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Evolving Systems Reports First Quarter 2014 Financial Results


May 6, 2014 - Englewood, CO

Evolving Systems, Inc. (NASDAQ: EVOL)

License and services bookings up 42% to $5.1M from $3.6M in Q1 last year

DSA license and services bookings up 95% in Q1 to $3.5M from $1.8M in Q1 last year

License and services backlog up 40% in Q1 to $7.8M from $5.6M in Q1 last year

DSA license and services backlog up 72% in Q1 to $5.3M from $3.1M in Q1 last year

Second quarter dividend of $0.10 per share, payable May 30, 2014, to stockholders of record on May 20, 2014

Evolving Systems, Inc. (NASDAQ: EVOL), a leader in activation, enablement and management of services for connected mobile devices, today reported financial results for its first quarter ended March 31, 2014.

"We followed strong third and fourth quarter bookings results with a first quarter record performance in the category of license and service bookings," said Thad Dupper, Chairman and CEO. "Total license and services bookings increased 42% year over year while license and services bookings for our flagship Dynamic SIM Allocation™ (DSA) solution grew 95% over the same period, indicating growing market acceptance of DSA as wireless carriers capitalize on the product's competitive benefits. Bookings momentum pushed our license and services backlog up 40% in the first quarter to $7.8 million from $5.6 million a year ago. At the same time, our DSA license and services backlog increased 72% in the first quarter to $5.3 million from $3.1 million year over year. We believe this backlog growth positions us for strong revenue and EBITDA performance in the second quarter."

First Quarter Highlights

  • Revenue of $6.6 million versus $6.7 million a year ago. License and services revenue was $4.4 million versus $4.5 million last year. Customer support revenue was $2.2 million for the comparative first quarters.

  • Operating income of $1.0 million versus $1.8 million in the first quarter last year.

  • Net income of $0.7 million versus $1.2 million in the first quarter last year. Diluted net income per share was $0.05 versus $0.10.

  • Adjusted EBITDA of $1.4 million versus $2.0 million in the first quarter last year.

  • Balance Sheet: Cash and cash equivalents at March 31, 2014, were $12.4 million, up from $11.5 million a year ago but down from $13.8 million at 2013 year-end.

  • Dividend Update: The Company declared a second quarter dividend of $0.10 per share to stockholders of record on May 20, 2014, payable May 30, 2014.

Bookings and Backlog Highlights

  • First quarter bookings totaled $7.4 million, up 30% from $5.7 million in the same quarter last year. Total bookings included $5.1 million in license and services, up 42% year over year, and $2.4 million in customer support, up 10% over the first quarter last year. DSA license and services bookings in the first quarter grew 95% to $3.5 million from $1.8 million year over year. Tertio® Service Activation (TSA) license and services bookings were $1.6 million, down 10% from $1.8 million in the first quarter last year. (Bookings are defined as new, non-cancelable orders expected to be recognized as revenue during the following 12 months.)

  • Total backlog at March 31, 2014, was $13.1 million, up 34% from $9.8 million in the first quarter last year. License and services backlog was up 40% in the first quarter to $7.8 million from $5.6 million a year ago. DSA license and services backlog was up 72% year over year to $5.3 million from $3.1 million, and TSA license and services backlog was flat at $2.5 million. Customer support backlog was $5.3 million, up 26% from $4.2 million a year ago.

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 36075031. A telephone replay will be available through May 20, 2014, and can be accessed by calling 1-855-859-2056 or 1-404-537-3406. Conference ID 36075031. 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 May 20, 2014.

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 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. (NASDAQ: EVOL) is a provider of software and services to 60 network operators in over 40 countries worldwide. The Company's product portfolio includes market-leading activation products that address subscriber service activation, SIM card activation, mobile broadband activation as well as the activation of connected devices. Founded in 1985, the Company has headquarters in Englewood, CO, with offices in San Francisco, CA; the United Kingdom; India; and Malaysia. For more information please visit www.evolving.com or follow us on Twitter: http://twitter.com/EvolvingSystems

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 market for the Company's DSA and TSA products, market leadership, bookings growth, expectations for additional orders and revenue, expectations for strong second quarter EBITDA and revenue results, and the Company's continued ability to pay dividends or post quarterly results that are similar to those described in this press release 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, 2014, as well as other SEC filings, including Forms 10-Q, 10-Q/A, 8-K and press releases.




Consolidated Statements of Operations
(In thousands except per share data)
(Unaudited)

Three months ended
March 31,
2014 2013
------------ ------------
Revenue:
License fees and services $ 4,367 $ 4,507
Customer support 2,215 2,162
------------ ------------
Total revenue 6,582 6,669
------------ ------------
Costs of revenue and operating expenses:
Costs of license fees and services, excluding
depreciation and amortization 1,478 1,536
Costs of customer support, excluding
depreciation and amortization 420 308
Sales and marketing 1,660 1,301
General and administrative 834 895
Product development 883 713
Depreciation 46 37
Amortization 23 98
Restructuring 211 -
------------ ------------
Total costs of revenue and operating expenses 5,555 4,888
------------ ------------
Income from operations 1,027 1,781
------------ ------------
Other income (expense):
Interest income 3 3
Interest expense (5) (6)
Foreign currency exchange gain (loss) (96) (43)
------------ ------------
Other income (expense), net (98) (46)
------------ ------------
Income from operations before income taxes 929 1,735
Income tax expense 278 562
------------ ------------
Net income $ 651 $ 1,173
============ ============
Basic income per common share $ 0.06 $ 0.10
============ ============
Diluted income per common share $ 0.05 $ 0.10
============ ============
Weighted average basic shares outstanding 11,621 11,409
Weighted average diluted shares outstanding 11,917 11,691



Consolidated Balance Sheets
(In thousands)
(Unaudited)

March 31, December 31,
ASSETS 2014 2013
------------ ------------
Current Assets:
Cash and cash equivalents $ 12,406 $ 13,785
Short-term restricted cash 24 -
Contract receivables, net 5,877 6,420
Unbilled work-in-progress, net 3,190 2,423
Deferred income taxes 133 131
Prepaid and other current assets 1,141 1,173
------------ ------------
Total current assets 22,771 23,932
Property and equipment, net 392 342
Amortizable intangible assets, net 679 702
Goodwill 18,090 17,936
Long-term restricted cash - 24
Long-term deferred income taxes 195 248
------------ ------------
Total assets $ 42,127 $ 43,184
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of capital lease obligations $ 7 $ 8
Accounts payable and accrued liabilities 3,694 4,479
Income taxes payable 497 459
Unearned revenue 4,108 4,287
------------ ------------
Total current liabilities 8,306 9,233
Long-term liabilities:
Capital lease obligations, net 10 11
Contingent earn-out obligation 178 178
Long-term unearned revenue 871 1,027
------------ ------------
Total liabilities 9,365 10,449
Stockholders' equity:
Common stock 12 12
Additional paid-in capital 94,123 93,895
Treasury stock (1,253) (1,253)
Accumulated other comprehensive loss (2,705) (3,016)
Accumulated deficit (57,415) (56,903)
------------ ------------
Total stockholders' equity 32,762 32,735
------------ ------------
Total liabilities and stockholders' equity $ 42,127 $ 43,184
============ ============



Reconciliation of GAAP to Non-GAAP Financial Measures
(In thousands except per share data)
(Unaudited)

Three months ended
March 31,
2014 2013
------------ ------------
Non-GAAP net income:
GAAP net income $ 651 $ 1,173
Amortization of intangible assets 23 98
Stock-based compensation expense 88 75
Restructuring 211 -
Income tax adjustment for non-GAAP* (116) (32)
------------ ------------
Non-GAAP net income $ 857 $ 1,314
============ ============

Diluted net income per share:
GAAP $ 0.05 $ 0.10
Non-GAAP $ 0.07 $ 0.11

Shares used to compute diluted EPS 11,917 11,691

Three months ended
March 31,
2014 2013
------------ ------------
Adjusted EBITDA:

Net income $ 651 $ 1,173
Depreciation 46 37
Amortization of intangible assets 23 98
Stock-based compensation expense 88 75
Restructuring 211 -
Interest expense and other (benefit), net 98 46
Income tax expense 278 562
------------ ------------
Adjusted EBITDA $ 1,395 $ 1,991
============ ============

*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.

Investor Relations


Jay Pfeiffer
Pfeiffer High Investor Relations, Inc.
303.393.7044
Email Contact

Press Relations

Jo Windel
Marketing Manager
Evolving Systems
+44 (0)1225 478062
Email Contact

MarketWire

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