Lawrence R. Irving - Chief Financial Officer, Executive Vice President and Treasurer Stephen G. Waldis - Founder, Executive Chairman, Chief Executive Officer, Member of Key Employee Stock Options Committee and Member of Business Development Committee

Shyam Patil - Wedbush Securities Inc., Research Division Tom M. Roderick - Stifel, Nicolaus & Co., Inc., Research Division Lauren Choi - JP Morgan Chase & Co, Research Division Michael B. Nemeroff - Crédit Suisse AG, Research Division Nandan Amladi - Deutsche Bank AG, Research Division Tavis C. McCourt - Raymond James & Associates, Inc., Research Division James Moore - FBR Capital Markets & Co., Research Division Paul B. Thomas - Goldman Sachs Group Inc., Research Division

Good day, ladies and gentlemen, and welcome to the Q2 2013 Synchronoss Technologies Inc. Earnings Conference Call. My name is Cathy, and I will be your operator for today. [Operator Instructions] As a reminder, this call is being recorded for replay purposes. I would now like to turn the call over to Mr. Lawrence Irving, Chief Financial Officer. Please proceed, sir. Lawrence R. Irving: Thank you. Good afternoon, and welcome to the Synchronoss' second quarter 2013 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 our most recent filed annual report on Form 10-K and quarterly report on Form 10-Q. With that, I will turn the call over to Steve, and then I'll come back a bit later to provide some further details regarding our financials and our forward-looking outlook. Steve? Stephen G. Waldis: Thank you, Larry. Good afternoon, and thanks for joining us on our call today to review our second quarter financial results, which were highlighted by revenue that was above the high end of our guidance. Our non-GAAP revenues were $85.2 million, representing 27% growth on a year-over-year basis and above our guidance range of $82 million to $84 million. Both our Activation Services and our personal cloud delivered strong performance during the quarter. From a profitability perspective, we achieved a non-GAAP operating margin of 23% and a non-GAAP EPS of $0.31, which was at the high end of our guidance. At the same time, we made significant investments in both our personal and business cloud platforms. Now given our strong success this past quarter and early indications from our customers, we will be increasing our full year revenue outlook, as Larry will discuss in a few minutes. Now Synchronoss executed at a high level in the second quarter, and we have now successfully deployed our Personal Cloud Platform with each of our major mobile operators. We are encouraged with the results to date, including how our Personal Cloud Platform had scaled at each of our mobile operator customers; early success in subscriber adoption rates and looking -- and forward-looking customer forecasts around cloud adoption; and how our operators are planning with us to further increase their forecast and internal investments in their cloud strategy over the long term which, in turn, is the reason we are increasing our investments in 2013 to support this future growth. Now the investments we have made over the past several years, building out the world's most comprehensive Personal Cloud Platform and signing up multiple Tier 1 mobile operators, is in the early stages of paying off. And we believe that we are well positioned to drive meaningful growth in this business over the long-term. Now during the second quarter, we made significant progress advancing our personal cloud deployments. We successfully completed the Verizon Wireless launch in late April and brought additional devices and features to the market during the quarter, including support for the iPhone. Together, we will continue to bring additional devices, including connected devices and additional capabilities to market throughout the rest of the year. We have also successfully completed the launch of our Personal Cloud Platform in 11 of the 14 Vodafone markets, slightly ahead of schedule. And our Telefonica cloud deployment began scaling in the second quarter and they are set to begin more significant promotions around their cloud during the second half of 2013. And we continue to make progress at AT&T, launching some initial cloud efforts on key devices, and we're optimistic that we'll continue to make additional progress going forward. Now as operators roll out more devices, offer more upgrades and promote family sharing plans, the central glue for the mobile operator is fast becoming the personal cloud. By making it easy to use and capable of storing all of the subscriber's content on all their devices, the mobile operator regains its critical role in the customer experience. Now we believe that subscribers will continue to look towards mobile operators to manage their connected life from their smartphones and devices to their homes, cars and much more. Now some of the forecast on the amount of consumer content that will be stored in the cloud are staggering. Gartner predicts the worldwide need for total consumer digital storage will increase nearly twelvefold by 2016. The growth is even more significant if you zoom into the personal content locker part of the personal cloud market, which is the part of the market Synchronoss is most focused on. Cisco, in its global cloud index, is forecasting an annual compound growth rate of over 100% through 2016 related to storage in the personal cloud market alone. Now as you'd anticipate, this expected expansion of both 4G LTE networks and growth in storage opens up significant opportunities for mobile operators as they position and price their cloud offerings for a compelling value proposition to their end subscribers. Now we've previously shared our view that 2013 would be all about mobile operators testing and iterating their cloud strategies, including adjusting their offers to optimize subscriber adoption and market share. This process has been ongoing for most of the year, but we are seeing signs that most mobile operators are getting close to finalizing their larger and more visible go-to market plans, albeit, later this year. Now we expect this to be a dynamic process, as mobile operators are just now launching their initial cloud strategies. And so far, we have seen a growing number of adoption of family share plans that include numerous mobile devices, driving even greater demand for cloud storage. Now given that better-than-expected adoption rates in measured marketing efforts, combined with the very tangible business efforts to these -- business benefits to these operators, most of our mobile operator customers are now looking to roll out more comprehensive offers into the market sooner than previously expected. These offers are expected to include more data classes and more storage per subscriber. Now in order to prepare for these launches, Synchronoss has been busy investing across-the-board for our deployment so we can be ready later this year to handle a higher ramp in volume and usage than our customers were initially projecting. And as we head into the 2014 and from a longer-term perspective, we believe the initial mobile operator forecast that we are seeing can only be viewed as very good news for Synchronoss. Mobile operators are increasing their investments because they're seeing strong initial adoption rates and consumer demand. And Synchronoss stands to benefit from greater amounts of storage offered by mobile operators. Now based on these early results, we are more confident today that the mobile operators will be successful with their personal cloud initiatives and Synchronoss is well positioned to capitalize on this opportunity. Now as our customers plan to ramp their storage offerings to support future marketing initiatives and demand from their subscribers, Synchronoss has made additional upfront infrastructure investments necessary to enable the implementation of these strategies. Now you can see this in the high levels of capital expenditures we incurred in the second quarter, which Larry will review in just a few moments. As history has proven out at Synchronoss, and we have discussed in the past, the only time we make such infrastructure investments is when our customers provide us with committed demand and a clear path for increased revenues at Synchronoss. So this should be considered a sign of our confidence in our business. It's important to note that this trend-increased storage offerings is being seen throughout the market, including from traditional leading storage players, who have more than doubled their storage for existing subscriber base. And while these traditional vendors are offering additional storage, they remain vertically focused and they do not offer the cross-platform sync and sharing capabilities that our mobile operators are able to offer their customers via our personal cloud. And on top of this, our ability to support connected devices and smartphones, SMS messages, MMS messages and device settings puts us truly at the center and the glue of the personalized customer experience for operators. Now during the second quarter, we also begin development efforts around our business cloud platform that we announced on our last earnings call. We remain on track to deploy limited trials with our early adopter customer in late Q4, early Q1, and to further expand this deployment as we move into 2014. And while we're still clearly early as it relates to our business cloud offering, it's worth pointing out that we've already been in touch with many major operators that have expressed interest in our solution. Now let me spend a minute on our Activation business. It was a strong quarter for our mobile operator customers who ran successful wireless upgrade promotions and programs that drove volumes slightly higher than our expectations. A major driver in the business is the continued proliferation of the family share plans, which are driving an increase in activations around tablets and other connected devices onto the operator networks. Getting improved attach rates on connected devices is a key focus for mobile operators, and their success at increasing the number of devices per subscriber will benefit our Activation Services performance. I would also like to point out that contributing to activation growth is the various plans now being offered by mobile operators to subscribers to upgrade to more devices much more frequently with new marketing incentive plans, reversing an industry trend to delay upgrades that we've seen over the past few years. Now we also generated solid performance in our activation broadband business. We have integrated some of the spatial assets into our existing activation broadband business and we have early traction in broadening our broadband business. We have also expanded our relationships with major broadband and cable operators, both here in the U.S., Canada and Asia. Now from an innovation perspective, the first half of 2013 has been active and exciting time for Synchronoss. We previewed an array of new products at Mobile World Congress that demonstrated the connected home and the connected car that expands the number of devices that are supported by our Personal Cloud Platforms and opens up even further activation opportunities. The response from customers has been extremely positive. And we have been building a pipeline of opportunities in this area that will increase activation opportunities to new markets for Synchronoss outside of our traditional smartphone and tablets. Now during the quarter, we also rolled out our activation technology stack, which incorporates our on-device broadband activation and inventory as well as advanced speech-recognition technology, into an integrated product offering. We rolled this out at our broadband user conference in the second quarter, which was attended by over 60 operators from 25 countries, and the initial feedback was very encouraging. In summary, we look at the second half of 2013, we are optimistic on the outlook for our business. We have now successfully brought each of our initial personal cloud customers into production, and we are now focused on working with them to help prepare new offerings and drive increased subscriber adoption. We are increasingly confident in the success of our personal cloud deployments based on the early adoption rates, the forecast that we're seeing from our customers related to future adoption rates and the overall investments that they are making in their cloud strategies. In addition, our Activation Services business continued to perform at a better-than-expected level. With that, let me turn it over to Larry. Lawrence R. Irving: Thanks, Steve. I would like to begin with a review of our second quarter financial results, which met or exceeded our guidance range, and finish with our guidance for the third quarter and full year for 2013. As Steve mentioned, we are now in live production with each of our major personal cloud customers. The early success we are seeing in adoption rates and future storage forecasts from our customers have positioned us well to generate significant long-term revenue growth. At the same time, our strong revenue performance and commitments from our mobile operator customers give us confidence to continue to make substantial investments in our Cloud Service business. We are in the early stages of a dynamic, high-growth market opportunity, and we are committed to making the investments necessary to ensure our long-term success. We believe this is the right strategy and will generate significant operating leverage in shareholder value. With that overview, let me provide additional details on our second quarter financial performance. Starting with the income statement, GAAP revenue was $83.8 million for the second quarter. Non-GAAP revenue, after adding back $1.4 million of deferred revenue write-downs from certain acquisitions, was $85.2 million, which is above the high end of our guidance and up 27% on a year-over-year basis. Our non-GAAP Cloud Service revenue in the second quarter was $26.8 million, which represented 31% of our total revenue and year-over-year growth of 30%. Our Cloud Services revenue growth was driven by the implementations of our Personal Cloud Platform with major Tier 1 mobile operator customers, including Verizon Wireless, Telefonica, Vodafone and AT&T. We are pleased with the performance of this business so far in 2013, and we anticipate revenue growth to accelerate in the second half of the year, as our mobile operator customers begin to more heavily promote their cloud services and our offerings get rolled out to additional devices, which we expect to ramp customer adoption. Our non-GAAP Activation Services revenue was $58.4 million for the second quarter, representing 69% of our total revenue and year-over-year growth of 26%. We saw a broad-based strength in Activation Services during the second quarter, and our performance at AT&T was ahead of our expectations. Further on the revenue mix, 66% of our second quarter non-GAAP revenue came from recurring sources, namely transaction processing and subscription arrangements, while professional services represented 21% and licenses made up the other 13%. 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 in our Investor Relations section of our website. Non-GAAP gross profit in the quarter was $51.2 million or a gross margin of 60% compared to a gross margin of 62% in the year-ago quarter. The year-over-year decline in gross margin was largely driven by the upfront investments we are making to ensure we are able to scale with the expected ramp in our Cloud Service business and the increased storage commitments from our customers that Steve referenced earlier. Non-GAAP SG&A was $11.1 million or 13% of non-GAAP revenues, which was flat compared to the year-ago quarter and down from 15% last quarter. R&D was $14.5 million or 17% of non-GAAP revenues, which was consistent with the year-ago period and down from 20% last quarter. The sequential reduction in R&D expense was driven by lower integration costs associated with the NewBay acquisition and the heavier investments needed during the first quarter to prepare additional devices for launch on day 1. As we look towards the rest of the year, we will continue to make meaningful R&D investments in our Cloud Service business, including the business cloud solution. Non-GAAP income from operations was $19.5 million in the second quarter, representing an operating margin of 23%, which is up from 20% in the first quarter and down from a 26% operating margin in the year-ago quarter. As expected, our non-GAAP operating margin rebounded sequentially, as the restructuring plans we undertook as part of the NewBay acquisition positively impacted our overall cost structure. Our non-GAAP tax rate for the quarter was 37.5%, which led to a non-GAAP EPS of $0.31, which was up from $0.29 from the year-ago period and at the high point of our guidance. The number of weighted average outstanding shares for the quarter was 39.5 million, up from 39.1 million in the year-ago quarter. On a GAAP basis, second quarter gross profit was $48.3 million. Income from operations was $5.7 million and GAAP fully diluted earnings per share was $0.09. Looking at our cash. Total cash, cash equivalents and marketable securities was $61 million, down $6.1 million from $67.1 million at the end of last quarter. We generated $18.1 million in adjusted cash flow from operations for the quarter. Non-GAAP cash from operations excludes the payments for additional purchase price for acquisition earn-outs and the excess tax benefit of exercising stock options. Capital expenditures were $26.8 million, which compares to $17 million in the year ago period. Capital expenditures remain above our historical averages, as we continue to make investments in our infrastructure to support adoption rates and the increase of storage commitments forecasted by our mobile operator customers. Given our most recent customer forecast for the current year and beyond, we now expect our 2013 capital expenditures to increase from our historical rate of 10% of revenue to as much as 15%. This year is somewhat of an anomaly with respect to our level of capital expenditures, as we continue to ramp our infrastructures to support the multiple cloud deployments. We do expect capital expenditures to return to our historical rate of approximately 10% in 2014. With that, let me turn to the guidance, starting with the third quarter. For the third quarter, we are targeting non-GAAP revenues in the range of $89 million to $91 million, which represents year-over-year growth of approximately 29% to 32%. We are targeting non-GAAP gross margins of 60%, non-GAAP operating margins between 23% and 24% and non-GAAP EPS of approximately $0.33 to $0.34, assuming a tax rate of 34% and a diluted share count of approximately 40.3 million shares. Turning to our full year guidance. Based on the strength of our performance in the first half of the year, we are raising our revenue guidance range, and we are now targeting total non-GAAP revenues in the range of $345 million to $352 million versus our previous guidance of $335 million to $350 million. This represents growth of 26% to 28% on a year-over-year basis. We continue to provide a revenue guidance range that is modestly wider than our historical practice to reflect the early-stage of our personal cloud implementations and the fact we do not have a long history of benchmarking adoption rates. We've been encouraged by the adoption rates to date, and we are gaining valuable data with each passing month. But this market is still in its early stages, and we expect our customers will continue to test different strategies to optimize their adoption rates. From a profitability perspective, we are continuing to target non-GAAP gross margins in the 60% to 62% range with quarter-to-quarter variability, and non-GAAP operating margins in the range of 23% to 24%. We are modestly increasing the low end of our non-GAAP EPS range to $1.31 to $1.36, assuming a tax rate of approximately 34% and a diluted share count of approximately 39.8 million shares. This compares to our private -- prior guidance of $1.30 to $1.36. In summary, Synchronoss is executing at a high level through the first half of 2013. We are excited by the early success we are seeing with our personal cloud offering, and we see a significant multi-year growth opportunity in our Cloud Service business. We are confident that we are in the right markets with the most comprehensive technology offering and that Synchronoss is well positioned to scale into a substantially larger, more profitable company over time. With that, let me turn it back to the operator and we'll begin our Q&A session.

[Operator Instructions] Please standby for your first question, which is from the line of Shyam Patil from Wedbush Securities. Shyam Patil - Wedbush Securities Inc., Research Division: First question, just at a high level, not necessarily around the Verizon Cloud, can you talk a little bit about what kind of penetration your personal cloud offering is seeing in Droid and Apple ecosystems separately? There's been some talk that only the non-Apple ecosystem is addressable. I was just hoping you could talk about that a little bit. Stephen G. Waldis: Sure. Shyam, this is Steve. I would say that, obviously, I don't have any specific data around you. But we haven't seen one particular operating platform versus another that has significantly outperformed in terms of the adoption of the personal cloud. I mean, the key component is during the time of registration, the adoption philosophy of how customers either get on the device, via over-the-top applications on the firmware, stores the content and allows them to use it in various different components. Clearly, the best part of a lot of the personal cloud that we've been driving is the MMS, SMS and the initial setup of the device, which really puts us in a poll position to get on the device and to be used. And then in terms of how that's applied across the different operating systems, not just Android, but Androids [ph], Window and iOS, I don't have any specific data in front of me, but I haven't seen anything would significantly gear one towards the other. Shyam Patil - Wedbush Securities Inc., Research Division: And then when you look at the current customers you have for cloud rollouts, do you envision any of those reaching the scale of Verizon over the next 2 to 4 years or do you think that Verizon is somewhat unique in terms of its size, its revenues -- revenue opportunity? Stephen G. Waldis: Well, I think -- we think all of our -- we think the role of the cloud across all of our operators definitely, from a longer-term perspective, has great potential. And obviously, the ability or the speed for operators to get to that type of scale really depends upon how many years they've been at it. Some of the operators that we're dealing with have been working on this for a couple of years. So they're a little ahead of others. But I will tell you, the basic principles of what the cloud brings to the operators is universal in the sense that we are seeing very clear churn rates that are much lower with folks that are on the personal cloud. We're seeing additional data consumption for data plans being signed up for people that use the personal cloud. And ultimately, it becomes almost one of the biggest beneficial opportunities for someone who purchase a new device out of the gate. So adoption principles, we think, remain strong across all the base. Clearly, some of the early adopters will have a little bit of an advantage out of the gate, but we don't see any reason why, over time, and the way that the operators are viewing the importance of the personal cloud, that with the right marketing efforts and focus, that they all can't scale accordingly.

The next question is from the line of Tom Roderick from Stifel. Tom M. Roderick - Stifel, Nicolaus & Co., Inc., Research Division: So the first question I would have here, I'm getting a lot of questions, as I'm sure you are, just regarding the business model behind the cloud. And as Verizon has rolled out, and as you're doing more work for Vodafone and Telefonica and even AT&T, can you give us some more details into how this model is constructed? In other words, as a subscriber at Verizon specifically signs up for -- downloads the Verizon Cloud application, and even signs up for, say, 300-, 500-meg type of service, how are you sort of recognizing those revenues? Are they subscription-based? Do you recognize them monthly in arrears? And then to the extent that, that subscriber then goes to a sort of more of a premium service, let's imagine it's $3 a month, how much can you participate in the upside that Verizon is seeing from that? Lawrence R. Irving: Look, Tom, the model that we have for the cloud is a subscription model, so it's based on the subscribers that come in. And it is billed in arrears. So based on a number of different subscribers that you have will dictate the price point. Now we -- a couple of things drive that, all right? First is the number of subscribers. Two is the number of devices that, that subscriber has. And the third component of the pricing is associated with the amount of storage that you have. So those 3 areas are the pieces that drive the amount of revenue we get per subscriber for our customers. Tom M. Roderick - Stifel, Nicolaus & Co., Inc., Research Division: And Larry, you said in arrears, is that monthly or quarterly in arrears? Lawrence R. Irving: It's monthly. Tom M. Roderick - Stifel, Nicolaus & Co., Inc., Research Division: Okay. And the other thing that I remember from the Analyst Day, and you've hinted at it on the call here, is that the take rates have the potential to go up, particularly, as the carriers become more aggressive with marketing and as they look to shift devices that have the software natively in the firmware. So when you kind of take that as a backdrop here, what could we see going forward that could up the take rates, and to what magnitude could those take rates be improved? I mean, I guess at this point, where you have really seen devices shipped natively with the software on it, though it seems like that is coming, right? So maybe you can kind of walk us through that. Stephen G. Waldis: Yes. So Tom, this is Steve. So I would say that the basic ways of adoption pretty much from a mechanism perspective, I'll address it from a technology perspective and then the marketing perspective. From a technology perspective, they remain pretty much -- if you have an application that's over-the-top, you're going to get lower adoption rates in single-digits versus an app that's promoted, meaning that there's some call-to-action for you to download that app. But as you start to get either pre-embedded in the device itself, meaning the device is shipped with the application on it or the device actually sits in the firmware of the device, you're going to see significantly higher adoption rates. And that, as we have pointed out that in Analyst Day, has pretty much held true throughout the year. But what we're seeing that is very interesting and positive for us is that the number of data classes that the individual subscribers are really utilizing the cloud for on a go-forward basis and the fact that the amount of storage capabilities that they want to bring into the market, because our operators almost globally are seeing those customers with high data plans, at high data consumptions, i.e. higher postpaid-type of plans each month, are absolutely wanting more storage capabilities and more devices. What that is doing is we had given ranges of about $1 to $5 per subscriber range. We're actually seeing that probably a little bit north of the median there. And we think that, as they promote these further, that trend will be a positive guide for us in a go-forward basis. So adoption rates haven't changed from a marketing perspective. The way it's seemed positioned, we're pleasantly surprised that where we're falling out on the price per subscriber scale that we've pointed out on the Analyst Day, has been more on the higher side than the lower.

The next question is from the line of Lauren Choi from JPMorgan. Lauren Choi - JP Morgan Chase & Co, Research Division: I guess at the Analyst Day, you gave a total subscriber number. Can you, I guess, give that again or the latest? And then also, Verizon specifically, you talked -- mentioned like additional capabilities in connected devices through the end of the year? If you could elaborate and also just maybe talk about how that can move the needle for you guys. Or is it more of a smaller event? Lawrence R. Irving: So Lauren, I'll take the first question. I'll let Steve do the follow-up on your follow-up question. But in terms of the actual number of subscribers, we did provide something at -- in February. And what we believe is that's probably a number that we'll share on a maybe an annual basis right now. We're early in the stages of the adoption, so we think it would be less meaningful than what it will be, let's say, 12 months from today. So yes, it'll be something we'll share, but not on a regular basis. Stephen G. Waldis: Yes. And then, Lauren, in terms of your other comments you raised to Verizon, I obviously can't comment on any specifics due to our relationship with Verizon, but I can answer on a more of a generic sense across our customer base. What we're seeing from customers is more and more type of personalized data in and around multiple devices that don't just sit in the actual device such as the smartphone or tablet, but across many different devices. So a lot of our operators are looking at ways to get our cloud data into the connected home. They're looking for ways to get us into the actual connected car. All these different devices require additional data classes and support functions that add different values. On top of that, the industry dynamics that you're seeing today in that the amount of storage that you're seeing today in that the amount of storage that all the folks in the business of cloud today are offering are increasing dramatically. And that's a positive sign for Synchronoss because, obviously, that's one of the vehicles that Larry just pointed out in terms of how we get compensated for it. But what I think is really exciting about is that most of our operators on a worldwide basis are looking at this, I think, in a very smart way. They're realizing that by providing these types of capabilities above and beyond managing a very cool customer experience, that they're attracting many, many more subscribers in their neighborhood to be able to be more and more connected into higher data usage. And when you've got customers that are spending more money with you on a postpaid basis and those customers, obviously, are wanting to use additional storage to get there, when you add the churn rates, which are dramatically lower with the cloud, you really get a winning combination that makes a lot of sense. And that's some of the excitement you've heard earlier from us today in terms of how the carriers are looking at this market. Lauren Choi - JP Morgan Chase & Co, Research Division: Great. And then around, I guess, your Vodafone relationship. So you mentioned you guys are ahead of plan. Does that change the going live date? And just update us on, again, when that's supposed to be. Lawrence R. Irving: From a cloud perspective? Lauren Choi - JP Morgan Chase & Co, Research Division: So you mentioned, I think, some of the properties had been rolling out faster than -- yes. Stephen G. Waldis: Yes. Yes, so we thought during the course of the year, that by the end of the year, we would be in the majority of the 14 properties. And as we ended the quarter, we actually rolled out in all -- 11 of the 14 big properties. So we're about a quarter ahead in getting into the market, which has a lot of beneficial opportunities for us. One, obviously, getting into market quicker has additional opportunities for adoption. But as we -- as some of the operators start to employ more marketing and more ways to get adoption rates up, it gets us a little bit ahead of the curve there. So the deployments within the various different countries went faster than we had initially anticipated during the year. Lauren Choi - JP Morgan Chase & Co, Research Division: Okay. So then did your guidance include some Vodafone for the full year? Lawrence R. Irving: Well, yes. So our guidance takes into consideration all of our opportunities. So as Steve pointed out, Vodafone is just one of many of the subscribers we have in our base. But we have kind of a large range there and it takes into consideration kind of the early stages we are in adoption and really getting a better understanding on how that adoption is going to materialize over the course of the year. So Vodafone as well as all the other carriers are included into our guidance. Lauren Choi - JP Morgan Chase & Co, Research Division: All right. Okay. And last question. The CapEx increase and basically the infrastructure ramp of, I think you mentioned, multiple cloud deployments. Just kind of curious, does that also include some relationships that you may be starting and you haven't announced or is it just kind of current kind of relationships that you're expecting to increase to a certain level? Stephen G. Waldis: What I would do is -- it really, Lauren, what I can answer is it's a reflection of forecast that we received from our clients in terms of the expected adoption rates, the amount of storage that we would have to support those adoption rates. And we're also setting up, from geographically, different types of infrastructure to support it because that's obviously critical from a speed and responsiveness. So it's all of those factors alone. But clearly, it's being driven by demand that we've gotten a much more updated view from our customers in terms of where we think the adoption rates are going to be, not just exiting this year, but some of the committed forecast that we're starting to see in 2014.

The next question comes from the line of Michael Nemeroff from Credit Suisse. Michael B. Nemeroff - Crédit Suisse AG, Research Division: Just 2 of them. First, Larry, I just wanted to know how much of the revenue guide increase is coming from the Cloud Services business versus the Activations? And then the second question, I can't help but ask, looking at some of the reviews that I saw on the Verizon about the app, they've been less than stellar. If you could just maybe address that, I don't know, maybe you haven't seen them. I'm sure you can't help yourself from looking and seeing if there's something you guys can do differently. But I just wanted to know what you guys think about that? Lawrence R. Irving: Well, again, I'll take the guidance question. So in terms of a full year guidance as we move into the future quarters, we don't break out guidance between the 2 business segments, but I will point you to how we did here in the second quarter. So sequentially, the Cloud business did grow 13% sequentially. So -- but as far as providing guidance in Q3 and Q4 between the breakout between Activations and Cloud, we don't do that and we don't provide that. Michael B. Nemeroff - Crédit Suisse AG, Research Division: I'm saying for the year, Larry. Just -- not for the quarter specifically, but you gave us an annual number for Cloud Services. Lawrence R. Irving: Yes. So we don't provide the guidance for the full year, either. So... Stephen G. Waldis: And then, Michael, on your question about the adoption rates. I mean, we support literally millions and millions of subscribers a day that have a great experience. Clearly, there are less than 100-or-something comments that are even made in terms of applications. Clearly, the operators, in general, aren't known to obviously get favorable reviews in some of those write-ups across-the-board. A lot of them, obviously, have to do with the service. Some of them, obviously, are posted that may or may not be factually correct. I will tell you that some of the newer reports that you see coming out, for example, one today, I don't know the site, that mentions that one of the must-have applications in storage is one of the products that we have with our carriers. So you'll see that out there, I think that's been traditional for carriers. I can tell you that the adoption rates and the success that we're having and the tangible data has far exceeded our expectation.

The next question comes from the line Nandan Amladi. Nandan Amladi - Deutsche Bank AG, Research Division: Just a quick question on the CapEx guidance for the year, around 15%. Is that a 15% quarterly number or is that a total year percentage guidance? Lawrence R. Irving: No, that's a total revenue -- that's a total CapEx as a percentage of full year revenue. So when we finish the year, we expect CapEx to be roughly around 15% of our total revenues for the full year. Nandan Amladi - Deutsche Bank AG, Research Division: Okay. So just to make sure I'm thinking about this, I should sort of expect CapEx to decline throughout the remainder of the year then? This was a big quarter and the remaining will be smaller? Lawrence R. Irving: That's correct. The second half will definitely be lower than the first half. Nandan Amladi - Deutsche Bank AG, Research Division: Great. And then thinking about the subscriber adoption of storage and how your clients are using that. Are they thinking, "We're going to add higher tiers, but we're still going to charge them," or are they moving the free bucket up from whatever it happens to be for that client to a higher number? Stephen G. Waldis: I'm sorry, could you -- this is Steve, if you could repeat the question. Nandan Amladi - Deutsche Bank AG, Research Division: Sure, yes. So with your carrier partners asking for greater storage, are they allocating that storage to higher tiers, but still requiring their customers pay for it or are they allocating higher free storage tiers? Stephen G. Waldis: It does vary. I will say the overall trend across the operators has really been as you sign up for more and more data consumption as the data customer for them, you're eligible for more and more free storage, which doesn't impact Synchronoss. We're paid, as Larry described. But the operator because of the way they manage the value proposition may give you better free storage bands. And you'll see that trend across the world, the globe here, as you begin a bigger, bigger family, either family share, data consumer, in which the data usage or postpaid commitments that you're making are larger. Nandan Amladi - Deutsche Bank AG, Research Division: Okay. Just to make sure I'm clear, there is a direct connection between what the subscriber chooses for their data plan, their storage plan, and how much you're paid for that subscriber per month. Stephen G. Waldis: In general. But obviously, each plan has a little bit of gyrations to it but, conceptually, depending upon what promotional offers that they have, and I just -- generically, typically, it's those higher end customers in terms of either number of devices or family share plans or what have you, will typically get additional or higher storage amounts. And that trend that we see across-the-board, not just one individual customers, it seems to be pretty consistent. Nandan Amladi - Deutsche Bank AG, Research Division: Great. And then just final housekeeping question for me. Do you guys give AT&T as a percent of revenue? I must have missed that. Lawrence R. Irving: Yes. So we don't provide the customer detail any longer. We -- in the last conference call, we had mentioned that we would stop doing that. So we don't break it out any longer.

The next question comes from Tavis McCourt from Raymond James. Tavis C. McCourt - Raymond James & Associates, Inc., Research Division: I was wondering if, Steve, you could remind us kind little historical perspective on Verizon. They've had Backup Assistant and then Backup Assistant Plus, now Verizon Cloud. Has that always been Synchronoss or was that multi-vendor at some point, with Synchronoss taking share? Stephen G. Waldis: Sure. There is -- obviously, we don't get into specifics on any account. But I will say that there has been multiple vendors in the past that have provided solutions. Currently, on a go-forward basis, Synchronoss really is the de facto solution and it's marketed in different areas with different applications that, obviously, I would leave it up to Verizon to describe how they will actually go to market with it. Tavis C. McCourt - Raymond James & Associates, Inc., Research Division: And in terms of the capital spending, although you kind of mentioned this in terms of infrastructure and storage, I'm wondering in terms of the application development, is that all expensed or is there capitalized development for the applications for each specific OS and phone as well? Lawrence R. Irving: No. We -- right now, our development costs are expensed as incurred from a research and development perspective. We don't capitalize our R&D investments around this cloud initiative.

The next question comes from the line of Daniel Ives from FBR Capital Markets. James Moore - FBR Capital Markets & Co., Research Division: This is Jim Moore, in for Dan. And just a little follow-up to the operator you guys announced earlier this year from India. Is there any more color you can provide us on how things are going there and what other international opportunities might be out there? Stephen G. Waldis: Well, I think, from an Analyst Day perspective, I mean, the India operator that we're working on continues to perform as expected. We'll be moving into some trials towards the middle or later part of this year, I guess, more towards the fall timeframe. And that remains on target. I will say that the experience that we have has developed a lot of opportunities for us, both here in the U.S. and internationally. So although we don't get into specifics, clearly, the pipeline, both not just in Europe but even some opportunities that are coming our way from the Asia-Pac region, have been encouraging. James Moore - FBR Capital Markets & Co., Research Division: Okay, great. And then on the Activation side. You guys mentioned a trend towards -- I guess, times are shrinking in between upgrades. Is that something that you guys just saw in the quarter or is that something you guys see as like a secular shift? Stephen G. Waldis: You know what? I think kind of a little bit of both. Typically in the past, if you go back 3 or 4 years ago, pretty much carriers were really incenting you every 12 months or so to upgrade to a new device. And there was a period of time, over the last few years, where based upon the capital outlay, that there was almost a generic view across-the-board to deincentivize you to upgrade early. And what we saw over the last quarter, that started to contribute positively to our Activation business, was that some of these promotions that you're seeing almost virtually from every operator are encouraging you to upgrade more. As you upgrade more, that creates more transactions for Synchronoss. That's a positive sign. And then on top of it, when you add that family share element to plans that are being produced, when you combine those 2 together, where people now are incented to activate third-party devices like tablets, et cetera, because they weren't getting separate bills for it, for example, those 2 trends have been positive. And we saw that in this last quarter. And we believe that, that will continue through the rest of the year as long as these promotions remain currently in place.

The next question comes from the line of Paul Thomas from Goldman Sachs. Paul B. Thomas - Goldman Sachs Group Inc., Research Division: I wanted to follow up on an earlier question about the early adoption rates and how those compare with what you showed at the Analyst Day. You were talking about better adoptions than you expected. Is that with respect to over-the-top downloads or the aggressive marketing scenario? Could you give a little more color with respect to what you're seeing is better-than-expected? Stephen G. Waldis: Yes. Paul, this is Steve. Yes, so there are 2 areas. One was that we're seeing both in the amount of over-the-tops as well as even, in some instances, where we're getting embedded, the app, on device itself, as well as some of our initial firmware implementations are all slightly ahead of schedule. At the same time, we're also seeing that the amount of data classes that consumers are doing in the adoption are greater, which is leading to additional storage. So when we look at adoption, we look at it in 2 ways. The number of subscribers, obviously, but then the amount of revenue per subscriber, both of those have been positive influences going forward for those reasons. Paul B. Thomas - Goldman Sachs Group Inc., Research Division: Okay. And you touched on the $1 to $5 per sub and some of the opportunities you may have to expand that. Where do you think that, that could go with the additional storage classes you were talking about or potentially any revenue sharing from premium content sales or any other opportunities you see down the road for that? Stephen G. Waldis: So what we're seeing -- it's a good question. What we're seeing is that when we look at the traditional data classes, if you look at, obviously, contacts and basic photos, there are certain value to those that end up showing up that we monetize. But what we're seeing, for example, with additional data classes is user-generated video or the combination of smart TVs being connected in with our personal cloud, we rolled out in our Mobile World Congress event some technologies that showed that. And those types of adoption rates, when consumer start to grab those, it not only adds additional data classes, but they're adding devices in, which gives us additional revenue per subscriber. And then, obviously, video storage is dramatically different, for example, than photo storage. So when we look at that $1 to $5 range and we look at the uptick, we're finding that we're actually more towards the right and the middle of that than to the left of it in terms of the average price that we're seeing per subscriber.

And the next question comes from the line of Tom Roderick from Stifel. Tom M. Roderick - Stifel, Nicolaus & Co., Inc., Research Division: Just wanted to ask a follow-up question on the Activation side of the business. We haven't talked a lot about Spatial. I recognize it wasn't a huge acquisition. But NBN did pop up as a top 5 customer in Q1. Can you just talk a little bit about the strategic importance behind network planning? I get where it makes sense in regions where networks are building out rapidly. But is there an element of importance for your existing install base, particularly in the U.S., where network build-outs have largely happened? Stephen G. Waldis: Yes. So -- Tom, it's Steve. So yes, from time to time, certainly, NBN, on a go-forward basis, clearly won't be on our top 5 customer list. Typical, like FusionOne, when you convert customers from licensing to your traditional areas, you do see somewhat of a bump once in a while for licensing. But the strategic importance has been huge for us because when you combine the inventory layer, and you can use National Broadband Network as an example, immediately when you start to wholesale that product to those inventories, you immediately get an opportunity to say, "Well, you could use our interconnect now activation gateways, which we are obviously the largest ASR provisioner here in the United States." You can tie those capabilities. So in that market, for those who aren't familiar with it, that's the National Broadband Network Fiber to the Home. Eventually, companies like Telstra and others will want to order to get access to that inventory. Having that data capability in a very verticalized approach is very important. And then secondly, here in the U.S., where I would beg to differ with your conclusion, Tom, is that the networks are out here today, but they're not efficient. And most of the operators in the U.S., especially on the cable side, are trying to figure out how to more efficiently manage what inventory they have in their networks more accurately. And once they figure that out, then there's another need to be able to reprovision or activate those in a much more friendlier way from an economics perspective, from a coverage perspective. Many of the cable operators in the U.S. actually are leasing lines from third parties that they actually have network coverage. All of that is very critical at the inventory layer, something that Synchronoss didn't have. Now that we have that data, it's very easily to electronically figure out how to send the ASR, LSR type of circuit provisioning on top of it. And so those 2 areas, by combining that stack, you think about the unique position of Synchronoss' assets from the lowest level of the inventory all the way up through the device, we've got a pretty verticalized stack. And we rolled that out at our user conference out in Denver. And we've got great reception from that. And so we're going to continue to build that. And the reception, by the way, was both here in the U.S. also in Asia-Pac, with the work we've done in Australia. But we also picked up some nice opportunities and wins in Canada that have pulled in more of our traditional activation platforms. Tom M. Roderick - Stifel, Nicolaus & Co., Inc., Research Division: And Steve, as you market this more aggressively, and you talk about the U.S. and Canada, is this a displacement market relative to traditional technologies out there? Who are you competing with? Who are you displacing? And what's sort of special about it that drives the displacement? Stephen G. Waldis: Well, most of the time, it's that people have had all the copper, most of their inventory was built on copper lines 8 years ago, right, where spatials benefited -- it's fiber-based, right? So as you move to new fiber-based networks, there is no truly accurate incumbent inventory system that can provide an efficient way to understand where your facilities are and where you want to activate different customers that you're targeting. So when we get into these opportunities, no surprise to our business model, not only are the network guys very big supporters of this, but the marketing guys at the cable operators here in the U.S. and Canada are saying, "Hey, I've already got multiple coverage in this area. And I only have 60% of my customers taking one of my triple-play offers." So that's where the advantage of using the platform together in the model that we provided that provides opportunity for us. So clearly, the greenfield opportunities are the easiest. But what we're seeing is that a lot folks who are migrating off of older technology to try to pull this together in one [indiscernible], and we're seeing it both here in the U.S. with the major cable operator and the big win that we have in Canada. And that's really a primary focus. So it's been -- it's really been putting a next-generation platform in that can handle fiber along with their copper networks.

I would now like to turn the call over to Steve Waldis for closing remarks. Stephen G. Waldis: Well, we thank everybody for joining us here today for our Q2 earnings call, and we look forward to speaking with all of you soon. Thank you.

Thank you for joining today's conference. This concludes the presentation. You may now disconnect, and have a very good day.