Evolving Systems Reports First Quarter 2020 Financial Results

ENGLEWOOD, Colo., May 14, 2020 (GLOBE NEWSWIRE) — Evolving Systems, Inc. (NASDAQ: EVOL), a leader in real-time digital engagement, today reported financial results for its first quarter ended March 31, 2020.

2020 First Quarter Highlights:

First quarter revenue was $6.3 million

First quarter operating loss was $0.2 million, net loss was less than $0.1 million

Adjusted EBITDA was positive $0.2 million

“We are pleased that, in a difficult global environment, we were able to attain EBITDA positive performance and that our service revenues rose from the corresponding period a year ago. While our 2020 first quarter revenues were down from 2019 levels, we have, during the COVID-19 outbreak, leveraged our ability to implement and provide support remotely and this has resulted in a relatively limited effect on our operations. Due to the geographical distribution of our employees, over the years we have developed a culture of successfully managing our business through telework. The largest practical impact we’ve seen has been on our ability to travel and interact with our clients on projects and in the traditional modes of sales and business development. We are quickly working with our current and prospective clients to find new ways to communicate, sell and service,” said Matthew Stecker, Chief Executive Officer and Executive Chairman of Evolving Systems.

First Quarter 2020 Results

Total revenue for the first quarter ended March 31, 2020 was $6.3 million, a $0.4 million or approximately 6.2% decrease from the three months ended March 31, 2019. The decrease was primarily related to one time licensing fees recognized in the first quarter of 2019. Services revenues of $6.1 million, that are mostly recurring in nature, increased year-over-year by $0.1 million or 2% over the comparable year-ago period. The Company reported gross profit margins, excluding depreciation and amortization, of approximately 66.0% for the quarter ended March 31, 2020 as compared to gross profit margins of approximately 71.0% for the quarter ended March 31, 2019. This decrease in gross margin was primarily related to product and service mix in the prior year, inclusive of the aforementioned licensing revenue.

Total operating expenses of $4.3 million in the quarter ended March 31, 2020 decreased by approximately $1.1 million, as compared to $5.4 million in the corresponding year-ago period. The decrease was primarily related to a reduction in sales and marketing costs as commission expenses decreased from the same period a year ago, and travel and tradeshow costs were reduced due to the travel restrictions imposed. Our focus on product development continues, however internal staff have been reassigned to client project work reducing product development costs. Further included in general and administrative costs for three months ended March 31, 2019, there were approximately $0.3 million of one-time charges, associated with complexities in the completion of our year end audit and other accounting services related to updating our global transfer pricing policies to include the acquired companies and fees for the submission of R&D tax credits refunded to our United Kingdom subsidiary.

The Company reported operating loss of $0.2 million as compared to $0.7 million in the quarter ended March 31, 2020 and March 31, 2019, respectively; with a net loss of less than $0.1 million for the quarter ended March 31, 2020 as compared to a net loss of $1.1 million in the comparable year-ago period. The Company reported adjusted earnings before interest, taxes, depreciation and amortization (“adjusted EBITDA”) of $0.2 million in the first quarter of 2020 as compared to a negative $0.3 million adjusted EBITDA in the first quarter of 2019. This was below the prescribed trailing three month adjusted EBITDA amount required by an amendment to our loan agreement agreed upon with East West Bank in 2019. This resulted in the Company’s noncompliance with bank covenants and we are negotiating the restructuring of our terms. There was not sufficient time to properly negotiate new terms with our lenders prior to the filing deadline. The Company has made every loan repayment in full as originally scheduled within our loan agreement and anticipates making all future payments as scheduled. We believe there is ample cash on hand and liquidity in the working capital to fund our business and continued strategic investments.

Cash and cash equivalents as of March 31, 2019 was $2.6 million, a decrease of 15.3% compared to $3.1 million as of December 31, 2019. Contract receivables, net of allowance for doubtful accounts, were $5.1 million, a decrease of $1.6 million compared to December 31, 2019. Unbilled work-in-progress was $1.8 million for the period ended March 31, 2020 an increase of $0.7 million compared to December 31, 2019. Working capital as of March 31, 2020 increased to $3.9 million as compared to $3.8 million as of December 31^, 2019. This includes an AMT tax refund expected in the current year and which was previously recorded in our deferred tax assets.

Matthew Stecker concluded: “We continue to monitor the effects on our business of the current global pandemic and take the necessary actions to service our clients to our fullest ability. During 2020, we plan to continue our focus on our transformation, increasing innovation and product enhancements while identifying additional new sales opportunities in the Telecom Market. We have a very strong customer footprint and decades of proven performance that gives us a significant head-start. At the same time, we continue to selectively seek new opportunities whether through potential accretive acquisitions, joint ventures, or strategic partnerships to drive both top- and bottom-line performance and over the long-term to bring our shareholders long term value.”

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