Document And Entity Information
Document And Entity Information - shares | 3 Months Ended | |
Mar. 31, 2019 | May 13, 2019 | |
Document And Entity Information [Abstract] | ||
Document Type | 10-Q | |
Amendment Flag | false | |
Document Period End Date | Mar. 31, 2019 | |
Document Fiscal Period Focus | Q1 | |
Document Fiscal Year Focus | 2019 | |
Entity Registrant Name | EVOLVING SYSTEMS INC | |
Trading Symbol | evol | |
Entity Central Index Key | 0001052054 | |
Current Fiscal Year End Date | --12-31 | |
Entity Filer Category | Non-accelerated Filer | |
Entity Small Business | true | |
Entity Emerging Growth Company | false | |
Entity Common Stock, Shares Outstanding | 12,161,489 |
Condensed Consolidated Balance
Condensed Consolidated Balance Sheets - USD ($) $ in Thousands | Mar. 31, 2019 | Dec. 31, 2018 |
Current assets: | ||
Cash and cash equivalents | $ 5,562 | $ 6,732 |
Contract receivables, net of allowance for doubtful accounts of $942 and $771 at March 31, 2019 and December 31, 2018, respectively | 7,676 | 7,757 |
Unbilled work-in-progress, net of allowance for doubtful accounts of $554 and $552 at March 31, 2019 and December 31, 2018, respectively | 3,027 | 3,044 |
Prepaid and other current assets | 1,920 | 1,351 |
Income taxes receivable | 1,179 | 1,137 |
Total current assets | 19,364 | 20,021 |
Property and equipment, net | 375 | 303 |
Amortizable intangible assets, net | 4,356 | 4,550 |
Operating leases - right to use assets | 1,534 | |
Goodwill | 6,828 | 6,738 |
Deferred income taxes, net | 1,144 | 1,140 |
Total assets | 33,601 | 32,752 |
Current liabilities: | ||
Term loans - current portion | 5,149 | 3,573 |
Accounts payable and accrued liabilities | 5,174 | 4,483 |
Unearned revenue | 4,366 | 3,911 |
Total current liabilities | 14,689 | 11,967 |
Long-term liabilities: | ||
Term loans, net of current portion | 2,365 | |
Lease obligations - operating leases, net of current portion | 1,152 | |
Total liabilities | 15,841 | 14,332 |
Commitments and contingencies (Note 10) | ||
Stockholders' equity: | ||
Preferred stock, $0.001 par value; 2,000,000 shares authorized; no shares issued and outstanding as of March 31, 2019 and December 31, 2018 | ||
Common stock, $0.001 par value; 40,000,000 shares authorized; 12,340,378 shares issued and 12,161,489 outstanding as of March 31, 2019 and 12,305,597 shares issued and 12,126,708 outstanding as of December 31, 2018 | 12 | 12 |
Additional paid-in capital | 99,354 | 99,224 |
Treasury stock, 178,889 shares as of March 31, 2019 and December 31, 2018, at cost | (1,253) | (1,253) |
Accumulated other comprehensive loss | (9,788) | (10,115) |
Accumulated deficit | (70,565) | (69,448) |
Total stockholders' equity | 17,760 | 18,420 |
Total liabilities and stockholders' equity | $ 33,601 | $ 32,752 |
Condensed Consolidated Balanc_2
Condensed Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands | Mar. 31, 2019 | Dec. 31, 2018 |
Condensed Consolidated Balance Sheets [Abstract] | ||
Allowance for doubtful accounts receivable | $ 942 | $ 771 |
Allowance for doubtful unbilled work-in-progress | $ 554 | $ 552 |
Preferred stock, par value | $ 0.001 | $ 0.001 |
Preferred stock, shares authorized | 2,000,000 | 2,000,000 |
Preferred stock, shares issued | 0 | 0 |
Preferred stock, shares outstanding | 0 | 0 |
Common stock, par value | $ 0.001 | $ 0.001 |
Common stock, shares authorized | 40,000,000 | 40,000,000 |
Common stock, shares issued | 12,340,378 | 12,305,597 |
Common stock, shares outstanding | 12,161,489 | 12,126,708 |
Treasury stock, shares | 178,889 | 178,889 |
Condensed Consolidated Statemen
Condensed Consolidated Statements Of Operations - USD ($) shares in Thousands, $ in Thousands | 3 Months Ended | |
Mar. 31, 2019 | Mar. 31, 2018 | |
REVENUE | ||
Total revenue | $ 6,697 | $ 8,158 |
COSTS OF REVENUE AND OPERATING EXPENSES | ||
Costs of revenue, excluding depreciation and amortization | 1,945 | 2,857 |
Sales and marketing | 2,066 | 1,637 |
General and administrative | 1,800 | 1,740 |
Product development | 1,289 | 853 |
Depreciation | 25 | 33 |
Amortization | 237 | 242 |
Total costs of revenue and operating expenses | 7,362 | 7,362 |
(Loss) income from operations | (665) | 796 |
Other (expense) income | ||
Interest income | 5 | 28 |
Interest expense | (93) | (126) |
Other expense | (12) | (31) |
Foreign currency exchange loss | (261) | (88) |
Other income (expense), net | (361) | (217) |
(Loss) income from operations before income taxes | (1,026) | 579 |
Income tax expense | 91 | 95 |
Net (loss) income | $ (1,117) | $ 484 |
Basic (loss) income per common share | $ (0.09) | $ 0.04 |
Diluted (loss) income per common share | $ (0.09) | $ 0.04 |
Weighted average basic shares outstanding | 12,138 | 12,077 |
Weighted average diluted shares outstanding | 12,138 | 12,165 |
License Fees [Member] | ||
REVENUE | ||
Total revenue | $ 714 | $ 335 |
Services [Member] | ||
REVENUE | ||
Total revenue | $ 5,983 | $ 7,823 |
Condensed Consolidated Statem_2
Condensed Consolidated Statements Of Comprehensive (Loss) Income - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2019 | Mar. 31, 2018 | |
Condensed Consolidated Statements Of Comprehensive (Loss) Income [Abstract] | ||
Net (loss) income | $ (1,117) | $ 484 |
Other comprehensive income | ||
Foreign currency translation gain | 327 | 722 |
Comprehensive (loss) income | $ (790) | $ 1,206 |
Condensed Consolidated Statem_3
Condensed Consolidated Statements Of Changes In Stockholders' Equity - USD ($) $ in Thousands | Common Stock [Member] | Additional Paid-In Capital [Member] | Treasury Stock [Member] | Accumulated Other Comprehensive Loss [Member] | Accumulated Deficit [Member] | Total |
Balance at Dec. 31, 2017 | $ 12 | $ 98,517 | $ (1,253) | $ (8,202) | $ (54,661) | $ 34,413 |
Balance, shares at Dec. 31, 2017 | 11,941,072 | |||||
Stock option exercises, shares | 235 | |||||
Common stock issued pursuant to the Employee Stock Purchase Plan, shares | 85 | |||||
Restricted stock vested, shares | 174,000 | |||||
Share-based compensation expense | 366 | 366 | ||||
Net (loss) income | 484 | 484 | ||||
Foreign currency translation gain | 722 | 722 | ||||
Balance at Mar. 31, 2018 | $ 12 | 98,883 | (1,253) | (7,480) | (54,177) | 35,985 |
Balance, shares at Mar. 31, 2018 | 12,115,392 | |||||
Balance at Dec. 31, 2018 | $ 12 | 99,224 | (1,253) | (10,115) | (69,448) | $ 18,420 |
Balance, shares at Dec. 31, 2018 | 12,126,708 | 12,126,708 | ||||
Stock option exercises, shares | ||||||
Restricted stock vested, shares | 34,781 | |||||
Share-based compensation expense | 130 | $ 130 | ||||
Net (loss) income | (1,117) | (1,117) | ||||
Foreign currency translation gain | 327 | 327 | ||||
Balance at Mar. 31, 2019 | $ 12 | $ 99,354 | $ (1,253) | $ (9,788) | $ (70,565) | $ 17,760 |
Balance, shares at Mar. 31, 2019 | 12,161,489 | 12,161,489 |
Condensed Consolidated Statem_4
Condensed Consolidated Statements Of Cash Flows - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2019 | Mar. 31, 2018 | |
CASH FLOWS FROM OPERATING ACTIVITIES: | ||
Net (loss) income | $ (1,117) | $ 484 |
Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities: | ||
Depreciation | 25 | 33 |
Amortization of intangible assets | 237 | 242 |
Amortization of debt issuance costs | 6 | 5 |
Amortization of operating leases - right to use assets | 75 | |
Share-based compensation expense | 130 | 366 |
Unrealized foreign currency transaction loss, net | 261 | 88 |
Bad debt expense, net | 63 | |
Provision for deferred income taxes | 31 | (135) |
Change in operating assets and liabilities: | ||
Contract receivables | (5) | (571) |
Unbilled work-in-progress | 33 | 461 |
Prepaid and other assets | (558) | 453 |
Accounts payable and accrued liabilities | 276 | (784) |
Income taxes receivable | (42) | |
Unearned revenue | 375 | 1,232 |
Lease obligations - operating leases | (87) | |
Net cash (used in) provided by operating activities | (297) | 1,874 |
CASH FLOWS FROM INVESTING ACTIVITIES: | ||
Purchases of property and equipment | (95) | (12) |
Net cash used in investing activities | (95) | (12) |
CASH FLOWS FROM FINANCING ACTIVITIES: | ||
Principal payments on notes payable | (781) | (500) |
Net cash used in financing activities | (781) | (500) |
Effect of exchange rate changes on cash and cash equivalents | 3 | (250) |
Net (decrease) increase in cash and cash equivalents | (1,170) | 1,112 |
Cash and cash equivalents at beginning of period | 6,732 | 7,562 |
Cash and cash equivalents at end of period | 5,562 | 8,674 |
Supplemental disclosure of cash and non-cash transactions: | ||
Interest paid | 74 | 122 |
Income taxes paid | $ 150 | |
Supplemental non-cash amounts of lease liabilities arising from obtaining right of use | $ 1,609 |
Organization And Summary Of Sig
Organization And Summary Of Significant Accounting Policies | 3 Months Ended |
Mar. 31, 2019 | |
Organization And Summary Of Significant Accounting Policies [Abstract] | |
Organization And Summary Of Significant Accounting Policies | NOTE 1 — ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Organization — Evolving Systems, Inc. (“we,” “us,” “our,” the “Company”, “Evolving” and “Evolving Systems”) is a provider of real-time digital engagement solutions and services of software solutions and services to the wireless carrier and consumer financial services markets. We maintain long-standing relationships with many of the largest wireless companies worldwide. The Company’s portfolio includes market-leading solutions and services for real-time analytics, customer acquisition and activation, customer value management and loyalty for the telecom industry and their partners. Our software solution platforms enable carriers’ marketing departments to innovate, execute and manage highly personalized and contextually relevant, interactive campaigns that engage consumers in real time and enhance customer retention through deploying loyalty programs. Our service activation solution, Tertio® (“TSA”) is used to activate bundles of voice, video and data services for wireless, wireline and cable network operators; our SIM card activation solution, Dynamic SIM Allocation TM (“DSA”) is used to dynamically allocate and assign resources to Mobile Network Operators (“MNOs”) devices that rely on SIM cards; our Mobile Data Enablement TM (“MDE”) solution provides a data consumption and policy management solution for wireless carriers and Mobile Virtual Network Operators (“MVNOs”) that monitor the usage and consumption of data services; our Total Number Management ™ (“TNM”) product is a scalable and fully automated database solution that enables operators to reliably and efficiently manage their telephone numbers as well as other communication identifiers (i.e. SIMs, MSISDNs IMSIs, ICCIDs, IPs). Our solutions can be deployed on-premise or as a Software-as-a-Service (“SaaS”). We service a customer base of more than 100 customers spanning 65 countries across the world. Basis of presentation — As disclosed in NOTE 7 — DEBT, as of March 31, 2019, we have $5.1 million in outstanding principal obligations on two term loans payable to East West Bank (“EWB”) that require us to maintain specified financial ratios that are defined in the loan agreements. During the first quarter 2019, the Company incurred a net loss and negative cash flows from operations. We are current on our loan payment obligations and we have made all scheduled loan payments to date. We did not comply with the fixed charge ratio covenant for the quarter ended December 31, 2018 and received a waiver of the non-compliance from EWB. We did not comply with the fixed charge ratio and the leverage ratio covenants for the quarter ended March 31, 2019. We are currently negotiating with EWB to resolve the non-compliance and loan terms. EWB has the right to demand that we repay the loans sooner than scheduled upon the occurrence and continuance of certain events of default, including the breach of covenants beyond applicable grace periods. To date, EWB has not issued a notice of default or demanded accelerated payment. There can be no assurance that we will successfully renegotiate the loans’ terms, however our current liquidity and funds from our ongoing operations will be sufficient to fund operations and meet the Company’s cash needs for future term loan payments, working capital and capital expenditure requirements for at least the next twelve months from the date of issuance of these unaudited condensed consolidated financial statements. In making this assessment, we considered our $5.6 million in cash and cash equivalents and our $4.7 million in working capital at March 31, 2019, along with our ability to historically generate positive cash flows from operations. Other than classifying the entire $5.1 million in outstanding debt principal as a current liability on our March 31, 2019 balance sheet, no adjustments have been made to our unaudited condensed consolidated financial statements. Interim Condensed Consolidated Financial Statements — The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and in conformity with the instructions to Form 10-Q and Article 8 of Regulation S-X and the related rules and regulations of the Securities and Exchange Commission (“SEC”). Accordingly, certain information and note disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. However, we believe that the disclosures included in these condensed consolidated financial statements are adequate to make the information presented not misleading. The unaudited condensed consolidated financial statements included in this document have been prepared on the same basis as the annual consolidated financial statements, and in our opinion reflect all adjustments, which include normal recurring adjustments necessary for a fair presentation in accordance with GAAP and SEC regulations for interim financial statements. The results for the three months ended March 31, 2019 are not necessarily indicative of the results that we will have for any subsequent period. These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and the notes to those statements for the year ended December 31, 2018 included in our Annual Report on Form 10-K as filed with the SEC on April 4, 2019. Use of Estimates — The preparation of condensed consolidated financial statements in conformity with GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities, at the date of the condensed consolidated financial statements, as well as the reported amounts of revenue and expenses during the reporting period. We made estimates with respect to revenue recognition for progress toward completion and direct profit or loss on contracts, allowance for doubtful accounts, deferred taxes and income tax valuation allowance, fair values of long-lived assets, valuation of intangible assets and goodwill, useful lives for property, equipment and intangible assets, capitalization of internal software development costs and fair value of stock-based compensation amounts. Actual results could differ from these estimates. Foreign Currency — Our functional currency is the U.S. dollar. The functional currency of our foreign operations, generally, is the respective local currency for each foreign subsidiary. Assets and liabilities of foreign operations denominated in local currencies are translated at the spot rate in effect at the applicable reporting date. Our condensed consolidated statements of operations are translated at the weighted average rate of exchange during the applicable period. The resulting unrealized cumulative translation adjustment is recorded as a component of accumulated other comprehensive loss in stockholders’ equity. Realized and unrealized transaction gains and losses generated by transactions denominated in a currency different from the functional currency of the applicable entity are recorded in other (expense) income in the period in which they occur. Principles of Consolidation — The unaudited condensed consolidated financial statements include the accounts of Evolving Systems, Inc. and subsidiaries, all of which are wholly owned. All significant intercompany transactions and balances have been eliminated in consolidation. Reclassification — Certain reclassifications have been made to conform the 2018 amounts to the 2019 classifications for comparative purposes. Revenue Recognition — The majority of our license fees and services revenue is generated from fixed-price contracts and provides for licenses to our software products and services that customize such software to meet our customers’ needs. In most instances, customization services are determined to be essential to the functionality of the delivered software. Under ASC 606, revenue is recognized when our customer obtains control of promised goods or services in an amount that reflects the consideration we expect to receive in exchange for those goods or services. We measure revenue based on consideration specified in a contract with a customer and exclude any sales incentives. Furthermore, we recognize revenue when we satisfy a performance obligation by transferring control over the service and/or software to our customer. A performance obligation is a promise in a contract to transfer a distinct service to the customer. The transaction price of a contract is allocated to each distinct performance obligation and recognized as revenue when or as the customer receives the benefit of the performance obligation. Losses on fixed-price projects are recorded when identified. Taxes assessed by a governmental authority that are both imposed on and concurrent with a specific revenue-producing transaction, that are collected by us from a customer, are excluded from revenue. Nature of goods and services The following is a description of our products and services from which we generate revenue, as well as the nature, timing of satisfaction of performance obligations, and significant payment terms for each: i. License Revenue License fees represent the fees we receive from the licensing of our software products. In most instances, customization services are determined to be essential to the functionality of the delivered software. The license along with the customization services are transferred to our customers over time generally as a single performance obligation. In arrangements where the services are not essential to the functionality of the delivered software, we recognize license revenue when the license agreement has been approved and the software has been delivered at a point in time. We can identify each party’s rights, payment terms, and commercial substance of the content. Where applicable, we identify multiple performance obligations and record as revenue as the performance obligations are fulfilled based on their estimated allocated value. The selection of the method to measure progress towards completion requires judgment and is based on the extent of progress towards completion of the performance obligation. We recognize revenue using the input method of accounting based on labor hours. ii. Customer Support Revenue Customer support services includes annual support fees, recurring maintenance fees, and minor product upgrades generally as a single performance obligation. The Company also offers a warranty support fee which represents a separate performance obligation that is provided for up to a year with initial license purchase. The Company allocates the contract transaction price related to warranty support fees based on pricing consistent with what we would offer to other market participants. Upon the conclusion of the warranty period, the customer can choose to continue to receive support and maintenance services via our customer support offerings. We recognize revenue from our support ratably over the service contract period. iii. Services Revenue We recognize revenue from fixed-price service contracts using the input method of accounting based on labor hours. These contracts generally include a single performance obligation. Under the input method, revenue is recognized on the basis of an entity’s efforts or inputs toward satisfying a performance obligation. We recognize revenue from professional services provided pursuant to time-and-materials based contracts and training services as the services are performed, as that is when our performance obligation to our customers under such arrangements is fulfilled. iv. Managed Services We recognize revenue from our managed services contracts primarily over the service contract period generally as a single performance obligation. On occasion, our managed services contracts will contain a specified number of hours to work over the term of the contract. Revenue for this type of managed service contract is recognized using the input method of accounting, as previously described. Disaggregation of revenue In the following table, revenue is disaggregated by primary geographical market, major products/service lines, and timing of revenue recognition (in thousands): For the Three Months Ended March 31, 2019 2018 Primary geographical markets United Kingdom $1,372 $1,806 Other 5,325 6,352 $6,697 $8,158 Major products/service lines Licensing fees $714 $335 Customer support, including warranty support fees 2,232 2,609 Services 1,581 2,951 Managed services 2,170 2,263 Total services 5,983 7,823 $6,697 $8,158 Timing of revenue recognition Products transferred at a point in time $487 $160 Products and services transferred over time 6,210 7,998 $6,697 $8,158 Contract balances The following table provides information about receivables, assets, and liabilities from contracts with customers (in thousands): March 31, 2019 December 31, 2018 Assets Contract receivables, net $ 7,676 $ 7,757 Unbilled work-in-progress, net $ 3,027 $ 3,044 Liabilities Unearned revenue $ 4,366 $ 3,911 Contract receivables are recorded at the invoiced amount and do not bear interest. Credit is extended based on the evaluation of a customer’s financial condition and collateral is not required. Unbilled work-in-progress is revenue which has been earned but not invoiced. The contract assets are transferred to the receivables when invoiced. Management expects that incremental commission fees paid to employees and intermediaries as a result of obtaining contracts are recoverable and therefore the Company capitalized them as contract costs in the amount of $0.2 million and less than $0.1 million at March 31, 2019 and December 31, 2018, respectively. Capitalized commission fees are amortized based on the transfer of services to which the assets relate which may range from two to three years, and are included in sales and marketing . In the three-month periods ended March 31, 2019 and 2018, the amount of amortization was less than $0.1 million and there was no impairment loss in relation to the costs capitalized. Applying the practical expedient in paragraph 340-40-25-4, the Company recognizes the incremental costs of obtaining contracts as an expense when incurred if the amortization period of the assets that the Company otherwise would have recognized is one year or less. These costs are included in sales and marketing . The contract liabilities primarily relate to unearned revenue. Amounts billed in advance of performance obligations being satisfied are recognized as unearned revenue. For the three months ended March 31, 2019 and 2018, we recognized revenue of $1.8 million and $3.8 million, respectively, that was included in the corresponding contract liability balance at the beginning of this period and 2018 . Transaction price allocated to the remaining performance obligations Remaining performance obligations represent the transaction price of firm orders for which work has not been completed as of the period end date and excludes unexercised contract options and potential orders under ordering-type contracts (e.g., indefinite-delivery, indefinite-quantity). As of March 31, 2019, the aggregate amount of the transaction price allocated to remaining performance obligations with lives greater than one-year totals $5.1 million. The Company expects approximately 65% of remaining performance obligations to be recognized into revenue within the next twelve months, with the remaining 23% in 1-2 years and 12% in 3-4 years. Stock-based Compensation — We account for stock-based compensation by applying a fair-value-based measurement method to account for share-based payment transactions with employees, non-employees and directors. We record compensation costs associated with the vesting of unvested options on a straight-line basis over the vesting period. Stock-based compensation is a non-cash expense because we settle these obligations by issuing shares of our common stock instead of settling such obligations with cash payments. We use the Black-Scholes model to estimate the fair value of each option grant on the date of grant. This model requires the use of estimates for expected term of the options and expected volatility of the price of our common stock. Income Taxes — We record deferred tax assets and liabilities for the estimated future tax effects of temporary differences between the tax bases of assets and liabilities and amounts reported in the accompanying condensed consolidated balance sheets, as well as operating losses and tax credit carryforwards. We measure deferred tax assets and liabilities using enacted tax rates expected to be applied to taxable income in the years in which those temporary differences are expected to be recovered or settled. We reduce deferred tax assets by a valuation allowance if, based on available evidence, it is more likely than not that these benefits will not be realized. We use a recognition threshold and a measurement attribute for financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more likely than not to be sustained upon examination by taxing authorities. Segment Information — We define operating segments as components of our enterprise for which separate financial information is reviewed regularly by the chief operating decision-makers to evaluate performance and to make operating decisions. We have identified our Chief Executive Officer and Senior Vice President of Finance as our chief operating decision-makers (“CODM”). These chief operating decision makers review revenues by segment and review overall results of operations. We currently operate our business as one operating segment which includes two revenue types: license fees revenue and services revenue (as shown on the condensed consolidated statements of operations). License fees revenue represents the fees received from the license of software products. Services revenue includes services directly related to the delivery of the licensed products, such as fees for custom development, integration services, SaaS services, managed services, annual support fees, recurring maintenance fees, fees for maintenance upgrades and warranty services. Warranty services that are similar to software maintenance services are typically bundled with a license sale. Recently Adopted Accounting Pronouncements — In February 2016, the Financial Accounting Standards Board (“FASB”) established Topic 842, Leases, by issuing Accounting Standards Update (“ASU”) 2016-02, which requires lessees to recognize leases on-balance sheet and disclose key information about leasing arrangements. Topic 842 was subsequently amended by ASU 2018-01, Land Easement Practical Expedient for Transition to Topic 842; ASU 2018-10, Codification Improvements to Topic 842, Leases; and ASU 2018-11, Targeted Improvements. The new standard establishes a right-of-use model (ROU) that requires a lessee to recognize a ROU asset and lease liability on the balance sheet for all leases with a term longer than 12 months. Leases are classified as finance or operating, with classification affecting the pattern and classification of expense recognition in the condensed consolidated statements of operations. We adopted the new standard on January 1, 2019, its effective date. We used the optional transition method approach with the effective date as the date of initial application. Consequently, prior periods will not be restated, and the disclosures required under ASC 840 will continue to be provided for dates and periods before January 1, 2019. The new standard provides several optional practical expedients in transition. We elected the ‘package of practical expedients’, which permits us not to reassess under the new standard our prior conclusions about lease identification, lease classification and initial direct costs. The new standard also provides practical expedients for an entity’s ongoing accounting. We currently have elected the short-term lease recognition exemption for all leases that qualify. This means, for those leases that qualify, we will not recognize ROU assets or lease liabilities, and this includes not recognizing ROU assets or lease liabilities for existing short-term leases of those assets in transition. We also have elected the practical expedient to not separate lease and non-lease components for all our leases and will not reassess whether initial direct costs qualify for capitalization (see Note 10). The adoption of the standard resulted in the recognition of additional ROU assets and lease liabilities of approximately $1.6 million as of January 1, 2019 , that did not change previously reported net income and did not result in a cumulative effect adjustment to accumulated deficit and did not impact cash flows. In February 2018, the FASB issued ASU 2018-02, Income Statement — Reporting Comprehensive Income (Topic 220) —Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income. The amendments in this ASU allow a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the Tax Act. Consequently, the amendments eliminate the stranded tax effects resulting from the Act and will improve the usefulness of information reported to financial statement users. The amendments in this ASU are effective for fiscal years beginning after December 15, 2018. We adopted this ASU as of January 1, 2019. The amendments in this ASU did not have a material impact on our condensed consolidated financial statements. In June 2018, the FASB issued ASU 2018-07, Compensation - Stock Compensation (Topic 718) — Improvements to Nonemployee Share-Based Payment Accounting. ASU 2018-07 is intended to reduce cost and complexity and to improve financial reporting for share-based payments issued to nonemployees. This ASU expands the scope of ASC Topic 718, Compensation – Stock Compensation, which currently only includes share-based payments issued to employees, to also include share-based payments issued to nonemployees for goods and services. Consequently, the accounting for share-based payments to nonemployees and employees will be substantially aligned. ASU 2018-07 supersedes ASC Subtopic 505-50, Equity - Equity-Based Payments to Non-Employees. The amendments in this ASU are effective for fiscal years beginning after December 15, 2018. We adopted this ASU as of January 1, 2019. The amendments in this ASU did not have a material impact on our condensed consolidated financial statements. Recent Accounting Pronouncements — In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326) — Measurement of Credit Losses on Financial Instruments (ASU 2016-13). ASU 2016-13 requires entities to establish an allowance for credit losses for most financial assets. Prior GAAP was based on an incurred loss methodology for recognizing credit losses on financial assets measured at amortized cost and available-for sale debt securities. The update is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption is permitted for fiscal years beginning after December 31, 2018. We have not yet assessed the impact on our condensed consolidated financial statements or related disclosures. In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (ASC 820) — Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement. ASU 2018-13 removes certain disclosures, modifies certain disclosures and adds additional disclosures. ASU 2018-13 is effective for annual periods, including interim periods within those annual periods, beginning after December 15, 2019. Early adoption is permitted. We have not yet assessed the impact on our condensed consolidated financial statements or related disclosures. Management has evaluated other recently issued accounting pronouncements and does not believe that any of these pronouncements will have a significant impact on our condensed consolidated financial statements and related disclosures. |
Goodwill And Intangible Assets
Goodwill And Intangible Assets | 3 Months Ended |
Mar. 31, 2019 | |
Goodwill And Intangible Assets [Abstract] | |
Goodwill And Intangible Assets | NOTE 2 — GOODWILL AND INTANGIBLE ASSETS Changes in the carrying amount of goodwill were as follows (in thousands): Total Goodwill Balance at January 1, 2019 $ 6,738 Effect of changes in foreign currency exchange rates (1) 90 Balance at March 31, 2019 $ 6,828 (1) Represents the impact of foreign currency translation for instances when goodwill is recorded in foreign entities whose functional currency is also their local currency. Goodwill balances are translated into U.S. dollars using exchange rates in effect at period end. Adjustments related to foreign currency translation are included in other comprehensive income. We perform our annual goodwill impairment test as of July 31. Changes in estimates and assumptions could materially affect the determination of fair value and goodwill. Due to our transition of packaging our products and services into a single managed service offering, we have determined we have one reporting unit. We do not believe the aggregation of our reporting units impacts the value of our goodwill nor are there any additional events through the date this Form 10-Q was filed which impact our assumptions on the determination of the fair value of our goodwill. We amortized identifiable intangible assets for Evolving Systems Labs, Evolving Systems NC, EVOL BLS, and the Lumata entities on a straight-line basis over their estimated useful lives. As of March 31, 2019, and December 31, 2018, identifiable intangibles were as follows (in thousands): March 31, 2019 Gross Amount Accumulated Amortization Net Carrying Amount Purchased software $ 2,895 $ (1,220) $ 1,675 Trademarks and tradenames 306 (229) 77 Non-competition 39 (39) - Customer relationships 4,333 (1,729) 2,604 $ 7,573 (1) $ (3,217) (1) $ 4,356 December 31, 2018 Gross Amount Accumulated Amortization Net Carrying Amount Purchased software $ 2,877 $ (1,121) $ 1,756 Trademarks and tradenames 303 (223) 80 Non-competition 39 (38) 1 Customer relationships 4,303 (1,590) 2,713 $ 7,522 (1) $ (2,972) (1) $ 4,550 (1) Includes foreign currency translation adjustment of less than $0.1 million. Amortization expense of identifiable intangible assets was $0.2 million for the three months ended March 31, 2019 and 2018, respectively. Expected future amortization expense related to identifiable intangibles based on our carrying amount as of March 31, 2019 is as follows (in thousands): Twelve Months Ending March 31, 2020 $ 943 2021 943 2022 909 2023 632 2024 312 |
Balance Sheet Components
Balance Sheet Components | 3 Months Ended |
Mar. 31, 2019 | |
Balance Sheet Components [Abstract] | |
Balance Sheet Components | NOTE 3 — BALANCE SHEET COMPONENTS The components of accounts payable and accrued liabilities are as follows (in thousands): March 31, 2019 December 31, 2018 Accounts payable and accrued liabilities: Accounts payable $ 1,751 $ 1,276 Accrued compensation and related expenses 1,765 1,863 Accrued liabilities 1,288 1,344 Lease obligations – operating leases - current 370 - $ 5,174 $ 4,483 |
(Loss) Income Per Common Share
(Loss) Income Per Common Share | 3 Months Ended |
Mar. 31, 2019 | |
(Loss) Income Per Common Share [Abstract] | |
(Loss) Income Per Common Share | NOTE 4 — (LOSS) INCOME PER COMMON SHARE We compute basic (loss) income per share (“IPS”) by dividing net income or loss available to common stockholders by the weighted average number of shares outstanding during the period, including common stock issuable under participating securities. We compute diluted IPS using the weighted average number of shares outstanding, including participating securities, plus all potentially dilutive common stock equivalents. Common stock equivalents consist of stock options and restricted stock. The following is the reconciliation of the denominator of the basic and diluted IPS computations (in thousands, except per share data): For the Three Months Ended March 31, 2019 2018 Basic income per common share: Net (loss) income $ (1,117) $ 484 Basic weighted average shares outstanding 12,138 12,077 Basic (loss) income per common share: $ (0.09) $ 0.04 Diluted income per common share: Net (loss) income $ (1,117) $ 484 Weighted average shares outstanding 12,138 12,077 Effect of dilutive securities - options and restricted stock - 88 Diluted weighted average shares outstanding 12,138 12,165 Diluted (loss) income per common share: $ (0.09) $ 0.04 As a result of our loss for the three months ended March 31, 2019, basic and diluted loss per common share are $(0.09) because any potentially dilutive shares are excluded from determining the dilutive loss per share. For the three months ended March 31, 2019 and 2018, 0.6 million and 0.3 million shares, respectively, underlying stock options were excluded from the dilutive stock calculation because their exercise prices were greater than the average fair value of our common stock for the period. |
Share-Based Compensation
Share-Based Compensation | 3 Months Ended |
Mar. 31, 2019 | |
Share-Based Compensation [Abstract] | |
Share-Based Compensation | NOTE 5 — SHARE-BASED COMPENSATION We recogn ized $ 0.1 million and $0.4 million of compensation expense in the condensed consolidated statements of operations, with respect to our stock-based compensation plans for the three months ended March 31, 2019 and 201 8, respectively. The following table summarizes share-based compensation expenses recorded in the condensed consolidated statement of operations (in thousands): For the Three Months Ended March 31, 2019 2018 Cost of revenue, excluding depreciation and amortization $ 4 $ 13 Sales and marketing 3 16 General and administrative 115 310 Product development 8 27 Total share-based compensation $ 130 $ 366 Stock Incentive Plans At March 31, 2019 and December 31, 2018, no shares were available for grant under the 2007 Stock Plan, as amended. At March 31, 2019 and December 31, 2018, 0.5 million options and restricted shares were issued and outstanding under the 2007 Stock Plan as amended, respectively. At March 31, 2019 and December 31, 2018, there were approximately 0.4 million shares available for grant under the 2016 Stock Plan, respectively. At March 31, 2019 and December 31, 2018, 0.4 million options and restricted shares were issued and outstanding under the 2016 Stock Plan, respectively. The fair value of restricted shares for share-based compensation expensing is equal to the closing price of our common stock on the date of grant. The restrictions for stock awards generally vest over four years for senior management and over one year for the board of directors. The company did not recognize any share-based compensation expense in connection with its performance vesting conditions during the period. Vested shares are included in the number of Common Stock outstanding shares referenced on the cover of this Quarterly Report on Form 10-Q and referenced in the table below for the three months ended March 31, 2019. The following is a summary of restricted stock activity under the plans for the three months ended March 31, 2019: Restricted Stock Number of Shares (in thousands) Unvested restricted stock at January 1, 2019 349 Less restricted stock vested (34) Less restricted stock forfeited/expired (139) Unvested restricted stock at March 31, 2019 176 The following is a summary of stock option activity under the plans for the three months ended March 31, 2019: Weighted- Average Weighted- Remaining Aggregate Number of Average Contractual Intrinsic Shares Exercise Term Value (in thousands) Price (Years) (in thousands) Options outstanding at January 1, 2019 591 $ 5.75 7.39 $ - Less options forfeited/cancelled (23) 4.56 Less options exercised - - Options outstanding at March 31, 2019 568 $ 5.80 7.09 $ - Options exercisable at March 31, 2019 373 $ 6.55 6.37 $ - There were no stock options granted during the three months ended March 31, 2019 and 2018, respectively. As of March 31, 2019, there was approximately $ 0.9 million of total unrecognized compensation costs related to unvested stock options and restricted stock. These costs are expected to be recognized over a weighted average period of 2.19 years. The total fair value of stock options and restricted stock vested during the three months ended March 31, 2019 and 2018 was less than $0.1 million, respectively. |
Concentration Of Credit Risk
Concentration Of Credit Risk | 3 Months Ended |
Mar. 31, 2019 | |
Concentration Of Credit Risk [Abstract] | |
Concentration Of Credit Risk | NOTE 6 — CONCENTRATION OF CREDIT RISK For the three months ended March 31, 2019 and 2018 one significant customer (defined as contributing at least 10 %) accounted for 11% of revenue from operations, respectively. The significant customer is a large telecommunications operator in Europe. |
Debt
Debt | 3 Months Ended |
Mar. 31, 2019 | |
Debt [Abstract] | |
Debt | NOTE 7 — DEBT On August 16, 2017, we entered into a Term Loan Facility Agreement with East West Bank as lender in the amount of $4.7 million (the “Loan Facility”). The Loan Facility requires the Company to make monthly principal payments of approximately $0.1 million that commenced on July 31, 2018 and interest at the greater of (a) 3.5% or (b) the variable rate of interest that appears in the Wall Street Journal on a monthly measurement date plus in either case 1.5% . As of March 31, 2019, the U.S.A. Prime Rate was 5.5% . In the event of a default, the interest rate increases by 5% per annum. EVOL Inc. entered into the Loan Facility as the Parent Guarantor; Evolving Systems BLS LTD and Evolving Systems Limited entered into the Loan Facility as Original Guarantors (the “Original Guarantors”). The Loan Facility is secured by all of the assets of EVOL Holdings and the Original Guarantors in accordance with the terms of a Debenture entered into by EVOL Holdings and the Original Guarantors in favor of East West Bank. EVOL Holdings, EVOL Inc. and the Original Guarantors also entered into a Subordination Deed whereby each of the parties agreed to subordinate all loans by and among each other to East West Bank. Following completion of the Lumata Acquisition, Lumata France SAS and Lumata UK Ltd are also bound to adhere to the finance documents as additional obligors. The Loan Facility requires the Company to pay an Arrangement Fee (“Origination Fee”) of $23,650 , payable in four equal installments, with the first payment due on the date of the Loan Facility and the remaining three payments on the first, second and third anniversary thereof. The Company also agreed to pay East West Bank’s legal fees in connection with the transaction. The Company may prepay the Loan Facility at any time, in a minimum amount of $250,000 and increments of $50,000 , subject to a prepayment fee of 2% of the amount prepaid, on any prepayment made before the second anniversary date of the Agreement. The unpaid balance of the Loan Facility is due on August 16, 2021 . On February 29, 2016, we entered into the Fifth Amendment to the Loan and Security Agreement with East West Bank which provides for a Term Loan (the “Term Loan”) for $6.0 million. The $6.0 million Term Loan bears interest at a floating rate equal to the U.S. Prime Rate plus 1.0% . As of March 31, 2019 , the U.S. Prime Rate was 5.5% . In the event of a default, the interest rate increases 5% per annum. The Term Loan is secured by substantially all of the assets of Evolving Systems, including a pledge, subject to certain limitations with respect to stock of foreign subsidiaries, of the stock of the existing and future direct subsidiaries of Evolving Systems. Interest accrues from the date the Term Loan was made at the aforementioned rate and is payable monthly. The Term Loan shall be repaid in 36 equal monthly installments of principal, plus accrued but unpaid interest, commencing on January 1, 2017 and continuing on the first day of each month thereafter through and including January 1, 2020. We must maintain a minimum current ratio, a specified ratio of Total Liabilities to EBITDA and a minimum fixed charge coverage ratio which are as defined in the Term Loan. The Term Loan requires us to pay two annual credit facility fees of $18,750 and legal fee equal to $1,000 . The Term Loan matures on January 1, 2020 . As of December 31 , 2018, our fixed charge coverage ratio, was 0.81 , which failed to meet the minimum required 1.25 fixed charge coverage ratio. On March 29, 2019, we received a letter from East West Bank that waived the December 31, 2018 violation. As of March 31, 2019, our fixed charge ratio was 0.31 , which failed to meet the minimum required 1.25 fixed charge coverage ratio and our leverage ratio was 2.8 , which failed to meet the maximum required 2.0 leverage ratio. We are negotiating amendments to the loan agreements. As of March 31, 2019, we classified the entire $5.1 million in outstanding debt as a current liability. |
Income Taxes
Income Taxes | 3 Months Ended |
Mar. 31, 2019 | |
Income Taxes [Abstract] | |
Income Taxes | NOTE 8 — INCOME TAXES We recorded net income tax expense of $0.1 million for the three months ended March 31, 2019 and 2018, respectively. The net expense during the three months ended March 31, 2019 consisted of current income tax expense of $0.1 million. The current tax expense consists of income tax primarily from our Indian and Nigerian based operations. The net expense during the three months ended March 31, 2018 consisted of current income tax expense of $0.2 million and a deferred tax benefit of $(0.1) million. The current tax expense consists of income tax from our U.K. a nd India based operations. The deferred tax benefit was related primarily to the amortization of deferred tax liabilities in the U.S. Our effective tax rate was (9% ) and 16% for the three months ended March 31, 2019 and 2018, respectively. The effective tax rate relates to our net income coming from our Indian and Nigerian operations and net losses from our other operations for which we did not recognize a net deferred tax benefit. As of March 31, 2019, and December 31, 2018 we continued to maintain a valuation allowance on our domestic net deferred tax asset for foreign tax credit (“FTC”) carryforwards, certain state NOL carryforwards and research and development tax credits. We have $0.8 million in U.S. Alternative Minimum Tax (“AMT”) tax credits that are a deferred tax asset that, as a result of U.S. tax reform, carry no valuation allowance. Our deferred tax assets and liabilities as of March 31, 2019 and December 31, 2018, were comprised of the following (in thousands): March 31, 2019 December 31, 2018 Deferred tax assets: Foreign tax credits carryforwards $ 4,835 $ 4,788 Net operating loss carryforwards – Foreign 5,584 5,531 Net operating loss carryforwards - State 907 887 Research & development credits - 303 AMT credits 770 770 Stock compensation 600 559 Depreciable assets 41 38 Accrued liabilities and reserves 89 67 Total deferred tax assets 12,826 12,943 Deferred tax liabilities: Intangibles (651) (697) Accrued liabilities and reserves (184) (174) Total deferred tax liability (835) (871) Net deferred tax assets, before valuation allowance 11,991 12,072 Valuation allowance (10,847) (10,932) Net deferred tax asset $ 1,144 $ 1,140 As of March 31, 2019, and December 31, 2018 we had no liability for unrecognized tax benefits. We conduct business globally and, as a result, Evolving Systems, Inc. or one or more of our subsidiaries file income tax returns in the U.S. federal jurisdiction and various state and foreign jurisdictions. In the normal course of business, we are subject to examination by taxing authorities throughout the world, namely the U.K., France, and India. Although carryovers can always be subject to review by taxing authorities, we are no longer subject to U.S. federal, state and local, or non-U.S. income tax examinations for years before 2013. Transfer Pricing Adjustments, net The Company’s tax positions include the Company’s intercompany transfer pricing policies and the associated taxable income and deductions arising from intercompany charges between subsidiaries within the consolidated group. During fiscal year 2018, the Company finalized an Advance Pricing Arrangement (“APA”) with the Evolving Systems, Inc. and its subsidiaries. This APA determined the amount of income which is taxable in each respective jurisdiction. The Company applied this methodology in accordance with the APA and, the adjustments necessary to reflect the reduction in U.S. pre-tax income resulted in an increase in domestic income before income tax expense of $1.2 million and a corresponding decrease in foreign income before income tax expense in the three months ended March 31, 2019. |
Geographical Information
Geographical Information | 3 Months Ended |
Mar. 31, 2019 | |
Geographical Information [Abstract] | |
Geographical Information | NOTE 9 —GEOGRAPHICAL INFORMATION We are headquartered in Englewood, a suburb of Denver, Colorado. We use customer locations as the basis for attributing revenue to individual countries. We provide products and services on a global basis through our offices in Colorado, North Carolina and our U.K.-based Evolving Systems U.K. subsidiary. Additionally, personnel in Cluj, Romania; Grenoble, France; and Bangalore and Kolkata, India; provide software development services and support to our global operations. Financial information relating to operations by geographic region exceeding the threshold (defined as contributing at least 10%) of revenue from operations is as follows (in thousands): March 31, 2019 December 31, 2018 Long-lived assets, net United States $ 2,633 $ 2,741 United Kingdom 7,241 7,098 Other 3,219 1,752 $ 13,093 $ 11,591 |
Commitments And Contingencies
Commitments And Contingencies | 3 Months Ended |
Mar. 31, 2019 | |
Commitments And Contingencies [Abstract] | |
Commitments And Contingencies | NOTE 10 — COMMITMENTS AND CONTINGENCIES (a) Lease Commitments Under Topic 842, operating lease expense is generally recognized evenly over the term of the lease. The Company has operating leases primarily consisting of facilities with remaining lease terms of one year to seven years. We lease office and operating facilities under non-cancelable operating leases. Current facility leases include our offices in Englewood, Colorado, New York, New York, Durham, North Carolina, London, England Bangalore, Kolkata and Delhi India, Johannesburg, South Africa, Kuala Lumpur, Malaysia, Mexico City, Mexico, Grenoble, France, Cluj-Napoca, Romania and Madrid, Spain. The Company did not enter into any new leases in the three months ended March 31, 2019. Certain leases, based on our expected future use of the facilities, are assumed to be renewed for periods beyond their contractual termination dates and the estimated costs for the extended periods are included in determining the lease liabilities and ROU assets. Our lease for the Kolkota facility provides us with the option to terminate the lease in August 2020, however we do not expect to exercise our termination option and have included costs through the July 2026 lease end date. Rent expense consisted of operating lease expense of $0.1 million and short-term lease expense of less than $0.1 million for the three months ended March 31, 2019. Rent expense was $0.2 million for the three months ended March 31, 2019. There was no sublease rental income for the three months ended March 31, 2019 and 2018. We paid $0.2 million against Lease obligations – operating leases in the three months ended March 31, 2019. Leases with an initial term of twelve months or less are not recorded on the condensed consolidated balance sheet. For lease agreements entered into or reassessed after the adoption of Topic 842, we combine the lease and non-lease components in determining the lease liabilities and ROU assets. Our lease agreements generally do not provide an implicit borrowing rate; therefore, an internal incremental borrowing rate is determined based on information available at lease commencement date for purposes of determining the present value of lease payments. We used the incremental borrowing rate on December 31, 2018 for all leases that commenced prior to that date. ROU lease assets and lease liabilities for our operating leases were recorded in the condensed consolidated balance sheet as follows: March 31, 2019 Other long-term assets $ 1,534 Accounts payable and accrued liabilities 370 Lease obligations – operating leases, net of current portion 1,152 Total lease liability $ 1,522 Weighted average remaining lease term (in years) 4.9 Weighted average discount rate 6.75% Future lease payments included in the measurement of lease liabilities on the condensed consolidated balance sheet as of March 31, 2019, for the following five fiscal years and thereafter were as follows: March 31, 2019 2019 – Remaining $ 393 2020 403 2021 337 2022 313 2023 178 Thereafter 168 Total future minimum lease payments 1,792 Present value adjustment 270 Total $ 1,522 (b) Other Commitments As permitted under Delaware law, we have agreements with officers and directors under which we agree to indemnify them for certain events or occurrences while the officer or director is, or was, serving at our request in this capacity. The term of the indemnification period is indefinite. There is no limit on the amount of future payments we could be required to make under these indemnification agreements; however, we maintain Director and Officer insurance policies, as well as an Employment Practices Liability Insurance Policy, that may enable us to recover a portion of any amounts paid. As a result of our insurance policy coverage, we believe the estimated fair value of these indemnification agreements is minimal. Accordingly, there were no liabilities recorded for these agreements as of March 31, 2019 or December 31, 2018. We enter into standard indemnification terms with customers and suppliers, in the ordinary course of business, for third party claims arising under our contracts. In addition, as we may subcontract the development of deliverables under customer contracts, we could be required to indemnify customers for work performed by subcontractors. Depending upon the nature of the indemnification, the potential amount of future payments we could be required to make under these indemnification agreements may be unlimited. We may be able to recover damages from a subcontractor or other supplier if the indemnification results from the subcontractor’s or supplier’s failure to perform. To the extent we are unable to recover damages from a subcontractor or other supplier, we could be required to reimburse the indemnified party for the full amount. We have never incurred costs to defend lawsuits or settle claims relating to an indemnification. As a result, we believe the estimated fair value of these agreements is minimal. Accordingly, there were no liabilities recorded for these agreements as of March 31, 2019 or December 31, 2018. Our standard license agreements contain product warranties that the software will be free of material defects and will operate in accordance with the stated requirements for a limited period of time. The product warranty provisions require us to cure any defects through any reasonable means. We believe the estimated fair value of the product warranty provisions in the license agreements in place with our customers is minimal. Accordingly, there were no liabilities recorded for these product warranty provisions as of March 31, 2019 or December 31, 2018. Our software arrangements generally include a product indemnification provision whereby we will indemnify and defend a customer in actions brought against the customer for claims that our products infringe upon a copyright, trade secret, or valid patent of a third party. We have not historically incurred any significant costs related to product indemnification claims. Accordingly, there were no liabilities recorded for these indemnification provisions as of March 31, 2019 or December 31, 2018. (c) Litigation From time to time, we are involved in various legal matters arising in the normal course of business. We also receive letters from former employees claiming that upon exiting the final compensation was not properly calculated. We currently do not expect the outcome of such proceedings, either individually or in the aggregate, to have a material effect on our financial position, cash flows or results of operations. |
Organization And Summary Of S_2
Organization And Summary Of Significant Accounting Policies (Policy) | 3 Months Ended |
Mar. 31, 2019 | |
Organization And Summary Of Significant Accounting Policies [Abstract] | |
Organization | Organization — Evolving Systems, Inc. (“we,” “us,” “our,” the “Company”, “Evolving” and “Evolving Systems”) is a provider of real-time digital engagement solutions and services of software solutions and services to the wireless carrier and consumer financial services markets. We maintain long-standing relationships with many of the largest wireless companies worldwide. The Company’s portfolio includes market-leading solutions and services for real-time analytics, customer acquisition and activation, customer value management and loyalty for the telecom industry and their partners. Our software solution platforms enable carriers’ marketing departments to innovate, execute and manage highly personalized and contextually relevant, interactive campaigns that engage consumers in real time and enhance customer retention through deploying loyalty programs. Our service activation solution, Tertio® (“TSA”) is used to activate bundles of voice, video and data services for wireless, wireline and cable network operators; our SIM card activation solution, Dynamic SIM Allocation TM (“DSA”) is used to dynamically allocate and assign resources to Mobile Network Operators (“MNOs”) devices that rely on SIM cards; our Mobile Data Enablement TM (“MDE”) solution provides a data consumption and policy management solution for wireless carriers and Mobile Virtual Network Operators (“MVNOs”) that monitor the usage and consumption of data services; our Total Number Management ™ (“TNM”) product is a scalable and fully automated database solution that enables operators to reliably and efficiently manage their telephone numbers as well as other communication identifiers (i.e. SIMs, MSISDNs IMSIs, ICCIDs, IPs). Our solutions can be deployed on-premise or as a Software-as-a-Service (“SaaS”). We service a customer base of more than 100 customers spanning 65 countries across the world. |
Basis Of Presentation | Basis of presentation — As disclosed in NOTE 7 — DEBT, as of March 31, 2019, we have $5.1 million in outstanding principal obligations on two term loans payable to East West Bank (“EWB”) that require us to maintain specified financial ratios that are defined in the loan agreements. During the first quarter 2019, the Company incurred a net loss and negative cash flows from operations. We are current on our loan payment obligations and we have made all scheduled loan payments to date. We did not comply with the fixed charge ratio covenant for the quarter ended December 31, 2018 and received a waiver of the non-compliance from EWB. We did not comply with the fixed charge ratio and the leverage ratio covenants for the quarter ended March 31, 2019. We are currently negotiating with EWB to resolve the non-compliance and loan terms. EWB has the right to demand that we repay the loans sooner than scheduled upon the occurrence and continuance of certain events of default, including the breach of covenants beyond applicable grace periods. To date, EWB has not issued a notice of default or demanded accelerated payment. There can be no assurance that we will successfully renegotiate the loans’ terms, however our current liquidity and funds from our ongoing operations will be sufficient to fund operations and meet the Company’s cash needs for future term loan payments, working capital and capital expenditure requirements for at least the next twelve months from the date of issuance of these unaudited condensed consolidated financial statements. In making this assessment, we considered our $5.6 million in cash and cash equivalents and our $4.7 million in working capital at March 31, 2019, along with our ability to historically generate positive cash flows from operations. Other than classifying the entire $5.1 million in outstanding debt principal as a current liability on our March 31, 2019 balance sheet, no adjustments have been made to our unaudited condensed consolidated financial statements. |
Interim Condensed Consolidated Financial Statements | Interim Condensed Consolidated Financial Statements — The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and in conformity with the instructions to Form 10-Q and Article 8 of Regulation S-X and the related rules and regulations of the Securities and Exchange Commission (“SEC”). Accordingly, certain information and note disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. However, we believe that the disclosures included in these condensed consolidated financial statements are adequate to make the information presented not misleading. The unaudited condensed consolidated financial statements included in this document have been prepared on the same basis as the annual consolidated financial statements, and in our opinion reflect all adjustments, which include normal recurring adjustments necessary for a fair presentation in accordance with GAAP and SEC regulations for interim financial statements. The results for the three months ended March 31, 2019 are not necessarily indicative of the results that we will have for any subsequent period. These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and the notes to those statements for the year ended December 31, 2018 included in our Annual Report on Form 10-K as filed with the SEC on April 4, 2019. |
Use Of Estimates | Use of Estimates — The preparation of condensed consolidated financial statements in conformity with GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities, at the date of the condensed consolidated financial statements, as well as the reported amounts of revenue and expenses during the reporting period. We made estimates with respect to revenue recognition for progress toward completion and direct profit or loss on contracts, allowance for doubtful accounts, deferred taxes and income tax valuation allowance, fair values of long-lived assets, valuation of intangible assets and goodwill, useful lives for property, equipment and intangible assets, capitalization of internal software development costs and fair value of stock-based compensation amounts. Actual results could differ from these estimates. |
Foreign Currency | Foreign Currency — Our functional currency is the U.S. dollar. The functional currency of our foreign operations, generally, is the respective local currency for each foreign subsidiary. Assets and liabilities of foreign operations denominated in local currencies are translated at the spot rate in effect at the applicable reporting date. Our condensed consolidated statements of operations are translated at the weighted average rate of exchange during the applicable period. The resulting unrealized cumulative translation adjustment is recorded as a component of accumulated other comprehensive loss in stockholders’ equity. Realized and unrealized transaction gains and losses generated by transactions denominated in a currency different from the functional currency of the applicable entity are recorded in other (expense) income in the period in which they occur. |
Principles Of Consolidation | Principles of Consolidation — The unaudited condensed consolidated financial statements include the accounts of Evolving Systems, Inc. and subsidiaries, all of which are wholly owned. All significant intercompany transactions and balances have been eliminated in consolidation. |
Reclassifications | Reclassification — Certain reclassifications have been made to conform the 2018 amounts to the 2019 classifications for comparative purposes. |
Revenue Recognition | Revenue Recognition — The majority of our license fees and services revenue is generated from fixed-price contracts and provides for licenses to our software products and services that customize such software to meet our customers’ needs. In most instances, customization services are determined to be essential to the functionality of the delivered software. Under ASC 606, revenue is recognized when our customer obtains control of promised goods or services in an amount that reflects the consideration we expect to receive in exchange for those goods or services. We measure revenue based on consideration specified in a contract with a customer and exclude any sales incentives. Furthermore, we recognize revenue when we satisfy a performance obligation by transferring control over the service and/or software to our customer. A performance obligation is a promise in a contract to transfer a distinct service to the customer. The transaction price of a contract is allocated to each distinct performance obligation and recognized as revenue when or as the customer receives the benefit of the performance obligation. Losses on fixed-price projects are recorded when identified. Taxes assessed by a governmental authority that are both imposed on and concurrent with a specific revenue-producing transaction, that are collected by us from a customer, are excluded from revenue. Nature of goods and services The following is a description of our products and services from which we generate revenue, as well as the nature, timing of satisfaction of performance obligations, and significant payment terms for each: i. License Revenue License fees represent the fees we receive from the licensing of our software products. In most instances, customization services are determined to be essential to the functionality of the delivered software. The license along with the customization services are transferred to our customers over time generally as a single performance obligation. In arrangements where the services are not essential to the functionality of the delivered software, we recognize license revenue when the license agreement has been approved and the software has been delivered at a point in time. We can identify each party’s rights, payment terms, and commercial substance of the content. Where applicable, we identify multiple performance obligations and record as revenue as the performance obligations are fulfilled based on their estimated allocated value. The selection of the method to measure progress towards completion requires judgment and is based on the extent of progress towards completion of the performance obligation. We recognize revenue using the input method of accounting based on labor hours. ii. Customer Support Revenue Customer support services includes annual support fees, recurring maintenance fees, and minor product upgrades generally as a single performance obligation. The Company also offers a warranty support fee which represents a separate performance obligation that is provided for up to a year with initial license purchase. The Company allocates the contract transaction price related to warranty support fees based on pricing consistent with what we would offer to other market participants. Upon the conclusion of the warranty period, the customer can choose to continue to receive support and maintenance services via our customer support offerings. We recognize revenue from our support ratably over the service contract period. iii. Services Revenue We recognize revenue from fixed-price service contracts using the input method of accounting based on labor hours. These contracts generally include a single performance obligation. Under the input method, revenue is recognized on the basis of an entity’s efforts or inputs toward satisfying a performance obligation. We recognize revenue from professional services provided pursuant to time-and-materials based contracts and training services as the services are performed, as that is when our performance obligation to our customers under such arrangements is fulfilled. iv. Managed Services We recognize revenue from our managed services contracts primarily over the service contract period generally as a single performance obligation. On occasion, our managed services contracts will contain a specified number of hours to work over the term of the contract. Revenue for this type of managed service contract is recognized using the input method of accounting, as previously described. Disaggregation of revenue In the following table, revenue is disaggregated by primary geographical market, major products/service lines, and timing of revenue recognition (in thousands): For the Three Months Ended March 31, 2019 2018 Primary geographical markets United Kingdom $1,372 $1,806 Other 5,325 6,352 $6,697 $8,158 Major products/service lines Licensing fees $714 $335 Customer support, including warranty support fees 2,232 2,609 Services 1,581 2,951 Managed services 2,170 2,263 Total services 5,983 7,823 $6,697 $8,158 Timing of revenue recognition Products transferred at a point in time $487 $160 Products and services transferred over time 6,210 7,998 $6,697 $8,158 Contract balances The following table provides information about receivables, assets, and liabilities from contracts with customers (in thousands): March 31, 2019 December 31, 2018 Assets Contract receivables, net $ 7,676 $ 7,757 Unbilled work-in-progress, net $ 3,027 $ 3,044 Liabilities Unearned revenue $ 4,366 $ 3,911 Contract receivables are recorded at the invoiced amount and do not bear interest. Credit is extended based on the evaluation of a customer’s financial condition and collateral is not required. Unbilled work-in-progress is revenue which has been earned but not invoiced. The contract assets are transferred to the receivables when invoiced. Management expects that incremental commission fees paid to employees and intermediaries as a result of obtaining contracts are recoverable and therefore the Company capitalized them as contract costs in the amount of $0.2 million and less than $0.1 million at March 31, 2019 and December 31, 2018, respectively. Capitalized commission fees are amortized based on the transfer of services to which the assets relate which may range from two to three years, and are included in sales and marketing . In the three-month periods ended March 31, 2019 and 2018, the amount of amortization was less than $0.1 million and there was no impairment loss in relation to the costs capitalized. Applying the practical expedient in paragraph 340-40-25-4, the Company recognizes the incremental costs of obtaining contracts as an expense when incurred if the amortization period of the assets that the Company otherwise would have recognized is one year or less. These costs are included in sales and marketing . The contract liabilities primarily relate to unearned revenue. Amounts billed in advance of performance obligations being satisfied are recognized as unearned revenue. For the three months ended March 31, 2019 and 2018, we recognized revenue of $1.8 million and $3.8 million, respectively, that was included in the corresponding contract liability balance at the beginning of this period and 2018 . Transaction price allocated to the remaining performance obligations Remaining performance obligations represent the transaction price of firm orders for which work has not been completed as of the period end date and excludes unexercised contract options and potential orders under ordering-type contracts (e.g., indefinite-delivery, indefinite-quantity). As of March 31, 2019, the aggregate amount of the transaction price allocated to remaining performance obligations with lives greater than one-year totals $5.1 million. The Company expects approximately 65% of remaining performance obligations to be recognized into revenue within the next twelve months, with the remaining 23% in 1-2 years and 12% in 3-4 years. |
Stock-based Compensation | Stock-based Compensation — We account for stock-based compensation by applying a fair-value-based measurement method to account for share-based payment transactions with employees, non-employees and directors. We record compensation costs associated with the vesting of unvested options on a straight-line basis over the vesting period. Stock-based compensation is a non-cash expense because we settle these obligations by issuing shares of our common stock instead of settling such obligations with cash payments. We use the Black-Scholes model to estimate the fair value of each option grant on the date of grant. This model requires the use of estimates for expected term of the options and expected volatility of the price of our common stock. |
Income Taxes | Income Taxes — We record deferred tax assets and liabilities for the estimated future tax effects of temporary differences between the tax bases of assets and liabilities and amounts reported in the accompanying condensed consolidated balance sheets, as well as operating losses and tax credit carryforwards. We measure deferred tax assets and liabilities using enacted tax rates expected to be applied to taxable income in the years in which those temporary differences are expected to be recovered or settled. We reduce deferred tax assets by a valuation allowance if, based on available evidence, it is more likely than not that these benefits will not be realized. We use a recognition threshold and a measurement attribute for financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more likely than not to be sustained upon examination by taxing authorities. |
Segment Information | Segment Information — We define operating segments as components of our enterprise for which separate financial information is reviewed regularly by the chief operating decision-makers to evaluate performance and to make operating decisions. We have identified our Chief Executive Officer and Senior Vice President of Finance as our chief operating decision-makers (“CODM”). These chief operating decision makers review revenues by segment and review overall results of operations. We currently operate our business as one operating segment which includes two revenue types: license fees revenue and services revenue (as shown on the condensed consolidated statements of operations). License fees revenue represents the fees received from the license of software products. Services revenue includes services directly related to the delivery of the licensed products, such as fees for custom development, integration services, SaaS services, managed services, annual support fees, recurring maintenance fees, fees for maintenance upgrades and warranty services. Warranty services that are similar to software maintenance services are typically bundled with a license sale. |
Recently Adopted Accounting Pronouncements And Recent Accounting Pronouncements | Recently Adopted Accounting Pronouncements — In February 2016, the Financial Accounting Standards Board (“FASB”) established Topic 842, Leases, by issuing Accounting Standards Update (“ASU”) 2016-02, which requires lessees to recognize leases on-balance sheet and disclose key information about leasing arrangements. Topic 842 was subsequently amended by ASU 2018-01, Land Easement Practical Expedient for Transition to Topic 842; ASU 2018-10, Codification Improvements to Topic 842, Leases; and ASU 2018-11, Targeted Improvements. The new standard establishes a right-of-use model (ROU) that requires a lessee to recognize a ROU asset and lease liability on the balance sheet for all leases with a term longer than 12 months. Leases are classified as finance or operating, with classification affecting the pattern and classification of expense recognition in the condensed consolidated statements of operations. We adopted the new standard on January 1, 2019, its effective date. We used the optional transition method approach with the effective date as the date of initial application. Consequently, prior periods will not be restated, and the disclosures required under ASC 840 will continue to be provided for dates and periods before January 1, 2019. The new standard provides several optional practical expedients in transition. We elected the ‘package of practical expedients’, which permits us not to reassess under the new standard our prior conclusions about lease identification, lease classification and initial direct costs. The new standard also provides practical expedients for an entity’s ongoing accounting. We currently have elected the short-term lease recognition exemption for all leases that qualify. This means, for those leases that qualify, we will not recognize ROU assets or lease liabilities, and this includes not recognizing ROU assets or lease liabilities for existing short-term leases of those assets in transition. We also have elected the practical expedient to not separate lease and non-lease components for all our leases and will not reassess whether initial direct costs qualify for capitalization (see Note 10). The adoption of the standard resulted in the recognition of additional ROU assets and lease liabilities of approximately $1.6 million as of January 1, 2019 , that did not change previously reported net income and did not result in a cumulative effect adjustment to accumulated deficit and did not impact cash flows. In February 2018, the FASB issued ASU 2018-02, Income Statement — Reporting Comprehensive Income (Topic 220) —Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income. The amendments in this ASU allow a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the Tax Act. Consequently, the amendments eliminate the stranded tax effects resulting from the Act and will improve the usefulness of information reported to financial statement users. The amendments in this ASU are effective for fiscal years beginning after December 15, 2018. We adopted this ASU as of January 1, 2019. The amendments in this ASU did not have a material impact on our condensed consolidated financial statements. In June 2018, the FASB issued ASU 2018-07, Compensation - Stock Compensation (Topic 718) — Improvements to Nonemployee Share-Based Payment Accounting. ASU 2018-07 is intended to reduce cost and complexity and to improve financial reporting for share-based payments issued to nonemployees. This ASU expands the scope of ASC Topic 718, Compensation – Stock Compensation, which currently only includes share-based payments issued to employees, to also include share-based payments issued to nonemployees for goods and services. Consequently, the accounting for share-based payments to nonemployees and employees will be substantially aligned. ASU 2018-07 supersedes ASC Subtopic 505-50, Equity - Equity-Based Payments to Non-Employees. The amendments in this ASU are effective for fiscal years beginning after December 15, 2018. We adopted this ASU as of January 1, 2019. The amendments in this ASU did not have a material impact on our condensed consolidated financial statements. Recent Accounting Pronouncements — In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326) — Measurement of Credit Losses on Financial Instruments (ASU 2016-13). ASU 2016-13 requires entities to establish an allowance for credit losses for most financial assets. Prior GAAP was based on an incurred loss methodology for recognizing credit losses on financial assets measured at amortized cost and available-for sale debt securities. The update is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption is permitted for fiscal years beginning after December 31, 2018. We have not yet assessed the impact on our condensed consolidated financial statements or related disclosures. In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (ASC 820) — Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement. ASU 2018-13 removes certain disclosures, modifies certain disclosures and adds additional disclosures. ASU 2018-13 is effective for annual periods, including interim periods within those annual periods, beginning after December 15, 2019. Early adoption is permitted. We have not yet assessed the impact on our condensed consolidated financial statements or related disclosures. Management has evaluated other recently issued accounting pronouncements and does not believe that any of these pronouncements will have a significant impact on our condensed consolidated financial statements and related disclosures. |
Organization And Summary Of S_3
Organization And Summary Of Significant Accounting Policies (Tables) | 3 Months Ended |
Mar. 31, 2019 | |
Organization And Summary Of Significant Accounting Policies [Abstract] | |
Schedule Of Disaggregation Of Revenue | For the Three Months Ended March 31, 2019 2018 Primary geographical markets United Kingdom $1,372 $1,806 Other 5,325 6,352 $6,697 $8,158 Major products/service lines Licensing fees $714 $335 Customer support, including warranty support fees 2,232 2,609 Services 1,581 2,951 Managed services 2,170 2,263 Total services 5,983 7,823 $6,697 $8,158 Timing of revenue recognition Products transferred at a point in time $487 $160 Products and services transferred over time 6,210 7,998 $6,697 $8,158 |
Schedule Of Receivables, Assets And Liabilities From Contracts With Customers | March 31, 2019 December 31, 2018 Assets Contract receivables, net $ 7,676 $ 7,757 Unbilled work-in-progress, net $ 3,027 $ 3,044 Liabilities Unearned revenue $ 4,366 $ 3,911 |
Goodwill And Intangible Assets
Goodwill And Intangible Assets (Tables) | 3 Months Ended |
Mar. 31, 2019 | |
Goodwill And Intangible Assets [Abstract] | |
Summary Of Changes In Carrying Amount Of Goodwill | Total Goodwill Balance at January 1, 2019 $ 6,738 Effect of changes in foreign currency exchange rates (1) 90 Balance at March 31, 2019 $ 6,828 (1) Represents the impact of foreign currency translation for instances when goodwill is recorded in foreign entities whose functional currency is also their local currency. Goodwill balances are translated into U.S. dollars using exchange rates in effect at period end. Adjustments related to foreign currency translation are included in other comprehensive income. |
Summary Of Identifiable Intangible Assets | March 31, 2019 Gross Amount Accumulated Amortization Net Carrying Amount Purchased software $ 2,895 $ (1,220) $ 1,675 Trademarks and tradenames 306 (229) 77 Non-competition 39 (39) - Customer relationships 4,333 (1,729) 2,604 $ 7,573 (1) $ (3,217) (1) $ 4,356 December 31, 2018 Gross Amount Accumulated Amortization Net Carrying Amount Purchased software $ 2,877 $ (1,121) $ 1,756 Trademarks and tradenames 303 (223) 80 Non-competition 39 (38) 1 Customer relationships 4,303 (1,590) 2,713 $ 7,522 (1) $ (2,972) (1) $ 4,550 (1) Includes foreign currency translation adjustment of less than $0.1 million. |
Summary Of Expected Future Amortization Expense Related To Identifiable Intangibles | Twelve Months Ending March 31, 2020 $ 943 2021 943 2022 909 2023 632 2024 312 |
Balance Sheet Components (Table
Balance Sheet Components (Tables) | 3 Months Ended |
Mar. 31, 2019 | |
Balance Sheet Components [Abstract] | |
Accounts Payable And Accrued Liabilities | March 31, 2019 December 31, 2018 Accounts payable and accrued liabilities: Accounts payable $ 1,751 $ 1,276 Accrued compensation and related expenses 1,765 1,863 Accrued liabilities 1,288 1,344 Lease obligations – operating leases - current 370 - $ 5,174 $ 4,483 |
(Loss) Income Per Common Share
(Loss) Income Per Common Share (Tables) | 3 Months Ended |
Mar. 31, 2019 | |
(Loss) Income Per Common Share [Abstract] | |
Summary Of Basic And Diluted (Loss) Income Per Common Share | For the Three Months Ended March 31, 2019 2018 Basic income per common share: Net (loss) income $ (1,117) $ 484 Basic weighted average shares outstanding 12,138 12,077 Basic (loss) income per common share: $ (0.09) $ 0.04 Diluted income per common share: Net (loss) income $ (1,117) $ 484 Weighted average shares outstanding 12,138 12,077 Effect of dilutive securities - options and restricted stock - 88 Diluted weighted average shares outstanding 12,138 12,165 Diluted (loss) income per common share: $ (0.09) $ 0.04 |
Share-Based Compensation (Table
Share-Based Compensation (Tables) | 3 Months Ended |
Mar. 31, 2019 | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Summary Of Stock-Based Compensation Expenses | For the Three Months Ended March 31, 2019 2018 Cost of revenue, excluding depreciation and amortization $ 4 $ 13 Sales and marketing 3 16 General and administrative 115 310 Product development 8 27 Total share-based compensation $ 130 $ 366 |
Stock Options [Member] | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Summary Of Stock Option Activity | Weighted- Average Weighted- Remaining Aggregate Number of Average Contractual Intrinsic Shares Exercise Term Value (in thousands) Price (Years) (in thousands) Options outstanding at January 1, 2019 591 $ 5.75 7.39 $ - Less options forfeited/cancelled (23) 4.56 Less options exercised - - Options outstanding at March 31, 2019 568 $ 5.80 7.09 $ - Options exercisable at March 31, 2019 373 $ 6.55 6.37 $ - |
Restricted Stock [Member] | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Summary Of Restricted Stock Activity | Restricted Stock Number of Shares (in thousands) Unvested restricted stock at January 1, 2019 349 Less restricted stock vested (34) Less restricted stock forfeited/expired (139) Unvested restricted stock at March 31, 2019 176 |
Income Taxes (Tables)
Income Taxes (Tables) | 3 Months Ended |
Mar. 31, 2019 | |
Income Taxes [Abstract] | |
Components Of Deferred Tax Assets And Liabilities | March 31, 2019 December 31, 2018 Deferred tax assets: Foreign tax credits carryforwards $ 4,835 $ 4,788 Net operating loss carryforwards – Foreign 5,584 5,531 Net operating loss carryforwards - State 907 887 Research & development credits - 303 AMT credits 770 770 Stock compensation 600 559 Depreciable assets 41 38 Accrued liabilities and reserves 89 67 Total deferred tax assets 12,826 12,943 Deferred tax liabilities: Intangibles (651) (697) Accrued liabilities and reserves (184) (174) Total deferred tax liability (835) (871) Net deferred tax assets, before valuation allowance 11,991 12,072 Valuation allowance (10,847) (10,932) Net deferred tax asset $ 1,144 $ 1,140 |
Geographical Information (Table
Geographical Information (Tables) | 3 Months Ended |
Mar. 31, 2019 | |
Geographical Information [Abstract] | |
Long-Lived Assets, Net By Geographic Region | March 31, 2019 December 31, 2018 Long-lived assets, net United States $ 2,633 $ 2,741 United Kingdom 7,241 7,098 Other 3,219 1,752 $ 13,093 $ 11,591 |
Commitments And Contingencies (
Commitments And Contingencies (Tables) | 3 Months Ended |
Mar. 31, 2019 | |
Commitments And Contingencies [Abstract] | |
Operating ROU Lease Assets And Lease Liabilities | March 31, 2019 Other long-term assets $ 1,534 Accounts payable and accrued liabilities 370 Lease obligations – operating leases, net of current portion 1,152 Total lease liability $ 1,522 Weighted average remaining lease term (in years) 4.9 Weighted average discount rate 6.75% |
Future Lease Payments | March 31, 2019 2019 – Remaining $ 393 2020 403 2021 337 2022 313 2023 178 Thereafter 168 Total future minimum lease payments 1,792 Present value adjustment 270 Total $ 1,522 |
Organization And Summary Of S_4
Organization And Summary Of Significant Accounting Policies (Narrative) (Details) | 3 Months Ended | ||||
Mar. 31, 2019USD ($)itemsegmentcustomercountry | Mar. 31, 2018USD ($) | Jan. 01, 2019USD ($) | Dec. 31, 2018USD ($) | Dec. 31, 2017USD ($) | |
Outstanding debt as a current liability | $ 5,149,000 | $ 3,573,000 | |||
Cash and cash equivalents | 5,562,000 | $ 8,674,000 | 6,732,000 | $ 7,562,000 | |
Working capital | $ 4,700,000 | ||||
Number of recognized sources for revenue | item | 2 | ||||
Capitalized contract cost | $ 200,000 | ||||
Capitalized contract cost, impairment loss | 0 | 0 | |||
Revenue recognized in correponding to contract liability | 1,800,000 | 3,800,000 | |||
Remaining performance obligations | $ 5,100,000 | ||||
Percentage of remaining performance obligations, next twelve months | 65.00% | ||||
Number of operating segments | segment | 1 | ||||
Operating leases - right to use assets | $ 1,534,000 | ||||
Operating lease liability | $ 1,522,000 | ||||
Accounting Standards Update 2016-02 [Member] | |||||
Operating leases - right to use assets | $ 1,600,000 | ||||
Operating lease liability | $ 1,600,000 | ||||
Minimum [Member] | |||||
Number of customers | customer | 100 | ||||
Number of countries across the world for customer base | country | 65 | ||||
Maximum [Member] | |||||
Capitalized contract cost | $ 100,000 | ||||
Capitalized contract cost, amortization | $ 100,000 | $ 100,000 | |||
Year 1 and 2 [Member] | |||||
Percentage of remaining performance obligations, thereafter | 23.00% | ||||
Year 3 and 4 [Member] | |||||
Percentage of remaining performance obligations, thereafter | 12.00% |
Organization And Summary Of S_5
Organization And Summary Of Significant Accounting Policies (Schedule Of Disaggregation Of Revenue) (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2019 | Mar. 31, 2018 | |
Disaggregation of Revenue [Line Items] | ||
Revenues | $ 6,697 | $ 8,158 |
Products Transferred At A Point In Time [Member] | ||
Disaggregation of Revenue [Line Items] | ||
Revenues | 487 | 160 |
Products and Services Transferred Over Time [Member] | ||
Disaggregation of Revenue [Line Items] | ||
Revenues | 6,210 | 7,998 |
License Fees [Member] | ||
Disaggregation of Revenue [Line Items] | ||
Revenues | 714 | 335 |
Customer Support Including Warranty Support Fees [Member] | ||
Disaggregation of Revenue [Line Items] | ||
Revenues | 2,232 | 2,609 |
Services [Member] | ||
Disaggregation of Revenue [Line Items] | ||
Revenues | 1,581 | 2,951 |
Managed Services [Member] | ||
Disaggregation of Revenue [Line Items] | ||
Revenues | 2,170 | 2,263 |
Services [Member] | ||
Disaggregation of Revenue [Line Items] | ||
Revenues | 5,983 | 7,823 |
United Kingdom [Member] | ||
Disaggregation of Revenue [Line Items] | ||
Revenues | 1,372 | 1,806 |
Other [Member] | ||
Disaggregation of Revenue [Line Items] | ||
Revenues | $ 5,325 | $ 6,352 |
Organization And Summary Of S_6
Organization And Summary Of Significant Accounting Policies (Schedule Of Receivables, Assets And Liabilities From Contracts With Customers) (Details) - USD ($) $ in Thousands | Mar. 31, 2019 | Dec. 31, 2018 |
Assets | ||
Contract receivables, net | $ 7,676 | $ 7,757 |
Unbilled work-in-progress, net | 3,027 | 3,044 |
Liabilities | ||
Unearned revenue | $ 4,366 | $ 3,911 |
Goodwill And Intangible Asset_2
Goodwill And Intangible Assets (Narrative) (Details) - USD ($) $ in Thousands | 3 Months Ended | ||
Mar. 31, 2019 | Mar. 31, 2018 | Dec. 31, 2018 | |
Goodwill And Intangible Assets [Abstract] | |||
Goodwill | $ 6,828 | $ 6,738 | |
Amortization of intangible assets | $ 237 | $ 242 |
Goodwill And Intangible Asset_3
Goodwill And Intangible Assets (Summary Of Changes In Carrying Amount Of Goodwill) (Details) $ in Thousands | 3 Months Ended | |
Mar. 31, 2019USD ($) | ||
Goodwill And Intangible Assets [Abstract] | ||
Balance at beginning of the period | $ 6,738 | |
Effect of changes in foreign currency exchange rates | 90 | [1] |
Balance at ending of the period | $ 6,828 | |
[1] | Represents the impact of foreign currency translation for instances when goodwill is recorded in foreign entities whose functional currency is also their local currency. Goodwill balances are translated into U.S. dollars using exchange rates in effect at period end. Adjustments related to foreign currency translation are included in other comprehensive income. |
Goodwill And Intangible Asset_4
Goodwill And Intangible Assets (Summary Of Identifiable Intangible Assets) (Details) - USD ($) $ in Thousands | 3 Months Ended | ||
Mar. 31, 2019 | Dec. 31, 2018 | ||
Finite-Lived Intangible Assets [Line Items] | |||
Net Carrying Amount | $ 4,356 | $ 4,550 | |
Foreign currency translation adjustment | [1] | 90 | |
Evolving Systems Labs And Evolving Systems NC, Inc [Member] | |||
Finite-Lived Intangible Assets [Line Items] | |||
Gross Amount | [2] | 7,573 | 7,522 |
Accumulated Amortization | [2] | (3,217) | (2,972) |
Net Carrying Amount | 4,356 | 4,550 | |
Evolving Systems Labs And Evolving Systems NC, Inc [Member] | Purchased Software [Member] | |||
Finite-Lived Intangible Assets [Line Items] | |||
Gross Amount | 2,895 | 2,877 | |
Accumulated Amortization | (1,220) | (1,121) | |
Net Carrying Amount | 1,675 | 1,756 | |
Evolving Systems Labs And Evolving Systems NC, Inc [Member] | Trademarks And Tradenames [Member] | |||
Finite-Lived Intangible Assets [Line Items] | |||
Gross Amount | 306 | 303 | |
Accumulated Amortization | (229) | (223) | |
Net Carrying Amount | 77 | 80 | |
Evolving Systems Labs And Evolving Systems NC, Inc [Member] | Non-competition [Member] | |||
Finite-Lived Intangible Assets [Line Items] | |||
Gross Amount | 39 | 39 | |
Accumulated Amortization | (39) | (38) | |
Net Carrying Amount | 1 | ||
Evolving Systems Labs And Evolving Systems NC, Inc [Member] | Customer Relationships [Member] | |||
Finite-Lived Intangible Assets [Line Items] | |||
Gross Amount | 4,333 | 4,303 | |
Accumulated Amortization | (1,729) | (1,590) | |
Net Carrying Amount | $ 2,604 | $ 2,713 | |
[1] | Represents the impact of foreign currency translation for instances when goodwill is recorded in foreign entities whose functional currency is also their local currency. Goodwill balances are translated into U.S. dollars using exchange rates in effect at period end. Adjustments related to foreign currency translation are included in other comprehensive income. | ||
[2] | Includes foreign currency translation adjustment of less than $0.1 million. |
Goodwill And Intangible Asset_5
Goodwill And Intangible Assets (Summary Of Expected Future Amortization Expense Related To Identifiable Intangibles) (Details) $ in Thousands | Mar. 31, 2019USD ($) |
Twelve months ending March 31, | |
2020 | $ 943 |
2021 | 943 |
2022 | 909 |
2023 | 632 |
2024 | $ 312 |
Balance Sheet Components (Accou
Balance Sheet Components (Accounts Payable And Accrued Liabilities) (Details) - USD ($) $ in Thousands | Mar. 31, 2019 | Dec. 31, 2018 |
Balance Sheet Components [Abstract] | ||
Accounts payable | $ 1,751 | $ 1,276 |
Accrued compensation and related expenses | 1,765 | 1,863 |
Accrued liabilities | 1,288 | 1,344 |
Lease obligations - operating leases - current | 370 | |
Accounts payable and accrued liabilities | $ 5,174 | $ 4,483 |
(Loss) Income Per Common Shar_2
(Loss) Income Per Common Share (Narrative) (Details) - $ / shares shares in Millions | 3 Months Ended | |
Mar. 31, 2019 | Mar. 31, 2018 | |
(Loss) Income Per Common Share [Abstract] | ||
Basic (loss) income per common share | $ (0.09) | $ 0.04 |
Diluted (loss) income per common share | $ (0.09) | $ 0.04 |
Shares excluded from the dilutive stock calculation | 0.6 | 0.3 |
(Loss) Income Per Common Shar_3
(Loss) Income Per Common Share (Summary Of Basic And Diluted (Loss) Income Per Common Share) (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands | 3 Months Ended | |
Mar. 31, 2019 | Mar. 31, 2018 | |
Basic income per common share: | ||
Net (loss) income | $ (1,117) | $ 484 |
Basic weighted average shares outstanding | 12,138 | 12,077 |
Basic (loss) income per common share: | $ (0.09) | $ 0.04 |
Diluted income per common share: | ||
Net (loss) income | $ (1,117) | $ 484 |
Weighted average shares outstanding | 12,138 | 12,077 |
Effect of dilutive securities - options and restricted stock | 88 | |
Diluted weighted average shares outstanding | 12,138 | 12,165 |
Diluted (loss) income per common share: | $ (0.09) | $ 0.04 |
Share-Based Compensation (Narra
Share-Based Compensation (Narrative) (Details) - USD ($) $ in Thousands | 3 Months Ended | ||
Mar. 31, 2019 | Mar. 31, 2018 | Dec. 31, 2018 | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Share-based compensation expense | $ 130 | $ 366 | |
Stock options granted | 0 | 0 | |
Stock options outstanding | 568,000 | 591,000 | |
Total unrecognized compensation costs | $ 900 | ||
Weighted average recognition period | 2 years 2 months 9 days | ||
2007 Stock Plan [Member] | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Shares available for grant | 0 | 0 | |
Shares issued and outstanding | 500,000 | 500,000 | |
2016 Stock Plan [Member] | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Shares available for grant | 400,000 | 400,000 | |
Shares issued and outstanding | 400,000 | ||
Maximum [Member] | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Fair value of stock options and restricted stock vested | $ 100 | $ 100 | |
Senior Management [Member] | Minimum [Member] | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Vesting period | 4 years | ||
Board Members [Member] | Minimum [Member] | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Vesting period | 1 year |
Share-Based Compensation (Summa
Share-Based Compensation (Summary Of Stock-Based Compensation Expenses) (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2019 | Mar. 31, 2018 | |
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items] | ||
Total share-based compensation | $ 130 | $ 366 |
Cost Of Revenue, Excluding Depreciation And Amortization [Member] | ||
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items] | ||
Total share-based compensation | 4 | 13 |
Sales And Marketing [Member] | ||
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items] | ||
Total share-based compensation | 3 | 16 |
General And Administrative [Member] | ||
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items] | ||
Total share-based compensation | 115 | 310 |
Product Development [Member] | ||
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items] | ||
Total share-based compensation | $ 8 | $ 27 |
Share-Based Compensation (Sum_2
Share-Based Compensation (Summary Of Restricted Stock Activity) (Details) - Restricted Stock [Member] shares in Thousands | 3 Months Ended |
Mar. 31, 2019shares | |
Unvested restricted stock at January 1, 2019 | 349 |
Less restricted stock vested | (34) |
Less restricted stock forfeited/expired | (139) |
Unvested restricted stock at March 31, 2019 | 176 |
Share-Based Compensation (Sum_3
Share-Based Compensation (Summary Of Stock Option Activity) (Details) - USD ($) shares in Thousands | 3 Months Ended | 12 Months Ended |
Mar. 31, 2019 | Dec. 31, 2018 | |
Share-Based Compensation [Abstract] | ||
Number of Shares, Options outstanding at beginning | 591 | |
Number of Shares, Less options forfeited/cancelled | (23) | |
Number of Shares, Less options exercised | ||
Number of Shares, Options outstanding at ending | 568 | 591 |
Number of Shares, Options exercisable at March 31, 2019 | 373 | |
Weighted-Average Exercise Price, Options outstanding at beginning | $ 5.75 | |
Weighted-Average Exercise Price, Less options forfeited/cancelled | 4.56 | |
Weighted-Average Exercise Price, Less options exercised | ||
Weighted-Average Exercise Price, Options outstanding at ending | 5.80 | $ 5.75 |
Weighted-Average Exercise Price, Options exercisable at March 31, 2019 | $ 6.55 | |
Weighted-Average Remaining Contractual Term (Years), Options outstanding | 7 years 1 month 2 days | 7 years 4 months 21 days |
Weighted-Average Remaining Contractual Term (Years), Options exercisable at March 31, 2019 | 6 years 4 months 13 days | |
Aggregate Intrinsic Value, Options outstanding at beginning | ||
Aggregate Intrinsic Value, Options outstanding at ending | ||
Aggregate Intrinsic Value, Options exercisable at March 31, 2019 |
Concentration Of Credit Risk (N
Concentration Of Credit Risk (Narrative) (Details) - Sales Revenue Net [Member] - Customer One [Member] - Europe [Member] - customer | 3 Months Ended | |
Mar. 31, 2019 | Mar. 31, 2018 | |
Concentration Risk [Line Items] | ||
Number of significant customers | 1 | 1 |
Concentration risk, percentage | 11.00% | 11.00% |
Minimum [Member] | ||
Concentration Risk [Line Items] | ||
Concentration risk, percentage | 10.00% | 10.00% |
Debt (Narrative) (Details)
Debt (Narrative) (Details) | Jul. 31, 2018USD ($) | Aug. 16, 2017USD ($)item | Feb. 29, 2016USD ($)item | Mar. 31, 2019USD ($) | Dec. 31, 2018USD ($) | Jan. 01, 2017item |
Debt Instrument [Line Items] | ||||||
Outstanding debt as a current liability | $ 5,149,000 | $ 3,573,000 | ||||
Term Loan [Member] | East West Bank [Member] | ||||||
Debt Instrument [Line Items] | ||||||
Loan amount | $ 6,000,000 | |||||
Rate plus prime rate | 1.00% | |||||
Increase in interest rate, in event of a default | 5.00% | |||||
Number of monthly installments of principal | item | 36 | |||||
Number of payment for annual credit facility fees | item | 2 | |||||
Credit facility fees | $ 18,750 | |||||
Legal fee | $ 1,000 | |||||
Maturity date | Jan. 1, 2020 | |||||
Fixed charge coverage ratio | 0.31% | 0.81% | ||||
Leverage ratio | 2.80% | |||||
Term Loan [Member] | East West Bank [Member] | Prime Rate [Member] | ||||||
Debt Instrument [Line Items] | ||||||
Interest rate | 5.50% | |||||
Loan Facility [Member] | East West Bank [Member] | ||||||
Debt Instrument [Line Items] | ||||||
Monthly principal payment | $ 100,000 | |||||
Interest rate | 3.50% | |||||
Rate plus prime rate | 1.50% | |||||
Increase in interest rate, in event of a default | 5.00% | |||||
Number of monthly installments of principal | item | 4 | |||||
Maturity date | Aug. 16, 2021 | |||||
Origination fee | $ 23,650 | |||||
Increment amount | $ 50,000 | |||||
Prepayment fee percentage | 2.00% | |||||
Loan Facility [Member] | East West Bank [Member] | Lumata Entities [Member] | ||||||
Debt Instrument [Line Items] | ||||||
Loan amount | $ 4,700,000 | |||||
Loan Facility [Member] | East West Bank [Member] | Prime Rate [Member] | ||||||
Debt Instrument [Line Items] | ||||||
Interest rate | 5.50% | |||||
Minimum [Member] | Term Loan [Member] | East West Bank [Member] | ||||||
Debt Instrument [Line Items] | ||||||
Required fixed charge coverage ratio | 1.25% | 1.25% | ||||
Minimum [Member] | Loan Facility [Member] | East West Bank [Member] | ||||||
Debt Instrument [Line Items] | ||||||
Prepayment amount | $ 250,000 | |||||
Maximum [Member] | Term Loan [Member] | East West Bank [Member] | ||||||
Debt Instrument [Line Items] | ||||||
Required leverage ratio | 2.00% |
Income Taxes (Narrative) (Detai
Income Taxes (Narrative) (Details) - USD ($) | 3 Months Ended | ||
Mar. 31, 2019 | Mar. 31, 2018 | Dec. 31, 2018 | |
Income Taxes [Line Items] | |||
Net income tax (benefit) expense | $ 91,000 | $ 95,000 | |
Deferred tax benefit | $ (100,000) | ||
Effective tax rate | (9.00%) | 16.00% | |
Unrecognized tax benefits | $ 0 | $ 0 | |
AMT credit | 770,000 | 770,000 | |
Valuation allowance | 10,847,000 | 10,932,000 | |
Income before income tax expense | 1,200,000 | ||
Indian And Nigerian Based Operations [Member] | |||
Income Taxes [Line Items] | |||
Current income tax expense | 100,000 | ||
U.K. and India Operations [Member] | |||
Income Taxes [Line Items] | |||
Current income tax expense | $ 200,000 | ||
Scenario, Plan [Member] | |||
Income Taxes [Line Items] | |||
Valuation allowance | $ 0 | $ 0 |
Income Taxes (Components Of Def
Income Taxes (Components Of Deferred Tax Assets And Liabilities) (Details) - USD ($) $ in Thousands | Mar. 31, 2019 | Dec. 31, 2018 |
Deferred tax assets: | ||
Foreign tax credits carryforwards | $ 4,835 | $ 4,788 |
Net operating loss carryforwards - Foreign | 5,584 | 5,531 |
Net operating loss carryforwards - State | 907 | 887 |
Research & development credits | 303 | |
AMT credit | 770 | 770 |
Stock compensation | 600 | 559 |
Depreciable assets | 41 | 38 |
Accrued liabilities and reserves | 89 | 67 |
Total deferred tax assets | 12,826 | 12,943 |
Deferred tax liabilities: | ||
Intangibles | (651) | (697) |
Accrued liabilities and reserves | (184) | (174) |
Total deferred tax liability | (835) | (871) |
Net deferred tax assets, before valuation allowance | 11,991 | 12,072 |
Valuation allowance | (10,847) | (10,932) |
Net deferred tax asset | $ 1,144 | $ 1,140 |
Geographical Information (Long-
Geographical Information (Long-Lived Assets, Net By Geographic Region) (Details) - USD ($) $ in Thousands | Mar. 31, 2019 | Dec. 31, 2018 |
Segment Reporting Information [Line Items] | ||
Long-lived assets, net | $ 13,093 | $ 11,591 |
United States [Member] | ||
Segment Reporting Information [Line Items] | ||
Long-lived assets, net | 2,633 | 2,741 |
United Kingdom [Member] | ||
Segment Reporting Information [Line Items] | ||
Long-lived assets, net | 7,241 | 7,098 |
Other [Member] | ||
Segment Reporting Information [Line Items] | ||
Long-lived assets, net | $ 3,219 | $ 1,752 |
Commitments And Contingencies_2
Commitments And Contingencies (Narrative) (Details) - USD ($) | 3 Months Ended | ||
Mar. 31, 2019 | Mar. 31, 2018 | Dec. 31, 2018 | |
Other Commitments [Line Items] | |||
Operating lease expense | $ 100,000 | ||
Short-term lease expense | 100,000 | ||
Rent expense, operating lease | 200,000 | ||
Sublease rental income | 0 | $ 0 | |
Lease obligations - operating leases | $ 200,000 | ||
Minimum [Member] | |||
Other Commitments [Line Items] | |||
Remaining lease terms | 1 year | ||
Maximum [Member] | |||
Other Commitments [Line Items] | |||
Remaining lease terms | 7 years | ||
Product Warranty [Member] | |||
Other Commitments [Line Items] | |||
Liabilities | $ 0 | $ 0 | |
Indemnification Agreement [Member] | Insurance Policy Coverage [Member] | |||
Other Commitments [Line Items] | |||
Liabilities | 0 | 0 | |
Indemnification Agreement [Member] | Customers And Suppliers [Member] | |||
Other Commitments [Line Items] | |||
Liabilities | 0 | 0 | |
Indemnification Agreement [Member] | Software [Member] | |||
Other Commitments [Line Items] | |||
Liabilities | $ 0 | $ 0 |
Commitments And Contingencies_3
Commitments And Contingencies (Operating ROU Lease Assets And Lease Liabilities) (Details) $ in Thousands | Mar. 31, 2019USD ($) |
Commitments And Contingencies [Abstract] | |
Other long-term assets | $ 1,534 |
Accounts payable and accrued liabilities | 370 |
Lease obligations - operating leases, net of current portion | 1,152 |
Total lease liability | $ 1,522 |
Weighted average remaining lease term (in years) | 4 years 10 months 24 days |
Weighted average discount rate | 6.75% |
Commitments And Contingencies_4
Commitments And Contingencies (Future Lease Payments) (Details) $ in Thousands | Mar. 31, 2019USD ($) |
Commitments And Contingencies [Abstract] | |
2019 - Remaining | $ 393 |
2020 | 403 |
2021 | 337 |
2022 | 313 |
2023 | 178 |
Thereafter | 168 |
Total future minimum lease payments | 1,792 |
Present value adjustment | 270 |
Total | $ 1,522 |