SOURCE: EVOLVING SYSTEMS

Evolving Systems

August 05, 2014 16:00 ET

Evolving Systems Reports Second Quarter 2014 Financial Results

ENGLEWOOD, CO--(Marketwired - Aug 5, 2014) -  Evolving Systems, Inc. (NASDAQ: EVOL)

Record Q2 revenue of $7.9 million, up 37% from $5.8 million in Q2 last year

Record Q2 adjusted EBITDA of $2.8M, up 93% from $1.5M in Q2 last year

First half license and services bookings up 34% year over year

First half DSA license and services bookings up 58% year over year

Third quarter dividend of $0.11 per share, payable August 29, 2014, to stockholders of record on August 22, 2014

Evolving Systems, Inc. (NASDAQ: EVOL), a leader in activation, enablement and management of services for connected mobile devices, today reported financial results for its second quarter and six months ended June 30, 2014.

"Evolving Systems delivered record revenue and profitability in the second quarter, led by strong revenue growth from our Dynamic SIM Allocation™ (DSA) solution, which grew 76% year-over-year," said Thad Dupper, Chairman and CEO. "Also in the second quarter, we achieved new records for gross margins (75%) and operating margins (33%). We are executing our strategy, and the results reflect the compelling value proposition and overall growing market acceptance of our DSA solution. Our outlook for 2014 remains positive and as a result we're pleased to report the board of directors has increased our quarterly dividend by 10% to $0.11 per share."

Second Quarter Results Recap 

  • Revenue increased 37% to $7.9 million from $5.8 million in the second quarter last year. It was a record quarter for revenue since the Company divested its Numbering business in 2011. License and services revenue increased 47% to $5.2 million from $3.5 million last year. Customer support revenue increased 22% to $2.8 million from $2.3 million in the second quarter last year.

  • Operating income increased 109% to $2.6 million from $1.3 million in the second quarter last year.

  • Net income increased 84% to $1.7 million from $0.9 million in the second quarter last year. Diluted net income per share was $0.14 versus $0.08. 

  • Record adjusted EBITDA of $2.8 million, up 93% from $1.5 million in the second quarter last year.

  • Balance Sheet: Cash and cash equivalents at June 30, 2014, were $12.4 million, equal to the first quarter but down from $13.8 million at 2013 year-end. Working capital at June 30, 2014, was $15.4 million, up from $14.7 million at 2013 year-end.

  • Dividend Update: The Company declared a third quarter dividend of $0.11 per share, payable on August 29, 2014, to stockholders of record on August 22, 2014.

Six-Month Results Recap

  • Revenue increased 17% to $14.5 million in the first half of 2014 from $12.5 million in the same period last year. License and services revenue was up 19% to $9.5 million from $8.0 million last year. Customer support revenue increased 12% to $5.0 million from $4.4 million.

  • Operating income increased 20% to $3.6 million (inclusive of $0.2 million in restructuring costs) from $3.0 million last year.

  • Net income increased 12% to $2.3 million from $2.1 million a year ago. Diluted net income per share was $0.20 versus $0.18.

  • Adjusted EBITDA increased 22% to $4.2 million versus $3.5 million a year ago.

Bookings and Backlog Highlights

  • Second quarter bookings increased 18% to $7.2 million from $6.1 million in the same quarter last year. License and services bookings were up 25% to $3.7 million from $3.0 million year over year. DSA license and services bookings grew 18% to $1.9 million from $1.6 million. TSA license and services bookings grew 33% to $1.8 million from $1.3 million in the second quarter last year. Customer support bookings in the second quarter were up 12% year over year to $3.6 million from $3.2 million. Bookings are defined as new, non-cancelable orders expected to be recognized as revenue during the following 12 months.

  • Six-month bookings increased 24% year over year to $14.7 million from $11.8 million. License and services bookings were $8.8 million, up 34% over $6.5 million. DSA license and services orders were up 58% to $5.4 million from $3.4 million. TSA license and services orders increased 9% year over year to $3.4 million from $3.1 million. Customer support bookings totaled $5.9 million, up 11% over $5.3 million last year. Customer support bookings included $2.1 million in DSA, up 13% from $1.9 million last year, and $3.8 million in TSA, up 10% from $3.5 million a year ago.

  • Total backlog at June 30, 2014, was $12.5 million, up 21% from $10.3 million in the second quarter last year. License and services backlog totaled $6.3 million and included $3.8 million in DSA and $2.5 million in TSA. Customer support backlog was $6.2 million, up 20% over the year-ago total of $5.2 million.

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 77902156. A telephone replay will be available through August 19, 2014, and can be accessed by calling 1-855-859-2056 or 1-404-537-3406. Conference ID 77902156. 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 August 19, 2014.

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 60 network operators in over 40 countries worldwide. The Company's product portfolio includes market-leading activation products that address subscriber service activation, SIM card activation, mobile broadband activation as well as the activation of connected devices. Founded in 1985, the Company has headquarters in Englewood, CO, with offices in San Francisco, CA; the United Kingdom; India; and Malaysia. 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 market for the Company's DSA, TSA and SaaS products, market leadership, positive outlook, EBITDA, cash flow and bookings growth, and the Company's continued ability to pay dividends or post quarterly or six-month 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 11, 2014, as well as other SEC filings, including Forms 10-Q, 10-Q/A, 8-K and press releases.

   
   
Consolidated Statements of Operations  
(In thousands except per share data)  
   
(Unaudited)   Three months ended     Six months ended  
    June 30,     June 30,  
    2014     2013     2014     2013  
Revenue:                                
  License fees and services   $ 5,182     $ 3,518     $ 9,549     $ 8,025  
  Customer support     2,757       2,267       4,972       4,429  
Total revenue     7,939       5,785       14,521       12,454  
Costs of revenue and operating expenses:                                
  Costs of license fees and services, excluding depreciation and amortization     1,513       1,301       2,991       2,837  
  Costs of customer support excluding depreciation and amortization     488       401       908       709  
  Sales and marketing     1,321       1,245       2,981       2,546  
  General and administrative     943       768       1,777       1,663  
  Product development     955       684       1,838       1,397  
  Depreciation     52       37       98       74  
  Amortization     24       97       47       195  
  Restructuring     26       -       237       -  
Total costs of revenue and operating expenses     5,322       4,533       10,877       9,421  
  Income from operations     2,617       1,252       3,644       3,033  
Other income (expense):                                
  Interest income     4       3       7       6  
  Interest expense     (4 )     (5 )     (9 )     (11 )
  Other loss     (27 )     -       (27 )     -  
  Foreign currency exchange gain (loss)     (76 )     188       (172 )     145  
Other income (expense), net     (103 )     186       (201 )     140  
Income from operations before income taxes     2,514       1,438       3,443       3,173  
  Income tax expense     838       529       1,116       1,091  
Net income   $ 1,676     $ 909     $ 2,327     $ 2,082  
Basic income per common share   $ 0.14     $ 0.08     $ 0.20     $ 0.18  
Diluted income per common share   $ 0.14     $ 0.08     $ 0.20     $ 0.18  
Weighted average basic shares outstanding     11,635       11,423       11,628       11,416  
Weighted average diluted shares outstanding     11,907       11,691       11,912       11,691  
                                 
                                 
                                 
Consolidated Balance Sheets  
(In thousands)  
(Unaudited)   June 30,     December 31,  
ASSETS   2014     2013  
Current Assets:                
  Cash and cash equivalents   $ 12,376     $ 13,785  
  Short-term restricted cash     24       -  
  Contract receivables, net     6,190       6,420  
  Unbilled work-in-progress, net     4,461       2,423  
  Deferred income taxes     98       131  
  Prepaid and other current assets     1,290       1,173  
    Total current assets     24,439       23,932  
Property and equipment, net     462       342  
Amortizable intangible assets, net     655       702  
Goodwill     18,504       17,936  
Long-term restricted cash     -       24  
Long-term deferred income taxes     262       248  
    Total assets   $ 44,322     $ 43,184  
LIABILITIES AND STOCKHOLDERS' EQUITY                
Current liabilities:                
  Current portion of capital lease obligations   $ 5     $ 8  
  Accounts payable and accrued liabilities     3,954       4,479  
  Income taxes payable     807       459  
  Unearned revenue     4,295       4,287  
    Total current liabilities     9,061       9,233  
Long-term liabilities:                
  Capital lease obligations, net     9       11  
  Contingent earn-out obligation     178       178  
  Long-term unearned revenue     721       1,027  
    Total liabilities     9,969       10,449  
Stockholders' equity:                
  Common stock     12       12  
  Additional paid-in capital     94,619       93,895  
  Treasury stock     (1,253 )     (1,253 )
  Accumulated other comprehensive loss     (2,122 )     (3,016 )
  Accumulated deficit     (56,903 )     (56,903 )
    Total stockholders' equity     34,353       32,735  
  Total liabilities and stockholders' equity   $ 44,322     $ 43,184  
                   
                   
                   
Reconciliation of GAAP to Non-GAAP Financial Measures  
(In thousands except per share data)  
(Unaudited)  
    Three months ended     Six months ended  
    June 30,     June 30,  
    2014     2013     2014     2013  
Non-GAAP net income and income per share:                                
GAAP net income   $ 1,676     $ 909     $ 2,327     $ 2,082  
Amortization of intangible assets     24       97       47       195  
Stock-based compensation expense     113       79       201       154  
Restructuring     26       -       237       -  
Income tax adjustment for non-GAAP*     (52 )     (49 )     (168 )     (98 )
Non-GAAP net income   $ 1,787     $ 1,036     $ 2,644     $ 2,333  
                                 
Diluted net income per share                                
  GAAP   $ 0.14     $ 0.08     $ 0.20     $ 0.18  
  Non-GAAP   $ 0.15     $ 0.09     $ 0.22     $ 0.20  
  Shares used to compute diluted EPS     11,907       11,691       11,912       11,691  
                                 
    Three months ended     Six months ended  
    June 30,     June 30,  
    2014     2013     2014     2013  
Adjusted EBITDA:                                
                                 
Net income   $ 1,676     $ 909     $ 2,327     $ 2,082  
  Depreciation     52       37       98       74  
  Amortization of intangible assets     24       97       47       195  
  Stock-based compensation expense     113       79       201       154  
  Restructuring     26       -       237       -  
  Interest expense and other (benefit), net     103       (186 )     201       (140 )
  Income tax expense     838       529       1,116       1,091  
Adjusted EBITDA   $ 2,832     $ 1,465     $ 4,227     $ 3,456  

*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.

Contact Information

  • Investor Relations

    Jay Pfeiffer
    Pfeiffer High Investor Relations, Inc.
    303.393.7044
    Email Contact

    Press Relations

    Sarah Hurp
    Evolving Systems
    +44 (0) 1225 478060
    Email Contact