Good afternoon, and welcome to Evolving Systems 2012 second quarter earnings call. I’m Dan Moorhead, Vice President of Finance and Administration, and joining me today is Thad Dupper, Chief Executive Officer.

During the course of this call, we will be making forward-looking statements based on current expectations, estimates and projections that are subject to risk. Specifically, our statements about future revenue, expenses, cash, taxes and the company’s growth strategy are forward-looking statements.

Listeners should not place undue reliance on these statements. There are many factors that could cause actual results to differ materially from our forward-looking statements.

We encourage you to review our publically filed documents, including our SEC filings, news releases and websites for more information about the company.

As a reminder, in July 2011, we sold our Numbering business for $39.4 million in cash, plus the assumption of $5.8 million in liabilities. The resulting gain from the asset sale, as well as the financial result attributed to the Numbering business are presented in discontinued operations in our financial statements.

Second quarter results, revenue grew 50% to $6.7 million from $4.4 million in Q2 last year. The growth was due to license and services revenue, which increased 120% year-over-year to $4.5 million from $2.1 million.

That increase more than offset its slight decrease in customer support revenue to $2.1 million from $2.4 million.

Total cost of revenue and operating expenses in Q2 decline by 10% to $5.1 million from $5.6 million in Q2 last year. This reflected a 16% year-over-year decline in sales and marketing expense, to $1.2 million from $1.5 million.

And the impact of the $600,000 restructuring charge in Q2 last year.

General and Administrative expense was up slightly year-over-year at $1 million versus $900,000 and product development cost increased to $800,000 from $600,000. Higher revenue combined with a lower expense base led to a $2.8 million positive swing in operating income year-over-year to $1.6 million from an operating loss of $1.2 million.

Our other income category, which consist primarily of interest income and gain on sale of investments, grew to $1.1 million in Q2 from $12,000 in the same quarter last year. Interest income and gain on sale of investment were primarily related to marketable debt securities, which were purchased during 2011.

Please note, all of our remaining marketable debt securities were sold during the second quarter Therefore, interest income will be minimal going forward.

Net income from continuing operations in Q2 grew to $2.1 million, or $0.19 for basic and diluted share. From a net loss from continuing operations of $1.1 million or $0.10 for basic and diluted share in Q2 last year.

Year-over-year adjusted EBITDA from continued operations was $1.8 million versus a loss of $200,000. We reported net income of $2.1 million or $0.19 per basic and diluted share in the second quarter, compared with net income of $11.4 million or $1.05 per basic, and $1.02 per diluted share in the same quarter last year.

I’ll point out that the year ago Q2 included $12.5 million in income from discontinued operations.

Six months results. For the first 6 months of 2012, revenue increased 28% to $12.6 million from $9.8 million in the comparable period last year.

License and services revenue was up 60% to $8.3 million from $5.2 million in the same period last year. Customer support revenue was slightly lower at $4.3 million versus $4.6 million.

Total cost of revenue and operating expenses year-to-date declined 9% to $10.4 million from $11.5 million. This reflected 23% lower sales and marketing expense of $2.6 million versus $3.3 million, and the impact of the $600,000 restructuring charge in Q2 of 2011.

General and administrative costs were down slightly at $19 million versus $2 million year-over-year. Product development costs increased 22% to $1.5 million from $1.2 million.

We reported $2.1 million in operating income year-to-date versus an operating loss of $1.6 million in the same period last year, a $3.7 million increase. Total other income increased to $1.4 million from $100,000 year-over-year due primarily to interest income and the gain on sale of investments related to marketable debt securities.

Net income from continuing operations through 6 months increased to $2.9 million or $0.26 per basic and $0.25 per diluted share, from a loss from continuing operations of $1.3 million, or $0.12 per basic and diluted share in the same period last year.

Year-to-date net income was $2.9 million, or $0.26 per basic and $0.25 per diluted share, compared with net income of $12.4 million or $1.14 per basic, and $1.10 per diluted share in the same period a year ago when the company had $13.6 million in income from discontinued operations.

Now a review of our bookings and backlog highlights. The company defines bookings as new, non-cancelable order, expected to be recognized as revenue during the following 12 months.

In the second quarter we booked $5.8 million in new orders, up 59% year-over-year from $3.6 million.

License and services orders increase 142% year-over-year to $4.1 million from $1.7 million. It was our fourth straight quarter of solid year-over-year increases in license and services bookings, and represented the best second quarter in this category since 2009.

Dynamic SIM Allocation, or DSA license and services bookings were up 233% year-over-year to $1.1 million from $300,000. License and services bookings for the Tertio Service Activation Solution, or TSA increased 123% to $3 million from $1.4 million.

Customer support bookings in Q2 declined by 15% to $1.6 million from $1.9 million, primarily due to the timing of renewals.

For the 6 month period, total bookings increased 30% to $11.4 million from $8.8 million in the same period last year. License and services orders grew by 66% to $7.9 million from $4.8 million.

DSA license and services bookings increased 147% to $3.7 million from $1.5 million. TSA license and services bookings increase 27% to $4.1 million from $3.2 million.

Customer support bookings declined by 13% to $3.5 million from $4 million. The company’s total backlog at June 30, 2012, increased 66% to $11.4 million from $6.9 million at the same time last year.

Our license and services backlog increased to 7.4 million, up 202% over the year ago backlog of 2.5 million. The DSA license and services backlog grew 996% year-over-year to 4.7 million from 400,000.

Customer support backlog was 4 million versus 4.4 million a year ago.

Balance sheet highlights. Cash and cash equivalence at June 30, 2012 were $10 million.

Keep in mind that in the first half of 2012, the company returned approximately $41.4 million to stockholders in the form of special dividends, which accounts for the lower June 30, 2012 cash and marketable securities balance relative to the 2011 year-end total of $50.7 million.

Dividend update. The company declared a third quarter dividend of $0.05 per share to stockholders of record as of September 7, 2012, payable October 12, 2012.

With that, I’ll now turn the call over to Thad.

As Dan just reported, our 6 year results showed across the board strength, led by 50% growth in revenue, significant improvement in all profit metrics, and a strong performance in bookings and backlog that set the stage for our continued success.

There are 2 results that Dan didn’t cover. The first gross margins, which in Q2 were an all time high at 71.3%.

To takeaway, we were able to grow revenue by 50% and also drive record high margins, and I’ll add, there were no significant onetime items in Q2 that affected those results.

The second metric is our operating margins, which came in at 24%. And keep in mind, as a small public company; our operating margins include our public company cost, which as a percent of revenue is higher due to our size.

And now for some comments about the industry, our strategy and products. As you know, our pure play activation strategy focuses on our 2 main products, our on device activation product, DSA and our service enablement product, TSA.

And for Q2, both generated strong results. It has now been 4 quarters since we’ve divested our numbering business, and since then, the execution of our pure play strategy has delivered significant and increasing growth.

We believe these results speak directly to our core competencies. Namely our knowledge and expertise in activating SIM cards, which we believe will own an increase in importance, as the connected device market materializes, our experience implementing pre-paid services, which is clearly the dominant global pay plan, and our network integration proficiency, which is a result of our integrating our TSA and DSA platforms into so many production networks.

It’s these capabilities embedded throughout our products, as well as our ability to execute, which is responsible for our overall success. Looking at our regional results, the Q2 59% of our revenue came from Europe and Russia.

That’s a double-digit improvement over a year ago results. This comes at a time when some companies are facing slowdowns in the European business.

We are experiencing growth.

Likewise, we continue to generate growth from the emerging markets. And let me add, the term emerging markets sometimes may suggest smaller unfamiliar carrier names.

To be clear, our emerging market customers are comprised primarily of Tier 1 carriers like Vodafone, Telefonica, MTN, Telenor and SingTel. As such, these are large stable sophisticated carriers with advanced networks, operating in high growth markets.

To illustrate this point, we have partnered with a multi-national operator who has implemented our TSA product in 9 countries across Africa and Latin America. Since 2007, these 9 operating companies have upgraded their core license 38 times and have on board over 104 new features.

This is the sort of growth that typically comes when a carrier subscriber base grows at double-digit rates. As a result, our international markets, led by our Tier 1 customers, have become very lucrative markets for Evolve, to both TSA and DSA.

In terms of our product strategy, I would like to first discuss some general trends occurring in the wireless industry. The first is around prepaid services.

Today, the GSM Association tells us that 76% of the world’s 6 billion subscribers are prepaid customers. As a matter of fact, the U.S.

is the only major market we know of where prepay is not the de facto of standard.

We are however, beginning to see signs that this may be changing. Sprint has been one of the carriers at the forefront of offering prepaid services in the U.S.

And going forward, we expect other carriers in the U.S. to also become more proactive in offering prepaid services.

U.S. customers in general realize little, if no value from their rollover minutes, nor is there much value in entering into restrictive and ever longer term contracts.

In short, U.S. subscribers are beginning to understand what the rest of the world has known for years.

That not unlike other products and services we consume, such as food, electricity, water, the gas for our cars, that paying only for what you use, just makes good economic sense.

The point, Evolving Systems is expert in implementing activation solutions for the prepaid model. Indeed, our DSA solution is the world leader in providing on device activation for prepaid customers.

And so, we are ideally positioned to participate in any domestic transition to the prepaid model.

The second trend is around mobile data services. Subscribers around the world are increasingly consuming more data services as a result, and as a result are driving SmartPhone sales.

This was recently highlighted by Apple where iPhone sales, and mainly in China, grew by triple digits. And the growth is not just limited to China.

Today, Apple sells iPhones in 100 countries, in partnership with over 250 carriers, and this plays to the strength of our TSA and DSA products, which have broad and complete feature sets that allow carriers to define, activate, and up sell mobile broadband services, both within the prepaid and postpaid envelope.

As Dan mentioned, Q2 was our best quarter for TSA bookings since 2009, with TSA, L&S bookings up 123% year-over-year. We’re currently engaged with several European carriers, but we are assisting them on major branding and network migration.

Bear in mind, if a carrier launches a new service, they obviously have to be able to activate those new services, which drives changes to the activation layer, and consequently TSA orders.

Also in Q2, we added a new TSA customer in Africa. Turning our attention to DSA, today we are the unequivocal leader in the newly growing space of dynamics and allocation or what some of our partners call Smart HOR.

With DSA we provide a powerful on device self-activation solution. Automating activation and allowing customers to define or change their service themselves, without having to call to a carrier's call center or having to go to a carrier's store, is where this industry is heading.

With DSA, subscribers can swap SIM cards, register and tailor their services, choose a number or even reserve a number in advance of purchasing the SIM card, all from either the handset or web portal, with no call center interaction, and no waiting in line at a wireless store.

In many ways, this supports subscribers the same convenience and flexibility they enjoy today in many other aspects of their lives, when making airline reservations, paying bills, shopping on the web, or trading stocks.

Improving the customer experience, while at the same time lowering operational cost, is what we mean when we say our products have product relevance with today’s carriers.

Now a few comments regarding our dividends. As you know, in January we distributed a special dividend of $2 per share.

Then in May, we distributed our second special dividend an additional $1.70 per share. In between those special dividends, we paid our Q1 quarterly dividend, and today, we are declaring a Q3 quarterly dividend of $0.05.

So this year alone, we will have returned $3.80 per share to our shareholders. That said, we remain a well-capitalized company with no debt, and adequate levels of cash on hand.

In addition, for Q2 we increased our R&D investments by 40%, which speaks to our commitment to fund our strategic initiatives. And as I do every quarter, let me again remain you that we remain a small company where the delay of any single key order can have a pronounced effect on our quarterly results.

With that, we continue to believe that it’s more accurate to judge Evolves results on a annual rather than quarterly basis.

In conclusion, we believe our success over these last 4 quarters, since we’ve divested our Numbering Business, shows the strength of our activation pure play strategy, as well as our ability to execute. And given our strong first half and the shape and size of our second half funnel, we remain confident as to our outlook for the balance of 2012 and beyond.

With that, we thank you again for joining us today, and we are now happy to take your questions.

Can you talk a little bit about your channel partners and what you’re seeing with Oberthur and Gemalto?

You know, we closed the big deal earlier this year, DSA deal through one of our channel partners, and we were very pleased to do that. And we are in basically daily contact with them on that project and for some other initiatives we’re pursuing with them.

Likewise, with our other partner, we’re in the process of securing an upgrade from one of our DSA customers. And right now, I think we’ve got that forecast for Q3.

So I would say, both channel -- both channel partners are very active with us. And even though it’s the summer and you know both these channel partners reside in France, and sometimes August is a difficult month to reach them.

Nevertheless, with both those partners, we’re in constant contact, and we expect to be closing additional business with both through the balance of the year.

And then the other thing we’re looking for is with competitors of carriers that are DSA customers that have been implementing the DSA Solution, what kind of traction are you seeing with their competitors you see, what you can with DSA?

Well there is competition out there for DSA, so we’ve seen that. But as our Vice President of Sales Ricardo Rengifo said at our recent board meeting, nobody knows how to sell DSA like we do.

And we believe that production experience, our recently awarded patent in the U.S. for DSA technology, our ability to implement the new features we’re putting in the product, leaves us head-and-shoulders, miles ahead of the competition when it comes to implementing DSA.

So if it sounds like I’m confident, it’s because I am. And while there is competition out there, we know how to meet them and beat them when we see them.

I’m sorry, Thad, I wasn’t clear enough perhaps in my question. I was talking about what progress are you seeing in terms of lead generation from other carriers who in their business, they compete against carriers that have implemented your solution.

We see it, and every time we implement a DSA at a Tier 1, it always gets the attention of the other Tier 1s in the country. So when I look at our funnel, wherever we’ve closed a large DSA account, and we’ve gone into production, we expect that those other carriers in that region, enter the funnel.

Now the sales cycle with DSA is not a short sale cycle, but as you know, we closed a big deal in Russia last year, that’s drawing attention of the operators in the region. We closed our first deal with Simtel group last year.

That’s getting the attention of other operators from Simtel Group. We’ve been very successful in closing DSA in Africa, that’s generated other interest.

And then the same thing in Europe. We believe that the presence and our reference ability within the Tier 1 is gaining attention.

And the last comment I’d share on that point is we’re also very active in the India market, and we’re beginning to become active in the China market. And just to remind you, you know when people talk about the BRIC economy, we’re in production in Brazil today, we’re in the process of going into production in Russia today.

We have activity underway currently in India, and we’re also hopeful about activity in China. So we like the growth market to the BRIC economy, and we also liked it when we implement with one Tier 1 in the region it draws the attention of other Tier 1s, and that helps our funnel as well.

And final question relates to M-to-M markets, so what time line do you see for potential intelligent M to M controller?

Yes, if there’s -- if there’s a weakness in this quarter results, it’s probably around M-to-M. And M-to-M hasn’t lived up to our expectations yet for the quarter.

But, we’re very active, and as a matter of fact, we’re very active with one of our channel partners on some M-to-M initiatives. So whereas IMC maybe disappointing us, we’re versus interested in what we’re doing with one of our channel partners around M-to-M.

And we’re hoping that will bear fruit, I would say probably in the second -- in the 2 to 3 quarters from now.

It’s not a question, I just wanted to congratulate you on your question, Thad. I think you and your people did a great job.

And as the -- you know, as the manager for your single largest shareholder, I couldn’t be happier with the results.

Well thank you, Gary, that’s very nice to hear. We appreciate it.

Well thank you again for joining us today. We look forward to sharing our Q3 results with you in the early November timeframe.

In the meantime, I hope everybody has a safe and enjoyable summer. Thank you again.

Cheers.