GlobeNewswire Inc | Mar 17, 2021 04:30PM EDT

March 17, 2021

ENGLEWOOD, Colo., March 17, 2021 (GLOBE NEWSWIRE) -- Evolving Systems,Inc. (NASDAQ: EVOL) (the Company), a leader in real-time digital engagement, today reported financial results for its fourth quarter and full year ended December 31, 2020.

2020 Financial Results Highlights:

-- 2020 revenues were $26.4 million, an increase of $0.6 million from 2019 revenues -- Fourth quarter revenues of $7.0 million, a $0.3 million increase from the fourth quarter 2019 revenues -- Operating income of $1.0 million for the year 2020 and fourth quarter operating income of $0.5 million -- Positive adjusted EBITDA of $2.4 million for the year 2020 and adjusted EBITDA of $0.8 million in the fourth quarter -- The Company has generated positive cash flow from operations in 2020 -- The Company made the final payment on its bank term loan in January 2021 -- The Company continues to function efficiently during the global pandemic

Matthew Stecker, the Companys Chief Executive Officer and Executive Chairman, stated: In our years of servicing our global clients, we have developed a culture of successfully managing our business through telework. We have leveraged our ability to implement and provide support remotely and have noted a relatively limited effect on our operations during this time of a global pandemic. This has allowed us to overcome many challenges and we are proud to announce the Company has increased revenues and generated a profit for the year and for the fourth quarter. The Company also generated positive cash flows from operations and paid off the bank term loan. We continue working with existing and new clients, helping them to explore new ways of using our products and services to enhance their businesses during these historic times. Although there has been continued impact on our ability to interact with our clients in the traditional modes of sales and business development, and the pandemic has slowed our expected growth, we are excited to have made the gains that we have.

Matthew Stecker further added: During 2021, Evolving Systems will focus on increasing innovation and finding new growth opportunities. We plan to develop exciting new products that will grow existing client relationships, facilitate penetration into new markets, and reach new customers while continuing to generate sustainable long-term shareholder value.

2020 ResultsTotal revenue for the year ended December 31, 2020 was $26.4 million, a $0.6 million or 2.3% increase compared to the year-ago period. Services revenues of $25.6 million increased year-over-year by $1.1 million, mostly related to work from new client projects and upgrades to existing clients partially offset by a decrease in work with other existing clients as projects reached completion.

The Company reported gross profit margins, excluding depreciation and amortization, of approximately 66.5% for the year ended December 31, 2020 as compared to gross profit margins of approximately 66.3% for the year ended December 31, 2019. The Company continues to assign staff to support internal efforts including product development, reducing the project hours worked and maintaining project margins.

Total operating expenses were $16.5 million for the year ended December 31, 2020, a decrease from total operating expenses of $25.0 million in the year ended December 31, 2019. Excluding the $6.7 million goodwill impairment charge in 2019, the Companys operating expenses were $18.3 million in the corresponding year-ago period. The decrease of approximately $1.8 million was related to reductions in the Companys sales and marketing costs, as incentive compensation expenses decreased, and a decrease in travel and marketing costs mainly due to the travel restrictions during the global pandemic. There was also a decrease in overall resource costs on the product development team.

The Company reported operating profit of $1.0 million and net income of $0.6 million for the year ended December 31, 2020 as compared to operating loss of $7.9 million and net losses of $9.7 million for the year ended December 31, 2019. Excluding the effect of the goodwill impairment in 2019, the operating loss would have been $1.2 million and net loss would have been $3.0 million. Net earnings per share, both basic and diluted, was $0.05 for the year ended December 31, 2020 as compared to net loss per share, both basic and diluted, of ($0.80) in the comparable year-ago period. The Company reported adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) of $2.4 million for the year ended December 31, 2020 compared to $0.3 million for the same period a year ago and the Company plans to continue to strategically invest a portion of the profits in our continuing initiatives to foster long-term growth.

Cash and cash equivalents as of December 31, 2020 and December 31, 2019 were approximately $2.8 million and $3.1 million, respectively. Contract receivables, net of allowance for doubtful accounts, were $5.7 million at December 31, 2020, a decrease of $1.0 million or approximately 15.6%, compared to December 31, 2019. Working capital increased by $1.7 million or approximately 44.9%, to $5.5 million as of December 31, 2020 from $3.8 million as of December 31, 2019. The increase in working capital is related to an increase in unbilled work-in-progress and a decrease in the current portion of the term loan, partially offset by decreases in cash and cash equivalents, contract receivables, and income taxes receivable along with an increase in accounts payable and accrued liabilities.

Matthew Stecker concluded: Our strong customer footprint and decades of proven performance gave us the steadiness to maintain our business trends during these uncertain times. Therefore, 2020 was a year where Evolving Systems has made progress on delivering the results on the transformation of our business that we started in recent years. We are always seeking new opportunities whether through potential accretive acquisitions, joint ventures, or strategic partnerships to drive both top- and bottom-line performance. The key to our future success is in driving innovation and capturing more wallet share from our installed base, while in parallel driving new engagements that can enhance our value proposition and expand our reach.

Fourth Quarter ComparisonsTotal revenue in the fourth quarter ended December 31, 2020 was $7.0 million as compared to $6.7 million in the comparable year-ago period, an increase of $0.3 million or 4.2%. Driving the period-over-period increase were higher revenues associated with new projects, partially offset by a decrease in work with other existing clients as projects reached completion.

Total operating expenses for the fourth quarter of 2020 were $4.1 million compared to $4.2 million for the comparable period a year ago. The decrease was mostly related to lower travel and entertainment costs due to restrictions during the global pandemic, and a reduction of marketing programs partially offset by a larger number of hours worked on product development, as staff previously working on delivery shifted to product development work.

The Company reported operating income of $0.5 million and net income of $0.6 million for the fourth quarter ending December 31, 2020. The Company had operating income of $0.1 million and a net loss of $1.4 million for the fourth quarter ended December 31, 2019. Adjusted EBITDA for the fourth quarter ended December 31, 2020 was $0.8 million as compared to adjusted EBITDA of $0.4 million in the fourth quarter ended December 31, 2019.

Conference CallThe Company will be conducting a conference call and webcast on Wednesday March 17, 2021 at 5:00 p.m. Eastern Time and 3:00 p.m. Mountain Time. To access a live video webcast of the call, please click the Investors tab on the Companys website at https://www.evolving.com/investors and then click the 2020 earnings call icon on the left. A replay of the webcast will be accessible at that website through June 17, 2021.

Non-GAAP Financial MeasuresThe Company reports its financial results in accordance with accounting principles generally accepted in the U.S. (GAAP). In addition, the Company is providing in this news release financial information in the form of non-GAAP net income and diluted net earnings per share and adjusted EBITDA (earnings before interest, taxes, depreciation, amortization, impairment, stock compensation, restructuring and gain/loss on foreign exchange transactions). Management believes these non-GAAP financial measures are useful to investors and lenders in evaluating the overall financial health of the Company in that they allow for greater transparency of additional financial data routinely used by management to evaluate performance. Investors and financial analysts who follow the Company use non-GAAP net income and non-GAAP diluted earnings per share to compare the Company against other companies. Adjusted EBITDA can be useful for lenders as an indicator of earnings available to service debt. Non-GAAP financial measures should not be considered in isolation from, as an alternative to, or superior to, the financial information prepared in accordance with GAAP.

About Evolving SystemsEvolving Systems, Inc. (NASDAQ: EVOL) empowers Communications Service Providers (CSPs) to succeed in fast-changing, disruptive telecom environments. This is achieved through a combination of People, Processes, and Platforms and empowers CSPs to activate, engage, and retain their customers. Evolving Systems real-time digital engagement solutions and services are used by more than 90 service providers in over 60 countries worldwide. The Companys portfolio includes CSP market-leading solutions and services for network provisioning and resource management, enhancing the digital sales and distribution channels, service activation, real-time analytics, customer value management and loyalty. Founded in 1985, the Company has its headquarters in Englewood, Colorado, with offices in Asia, Europe, Africa, South and North America. For more information, please visitwww.evolving.comor follow us on Twitter at http://twitter.com/EvolvingSystems.

CAUTIONARY STATEMENTThis news release contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, based on current expectations, estimates and projections that are subject to risk. Specifically, statements about the market for, and performance of, the Companys products, the Companys plans to develop new products, its ability to successfully integrate its solutions with existing customer network systems, the Companys business strategy and the Companys cash runway are forward-looking statements. These statements are based on the Companys expectations and are naturally subject to uncertainty and changes in circumstances. Readers should not place undue reliance on these forward-looking statements. Actual results could vary materially from these expectations. For a more extensive discussion of Evolving Systems business, and important risk factors that could cause actual results to differ materially from those contained in the forward-looking statements, please refer to the Companys filings and reports filed with the United States Securities and Exchange Commission. All forward-looking statements contained in this press release speak only as of the date on which they were made. The Company undertakes no obligation to update such statements to reflect events that occur or circumstances that exist after the date on which they were made.

Investor Relations Contacts: Alice AhernInvestor RelationsEvolving SystemsTel: 1-844-732-5898Email: investors@evolving.com

EVOLVING SYSTEMS, INC.CONDENSED CONSOLIDATED BALANCE SHEETS(in thousands) (unaudited) December December 31, 31, 2020 2019ASSETS Current assets: Cash and cash equivalents $ 2,763 $ 3,076 Contract receivables 5,681 6,732 Unbilled work-in-progress 3,365 1,105 Prepaid and other current assets 1,828 1,594 Income taxes receivable 270 953 Total current assets 13,907 13,460 Property and equipment, net 532 482 Amortizable intangible assets, net 2,769 3,665 Operating leases - right of use assets, net 915 1,205 Deferred income taxes 953 1,000 Total assets $ 19,076 $ 19,812 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Term loan - current portion $ 142 $ 1,577 Accounts payable and accrued liabilities 4,305 3,827 Lease obligations ? operating leases 294 321 Unearned revenue 3,713 3,971 Total current liabilities 8,454 9,696 Long-term liabilities: Term loan, net of current portion 319 122 Lease obligations - operating leases, net of current 613 876 portionTotal liabilities 9,386 10,694 Stockholders' equity: Common stock 12 12 Additional paid-in capital 99,776 99,555 Treasury stock (1,253 ) (1,253 )Accumulated other comprehensive loss (10,345 ) (10,053 )Accumulated deficit (78,500 ) (79,143 )Total stockholders' equity 9,690 9,118 Total liabilities and stockholders' equity $ 19,076 $ 19,812

EVOLVING SYSTEMS, INC.CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS(in thousands, except per share data)(unaudited) Three Months Ended Twelve Months Ended December 30, December 30, 2020 2019 2020 2019 REVENUE License fees $ 358 $ 93 $ 745 $ 1,245 Services 6,606 6,591 25,607 24,505 Total revenue 6,964 6,684 26,352 25,750 COSTS OF REVENUE AND OPERATING EXPENSESCosts of revenue, excluding depreciationand amortization 2,381 2,436 8,837 8,685 Sales and marketing 1,484 1,885 6,000 7,459 General and administrative 1,177 1,106 5,052 5,091 Product development 1,159 918 4,327 4,594 Depreciation 58 40 216 190 Amortization 236 234 940 938 Goodwill impairment loss ? ? ? 6,687 Total costs of revenue and 6,495 6,619 25,372 33,644 operating expenses Income (loss) from operations 469 65 980 (7,894 ) Other income (expense) Interest income 1 5 5 15 Interest expense (5 ) (59 ) (70 ) (314 )Other income, net 168 55 186 56 Foreign currency exchange 130 (638 ) 370 (455 )income (ioss)Other income (expense), net 294 (637 ) 491 (698 ) Income (loss) from operations 763 (572 ) 1,471 (8,592 )before income taxesIncome tax expense 176 807 828 1,103 Net income (loss) $ 587 $ (1,379 ) $ 643 $ (9,695 ) Basic earnings (loss) percommon share - net income $ 0.05 $ (0.11 ) $ 0.05 $ (0.80 )(loss) Diluted earnings (loss) percommon share - net income $ 0.05 $ (0.11 ) $ 0.05 $ (0.80 )(loss) Weighted average basic shares 12,196 12,117 12,187 12,157 outstandingWeighted average diluted 12,258 12,117 12,271 12,157 shares outstanding EVOLVING SYSTEMS, INC.Reconciliation of GAAP to Non-GAAP Measures(in thousands, except per share data)(unaudited) Three Months Ended Twelve Months Ended December 30, December 30, 2020 2019 2020 2019 Adjusted EBITDA: Net income (loss) $ 587 $ (1,379 ) $ 643 $ (9,695 )Depreciation 58 40 216 190 Amortization of intangible 236 234 940 938 assetsStock-based compensation 63 68 221 331 expenseGoodwill impairment loss ? ? ? 6,687 Interest expense and other (294 ) 637 (491 ) 698 (benefit), netIncome tax expense 176 807 828 1,103 Adjusted EBITDA $ 826 $ 407 $ 2,357 $ 252 Non-GAAP net income (loss): GAAP net income (loss) $ 587 $ (1,379 ) $ 643 $ (9,695 )Amortization of intangible 236 234 940 938 assetsStock-based compensation 63 68 221 331 expenseIncome tax adjustment for (52 ) (52 ) (198 ) (352 )non-GAAP*Non-GAAP net income (loss) $ 834 $ (1,129 ) $ 1,606 $ (8,778 ) Diluted net (loss) income per shareGAAP $ 0.05 $ (0.11 ) $ 0.05 $ (0.80 )Non-GAAP $ 0.07 $ (0.09 ) $ 0.13 $ (0.72 )Shares used to computediluted net (loss) income per 12,258 12,124 12,271 12,157 share * The estimated income tax for non-GAAP net income isadjusted by the amount of additionalexpense that wewould accrue if we used non-GAAP results instead ofGAAP results in thecalculation of our tax liability, taking into account which tax jurisdiction each ofthe aboveadjustments would be made and the tax ratein that jurisdiction.