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 Company
Profile:
Evolving Systems (NASDAQ-EVOL) is a provider of
software and services to more than 70 network operators in over 40 countries
worldwide. Its portfolio includes market-leading solutions for Activation,
Dynamic SIM Allocation and Number Management. Our best in class products
help network operators of all sizes reduce operation costs, improve business
efficiency and deliver a high quality customer experience as they take
advantage of next-generation technologies and roll out new voice, data and
content services. Founded in 1985, the Company has headquarters in
Englewood, Colorado, with offices in the United Kingdom, Germany, India and
Malaysia. More information available at
www.evolving.com
 Thad
Dupper, President & CEO of Evolving Systems
Dupper, promoted to Chief Executive Officer in
April 2007, joined Evolving Systems' leadership team in 2004 to oversee
sales, business development and marketing. Dupper has more than 23 years'
experience in the telecommunications technology industry and has a track
record of delivering innovative solutions to leading telecommunications
companies.
Dupper was Vice President of Sales and
Marketing for Expand Beyond, a wireless software company. He was also Vice
President, International Sales and Business Development of Terabeam, where
he helped pioneer the use of free space optics with telecommunications
carriers around the world. Dupper held positions as Senior Vice President of
Dun & Bradstreet and Vice President of Teradata, where he oversaw data
warehousing solutions for the communication industry. He holds a B.S. in
Computer Information Systems from Manhattan College in New York. |
Technology
Technical & System Software
(EVOL-NASDAQ)
Evolving Systems, Inc.
9777 Mount Pyramid Court
Suite 100
Englewood, CO 80112
Phone: 303-802-1000
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Interview conducted by:
Walter Banks, Publisher, CEOCFOinterviews.com, Published – September 18,
2009
CEOCFO:
Mr. Dupper, what is your vision for Evolving Systems; where was is
when you joined the company and where is it today?
Mr. Dupper: “I’ve been with the company
for 5 ½ years, and I’ve been in a leadership position since January 2007.
Evolving Systems is a Denver, Colorado headquartered company, NASDAQ traded
and has been in business for 24 years. Our focus has always been the
software market and more specifically the software telecoms market. We have
a reputation in the United States from the work we’ve done with carriers
around number portability. That is the management and porting of telephone
numbers from one carrier to another. Almost 5 years ago, in November of
2004, we acquired Tertio Telecoms Ltd, which was a London, UK based company
specializing in service activation. Since that date in 2004, we have
expanded our footprint from what was a U.S. only presence to an
international presence. Today, we represent a $39 million company, trailing
12 months GAAP earnings per share is .45 cents. Our adjusted-EBITDA for the
first 6 months of this year (2009) was $4.2 million. We have been able to
increase EBITDA significantly over the last three years, all with the
backdrop of this very difficult economy. Evolving Systems has posted very
strong earnings growth in 2009, after having posted solid growth in 2007 and
2008.”
CEOCFO: Where does Evolving Systems
stand in the marketplace for your products?
Mr. Dupper: “Evolving Systems has three
key concentrations of expertise. First, our expertise in number portability
where we are the leader in wireline number portability in the United States.
The two leaders in this space are Evolving Systems and Telcordia. Neustar is
also a significant player as the operator of the number clearinghouse that
facilitates the porting of numbers for North America. Our second area of
expertise is service activation where we are also a leader -- particularly
for wireless service activation. To give you an example of wireless service
activation, let’s say you go to a AT&T Mobility store, and you purchase for
a cell phone with 1,000 minutes of use, unlimited text messaging and be able
to browse the internet. The sales rep types that order up into a CRM order
capture system and then that order gets passed to an activation layer. We
deconstruct that order into its piece parts and then the service activation
layer will interface with the network elements to turn on those features,
which represent your subscription. For example, the service activation
layer will turn on the voice mail for the account and it will put your
number in the network switches so that the network now knows of your number.
We do have a competitor in this area a company in Finland, by the name of
Comptel they are also known in the space of service activation. Finally,
the third area, and one that we are very excited about, is a product that we
call Dynamic SIM Allocation. This a breakthrough methodology that allows
wireless GSM carriers to greatly reduce the complexity, inefficiency and
cost associated with activating SIM cards within their networks. SIM cards
are the brains within the cell phone that gives the subscriber its identity
information. This is our latest product and, frankly, we do not see any real
competition. We think we are pioneer and it is nothing short of a
breakthrough product.”
CEOCFO: Who are your customers and what
is your revenue model?
Mr. Dupper: “Our customers are most of
the big name tier ones around the world that you would think of. AT&T is our
largest customer, with about 12% of our revenues, T-Mobile UK is also a big
customer of ours as well as Vodafone, MTN, Telefonica, Telenor, H3G, Qwest
and Verizon. Our revenue model is a software licensing model. When we sell
our product, we license the software to the customer; in addition, there is
some integration that is required to install our product into the particular
carrier’s network. There is also an annual maintenance fee and then finally
there is a recurring revenue charge for license extensions. For Dynamic SIM,
we license it based on the number of activations the carrier does. With the
service activation product, we license it based on the number of subscribers
the carrier has. Our LNP (local number portability) products we license
based on the number of numbers the carrier manages. To sum up, there are
incremental usage fees associated with each of the licensed products that we
sell to our customers.”
CEOCFO: How do you grow your business
and reach and attract customers?
Mr. Dupper: “We have a global direct
sales force that has been very successful – for example, in addition to some
very large anchor customers in North America and Western Europe we also have
ten customers in Latin America and just as many in Africa. In Eastern
Europe, we have been very in the Balkans and Asia too. In addition to our
direct sales force, we also have partnerships that extend our reach. If you
look at license and services results sales were up 16% in 2007, 16% in 2008
and in the quarter we just announced, license and service orders were up 15%
for Q2-2009 verses Q2-2008. And again that is against the backdrop of a
pretty tough economic climate.”
CEOCFO: So I guess your have a pretty
good retention rate and recurring revenues because of this?
Mr. Dupper: “It is very, very high and
our products are very sticky. Once a large carrier puts a system into
production we have found that they are very reluctant to take the system
out, this mainly because of the cost and complexity involved in
de-installing it. Of our $39 million in revenue, approximately $17 million
comes from annual maintenance contracts which are recurring and very
stable.”
CEOCFO: Are you interested in attracting
potential investors to Evolving Systems, and if so, what would you say to
them?
Mr. Dupper: “Yes, we are always
interested in attracting new investors to EVOL and to that end I would like
to make three points. First, today we are trading at about $5.50 a share and
that is up from a low last Q4 of about $1.40. So on one hand, investors
might say Evolving Systems has already had its run and they’ve missed it.
However, we have two recent analysts, one from B. Riley, and the other from
Bathgate Capital, and both have target prices in the $9 and $9.75 range for
the next 52 weeks. So even though we have had a great run year-to-date and
I’d put Evolving Systems’ chart against any other companies year-to-date
performance, we think that there is significant upside to our share price
according to our analysts. We can clearly see our path to a $9 share price.
The second point that I would make is that the reason why we think that $9
is an achievable goal is if you look at the EPS performance. We did .6 cents
of GAAP EPS in 2007, last year we did .30 cents GAAP EPS, trailing 12 months
including Q2-2009, we have a .45 cents GAAP EPS. It is clear we are becoming
more a profitable company and investors can see that trend and we think that
we can do even better once our new products, Dynamic SIM Allocation and
International NumeriTrack hit their stride.
The final point I would make is that three years ago, we made a very
important key bet to invest in the emerging markets and that has been one of
the main reason why we have thrived during this difficult economy. The fact
that we can conduct business in Asia, Africa and Latin America has been very
important to us. Those companies that only conduct business in Europe and
North America have really felt the downturn of the economy. To recap, the
main drivers of our growth have been our investment in the development of
new products and our investment in expanded our footprint in the emerging
markets. These two key initiatives have led to our improved profitability
over the last three years and, I believe, are the main reasons why investors
should take a look at Evolving Systems.”
CEOCFO: There is also the possibility
that the wireless market itself could see more growth because of technology.
This speaks well for the future of companies like Evolving Systems.
Mr. Dupper: “Well it’s absolutely
essential to our strategy -- we are very strong believers in the growth of
global wireless sector. This is specifically where we are investing our R&D
dollars and our Dynamic SIM Allocation product is a clear illustration of
this fact. While we don’t have the time to get into the technical details of
the Dynamic SIM product, I would like to point out that this product is a
very important breakthrough for GSM carriers and we are just at the early
stages of the adoption curve of this product. That fact, that we are at the
early stages of a very exciting product Dynamic SIM Allocation coupled with
the fact we run a very efficient operation highlighted by our earnings
growth over the last three years are reasons we would like investors to take
at look at EVOL. Thank you.”
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