Edgewater Reports 9% Year-Over-Year Service Revenue Growth

Q3 Cash Flow from Operations of $2.4 Million
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Wakefield, MA, October 29, 2008 – A technology management consulting firm specializing in providing premium IT services, Edgewater Technology, Inc. (NasdaqGM: EDGW, www.edgewater.com, “Edgewater” or the “Company”), today announced financial results for its third quarter ended September 30, 2008.

Third Quarter Results
Financial results and utilization for the quarter ended September 30, 2008:

Total revenue increased 12.2% to $18.3 million compared to $16.4 million during the third quarter of 2007;
Service revenue, which excludes software sales and reimbursed expenses, increased 8.9% to $17.0 million compared to $15.7 million during the third quarter of 2007;
Gross profit amounted to $7.5 million, or 40.7% of total revenues, compared to $6.9 million, or 42.4% of total revenues, during the third quarter of 2007;
Gross profit margin related to service revenue was 43.6% compared to 44.3% during the third quarter of 2007;
Utilization was 71.9% compared to 80.8% during the third quarter of 2007;
Net income was $0.8 million, or $0.06 per diluted share, compared to net income of $1.1 million, or $0.08 per diluted share, during the third quarter of 2007;
Cash net income increased to $1.7 million, or $0.13 per diluted share compared to $1.6 million, or $0.12 per diluted share, during the third quarter of 2007;
EBITDA was $1.5 million, or $0.12 per diluted share compared to $1.7 million, or $0.13 per diluted share, during the third quarter of 2007; and
Cash flow provided by operating activities amounted to $2.4 million compared to cash flow provided by operating activities of $2.1 million during the third quarter of 2007.

First Nine Months of 2008
Financial results and utilization for the nine months ended September 30, 2008:

Total revenue increased 12.1% to $57.4 million compared to $51.2 million during the first nine months of 2007;
Service revenue, which excludes software sales and reimbursed expenses, increased 12.5% to $53.1 million compared to $47.2 million during the first nine months of 2007;
Gross profit amounted to $22.5 million, or 39.2% of total revenues, compared to $21.3 million, or 41.5% of total revenues during the first nine months of 2007;
Gross profit margin related to service revenue was 42.0% compared to 44.4% during the first nine months of 2007;
Utilization decreased to 75.2% compared to 81.9% during the first nine months of 2007;
Net (loss) income was $(19.1) million, or $(1.46) per diluted share, which was primarily the result of our second quarter impairment charge of $24.7 million related to our goodwill and other intangible assets, compared to $3.0 million, or $0.23 per diluted share, during the first nine months of 2007;
Cash net (loss) income was $(16.3) million, or $(1.25) per diluted share, compared to $4.2 million, or $0.32 per diluted share, during the first nine months of 2007;
EBITDA was $(20.7) million, or $(1.58) per diluted share, compared to $5.3 million, or $0.40 per diluted share, during the first nine months of 2007; and
Cash flow provided by operating activities was $2.3 million, compared to cash flow provided by operating activities of $3.7 million during the first nine months of 2007.

Cash Net Income (Loss), Cash Earnings (Loss) per Diluted Share, EBITDA and EBITDA per Diluted Share are Non-GAAP financial measures. A reconciliation of these measures to their most directly comparable GAAP measures is included in the financial data accompanying this press release.

“During the third quarter, Edgewater secured 29 new customers, a number well above recent quarters,” commented Shirley Singleton, Edgewater’s President and Chief Executive Officer. “Customers continue to buy services, but in smaller-sized first-time engagements compared to a year ago. As we stated in our second quarter financial results release and during our conference call, we contemplated third quarter service revenues being flat to down compared to second quarter service revenues, as we were concerned that the rate of new customer acceleration would not be enough to overcome both the softness in our legacy accounts and the traditional effect of third quarter seasonality.”

“The current economic landscape makes it difficult to assess whether the new customers secured in the third quarter will continue to spend and if there will be any further pullback in legacy accounts. To deal with these uncertainties in the first half of 2009, Edgewater’s management is taking proactive steps to control operating expenses with the intention of entering 2009 as a leaner, tighter organization. We believe the current negativity in the economic sentiment precludes a wait and see approach. As always, we believe the best offense is a solid defense,” continued Ms. Singleton.

“Despite these uncertainties, Edgewater is up on a year-over-year basis, primarily from our continued success in the Enterprise Performance Management space (“EPM” – previously referred to as Corporate Performance Management), securing traction in the healthcare space, as well as in emerging offerings such as data services, Web Analytics and Internet Commerce. The Company is well capitalized, has virtually no debt and continues to generate strong cash flow.

“We intend to continue controlled investment in promising growth areas, while at the same time, we will proactively monitor and manage our operating expenses. This approach will enable the Company to capitalize on market opportunities related to our emerging offerings, while at the same time position the Company to quickly respond to economic changes occurring in our marketplace. With two less bill days and a challenging business climate, we anticipate that revenue for the fourth quarter will be flat to down compared to the third quarter,” Ms. Singleton concluded.

We have repurchased $4.8 million of our own common stock under a $5.0 million stock repurchase program (the “Repurchase Program”). The Repurchase Program was approved by our board in December of 2007. Recently, our board has authorized an additional $3.5 million for repurchases, which gives us aggregate capacity to repurchase up to $3.7 million of our common stock through open market or privately negotiated purchases through September of 2009. The timing and amount of future stock repurchases will be based upon market conditions, securities law considerations and other factors.

Click here for Q3 2008 Selected Financial Data

Third Quarter Conference Call Details

Edgewater will host a conference call on Wednesday, October 29, 2008 at 10:00 a.m. (ET) to discuss third quarter 2008 financial results. To listen to the call, you can participate by webcast at www.edgewater.com - Investor Relations section or you can dial 888-680-0890 (pass code 12783921). Investors are advised to dial into the call at least ten minutes prior to the call to register. Participants may pre-register for the call at www.theconferencingservice.com/prereg/key.process?key=PKY4M6VUR. Pre-registrants will be issued a pin number to use when dialing into the live call which will provide quick access to the conference by bypassing the operator upon connection.

A replay of the call can be accessed via Edgewater’s website at www.edgewater.com - Investor Relations section or by dialing 888-286-8010 (pass code 68472852) from 12:00 p.m. (ET) Wednesday, October 29 through 11:59 p.m. (ET) Wednesday, November 12.

About Edgewater Technology, Inc.

Edgewater Technology, Inc. (NASDAQ: EDGW) is an innovative technology management consulting firm providing a synergistic blend of premium information technology (“IT”) services primarily in the North American market. We provide a unique blend of premium IT services by leveraging our proven industry expertise in strategy, technology and corporate performance management. Headquartered in Wakefield, MA, we go to market by vertical industry and provide our clients with a wide range of business and technology offerings. To learn more, visit www.edgewater.com or call 800-410-4014.

Contacts:

Kevin R. Rhodes, Chief Financial Officer
Timothy R. Oakes, Chief Accounting Officer
(781) 246-3343
ir@edgewater.com

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This Press Release contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, including statements made with respect to our fourth quarter 2008 revenue and business outlook, operating expense control initiatives, market trends and potential future stock repurchases.

The forward-looking statements in this press release and referred to elsewhere are related to future events, revenue or our strategies or future financial performance. In some cases, you can identify forward-looking statements by terminology such as “may,” “should,” “believe,” “anticipate,” “future,” “forward,” “potential,” “estimate,” “encourage,” “opportunity,” “goal,” “objective,” “quality,” “growth,” “leader,” “could,” “expect,” “intend,” “plan,” “planned” “expand,” “focus,” “build,” “through,” “strategy,” “expiration,” “provide,” “offer,” “maximize,” “allow,” “allowed,” “represent,” “commitment,” “create,” “implement,” “result,” “seeking,” “increase,” “add,” “establish,” “pursue,” “feel,” “work,” “perform,” “make,” “continue,” “can,” “ongoing,” “include” or the negative of such terms or comparable terminology. These forward-looking statements inherently involve certain risks and uncertainties, although they are based on our current plans or assessments, which are believed to be reasonable as of the date of this press release. Factors that may cause actual results, goals, targets or objectives to differ materially from those contemplated, projected, forecasted, estimated, anticipated, planned or budgeted in such forward-looking statements include, among others, the following possibilities: (1) inability to execute upon growth objectives, including new services and growth in entities acquired by our Company; (2) failure to obtain new customers or retain significant existing customers, including large legacy customer engagements and the failure to generate new service revenue faster than revenue associated with completed engagements and legacy customer arrangements; (3) the loss of one or more key executives and/or employees; (4) changes in industry trends, such as a decline in the demand for Business Intelligence (“BI”) and Enterprise Performance Management (“EPM”) solutions, custom development and system integration services and/or delays in industry-wide information technology (“IT”) spending, whether on a temporary or permanent basis and/or delays by customers in initiating new projects or existing project milestones; (5) adverse developments and volatility involving geopolitical or technology market conditions; (6) unanticipated events or the occurrence of fluctuations or variability in the matters identified under “Item 2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations – Business Overview;” (7) failure of our sales pipeline to be converted to billable work and recorded as revenue; (8) failure of the middle market and the needs of middle-market enterprises for business services to develop as anticipated; (9) inability to recruit and retain professionals with the high level of information technology skills and experience needed to provide our services; (10) failure to expand outsourcing services to generate additional revenue; (11) any changes in ownership of the Company or otherwise that would result in a limitation of the net operating loss carryforward under applicable tax laws; and/or (12) the failure of the marketplace to embrace EPM or BI services. In evaluating these statements, you should specifically consider various factors described above as well as the risks outlined under Item I “Business – Factors Affecting Finances, Business Prospects and Stock Volatility” in our 2007 Annual Report on Form 10-K filed with the SEC on March 17, 2008. These factors may cause our actual results to differ materially from those contemplated, projected, anticipated, planned or budgeted in any such forward-looking statements.

Although we believe that the expectations in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance, growth, earnings per share or achievements. However, neither we nor any other person assumes responsibility for the accuracy and completeness of such statements. We are under no duty to update any of the forward-looking statements after the date of this press release to conform such statements to actual results.

Use of Non-GAAP Financial Information:
The Company reports its financial results in accordance with generally accepted accounting principles (“GAAP”). Management believes, however, that certain non-GAAP financial measures used in managing the Company’s business may provide users of this financial information with additional meaningful comparisons between current results and prior reported results. Certain of the information set forth herein and certain of the information presented by the Company from time to time may constitute non-GAAP financial measures within the meaning of Regulation G adopted by the Securities and Exchange Commission. We have presented herein a reconciliation of these measures to the most directly comparable GAAP financial measure. The presentation of this additional information is not meant to be considered in isolation or as a substitute for comparable amounts determined in accordance with generally accepted accounting principles in the United States. The Non-GAAP measures presented herein may not be comparable to similarly titled measures presented by other companies. A reconciliation of EBITDA and EBITDA per Diluted Share to Net Income (Loss) and a reconciliation of Net Income (Loss) to Cash Net Income (Loss) and Cash Earnings (Loss) per Diluted Share are included in the unaudited consolidated statements of operations accompanying to this release.