Q2 2021 Evolving Systems Inc Earnings Call
<unk> is designed specifically to capture customer data from multiple sources build a 360 degree profile of customers and integrate with communication and provisioning channels, providing marketing retention and customer value management teams with an intuitive user interface. So they can more effectively manage real time context driven decisions.
Machine learning advanced customer journey management, Gamify loyalty and rewards.
Using evolution puts our customers at a competitive advantage by putting both inbound and outbound customer engagement in a single platform that orchestrates personalized journeys across multiple campaigns and offers it provides a powerful marketing catalog to create products based on the telecoms and services as well as third party products and to build various.
Packaged offers with various prices and enables more complex scheme of five loyalty program mechanics beyond points earn and burn it's flexible dashboards and reporting provides advanced customer insight and breadth best practice program measurement against key performance indicators evolution and more generally this product niche.
<unk> is one two which telcos are not directly looking at they bought their post pandemic business models, we know because our phone has been ringing at this juncture on a confident note I will now turn over the call to our CFO, Mark and Koski for detailed update on the second quarter of 2021 numbers Mark.
Thank you Matthew and thank you to everyone for joining this afternoon.
As Matthew reported total revenue for the second quarter ended June 30 of 2021 was <unk> 7 million.
This was a <unk> 7 million increase from three months ended June 32020, the change was primarily related to revenues from existing client work on new projects and on upgrades to new to those existing clients and new client projects as well. These gains were partially offset by the reduction work with other clients.
Vince as projects neared completion for services request to decrease from the corresponding period into our EMEA, 20%.
Total revenue for the six months ended June 32021 was $13.5 million or approximately a six 7% increase from $12.6 million in the same period, a year ago predominantly related to the aforementioned reasons.
Versus revenues, which are mostly reoccurring in nature were $13.3 million year to date, an increase over year over year of $1 million or seven 8% from the comparable year ago period.
Service revenues, which include revenues from the company's preference for managed services over perpetual licensing comprised approximately 99% of our total revenues year to date for June 32021.
The Companys gross profit margins, excluding depreciation and amortization were approximately 68, 8% for the quarter ended June 32021, an increase over the comparable period a year ago for the six months ended June 32021, we reported gross profit margins, excluding depreciation and amortization of approximately.
The new 67, 1% as compared to the gross profit margins of approximately 65, 7% for the six months ended June 32020.
The increase in gross margins was primarily related to our work on new projects and an increase in revenue from those managed service accounts, which provide higher margins.
Our total operating expenses were $4.5 million for the quarter ended June 32021.
An increase from total operating expenses of $3.8 million in the quarter ended June 32020, the increase was primarily related to resource cost spent in our product development as.
As we have increased that staff size, there were increases in general and administrative costs, primarily related to higher professional and accounting fees as well as internal resource costs compared to the prior year period.
Total operating expenses were $8.8 million from the six months ended June 32021, compared to total operating expenses of $8.2 million for the six months ended June 32020.
The increase of approximately <unk> 6 million was related to the aforementioned increases in resource cost and product development and the G&A groups increases in professional and accounting fees and an increase in equity compensation costs. These are partially offset by a reduction in resource costs on our sales and marketing team as well as a decrease in travel and marketing.
Costs due to the restrictions imposed by during the global pandemic.
Company reported an operating profit of <unk> 4 million and a net income of $1 million for the three months ended June 32021.
Net income was inclusive of other income items, such as the forgiveness of the Paycheck protection program loan and a foreign research and development tax credit related to work done by our French subsidiary and have not applied to future tax liabilities will be refunded in future years. These were increases over the three months ended June 32020.
Operating income of <unk> 3 million and a net loss of less than $1 million. The company reported adjusted EBITDA of <unk> 7 million for the quarter ended June 32021, compared to <unk> 6 million for the same period, a year ago and adjusted EBITDA for the six months ended June 32021.
<unk> was $1.1 million compared to adjusted EBITDA of $8 million for the first six months in 2020.
Turning now to look at our balance sheet, our cash and cash equivalents as of June 32021 were $4.9 million, an increase of 77, 2% compared to the $2.8 million as of December 31, 2020 on.
On June 30 of 2021 contract receivables net allowance for doubtful accounts were $4.7 million a decrease of 16, 2% compared to the $5.7 million as of December 31, 2020. This was related to the strong collection efforts and an increase in the Unbilled work in progress the point $8 million to a total of four.
$2 million as of June 32021, as compared to $3.4 million as of December 31, 2020.
Unearned revenue was $5.5 million at the end of June 32021, an increase of $1.8 million compared to December 31, 2020. This increase was primarily related to collection of yearly support contracts build at the start of the support period and some large projects with significant billing during the early stages of the project.
Working capital as of June 30.
2021 increased to $5.6 million compared to $5.5 million as of December 31, 2020. The change was primarily related to the changes in the accounts. We just noted.
At this point I'd like to hand, the call back to Matthew Stecker I'll remind you that if you are why you are welcome to post any questions in the Q&A section.
Matthew.
Thank you Mark before I continue I will briefly note as many of you may have seen announced on our website that we have amicably amicably resolved our dispute with our former president and CEO and my predecessor, Thomas <unk> as part of that agreement evolving was happy to make a donation to the learned for life Foundation a charity.
Thomas tiers that provide support to individuals in India, a region in which the company has a significant presence the foundations valuable work is entirely consistent with evolving systems ethos and beliefs and we are thrilled to be able to invest in India in education.
Earlier in the call I spoke at some length about the telecom industry is direction of travel and how that's benefiting us, particularly with regard to our CV ml and loyalty business unit.
With dessert with Digitization happening at pace, that's a glamorous and potentially lucrative niche to be involved in and as I noted. One reason we are confident that the present growth trend will continue however, our confidence isn't founded only on one half of our business and our traditional customer acquisition and network service business. The same is also.
True I'd like to take a little time to spell out why.
Whether via the newer <unk>, where the traditional physical Sim, which is still forecast to be with us in large volumes for the foreseeable future. The centrality of the sand presents communication service providers with a growing logistical challenge demand for mobile data will likely double over the next five years, which means that mobile network operators are able to.
Find more efficient less costly costly methods of handling that growth will be in an advantaged to achieve this they must reduce the cost of managing the Sim lifecycle end to end, while simultaneously providing upgraded subscriber experiences with increased competition in any market. They are invariably comes the need for greater efficiency for an enterprise.
While finding alternative sources of revenue as critical lowering existing cost is no less important to financial success in the contest context of Sim logistics evolving believes that this can best be met through digitized cost effective approach to complete Sim lifecycle management process. This is a process that runs from sales through to ordering food.
Distribution to provisioning and right through to activation, it's been logistics can be streamlined it will help service providers control and reduce costs associated with a variety of functions network resource management and connections network optimization and Sim logistic processes, all while driving new sales through digitized opportunities and subscriber interactions.
Our Sim lifecycle, whether it's E sim or otherwise begins before the CMS activated or in many cases, even exists for example, and thinking about what services are to be produced and what identifiers needs to be resource within the network since that need to be purchased.
That need to be shipped to distributed and placed into the market assumes that need to be sold in activated driving sales as necessary to potentially and also an expensive process because enterprises need to manage an increase of seven supply chain, while simultaneously reducing their cost efficiencies can be gained by developing new sales upgrade tactics like self service secure.
Sim swapping activating new services in real time by assigning MSI SDN and other associated resources at the time of first use in designing new initiatives to target dormant.
These are all businesses evolving has been in the forefront of for over a decade.
The Sim lifecycle begins with resource management, when it's Tim using enterprise goes to market. These resources need to be set up and loaded onto the network somewhere in a ready state. This is a case of dynamic Sim activation of pre activation or being considered placing an order with multiple sim manufacturers and streamlining the ordering process as the next stage in the lifecycle standardizing the.
Ongoing ordering process with the manufacturers and understanding when an order should be placed as crucial as Sims are sold at different times throughout the year. Similar then distributed in central warehouse or storage location and Thats. When they are they are we sold.
The seller will require an end to end systems did track the entire distribution process from the same vendor right through the storage location into distributor systems and into the market. This is a topic that we are seeing becoming very popular through industry.
Enabling the digital sales channel and providing service providers with the ability to engage and monetize their network and subscribers as the next lifecycle stage. There is need for truly flexible digital salesforce, which enables dealers to interact with their subscribers across all their products and services. This can help provide visibility of dealer performance and in turn drastically reduce costs, which.
As vital to the selling process. In addition sales activities can feed back into the distribution and ordering functions, enabling just in time logistics in short the traditional business of evolving is very much alive and represents the majority of both our profits and revenues, we only anticipate continued growth and vitality in these businesses based on what.
We are seeing in the market.
One last note there were some public reaction to two parts of our last earnings call from some prominent bloggers, while it usually focus on the business itself and leave the commentary to the market I'll respond to a couple of things that were said about the last call first as to our shelf registration. It was pointed out that the shelf registration in its taxed allows for.
We're raising funds quote up to $100 million unquote. Some commentators were aghast that we'd allow for such a massive dilution of shareholders I would just like to note that this figure as a placeholder for asking for authorization to raise as much as we'd be permitted to raised under the relevant rules $100 million. It's just a large number and a placeholder.
And it could easily just as easily have read of $1 billion <unk> trillion.
There was never any intention to raise $100 million 1 billion or a trillion.
The baby shelf rules, which apply to evolving should we at some point choose to execute on such a fund raising exercise.
If called upon today would limit us to arrays under $10 million.
I'll emphasize what I said back then which is that while we have no plans right now to raise additional cash having the shelf effective gives us a quick path to doing so in the future should we have a need for additional capital.
Finally in the last call I fielded a question from an investor asking whether we'd be open to accepting dogecoin as the currency I Laughingly said, yes, assuming that everyone was done on the meme culture that pervades, the doge ecosystem and precipitate such questions across public earnings calls still perhaps my last wasn't obvious enough because my crypto.
Vacation for called into question for entertaining accepting an unstable mean based currency lesson learned I suppose in all serious though my seriousness, though my background encrypted goes back to the beginning and crypto is increasingly something I'm not only involved in personally but is squarely in our product development plans, it's fairly obvious that an evolution from.
<unk> points to digital currencies is going to happen in the loyalty space today, we issued points for programs around the world for many of these we will be issuing crypto tokens in the future. Our customers are the most conservative of enterprises, and while I would be happy for a world where crypto gains enough traction for commercial settlements we are far.
Less likely to see crypto used as a tool in our.
So we are far more likely to see crypto used as a tool in our loyalty platform long before our customers use crypto to settle billing transactions with customers that said I'd be thrilled to see it happen.
Anyway I'd like to thank all of you for attending this session and in addition to celebrating another positive quarter closing I Hope you are now in a position to share my confidence about the opportunities ahead of us knowing that we have the tools and the capacities to address a lot of key issues in our target markets for evolving needs or potentially exciting times ahead. I also want to thank you for your support and look for.
Forward to continuing to update you on our continued progress at this point I'm happy to open the calls to questions.
Thank you Matthew.
<unk>.
Right now it doesn't.
A payer that we have any questions.
So with that 10 months.
There is one question someone has asked in the question and answer whether.
Just concerning that there have been some sent 10% owners and director selling stock back in March.
Generally the directors, we have have been onboard for a long time.
Stock did Trey.
Trade on.
Market volatility.
And.
I think I share your enthusiasm for the long term.
The long term opportunities in the stock.
I think that Youll.
I can't blame people for profit, taking and Youll see that occasionally when the stock does it spikes, but I think that long term.
Both management and the board are.
Our.
Enthused about the value of the stock long term.
Okay. Thank you Matthew.
And I don't think we have any other questions so with that in mind, ladies and gentlemen.
Thank you again for your continued support management will be available to talk to investors throughout the week and if you have any additional questions by all means street feel free to contact us and we look forward to communicating further progress and developments with you.
Operator, we're now ready to end the call. Thanks, everyone.
Thank you.
Yes.