Symbolic Logic Inc. (EVOL)

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Evolving Systems Reports 2010 Financial Results

Tuesday , March 08, 2011 16:01ET



ENGLEWOOD, CO -- (Marketwire) -- 03/08/11 -- Evolving Systems, Inc. (NASDAQ: EVOL)

Net income up 11% to $5.4 million

18th consecutive quarter of positive operating income

Increased cash generation further strengthens balance sheet -- cash and working capital both up more than 100%

Company declares first quarter dividend of $0.05

Evolving Systems, Inc. (NASDAQ: EVOL), a leading provider of software solutions and services to the wireless, wireline and cable markets, today reported results for its fourth quarter and year ended December 31, 2010.

"Evolving Systems continued to produce strong bottom line results in 2010, highlighted by an 11% increase in net income. Cash from operations increased 57% and our working capital and cash positions were up 147% and 101%, respectively," said Thad Dupper, chairman and CEO. "New orders were impacted by longer sales cycles for our Dynamic SIM Allocation™ (DSA) product. However, we've begun to see renewed activity around our Activation solutions and expect first half 2011 orders to rebound following a sluggish fourth quarter.

"We added two new DSA wins in 2010, raising our total to eight DSA customers around the world, six of which are now in production," Dupper added. "Our DSA customers have activated more than 25 million SIM cards, and with the anticipated growth of wirelessly enabled consumer devices that require SIM cards, we are confident that our DSA solution will become an increasingly important contributor to revenue. We also continued to execute our strategy in international markets during 2010, adding new customers and taking others into production in Asia, Africa, Central and South America as well as North America, where we won a large NumeriTrack® order with a tier one U.S. carrier and a DSA order in Canada. And finally, during the first quarter we introduced Intelligent M2M Controller™ -- a new machine to machine solution for wireless service providers who are seeking to reduce costs, protect their networks and monetize growing opportunities in the M2M space."

2010 Full Year Results

Net income for 2010 increased 11% to $5.4 million from $4.8 million in 2009. Earnings per share increased to $0.53 per basic and $0.49 per diluted share in 2010 from $0.49 per basic and $0.48 per diluted share a year ago. Non-GAAP net income increased 9% year over year to $6.7 million from $6.2 million, or $0.62 per diluted share versus $0.61 per diluted share. Non-GAAP adjusted EBITDA declined 5% to $8.4 million from $8.9 million last year.

Operating income in 2010 declined to $6.2 million, or 16.7% of revenue, from $6.7 million, or 17.5% of revenue, in 2009.

The Company experienced a 2% decline in full year revenue, to $37.3 million in 2010 from $38.2 million a year ago. License fees and services revenue was $20.3 million versus $21.6 million in 2009, a decline that was partially offset by an increase in customer support revenue to $17.1 million from $16.6 million.

Revenue from the Company's DSA and NumeriTrack solutions hit an all-time high in 2010. DSA revenue increased 31% year over year, to $7.4 million from $5.6 million, and comprised approximately 20% of overall revenue. Revenue from the Company's NumeriTrack solution increased by 34% in 2010, to $5.4 million from $4.0 million a year ago, and represented approximately 14% of total revenue. Revenue mix in 2010 included $22.8 million in Activation and $14.5 million in Numbering. Mediation revenue, which represented less than 5% of total 2010 revenue, will now be reported in the Activation and Numbering revenue categories to more accurately reflect management of the operations.

Total costs of revenue and operating expenses declined slightly in 2010 to $31.1 million from $31.5 million in 2009. Product development expense increased 22% year-over-year to $4.3 million from $3.5 million, primarily as the result of investments in the Company's DSA and Numbering products. Sales and marketing expense declined 6% to $7.3 million from $7.7 million and general and administrative expense declined 5% to $5.4 million from $5.7 million, with both declines the result of lower incentive compensation and professional fees.

Quarterly Dividends

The Company declared three quarterly cash dividends of $0.05 per share in 2010. And in the first quarter of 2011 the Company declared a quarterly cash dividend of $0.05 per share, payable April 15, 2011, to stockholders of record March 18, 2011.

Fourth Quarter Results

Net income was $1.2 million in the fourth quarter of 2010, down 18% from $1.4 million in the same quarter last year. EPS was $0.11 per basic and $0.10 per diluted share versus $0.14 per basic and diluted share a year ago. Non-GAAP net income in the fourth quarter was $1.5 million versus $1.8 million, or $0.13 per diluted share versus $0.17 per diluted share a year ago. Non-GAAP adjusted EBITDA was $1.7 million versus $2.4 million last year.

The Company had operating income of $1.2 million in the fourth quarter as compared with $1.9 million in the same quarter last year. It was the Company's 18th consecutive quarter of positive operating income. As a percentage of revenue, fourth quarter operating income was 13.7% versus 19.1% a year ago.

Fourth quarter revenue was $8.6 million, down from $9.8 million in the same quarter last year, due to lower license fees and services bookings related to longer sales cycles. Lower license fees and services revenue -- $4.1 million in the fourth quarter versus $5.6 million in the same quarter last year -- was partially offset by an increase in customer support revenue -- to $4.5 million from $4.2 million. The higher customer support revenue reflected the impact of DSA solutions that are now in production and under maintenance. Revenue mix by product group included $5.2 million in Activation and $3.4 million in Numbering.

Total costs of revenue and operating expenses in the fourth quarter declined by 7% to $7.4 million from $7.9 million due primarily to lower variable costs related to the revenue decline as well as to lower facility costs, professional fees and product development costs. Sales and marketing expense declined to $1.7 million from $1.8 million. General and administrative expense declined to $1.2 million from $1.4 million, and product development expense declined to $1.0 million from $1.2 million.

Bookings and Backlog Highlights

The Company booked $33.5 million in new orders in 2010, down 12% from $38.0 million in 2009. License fees and services orders totaled $16.9 million, down from $21.1 million a year ago. Customer support orders declined slightly to $16.6 million from $16.9 million. By product category 2010 orders included $19.6 million in Activation and $13.9 million in Numbering.

Total bookings in the fourth quarter were $11.5 million, down from $13.8 million in the fourth quarter last year. License fees and services orders totaled $3.4 million versus $4.8 million last year while customer support orders were $8.1 million compared with $9.0 million a year ago. By product category in the fourth quarter, bookings included $5.6 million in Activation and $5.9 million in Numbering. The Company defines bookings as new, non-cancelable orders expected to be recognized as revenue during the following 12 months.

Backlog at December 31, 2010, was $16.6 million, down from $20.8 million at the end of 2009. Backlog included $5.0 million in license fees and services and $11.6 million in customer support.

Balance Sheet Highlights

Cash and cash equivalents at December 31, 2010, were $10.8 million, up 101% from $5.4 million at the same time last year and up slightly from $10.7 million at September 30, 2010. Working capital improved by 147% year over year to $11.8 million from $4.8 million. The Company generated $5.7 million in cash from operations in 2010, up 57% from $3.6 million in 2009.

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