ENGLEWOOD, CO--(Marketwire - August 6, 2008) - Evolving Systems, Inc. (
NASDAQ:
EVOL), a
leading provider of software solutions and services to the wireless,
wireline and IP carrier market, today reported strong profitability on
solid revenue growth for its second quarter ended June 30, 2008.
"We are very pleased with the growth we are achieving in revenue, earnings,
EBITDA and new orders, particularly in light of uncertainty in worldwide
economies," said Thad Dupper, president and CEO. "We are now benefitting
from our investments in new product development, evidenced by increased
revenue and orders from emerging markets, as highlighted by MTN South
Africa's order for our Dynamic SIM Allocation™ (DSA) solution. We
believe that DSA is a unique solution with very significant potential for
higher margin growth. DSA orders comprised 27% of our second quarter
license and services bookings, up from 10% in the first quarter. This has
helped drive a near record backlog entering the second half of 2008,
positioning us for solid results through year-end."
Second Quarter Results
Net income in the second quarter was $775,000, or $0.04 per basic and
diluted share, a better than 10-fold increase over net income of $72,000,
or less than $0.01 per basic and diluted share, in the same quarter last
year. The increase in year-over-year net income was attributable to higher
revenue growth and a stable expense base. Earnings before interest, taxes,
depreciation, amortization, impairment, stock compensation and gain/loss on
foreign exchange transactions ("Adjusted EBITDA") for the second quarter
were $2.0 million versus $1.4 million in the same quarter last year.
The Company reported $9.6 million in revenue in the second quarter, up 6%
from revenue of $9.1 million in the same quarter last year. It was the
Company's sixth consecutive quarter of year-over-year revenue growth.
Management attributed the steady revenue growth to a combination of new
customer engagements, additional revenue from established customers, and
growing sales momentum in emerging markets. License fees and services
revenue grew by 13% to $5.3 million from $4.7 million, offsetting a slight
decline in customer support revenue, to $4.3 million from $4.4 million in
the same quarter last year. Revenue mix in the second quarter included
$5.3 million in Service Activation, $3.5 million in Numbering Solutions and
$0.8 million in Mediation.
Total costs of revenue and operating expenses in the second quarter
remained flat at $8.5 million versus the same quarter last year, reflecting
management's commitment to maintaining a lean operating structure. Sales
and marketing expense remained stable while general and administrative
expense declined by 25% to $1.2 million from $1.6 million due to lower
professional fees, headcount, and costs of facilities. Product development
expense increased 165% in the second quarter due to ongoing product
enhancements designed to drive revenue growth.
Income from operations in the second quarter increased 75% to $1.1 million
as compared with $0.6 million in the same quarter last year. It was the
Company's eighth consecutive quarter of positive operating income.
Six-Month Results
The Company reported net income of $531,000, or $0.03 per basic and diluted
share, through six months of 2008 as compared with a net loss of $254,000,
or $0.01 per basic and diluted share, in the same period last year. The
$531,000 in net income through the first half of 2008 compares with
$598,000 in net income for all of 2007. Adjusted EBITDA for the first half
of 2008 increased 14% to $2.9 million from $2.6 million in the same period
last year.
Revenue in the first half of 2008 grew to $18.8 million, a 7% increase from
$17.6 million a year ago. License fees and services revenue increased 17%
to $10.2 million from $8.7 million, more than offsetting a 3% decline in
customer support revenue, to $8.6 million from $8.9 million a year ago.
Revenue mix included $10.0 million in Activation, $6.4 million in Numbering
Solutions and $2.4 million in Mediation.
Total costs of revenue and operating expenses through six months increased
5% to $17.6 million in 2008 from $16.7 million in the comparative period
last year. The increase is primarily attributable to higher product
development costs, which were partially offset by lower general and
administrative expense. Product development costs grew to $2.0 million
from $0.9 million a year ago as the Company continued to invest in its core
solutions as well as new product offerings. General and administrative
expense declined by 17% year-to-date -- to $2.7 million from $3.2 million
-- reflecting lower professional fees, personnel and facility costs. Sales
and marketing expense was up 4% -- to $4.4 million from $4.2 million -- due
to higher costs associated with the Company's successful entry into
emerging markets.
Operating income through the first six months of 2008 was $1.2 million
compared with $859,000 in the same period a year ago.
Bookings and Backlog Highlights
The Company booked $8.3 million in new orders in the second quarter, which
equaled its first quarter total. The new orders included $5.3 million in
license fees and services, up 20% from $4.4 million in the second quarter
last year and the highest second quarter total in that category since the
Company's 2004 acquisition of Tertio Telecoms, Ltd. Customer support
orders totaled $3.0 million in the second quarter. Bookings by product
category in the second quarter included $4.9 million in Activation, $3.1
million in Numbering Solutions, and $0.3 million in Mediation.
New orders totaled $16.6 million through six months, which was down from
$18.8 million in the first half last year. The higher 2007 order number
was the result of an industry consolidation event that caused a large
carrier customer to accelerate its 2008 annual support order into the
fourth quarter of 2007. Bookings of new license and service orders, a key
leading indicator of growth, increased to $10.8 million through the first
half of 2008, up from $9.4 million in the year ago period, reflecting a 15%
growth rate. Customer support bookings through six months totaled $5.8
million in 2008. The Company defines bookings as new, non-cancelable
orders expected to be recognized as revenue during the following 12 months.
Backlog at June 30, 2008, was $17.6 million, up 16% from $15.1 million at
the same time a year ago. The license and services backlog grew 29% over
the same period, to $7.1 million from $5.5 million, and equaled the
Company's largest mid-year backlog since the Tertio acquisition.
Balance Sheet Highlights
The Company took several actions to strengthen its balance sheet in the
first half of 2008. In addition to converting the balance of its preferred
stock to common stock during the first quarter, the Company completed a
$10.0 million debt refinancing that lowered the average cash interest rate
and improved financial flexibility with more favorable covenants. The
Company reduced its year-over-year interest expense by 37% in the second
quarter and 32% for the six-month period. Also in the first quarter, the
Company used $3.0 million of existing cash to pay down its senior revolver
and subordinated debt obligations. The conversion of preferred stock,
accelerated payments on the long-term debt obligations and scheduled senior
debt payments reduced the Company's total preferred stock and long-term
debt obligations by $9.3 million during the first half. The Company
generated $3.9 million in cash from operations in the first six months of
2008, down from $6.1 million a year ago primarily as the result of longer
collection cycles from certain international customers and a $0.8 million
first quarter payment of accrued interest on subordinated debt. The cash
and cash equivalents balance at June 30, 2008 declined slightly from
year-end to $7.2 million.
Conference Call
The Company will conduct a conference call and Web cast today at 3:00 p.m.
Mountain Daylight Savings Time. The call-in numbers for the conference
call are 1-877-548-7913 for domestic toll free and 719-325-4855 for
international callers. The conference ID is 4354389. A telephone replay
will be available through August 20, 2008, and can be accessed by calling
1-888-203-1112 or 1-719-457-0820, passcode 4354389. 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 20, 2008.
About Evolving Systems®
Evolving Systems (
NASDAQ:
EVOL) is a worldwide provider of software and
services to telecommunications carriers, with over 65 network operators in
more than 40 countries. The Company's software offerings address
Activation, Dynamic SIM Allocation, Number Portability, Number Management
and Mediation. These solutions help carriers deliver an improved customer
experience, shorter time-to-market and lower cost of rendering value-added
services. With an expanding solutions portfolio, global sales and support,
onshore/offshore development, and a focus on emerging markets, Evolving
Systems is well positioned for growth. Founded in 1985, the Company has
headquarters in Englewood, Colorado, with offices in the United Kingdom,
Germany, India and Malaysia.
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 Company's growth and future
profitability, future business, revenue and expense projections, the
Company's continued ability to post quarterly results that are similar to
those described in this press release and the impact of new products and
accounts on the Company's business 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 13,
2008, as well as subsequently filed Forms 10-Q, 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,
2008 2007 2008 2007
-------- -------- -------- --------
Revenue:
License fees and services $ 5,342 $ 4,742 $ 10,174 $ 8,733
Customer support 4,303 4,380 8,598 8,850
-------- -------- -------- --------
Total revenue 9,645 9,122 18,772 17,583
-------- -------- -------- --------
Costs of revenue and operating
expenses:
Costs of license fees and
services, excluding
depreciation and amortization 1,902 1,941 4,126 3,865
Costs of customer support,
excluding depreciation and
amortization 1,632 1,716 3,125 3,209
Sales and marketing 2,194 2,186 4,381 4,225
General and administrative 1,236 1,648 2,661 3,199
Product development 950 358 2,018 907
Depreciation 252 252 482 540
Amortization 379 392 759 780
Restructuring and other expense - - - (1)
-------- -------- -------- --------
Total costs of revenue and
operating expenses 8,545 8,493 17,552 16,724
-------- -------- -------- --------
Income from operations 1,100 629 1,220 859
-------- -------- -------- --------
Interest and other income
(expense), net (212) (474) (650) (890)
-------- -------- -------- --------
Income (loss) before income
taxes 888 155 570 (31)
Income tax expense 113 83 39 223
-------- -------- -------- --------
Net income (loss) $ 775 $ 72 $ 531 $ (254)
======== ======== ======== ========
Basic income (loss) per
common share $ 0.04 $ 0.00 $ 0.03 $ (0.01)
======== ======== ======== ========
Diluted income (loss) per
common share $ 0.04 $ 0.00 $ 0.03 $ (0.01)
======== ======== ======== ========
Weighted average basic
shares outstanding 19,374 19,180 19,368 19,167
Weighted average diluted
shares outstanding 19,845 19,604 19,840 19,167
Reconciliation of Net Income (Loss) to Adjusted EBITDA
(In thousands)
(Unaudited)
Three months ended Six months ended
June 30, June 30,
2008 2007 2008 2007
-------- -------- -------- --------
Net income (loss) $ 775 $ 72 $ 531 $ (254)
Depreciation 252 252 482 540
Amortization 379 392 759 780
Stock-based compensation
expense 228 132 456 381
Interest expense and other,
net 212 474 650 890
Income tax expense 113 83 39 223
-------- -------- -------- --------
Adjusted EBITDA $ 1,959 $ 1,405 $ 2,917 $ 2,560
======== ======== ======== ========
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 information in the
form of adjusted EBITDA (earnings before interest, taxes, depreciation,
amortization, impairment, stock compensation and gain/loss on foreign
exchange transaction.) Management believes adjusted EBITDA is useful to
investors and lenders in evaluating the overall financial health of the
Company in that it allows for greater transparency of additional financial
data routinely used by management to evaluate performance. Adjusted EBITDA
relates to a covenant contained in the Company's loan agreements and
therefore can be useful for lenders as an indicator of earnings available
to service debt. Readers of this adjusted EBITDA information are reminded
that adjusted EBITDA is not a recognized term under GAAP and does not
purport to be an alternative to income (loss) from operations, an indicator
of cash flow from operations or a measure of liquidity. Not all companies
calculate adjusted EBITDA identically, so this presentation may not be
comparable to similar presentations of other companies.
Consolidated Balance Sheets
(In thousands)
(Unaudited) June 30, December 31,
2008 2007
-------- --------
ASSETS
Current Assets:
Cash and cash equivalents $ 7,249 $ 7,271
Contract receivables, net 6,004 10,959
Unbilled work-in-progress 1,261 922
Prepaid and other current assets 1,756 1,335
-------- --------
Total current assets 16,270 20,487
Property and equipment, net 1,501 1,677
Amortizable intangible assets, net 3,920 4,687
Goodwill 26,398 26,417
Long-term restricted cash 100 100
Other long-term assets 308 359
-------- --------
Total assets $ 48,497 $ 53,727
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt
and capital lease obligations $ 2,020 $ 2,520
Accounts payable and accrued liabilities 5,450 5,937
Unearned revenue 8,829 10,635
-------- --------
Total current liabilities 16,299 19,092
Long-term liabilities:
Long-term debt and other obligations 6,996 10,242
Deferred foreign income taxes 753 878
-------- --------
Total liabilities 24,048 30,212
Preferred stock - 5,587
Stockholders' equity:
Common stock 19 18
Additional paid-in capital 81,395 75,317
Accumulated other comprehensive income 2,055 2,144
Accumulated deficit (59,020) (59,551)
-------- --------
Total stockholders' equity 24,449 17,928
-------- --------
Total liabilities and stockholders' equity $ 48,497 $ 53,727
======== ========
Contact Information: Investor Relations:
Jay Pfeiffer
Pfeiffer High Investor Relations, Inc.
303.393.7044
Press Relations:
Sarah Hurp
Marketing Communications Manager
Evolving Systems
+44 1225 478060