Real-Time Digital Engagement Increasing Customer Lifetime Value in Telecom, Retail & Financial Services Investor Presentation – December 2017
Safe Harbor Statement This presentation contains “forward -looking statements” based on expectations, estimates and projections that are subject to risk. Statements about future revenue, addressable market size, cash, growth and profitability are forward-looking and actual results could differ. These forward looking statements are based on Evolving System’s current estimates and assumptions as of the date of the information presented and as such, involve uncertainty and risk. Forward looking statements are not guarantees of future performance, and actual results may differ materially from those contemplated by the forward looking statements because of a number of factors, including the factors described in the Company’s Form 10-K for the fiscal year ended December 31, 2016 and other reports on file with the Securities and Exchange Commission. Except to the extent required under the federal securities laws, Evolving Systems does not intend to update or revise the forward-looking statements. 2
EVOLVING SYSTEMS: AT-A-GLANCE Background • NASDAQ: EVOL • HQ: Englewood, CO; Offices: Asia, Africa, Europe, LATAM, USA Product / Services • Premise and SaaS Provider of Real-Time Digital Engagement Solutions targeting Telecom, Retail & Financial Services Customers • 100+ Customers in 65+ countries on 5 continents touching ~1.3 billion consumers Consistent Financial Performance • 38 consecutive quarters of positive net income • Profitable on an operating, net and Adjusted EBITDA basis quarterly and YTD • Sequential revenue growth of ~21%; YTD revenue growth of ~5% • Recent acquisitions of BLS and Lumata expected to positively impact top- and bottom-line in Q4 FY17 and FY18, leading to increased cash flow and strengthened balance sheet 3
2017 FINANCIAL SNAPSHOT (Nine Months ended September 30, 2017 vs. Nine Months ended September 30, 2016) Revenue • Total Revenue – $19.6M vs. $18.7M (up ~5% YTD) • License Fees – $2.1M vs. $2.3M (down ~7% YTD, due primarily to business model transition) • Expert Services – $17.5M vs. 16.4M (up ~7% YTD) Margin and Expenses • YTD Gross margin of ~71% vs.~79%; shift due to acquisitions completed in 3Q which carry lower but still, high gross margins • YTD Operating expenses of $9.4M vs. $10.9M; increase due to one-time acquisition related costs, one-time restructuring costs and overhead added from BLS and Lumata; synergies to drive further reductions and expenses anticipated to decline as a % of revenue Profitability • Operating income of $4.5M vs. $3.8M YTD, an improvement of ~18% YOY • Net income of $2.8M vs. $2.1M, an improvement of ~32% YOY Balance Sheet • Cash and cash equivalents of $7.6M vs. $7.6M, which includes acquisitions • $9.4M balance under the Term Loan and Facility Loan, net of ~$14k of debt issuance costs • In compliance with all covenants; higher anticipated cash flow in future periods to fund working capital needs, debt obligations and future accretive acquisitions 4
EVOL: OUR BUSINESS TRANSFORMATION Expansion to cover 100+ Telecoms, Financial Services & Retail Customers Leader in Real Time Digital Engagement 50+ Acquired Expansion into Real- Business Logic Systems Time Contextual (June 2017) Marketing Acquired Lumata Acquired 20+ (Sept 2017) Technology Leadership in Sixth Sense Media Customer Activation in (Sept. 2015) Mobile Telecoms 2000s 2015 2017 Becoming an end-to-end provider of digital consumer engagement across Telecoms, Retail and Financial Services 5
PROVEN TECHNOLOGY PLATFORM DEPLOYED ACROSS A GROWING GLOBAL CUSTOMER BASE Telcos at forefront of Customer Lifetime Value (“CLV”) technology Our learning in telecom and the highly competitive emerging market can now be applied in the digital transformation of new verticals and developed markets 6
DECADES OF EXPERIENCE WORKING WITH GLOBAL BRANDS 7
NEW SENIOR LEADERSHIP DRIVING “TRANSFORMATION” Name and Title Experience Thomas Thekkethala Former CEO of Sixth Sense Media; 30 years of experience in financing and building President and CEO enterprise software companies Richard Lewis Former CEO of BLS; 32 years of sales leadership in telecom software companies with extensive experience in Europe, Middle East & Africa SVP, Sales Mo Firouzabadian Former co-CEO of Lumata; 13+ years of experience in telecom and mobile marketing; SVP, Sales formerly Head of Connected Devices/New Business with Buongiorno Adhish Kulkarni Former co-CEO of Lumata; 15+ years of experience in telecom and mobile marketing; previously part of the senior team at Buongiorno Digital and Flytxt; and served as a SVP, CVM Solutions Management Consultant for 6 years with Accenture Eric Hatton Over 20 years of experience delivering new products for telecom networks and point- of-sale systems affecting billions of people globally SVP, Activation Solutions Don Stone Over 25 years of experience designing, developing and implementing large-scale, SVP, R&D mission-critical software systems for global telecom carriers Hart Singh Over 25 years of experience ranging from multiple start-ups to corporates in planning and deploying break-through software solutions SVP, New Ventures Leadership team with over 125+ years of experience in building and scaling enterprise software and technology companies 8
What is Customer Lifetime Value?
CUSTOMER LIFETIME VALUE (“CLV”) DEFINED Average Average Customer Spend Tenure Base Activate Increase Extend More Customer Tenure Customers Spend Increasing CLV through Real-Time Digital Engagement 10
CLV AT WORK WITH ORANGE (EU Mobile Carrier Group) Engage: Orange Thank You 20 strategic brand partners Personalized physical Rewards based on real-time Engaged in retail, film, media and virtual rewards customer lifecycle triggers Customers and app developers. Driving real-time digital engagement with a two-sided business model – generate incremental revenues through brand partners and extend tenure of customers > drives increased CLV 11
CLV AT WORK WITH ORANGE – “MOVIES AND MORE” 3 2 1 Get Ticket Any Movie Any Theatre 5 4 Every Wednesday Get Offers Select a Movie Trans- Higher Higher Longer CLV actions Spend Tenure Real-Time Digital Engagement generates higher spend and longer “$pend More” Time Skip The Line retention resulting in increased CLV. 12
CLV AT WORK: RAPID CUSTOMER ACTIVATION AND ON-BOARDING Empower Dealers Time-to-Market Ecommerce Bundling Handset Bundling Additional Revenue SIM Flooding 100,000 1,000 Dealer Experience Customer Activations Per Day Retail Channel Analytics Improvement Helping one of Asia’s largest mobile operators to drive customer activations from 1,000/day to over 100,000/day for higher value 4G services resulting in higher CLVs 13
CLV AT WORK WITH AIRTEL – “4G IS HERE” You’re Live! Do More Convenient Choose Enter Details at Your Pace Biometrics Language 1 2 3 4 More Higher Higher Customers Spend CLV 7 6 5 Instant Lite App Installed Data Reward for 1st Use: (no wait for FREE 4G data promotes use download or of partner apps and data install) usage behavior Full Service Support App 14
CLV AT WORK #3 – RETAIL OFFERS Customers Real- That Time Matter Rewards Using That Insights Matter Higher Spend 1 3 2 Select Products at App Scans Product Install Partner App For Partner Store for Offers Extreme Savings Increased Tenure Higher CLV 4 6 5 Displays Discount or Competing Platform Learns for App Tracks Products Better Future Offers Choices Made 15
Shifting Market Dynamics Key Drivers for our Optimism Transitioning and Expanding our Business in Targeted Growth Areas
MARKETS EXPANDING IN DIGITAL CHANNELS AND ADVERTISING Newer digital channels enhancing traditional Print, E-mail and TV 17
THE “DIGITAL TRANSFORMATION MARKET” IS GROWING RAPIDLY The global “Digital Transformation Market” is expected to top $431.7B by 2021, growing at a CAGR of 19.2% between 2016 and 2021 18
MARKET TRENDING TOWARDS SMARTER, DATA-DRIVEN ENGAGEMENT Smart Real-Time Conversations Campaigns 1-to-1 Dialogue Personalized Messages One-way • Predictive Analytics Broadcasts • Machine Learning • Rules-based • Propensity Forecast • Real-time triggers • ROI optimization • Data Analytics • Automatic Execution • Test & Learn • Data capture • Interactive dialogue • Personalized fields • Contextual content • No customization • Limited targeting Redefining the boundaries of digital customer engagement by applying cognitive technology to solve tomorrow’s marketing challenges… 19
MARKETS CONTINUING “CROSS - CONVERGENCE” ACROSS VERTICALS • Real-time engagement • Transaction history and insights from large data sets • Engagement across multiple channels • Customer valuation • Contextual marketing This converging landscape requires real-time digital customer engagement based on intelligent, data-driven solutions 20
EVOLVING PLATFORM: OUR POSITIONING & CUSTOMER VALUE Transaction Data Engage with the Right Offer Intelligent Actions-based Triggers Evolving’s platform is based on massively -scalable, cognitive and machine learning technologies to process real-time events and trigger highly personalized and relevant offers 21
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