Evolving Systems, Inc. (NASDAQ: EVOLD)
Net income:
-- Up 42% from Q2 2008 to $1.1 million -- $0.11 EPS
-- Up 290% from first half 2008 to $2.1 million -- $0.21 EPS
-- Most profitable Q2 and first half since 2003
-- EPS figures adjusted for recent 1-for-2 reverse split
Constant currency revenue increases 8% in both second quarter
and six-month period
Bookings highlights:
-- New product offering license and services orders for first half up
258% year over year
-- New products accounted for 67% of first half license and services
bookings
-- Emerging markets customers comprise 81% of first half license and
services bookings
Record high second quarter ending license and services backlog
of $9.6 million as a global business
$3 million in accelerated debt pay down in first half of
2009
Evolving Systems, Inc. (NASDAQ: EVOLD), a leading provider of
software solutions and services to the wireless, wireline and cable
markets, today reported increased profitability and strong overall
results for its second quarter and six month period ended June 30,
2009.
"We continue to experience solid demand for our solutions,
highlighted by growing interest in our new product offerings in
emerging markets, where we have been aggressively targeting
carriers for the past few years," said Thad Dupper, president and
CEO of Evolving Systems. "We experienced good growth in constant
currency revenue, operating income, net income and adjusted EBITDA.
We're particularly pleased with fully diluted EPS of $0.11 in the
second quarter and $0.21 for the six-month period, after reflecting
the effect of our one-for-two reverse stock split.
"We recorded two more sales of our new Dynamic SIM
Allocation(TM) (DSA) solution in the second quarter, bringing the
total number of DSA sales year to date to four -- three with
customers in emerging markets and one with a customer in Europe,"
Dupper added. "Our newest product offerings -- DSA and our
international NumeriTrack® (iNT) solution -- comprised 21% of
revenue and 43% of new orders during the second quarter -- an
important indicator that our focus on new products and emerging
markets is paying off."
Second Quarter Results
Second quarter net income rose 42% to $1.1 million, or $0.11 per
basic and diluted share, from $775,000, or $0.08 per basic and
diluted share, in the second quarter of 2008. It was the Company's
most profitable second quarter since 2003 and fifth consecutive
profitable quarter overall. Non-GAAP adjusted EBITDA for the second
quarter was $2.4 million, up 21% from $2.0 million in the same
quarter last year.
Due to the stronger U.S. dollar in the second quarter of 2009
compared with the second quarter of 2008, reported revenue in the
second quarter was essentially flat at $9.6 million. However, when
adjusted for the change in foreign currency exchange rates, second
quarter revenue increased 8% year over year due to growing demand
for the Company's DSA and iNT solutions in emerging markets.
Reported license fees and services revenue as well as customer
support revenue totals were nearly flat at approximately $5.4
million and $4.3 million, respectively, for the comparative second
quarters. Second quarter revenue mix included $5.6 million in
Service Activation, $3.4 million in Numbering Solutions and $0.6
million in Mediation.
Total costs of revenue and operating expenses in the second
quarter declined 8% to $7.8 million in 2009 from $8.5 million in
2008, reflecting the positive effects of foreign exchange
transactions principally involving the British Pound Sterling.
Adjusted for currency changes, total expenses were up approximately
5%. The increase in second quarter constant currency expenses was
due to higher costs of revenue to support the constant currency
revenue growth, increased selling costs to cover the emerging
markets, and higher professional fees.
Second quarter income from operations was up 63% to $1.8 million
from $1.1 million in the comparable quarter last year. It was the
Company's 12th consecutive quarter of positive operating income and
the second highest total in that category since 2003.
6-Month Results
The Company reported a 290% increase in net income to $2.1
million, or $0.21 per basic and diluted share, through six months
as compared with net income of $531,000, or $0.05 per basic and
diluted share, in the same period a year ago. Adjusted EBITDA for
the six-month period was $4.3 million, a 47% increase over the
total of $2.9 million a year ago.
Again, due to the comparatively stronger U.S. dollar in 2009,
reported revenue through the first six months of 2009 declined
slightly to $18.5 million from $18.8 million in the same period a
year ago. On a constant currency basis, however, revenue increased
8% based on solid growth in demand for new products. License fees
and services revenue declined slightly -- to $10.1 million from
$10.2 million -- while customer support revenue was $8.4 million
versus $8.6 million in the year ago period. Revenue mix included
$10.5 million in Activation, $6.8 million in Numbering Solutions
and $1.2 million in Mediation.
Total costs of revenue and operating expenses through the first
six months of 2009 benefitted from the effects of foreign currency
exchange transactions, declining by nearly 13% to $15.3 million
from $17.6 million in the comparable six-month period last year. On
a constant currency basis, total costs of revenue and operating
expenses increased approximately 2%.
Operating income through six months of 2009 grew 161% to $3.2
million from $1.2 million in the same period of 2008.
Bookings and Backlog Highlights
The Company booked $10.5 million in new orders in the second
quarter, a 26% increase over bookings of $8.3 million in the second
quarter last year and a 67% increase over bookings of $6.3 million
in the first quarter of this year. Second quarter bookings included
$6.1 million in license fees and services and $4.4 million in
customer support, representing year over year increases of 15% and
45%, respectively. Bookings by product category in the second
quarter included $6.9 million in Activation, $2.9 million in
Numbering Solutions, and $0.6 million in Mediation.
DSA and iNT solutions combined to represent 60% of license fees
and services bookings in the second quarter, with DSA contributing
52% and iNT contributing 8%. As a percentage of total bookings, DSA
represented 37% with iNT at 6% for a combined 43% of total
bookings.
New orders for the first six months of 2009 increased to $16.7
million from $16.6 million in the same period last year.
Year-to-date new orders were impacted by the acceleration in the
first quarter of a large, recurring 2009 license and services order
into the fourth quarter of 2008. License and services orders were
flat at $10.8 million for the comparative six-month periods while
support orders for the same periods increased to $6.0 million from
$5.8 million. By product category, six-month bookings included
$11.0 million in Activation, $4.9 million in Numbering Solutions
and $.8 million in Mediation.
Orders for DSA solutions represented 49% of license fees and
services bookings through six months while iNT orders came in at
18%, bringing the combined DSA and iNT orders to 67% of license
fees and services bookings in the first half of 2009. License fees
and services orders for DSA and iNT solutions in the first half
increased a combined 258% over the first half of 2008. As a percent
of total new orders, DSA and iNT contributed 36% and 12%,
respectively, for a total of 48% of total bookings year to date.
Emerging markets generated 81% of first half license and services
orders.
The Company defines bookings as new, non-cancelable orders
expected to be recognized as revenue during the following 12
months.
Backlog at June 30, 2009, was $19.3 million, up 10% over $17.6
million. The license fees and services backlog, a leading
indicator, increased 35% to $9.6 million from $7.1 million, more
than offsetting an 8% decline in customer support backlog.
Balance Sheet Highlights
The Company made a $1.0 million prepayment on its subordinated
debt obligations in the second quarter, raising to $3.0 million the
total sub-debt prepayments made year to date. When appropriate, the
Company expects to continue accelerating its debt payments in order
to enhance earnings and strengthen its balance sheet. The Company's
cash and cash equivalents balance at June 30, 2009, was $5.0
million.
Conference Call
The Company will conduct a conference call and webcast today at
2:45 p.m. Mountain Time. The call-in numbers for the conference
call are 1-877-548-7907 for domestic toll free and 719-325-4905 for
international callers. The conference ID is 3894744. A telephone
replay will be available through August 11, 2009, and can be
accessed by calling 1-888-203-1112 or 1-719-457-0820, passcode
3894744. 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 11,
2009.
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, Number Portability,
Number Inventory and Mediation solutions. 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 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 11, 2009, 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,
2009 2008 2009 2008
---------- ---------- ---------- ----------
Revenue:
License fees and services $ 5,359 $ 5,342 $ 10,104 $ 10,174
Customer support 4,270 4,303 8,368 8,598
---------- ---------- ---------- ----------
Total revenue 9,629 9,645 18,472 18,772
---------- ---------- ---------- ----------
Costs of revenue and operating
expenses:
Costs of license fees and
services, excluding
depreciation and
amortization 2,065 1,902 3,742 4,126
Costs of customer support,
excluding depreciation and
amortization 1,401 1,632 2,834 3,125
Sales and marketing 1,942 2,194 3,829 4,381
General and administrative 1,399 1,236 2,832 2,661
Product development 686 950 1,381 2,018
Depreciation 158 252 314 482
Amortization 183 379 354 759
---------- ---------- ---------- ----------
Total costs of revenue and
operating expenses 7,834 8,545 15,286 17,552
---------- ---------- ---------- ----------
Income from operations 1,795 1,100 3,186 1,220
---------- ---------- ---------- ----------
Interest and other
expense, net (640) (212) (1,057) (650)
---------- ---------- ---------- ----------
Income before income taxes 1,155 888 2,129 570
Income tax expense 53 113 58 39
---------- ---------- ---------- ----------
Net income $ 1,102 $ 775 $ 2,071 $ 531
========== ========== ========== ==========
Basic income per common
share $ 0.11 $ 0.08 $ 0.21 $ 0.05
========== ========== ========== ==========
Diluted income per common
share $ 0.11 $ 0.08 $ 0.21 $ 0.05
========== ========== ========== ==========
Weighted average basic
shares outstanding 9,777 9,687 9,771 9,684
Weighted average diluted
shares outstanding 10,087 9,922 9,992 9,920
Reconciliation of Net Income to Adjusted EBITDA
(In thousands)
(Unaudited)
Three months ended Six months ended
June 30, June 30,
2009 2008 2009 2008
---------- ---------- ---------- ----------
Net income $ 1,102 $ 775 $ 2,071 $ 531
Depreciation 158 252 314 482
Amortization 183 379 354 759
Stock-based compensation
expense 225 228 426 456
Interest expense and other,
net 640 212 1,057 650
Income tax expense (benefit) 53 113 58 39
---------- ---------- ---------- ----------
Adjusted EBITDA $ 2,361 $ 1,959 $ 4,280 $ 2,917
========== ========== ========== ==========
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,
2009 2008
-------------- --------------
ASSETS
Current Assets:
Cash and cash equivalents $ 4,995 $ 5,783
Contract receivables, net 9,002 11,484
Unbilled work-in-progress 2,251 1,910
Prepaid and other current assets 1,556 1,309
-------------- --------------
Total current assets 17,804 20,486
Property and equipment, net 1,285 1,277
Amortizable intangible assets, net 2,314 2,374
Goodwill 22,898 20,811
Long-term restricted cash 100 100
Other long-term assets 194 363
-------------- --------------
Total assets $ 44,595 $ 45,411
============== ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt
and capital lease obligations $ 1,356 $ 2,021
Accounts payable and accrued
liabilities 4,421 5,218
Unearned revenue 9,960 11,445
-------------- --------------
Total current liabilities 15,737 18,684
Long-term liabilities:
Long-term debt and other obligations 3,270 6,344
Deferred foreign income taxes 388 441
-------------- --------------
Total liabilities 19,395 25,469
Stockholders' equity:
Common stock 10 10
Additional paid-in capital 82,284 81,824
Accumulated other comprehensive loss (2,543) (5,270)
Accumulated deficit (54,551) (56,622)
-------------- --------------
Total stockholders' equity 25,200 19,942
-------------- --------------
Total liabilities and stockholders'
equity $ 44,595 $ 45,411
============== ==============
Investor Relations Jay Pfeiffer Pfeiffer High Investor
Relations, Inc. 303.393.7044 Email Contact Press Relations Sarah
Hurp Marketing Manager Evolving Systems +44 1225 478060 Email
Contact
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