SOURCE: EVOLVING SYSTEMS

Evolving Systems

November 10, 2015 16:10 ET

Evolving Systems Reports Third Quarter 2015 Financial Results

ENGLEWOOD, CO--(Marketwired - Nov 10, 2015) -  Evolving Systems, Inc. (NASDAQ: EVOL)

  • Acquisition of Sixth Sense Media expands product portfolio and accelerates move into mobile marketing, positioning Company for profitable growth

  • Sequential quarter license and services bookings up 34%; sequential quarter license and services backlog up 11%

  • 30th consecutive profitable quarter; profit metrics remain steady with 75% gross margins, 17% operating margins, 20% adjusted-EBITDA margins

  • Two new Dynamic SIM Allocation™ (DSA) wins subsequent to third quarter raise 2015 DSA win total to four vs. one in 2014

  • Fourth quarter dividend of $0.11 per share, payable December 4, 2015, to stockholders of record on November 27, 2015

Evolving Systems, Inc. (NASDAQ: EVOL), a leader in activation, enablement and real-time marketing of services for connected mobile devices worldwide, today reported financial results for its third quarter and nine-month period ended September 30, 2015.

Late in the third quarter Evolving Systems acquired RateIntegration, Inc., d/b/a Sixth Sense Media (SSM), a transformative event for the Company. The acquisition of SSM accelerates the Company's entry into the lucrative area of mobile marketing, adding technology and talent and expanding the Company's global customer base. The transaction is expected to be accretive and contribute an additional 20% to current revenue run rates.

Mobile marketing and advertising software enables carriers to conduct sophisticated, revenue-generating campaigns from the moment a subscriber's device is activated and continuing through the entire lifecycle with the carrier. The combination of SSM's Real-time Lifecycle Marketing™, or RLM, solution with Evolving Systems' Dynamic SIM Allocation™ (DSA) and Mobile Data Enablement™ (MDE) solutions forms one of the most advanced and robust mobile marketing platforms available today. Evolving Systems will be reporting these products under a new bookings and revenue category referred to as Mobile Marketing Solutions (MMS). MMS products can be purchased individually or as a complete integrated product solution. 

"We are pleased to see renewed momentum in our license and service bookings. Based upon our current sales pipeline, as well as the contributions we will post from SSM, we are confident we will sustain this momentum in the fourth quarter," said Thad Dupper Chairman and CEO. "The current fourth quarter will be the first quarter in which we recognize revenue and profitability from the acquisition. In addition, we are seeing a resurgence in DSA orders thus far in the fourth quarter. We've recorded two new DSA wins in the past two weeks, which brings to four the number of new DSA orders year to date, as compared with one for all of 2014. DSA remains a compelling value proposition and we are confident we'll continue to extend our leadership position in the SIM activation market."

Thomas Thekkethala, President, added, "We are excited by the integration of SSM into Evolving and the cross-selling opportunities with our respective product lines and worldwide customer bases. We are also developing mobile advertising and advanced campaign management capabilities for the mobile gaming and entertainment sector, which we believe will be significant new revenue drivers for our customers."

The Company's Board of Directors has declared a fourth quarter dividend of $0.11 per share, which raises to $5.41 per share the total amount of capital returned to Evolving Systems stockholders since May 2010.

Financial Results Recap 

The Company reported net income of $0.6 million, or $0.05 per share, on revenue of $5.8 million in the third quarter versus net income of $1.7 million, or $0.14 per share, on revenue of $7.6 million in the same quarter last year. Adjusted EBITDA was $1.1 million compared to $2.5 million year over year. Nine-month net income was $2.2 million, or $0.19 per share, on revenue of $18.5 million compared to net income of $4.0 million, or $0.34 per share, on revenue of $22.1 million a year ago. Adjusted EBITDA was $3.9 million versus $6.8 million year over year.

Cash and cash equivalents at September 30, 2015, were $9.4 million versus $9.8 million at 2014 year-end. The Company declared a fourth quarter dividend of $0.11 per share, payable on December 4, 2015, to stockholders of record on November 27, 2015.

Bookings and Backlog Highlights

License and services bookings in the third quarter increased 34% sequentially to $3.8 million from $2.8 million the second quarter. MMS license and services bookings increased to $2.2 million from $1.1 million in the second quarter. Customer support bookings in the third quarter increased to $2.0 million from $1.5 million year over year. Bookings are defined as sales orders expected to be recognized as revenue during the following 12 months.

License and services backlog was $5.2 million, up 11% sequentially from $4.7 million in the second quarter. License and services backlog included $3.9 million in MMS, up 20% year over year and up 28% sequentially, and $1.3 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 61307822. A telephone replay will be available through November 24, 2015, and can be accessed by calling 1-855-859-2056 or 1-404-537-3406. Conference ID 61307822. 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 24, 2015. The webcast is also available by clicking the following link: http://edge.media-server.com/m/p/vvimzpr3

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 to 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, positive outlook, EBITDA, cash flow and growth, 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 17, 2015; Forms 10-Q, 10-Q/A, and 8-K; press releases and the Company's website.

   
   
Consolidated Statements of Operations  
(In thousands except per share data)  
   
(Unaudited)   Three months ended     Nine months ended  
    September 30,     September 30,  
    2015     2014     2015     2014  
Revenue:                                
  License fees and services   $ 3,228     $ 5,141     $ 11,177     $ 14,690  
  Customer support     2,545       2,419       7,327       7,391  
Total revenue     5,773       7,560       18,504       22,081  
Costs of revenue and operating expenses:                                
  Costs of license fees and services, excluding depreciation and amortization     1,043       1,446       3,458       4,437  
  Costs of customer support excluding depreciation and amortization     396       509       1,116       1,417  
  Sales and marketing     1,336       1,363       4,435       4,344  
  General and administrative     1,010       877       2,943       2,654  
  Product development     913       948       2,887       2,786  
  Depreciation     97       74       277       172  
  Amortization     24       24       71       71  
  Restructuring     -       -       -       237  
Total costs of revenue and operating expenses     4,819       5,241       15,187       16,118  
  Income from operations     954       2,319       3,317       5,963  
Other income (expense):                                
  Interest income     5       6       14       13  
  Interest expense     (3 )     (4 )     (9 )     (13 )
  Other loss     -       -       -       (27 )
  Foreign currency exchange gain (loss)     (244 )     185       (218 )     13  
Other income (expense), net     (242 )     187       (213 )     (14 )
Income from operations before income taxes     712       2,506       3,104       5,949  
    Income tax expense     142       827       894       1,943  
Net income   $ 570     $ 1,679     $ 2,210     $ 4,006  
Basic income per common share   $ 0.05     $ 0.14     $ 0.19     $ 0.34  
Diluted income per common share   $ 0.05     $ 0.14     $ 0.19     $ 0.34  
Weighted average basic shares outstanding     11,687       11,647       11,677       11,635  
Weighted average diluted shares outstanding     11,927       11,934       11,938       11,919  
                                 
                                 
                                 
Consolidated Balance Sheets  
(In thousands)  
(Unaudited)   September 30,     December 31,  
ASSETS   2015     2014  
Current Assets:                
  Cash and cash equivalents   $ 9,410     $ 9,781  
  Contract receivables, net     9,935       9,182  
  Unbilled work-in-progress, net     3,370       4,995  
  Deferred income taxes     -       80  
  Prepaid and other current assets     1,533       1,331  
    Total current assets     24,248       25,369  
Property and equipment, net     595       659  
Amortizable intangible assets, net     5,179       608  
Goodwill     23,553       17,010  
Long-term deferred income taxes     -       586  
    Total assets   $ 53,575     $ 44,232  
LIABILITIES AND STOCKHOLDERS' EQUITY                
Current liabilities:                
  Current portion of capital lease obligations   $ 5     $ 5  
  Accounts payable and accrued liabilities     5,704       4,460  
  Income taxes payable     466       1,227  
  Unearned revenue     4,343       3,883  
    Total current liabilities     10,518       9,575  
Long-term liabilities:                
  Capital lease obligations, net     3       7  
  Revolving line of credit, net of current portion     10,000       -  
  Deferred income taxes     1,065       -  
  Contingent earn-out obligation     178       178  
  Long-term unearned revenue     -       420  
    Total liabilities     21,764       10,180  
Stockholders' equity:                
  Common stock     12       12  
  Additional paid-in capital     96,307       96,005  
  Treasury stock     (1,253 )     (1,253 )
  Accumulated other comprehensive loss     (5,443 )     (4,534 )
  Accumulated deficit     (57,812 )     (56,178 )
    Total stockholders' equity     31,811       34,052  
  Total liabilities and stockholders' equity   $ 53,575     $ 44,232  
                 
                 
                 
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,  
    2015     2014     2015     2014  
Non-GAAP net income and income per share:                                
GAAP net income   $ 570     $ 1,679     $ 2,210     $ 4,006  
Amortization of intangible assets     24       24       71       71  
Stock-based compensation expense     69       108       229       309  
Restructuring     -       -       -       237  
Income tax adjustment for non-GAAP*     (30 )     (46 )     (99 )     (214 )
Non-GAAP net income   $ 633     $ 1,765     $ 2,411     $ 4,409  
                                 
Diluted net income per share                                
  GAAP   $ 0.05     $ 0.14     $ 0.19     $ 0.34  
  Non-GAAP   $ 0.05     $ 0.15     $ 0.20     $ 0.37  
  Shares used to compute diluted EPS     11,927       11,934       11,938       11,919  
                                 
    Three months ended     Nine months ended  
    September 30,     September 30,  
    2015     2014     2015     2014  
Adjusted EBITDA:                                
                                 
Net income   $ 570     $ 1,679     $ 2,210     $ 4,006  
  Depreciation     97       74       277       172  
  Amortization of intangible assets     24       24       71       71  
  Stock-based compensation expense     69       108       229       309  
  Restructuring     -       -       -       237  
  Interest expense and other (benefit), net     242       (187 )     213       14  
  Income tax expense     142       827       894       1,943  
Adjusted EBITDA   $ 1,144     $ 2,525     $ 3,894     $ 6,752  
                                 

*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   Nine months ended
    September 30,   September 30,
Revenue   2015   2014   2015   2014
License fees and services                        
  MMS   $ 1,313   $ 3,001   $ 5,250   $ 8,574
  TSA     1,915     2,140     5,927     6,116
    Total license fees and services     3,228     5,141     11,177     14,690
Customer support                        
  MMS     912     750     2,487     2,256
  TSA     1,633     1,669     4,840     5,135
    Total customer support     2,545     2,419     7,327     7,391
Total revenue   $ 5,773   $ 7,560   $ 18,504   $ 22,081
                         
    Three months ended   Nine months ended
    September 30,   September 30,
Bookings   2015   2014   2015   2014
License fees and services                        
  MMS   $ 2,236   $ 2,486   $ 5,087   $ 7,840
  TSA     1,565     1,966     5,806     5,364
    Total license fees and services     3,801     4,452     10,893     13,204
Customer support                        
  MMS     1,330     910     3,241     2,999
  TSA     671     594     4,076     4,432
    Total customer support     2,001     1,504     7,317     7,431
Total bookings   $ 5,802   $ 5,956   $ 18,210   $ 20,635
                 
    Three months ended        
    September 30,        
Backlog**   2015   2014        
License fees and services                        
  MMS   $ 3,930   $ 3,280            
  TSA     1,319     2,237            
    Total license fees and services     5,249     5,517            
Customer support                        
  MMS     2,455     2,367            
  TSA     2,588     2,751            
    Total customer support     5,043     5,118            
Total backlog   $ 10,292   $ 10,635            

**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
    Email Contact

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