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Synacor Faces Charter Questions

Growth remained elusive for Synacor in the second quarter, but its ongoing relationship with Charter Communications and how it would affect Synacor’s future was a point of emphasis on the company’s earnings call on Tuesday afternoon.

Analysts questioned Synacor’s role with Charter as the MSO takes its Web portal in-house. Charter is one of Synacor’s largest customers, representing more than 10% of revenues for the vendor, which specializes in Web start pages and TV Everywhere authentication services.

Bill Stuart, Synacor's CFO, acknowledged that Charter’s contract had recently been “amended” to allow the MSO to take over the portal. The precise timing of the switch isn’t clear, but Syancor expects it to happen before the next renewal on the contract, set to be March of 2015, Stuart said.

He said the effects of Synacor’s changing relationship with Charter has been contemplated in Synacor’s guidance for the third quarter (revenues of $25 million to $26 million) and for the full year ($100 million to $103 million).

Synacor was also asked about how it intends to return to growth and protect its profitability in the wake of Charter’s decision. The company responded that new products and a revised agreement with Charter will help to bridge that gap.

Stuart said Synacor has “several other opportunities in the pipeline.” In addition to ways to expand the company’s traditional search and ad business for desktops and laptops via a next-gen start-page product, Synacor is also expanding into mobile, and expects that effort to have an impact on revenue in 2015, Stuart said. On that note, Synacor’s Android product, spawned from its acquisition last year of  Teknision, is expected to go live with customers “over the next couple of months,” he said. 

Himesh Bhise, a former Comcast exec who was named CEO of Synacor on August 8, added that Synacor’s new agreement with Charter calls for the vendor to “offer a whole series of new services and support over the next year. So I view that as a positive.”

Synacor posted a second quarter net loss of $1.9 million on revenues of $24.2 million, versus $26.7 million in the year-ago quarter. The net loss excluded a one-time gain of $1 million from the company’s sale of the domain.

The company generated search and display ad revenues of $18.5 million, down from $21.4 million, and brought in subscription revenues of $5.7 million, up from $5.3 million, thanks to increases tied to Syancor’s TV Everywhere business.

As Synacor looks to execute on its plan under a new leader, the company has  been under pressure recently from two dissident investors -- JEC Capital and Ratio Capital – that have demanded the resignation of Syancor chairman Jordon Levy and have previously urged Synacor to drop its search for a new CEO and to instead seek a sale.

In addition to Charter, Synacor’s service provider customers include BendBroadband, Buckeye CableSystem, Google Fiber, CenturyLink, CableOne, Suddenlink Communications, WideOpenWest, Surewest Communications and Verizon Communications, among others.

Shares in Synacor were down 13 cents (5.58%) to $2.20 each in morning trading Wednesday.