07-Nov-2005
- Evolving Systems Reports Third Quarter Results for 2005
License Fees and Service Bookings Up 93% in Q3 as Compared with Q4
ENGLEWOOD, Colorado - Evolving Systems, Inc. (NASDAQ-EVOL), a leading provider of innovative software solutions and services to the wireless, wireline and IP carrier market, today reported results for its third quarter and nine-month periods ended September 30, 2005.
Third Quarter Results
Third quarter revenue increased 68% to $9.6 million from $5.7 million in the
same quarter last year. This increase reflected the contribution from the
fourth quarter 2004 acquisitions of Telecom Software Enterprises, LLC (TSE)
and Tertio Telecoms Limited (Tertio). License fees and services revenue in
the third quarter of 2005 was $4.8 million, up significantly over $800,000
in the same quarter last year. Customer support revenue was $4.8 million
in the third quarter, as compared with $4.9 million in the third quarter
a year ago. The 2004 third quarter customer support revenue figure, however,
included $1.1 million of revenue recognized from a previously deferred customer
maintenance contract. Revenue mix in the third quarter of 2005 included $4.0
million in Numbering Solutions, $4.7 million in Service Activation, and $900,000
in Mediation.
Total costs of revenue and operating expenses in the third quarter increased to $9.9 million from $5.3 million in the third quarter of 2004. This increase was primarily due to additional costs from Tertio's operations and related integration activities. In addition, the Company incurred approximately $477,000 in severance costs in the third quarter related to previously announced headcount reductions. Sequentially, total costs of revenue and operating expenses declined for the second consecutive quarter as the Company continued to benefit from eliminating duplicate roles while integrating its Tertio acquisition as well as savings from expanding its offshore development activities.
The Company had an operating loss of $338,000 in the third quarter compared with operating income of $445,000 in the third quarter last year. The $338,000 operating loss included non-cash amortization and depreciation charges of $1.7 million. Net loss for the third quarter was $926,000, or $0.05 per basic and diluted share, versus net income of $517,000, or $0.03 per basic and diluted share, in the same quarter a year ago.
Third quarter new order bookings increased sequentially to $8.6 million from $7.1 million in the second quarter. The Company booked $5.8 million in license fees and services, up 93% from $3.0 million in license fees and services bookings in the second quarter. Total new order bookings included $2.8 million in customer support. The Company defines bookings as new, non-cancelable orders expected to be recognized as revenue in the next twelve months. Backlog at September 30, 2005, was $13.8 million versus a second quarter backlog of $14.5 million. The September 30 backlog consisted of $4.6 million in license fees and services, up 39% from $3.3 million in the second quarter, and $9.2 million in customer support. As expected, customer support backlog declined sequentially from the second quarter, reflecting the seasonality of customer support renewals. Historically, the large customer support renewals occur in the fourth and first quarters. Evolving Systems closed the third quarter with cash and cash equivalents of $3.4 million, down from $4.6 million at June 30. The decline in cash was primarily attributable to the seasonality of customer support receipts and employee severance cash payments of approximately $580,000.
Nine-Month Results
Driven by the acquisitions of Tertio and TSE, revenue increased 74% to $29.3
million for the nine-month period ended September 30, 2005, as compared with
revenue of $16.8 million for the same period last year. License fees and services
revenue for the respective periods increased to $14.6 million from $6.4 million
while customer support revenue grew to $14.7 million from $10.4 million. Revenue
mix included $11.7 million in Numbering Solutions, $13.8 million in Service
Activation, and $3.8 million in Mediation.
Total costs of revenue and operating expenses for the nine-month period ended September 30, 2005, increased to $31.9 million from $16.4 million in the same period last year. This increase was primarily attributable to the added costs from the Tertio acquisition and integration.
The Company reported an operating loss of $2.5 million for the nine-month period ended September 30, 2005. That figure includes nearly $5.3 million in non-cash amortization and depreciation expenses. Net loss for the nine-month period was $3.8 million, or $0.20 per basic and diluted share, versus net income of $593,000, or $0.04 per basic and $0.03 per diluted share, in the same period last year.
CEO comments
"At this point in the year, we feel our late 2004 acquisitions of Tertio
and TSE are showing positive results and we are at a stage where we now expect
to start seeing the value of our combined operations," said Stephen Gartside,
president and CEO.
"Evolving Systems won two new key accounts in the third quarter - one in the U.S. in partnership with Alcatel and one in Asia in partnership with Siemens," Gartside said. "In addition, we booked the first sale of our new Tertio™ Content Connector solution with one of our European customers - an important milestone for a product that helps operators integrate content and service delivery platforms on which next-generation IP-based services can be launched. As a result, bookings and backlog for license fees and services increased during the period - good leading indicators for future revenue growth.
"We are carrying strong sales momentum for Activation and Numbering Solutions
into the fourth quarter as evidenced by two fourth quarter contract wins," Gartside
added. "Most recently we announced that a major U.S. Tier One carrier
- a long time Evolving Systems customer - expanded its relationship by implementing
our OrderPath® product. As a result, our Numbering Solutions are now deployed
at three of the nation's top four Incumbent Local Exchange Carriers. Just prior
to that announcement, we reported that Onetel, one of the UK's largest integrated
communications carriers, plans to deploy several of our products in their next
generation back office. This contract, which includes Activation and Numbering
Solutions, represents one of the synergies of our 2004 Tertio acquisition in
that Onetel's solution will combine products from both our U.S. and U.K. organizations."
Gartside noted that the Company continues to pursue opportunities to restructure
its Tertio acquisition debt. This restructuring, which the Company believes
is imminent, is expected to provide solid improvement in working capital and
future cash flows.
Outlook
Evolving Systems expects to end the year with approximately $40 million in revenue.
The Company continues to expect positive net income in 2005 after adjusting
for non-cash amortization expense. In addition, the Company expects its results
from operations to improve in 2006. Management will provide more details on
2006 guidance in the 2005 year-end conference call planned for late in the
first quarter of 2006.
Conference Call
Evolving
Systems will conduct its conference call on November 7 at 2:15 p.m. MT.
- Call 1-866-510-0704 for domestic toll free.
- Call 617-597-5362 for international.
- Conference passcode is 43116904.
- Telephone replay through November 21 at 888-286-8010 or 617-801-6888, passcode 47369528.
- Webcast, go to www.evolving.com. Replay available through November 21, 2005.
Click here for Q3 Financials PDF
About Evolving Systems®
Evolving Systems, Inc. (NASDAQ-EVOL) is a provider of software and services to
more than 50 network operators in 38 countries worldwide. Its portfolio includes
market-leading products for Activation, Mediation and Numbering Solutions.
Founded in 1985, the Company has headquarters in Englewood, Colorado, with
offices in the United States, United Kingdom, Germany, India and Malaysia.
Further information at www.evolving.com
CAUTIONARY STATEMENT
This news release contains "forward-looking statements" within the
meaning of the Private Securities Litigation Reform Act of 1995, based on current
expectations, estimates and projections that are subject to risk. Specifically,
statements about the impact of the Company's acquisitions, growth and future
profitability, cash and cash flow, future business, revenue and expense projections,
the integration of acquisitions, and the Company's ability to restructure its
debt are forward-looking statements. These statements are based on our expectations
and are naturally subject to uncertainty and changes in circumstances. Readers
should not place undue reliance on these forward-looking statements, and the
Company may not undertake to update these statements. Actual results could vary
materially from these expectations. For a more extensive discussion of Evolving
Systems' business, please refer to the Company's Form 10-K filed with the SEC
on March 31, 2005 as well as subsequently filed Form 10-Q, and 8-K reports.
CONTACTS:
Investor Relations
Jay Pfeiffer
Pfeiffer High Investor Relations, Inc.
303.393.7044
jay@pfeifferhigh.com
Public Relations (EMEA & Asia Pacific)
Jenny Dutta
Ogilvy Public Relations Worldwide
+44 20 7309 1217
jenny.dutta@uk.ogilvypr.com
Public Relations Contact (Americas)
Dan La Russo
Ogilvy Public Relations Worldwide
212.880.5315
dan.larusso@ogilvypr.com
