08-May-2007 - Evolving Systems Reports 2007 First Quarter Results

Q1 license and services orders up 21% to $5.0 million from $4.1 million in 2006
License and services backlog grows to $5.8 million in Q1 from $4.8 million in Q4
Revenue up 4% to $8.5 million in 2007 versus $8.1 million in 2006
Adjusted EBITDA of $1.2 million, up from $168,000 a year ago
Operating income of $230,000 versus operating loss of $1.3 million a year ago
Operating cash flow increases to $3.8 million from $2.3 million last year

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 financial results for its first quarter ended March 31, 2007.

First Quarter Results
The Company reported earnings before interest, taxes, depreciation, amortization, stock compensation, gain on extinguishment of debt and loss on foreign exchange transactions (adjusted EBITDA) for the first quarter of $1.2 million as compared with adjusted EBITDA of $168,000 in the first quarter a year ago. Net loss in the first quarter declined to $326,000, or $0.02 per basic and diluted share, versus a net loss of $1.7 million, or $0.09 per basic and diluted share, in the same period last year.

Revenue in the first quarter increased 4% to $8.5 million from $8.1 million in the first quarter of 2006. License fees and services revenue increased to $4.0 million from $3.9 million in the first quarter of 2006, while customer support revenue increased to $4.5 million from $4.2 million. First quarter revenue mix included $4.6 million in Service Activation, $2.8 million in Numbering Solutions and $1.1 million in Mediation.

Total costs of revenue and operating expenses in the first quarter declined by 12% to $8.2 million from $9.4 million in the first quarter last year. The reduction is primarily attributable to lower sales and marketing and intangible amortization expense. The Company reduced its sales force in more mature markets and plans to continue to grow the sales force in emerging markets. Amortization expense will be lower in 2007 than in 2006 due to the write down of certain intangible assets taken in the second quarter of 2006. General and administrative expenses increased 10% from 2006 due to costs related to the management transition and professional fees associated with the conversion of preferred stock, proxy proposals and implementation of FASB Interpretation No. 48 Accounting for Uncertainties in Income Taxes.

Income from operations in the first quarter was $230,000, an improvement of $1.5 million over the same quarter of 2006 when the Company reported a $1.3 million operating loss. It was the Company's third consecutive quarter of positive income from operations.

Bookings and Backlog Highlights
The Company booked $11.2 million in new orders in the first quarter, including $5.0 million in license fees and services, up 21% from $4.1 million in license fees and services bookings in the first quarter a year ago. The $11.2 million in new orders was comprised of $5.2 million in Activation, $4.5 million in Numbering Solutions, and $1.5 million in Mediation.

Backlog at March 31, 2007, was $16.7 million, up slightly from $16.5 million at the same time a year ago. The Companys license and service backlog grew 52% year over year to $5.8 million from $3.8 million and was also up $1.0 million over the 2006 year-end backlog of $4.8 million. The Company defines bookings as new, non-cancelable orders expected to be recognized as revenue during the following 12 months.

Balance Sheet Highlights
Evolving Systems generated $3.8 million in cash from operations in the first quarter as compared with $2.3 million in the same quarter last year. At March 31, 2007, working capital was $718,000 and cash and cash equivalents totaled $8.0 million versus $803,000 and $5.1 million, respectively, at year-end. The Company made a scheduled $500,000 payment and an additional $81,000 payment on its senior term loan in the first quarter. In addition, the Company paid $77,000 to retire $119,000 on its subordinated debt obligations and recorded a gain on extinguishment of debt of $42,000. Additionally in the first quarter, holders of 46% of the Company's Series B Convertible Preferred Stock converted their preferred shares into approximately 1.3 million shares of common stock, thereby reducing the preferred stock balance from $11.3 million at year-end to $6.1 million at March 31, 2007.

CEO Comments
"Our performance in the first quarter yielded year-over-year increases in revenue, adjusted EBITDA and operating income," said Thad Dupper, President and CEO. "These results, along with improvements in our backlog and balance sheet, indicate that were off to a good start. We are particularly pleased with the strength of our new license and services orders, which saw a 21% increase over the year-ago period. I want to congratulate our employees on delivering a solid first quarter. As our results demonstrate, we are executing against our Blueprint for Growth and, consequently, are creating value for our shareholders."

Additional First Quarter Highlights

Introduction of the Tertio™ 7 Service Activation solution at 3GSM World Congress in Barcelona. The solution includes a distributed architecture feature that significantly reduces a carrier's total cost of ownership, and a Service Verification feature that enables carriers to continuously confirm that activated services match the services ordered by the customer.
Receipt of an order for the Dynamic SIM Allocation solution, which integrates the Company's international NumeriTrack and Tertio solutions to provide real-time capability for GSM operators to assign numbers to their SIM cards and activate those cards while a customer is in the wireless retail location. The Dynamic SIM Allocation solution improves the customer experience and reduces costs associated with a carriers SIM card inventory.
The appointment of James King as vice president of worldwide sales and marketing, filling the position previously held by Thad Dupper, who has assumed the roles of President and CEO.

Conference Call
The Company will conduct a conference call and web cast on May 9, 2007, at 2:15 p.m. Mountain Time. The call-in numbers for the conference call are 1-800-561-2813 for domestic toll free and 617-614-3529 for international. The passcode is 17866762. A telephone replay will be available through May 23, 2007, and can be accessed by calling 1-888-286-8010 or 617-801-6888, passcode 35131218. To access a live Web cast of the call, please visit Evolving Systems web site at www.evolving.com. A replay of the Web cast will be accessible at that Web site through June 9, 2007.

About Evolving Systems®
Evolving Systems, Inc. (NASDAQ-EVOL) is a provider of software and services to more than 50 network operators in over 30 countries worldwide. Its portfolio includes market-leading products for Activation, Number Portability, Number Inventory and Mediation. Founded in 1985, the Company has headquarters in Englewood, Colorado, with offices in the United States, 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 Companys growth and future profitability, future business, revenue and expense projections, the Companys continued ability to post quarterly results that are similar to those described in this press release, the impact of new products on the Companys business, the impact of backlog growth and the potential impact of the Blueprint for Growth 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 Companys Form 10-K filed with the SEC on March 15, 2007, 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

Press Relations
Sarah Hurp
Marketing Communications Manager
Evolving Systems
+44 1225 478060
sarah.hurp@evolving.com

Evolving Systems is a registered trademark of Evolving Systems, Inc.

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