ENGLEWOOD, CO--(Marketwire - March 8, 2011) - Evolving Systems, Inc. (NASDAQ: EVOL)
Net income up 11% to $5.4 million
18th consecutive quarter of positive operating income
Increased cash generation further strengthens balance sheet -- cash and
working capital both up more than 100%
Company declares first quarter dividend of $0.05
Evolving Systems, Inc. (NASDAQ: EVOL), a leading provider of software
solutions and services to the wireless, wireline and cable markets, today
reported results for its fourth quarter and year ended December 31, 2010.
"Evolving Systems continued to produce strong bottom line results in 2010,
highlighted by an 11% increase in net income. Cash from operations
increased 57% and our working capital and cash positions were up 147% and
101%, respectively," said Thad Dupper, chairman and CEO. "New orders were
impacted by longer sales cycles for our Dynamic SIM Allocation™ (DSA)
product. However, we've begun to see renewed activity around our Activation
solutions and expect first half 2011 orders to rebound following a sluggish
fourth quarter.
"We added two new DSA wins in 2010, raising our total to eight DSA
customers around the world, six of which are now in production," Dupper
added. "Our DSA customers have activated more than 25 million SIM cards,
and with the anticipated growth of wirelessly enabled consumer devices that
require SIM cards, we are confident that our DSA solution will become an
increasingly important contributor to revenue. We also continued to
execute our strategy in international markets during 2010, adding new
customers and taking others into production in Asia, Africa, Central and
South America as well as North America, where we won a large NumeriTrack®
order with a tier one U.S. carrier and a DSA order in Canada. And finally,
during the first quarter we introduced Intelligent M2M Controller™ -- a
new machine to machine solution for wireless service providers who are
seeking to reduce costs, protect their networks and monetize growing
opportunities in the M2M space."
2010 Full Year Results
Net income for 2010 increased 11% to $5.4 million from $4.8 million in
2009. Earnings per share increased to $0.53 per basic and $0.49 per
diluted share in 2010 from $0.49 per basic and $0.48 per diluted share a
year ago. Non-GAAP net income increased 9% year over year to $6.7 million
from $6.2 million, or $0.62 per diluted share versus $0.61 per diluted
share. Non-GAAP adjusted EBITDA declined 5% to $8.4 million from $8.9
million last year.
Operating income in 2010 declined to $6.2 million, or 16.7% of revenue,
from $6.7 million, or 17.5% of revenue, in 2009.
The Company experienced a 2% decline in full year revenue, to $37.3 million
in 2010 from $38.2 million a year ago. License fees and services revenue
was $20.3 million versus $21.6 million in 2009, a decline that was
partially offset by an increase in customer support revenue to $17.1
million from $16.6 million.
Revenue from the Company's DSA and NumeriTrack solutions hit an all-time
high in 2010. DSA revenue increased 31% year over year, to $7.4 million
from $5.6 million, and comprised approximately 20% of overall revenue.
Revenue from the Company's NumeriTrack solution increased by 34% in 2010,
to $5.4 million from $4.0 million a year ago, and represented approximately
14% of total revenue. Revenue mix in 2010 included $22.8 million in
Activation and $14.5 million in Numbering. Mediation revenue, which
represented less than 5% of total 2010 revenue, will now be reported in the
Activation and Numbering revenue categories to more accurately reflect
management of the operations.
Total costs of revenue and operating expenses declined slightly in 2010 to
$31.1 million from $31.5 million in 2009. Product development expense
increased 22% year-over-year to $4.3 million from $3.5 million, primarily
as the result of investments in the Company's DSA and Numbering products.
Sales and marketing expense declined 6% to $7.3 million from $7.7 million
and general and administrative expense declined 5% to $5.4 million from
$5.7 million, with both declines the result of lower incentive compensation
and professional fees.
Quarterly Dividends
The Company declared three quarterly cash dividends of $0.05 per share in
2010. And in the first quarter of 2011 the Company declared a quarterly
cash dividend of $0.05 per share, payable April 15, 2011, to stockholders
of record March 18, 2011.
Fourth Quarter Results
Net income was $1.2 million in the fourth quarter of 2010, down 18% from
$1.4 million in the same quarter last year. EPS was $0.11 per basic and
$0.10 per diluted share versus $0.14 per basic and diluted share a year
ago. Non-GAAP net income in the fourth quarter was $1.5 million versus
$1.8 million, or $0.13 per diluted share versus $0.17 per diluted share a
year ago. Non-GAAP adjusted EBITDA was $1.7 million versus $2.4 million
last year.
The Company had operating income of $1.2 million in the fourth quarter as
compared with $1.9 million in the same quarter last year. It was the
Company's 18th consecutive quarter of positive operating income. As a
percentage of revenue, fourth quarter operating income was 13.7% versus
19.1% a year ago.
Fourth quarter revenue was $8.6 million, down from $9.8 million in the same
quarter last year, due to lower license fees and services bookings related
to longer sales cycles. Lower license fees and services revenue -- $4.1
million in the fourth quarter versus $5.6 million in the same quarter last
year -- was partially offset by an increase in customer support revenue --
to $4.5 million from $4.2 million. The higher customer support revenue
reflected the impact of DSA solutions that are now in production and under
maintenance. Revenue mix by product group included $5.2 million in
Activation and $3.4 million in Numbering.
Total costs of revenue and operating expenses in the fourth quarter
declined by 7% to $7.4 million from $7.9 million due primarily to lower
variable costs related to the revenue decline as well as to lower facility
costs, professional fees and product development costs. Sales and
marketing expense declined to $1.7 million from $1.8 million. General and
administrative expense declined to $1.2 million from $1.4 million, and
product development expense declined to $1.0 million from $1.2 million.
Bookings and Backlog Highlights
The Company booked $33.5 million in new orders in 2010, down 12% from $38.0
million in 2009. License fees and services orders totaled $16.9 million,
down from $21.1 million a year ago. Customer support orders declined
slightly to $16.6 million from $16.9 million. By product category 2010
orders included $19.6 million in Activation and $13.9 million in Numbering.
Total bookings in the fourth quarter were $11.5 million, down from $13.8
million in the fourth quarter last year. License fees and services orders
totaled $3.4 million versus $4.8 million last year while customer support
orders were $8.1 million compared with $9.0 million a year ago. By product
category in the fourth quarter, bookings included $5.6 million in
Activation and $5.9 million in Numbering. The Company defines bookings as
new, non-cancelable orders expected to be recognized as revenue during the
following 12 months.
Backlog at December 31, 2010, was $16.6 million, down from $20.8 million at
the end of 2009. Backlog included $5.0 million in license fees and
services and $11.6 million in customer support.
Balance Sheet Highlights
Cash and cash equivalents at December 31, 2010, were $10.8 million, up 101%
from $5.4 million at the same time last year and up slightly from $10.7
million at September 30, 2010. Working capital improved by 147% year over
year to $11.8 million from $4.8 million. The Company generated $5.7
million in cash from operations in 2010, up 57% from $3.6 million in 2009.
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 45167905. A telephone replay will be
available through March 15, 2011, and can be accessed by calling
1-800-642-1687 or 1-706-645-9291, passcode 45167905. 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 15, 2011.
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 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. 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. is a provider of software and services to more than
70 network operators in over 40 countries worldwide. Its portfolio
includes market-leading products for Service Activation, Service
Verification, Dynamic SIM Allocation, M2M, Number Portability, Number
Inventory and Mediation solutions. Founded in 1985, the Company has
headquarters in Englewood, Colorado, with offices in the United Kingdom,
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 or annual 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 8, 2011, 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 Years ended
December 31, December 31,
2010 2009 2010 2009
------- ------- ------- -------
Revenue:
License fees and services $ 4,067 $ 5,621 $20,251 $21,561
Customer support 4,536 4,191 17,055 16,635
------- ------- ------- -------
Total revenue 8,603 9,812 37,306 38,196
------- ------- ------- -------
Costs of revenue and operating expenses:
Costs of license fees and
services, excluding depreciation
and amortization 2,028 1,916 8,099 7,642
Costs of customer support,
excluding depreciation and
amortization 1,158 1,257 4,694 5,543
Sales and marketing 1,744 1,835 7,265 7,696
General and administrative 1,160 1,359 5,431 5,737
Product development 1,011 1,230 4,322 3,530
Depreciation 146 158 592 632
Amortization 176 184 688 732
------- ------- ------- -------
Total costs of revenue and operating
expenses 7,423 7,939 31,091 31,512
------- ------- ------- -------
Income from operations 1,180 1,873 6,215 6,684
------- ------- ------- -------
Other income (expense):
Interest income 3 1 13 25
Interest expense (21) 16 (102) (547)
Foreign currency exchange loss (35) (138) (121) (574)
------- ------- ------- -------
Other income (expense), net (53) (121) (210) (1,096)
------- ------- ------- -------
Income before income taxes 1,127 1,752 6,005 5,588
Income tax expense
(benefit) (36) 327 652 764
------- ------- ------- -------
Net income $ 1,163 $ 1,425 $ 5,353 $ 4,824
======= ======= ======= =======
Basic income per common share $ 0.11 $ 0.14 $ 0.53 $ 0.49
======= ======= ======= =======
Diluted income per common share $ 0.10 $ 0.14 $ 0.49 $ 0.48
======= ======= ======= =======
Weighted average basic shares
outstanding 10,495 9,927 10,174 9,816
Weighted average diluted shares
outstanding 11,107 10,507 10,815 10,145
Consolidated Balance Sheets
(In thousands)
(Unaudited) December 31, December 31,
2010 2009
----------- -----------
ASSETS
Current Assets:
Cash and cash equivalents $ 10,801 $ 5,369
Contract receivables, net 12,073 11,344
Unbilled work-in-progress 2,245 1,720
Prepaid and other current assets 1,328 1,917
----------- -----------
Total current assets 26,447 20,350
Property and equipment, net 999 1,196
Amortizable intangible assets, net 1,123 1,864
Goodwill 21,830 22,295
Long-term restricted cash 50 50
Other long-term assets 2 82
----------- -----------
Total assets $ 50,451 $ 45,837
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt and
capital lease obligations $ 27 $ 357
Accounts payable and accrued liabilities 4,310 4,531
Unearned revenue 10,298 10,688
----------- -----------
Total current liabilities 14,635 15,576
Long-term liabilities:
Long-term debt and other obligations 8 1,535
Deferred foreign income taxes 51 257
----------- -----------
Total liabilities 14,694 17,368
Stockholders' equity:
Common stock 11 10
Additional paid-in capital 87,435 83,499
Accumulated other comprehensive loss (3,704) (3,242)
Accumulated deficit (47,985) (51,798)
----------- -----------
Total stockholders' equity 35,757 28,469
----------- -----------
Total liabilities and stockholders'
equity $ 50,451 $ 45,837
=========== ===========
Reconciliation of GAAP to Non-GAAP Financial Measures
(In thousands except per share data)
(Unaudited)
Three months ended Years ended
December 31, December 31,
2010 2009 2010 2009
------- ------- ------- -------
Non-GAAP net income and income
per share data
GAAP net income $ 1,163 $ 1,425 $ 5,353 $ 4,824
Amortization of intangible assets 176 184 688 732
Stock-based compensation expense 206 215 943 864
Income tax adjustment for non-GAAP* (69) (70) (273) (268)
------- ------- ------- -------
Non-GAAP net income $ 1,476 $ 1,754 $ 6,711 $ 6,152
======= ======= ======= =======
Diluted net income per share
GAAP $ 0.10 $ 0.14 $ 0.49 $ 0.48
======= ======= ======= =======
Non-GAAP $ 0.13 $ 0.17 $ 0.62 $ 0.61
======= ======= ======= =======
Shares used to compute diluted
EPS 11,107 10,507 10,815 10,145
*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.
Three months ended Years ended
December 31, December 31,
2010 2009 2010 2009
------- ------- ------- -------
Adjusted EBITDA
Net income $ 1,163 $ 1,425 $ 5,353 $ 4,824
Depreciation 146 158 592 632
Amortization 176 184 688 732
Stock-based compensation expense 206 215 943 864
Interest expense and other
(benefit), net 53 121 210 1,096
Income tax expense (36) 327 652 764
------- ------- ------- -------
Adjusted EBITDA $ 1,708 $ 2,430 $ 8,438 $ 8,912
======= ======= ======= =======
Contact Information: Investor Relations
Jay Pfeiffer
Pfeiffer High Investor Relations, Inc.
303.393.7044
Press Relations
Sarah Hurp
Marketing Manager
Evolving Systems
+44 1225 478060