EXHIBIT 99.1
IMMEDIATE RELEASE | NEWS |
November 7, 2005 | NASDAQ-EVOL |
EVOLVING SYSTEMS REPORTS THIRD QUARTER RESULTS FOR 2005
LICENSE FEES AND SERVICES BOOKINGS UP 93% IN Q3 AS COMPARED WITH Q2
ENGLEWOOD, Colorado — Evolving Systems, Inc. (NASDAQ-EVOL), a leading provider of innovative software solutions and services to the wireless, wireline and IP carrier market, today reported results for its third quarter and nine-month periods ended September 30, 2005.
Third Quarter Results
Third quarter revenue increased 68% to $9.6 million from $5.7 million in the same quarter last year. This increase reflected the contribution from the fourth quarter 2004 acquisitions of Telecom Software Enterprises, LLC (TSE) and Tertio Telecoms Limited (Tertio). License fees and services revenue in the third quarter of 2005 was $4.8 million, up significantly over $800,000 in the same quarter last year. Customer support revenue was $4.8 million in the third quarter, as compared with $4.9 million in the third quarter a year ago. The 2004 third quarter customer support revenue figure, however, included $1.1 million of revenue recognized from a previously deferred customer maintenance contract. Revenue mix in the third quarter of 2005 included $4.0 million in Numbering Solutions, $4.7 million in Service Activation, and $900,000 in Mediation.
Total costs of revenue and operating expenses in the third quarter increased to $9.9 million from $5.3 million in the third quarter of 2004. This increase was primarily due to additional costs from Tertio’s operations and related integration activities. In addition, the Company incurred approximately $477,000 in severance costs in the third quarter related to previously announced headcount reductions. Sequentially, total costs of revenue and operating expenses declined for the second consecutive quarter as the Company continued to benefit from eliminating duplicate roles while integrating its Tertio acquisition as well as savings from expanding its offshore development activities.
The Company had an operating loss of $338,000 in the third quarter compared with operating income of $445,000 in the third quarter last year. The $338,000 operating loss included non-cash amortization and depreciation charges of $1.7 million. Net loss for the third quarter was $926,000, or $0.05 per basic and diluted share, versus net income of $517,000, or $0.03 per basic and diluted share, in the same quarter a year ago.
Third quarter new order bookings increased sequentially to $8.6 million from $7.1 million in the second quarter. The Company booked $5.8 million in license fees and services, up 93% from $3.0 million in license fees and services bookings in the second quarter. Total new order bookings included $2.8 million in customer support. The Company defines bookings as new, non-cancelable orders expected to be
recognized as revenue in the next twelve months. Backlog at September 30, 2005, was $13.8 million versus a second quarter backlog of $14.5 million. The September 30 backlog consisted of $4.6 million in license fees and services, up 39% from $3.3 million in the second quarter, and $9.2 million in customer support. As expected, customer support backlog declined sequentially from the second quarter, reflecting the seasonality of customer support renewals. Historically, the large customer support renewals occur in the fourth and first quarters. Evolving Systems closed the third quarter with cash and cash equivalents of $3.4 million, down from $4.6 million at June 30. The decline in cash was primarily attributable to the seasonality of customer support receipts and employee severance cash payments of approximately $580,000.
Nine-Month Results
Driven by the acquisitions of Tertio and TSE, revenue increased 74% to $29.3 million for the nine-month period ended September 30, 2005, as compared with revenue of $16.8 million for the same period last year. License fees and services revenue for the respective periods increased to $14.6 million from $6.4 million while customer support revenue grew to $14.7 million from $10.4 million. Revenue mix included $11.7 million in Numbering Solutions, $13.8 million in Service Activation, and $3.8 million in Mediation.
Total costs of revenue and operating expenses for the nine-month period ended September 30, 2005, increased to $31.9 million from $16.4 million in the same period last year. This increase was primarily attributable to the added costs from the Tertio acquisition and integration.
The Company reported an operating loss of $2.5 million for the nine-month period ended September 30, 2005. That figure includes nearly $5.3 million in non-cash amortization and depreciation expenses. Net loss for the nine-month period was $3.8 million, or $0.20 per basic and diluted share, versus net income of $593,000, or $0.04 per basic and $0.03 per diluted share, in the same period last year.
CEO comments
“At this point in the year, we feel our late 2004 acquisitions of Tertio and TSE are showing positive results and we are at a stage where we now expect to start seeing the value of our combined operations,” said Stephen Gartside, president and CEO.
“Evolving Systems won two new key accounts in the third quarter – one in the U.S. in partnership with Alcatel and one in Asia in partnership with Siemens,” Gartside said. “In addition, we booked the first sale of our new Tertio™ Content Connector solution with one of our European customers – an important milestone for a product that helps operators integrate content and service delivery platforms on which next-generation IP-based services can be launched. As a result, bookings and backlog for license fees and services increased during the period – good leading indicators for future revenue growth.
“We are carrying strong sales momentum for Activation and Numbering Solutions into the fourth quarter as evidenced by two fourth quarter contract wins,” Gartside added. “Most recently we announced that a major U.S. Tier One carrier – a long time Evolving Systems customer – expanded its relationship by implementing our OrderPath® product. As a result, our Numbering Solutions are now deployed at three of the nation’s top four Incumbent Local Exchange Carriers. Just prior to that announcement, we reported that Onetel, one of the UK’s largest integrated communications carriers, plans to deploy several of our products in their next generation back office. This contract, which includes Activation and Numbering Solutions, represents one of the synergies of our 2004 Tertio acquisition in that Onetel’s solution will combine products from both our U.S. and U.K. organizations.”
Gartside noted that the Company continues to pursue opportunities to restructure its Tertio acquisition debt. This restructuring, which the Company believes is imminent, is expected to provide solid improvement in working capital and future cash flows.
Outlook
Evolving Systems expects to end the year with approximately $40 million in revenue. The Company continues to expect positive net income in 2005 after adjusting for non-cash amortization expense. In addition, the Company expects its results from operations to improve in 2006. Management will provide more details on 2006 guidance in the 2005 year-end conference call planned for late in the first quarter of 2006.
Conference Call
Evolving Systems will conduct its conference call on November 7 at 2:15 p.m. MT.
•Call 1-866-510-0704 for domestic toll free.
•Call 617-597-5362 for international.
•Conference passcode is 43116904.
•Telephone replay through November 21 at 888-286-8010 or 617-801-6888, passcode 47369528.
•Webcast, go to www.evolving.com. Replay available through November 21, 2005.
About Evolving Systems®
Evolving Systems, Inc. (NASDAQ-EVOL) is a provider of software and services to more than 50 network operators in 38 countries worldwide. Its portfolio includes market-leading products for Activation, Mediation and Numbering Solutions. Founded in 1985, the Company has headquarters in Englewood, Colorado, with offices in the United States, United Kingdom, Germany, India and Malaysia. Further information 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 impact of the Company’s acquisitions, growth and future profitability, cash and cash flow, future business, revenue and expense projections, the integration of acquisitions, and the Company’s ability to restructure its debt 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, please refer to the Company’s Form 10-K filed with the SEC on March 31, 2005 as well as subsequently filed Form 10-Q, and 8-K reports.
CONTACTS:
Investor Relations | | Public Relations
(Americas) | | Public Relations
(EMEA & Asia Pacific) |
Jay Pfeiffer Pfeiffer High Investor Relations, Inc. 303.393.7044 jay@pfeifferhigh.com | | Dan La Russo Ogilvy Public Relations Worldwide +1 303.634.2632 dan.larusso@ogilvypr.com | | Emi Papalamprou Ogilvy Public Relations Worldwide +44 20 7309 1280 emi.papalamprou@uk.ogilvypr.com |
Consolidated Statements of Operations
(In thousands, except per share data)
(UNAUDITED)
| | THREE MONTHS ENDED
September 30, | | NINE MONTHS ENDED
September 30, | |
| | 2005 | | 2004 | | 2005 | | 2004 | |
| | | | | | | | | |
Revenue: | | | | | | | | | |
License fees and services | | $ | 4,821 | | $ | 810 | | $ | 14,643 | | $ | 6,412 | |
Customer support | | 4,749 | | 4,929 | | 14,691 | | 10,354 | |
Total revenue | | 9,570 | | 5,739 | | 29,334 | | 16,766 | |
Costs of revenue and operating expenses: | | | | | | | | | |
Costs of license fees and services, excluding depreciation and amortization | | 2,285 | | 808 | | 7,654 | | 3,003 | |
Costs of customer support excluding depreciation and amortization | | 1,578 | | 1,807 | | 5,244 | | 5,286 | |
Sales and marketing | | 2,427 | | 942 | | 7,242 | | 2,779 | |
General and administrative | | 1,445 | | 1,100 | | 5,426 | | 2,969 | |
Product development | | 452 | | 152 | | 1,058 | | 884 | |
Depreciation | | 363 | | 272 | | 1,123 | | 811 | |
Amortization | | 1,354 | | 213 | | 4,170 | | 645 | |
Restructuring | | 4 | | — | | (47 | ) | — | |
Total costs of revenue and operating expenses | | 9,908 | | 5,294 | | 31,870 | | 16,377 | |
Loss from operations | | (338 | ) | 445 | | (2,536 | ) | 389 | |
Other income (expense), net | | (471 | ) | 92 | | (1,403 | ) | 216 | |
Income (loss) before income taxes | | (809 | ) | 537 | | (3,939 | ) | 605 | |
Income taxes | | 117 | | 20 | | (177 | ) | 12 | |
Net income (loss) | | $ | (926 | ) | $ | 517 | | $ | (3,762 | ) | $ | 593 | |
Basic income (loss) per common share | | $ | (0.05 | ) | $ | 0.03 | | $ | (0.20 | ) | $ | 0.04 | |
Diluted income (loss) per common share | | $ | (0.05 | ) | $ | 0.03 | | $ | (0.20 | ) | $ | 0.03 | |
Weighted average basic shares outstanding | | 18,665 | | 15,890 | | 18,634 | | 15,860 | |
Weighted average diluted shares outstanding | | 18,665 | | 16,906 | | 18,634 | | 17,378 | |
Consolidated Balance Sheets
(In thousands)
(Unaudited)
| | September 30, | | December 31, | |
| | 2005 | | 2004 | |
ASSETS | | | | | |
Current assets: | | | | | |
Cash and cash equivalents | | $ | 3,423 | | $ | 11,386 | |
Current portion of restricted cash | | 100 | | 100 | |
Contract receivables, net | | 4,989 | | 11,296 | |
Unbilled work-in-progress | | 1,489 | | 1,323 | |
Prepaid and other current assets | | 1,700 | | 1,832 | |
Total current assets | | 11,701 | | 25,937 | |
Property and equipment, net | | 2,015 | | 2,563 | |
Intangible assets, net | | 14,649 | | 19,993 | |
Goodwill | | 35,060 | | 37,698 | |
Restricted cash | | 300 | | 300 | |
Total assets | | $ | 63,725 | | $ | 86,491 | |
LIABILITIES AND STOCKHOLDERS’ EQUITY | | | | | |
Current liabilities: | | | | | |
Notes payable and long-term obligations | | $ | 4,455 | | $ | 4,911 | |
Accounts payable and accrued liabilities | | 5,796 | | 8,357 | |
Payable to Tertio sellers | | — | | 2,664 | |
Deferred foreign income taxes | | 98 | | 265 | |
Unearned revenue | | 7,822 | | 13,083 | |
Total current liabilities | | 18,171 | | 29,280 | |
Long-term liabilities: | | | | | |
Long-term obligations | | 80 | | 125 | |
Notes payable | | 8,697 | | 11,849 | |
Deferred foreign income taxes | | 3,346 | | 4,642 | |
Total liabilities | | 30,294 | | 45,896 | |
Preferred stock | | 11,281 | | 11,281 | |
Stockholders’ equity: | | | | | |
Common stock | | 16 | | 16 | |
Additional paid-in capital | | 67,859 | | 67,765 | |
Other comprehensive (loss) income | | (1,502 | ) | 1,994 | |
Accumulated deficit | | (44,223 | ) | (40,461 | ) |
Total stockholders’ equity | | 22,150 | | 29,314 | |
Total liabilities and stockholders’ equity | | $ | 63,725 | | $ | 86,491 | |
