Edgewater Reports Second Quarter 2017 Results

 

Wakefield, MA August 2, 2017 – Edgewater Technology, Inc. (NASDAQ: EDGW), a leading consulting firm that helps business leaders drive transformational change through its unique selection of business and technology services and specialized product-based solutions, reported financial results for the quarter ended June 30, 2017.

 

Second Quarter 2017 Financial Results vs. Same Year-Ago Quarter

  • Total revenue was $30.3 million compared to $34.0 million;
  • Service revenue was $24.4 million compared to $28.6 million;
  • Gross profit was $11.5 million, or 38.0% of total revenue, compared to $12.8 million, or 37.7% of total revenue;
  • Gross profit margin related to service revenue was 38.2% compared to 39.5%; 
  • Utilization was 73.7% compared to 75.6%;
  • Net loss was $(860,000), or $(0.06) per diluted share, compared to net income of $1.3 million, or $0.09 per diluted share.  Net loss during the second quarter of 2017, was largely attributable to a $1.1 million payment in connection with the termination of an investment banker services agreement and a $1.1 million increase in the valuation allowance provided against the gross carrying value of certain deferred tax attributes;
  • Cash flow used in operating activities was $(1.4) million compared to cash provided by operating activities of $4.2 million.  Second quarter 2017 operating cash flow was impacted by $2.9 million in acquisition-related contingent earnout consideration payments, $1.7 million in connection with severance payments made to former executive officers of the Company and a $1.1 million payment as a result of the termination of an investment banking agreement; and
  • Adjusted EBITDA (a non-GAAP financial measure) was $2.7 million, or 8.9% of total revenue (see "Non-GAAP Financial Measures" below for further discussion of this non-GAAP term), compared to Adjusted EBITDA of $3.4 million, or 10.1% of total revenue.

     

First Half of 2017 Financial Results vs. Same Year-Ago Period

  • Total revenue was $59.4 million compared to $65.9 million;
  • Service revenue was $49.6 million compared to $56.8 million;
  • Gross profit was $21.5 million, or 36.2% of total revenue, compared to $23.6 million, or 35.7% of total revenue;
  • Gross profit margin related to service revenue was 36.7% compared to 37.4%; 
  • Utilization was 74.0% compared to 74.2%;
  • Net loss was $(3.5) million, or $(0.27) per diluted share, compared to net income of $550,000, or $0.04 per diluted share.  Net loss in 2017 is impacted by $3.4 million in severance-related charges associated with the termination of former executive officers of the Company, $1.1 million in connection with the termination of an investment banking services agreement, a $1.1 million increase in the valuation allowance provided against the gross carrying value of certain deferred tax attributes and $666,000 in consent solicitation expenses;
  • Cash flow used in operating activities was $(5.2) million compared to $(934,000). First Half 2017 cash flow was impacted by $2.9 million in acquisition-related contingent earnout consideration payments, $1.7 million in connection with severance payments made to former executive officers of the Company and a $1.1 million payment as a result of the termination of an investment banking agreement; and
  • Adjusted EBITDA was $3.0 million, or 5.1% of total revenue, compared to Adjusted EBITDA of $4.8 million, or 7.3% of total revenue.

     

Management Commentary

"We have observed several positive indicators during the second quarter of 2017," commented Jeffrey Rutherford, Edgewater's chairman, interim president and interim CEO. "We have taken steps, including incremental investments in sales and marketing, to reset individual business units and have identified positive forward looking trends. 

"As we enter the third quarter of 2017, we focused the business unit leadership to position the Company to maximize shareholder value, through future revenue and profitability growth.  Our Oracle-based service offerings have steadied and have been positioned to capitalize on the accelerated adoption of Oracle's cloud-based service offerings.  Additionally, our Microsoft-based service offerings, from a product bookings perspective, had a solid quarter, which sets up nicely for the second half of 2017.

"We look forward to the third quarter of 2017 and we anticipate that our quarterly service revenue will be in the range of $24.5 million to $25.5 million, essentially flat compared to the second quarter of 2017 and down on a year-over-year basis."

 

Conference Call and Webcast Information

Edgewater has scheduled a conference call today (Wednesday, August 2, 2017) at 10:00 a.m. Eastern time to discuss its second quarter 2017 results.

 

Date: Wednesday, August 2, 2017

Time: 10:00 a.m. Eastern time

Dial-in number: 1-877-713-9347 / Passcode: 57210515

Webcast: http://ir.edgewater.com/

 

Please call the conference telephone number 5-10 minutes prior to the start time. An operator will register your name and organization.

 

A replay of the conference call can be accessed via Edgewater's investor relations web site at http://ir.edgewater.com/ or by dialing 1-404-537-3406 (Conference ID#: 57210515) after 1:00 p.m. Eastern time on the same day through Wednesday, August 16, 2017.

 

About Edgewater

Edgewater (NASDAQ: EDGW) helps business leaders drive transformational change through its unique selection of business and technology services and specialized product-based solutions.

 

Classic consulting disciplines (such as business advisory, process improvement, organizational change management, M&A due diligence, and domain expertise) are blended with technical services (such as digital transformation, technical roadmaps, data and analytics services, custom development, and system integration) to help organizations get the most out of their existing IT assets while creating new digital business models.

 

Delivering both on premise and in the cloud, Edgewater partners with Oracle and Microsoft to offer Business Analytics, BI, ERP, and CRM solutions. Edgewater Ranzal, an Oracle Platinum Consulting Partner, provides Business Analytics solutions leveraging Oracle EPM, BI, and Big Data technologies. As an award-winning Microsoft partner, Edgewater Fullscope delivers Dynamics AX ERP, Business Intelligence, and CRM solutions, with a specialty in manufacturing.