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Investments in Affiliates and Related Transactions | 6 Months Ended
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Jun. 30, 2017
Equity Method Investments and Joint Ventures [Abstract] |
Investments in Affiliates and Related Transactions | Investments in Affiliates and Related Transactions Sequential Technology International, LLC (“STIN”) The Company includes investments which are accounted for using the equity method, under the caption equity method investments on the Company’s Condensed Consolidated Balance Sheets. As of June 30, 2017, the Company’s investments in equity interests was comprised of $44.0 million related to a 30% equity interest in STIN. STIH, which holds a 70% equity interest in STIN, also holds a senior note issued by a Third Party (“Third-Party Note” or “Seller Note”). The Third-Party Note is secured against STIH’s equity interest in STIN and is senior to the Company’s equity interest in STIN. Under the arrangement, the recognition of cash dividends received by the Company from STIN, other than required cash distributions made for tax purposes, are deferred until the Third-Party Note is paid in full. Under the terms of the PIK note with STIH, deferred distributions are added to the amounts outstanding under the PIK note. The Company concluded that STIN is a VIE as it lacks sufficient equity to finance its activities. However, the Company is not the primary beneficiary of STIN, as the Company does not have the power to direct the activities that most significantly impact STIN’s economic performance and the obligation to absorb losses or the right to receive benefits from STIN that could potentially be significant to STIN. The Company regularly reviews its equity investments for impairments based on criteria that include the extent to which the investment’s carrying value exceeds its related market value, the duration of the market decline, the Company’s ability to hold its investment until recovery and the investment’s financial strength and specific prospects. Impairments of investments are reflected in “Equity method income/loss” in the Condensed Consolidated Statements of Operations and were recorded as a result of either the deteriorating financial position of the investee or due to a permanent impairment resulting from sustained losses and limited prospects for recovery. During the first six months of 2017, the Company recorded $1.0 million of equity income in the Condensed Consolidated Statement of Operations related to its investment in STIN. No impairment charges were recognized during the period. Transactions with STIN Cloud Telephony and Support Services In connection with the divestiture of the exception handling business of the Company, Synchronoss entered into a three-year Cloud Telephony and Support services agreement to grant STIN access to certain Synchronoss software and private branch exchange (“PBX”) systems to facilitate exception handling operations required to support STIN customers. The agreement requires the Company provide the following:
• | Access to use its PBX system, which acts as a digital call exchange used to process both in-bound and out-bound calls as well as any corresponding interactive voice response (“IVR”).
• | Solution access and hosting, including Synchronoss Activation Gateway (“SAG”) and iNow virtual front office platforms (the “Solution” service) includes access to a number of order managers, call tracker and reporting (visibility) modules used to initiate and perform necessary tasks as part of the exception handling process. Access to the Solution provides a mechanism for the exception handling business, whether STIN or any other BPO customer, to process orders manually. The Company is obligated to host and maintain the related technology throughout the term. In the event additional programs arise, requiring the use of Synchronoss products, such incremental programs will be priced in negotiations at such time.
• | Technical support service, including network infrastructure support and maintenance. The Company will provide access to use and support to ensure fully operational workstations (including personal computers), including desktop, workstation and network support to the PBX systems, including firewall and anti-virus protection
The Company recognized $4.2 million in revenue related to these services during the six months ended June 30, 2017. Support Services Agreement Additionally, the Company entered into a Support Services Agreement (“SSA”) to perform certain general and administrative support services, including billing and cash collections. The SSA is currently operating month-to-month and the Company expects to cease its support within the calendar year. Fees earned for services performed by the Company under the SSA were recorded as a reduction in the costs to perform within selling, general and administrative in the Condensed Consolidated Statements of Operations. Amounts earned under the arrangement were immaterial during all periods presented. Seller Note The Company holds a subordinated seller’s note receivable from STIH which has a carrying value of $82.1 million as of June 30, 2017, which is secured by STIH’s interest in STIN. The Company recognized $5.6 million in interest income related to this note during the first six months of 2017. The related party note receivable earns PIK interest at a rate equal to LIBOR plus 1100 basis points per annum and matures on June 16, 2022. As a result, of STIH’s covenant violation, in June 2017, the Company distributed approximately $6.2 million to Goldman (“Distribution Note”). The remaining amounts guaranteed under the arrangement were released upon assignment of certain customer contracts. Under the terms of the PIK note with STIH, distributed amounts made by the Company to Goldman are added to the amounts outstanding under the PIK note. The following is a summary of the PIK note related balances as of June 30, 2017:
| Loan Receivable | Allowance | Unamortized Discount | Loan Accrued Interest | Distribution Note | Distribution Interest | Total
Balance at December 31, 2016 (Restated) | $ | 83,000 |  | $ | — |  | $ | (13,146 | ) | $ | 415 |  | $ | — |  | $ | — |  | $ | 70,269 |
Activity | — |  | — |  | 476 |  | 5,135 |  | 6,187 |  | 32 |  | 11,830 |
Balance at June 30, 2017 | $ | 83,000 |  | $ | — |  | $ | (12,670 | ) | $ | 5,550 |  | $ | 6,187 |  | $ | 32 |  | $ | 82,099 |
Related Party Balances The STIN affiliate balances and their classification in the Condensed Consolidated Balance Sheets as of June 30, 2017 were as follows:
| Period Ended
| June 30, 2017 |  | December 31, 2016
|  |  | (Restated)
Restricted cash (A) | $ | 938 |  |  | $ | — |
Accounts receivable (B) | 17,123 |  |  | 1,164 |
Total assets | $ | 18,061 |  |  | $ | 1,164 |
(A) | The Company collected $0.9 million from STI customers, on behalf of STI, which remained outstanding as of June 30, 2017. This amount has been classified in short term restricted cash and in accrued expenses on the Condensed Consolidated Balance Sheets.
(B) | These amounts principally included revenues generated from the Cloud and Telephony Support Services agreement and pass-through of vendor expenses incurred during the transition and assignment of vendor contracts.

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- Definition The entire disclosure for equity method investments and joint ventures. Equity method investments are investments that give the investor the ability to exercise significant influence over the operating and financial policies of an investee. Joint ventures are entities owned and operated by a small group of businesses as a separate and specific business or project for the mutual benefit of the members of the group. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 323 -URI http://asc.fasb.org/topic&trid=2196965 + Details
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