Market Overview

Evolving Systems Reports First Quarter 2018 Financial Results


2018 First Quarter Highlights:

  • First quarter 2018 revenue increased 39% year-over-year to $8.2 million
  • First quarter 2018 operating income was $0.8 million, net income was $0.5 million and Adjusted EBITDA was $1.4 million
  • First quarter cash flow increased year-over-year by over $1.5 million resulting in a 15% growth in cash balance
  • Company continues to invest in research & development, sales, marketing and business development initiatives to improve its market position and competitive offering

ENGLEWOOD, Colo., May 15, 2018 (GLOBE NEWSWIRE) -- Evolving Systems, Inc. (NASDAQ:EVOL), a leader in real-time digital engagement, today reported financial results for its first quarter ended March 31, 2018.

"Our 2018 first-quarter results were in line with expectations as revenue grew approximately 39% year-over-year, we were profitable on an operating and net income basis, and our balance sheet strengthened. Cash flow increased by over $1.5 million year-over-year and our cash balance improved by 15% while we increased investments in research and development, marketing and sales-related initiatives. This is an important year for Evolving Systems as we work to further integrate the BLS and Lumata acquisitions, expedite investments to strengthen our offerings and expand our business with both our installed client base and add new accounts. During the quarter, we hired a Vice President of Products, a Vice President of Marketing, another Regional Vice President of Sales, and program and account managers supporting several of our larger customers. All of us at Evolving Systems remain focused on enhancing our business and creating long-term and sustainable shareholder value," said Thomas Thekkethala, Chief Executive Officer of Evolving Systems.

First Quarter 2018 Results
Total revenue for the first quarter ended March 31, 2018 was $8.2 million, a $2.3 million or approximately 39.0% increase over the comparable year-ago period. Services revenue comprised approximately 96% of total revenue and increased $2.3 million or over 41% when comparing the fiscal 2018 and fiscal 2017 first quarter periods.

The Company reported gross profit margins, excluding depreciation and amortization, of approximately 65.0% for the quarter ended March 31, 2018 as compared to gross profit margins of approximately 74.0% for the quarter ended March 31, 2017. This decline in gross margin was primarily related to product and service mix with the addition of BLS and Lumata contributing to the Company's fiscal 2018 results.

Total operating expenses of $4.5 million in the quarter ended March 31, 2018 increased by approximately $1.7 million, as compared to $2.8 million in the corresponding year-ago period. The increase in total operating expenses was directly related to added expenses associated with the BLS and Lumata operations, which accounted for approximately $1.4 million of the year-over-year increase. Other additions were primarily related to the Company's planned investments in sales and marketing, staffing and product development.

The Company reported operating income of $0.8 million as compared to $1.6 million in the quarter ended March 31, 2018 and March 31, 2017, respectively. Net income per share, both basic and diluted were $0.04 for the quarter ended March 31, 2018 as compared to net income per share, both basic and diluted of $0.08 in the comparable year-ago period. The Company reported Adjusted earnings before interest, taxes, depreciation and amortization ("EBITDA") of $1.4 million as compared to $1.9 million in the first quarter of 2018 and the first quarter of 2017, respectively.

Cash and cash equivalents as of March 31, 2018 was $8.7 million, an increase of $1.1 million or 15% compared to $7.6 million as of December 31, 2017. Contract receivables, net of allowance for doubtful accounts were $11.0 million, an increase of $0.9 million compared to December 31, 2017. Unbilled work-in-progress, net of allowance for doubtful accounts was $5.5 million and $5.8 million for the periods ended March 31, 2018 and December 31, 2017, respectively. Working capital as of March 31, 2018 increased slightly on a sequential basis to $9.1 million and the Company continued to generate positive cash flows from operations.

Conference Call
The Company will be conducting a conference call and webcast on Tuesday, May 15, 2018 at 4:30 p.m. Eastern Time and 2:30 p.m. Mountain Time. The call-in numbers for the conference call are: (877) 303-6316 for domestic toll free and (650) 521-5176 for international callers. The conference ID number is 5388209. A telephone replay will be available through May 30, 2018 and can be accessed by calling (855) 859-2056 for domestic toll free or (404) 537-3406 for international callers. The conference replay ID number is also 5388209. To access a live webcast of the call, please visit Evolving Systems' website at, click the ‘Investors' tab and then click the ‘Q1 earnings call' icon at right. A replay of the webcast will be accessible at that website through May 30, 2018. The webcast is also available by clicking the following link:

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 financial information in the form of non-GAAP net income and diluted net income per share and adjusted EBITDA (earnings before interest, taxes, depreciation, amortization, impairment, stock compensation, restructuring 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 real-time digital engagement solutions and services to more than 100 customers in over 65 countries worldwide. The Company's portfolio includes market-leading solutions and services for real-time analytics, customer acquisition, customer value management and loyalty for telecom, retail and financial services companies. Founded in 1985, the Company has its headquarters in Englewood, Colorado, with offices in Asia, Europe, Africa, South America and North America. For more information, please visit or follow us on Twitter at

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, and performance of, the Company's products and its ability to successfully integrate its solutions with existing customer network systems 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, 10‑Q, 10‑Q/A, 8‑K and 8‑K/A filed with the SEC and its press releases and the Company's website.

Investor Relations Contacts:
Michael Glickman, Senior Vice President
GW Communications (For Evolving Systems)
Tel: (917) 397-2272 / Email:

 (in thousands, except share data)
   For the Three Months Ended
March 31,
    2018       2017  
License fees $ 335     $ 343  
Services   7,823       5,532  
Total revenue   8,158       5,875  
Costs of revenue, excluding depreciation and amortization   2,857       1,545  
Sales and marketing   1,637       1,068  
General and administrative   1,740       973  
Product development   853       474  
Depreciation   33       51  
Amortization   242       196  
Total costs of revenue and operating expenses   7,362       4,307  
Income from operations   796       1,568  
Other income (expense)          
Interest income   28       1  
Interest expense   (126 )     (73 )
Other expense   (31 )     -  
Foreign currency exchange loss   (88 )     (173 )
Other income (expense), net   (217 )     (245 )
Income from operations before income taxes   579       1,323  
Income tax expense   95       350  
Net income $ 484     $ 973  
Basic income per common share - net income $ 0.04     $ 0.08  
Diluted income per common share - net income $ 0.04     $ 0.08  
Weighted average basic shares outstanding   12,077       11,921  
Weighted average diluted shares outstanding   12,165       11,944  

 (in thousands, except share data)
  March 31,
  December 31,
Current assets:            
Cash and cash equivalents $ 8,674     $ 7,562    
Contract receivables, net of allowance for doubtful accounts of $961 and $970            
at March 31, 2018 and December 31, 2017, respectively   11,018       10,151    
Unbilled work-in-progress, net of allowance for doubtful accounts of $105 and $107            
at March 31, 2018 and December 31, 2017, respectively   5,540       5,823    
Prepaid and other current assets   1,691       2,053    
Total current assets   26,923       25,589    
Property and equipment, net   236       258    
Amortizable intangible assets, net   5,457       5,613    
Goodwill   25,871       25,216    
Deferred income taxes   396       274    
Total assets $ 58,883     $ 56,950    
Current liabilities:            
Term loan - current portion $ 3,182     $ 2,805    
Accounts payable and accrued liabilities   6,055       6,890    
Contingent earnout   412       396    
Income taxes payable   1,377       1,107    
Unearned revenue   6,822       5,397    
Total current liabilities   17,848       16,595    
Long-term liabilities:            
Term loan, net of current portion   5,050       5,942    
Total liabilities   22,898       22,537    
Commitments and contingencies            
Stockholders' equity:            
Preferred stock, $0.001 par value; 2,000,000 shares authorized; no shares            
issued and outstanding as of March 31, 2018 and December 31, 2017, respectively   -       -    
Common stock, $0.001 par value; 40,000,000 shares authorized;            
12,294,281 shares issued and 12,115,392 outstanding as of March 31, 2018 and            
12,119,961 shares issued and 11,941,072 outstanding as of December 31, 2017, respectively   12       12    
Additional paid-in capital   98,883       98,517    
Treasury stock 178,889 shares as of March 31, 2018 and December 31, 2017, at cost   (1,253 )     (1,253 )  
Accumulated other comprehensive loss   (7,480 )     (8,202 )  
Accumulated deficit   (54,177 )     (54,661 )  
Total stockholders' equity   35,985       34,413    
Total liabilities and stockholders' equity $ 58,883     $ 56,950    

 Reconciliation of GAAP to Non-GAAP Measures
 (in thousands, except share data)
   For the Three Months Ended
March 31,
    2018       2017  
Adjusted EBITDA:          
Net income $ 484     $ 973  
Depreciation   33       51  
Amortization of intangible assets   242       196  
Stock-based compensation expense   366       81  
Interest expense and other (benefit), net   217       245  
Income tax expense (benefit)   95       350  
Adjusted EBITDA  $ 1,437     $ 1,896  
Non-GAAP net income:          
GAAP net income $ 484     $ 973  
Amortization of intangible assets   242       196  
Stock-based compensation expense   366       81  
Income tax adjustment for non-GAAP*   (163 )     (102 )
Non-GAAP net income $ 929     $ 1,148  
Diluted net income per share          
GAAP $ 0.04     $ 0.08  
Non-GAAP $ 0.08     $ 0.10  
Shares used to compute diluted net income per share   12,165       11,944  

* The estimated income tax for non-GAAP net income is adjusted by the amount of additional expense that we would accrue if we used non-GAAP results instead of GAAP results in the calculation of our tax liability, taking into account which tax jurisdiction each of the above adjustments would be made and the tax rate in that jurisdiction.

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