Karen Rosenberger - Chief Financial Officer, Executive Vice President and Treasurer Steve Waldis - Founder, Chief Executive Officer

Tom Roderick - Stifel Nicolaus Michael Nemeroff - Credit Suisse Sterling Auty - JPMorgan Gray Powell - Wells Fargo Tavis McCourt - Raymond James Daniel Ives - FBR Capital Markets Greg Burns - Sidoti & Company

Good day, ladies and gentlemen and welcome to the Synchronoss Technologies Second Quarter 2015 Earnings Conference Call. At this time all participants are in a listen-only mode. Later we’ll conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions] As a reminder, this conference call is being recorded. I’ll now like to introduce your host for today’s conference, Ms. Karen Rosenberger, CFO. Ma'am, you may begin.

Thank you. Good morning and welcome to the Synchronoss Technologies second quarter 2015 earnings call. We will be discussing the results announced in the press release issued before the market opened today. I am Karen Rosenberger, Chief Financial Officer of Synchronoss and 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 securities 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 recently 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 forward-looking outlook. Steve?

Thanks, Karen and thanks to all of you for joining us this morning to review our second quarter financial results which met or exceeded the high end of our expectations on both the top and bottom line. Non-GAAP revenues of $137.9 million grew 33% on a year-over-year basis and were at the high-end of our guidance. From a profitability perspective, we generated a 29% non-GAAP operating margin and a non-GAAP EPS of $0.56. Now this was well above the high-end of our guidance range as we realize leverage from our business model. The combination of R&D investments, the strong growth in our cloud revenues which have a higher margin profile and the evolution of our cloud business to a lower CapEx intensive model are beginning to contribute to increased margin expansion and profitability. And based on our second quarter results and the ongoing momentum of our business, including the continued strength in both our cloud and activation offerings, we are increasing our revenue and materially increasing our profitability outlook for fiscal 2015 which Karen will review in more detail. First, let me turn to the details of our second quarter results which were highlighted by the 54% year-over-year growth in our cloud services business. During the quarter we saw mobile operators around the world continuing to gain conviction with respect to how important Personal Cloud is to the subscribers. And we are pleased with how successful our methodology for cloud adoption is working and the benefits operators are seeing. Now in Q2, we are excited to announce two new customers on our Personal Cloud platforms both of which will initially deploy our mobile content transfer solution, T-Mobile and Target. With these additions, our cloud mobile content transfer solution will be persuasive across almost all North American operators and will now be deployed in over 8,500 retail stores which is up from 5,000 previously. And during the second quarter we continue to see strong results from Verizon as we scale up more and more personal cloud subscribers. Now we are still in the early innings with respect to realizing the full potential of our relationship with Verizon. The Personal Cloud is becoming such a critical and highly effective platform for Verizon subscribers and is leading to growing number of new ways to add value. Now this is truly shaping up to be a model implementation of how critical and effective the cloud can be in attracting and retaining subscribers. And as we move towards the second half of 2015 and longer term, we see even more opportunities to expand the use of our Personal Cloud within new areas at Verizon. Now during the quarter we also made good progress with AT&T's Personal Cloud offering as they remain on track to move to a single integrated technology platform that will be ready for deployment in the first half of 2016 which is discussed on previous calls. This entails a combination of migrating subscribers as well as integrating certain technology components into our cloud platform that we know will drive adoption and scale. We expect the majority of the integration to be completed in 2015 and we begin to deploy the new platform and functionality in early 2016. We are also excited to announce that we have reached agreement on a new two-year deal with AT&T which covers the migration process from the current crowd platform as well as the deployment of the first generation of our personal cloud platform in early '16. This agreement gives us the opportunity to add functionality and use cases which we expect to integrate into activation into the future. Now we are also excited about our overall progress on the international front reinforced by several recent big international wins. For example, we recently announced that we are beginning to deploy our activation software and will launch our Personal Cloud services in Vietnam. Now as we had mentioned in analyst day in March, we had established a relationship with the ministry in Vietnam and with the three largest operators there who will provide our full suite of products. We recently announced an agreement to deploy the mobile content transfer there which we believe will help seed our Personal Cloud offerings in our standard fashion. We believe this announcement represents the first step in Synchronoss to begin to scale a new relationship. We are also excited to announce our first deal with Singtel Group, a leading communications group in Asia. Singtel provides a diverse range of services including, fixed, mobile, data, Internet and TV. The Singtel Group services over 550 mobile customers around the world and our initial deal with Singtel is an agreement for multiyear, multimillion dollar deal for cloud services to be rolled out in the Philippines as our first country. Now we are pleased to closed both of these deals and the progress we are making in establishing Synchronoss as the personal cloud platform of choice by mobile operators on truly a global basis. These new opportunities position Synchronoss well to grow in this region materially and we are pleased to have closed both of these multimillion dollar opportunities. Overall, Synchronoss now has more than 75 mobile operator customers around the world and we continue to establish ourselves as the clear leader in the market, given our scale, carrier grade and cloud based platform. And finally, we are making great progress migrating to more of a software-only model, eliminating and/or reducing the need for CapEx intensive purposes on new cloud deployments. We have worked very hard to virtualize all of our cloud platforms. Now Synchronoss will now offer customers either the ability to purchase the hardware directly and then we will run and manage on their co-location environments and they can continue to rely on Synchronoss for the full solution or which represents a majority of our customers today and the case in which we are providing the full managed solution, our pricing remains the same but we will be purchasing a virtualized service from leading hosting providers and we will bundle these back to our customers as part of our offering. This new change is reflected in our reduced CapEx forecast going forward that Karen will cover in a minute. Now turning to our activation business which generated 16% year-over-year growth in the quarter. This was driven by strong transaction volumes across our entire set of customers. At AT&T we continue to see positive trends across all of our business with strong transactional growth on both wireless and broadband businesses and based on current visibility we expect these trends to continue in the second half of the year given initial indications with the back to school and holiday season. In regards to our international activation business, we continue to see strong volumes as expected as new wins begin to scale. We also continued to have a healthy set of international opportunities in both Europe and the Asia-Pacific region including traditional and emerging markets. Now given the Vietnam relationship I mentioned earlier which includes an opportunity to deploy our network service solution, we remain confident that these international opportunities will represent an important growth driver for our activation business. Now we are also seeing strong interest in our integrated life platform which provides activation capabilities for non-traditional devices such as connected cars and wearables. This is a key area of focus for Synchronoss and an area in which we will continue investing going forward. Overall, we are very pleased with our second quarter results and made great progress on many key growth initiatives, particularly in our international operations. With that, let me turn it over to Karen.

Thanks, Steve and good morning everyone. As Steve mentioned, Synchronoss delivered strong second quarter financial results that came in at or above the high end of our expectations from both a revenue and profitability perspective. We continue to execute at a high level as demand remains strong across both our cloud and activation businesses. I would like to begin with a review of our second quarter financial results and will finish by providing our updated outlook for the full year 2015 as well as our guidance for the third quarter. Starting with the income statement. GAAP revenues were $137.8 million for the second quarter. Non-GAAP revenues after adding back $38,000 of deferred revenue write-downs from certain acquisitions, were $137.9 million, above the high end of our guidance and up 33% on a year-over-year basis. Our non-GAAP cloud services revenue in the second quarter was $71.9 million which represented 52% of our total revenue and year-over-year growth of 54%. Growth in our cloud business is being driven by several factors including, stronger volumes among our existing cloud customers, increasing scale among our newer customers and growing adoption of our mobile content transfer offering. Our non-GAAP activation services revenue was $66 million for the second quarter, representing 48% of our total revenue and year-over-year growth of 16%. During the second quarter we saw strong activation volumes from our North American operators as well as our recent international wins as they began to scale. Breaking revenue down further. 73% of our second quarter non-GAAP revenue came from recurring sources. Namely, transaction processing and subscription arrangements. While the other 27% came from non-recurring sources, namely professional services and licenses. Turning to cost and expenses. We will review our numbers both on a GAAP and non-GAAP basis. A full reconciliation table between the two can be found in our earnings release which is located on the investor relations section of our Web site. Non-GAAP gross profit in the quarter was $85.4 million or a gross margin of 62% and was at the high end of our margin expectation. As we have said in the past, there will always be a certain amount of variability in our gross margins depending upon our mix of revenue and investment. Non-GAAP income from operations was $40.2 million in the second quarter, representing an operating margin of 29%. Our non-GAAP EPS was $.56 which was significantly above the high end of our guidance range and included a non-GAAP tax rate of 34.4% and 47.3 million weighted average outstanding shares during the quarter. Our outperformance on the bottom line was largely due to continued gross margin improvements in both the cloud and activation areas. As Steve mentioned, we are beginning to realize the benefits from a combination of the strong growth in our cloud revenues which have a higher margin profile and the evolution of our cloud business to a lower CapEx intensive model. This along with leveraging both R&D and SG&A has led to continued improvements in both operating margins and EPS. On a GAAP basis, second quarter gross profit was $82.9 million. Income from operations was $23.6 million and GAAP fully diluted earnings per share was $.33. It is important to note that our GAAP results include a $1.5 million restructuring charge related to the integration of F-Secure’s cloud assets and other corporate restructuring. As we complete our corporate restructuring efforts, we will incur additional restructuring cost in the third quarter. For the first six months of the year, total restructuring costs were $4.7 million and we expect them to be within a $5 million-$6 million range for the full year. Due to the one-time nature of this charge it was excluded from our non-GAAP results. Moving on to the balance sheet and cash flow. Total cash, cash equivalents and marketable securities were $249.3 million compared to $209.8 million as of March 31. During the second quarter we generated $43.8 million in non-GAAP cash from operations compared to the year ago period during which we generated $31.4 million in non-GAAP cash from operations. Non-GAAP cash from operations excludes the payments for additional purchase price for acquisition earn-outs and the excess tax benefit of exercising of stock options. We ended the second quarter with an accounts receivable balance of $136.4 million, resulting in DSO of 90 days, up from 76 days last year but down from 93 days at the end of Q1. The year-over-year increase was primarily due to the timing of invoices and collections which can have a pronounced impact on DSO at any specific point in time considering the fact that we have a number of sizable customers. Subsequent to June 30, we collected over $23 million in the initial weeks of the third quarter. While we continue to focus on making progress with our DSO, international expansion and our assumption of varying payment terms from our international customers have typically resulted in some upward pressure over time. Capital expenditures were $10.7 million for the second quarter or 8% of total non-GAAP revenue. This is down from 18% of revenue in the first quarter. While there will be quarter to quarter variability we expect our CapEx spend to trend lower over time as we recognize the efficiencies of moving towards a more virtualized, software centric model. That being said, we now anticipate CapEx to be approximately 10% to 13% of our total non-GAAP revenue for the full year with a few points of variability. This is a meaningful reduction from 19% of revenue for the full year 2014. With that, let me turn to guidance starting with the third quarter. For the third quarter we are currently targeting non-GAAP revenues in the range of $150 million to $153 million, which represents year-over-year growth of approximately 20% to 22%. We expect non-GAAP gross margins will be 61% to 62%. Non-GAAP operating margins will be approximately 28% and non-GAAP EPS will be approximately $.57 to $.59. Assuming a tax rate of 34.4% and a diluted share count of approximately 47.7 million shares. Turning to full year 2015 guidance. We are increasing non-GAAP revenue guidance to $575 million to $582 million, compared to our previous guidance of $566 million to $575 million. At the midpoint of our guidance range, this represents a growth of 26% on a year-over-year basis. The step up in our revenue guidance is a reflection of our solid second quarter performance and even more so the wins that we have announced and progress we have made with existing customer initiatives, the combination of which provide us with increased confidence in a higher level of growth in the second half of the year. Looking at profitability. We expect non-GAAP gross profit margins to be approximately 62% with usual quarter to quarter variability. In terms of operating profitability, we expect non-GAAP operating margin to increase to approximately 28%, up from our prior guidance of 26% to 27%. The combination of increased margin expectations on a higher level of revenue translate to an updated non-GAAP EPS guidance of $2.22 to $2.26, assuming approximately -- a tax rate of approximately 34.4% and a diluted share count of approximately 47.4 million shares. At the midpoint this represents an $.11 increase from our prior guidance and is a reflection of realizing leverage in our business model. In summary, we are pleased with both our financial and operational performance in the second quarter and remain focused on delivering strong growth and profitability for the remainder of the year. Longer-term, we believe we are well positioned to capitalize on the positive demand trends we are seeing across each product of our business and are confident in our ability to continue driving significant shareholder value. With that, let me turn it back to the operator to begin our Q&A session.

[Operator Instructions] Our first question comes from the line of Tom Roderick with Stifel. Your line is now open. Please go ahead. Tom Roderick - Stifel Nicolaus: So, Steve, I want to just touch on the virtualization topic a little bit here. Because it looks like you're already starting to see some pretty clear benefits on the margin front and very clearly guiding much higher on the EPS for the year. So it seems that there is a reflection of virtualization benefits already in the guidance. Can you talk about what virtualization means relative to your existing big cloud customers here in the U.S. as opposed to, you talked a little bit about international before, how does this impact existing customers? What components are being virtualized? And as we think about the model going forward, what's the trade-off between growth versus margin expansion? In other words, is there a sizable chunk of revenue that comes out of existing customers because of virtualizing components of this and therefore you take higher margins, lower revenues, or maybe just walk us through some of the trade-offs you're making on both margins and growth. Thanks.

Sure, Tom. So, again, as we have mentioned on earlier calls, we really gained a lot of experience last year, especially with our Reliance Jio work in terms of how to not just to manage the platform on another infrastructure but we started the process of allowing this full virtualization of the platform. If you think of it from two folds there are -- what we offer going forward as I mentioned is there will be customers who, if they have their own equipment and they have their own location, that will utilize that and that will provide our same services always to those particular customers. I will say there will be a few of those, they probably won't be the majority of those. And for those existing customers, to your point, the revenue associated with the hardware which is our lowest margin component of it, would go away. But the ability to get the higher margin profiles which you are seeing in the business exist and as the business scales over time it starts to increase that. The overwhelming majority of the customers today typically still want Synchronoss to manage the entire solution from end to end. But with the changes going forward, as we have now built our software in a way in which we can work with various different virtualized hosting providers around the world in which they will provide that service to us and we will repackage that back out and bundle it to our customers. So the pricing remains the same. The capital expenditures associated with it go way and certainly there will be additional incremental cost on our gross margin side of the balance sheet because obviously we will have to embed that service into the service delivery to the customer. But the most important element which is reflected in Karen's forward-looking guide is the fact that the investment profile on the CapEx side greatly diminishes in either of those scenarios. Tom Roderick - Stifel Nicolaus: Perfect. Can you -- maybe just a follow on question regarding the cloud. Can you talk a little bit more about mobile content transfer? You announced a new tier 1 win during the quarter and I would be curious to understand how MCT is impacting on boarding and adoption, maybe even of iOS devices at some of the existing cloud accounts. And as you look at forward cloud growth, does MCT serve as a bridge or gateway to drive a much broader cloud adoption when you look at particularly the new tier 1 customer?

It does. As we mentioned, one of the things that we worked on last year was really getting our -- we call it our recipe for adoption down with the operators. And one of the critical elements that has changed over the last year or two has been that rather having to rely on the particular device manufacturers to either install it or to have customers go to the app store or put it into the firmware device. All are capable of doing that today. Mobile content transfer provide this really easy to use experience that consumers can use walking in the store and the value that we see is it works across all devices. So typically we see operators either, a, when you arrive at the store, irrespective of what device you want to pick, the first step that they will walk through is transferring the data into the cloud, which does increase not only, to your point, Android but iOS adoption in the stores. Because as these family shares become more prolific and you are seeing it in operators announcement last week, MCT is a great way to store that information across various services and make it accessible and easy to use for the customers. So the big change has been that you really get a significant higher adoption rates and then once you have got that information, it makes it very easy to translate those customers directly into a typical personal cloud subscription model. So it's something that consumers have really given us tremendously positive feedback on and it's something that helps us accelerate the adoption process inside the various different operators and not be so dependent upon the individual device drivers to get our cloud installed and up and running.

Thank you. Our next question comes from the line of Michael Nemeroff with Credit Suisse. Your line is now open. Michael Nemeroff - Credit Suisse: Steve, you mentioned Singtel as a new Asian Personal Cloud opportunity or win. If you could give us a sense of what international represents today and where you see that over the next couple of years?

Okay. Yes. So international is just getting launched. We haven't broken out the specifics of it yet, Michael. But it's been an area that we are finding that cloud platforms should be a big part of our growth story going forward. There is a lot of infrastructure -- Vietnam is another example where there isn't a good fixed line infrastructure. A lot of the operators are going to right to market with 4G type offerings with Smartphone proliferation. The Singtel opportunity is very appealing to us because our first country will be inside the Philippines under the brand Globe. And it provides us a great opportunity to really leverage the market as smartphones drop in price and penetration increases. There is a tremendous amount of growth in these Asian markets for Smartphone penetration. And having the cloud installed at the very early parts of the adoption makes us feel really good about the long-term growth potentials in those regions. And so out of the gate, it's been one of the reasons why we are a little bit more confident in our guide towards the end of the year and I think it sets us up for some really nice long-term growth factors in that region. Michael Nemeroff - Credit Suisse: That's helpful, Steve. And this leads into a question for Karen. As that growth in the international markets continues to go, do you think that there's going to be a need to increase the CapEx spend like you increased the CapEx spend at the onset of Personal Cloud when you rolled that out? And then also, Karen, if you wouldn't mind, looking at the cloud services revenue, if you could just maybe give us a little bit more detail or breakout. The sequential growth obviously doesn't look as good but the year-over-year comparisons are fantastic. Could you just maybe touch on the services/subscription mix inside of the cloud services this quarter versus last?

Yes. So on the CapEx spend, what we have talked about is that primarily our customers are going to either cover those fixes asset purchases themselves and use us to manage that service, or we will do contracting with third party providers. So as far as in the immediate future, from what we see, clearly we wouldn’t be lowering our CapEx guide for the year or our CapEx anticipated spending for the year if we didn’t expect the fact that we are going to lower that CapEx. So we would say it's upfront, not as much as in the initial rollouts of Personal Cloud by way of CapEx spend going forward. And then on the cloud versus activation mix...

Yes. So you would see -- Michael, this is Steve -- you are starting to see a marriage between cloud and activation in and around devices will impact our growth. So typically second quarter is where people get ready for back of the year, back to school, holiday launches, those types of things. People don’t upgrade on a natural cycle as much. And two factors that impact that is, one, the natural cycle is getting closer to when people actually go out and get the next best thing, for lack of a better word, device. And also ties into the timing of some of our implementations in the regions. But, to your point, the cloud business continues to outpace our expectations at the beginning of the year and some of these new wins are reinforcing our confidence going forward. Michael Nemeroff - Credit Suisse: That's helpful. What I was asking was the mix of subscription versus services within the cloud services revenue. How that compares this quarter to last quarter? Was there a material step down in the level of services which was how you were able to get the profitability up this quarter so strong?

Yes. We don’t break out the specifics to it but you are right, Michael, in the sense on a per product line because we don’t track our businesses internally per say. But I would tell you that the mix of the transaction flow or subscribers definitely have an impact to it. And as we get more and more of our cloud revenue scale and more of those are in production, you definitely get a better margin scale. And that was one of the contributors to the higher EPS.

Thank you. Our next question comes from the line of Sterling Auty with JPMorgan. Your line is now open. Sterling Auty - JPMorgan: I'm going to ask the question that you probably won't answer but it's still on everybody's minds with the Wall Street Journal article and the Daily Reporter article. Given we have got a broad based dissemination on this conference call, is there any comments that you can make on whether you did run a process? Whether there is a process in place to possibly sell the company? And any type of thought process that went into whether you did or did not go through a process?

Hey, Sterling, it's Steve. It's unfortunate that a lot of these rumors hit the market. And so we obviously don’t speculate on false rumors or speculation. The business is performing incredibly well and so there is really not a lot we can say on that. It's probably amusing at times to read these things. But it's unfortunate that they end up in the market. Sterling Auty - JPMorgan: Now you know what it's like to be a celebrity and show up on the National Enquirer. So on to the business. I want to drill into the MCT again, but I want to drill into it from what the licensing and the revenue model, if you could just remind us. So in other words, how do you get paid for that solution? And what is maybe, I guess, the tie ratio, if that's the right way to talk about it in terms of once somebody actually uses that client. What percentage of those users end up being a Personal Cloud user on the back of it? Is it automatic or is there some percentage?

So it varies on how the -- two part of the question, Sterling. On your first part, the MCT product, we really sell in multiple ways because we view that really as a product that is important to see the bigger picture which is the Personal Cloud. And so there are multiple ways it is consumed today by consumers, in some instances we actually get paid a transaction fee for every time a user goes in and actually transfers the contact from device a to device b. There are other instances where we actually will sell a license for the product for a couple of reasons. One, we want to make it very easy for operators to put this out in their world because on the back end obviously, it drives very high Personal Cloud adoptions. So there is a extent that we can sell a license, cover some upfront cost and the implementation to make it easier or a no-brainer for our operators to go and install this on all the stores, you know we will do that as well. So it does vary depending upon the situation. In terms of how it's setup at the operator, in terms of many become Personal Cloud subscribers, it's a great question. It really varies upon how the operator itself is going to market with the offer. So we have some folks today that go out to the market, especially here in the U.S. where the overwhelming majority of those mobile content transfer customers will become Personal Cloud subscribers. There are other carriers, without getting into specifics of their offers, where they will offer it for a period of time and then depending upon how much either free storage they give or what plan you have to sign up, that will drive how many of those will actually stay on as permanent subscribers. What we are seeing and our advice to the operators is as you rollout the cloud capabilities to your subscriber base, the benefits are so easy for them to see today that we are over time seeing more and more of the overall population converting to Personal Cloud. And that’s becoming so because the -- not just our technology to be clear, but because the operators are putting together compelling offers in the market that consumers would consume on the cloud as associated with some other, either family share plan or a high-end data plan that they may buy from the operator. Sterling Auty - JPMorgan: Got you. And last one. It sounds like there's three different approaches here in terms of the cloud. The traditional, what you started with. The virtualized version where, am I right, that you're still buying the hardware but it's just being run virtualized so it has better margins? And then third is that the service provider themselves buys the hardware. I am wondering if there is any type of quantitative way that you could compare and contrast. Ideally it would be, hey, the gross margins on scenario one is this, scenario two is this etcetera. But at least any type of relative comparison just to get us in the right direction? We see the CapEx difference but what does that end up within terms of gross margin difference?

Yes. That’s a great question, Sterling. I would say that we are working through a lot of those models and as we get more mature in these various different offers, it's a good feedback for us to think about in terms of how to look at the business. I would say that for the folks that actually buy the equipment themselves, so in any scenario we always manage the platform, but in certain areas where the carrier buys the equipment and has it in their co-lo, than the piece of our $1 to $5 a year revenue associated with hardware would go away. The cost for any of the CapEx, obviously, and maintenance on that goes away which is a bigger win. And then it's the margin profiles on that are much higher but obviously you are not getting the low-end revenue of the hardware component of it. When you think about -- and there is few instances where that happens -- the majority of the folks today really are still looking to us to run the whole thing. But what ends up happening today is we are working with various different leading third parties who provide hosted, virtualized services today and they are making obviously big commitments to us. So instead of selling us the equipment of storage we are actually going to companies today that provide that virtualized service and we negotiate that price across our entire base. So if we are deploying like we are today with say an AT&T or America Movil or various different operators. We will go back and do that. So at the end of the day, that becomes a service to us. So where that impact us is, CapEx doesn’t exit but we take that line, it does impact gross margin because we have to put that above the line as cost to goods sold. But as we rise the volume, the license fees over time, that’s where we get confidence that we are starting to see even in the gross margin up tick that you saw this past quarter. That’s typically how the two models sit together. I think as we get smarter about it throughout the year that might be something that we would be in a better position probably when we do our annual analyst day to kind of give you guys a better view of that once we have got a few months of data behind us that we can get comfortable with.

Thank you. Our next question comes from the line of Gray Powell with Wells Fargo. Your line is now open. Gray Powell - Wells Fargo: Just a couple on my side. Maybe starting with AT&T, my understanding is that you all have been working to integrate the network address book from the Fox Mobile acquisition with user content from F-Secure and then your existing MCT platform. Once that work is done by the end of this year, do you think that AT& T could ramp as quickly as you do with Verizon? It just seems like you have more pieces of the puzzle in place with AT&T then you did a few years back with Verizon.

Yes. One of the things that we are doing, you are right Gray, we are spending the majority of the year integrating that. And it's a process that takes time and you are absolutely right, we will at the end of the day emerge with one unified platform with a bunch of use cases that we think are going to be pretty interesting. We believe that we are following a very similar adoption strategy, tying into the specific use cases that are unique to AT&T. And so we don’t have any guarantees that that would happen into the future to be clear but we are well positioned coming out of the year. Certainly having all the aspects and a proven platform that we know we can integrate, plus adding these additional use cases in 2016 around activation which we think brings even a better customer experience. So all those things to your right are lining up behind us, it would be a -- we believe it has great potential but, again, nothing is guaranteed. We did come to agreement for a new two-year term to deploy the platform. Now there's things that we need to work together with AT&T to drive that success. Gray Powell - Wells Fargo: Okay. That’s helpful. And then my other question is on the MCT platform. So you highlighted the T-Mobile win on that platform. Do you view MCT as a common stepping stone to getting carriers onto the full cloud platform? Is that sort of like a natural progression?

Yes. When we walk through kind of our, again, our recipe for success we say, look this is a great product that you want to put on the front of our cloud. Why, because folks come to stores, and everybody on the call here can visualize that. You walk into a store, you love the new device. In some instances you can go online to the store, backup and restore all your data, have it all set to go. So now all you have to do is go to a retail store and figure out what form factor device you really want to buy. And it's something that, a, the consumers really like because it makes the process of buying a phone or a mobile device easier, because you can focus on the form factor of the device and not spending 50% of your time in the store trying to figure out how to get all the device information on the new device. And so we feel that that’s a very big step in our process when we engage carriers. Now once that happens, now the carrier has a great opportunity because they have got all your information, all the core data classes off your set. And when they roll that into one of their existing plans that they are rolling out in the market, whether it's a family share which include x amount of free storage, it really puts the consumer in a possibility to say, yes, I want to consumer multiple devices and you guys will make it available across all the different types of applications or services that you are bringing to market. So we absolutely push that as a key part of the initial process for cloud.

Thank you. Our next question comes from the line of Tavis McCourt with Raymond James. Your line is now open. Tavis McCourt - Raymond James: A couple of follow-ups, Steve. First, on AT&T, can you comment or did you comment and I missed it, the form of cloud adoption that they will have between the three. And with all the integration work this year in preparation for AT&T, are there meaningful revenues that you have baked into the guidance for the back half of the year in preparation for the launch or is that mostly in 2016?

Yes. We don’t really have much at all in '15 because we really won't deploy, Tavis, till first part of '16 and we will do that in multiple phases without getting specific. And in terms of the adoption rate, it's really hard to predict how that will end up. I will tell you that we feel like we are in a very good position with the amount of technology that we are integrating together combined with our past history of our great relationship with AT&T, to provide a really cool experience not just for cloud but also tying in a lot of our activation capabilities. And so we think the combination of both will put us in a position where we would expect to see good results. But it's way too early to tell at this point how that will look going out of the gate. Tavis McCourt - Raymond James: And in terms of the business model they're choosing to deploy, will it be fully outsourced to you or are they buying equipment or some quasi hybrid?

So today we are going to be -- the agreement that we have is that we will manage the whole solution. Tavis McCourt - Raymond James: With you buying the equipment or through an outsourced hoster?

We haven't specified but it will be part of our model where we would actually rely on a third party that will provide that service to us. So we won't by buying the capital expenditures, we will be providing the whole solution. So pricing remains the same. We will have outsourced network provider, hosting provider that we will be working with. Tavis McCourt - Raymond James: And although I know the unit economics may probably differ carrier to carrier because these are all custom contracts .But in general, as you look across the three different business models, some may have lower revenues or higher revenues, or lower margins or higher gross margins. But on an EBIT dollar basis or a contribution dollar basis, would you expect there would be any meaningful difference between them if the carrier were to choose one of the three?

I wouldn’t expect material differences, no. And what you have to remember is that our model going forward is still going to be a hybrid model. It will have components of all three of those choices in it.

Thank you. Our next question comes from the line of Daniel Ives with FBR. Your line is now open. Daniel Ives - FBR Capital Markets: Props to Sterling for at least asking the question. Can you just talk about activation's second half, especially with potential new iPhone coming out? How we should think about that in terms of what's factored into guidance from an activation perspective?

As we have mentioned during the course of the year, we really look at typically activation with back to school and holiday season is traditionally is always back-ended. We also believe as international becomes more and more of a factor in our business, a lot of the activation visibility that we are seeing from, international clients have contributed to it. And so we take a look at what visibility we have and as customers give us their forecast across the board, we evaluate those and we reflect those. And that was a part of us looking into the second half of the year and getting more confident in terms of where we ended up with our guidance. Daniel Ives - FBR Capital Markets: Okay. And in terms of cloud, maybe you can compare where we are today versus even six to nine months ago in terms of conversation with customers. I think more, maybe it was a prove me a year ago and now you've obviously proven. So you could compare how that's changed sales cycles and just your conversations anecdotally.

It's a great question, Dan. It's been night and day. I think when we started in 2010 and '11, a lot of the operators felt like the cloud could be an important part of what they were doing in the market. But they were unsure how that would fit in and the tier 1 folks were willing to make the efforts and try. And the tier 2 and tier 3 operators at times would be referring to more third party over the top provider. What's changed over the last three years is the operators have found a way to really win big in cloud. Because they recognize that this is a huge way to maintain the customer experience, lower the churn rates in a competitive market, get customers to consume higher end data services and add more devices on to the network across services. And the tier one folks are seeing that business case proliferate today in big ways. And a lot of the tier two and tier three companies or markets that we are in and customers who are working with third parties have abandoned those strategies and are now approaching us and our funnel has been pretty robust around, hey, we would like to roll out an offer and we want to bundle it in as part of what we are bringing to the market. So it's a great opportunity for the operators as they go up against a lot of the over the top guys who at the end of the day compete on storage and compete on this commoditized service. They are using this to leverage and bolster multibillion dollar businesses that they are highly successful in. And today the market that we find ourselves in is becoming almost essential part of maintaining the customer experience and growing your most lucrative and profitable customers and putting them on the right plans.

Thank you. Our next question comes from the line of Greg Burns with Sidoti & Company. Your line is now open. Greg Burns - Sidoti & Company: Just hoping to get a little bit of color on some of your more mature European partners like Vodafone or Telefonica, how adoption rates are going there? Have they kept up with your expectations? And also maybe an update on Workspace? How that product is doing or service is doing in the market and whether you see that getting broader adoption. Thanks.

Yes. Our European customers, it really varies by -- it still varies by country. We see some countries, without getting specific, with our relationships with Vodafone and others where the adoption rates are low. They have got a lot of bigger issues inside those particular areas and we have other countries where it's becoming more and more critical part of what they are doing. So it does vary by region in terms of how they particularly see that. On the workspace front, we continued to believe that collaboration with these various different opco's, especially on the small and midsized enterprise, has some good momentum behind it. We are seeing a lot of, again, smart ability to take a workspace product and offer it out to a small to midsized enterprise customer. And giving them a particular ability to collaborate with either partners or internally in a secure environment as long as they continue to buy more data service and data plans. So we are seeing similar type of bundling, probably more on the small to medium sized market on the workspace front. Greg Burns - Sidoti & Company: Okay. Is Workspace still only at Vodafone or is there other carriers interested in the service or what does the pipeline look like?

You know we have only talked about Vodafone but there's others that we are working on. And we believe that by the end of the year we will be making some additional -- you will kind of see some additional changes in areas of focus that we think will add even more value in that space. We still feel very strongly about the ability to provide that service in a similar bundled fashion that we are doing in the market today. Greg Burns - Sidoti & Company: Okay. When you look at some of the international wins like Singtel in Vietnam, the ARPU profile of their subscribers, does it vary materially from like a Vodafone or -- sorry, from like a Verizon or some of your other tier 1 customers?

It does and as much as the pricing is relatively in line. I would say that the amount of services integration work is less. Which is good because they typically are more likely to take the as is product installed into the different areas. As I had mentioned earlier, we do like especially in the region, if we can do particularly a license to get them to consume like an MCT product across the entire enterprise or entire retail chain. We will make those modifications just because we feel like it's better for the long-term. But as it relates to the current pricing for example, if you look it like a Singtel global or some of the elements, it's very much in line with what we typically see.

Thank you. And I am showing no further questions at this time. I would like to turn the call back over to Mr. Steve Waldis for any closing comments.

Great. Thank you very much for joining us here on our second quarter conference call and we look forward to speaking with all of you soon. Thank you.

Ladies and gentlemen, thank you for participating in today's conference. This concludes today's program, you may all disconnect. Everyone have a great day.