Q1 2020 Earnings Call
Again today's conference is scheduled to begin shortly please computer standby and thank you for your patience.
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As you May have seen our press release was just issue.
Joining us from management today will be Matthew Stecher evolving systems, Chief Executive Officer, and executive Chairman and Mark zinc housekeeping evolving systems Senior Vice President Finance.
On today's call Mark will provide an update on the quarter and Matthew will update you on the business investment activities currently underway.
Both Mark and Matthew will be able to be available during the Q and a portion of the cool.
Before I turn the call over to Matthew I'd like to remind everyone that the company will be making forward looking statements based on current expectations estimates and projections that are subject to risks.
Typically statements about future revenue expenses cash taxes, and the company's growth strategy are forward looking statements.
Listeners should not place.
Do relying on the state.
There are many factors that could cause actual results could differ materially from our forward looking statements and we encourage you to review our publicly filed documents, including our I see filings news releases.
And website for more information about the company.
At this time I would like to turn the call over to Matthew Stucker for some opening comments Matthew.
Okay. Thank you good afternoon, and thank you for joining us.
That's where all only to where the company is presently operating it unusual conditions. The Corona virus pandemic is fundamentally change, but the commercial and for that matter personal landscapes for all of US I mentioned this at the start of this presentation because among other things it means that the context in which all earnings releases must be understood today differs from both previously.
The leases and existing forecasts.
With this new and challenging backdrop in mind. However, the headline in in today's news is the first quarter earnings is positive evolving systems is weathering. The cobot 19 storm successfully probably better than most fundamentally the update that I gave him. The last call remains true we're working our customers are working and the business moves forward through transition.
We have previously acknowledged has been a period of change it but their products in our portfolio performance best of all we're finding new opportunities not only in spite of but in some cases as a result of the pandemic.
What update that reflects this is the increase in income from services in the first quarter versus Q1 2019. In particular this reflects increases in work for a number of major clients and it underlines the point I made earlier the difficult market conditions have also yielded new opportunities.
You think about what we do it evolving this is actually not entirely surprising view, our two core product lines is being broadly in the areas of the subscriber activation and customer relations and you can immediately graphs that our technology out there has an obvious role to play what can be easily adapted to play a necessary and often key role in meeting the demands of managing the.
Pandemic one of the immediate suicidal requirements of Cobot 19 has been for the rapid dissemination of vital information to the general public something more often than not accomplish via mobile devices.
It's basically is what evolving systems software enables the cause and effect of sending out of communication engaging a consumer and increasing brand loyalty and commercial terms, it's only superficially different to sending out a key health care update if your technology can enable the former it can also enabled the latter.
Proof of this assertion is as ever in the putting in some of you may have notice that our recent press release, which one of our clients in Latin America met a government order to do just despite adapting and using evolving technology. In fact, we made an aggressive marketing push this quarter to make the world's wireless operators aware of ways that we can help specifically through the current situation how do we.
Do this fortunately a number of media articles highlighting the sort of use cases, we support as well as a paper documenting specifically how a company works the telecoms during the pandemic has been published and distribute in the past couple of months and links can be found on our website.
Response has been significant that you're now working to progress and number of opportunity set of the reason as a direct result of the awareness they've created if whereas these come to fruition as new business. If you give us confidence about the balance of 2020 will doubtless continued to be challenging evolving remains well placed to keep weathering the storm not only with our existing clientele, but with.
New customer wins as well, even if not one in into the traditional manner.
Another piece of good financial news is that we continue the March as planned toward the milestone of retiring that debt taken on to purchase the bought it BLS and SSM from 2015 to 2017, our last payment schedule to January but we have right to prepaid alone or enter considering various options to put it behind us, possibly even quicker.
Looking ahead, if we are able to continue executing for the next nine month, the prospect of a debt free profitable evolving with updated and new products and profile is now both very real and very close within reach today's evolving systems is a different company than it was 12 months ago more so than you might think we've become leaner and more soft really.
Brian we've sharpened our messaging and focus and Weve explicitly responded to the market needs at New technology. One small example, this in our first quarter earnings report is reduction in subcontract the expenses over the period well. This gain has been offset in the short term by an increase in assigned project hours as internal release resources have shifted from project product.
Element to client work the long term impact of this is entirely positive. We also continued to take advantage of all things distributed foundation as I said in our last call.
Our people serve a global footprint of operators and our themselves highly decentralized. This is met adapting to pandemic conditions has been easier for us, albeit still not easy then it has been from many other organizations. It's a major positive in the president contacts that we have for years been a company that has had to run itself and interact with customers remotely.
And it is because of our ability to implement and provide support remotely to our clients and stuff that the president global situation has had a relatively limited effect on our operation.
2019 did present us with considerable challenges 2020, taking into account the prevailing market conditions that are affecting every company is off to a good start evolving systems that rebuilt over the past 24 month, demonstrating it could compete in the today's telecom market. Once we would be gone cobot 19, who will be in an even stronger position is digitization and five.
Oh Gee yield opportunities for wireless carriers that we are ideally placed to support as a result, I'm confidently anticipating that 2020, we'll see revenues increase and even with a pandemic <unk> when announcements will continue.
I will discuss these and other developments in a little bit more detail later in the called the first let's start with an overview the quarter in the numbers. So at this point I'll hand, it over to marketing Koski.
Thank you Tim [noise].
Good evening, let me run through those dollars total revenue for the first quarter ended March 30, Onest 2020 was 6.3 million.
This was 0.4 million or approximately a 6.1% decrease from the first quarter 2019.
The decrease was primarily related to a onetime licensing fee recognized last year from one client. However service revenues increased year over year by 1 million by point 1 million to 6.1 million.
The company reported gross profit margins, excluding depreciation and amortization of approximately 66% for the quarter ended March 30, Onest 2020, which is consistent with prior year, but as compared to the gross profit from the comparative quarter in 2019 of approximately 71% a decrease which was primarily related.
So the revenue mix, we've concluded that aforementioned licensing revenue.
Total operating expenses in the quarter ended March 31st 2020 were 4.3 million decreased by approximately a 1.1 million as compared to 5.4 million the corresponding year ago period. The decrease was primarily related to the reduction in sales and marketing cost as commission expense decreased as well as travel in trade show.
Costs were reduced due to the travel restrictions imposed.
Our focus on the product development continues however staff working on product development. The previous periods were assigned to client project work as needed therefore, reducing product development costs.
Further included in the first quarter of last year were one time charges, a general and administrative costs, mostly associated with the complexities and completion of our 2018 year audit and accounting services related to updating our global transfer pricing and fees for related to R&D credits refunded.
To our UK subsidiaries.
The company reported an operating loss of point 2 million and a net loss of less than they're all point 1 million for the quarter ended March 30, Onest 2020, as compared to an operating loss of <unk> point 7 million and a net loss of 1.1 million in the comparable year ago period.
The company reported adjusted earnings before interest taxes, depreciation and amortization, our adjusted EBITDA was 0.2 million in the first quarter of 2020 as compared to a negative point threemillion in the first quarter 2019.
Two of the 2020 EBITDA figure, though it was below the prescribed trailing three month adjusted EBITDA ammo required by the amendment agreed upon with our lender East West Bank in 2019.
This has resulted in us not being compliant with one of the bank covenants. We are currently negotiating the restructuring of our terms and there was not sufficient time to properly you negotiate those terms prior to this filing deadline.
The company have made every loan payment in full it and as originally scheduled we anticipate making all future payments timely and we believe there is ample cash on hand, and liquidity and then the working capital to fund our business and continued strategic investments and alone is all in short term as it is scheduled to be paid off by January 2000.
21, right now.
The cash and cash equivalents as of March 31st 2019 was 2.6 million and the working capital is 3.9 million working capital increased point 1 million as compared to 3.8 million as of December 30, Onest 2019.
However, cash and cash equivalent did decrease by 15.3% compared to the 3.1 million as of December 30, Onest 2019.
Contract receivables net of allowance for doubtful accounts were 5.1 million and Unbilled work in progress was 1.8 million for the period ended March 31st 2020.
Thank you for your time this evening and let me turn it back over to Matthew.
Okay Mark Thank you.
So with these results in mind into under the underlying what I said earlier I'm confident that the company has now well pass through the key inflection points the integrations of our acquisitions in the rebuilding and repositioning of our products and we're now on track to begin delivering on an upward trend in revenues. The present pandemic notwithstanding we've done the heavy lifting and we are positioned to look at.
Head.
Since all of us are highly where the coke and situation I thought it might be worth spending a minute or two elaborating on something I mentioned earlier, the obvious suitability of our products to help in front and manage the requirements of the crisis you understand why this is the case what exactly evolving products. Do then it's easier to understand the compelling proposition or stock makes to inform investors. Let me give you just a couple of very brief examples.
For one we all know right now the government's public health services and other organizations must provide relevant information to population searching for sources. They can trust, while traditional social media can be used for the several of our clients are as I noted offering services on behalf of their governments delivered through mobile devices. This is critical in the early phases.
The epidemic when first cases are identified the remains very important in the peak and later phases cases start spiking and there is need to manage traffic due for people to specific locations for testing and educate people on new developments regulations and advice uses of our products can help governments capture survey data were managed digital voting help health care systems to provide.
And check flows and provide the necessary advice help retailers to provide information as to opening hours <unk> stocks of scarce resources and many other possibilities and other examples our customers adjusting their ongoing lifecycle campaign messaging and targets the tailor them to the current situation many wireless operators manage a large portfolios.
Automated below the line personalized lifecycle campaigns using our software based on customer profiles in real time event triggers. These traditionally resulting customers being sent offers and were notifications through our platform as reminders of expiring plans new services were depleting balances in the current movement operators are for.
Looking at Wise to review these be sheeting mechanics, and adjust them for the current climate for example customers may not be in a position to make a recharge and the timeframe that offer is valid as result of social distancing and closed stores. It maybe why three mine customers of the digital channels available to them for data replenishment you might be worth delivering some segmented him for me.
And campaigns based on customer location, and maybe a good time to relax some of the airtime data expirations. The carriers are governments have imposed.
In many of our countries, we're seeing governments mandate changes to the way that data is sold as wireless data moves in some cases from being a luxury to a critical resource.
Changes like this present opportunities for us to reengage existing customers with our marketing services as well as to up sell the flexibility inherent in our modern evolution platform, which enables complex campaigns and profiling beyond the capabilities.
Not only our previous platforms, but the entire previous generation of solutions in market.
And numerous other examples of how evolving is helping its customers and can help others in pandemic conditions in the rationing of scarce read resources through digital vouching, enabling charitable donations and adjusting the loyalty program here status expirations and rewards peripherally is and so on I hope this small flavor of the relevance of our work right now.
Underlines and provide substance to my confidence that we will successfully continued weather the storm.
I said previously more than ever we are positioned as a leading partner in digital innovation. The pandemic has only underlying that.
Moving in and looking inward rather than outwards evolving continues to fine tune its operations at the balance sheet demonstrates costs are tightly controlled and this year, we're making a strong push to invest in and optimize our digital marketing performance. The early results of which activity is encouraging you will know that two years ago, we began a push to upgrade our general marketing.
Among the results, which were on the website and a much higher media industry profile. This year, we are focused on optimizing the site and aggressively upgrading our returns from digital channels in the past few months alone we've moved up significantly into Google search rankings and of course, we now have the evolution platform and the repositioned Eastham lifecycle management suite as products the leverage in our efforts.
All this is really important because their traditional work of our sales people running around the world and knocking on doors doing meetings and taking clients at dinner has ended up so it is both fortuitous and in some sense well planned that we have put a big amount of effort into our digital marketing and digital outreach to new customers.
Instead of simply relying on the.
Time proven methods of global travel.
So to summarize the for first quarter 2020 has been encouraging for the new evolving systems, despite very challenging market conditions as ever we continue to optimize our own performance, but we are now doing so and the strong foundation that we have built in recent years I'm confident that our performance can return to more consistent topline and bottom line growth as the world Riocan.
I want to thank you for your support and look forward to updating you on our continued progress. So at this point I'd be happy to open the call to questions.
Operator.
Thank you.
And as a reminder to ask a question we'll need to press star one of your telephone withdraw. Your question. Please press the pound key please stand by what's implied Q1 irrational.
And that there's some I'm not showing any questions on the phone month, so I'd like to turn the call.
Matthew sector for any further remarks.
Well, great I will I will take that as a sign that we successfully anticipated all the questions that we might receive but I do want to point out I want to thank everyone for attending today and remind everyone that these calls our archived on our Investor Relations website and also that if anyone would like a more per.
Personal walk through either our finances are any of our business operations. There is a link on our Investor Relations website to set up a time to get in touch with us I do many of those each quarter on I'm happy to continue meeting many of you through that channel.
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Ladies and gentlemen.
Ladies and gentlemen, this concludes today's conference call. Thank you for your participation and you may now disconnect.
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