Synacor posted record revenues in Q4, but shareholders punished the company’s stock as revenues from the company’s portal deal with AT&T aren’t scaling up as quickly as originally anticipated.
The situation with AT&T isn’t new, as Synacor announced last August that revenues linked to its portal agreement with AT&T would be delayed into 2018. When the deal was announced in May 2016, the original expectation was that revenues from the contract would reach about $100 million per year following full deployment that, at the time, was seen starting in 2017.
In the last three quarters of 2017, Synacor generated about $25 million in revenue from the AT&T deal, as AT&T has chosen, for the near term, to prioritize consumer experience and engagement, Himesh Bhise, Synacor’s CEO, said on the earnings call, noting that Synacor’s 2018 guidance reflects the annualized 2017 run rate.
For full year 2018, Synacor expects revenues of $150 million to $155, or growth in the range of 7% to 11%, and a net loss of $4.4 million to $8.6 million.
“Clearly, this forecast is below the $100 million annual revenue target that AT&T and Synacor announced when we first discussed the portal contract and was a critical element of Synacor's $300 million 2019 target,” Bhise said, but stressed that the agreement still “reflects market validation of the quality of our platform and enables us to continue to advance our products with one of the nation's largest telecommunications companies.”
UPDATE:Synacor shares closed Friday at $1.75 each, down 30 cents, or 14.63%.
But progress is still being made, as the ATT.net portal is engaging “millions of customers every month,” and Synacor and AT&T have collaborated on the launch of more than 35 microsites that promote AT&T services and drive traffic to ATT.net, Bhise said.
And despite the slower than expected growth from the AT&T engagement, Synacor posted Q4 revenues of $46 million, up 32% from the year-ago, marking a quarterly record for the company. That was driven in part by growth in Synacor’s publisher advertising and software businesses, Bhise said.
Synacor also announced that it has expanded its authentication authorization deal with HBO to also include HBO Now (the programmer’s direct-to-consumer OTT subscription service), complementing earlier work with HBO Go, its TV Everywhere product.