyalty-type programs and other things that they can provide their end subscribers. Clearly, it probably makes better sense in the last quarter acquisition of Miyowa and the social graph element that you can combine with the address book is a pretty powerful set of information that could take a service provider from looking at the cloud from a defensive position to driving over time a revenue generation position. And I think we saw that. Our anchor client saw that. And if you can create a really extensive platform as a service, that marries the 2 that can turn into a revenue generation on a global basis. I think you've got something exciting there. And we believe based upon the investments that Verizon are making with us to get to 80 million and beyond, which ultimately one could take a look at it as more of a kind of real conservative view, shows you the emphasis that they're going to have going forward and the strategy going forward and more importantly, the strategic role that we're going to be playing in it.

Your next question comes from the line of Thomas Ernst with Deutsche Bank.

Nandan Amladi on behalf of Tom. You referred to some progress at Vodafone. Obviously, Germany and the Netherlands are live. Anything else to report on the other properties?

Nothing on the new expansion properties other than, like I said, as we had mentioned earlier, the structure of both our Verizon and Vodafone deal and our new global deal with Terremark allows us to provide a pretty compelling value proposition for other OpCos. As you know, those decision-makings are done in-country. But when you look at the breadth of services that we're providing and obviously mentioned in our press release today how happy The Netherlands was with their initial deployment and success with us, it gives us a lot of confidence that we see good opportunities continuing into multiple OpCos over the next few years.

And a quick follow-up, if I might. Gross margin guidance for the year seems to imply a fairly steep back-end loading. Is that coming from AT&T or are there other contributions to it as well?

Well, it's a couple of things, right? As we continue to expand the CN Plus platform, the cloud enhancement platform that Steve is referring to, it has a higher margin profile, so that's one. And that's going to be more in the back end of the year. And two, is this care channel that we were handling did have lower margins than we would like to have, so that slowing down would actually give us some margin lift as well in the back end of the year. So those 2 things are big contributors.

Your next question comes from the line of Scott Sutherland with Wedbush.

So first, again, back to the Verizon relationship, the cloud-based initiative you have there. Of the previous services you offer in the SmartMobility, the Network Address Book and some of the other technologies, is this being bundled into the new relationship and more professional services are being put in the cloud here as you launch this next -- in the back half of the year for transactional basis?

So this will be -- so the SmartMobility is separate. The Network Address Book, Scott, is part of this, as well as other road map acceleration items that we've added in. Some of them, we've talked about from a social perspective in and around what we're doing.

When we think about this moving from services to transactions or more of a recurring model, how does this get played out? Is it going to be a per active subscriber or a subscriber is going to have to sign up to this or is it going to be pushed out to all the Verizon and potentially Vodafone Netherlands type subscribers?

It varies by market. There are some degree of services that I'll say, generically, the carriers will offer for free and then there's some additional services that there'll be fees associated with. And it will mostly be driven by subscribers that become active subscribers that are transacting on a monthly or quarterly basis.

Okay. My last question was back to AT&T on this new channel. So you're ramping it up, and I think you're 75% complete in Q4. Can you talk about how this might set you back, you're kind of revamping it and do you catch up on the revenue eventually or the transaction starts to pick up more in 2013? When do you see the full impact coming back from AT&T's channel here?

Well, I think even with the change of deployment strategy this year, it's still relatively on par with some of the channels that we have. We believe in the long run, in '13 and beyond, it has potential to be one of the largest channels. But as Larry indicated, towards the latter half of the year, as those transactions come back in a much more automated fashion, it will have the contribution that's much more aligned with our business model but, more importantly, open up what we believe will be additional opportunities in service areas at AT&T that we typically don't have today.

Your next question comes from the line of Shyam Patil with Raymond James.

First question, just wanted to make sure I understood what was going on with the AT&T channel. Did you say that part of it is due to AT&T consolidating some of that channel and then the other part of it being it was too manual for Synchronoss to automate? Did I understand that correctly?

It's -- yes, basically, Shyam, an approach to that, when we started to look at where we could add longer-term value and what's much more aligned with what we're doing, that we thought this was a great opportunity to introduce the voice technology, which we'll then start to apply more smart with AT&T on transactions that make sense and then grow those over time.

Great. And around Miyowa, any color you can give us in terms of the contribution? And if there was -- how it came in relative to expectations?

We're not actually breaking out Miyowa. As we said last time, we did mention what we thought it would contribute. And it's pretty much in line with where we thought it was going to be so far, Shyam. But it's actually integrated into our offering. As Steve pointed out, it's a big part of what our cloud initiative is. And so what we had said is it would contribute up to as much as $10 million for the year. And it's doing just that, but it's an integrated offering.

Great. Just a couple more questions. SpeechCycle, it seems like they were more of a cloud-based IDR with apps around cable tech support. They were trying to get more into the telco space. Is that accurate? And how should we think about the breadth of their support capabilities and how much R&D you'd have to invest in them to roll them out at AT&T more broadly?

Well, a lot of their natural speech recognition technologies and the way that it was designed and their cloud approach is very similar to, think of our ConvergenceNow gateway in which we can plug those voice transactions in and then manage and offer those back in, in combination with our data and voice transactions. So from a design perspective, it fits really nicely. From an AT&T and wireless perspective, most of the cases obviously are very cable driven but proved that it can handle very complex voice activations, and so we're looking at that similar process. We'll have to make some investments, obviously, into making those use cases work to the extent that you would need to do some of the wireless environment. But the overall technology footprint fits very well with our gateway that we have established today.

Great. And my last question, could you talk a little bit about your level of visibility and confidence into the back half revenue guidance?

Shyam, we do the same thing as we always do. We've always had very good visibility in the upcoming quarter. In the full year, we actually look at the softer forecast that we get from our customers, our clients. So nothing has changed as it relates to that. So it's really -- our forecast is built up from a bottom's up view. We've got a very high percentage of that revenue that is already in place, so it's really dependent upon the volume being kicked in by the carriers but, again, really strong visibility in the upcoming quarter, less visibility as you go for the full year but good visibility.

Your next question comes from the line of Julio Quinteros with Goldman Sachs.

Just in terms of the -- just to make sure I have the numbers right, the Miyowa contribution, still about $10 million for the year. And the SpeechCycle piece, what is that supposed to be for the year? I thought I heard something in the $5 million to $7 million range but...

Yes, $5 million to $7 million is basically what we're counting on from SpeechCycle for the existing base of transactions that we got from SpeechCycle for the rest of this year.

Okay. And then what about the Terremark part? You said low end of $200 million over 5 years. What part of that is in 2012 for your non-AT&T revenues?

So there's a portion of that, that would be included in this year. So the contract would start in 2012, obviously, could be a portion of that, and it's based on, obviously, subscriber growth that we're looking at today, as well as the investments that we're making. There's some upfront investments that Verizon had asked us to make from a road map acceleration perspective, which is what we're doing.

Just any sense on when that starts off time in months, how many months of contribution or anything along those lines?

Yes, so right now, what you have is a contract that's migrating from an existing contract to a new contract. And what it's doing is, Julio, as you know, since our relationship with Verizon began, we had gone from what was, at one time, a licensed model to kind of a hybrid or transition period where we went from transactions to -- I'm sorry, from licenses to subscription to a form of transaction. What we're doing as we move into the year is we'll go to a more of a active subscriber type of transaction model, and that would really start kicking in, in the back end of this year, probably more so in the third quarter. And then, obviously, no different than any of our other transactions, it is based off of volumes. So the more active subscribers we have, the more revenue we'll have associated with that. But there are minimums, to Steve's point, in the agreement so it has the opportunities to be greater as we move into the further years.

Okay. And maybe just on a separate subject. Can you guys comment on some of the efforts by AT&T to slow consumer upgrades? If you kind of look at this systemically across the space with wireless carriers commenting that they want to slow the consumer upgrade pace. What does this mean for your business and can you guys provide some context around how you think about the potential impact of this longer term?

Well, I think, from a high-level perspective, just in general -- not related specifically to AT&T, but just in general, I think that a lot of carriers today are using the upgrade process as a way to introduce new devices and new launches. And so those new devices and launches that have an ebb and flow to them are becoming more timed around particular devices than they've ever been in the past. So maybe from a way they get to roll out versus your standard every 2 years you get an upgrade et cetera, you probably see some fluctuations around maybe delaying incentives with customers around the right device that they may want to push for that particular quarter or month. But at the end, we're not seeing any fundamental changes in terms of people wanting to upgrade every few years to some form of a new device. The timing definitely can be driven around promotions or lack thereof.

And what about activation volumes as they relates to your business directly? I mean, does this elongate the opportunity, make it more compressed? How do you think about that part of it?

It ends up that -- you have -- if you're looking more postpaid, that's an area that certainly is slowing down but where an area that we also play in is when prepaid and multiple types of connected devices and tablets, et cetera. Most people today have one -- more than one device, and so those are -- they're positive guys. At the end of the day, I think what we really see is the carriers volumes, in general, are really being shifted more around these particular promotions that they may want to get behind any given month or quarter, which absolutely would affect volume. But if you look at it over a year period, typically, these guys will run the same amount of promotions but they make time more [ph] increased with spike periods here and there.

Your next question comes from the line of Steven Beckert with Robert W. Baird.

First of all, in regards to AT&T's new customer care channel or your new channel for them, I was wondering if you can comment on who you're displacing there? Are you displacing an internal solution that AT&T had or another vendor?

Well, right now, a lot of the work is a combination of process design that the customer is going under and ultimately trying to reduce the manual flow of transactions that come in today.

Okay. And I'm wondering just speaking more higher level, is customer care an area where you'd like to play more seriously in the future, maybe independent of activations and upgrades? Is that an area where you'd like to get more aggressive now that you’ve built this platform?

Yes, I think part of the relationships that we've had with AT&T is that they've look at their market in terms of channels we've traditionally supported in the past that's been very driven around gross ads and upgrades. AT&T, as well as others, are looking at the industry and making sure that they provide really good customer automated support across their product lines that they've acquired. And this technology definitely gives us an opportunity to really be credible into channels before that we didn't have much to play on. That's absolutely one of the longer-term factors that we've done, no similar than what we did when we made the investments in the early days around the online channels and where we thought there was an opportunity there.

Okay, great. And I may have missed this earlier, but AT&T in the quarter was actually quite strong. What was the core driver of the strength at AT&T in Q1?

Well, it came in at where we expect it to come in, but the drivers would have been the existing base of business we have, as well as some of these transactions that we just mentioned from this new channel. Now it did come in at a margin a little bit lower than we normally have from a typical transaction, but it's a combination of our existing business, as well as this new channel.

Your next question comes from the line of Daniel Ives with FBR Capital Markets.

Could you just talk about some of the new opportunities internationally in regards to how you expect that to ramp second half of the year?

Sure. Well, I think there's 2 opportunities. One is in our traditional CN products that we've had good success in, in Germany. Secondly is I think a lot of the cloud-based initiatives that were focused on both directly with our customers like Vodafone et cetera. Obviously, when you look at that environment, there's all different opportunities. Certainly, the acquisition of Miyowa will help us with some of the opportunities we're looking at in and around [ph] as well. So it's a combination of both of the initiatives that we think have some opportunities there for the second half of the year.

Your next question comes from the line of Lauren Choi with JPMorgan.

Just 2 questions. So first, around Verizon. So when you signed a relationship with them, I think you renegotiated after the FusionOne acquisition, you talked about a road map. I just wasn't clear. So now that you're signing another 5 years, was that really like, I guess, driven by kind of the Terremark relationship that you're resigning it or is it separate and there's actually more product set that could increase the ASP?

So the original agreements were just amendments of the existing FusionOne contracts, just for clarity. And they were added onto to support some of the work that we were doing and, obviously, SmartMobility was subsequently added to that. This is really taking a much broader platform-as-a-service approach and putting in the right infrastructure over the next 5 years to support, a, larger amounts of volumes, so from the 40 million today to 80 million or greater. And then secondly, there was some road map acceleration work that Verizon had asked us to work on that, obviously, I can't discuss via our NDA that will be part of this deployment as we move forward. And so this one is much more, I would think, more of a holistic type of approach for a cloud platform that would incorporate all the elements of it. Terremark happened to be an asset that made a lot of sense for both parties to help get to where our desired end state is quicker.

Okay. And just a follow-up to that. You talked about, in the past, the ASPs may be low, like single digits? But then over time as you add on certain solutions, like SmartMobility, it can raise like $0.50, $1. Is that road map accelerated as well now?

Yes, so there's opportunities to, based upon how they choose to deploy it in markets and different functionality to basically provide either, a, additional, for lack of a better word, royalty fees on the devices themselves, or create opportunities for the providers to leverage their information and their brand with their customers to offer their customers kind of targeted deals that potentially could create future revenue streams for them. So it's combination of those 3 elements. But clearly, on the expanded product offering down the road, it is much more comprehensive than the original synchronization work that we had done a few years ago, if that's what you're asking.

Got it, okay. The other question was around, I guess, AT&T. Sort of one for your competitors, Amdocs, saw some slowing in projects that they mentioned it on their call. I just wanted to ask outside of what you mentioned, are you seeing anything, disruptions and stuff that you're doing there or maybe is there more opportunities at AT&T as well?

Lauren, it's a tough question because we really work in the OpEx area and not necessarily in the CapEx area, and I think a lot of what Amdocs does is probably in the capital expenditure side. So ours is really, we've already got, if you will, the pipes in place to handle the transactions. It really comes back down to whether or not the volume is going to come in and drive that volume up and translate to transactions for us, which ultimately translates to revenue. So that's really the driver for us, not necessarily new professional services type of arrangements.

Okay. And then just a follow-up on AT&T. So the contract there, still like a 1-year extension. Do you guys have any views in terms of are you looking to sign longer term or still kind of extend enough for another year?

Well, we haven't really added anymore comments other than the fact that the contract is in the automatic 1-year renewal phase, so that's what we've talked about. There's really not much more to add to that at this point.

Our next question comes from the line of Greg Burns with Sidoti & Company.

AT&T saw a little slowdown in subscriber growth. So I was wondering if you could help me out at better understanding the value of a new customer addition versus more of a life cycle transaction, like an upgrade from existing subscribers, just think of those?

Well, I think in the past, I mean, the way we've worked on our channels is clearly -- we're definitely, as Larry said, grow based upon the number of activations or upgrades that come through the channels we support. On the service side of it, so this particular new channel, it's not necessarily direct correlation, the customers that call in that are looking for some form of service or support, and those particular customer opportunities, I think, with the adjunct to this voice technology today gives us a great opportunity to start to make more penetration in those types of areas, which are new channels, so to speak, that we didn't have access to in the past.

But when I think of the legacy CN business, is there a difference between a new customer -- a totally new customer coming to the AT&T platform versus an existing customer upgrading a -- their old phone to Synchronoss?

It could -- based upon the channel, it could be. So typically, most of the interactions we would get is somebody trying to upgrade or buy or add some type of particular plan on. With the customer service side, you may have some these coming in and just trying to understand more about the use of the products or how to best get information to order new products potentially down the road or being educated about how service particularly works. It doesn't necessarily link directly to an activation or an upgrade or some plan that they may decide to purchase as an add-on.

And one last one. I know there's some transition in the professional service line of revenue, but could you just give us an idea of, I guess, what percentage of that is -- what you would consider more recurring type revenue and what percentage is project based?

Well, I think, the best -- the better way to answer that is that our transaction revenue was up sequentially. What is down is that the piece that I referred to which is the subscription base, so we're in that kind of that transition stage where we have some professional services as we get this new cloud initiative up and running. So that's really going to translate to services revenue for the Q1 and Q2 and then -- and revert back to transaction revenue in the back end of the year starting in Q3. So there's really not a specific number I can give you because of the combination of a lot of things that are being done, but it is important to note that our actual transaction revenues from Q1 to Q4 was actually up.

Your next question is a follow-up from the line of Tom Roderick with Stifel, Nicolaus.

Hey, guys, I apologize if I'm kicking a dead horse on this AT&T topic. But I'm just trying to get a little bit more clarity on the concept of 5% to 10% growth. I guess the unspoken concern around T is that you just went through the contract exploration on a 3-year deal. Now you'll go through one at the end of this year. I mean, just in terms of transactional growth versus any sort of repricing elements that might be [indiscernible] a onetime drop in pricing for this year, maybe you can kind of talk to that. Because, I guess, if I look at 5% to 10% growth for T and then take out this new channel, which, I guess, we can sort of take some guesses at but, I mean, roughly, x the new channel, that it would seem like growth would be flattish on AT&T. How should we think about that trade-off on transactional growth versus any pricing pressure on the contract expiration? And I guess, those are the topics that I'd be interested in learning a little bit more about.

Tom, we didn't have any amendment as it relates to pricing for our transactions on this new arrangement. So I mean, that's one way of answering the question. So it's -- the renewal was renewed on the same terms from a financial perspective as the previous agreement had in place before, so nothing has changed as it relates to that new agreement, as it relates to the pricing.

Okay. And would there be any concerns that as you get to the end of this year, that you have to go through that discussion again? Just thinking about traditional communication software contracts, anything in this arena, carriers typically hold some sway over pricing and seems a little bit unusual that you haven't had to give any up here?

Yes, I mean, Tom, there's no way to predict that in the future. But I'd tell you that in our contract, which is atypical of typical what you see in soft renewals is as we onboard new channels and add new transactions, there are economic discussions at every quarter, there's not - let's wait 2 or 3 years to have that discussion. So that's an evolving process as we onboard new channels, as we add new transaction types. And then, typically, that's how it's gone in as you look at our deals. They're really managed to govern, and govern is for lack of a better word, at the individual channel level. And those channels are all at different rollout schedules. And when those schedules come out, one of the things that we've always been able to do a good job on is have enough value added into new technology and things that we're doing, like the investments we're making here on the care side, that pays dividends down the road.

Yes, great. Last one for me, I mean, just to turn to the more of the bullish angle around the Vodafone and Terremark relationship. So you mentioned that $200 million over the next 5 years would be sort of on the low end of what you would expect that relationship to contribute. Clearly, a pretty strong statement and a pretty bullish statement. Where do you sort of -- what sort of assumptions go into that, that give you the visibility and confidence to give that discussion?

Well, I think it's -- when you look at the number of devices that we support today at Verizon, which you've talked about in the past, and growing that number to 80 million, there's a lot of confidence that we're going to be able to take that subscriber growth today and continue to move it out, along with some of the road map acceleration items that we've been engaged in with Verizon and investments that they've made with us. The combination of those 2 clearly give us a view that we think when you look out over a 5-year period, is the low end could be in the $200 million range. To Larry's point, clearly it becomes a factor next year as to how quickly will people devolve to these devices, how much of the software will they use in the particular devices. But so far, the experience we've seen out of the gate has been pretty encouraging.

I would now like to turn the conference back over to Mr. Steve Waldis for closing remarks.

Great. Well, thanks, everyone, for joining us on our first quarter call, and we look forward to speaking with all of you soon.

This concludes today's conference. Thank you for your participation. You may now disconnect. Have a great day.