SOURCE: EVOLVING SYSTEMS

Evolving Systems

March 15, 2016 16:01 ET

Evolving Systems Reports Fourth Quarter and Year-End 2015 Financial Results

ENGLEWOOD, CO--(Marketwired - Mar 15, 2016) -  Evolving Systems, Inc. (NASDAQ: EVOL)

  • Acquisition of Sixth Sense Media expands product portfolio and accelerates move into mobile marketing and managed services, positioning Company for profitable growth over the long term

  • Three new Dynamic SIM Allocation™ (DSA) wins in fourth quarter raises 2015 DSA win total to five, a new record for the Company

  • License and Services bookings of $5.3 million is the highest in any quarter since 2011; sequential quarter license and services bookings up 39%; sequential quarter license and services backlog up 16%

  • 31st consecutive profitable quarter; profit metrics remain strong with 73% gross margins, 14% operating margins, 26% adjusted-EBITDA margins

  • First quarter dividend of $0.11 per share, payable April 1, 2016, to stockholders of record on March 28, 2016 

Evolving Systems, Inc. (NASDAQ: EVOL), a leader in real-time activation, analytics and marketing for connected mobile devices, today reported financial results for its fourth quarter and year-end period ended December 31, 2015.

"Our late third quarter acquisition of Sixth Sense Media (SSM) was a seminal event for Evolving Systems that initiated the Company's transformation from a traditional software license and service model into a recurring revenue model based on managed services," said Thomas Thekkethala, CEO. "In the months that followed we have focused intensively on integrating SSM, directing our investment in sales and R&D activities and right-sizing the organization to eliminate redundancies and streamline operations. These actions have resulted in a significant reduction in annualized operating expenses.

"Our vision for the business is straightforward -- to help carriers leverage their networks and monetize lucrative next generation mobile services in the areas of advertising, banking, retail, gaming and entertainment. Carriers have invested billions of dollars in acquiring licenses and customers and in building networks -- but have yet to participate in the many emerging opportunities enabled by the mobile channel. Carriers who have watched 'over-the-top' (OTT) players leverage their networks to provide services such as voice, messaging and data, are now turning to global partners such as Evolving Systems to help them deliver these next generation mobile services to their customers.

"Having significantly strengthened our solutions portfolio with the acquisition of SSM, Evolving Systems is uniquely positioned to be a leader in this area. By combining SSM's real-time analytics and campaign capabilities with Evolving's Tertio® Service Activation and Dynamic SIM Allocation™ solutions, we can now provide contextual consumer information to accelerate the monetization of next generation services. Our integrated solutions help carriers acquire, upsell and retain consumers by creating a highly personalized experience that engages subscribers in real time from the first time they power on a new device through their day-to-day usage.

"A recent example of this new approach was our participation in a highly successful marketing program with a carrier customer in India that launched a 3G to 4G migration campaign by bundling a DSA-enabled 4G SIM card in a full-page advertisement on the front page of India's largest business newspaper. We are actively working on initiatives with our carrier customers to accelerate delivery of these next generation mobile services to their subscribers around the world." 

Evolving Systems encourages current and potential investors to review its investor presentation for more information about the Company and its products. The presentation is accessible at www.evolving.com. Click the 'Investors' tab, and click the 'IR Presentation' link on the lower left.

Financial Results Recap 

The Company reported net income of $1.1 million, or $0.09 per diluted share, on revenue of $7.1 million in the fourth quarter versus net income of $1.6 million, or $0.13 per diluted share, on revenue of $7.6 million in the same quarter last year. Adjusted EBITDA was $1.9 million compared to $2.7 million year over year. Full year net income was $3.3 million, or $0.28 per diluted share, on revenue of $25.6 million compared to net income of $5.6 million, or $0.47 per diluted share, on revenue of $29.7 million a year ago. Adjusted EBITDA was $5.8 million versus $9.4 million year over year.

Cash and cash equivalents at December 31, 2015, were $8.4 million versus $9.8 million at 2014 year-end. The Company declared a first quarter dividend of $0.11 per share, payable on April 1, 2016, to stockholders of record on March 28, 2016.

During February of 2016 Evolving Systems paid down $4.0 million of its $10.0 million revolving line of credit and converted the remaining $6.0 million into a term loan, which is scheduled to be fully repaid by the end of 2019.

Bookings and Backlog Highlights

License and services bookings in the fourth quarter increased 39% sequentially to $5.3 million from $3.8 million the third quarter and increased slightly from $5.2 million in the fourth quarter last year. Mobile Marketing Solutions (MMS) license and services bookings increased 76% sequentially to $3.9 million from $2.2 million in the third quarter and increased 6% year over year from $3.7 million in the fourth quarter of 2014. Customer support bookings in the fourth quarter increased 45% year over year to $3.7 million. Bookings are defined as sales orders expected to be recognized as revenue during the following 12 months.

License and services backlog at the end of the fourth quarter was $6.1 million, up 16% sequentially from $5.2 million in the third quarter and up 9% year over year. License and services backlog included $5.0 million in MMS, up 28% sequentially and up 22% year over year, and $1.1 million in TSA.

Conference Call
The Company will conduct a conference call and webcast today at 2:30 p.m. Mountain Time. The call-in numbers for the conference call are 1-877-303-6316 for domestic toll free and 650-521-5176 for international callers. The conference ID is 59334889. A telephone replay will be available through March 29, 2016, and can be accessed by calling 1-855-859-2056 or 1-404-537-3406. Conference ID 59334889. To access a live webcast of the call, please visit Evolving Systems' website at www.evolving.com. A replay of the Webcast will be accessible at that website through March 29, 2016. The webcast is also available by clicking the following link: http://edge.media-server.com/m/p/2s528tc4

Non-GAAP Financial Measures
Evolving Systems reports its financial results in accordance with accounting principles generally accepted in the U.S. (GAAP). In addition, the Company is providing in this news release non-GAAP financial information in the form of net income, diluted net income per share and adjusted EBITDA (earnings before interest, taxes, depreciation, amortization, impairment, stock compensation and gain/loss on foreign exchange transactions). Management believes these non-GAAP financial measures are useful to investors and lenders in evaluating the overall financial health of the Company in that they allow for greater transparency of additional financial data routinely used by management to evaluate performance. Investors and financial analysts who follow the Company use non-GAAP net income and non-GAAP diluted income per share to compare the Company against other companies. Adjusted EBITDA can be useful for lenders as an indicator of earnings available to service debt. Non-GAAP financial measures should not be considered in isolation from or as an alternative to the financial information prepared in accordance with GAAP.

About Evolving Systems®
Evolving Systems, Inc. (NASDAQ: EVOL) is a provider of software and services to 75 network operators in over 50 countries worldwide. The Company's portfolio includes market-leading activation products that address subscriber service activation, SIM card activation, mobile broadband activation and connected devices; mobile data enablement solutions to successfully monetize mobile data traffic; number management products that reliably and efficiently manage number resources; and real-time analytical and marketing solutions offering highly personalized interactive campaigns. Founded in 1985, the Company has headquarters in Englewood, Colorado, with offices in the United States, United Kingdom, India, Malaysia and Romania. For more information please visit www.evolving.com or follow us on Twitter http://twitter.com/EvolvingSystems

CAUTIONARY STATEMENT
This news release contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, based on current expectations, estimates and projections that are subject to risk. Specifically, statements about the impact of the SSM acquisition, the market for the Company's products, prospects for new customer wins, the Company's ability to deliver and help customers accelerate monetization of new services, and the Company's continued ability to pay dividends, achieve profitable growth, or post quarterly or year to date results that are similar to those described in this press release are forward-looking statements. These statements are based on our expectations and are naturally subject to uncertainty and changes in circumstances. Readers should not place undue reliance on these forward-looking statements, and the Company may not undertake to update these statements. Actual results could vary materially from these expectations. For a more extensive discussion of Evolving Systems' business, and important factors that could cause actual results to differ materially from those contained in the forward-looking statements, please refer to the Company's Form 10-K filed with the SEC on March 15, 2016; Forms 10-Q, 10-Q/A, 8-K and 8-K/A; press releases and the Company's website.

   
   
Consolidated Statements of Operations  
(In thousands except per share data)  
   
(Unaudited)   Three months ended     Twelve months ended  
    December 31,     December 31,  
    2015     2014     2015     2014  
Revenue:                                
  License fees and services   $ 4,407     $ 5,048     $ 15,584     $ 19,738  
  Customer support     2,665       2,551       9,992       9,942  
Total revenue     7,072       7,599       25,576       29,680  
Costs of revenue and operating expenses:                                
  Costs of license fees and services, excluding depreciation and amortization     1,423       1,345       4,881       5,782  
  Costs of customer support excluding depreciation and amortization     452       449       1,568       1,866  
  Sales and marketing     1,409       1,390       5,844       5,734  
  General and administrative     1,060       984       4,003       3,638  
  Product development     960       857       3,847       3,643  
  Depreciation     37       74       314       246  
  Amortization     195       24       266       95  
  Restructuring and other recovery     533       -       533       237  
Total costs of revenue and operating expenses     6,069       5,123       21,256       21,241  
  Income from operations     1,003       2,476       4,320       8,439  
Other income (expense):                                
  Interest income     4       6       18       19  
  Interest expense     (112 )     (4 )     (121 )     (17 )
  Other expense     -       -       -       (27 )
  Foreign currency exchange gain (loss)     212       (22 )     (6 )     (9 )
Other income (expense), net     104       (20 )     (109 )     (34 )
Income from operations before income taxes     1,107       2,456       4,211       8,405  
    Income tax expense     21       854       915       2,797  
Net income   $ 1,086     $ 1,602     $ 3,296     $ 5,608  
Basic income per common share   $ 0.09     $ 0.14     $ 0.28     $ 0.48  
Diluted income per common share   $ 0.09     $ 0.13     $ 0.28     $ 0.47  
Weighted average basic shares outstanding     11,740       11,664       11,693       11,642  
Weighted average diluted shares outstanding     11,927       11,948       11,935       11,926  
                                 
                                 
                                 
Consolidated Balance Sheets  
(In thousands)  
(Unaudited)  
    December 31,     December 31,  
ASSETS   2015     2014  
Current Assets:                
  Cash and cash equivalents   $ 8,400     $ 9,781  
  Contract receivables, net     7,727       9,182  
  Unbilled work-in-progress, net     4,158       4,995  
  Prepaid and other current assets     1,459       1,331  
  Deferred income taxes     -       80  
    Total current assets     21,744       25,369  
Property and equipment, net     560       659  
Amortizable intangible assets, net     4,983       608  
Goodwill     23,142       17,010  
Long-term deferred income taxes     -       586  
    Total assets   $ 50,429     $ 44,232  
LIABILITIES AND STOCKHOLDERS' EQUITY                
Current liabilities:                
  Current portion of capital lease obligations   $ 5     $ 5  
  Revolving line of credit     10,000       -  
  Accounts payable and accrued liabilities     4,429       4,460  
  Income taxes payable     324       1,227  
  Unearned revenue     3,330       3,883  
    Total current liabilities     18,088       9,575  
Long-term liabilities:                
  Capital lease obligations, net     1       7  
  Contingent earn-out obligation     178       178  
  Long-term unearned revenue     -       420  
                   
    Total liabilities     18,267       10,180  
Stockholders' equity:                
  Common stock     12       12  
  Additional paid-in capital     97,418       96,005  
  Treasury stock     (1,253 )     (1,253 )
  Accumulated other comprehensive loss     (5,999 )     (4,534 )
  Accumulated deficit     (58,016 )     (56,178 )
    Total stockholders' equity     32,162       34,052  
  Total liabilities and stockholders' equity   $ 50,429     $ 44,232  
                 
                 
                 
Reconciliation of GAAP to Non-GAAP Financial Measures  
(In thousands except per share data)  
(Unaudited)  
    Three months ended     Twelve months ended  
    December 31,     December 31,  
    2015     2014     2015     2014  
Non-GAAP net income and income per share:                                
GAAP net income   $ 1,086     $ 1,602     $ 3,296     $ 5,608  
Amortization of intangible assets     195       24       266       95  
Stock-based compensation expense     88       59       317       401  
Restructuring     533       -       533       237  
Income tax adjustment for non-GAAP*     (224 )     (41 )     (324 )     (255 )
Non-GAAP net income   $ 1,678     $ 1,644     $ 4,088     $ 6,086  
                                 
Diluted net income per share                                
  GAAP   $ 0.09     $ 0.13     $ 0.28     $ 0.47  
  Non-GAAP   $ 0.14     $ 0.14     $ 0.34     $ 0.51  
  Shares used to compute diluted EPS     11,927       11,948       11,935       11,926  
                         
    Three months ended     Twelve months ended  
    December 31,     December 31,  
    2015     2014     2015     2014  
Adjusted EBITDA:                                
                                 
Net income   $ 1,086     $ 1,602     $ 3,296     $ 5,608  
  Depreciation     37       74       314       246  
  Amortization of intangible assets     195       24       266       95  
  Stock-based compensation expense     88       92       317       401  
  Restructuring     533       -       533       237  
  Interest expense and other, net     (104 )     20       109       34  
  Income tax expense     21       854       915       2,797  
Adjusted EBITDA   $ 1,856     $ 2,666     $ 5,750     $ 9,418  
                                 

*The estimated income tax for non-GAAP net income is adjusted by the amount of additional expense that the Company would accrue if it used non-GAAP results instead of GAAP results in the calculation of its tax liability, taking into account in which tax jurisdiction each of the above adjustments would be made and the tax rate in that jurisdiction.

 
 
 
Supplementary Data
(In thousands) (Unaudited)
    Three months ended   Twelve months ended
    December 31,   December 31,
Revenue   2015   2014   2015   2014
License fees and services                        
  MMS   $ 2,817   $ 2,876   $ 8,067   $ 11,451
  TSA     1,590     2,172     7,517     8,287
    Total license fees and services     4,407     5,048     15,584     19,738
Customer support                        
  MMS     1,050     913     3,537     3,169
  TSA     1,615     1,638     6,455     6,773
    Total customer support     2,665     2,551     9,992     9,942
Total revenue   $ 7,072   $ 7,599   $ 25,576   $ 29,680
                         
    Three months ended   Twelve months ended
    December 31,   December 31,
Bookings   2015   2014   2015   2014
License fees and services                        
  MMS   $ 3,942   $ 3,732   $ 9,029   $ 11,572
  TSA     1,337     1,428     7,143     6,792
    Total license fees and services     5,279     5,160     16,172     18,364
Customer support                        
  MMS     1,238     260     4,480     3,259
  TSA     2,471     2,289     6,546     6,721
    Total customer support     3,709     2,549     11,026     9,980
Total bookings   $ 8,988   $ 7,709   $ 27,198   $ 28,344
                   
    Three months ended        
    December 31,        
Backlog**   2015   2014        
License fees and services                        
  MMS   $ 5,031   $ 4,121            
  TSA     1,053     1,435            
    Total license fees and services     6,084     5,556            
Customer support                        
  MMS     2,593     1,697            
  TSA     3,398     3,330            
    Total customer support     5,991     5,027            
Total backlog   $ 12,075   $ 10,583            

**The change in backlog during the periods presented may not equal the difference between revenue recognized and bookings due to changes in foreign exchange rates.

Contact Information

  • Investor Relations
    Jay Pfeiffer
    Pfeiffer High Investor Relations, Inc.
    303.393.7044
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    Evolving Systems Marketing Department
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