[Starts Abruptly] …and Year End Results Conference Call. As you may have seen our Form 10-Q was filed after the market closed today and our press release was just issued.

With us from management today will be Matthew Stecker, Evolving Systems’ Chief Executive Officer and Executive Chairman. On today’s call, we will provide an update on the fourth quarter 2020, as well as the cumulative year end 2020 results, as well as update you on the business investment activities currently underway.

Additionally, Mark Szynkowski, Evolving Systems Senior Vice President of Finance is with us and will be available during the Q&A portion of the call. 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.

Specifically, 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 and we encourage you to review our publicly filed documents, including our SEC filings, news releases and website for more information about the company. At this time, I’d now like to turn the call over to Matthew Stecker.

Matthew?

All right. Thank you, Keith, and thank you everyone for attending today.

If you’ve been with us for a while, you will remember that the third quarter 2020 saw Evolving complete our previously forecasted return to a cash flow positive position. While we were I think justifiably proud of that achievement, not least insofar as it occurred in the middle of the global pandemic, I’m even more delighted to report today that our upward trend in performance has been cemented by both a profitable fourth quarter and cumulatively a positive operating income of over $1 million for the year.

This is great news. It gets a little bit better.

Positive adjusted EBITDA for the year 2020 was $2.4 million. We generated positive flow across the 12-month period.

Fourth quarter revenues rose by $0.2 million, in spite of globally adverse market conditions, annual revenues increased by $0.6 million to $26.4 million. Importantly, the company made the final payment on its outstanding bank loan in January.

In short, we have been operating and continue to operate efficiently and now debt free. And I believe we are poised at the start of 2021 to build on last year’s success.

There seems to me to be a few obvious questions provoked by these numbers. Why?

Why now? And what’s next?

What’s behind Evolving Systems turn around and furthermore, isn’t the timing in the most challenging societal and global economic conditions most of us have faced in our lifetimes unlikely? I think if we spend a moment looking at the answers to both these questions, you’ll see why I’m confident that company is moving in the right direction long-term, and more importantly, while the next 12 months can be a springboard to sustained success.

The answer to the first question, why the turnaround is multifaceted? It’s the result of the combination of fiscally responsible management, tight operational control, streaming -- while streamlining how we work without sacrificing productivity, imaginative and timely product development that -- those are keywords for doing it on the cheap.

But I like imagining it, it’s better than just saying efficient. Anyway, an improved -- improvement in exposure and brand recognition, and a razor sharp focus on meeting the needs of our clients through extended relationships designed to deliver real value.

Let me give some examples. On the activation side of our business, in the past 12 months, we started promoting our over-the-air activation platform.

This timely solution provides secure remote management of SIM, files and applications, ensuring reliable updates occur efficiently and without impacting subscriber mobile services. Why is it important now?

Because mobile ecosystems are quickly accumulating new applications and becoming more advanced. As a result, remote SIM configuration has become increasingly critical to enable seamless updates, either via this short message service, SMS or IP-based bearer.

This process helps optimize the configuration data updates for SIM cards and enables the distribution of new SIM applications and configuration settings to use SIMs, which access these services. Evolving provides a cost effective platform which has been designed to provide a secure OTA SIM card management solution for any mobile operator.

Another example from the activation side of our business is our new Secure SMS offering. SMS or text messages are obviously a convenient way for organizations to communicate with their customers and are frequently used to send sensitive data.

For example, a one-time passcode used to access critical systems and services as part of a multi-factor authentication system. However, SMS has long been identified as insecure.

The American National Institutes of Standards and Technology had released guidelines to deprecate SMS for use in two-phased authentication. And with the steady increase of IoT devices and associated security requirements, secure communication with devices is crucial.

Evolving Systems patent pending Secure SMS solution enables mobile operators to promote the capability of securing SMS messages to their enterprise customers via standardized and intuitive interface. We help reduce the fraud window of potential hackers that are attempting to intercept those SMS messages and provide a simplified and cost effective solution from single vendor when compared to expensive in-house developed or various point solutions to provide similar capabilities.

With various validation points and prerequisites to complete on the SMS journey, our solution helps ensure that the SMS is intended for the subscriber is not hijacked and is received as originally intended. On the other side of our business, which we now refer to as digital engagement, where we previously used the somewhat confounding terms CVML, which stood for Customer Value Management Loyalty.

I believe the strides we’ve made in the past year are equally noteworthy. For a start, we positioned ourselves as leaders in the emerging area of gamification and we’re seeing rapid -- rapidly increasing interest from both customers and prospects in our solutions in that area.

In the mobile market, gamification is critical, yet often poorly understood. Self care applications sit at the heart of most digital customer engagement strategies and provide highly effective channels to actively engage and manage the lifetime value of the customer.

Yet the global average of downloads of such apps is low. It is clear that telcos must focus on improving download engagement they want to move the dial on ARPU or retention KPIs from their digital channels.

But how, gamification provides an increasingly proven answer. Evolving Systems over the past 12 months has become a visible leader in delivering gamification programs.

We believe that the principle of a transactional loyalty and engagement program is to introduce one or more mechanics between the customer usage and spend transactions, and the earning of reward. The mechanics required are similar if not identical to those you find in general context games that make them so addictive.

The game is like the product and core customer experience, but it’s the mechanics around it that provide the sense of achievement and incentive to engage. Our secret to success is combining everything together into a seamless gamified customer experience layer around our operators, products, services and programs, embedding this within the self care app in order to stimulate the desired customer behaviors.

It’s worth adding that the CEO of one of our customers Cellcard presented a case study on his work in this area with Evolving to seminar run by leading industry trade body, the TeleManagement Forum in November last year. If you’re interested in seeing a video of this session, please let us know.

We’ve also managed to provide leadership by, to coin a phrase, “helping the industry find solutions that enable them to stay ahead of the COVID curve”. We know that the pandemic is slowly starting to abate, but Evolving Systems isn’t sitting still and waiting to see what new market conditions emerge before reacting.

We’ve been anticipating future service provider needs for some months now and exposing our ideas and advice in the media. We think in the wake of COVID the service provider market will be particularly interesting.

For many customers, the pandemic has brought to the fore the importance of their mobile devices. At the same time, the distancing requirements have in some cases made it harder to maintain service with the closing of retail outlets, et cetera.

Mobile devices have also become a failsafe means of disseminating by pushing vital information. As competition for subscribers increases, how will service providers convert these realities into increased market share?

Some strategies we are already discussing include, the importance of data connections at a time when the network may be overloaded or dynamic SIM allocation service can be used as the serving solution for data connections without the additional overhead of having to provision the BSS or OSS entirely and can be introduced as an anticipatory measure, emergency workers in need of a data SIM that can then make use of these unlimited connections while the associated costs are drastically reduced, enabling our newfound reality of working from home via better telecommuting through rapid 4G and soon 5G activations time has come, in a way operators have become the new real estate agents, data has become an extremely important service in countries affected by COVID-19, secure self service SIM swap, for example, can enable subscribers to switch or upgraded from 3G to 4G or change phones within the comfort of their own homes, such SIMs may avoid using network resources until the 4G service is activated. Interactive digital information services for government, healthcare and retail came to the fore during the pandemic, when government’s public health services and other organizations had to provide relevant information to customers who were searching for information sources they can trust.

Now that Pandora’s box has been opened, it’s unlikely to be closed. While traditional social media can be used as before, an increasing number of operators have offered services on behalf of government as a trusted source of information delivered through the mobile device.

These new channels of communication are unlikely to disappear in the post-pandemic world. In fact, they’re likely to inspire new and profitable relationships and partnerships with vendors and operators like Evolving.

At Evolving Systems, our belief is right now as the new economy unfolds, telcos would be wise to rebuild their competitive strategies, articulating their direction in the post-COVID world rather than jumping in with more of the same based on the assumption that normal service will soon be resumed. A different set of use cases are likely to be required in the post-COVID world to maximize efficiency and profitability.

We are articulating the message that now is the time to start identifying and building them out. I hope these examples of our work during the last 12 months give you a flavor of why we’ve been able to both establish and cement our turnaround in 2020, but also encourage you to share my confidence in the company’s future.

Since I became CEO roughly three years ago, Evolving Systems has sometimes slowly but within increasing speed now matured into a more confident, more clearly articulated, more progressive, and I think, demonstrably more successful company. I’ll talk about the business and future plans a little bit more at the end of this session.

But for now, I’ll turn it over to Mark Szynkowski to talk about the numbers.

Thank you, Matthew. Good afternoon, everyone, and thank you for joining.

I know Matthew covered some of the numbers earlier, but to put them all in context, I’ll go over them again. Let us begin with revenue, which was $7 million for the fourth quarter of 2020, as compared to $6.7 million in the comparable quarter a year ago, an increase of $0.3 million or 4.2%.

Driving the year-over-year increase were higher revenues associated with new projects, partially offset by a decrease in work on other clients projects that reached or near completion. Total revenue for the year ended December 31, 2020, was $26.4 million, a $0.6 million increase or 2.3%, compared to the 12 months of 2019.

Service revenues were $25.6 million. This was an increase year-over-year of $1.1 million.

This again was mostly related to work for new clients and their projects, and upgrades to existing client’s platforms and services, which were partially offset by a decrease in work on those projects that have reached completion. Over the course of the year, our gross margin percentages were consistent with the prior year.

Total operating expenses for the three months ended December 31, 2020, were $4.1 million, compared to $4.2 million for the fourth quarter a year ago. The decrease is mostly related to lower travel and entertainment costs due to the restrictions during the global pandemic and also led to a reduction of our marketing programs.

This was partially offset by a larger number of hours worked on product development projects and staff previously working on delivery shifted the product development work during the past quarter. Total operating expenses for the year ended December 31, 2020, were $16.5 million, a decrease from the total of operating expenses of $25 million in the year ended December 31, 2019.

Excluding a $6.7 million goodwill impairment charge in 2019, the company’s operating expenses were $18.3 million for 2019. This is a decrease of approximately $1.8 million, which is related to the reductions in the company’s sales and marketing costs through declining incentive compensation expense, a decrease in the travel and marketing cost again due to the ongoing pandemic.

There was also a decrease in the overall resource costs associated to product development as the team had some exit of associates early in the year. The company reported operating income of $0.5 million and net income of $0.6 million for the three months ended December 31, 2020.

The company had operating income of $0.1 million and a net loss of $1.4 million for the three months ended December 31, 2019. The company reported adjusted earnings before interest, taxes, depreciation and amortization, our adjusted EBITDA number for the fourth quarter of 2020 was $0.8 million, as compared to an adjusted EBITDA of $0.4 million in the fourth quarter of 2019.

The company reported an operating profit of $1 million and net income of $0.6 million for the year ended December 31, 2020. This is compared to an operating loss of $7.9 million and net losses of $9.7 million for the year ended December 31, 2019.

Excluding the effect of that goodwill impairment in 2019, the operating loss would have been $1.2 million and a net loss would have been $0.3 million. Net earnings per share both basic and diluted was $0.05 for the year ended December 31, 2020, as compared to a net loss per share both basic and diluted of negative $0.80 in the comparable year ago period.

The company reported adjusted EBITDA of $2.4 million, Matthew noted earlier, for the month -- for this year and that’s compared to $0.3 million for the year ended December 31, 2019. The company plans to continue to strategically invest a portion of these profits that are continuing initiatives to foster long-term growth.

Moving to the balance sheet, the company reported cash and cash equivalents as of December 31, 2020, of approximately $2.8 million, compared to approximately $3.1 million as of December 31, 2019. Contract receivables and the net allowance for doubtful accounts were $5.7 million, a decrease of $1 million or approximately 15.6% compared to December 31, 2019.

However, the working capital increased by $1.7 million or approximately 44.9% to $5.5 million from $3.8 million at the same period a year ago. The increase in working capital is related to an increase in unbilled work-in-progress and a decrease in the current portion of the term loan that were paid off and also offset slightly by that small decrease in cash and the decrease in contract receivables, along with income tax receivables as large amounts of refunds and credits were received and the accounts payable and accrued liabilities also decreased.

The company was also proud to make the final payment on the bank term as Matthew noted, and the bank term loan in January of 2021. Thank you.

And I’ll now hand the call back over to Matthew Stecker. Matthew?

All right, Mark. Thank you very much.

Appreciate you going through all that. So earlier I gave everyone an insight into some of the exciting actions that Evolving has taken in the past 12 months to provide you with some insights into the reasons for our continuing progress.

I also asked the question why now, is that it appear on the surface unlikely that in an adverse global market, any company not directly servicing COVID needs would be likely to significantly improve its fortunes. But for us, we can articulate some reasons why this has been the case.

These are worth considering for a minute because they hold the reasons why you should be confident in our future and for believing is that the success we have started to experience will be sustained. For most, as I’ve already noted, has been our quick ability to identify the real everyday problems that our customers and prospects face and address them with well-positioned to flexible and cost effective solutions that resonate with their target audiences.

That Evolving Systems has three years experience, servicing clients around the world is a cliche that we frequently use in our sales and marketing literature, but it is stubbornly true. Our leadership draws on a deep well of industry knowledge and has unrivaled familiar -- familiarity with the operational and businesses challenged that the market phases.

We also have gotten really good overtime at servicing operators regardless of their geography and that shouldn’t be underestimated going forward. Having that experience provides the foundation for our success, but its impact is minible -- is minimal, if not exposed.

That’s an area that wants a shortcoming for Evolving Systems has also been dramatically turned around. Our visibility in the industry through media coverage and marketing output has improved dramatically.

Today Evolving is publishing articles and interviews across numerous leading sources. The TM forum is already noted feature two of our customers and one of our SVPs in a recent seminar.

The result is that now we are not just good at what we do, but good at what we do, but we are getting better at being seen to be doing it. The net of all this is that our sales pipeline is continuing to grow.

We are also not sitting on our laurels. It would be premature to present at present to offer specific details but we are looking around long and hard at options to fundamentally change, reposition or expand our digital engagement business.

Progress in this area has moved beyond the embryonic stage and I hope we be able to present more about our future directions on our next investor call. For now suffice to say, we are focused on how to move the needle significantly rather than simply growing the business at its present pace.

If I can use a sporting metaphor over the past 24 months roughly you’ve graduated -- gradually rebuilt and reassembled the roster we need to succeed in the early results are promising. Over the next 24 months, we’ll be very much focused on the progress we hope to make -- making the playoffs if you will.

Let me conclude with a few comments about the market we’re facing in 2021 and simultaneously provide at least a sneak peek into the answer of my previously posed what next question. It’s no secret that 5G will continue to rollout with end customers benefiting from more reliable high speed internet access, while the operators increase their bandwidth capacity and thus allowing them to target new subscriber growth via new services or by taking a bigger share of the marketplace.

It’s axiomatic that every operator cannot grab an increased share of every marketplace. So there will be winners and there will be losers.

Put another way, gearing up now to leverage the incoming 5G commercial opportunity will be table stakes for the future winners. From our perspective, there is good reason to believe the 2021 will be a year of infrastructure and investment in products like those Evolving Systems provides.

I’m asked frequently about the impact of 5G on our business at Evolving Systems. I think it’s fair to say that while we don’t sell 5G explicitly, both sides of our businesses sell services and software that orchestrate new networks and make them run reliably and profitably.

Whenever a new network is built, it provides us with a new opportunity to which we can sell all of our services. It’s a trend that’s good for us.

More network implementations means more attach for the entire portfolio of our solutions. You can also expect an increasing focus and determination to capitalize on our customer trust.

There is an ongoing battle for data intimacy, which is yet to be won and the winners will be in a position to uncap many different plays ranging from digital ID to optimize operations. This is another area in which our solutions are highly relevant.

The same is even more true for the operators search for still new ways to capitalize on customer data. AI offers one opportunity for a quantum leap and customer experience enhancement by utilizing the data to improve targeting and personalization.

The right offer at the right moment, the right customer and right channel thanks to an integrated customer view, which is what the industry will trend towards. Evolving doesn’t just operate in this area, we are leaders in it.

Marketing is another key area that is changing for our operator customers. They’re moving beyond the basic chatbot.

Inbound and outbound communication is being replaced by a new approach, interactive conversational marketing. Again, Evolving plays heavily in delivering solutions that enable operators to navigate the shift.

And lastly, we know that the pandemic has changed customer sentiment, with the result that people are adopting digital habits more rapidly than before and also trying new products, services, et cetera as a result. Necessity and lockdown have been the Mothers of Invention, which translates to new opportunities to connect with segments and brands.

That -- segments that the brands can previously reach. This means operators will need to work harder on their loyalty programs than ever before.

Our solutions enable them to be successful in doing that. In short, disruption in the wireless industry provides opportunities for carriers to compete and that sells the digital marketing side of our business, and the installation and upgrading of networks provides opportunity for the traditional software side of our business.

I want to thank you for your support and look forward to updating you on our continued progress. At this point, I’d like to open the call to questions.

Operator?

[Operator Instructions]

Right. I am not seeing any questions.

So I’d like to thank you for your continued support. Management will be available to talk with investors throughout the week.

And if you have any questions by all means, please feel free to contact us directly and we look forward to communicating further progress and developments with you. We’re now ready to end the call.

Thank you.

Thanks everyone for attending.

Thank you.