05-May-2004
- Evolving Systems Reports First Quarter Results for 2004
ENGLEWOOD, Colorado - Evolving Systems, Inc. (NASDAQ-EVOL), a provider of innovative software solutions for operations and systems integration to many of the largest communications companies in the U.S., today reported financial results for its first quarter ended March 31, 2004.
The Company reported its seventh consecutive profitable quarter, with net income of $244,000, or $0.02 per basic and $0.01 per diluted share, versus net income of $3.1 million, or $0.23 per basic and $0.21 per diluted share, in the same quarter a year ago. The decline in net income was directly attributable to lower revenue in the comparative first quarters.
Evolving Systems reported revenue of $5.8 million in the first quarter of 2004 as compared with revenue of $8.6 million in the first quarter last year. The year-ago quarter included license fees and services revenue of $1.6 million from a large, initial Local Number Portability (LNP) product license sale. Because the market for core LNP software is mature, large core LNP license sales have declined but the Company continues to make smaller sales of LNP software enhancements and features. First quarter 2004 customer support revenue was down from the comparable quarter last year due to the deferral of revenue on a $4.3 million contract and to continued pricing pressures, partially offset by support revenue acquired in the CMS acquisition. As previously announced, the deferral of revenue on the $4.3 million contract will continue to impact 2004 customer support revenue. This contract, with a large, key customer, included specified licensed software upgrades for which the fair value could not be determined and resulted in the deferral of revenue until the specified licensed software upgrades have been delivered and accepted. Currently, these upgrades are scheduled for acceptance in the first quarter of 2005.
Total costs of revenue and operating expenses remained stable versus the year-ago quarter. Costs of license fees and services declined in line with lower revenue while costs of customer support and product development increased in association with the acquisition of CMS Communications. Also of note, Evolving Systems incurred approximately $100,000 in product development expense related to start-up of its Evolving Systems India Networks (EVI) subsidiary.
Evolving Systems closed the quarter with cash and cash equivalents of $21.3 million, up from $18.0 million at year end. The increase in cash and cash equivalents came from cash generated from operations, principally collections of contract receivables. The Company had working capital of $14.2 million and long-term obligations that declined to $166,000. New orders booked during the first quarter totaled $5.7 million and the Company's backlog remained unchanged at $11.0 million, including $1.6 million in license and services, and $9.4 million in customer support.
"We are pleased to have reported a seventh consecutive profitable quarter in spite of continued sluggishness in the telecommunications sector," said Stephen Gartside, chief executive officer. "Our primary objectives are to control our costs while at the same time making the investments necessary to spur organic and acquisitive growth in the second half of the year. With a strong balance sheet, a focus on growing the Company's solutions portfolio, and the pending transition to an even lower cost offshore development capability, we remain confident in our ability to achieve sustainable, long-term growth."
Gartside noted that startup of the Company's newly formed Indian subsidiary remains on track with staffing having reached nearly 25 employees as of May 1. This new development model will afford Evolving Systems flexibility and control over the development process as well as lower overall operating costs and an ability to offer customers more aggressive pricing.
"We are managing our resources and cost structure with a focus in select areas of greatest growth potential, and we are carefully using our cash for initiatives that are geared toward achieving our growth objectives," said Gartside.
"We intend to maintain a lean operating environment that emphasizes high operating efficiencies and continue to look for ways to extend our presence in the tier one communications market by working closely with our customers. Our recent recognition by SBC Communications as an outstanding supplier underscores our ability to meet stringent performance requirements both in terms of operating efficiencies and technical innovation."
Gartside also announced that John Cullen, former President of CMS Communications and senior vice president of corporate development for Evolving Systems, is leaving the Company to pursue other interests. "We appreciate John's contributions to Evolving Systems, including the successful integration of CMS Communications, his former Company and the first example of our M&A strategy. In the meantime, we are currently evaluating a number of prospective M&A transactions and continue to view M&A growth as an important and synergistic component of our overall growth strategy. We are looking forward to updating investors periodically on our progress in this area."
Outlook
Based primarily on the recent deferral of $4.3 million in revenue, Evolving
Systems is revising its 2004 full-year revenue guidance from $31-$35 million
to $25-$31 million. The Company reaffirms expectations to be profitable for
the full year, but will not be providing quarterly guidance.
Evolving Systems will conduct its year-end conference call today at 2:15 p.m. Mountain Time.
- Call 1-800-257-7087 for domestic toll free
- Call 303-262-2130 for Denver and international
- Conference I.D. number is 578152
- Telephone replay through May 19, 2004 at 800-405-2236 or 303-590-3000, passcode 587152#.
- Webcast, go to www.evolving.com. Replay available through June 4, 2004.
About Evolving Systems®
Evolving Systems, Inc. (NASDAQ: EVOL) provides innovative software solutions
for operations and systems integration to many of the largest communications
companies in the U.S. The Company provides local number portability solutions,
offers software products that enable carriers to comply with the FCC's number
conservation mandates intended to extend the life of the North American Numbering
Plan, and offers solutions in the area of network management for monitoring
and capacity planning. The Company's ServiceXpress™ methodology and
offering is used to accelerate development and integration efforts. Evolving
Systems' unique competence as an integration and solutions provider for both
operations support systems (OSS) and network solutions positions the Company
to accelerate the automation and availability of tomorrow's services for
today's tier one carriers and application service providers. For additional
information visit www.evolving.com
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, the Company's statements about growth, and future profitability;
future business in number portability; revenue and expense projections; the
Company's M&A strategy and its impact on revenue and earnings growth;
the impact of the Indian subsidiary are forward-looking statements. Readers
should not place undue reliance on these forward-looking statements, and
the Company may not undertake to update these forward looking statements.
Actual results could differ materially because of many factors, such as the
timing of delivery under the Company's contracts; FCC decisions concerning
number portability; internal budgeting changes of customers; unexpected costs
and delays in, or failure to meet, project milestones; the impact of competition,
the impact of the CMS acquisition and future M&A activities, if any;
the impact of the business and economic climate in India and the Company's
ability to manage a foreign subsidiary; the impact of changes in management
and the general state of the telecommunications industry. For a more extensive
discussion of the Company's business, please refer to the Company's Form
10-K filed with the SEC on March 24, 2004 as well as subsequently filed Form
10-Q and 8-K reports.
CONTACTS:
Investor Relations
Jay Pfeiffer
Pfeiffer High Investor Relations, Inc.
303.393.7044
jay@pfeifferhigh.com
Public Relations Contact (Americas)
Dan La Russo
Ogilvy Public Relations Worldwide
212.880.5315
dan.larusso@ogilvypr.com
