John Leonard, CFA
Special situations, micro-cap, contrarian, CFA

Evolving Systems Is Attractive Due To Rising Free Cash Flow And Shareholder Friendly Management

Investment thesis

Evolving Systems (NASDAQ:EVOL) trades at a significant discount to its closest peer despite a superior product offering, growing recurring and high-margin revenue as well as one of the most shareholder friendly managements.

Company overview

EVOL provides service enablement, on-device activation and billing mediation solutions to 50 customers in 40 countries.

Source: Company presentation

The two operating segments are based on revenue type:

License fees and services revenue is generated from software product licenses, directly related services as well as fees for custom development and integration services.

Customer support revenue is generated from annual support fees, recurring maintenance fees, upgrades and warranties.

In November 2004, EVOL acquired Tertio Telecoms, a supplier of operations support systems software solutions...

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