06 August 2008 - Evolving Systems Reports second quarter 2008 financial results
- Net income increases to $775,000 from $72,000 a year ago
- Adjusted EBITDA $2.0 million vs. $1.4 million last year
- Eighth consecutive quarter of positive operating income
- Revenue up 6% to $9.6 million from $9.1 million
- Sixth straight quarter of year-over-year revenue growth
- License and services orders in Q2 and first half highest in three years
- Second Dynamic SIM Allocation™ solution order
ENGLEWOOD, Colorado - 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. Further
information is available on the web at 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,
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.
CONTACTS:
Investor Relations
Jay Pfeiffer
Pfeiffer High Investor Relations, Inc.
303.393.7044
jay@pfeifferhigh.com
