Stock to watch: Evolving Systems, Inc. (NASDAQ:EVOL)

Evolving Systems, Inc. (NASDAQ:EVOL) stock identified change of 2.53% away from 52-week low price and recently located move of -73.82% off 52-week high price. The company has 12.16M of outstanding shares and 10.349M shares were floated in the market.

Evolving Systems, Inc. (EVOL) recently stated financial results for its fourth quarter and full year ended December 31, 2018.

2018 Financial Results Highlights:

  • 2018 revenues exceeded $30M, an raise of $1.8M to $30.6M up 6.3% contrast to 2017
  • 2018 marked the first complete year of the Company’s fully integrated, with our previous year acquisitions, real-time digital engagement portfolio of services sold across our global footprint
  • During the fourth quarter, the Company incurred a non-cash charge related to the impairment of a substantial portion of goodwill of $17.8M associated with our past acquisitions and triggered by the recent decline in the market capitalization of the Company
  • The Company stated an operating loss of $16.0M and a net loss of $14.8M; not including the goodwill impairment, operating income would have been of $1.8M and with net income of $3.0M
  • The Company stated positive Adjusted EBITDA for 2018 of $3.5M or 11.6% of revenues
  • Management continues its planned investments to enhance its R&D activities, Sales and Marketing initiatives, and global business development to drive long-term growth, profitability, and raised operating cash flow

2018 Results
Total revenue for the year ended December 31, 2018 was $30.6M, a $1.8M or 6.3% raise over the comparable year-before period. Services revenues of $29.2M, that are mostly recurring in nature, raised year-over-year by $3.8M or 15.1%.

The Company stated gross profit margins, not including depreciation and amortization, of about 66.2% for the year ended December 31, 2018 as contrast to gross profit margins of about 70.0% for the year ended December 31, 2017. This decline was primarily related to the raise in cost of revenue associated with the real-time digital engagement projects, including existing projects from the Company’s acquisitions in 2017 and the shift from high-margin licensing sales to managed services solutions that create recurring revenue streams and on-going client engagement.

In accordance with Accounting Standards Codification (ASC) 350 “Intangibles Goodwill and Other” we are required to test our goodwill and other indefinite-lived intangible assets for impairment. During the fourth quarter of our fiscal year of 2018, our market capitalization declined to a level that was less than the net book value of our stockholders’ equity.  The Company adopted ASU 2017-04, Intangibles – Goodwill and Other (Topic 350), Simplifying the Test for Goodwill Impairment, which simplifies the subsequent measurement of goodwill by eliminating the second step from the quantitative goodwill impairment test. Under this guidance, yearly or interim goodwill impairment testing will be performed by comparing the fair value of a reporting unit with its carrying amount. An impairment charge will then be recognized for the amount by which the carrying amount exceeds the reporting unit’s fair value, not to exceed the carrying value of goodwill. Given the sustained decline in the market capitalization of our ordinary stock during the fourth quarter of 2018, we performed an interim goodwill impairment test. Management considered that factor, together with other possible factors affecting the assessment of the Company’s reporting unit for the purposes of performing a goodwill impairment assessment.  The outcome of this goodwill impairment test resulted in a non-cash charge for the impairment of goodwill of $17.8M, which was recorded in the consolidated financial statements for the year ended December 31, 2018.

 (NASDAQ:EVOL) moved with change of -3.30% to $0.8510 with the total traded volume of 11,528 shares in recent session versus to an average volume of 28,523. After opening the first trading session at $0.8700, it registered a day’s high of $0.9300 and touched a day’s low of $0.8510.

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