SOURCE: EVOLVING SYSTEMS

Evolving Systems

November 04, 2014 16:01 ET

Evolving Systems Reports Third Quarter 2014 Financial Results

ENGLEWOOD, CO--(Marketwired - Nov 4, 2014) - Evolving Systems, Inc. (NASDAQ: EVOL)

Total revenue of $7.6 million increases 25% year-over-year

Adjusted-EBITDA of $2.5 million increases 60% year-over-year

Net Income increase of 83% drives EPS of $0.14

DSA revenue of $3.8 million increases 68% year-over-year

Fourth quarter dividend of $0.11 per share, payable November 25, 2014, to stockholders of record on November 18, 2014

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

"Our strong quarterly financial results were highlighted by 68% year-over-year Dynamic SIM Allocation™ (DSA) revenue growth," said Thad Dupper, Chairman and CEO. "Our DSA growth is a direct result of more carriers deploying our solution in production, as well as steady and strong increases in SIM card activation volumes, driven by the proliferation of connected devices. The impact of this trend is positive revenue and EBITDA results along with gross margins and operating margins that are near all-time highs. Through nine months of 2014, adjusted EBITDA of $6.8 million has eclipsed 2013's full year total of $6.3 million. Our year-to-date bookings highlights included a 40% increase in DSA license and services orders and an 18% increase in overall license and services orders. Given the market dynamics we are experiencing with DSA, we believe we are well positioned for continued growth for Q4 and into 2015."

Third Quarter Results Recap

  • Revenue increased 25% to $7.6 million from $6.1 million in the third quarter last year. License and services revenue increased 34% to $5.1 million from $3.8 million last year. Customer support revenue increased 8% to $2.4 million from $2.2 million a year ago.

  • Operating income increased 58% to $2.3 million from $1.5 million in the third quarter last year.

  • Net income increased 83% to $1.7 million from $0.9 million in the third quarter last year. Diluted net income per share was $0.14 versus $0.08 year over year.

  • Adjusted EBITDA of $2.5 million, up 60% from $1.6 million in the third quarter last year.

  • Balance Sheet: Cash and cash equivalents at September 30, 2014, were $11.0 million, down from $13.8 million at 2013 year-end. However, working capital at September 30, 2014, increased 8% to $15.9 million from $14.7 million at 2013 year-end.

  • Dividend Update: The Company declared a fourth quarter dividend of $0.11 per share, payable on November 25, 2014, to stockholders of record on November 18, 2014.

Nine-Month Results Recap

  • Revenue increased 19% to $22.1 million through the first nine months of 2014 from $18.5 million in the same period last year. License and services revenue was up 24% to $14.7 million from $11.9 million last year. Customer support revenue increased 11% to $7.4 million from $6.7 million.

  • Operating income increased 33% to $6.0 million (inclusive of $0.2 million in restructuring costs) from $4.5 million last year.

  • Net income increased 33% to $4.0 million from $3.0 million a year ago. Diluted net income per share grew to $0.34 from $0.26.

  • Adjusted EBITDA increased 34% to $6.8 million from $5.0 million a year ago.

Bookings and Backlog Highlights

  • Third quarter bookings totaled $6.0 million compared to $7.0 million in the same quarter last year. License and services bookings were $4.5 million, down 5% from $4.7 million year over year. DSA license and services bookings totaled $2.5 million, up 12% from $2.2 million. Tertio® Service Activation (TSA) license and services bookings were $2.0 million, down 20% from $2.5 million in the third quarter last year. Customer support bookings in the third quarter totaled $1.5 million versus $2.3 million in the same quarter last year. Bookings are defined as new, non-cancelable orders expected to be recognized as revenue during the following 12 months.

  • Nine-month bookings increased 9% year over year to $20.6 million from $18.8 million. License and services bookings grew 18% to $13.2 million from $11.2 million. DSA license and services bookings were up 40% to $7.8 million from $5.6 million. TSA license and services bookings declined 4% year over year to $5.4 million from $5.6 million. Customer support bookings totaled $7.4 million, down 3% from $7.7 million last year.

  • Total backlog at September 30, 2014, was $10.6 million compared to $11.4 million in the same quarter last year. License and services backlog was $5.5 million, down 9% from $6.0 million year over year. License and services backlog included $3.3 million in DSA and $2.2 million in TSA. Customer support backlog was $5.1 million, down 4% from $5.3 million year over year.

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 20590912. A telephone replay will be available through November 18, 2014, and can be accessed by calling 1-855-859-2056 or 1-404-537-3406. Conference ID 20590912. 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 November 18, 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 over 60 network operators in more than 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 services for connected devices. Founded in 1985, the Company has headquarters in Englewood, CO, with offices in 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 products, market leadership, positive outlook, EBITDA, cash flow and growth, and the Company's continued ability to pay dividends or post quarterly or nine-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     Nine months ended  
    September 30,     September 30,  
    2014     2013     2014     2013  
Revenue:                                
  License fees and services   $ 5,141     $ 3,828     $ 14,690     $ 11,853  
  Customer support     2,419       2,241       7,391       6,670  
Total revenue     7,560       6,069       22,081       18,523  
Costs of revenue and operating expenses:                                
  Costs of license fees and services, excluding depreciation and amortization     1,446       1,217       4,437       4,054  
  Costs of customer support excluding depreciation and amortization     509       378       1,417       1,087  
  Sales and marketing     1,363       1,230       4,344       3,776  
  General and administrative     877       1,017       2,654       2,680  
  Product development     948       719       2,786       2,116  
  Depreciation     74       43       172       117  
  Amortization     24       0       71       195  
  Restructuring     -       -       237       -  
Total costs of revenue and operating expenses     5,241       4,604       16,118       14,025  
  Income from operations     2,319       1,465       5,963       4,498  
Other income (expense):                                
  Interest income     6       2       13       8  
  Interest expense     (4 )     (4 )     (13 )     (15 )
  Other loss     -       -       (27 )     -  
  Foreign currency exchange gain (loss)     185       (107 )     13       38  
Other income (expense), net     187       (109 )     (14 )     31  
Income from operations before income taxes     2,506       1,356       5,949       4,529  
  Income tax expense     827       436       1,943       1,527  
Net income   $ 1,679     $ 920     $ 4,006     $ 3,002  
Basic income per common share   $ 0.14     $ 0.08     $ 0.34     $ 0.26  
Diluted income per common share   $ 0.14     $ 0.08     $ 0.34     $ 0.26  
Weighted average basic shares outstanding     11,647       11,461       11,635       11,431  
Weighted average diluted shares outstanding     11,934       11,770       11,919       11,717  
                                 
                                 
   
   
Consolidated Balance Sheets  
(In thousands)  
(Unaudited)   September 30,     December 31,  
ASSETS   2014     2013  
Current Assets:                
  Cash and cash equivalents   $ 10,977     $ 13,785  
  Short-term restricted cash     24       -  
  Contract receivables, net     5,774       6,420  
  Unbilled work-in-progress, net     5,832       2,423  
  Deferred income taxes     91       131  
  Prepaid and other current assets     1,047       1,173  
    Total current assets     23,745       23,932  
Property and equipment, net     513       342  
Amortizable intangible assets, net     631       702  
Goodwill     17,681       17,936  
Long-term restricted cash     -       24  
Long-term deferred income taxes     305       248  
    Total assets   $ 42,875     $ 43,184  
LIABILITIES AND STOCKHOLDERS' EQUITY                
Current liabilities:                
  Current portion of capital lease obligations   $ 5     $ 8  
  Accounts payable and accrued liabilities     3,780       4,479  
  Income taxes payable     910       459  
  Unearned revenue     3,170       4,287  
    Total current liabilities     7,865       9,233  
Long-term liabilities:                
  Capital lease obligations, net     8       11  
  Contingent earn-out obligation     178       178  
  Long-term unearned revenue     710       1,027  
    Total liabilities     8,761       10,449  
Stockholders' equity:                
  Common stock     12       12  
  Additional paid-in capital     95,288       93,895  
  Treasury stock     (1,253 )     (1,253 )
  Accumulated other comprehensive loss     (3,428 )     (3,016 )
  Accumulated deficit     (56,505 )     (56,903 )
    Total stockholders' equity     34,114       32,735  
  Total liabilities and stockholders' equity   $ 42,875     $ 43,184  
                   
                   
   
   
Reconciliation of GAAP to Non-GAAP Financial Measures  
(In thousands except per share data)  
(Unaudited)  
    Three months ended     Nine months ended  
    September 30,     September 30,  
    2014     2013     2014     2013  
Non-GAAP net income and income per share:                                
GAAP net income   $ 1,679     $ 920     $ 4,006     $ 3,002  
Amortization of intangible assets     24       -       71       195  
Stock-based compensation expense*     108       74       309       228  
Restructuring     -       -       237       -  
Income tax adjustment for non-GAAP*     (46 )     (25 )     (214 )     (123 )
Non-GAAP net income   $ 1,765     $ 969     $ 4,409     $ 3,302  
                                 
Diluted net income per share                                
  GAAP   $ 0.14     $ 0.08     $ 0.34     $ 0.26  
  Non-GAAP   $ 0.15     $ 0.08     $ 0.37     $ 0.28  
  Shares used to compute diluted EPS     11,934       11,770       11,919       11,717  
                                 
    Three months ended     Nine months ended  
    September 30,     September 30,  
    2014     2013     2014     2013  
Adjusted EBITDA:                                
                                 
Net income   $ 1,679     $ 920     $ 4,006     $ 3,002  
  Depreciation     74       43       172       117  
  Amortization of intangible assets     24       -       71       195  
  Stock-based compensation expense     108       74       309       228  
  Restructuring     -       -       237       -  
  Interest expense and other (benefit), net     (187 )     109       14       (31 )
  Income tax expense     827       436       1,943       1,527  
Adjusted EBITDA   $ 2,525     $ 1,582     $ 6,752     $ 5,038  
                                 

*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