Edgewater Reports First Quarter 2013 Results​

Wakefield, MA – May 1, 2013 – Edgewater Technology, Inc. (NASDAQ: EDGW), a leading consulting firm that brings a blend of classic consulting and product-based consulting services to its clients, reported financial results for the first quarter ended March 31, 2013.

First Quarter 2013 Highlights

  • Repurchased 164,000 shares of common stock at an aggregate purchase price of $661,000, or $4.03 per share; and
  • Acquired a Microsoft Dynamics-based Trade Promotion Management software asset and intellectual property.

First Quarter 2013 Financial Results

  • Total revenue was $23.5 million compared to $25.3 million in the first quarter of 2012;
  • Service revenue was $19.7 million compared to $21.8 million in the first quarter of 2012;
  • Gross profit was $7.1 million, or 30.4% of total revenue, compared to $8.6 million, or 33.9% of total revenue, in the first quarter of 2012;
  • Gross profit margin related to service revenue was 32.4% compared to 37.4% in the first quarter of 2012;
  • Utilization was 69.0% compared to 75.4% in the first quarter of 2012;
  • Net loss was $(889,000), or $(0.08) per diluted share, compared to net income of $175,000, or $0.02 per diluted share, in the first quarter of 2012;
  • Adjusted EBITDA (a non-GAAP measure) was $198,000, or 0.8 % of total revenue and $0.02 per diluted share (see “Non-GAAP Financial Measures” below for further discussion of this non-GAAP term), compared to adjusted EBITDA of $990,000, or 3.9% of total revenue and $0.09 per diluted share, in the first quarter of 2012; and
  • Cash flow used in operating activities was $(2.2) million compared to cash flow used in operating activities of $(1.1) million during the first quarter of 2012.

Management Commentary

“First quarter 2013 service revenue was essentially flat, finishing up 1% sequentially. The softness in signings we experienced in the second half of 2012 did not provide the backlog necessary to lift first quarter service revenue,” commented Shirley Singleton, Edgewater’s chairman, president and CEO.  “As mentioned in our last earnings call, we did see a flurry of signings, particularly in our classic consulting and enterprise performance management (EPM) offerings, in the second half of the first quarter.  In fact, we secured engagements with 21 new customers during the quarter, primarily within business and technical advisory, as well as some solid EPM projects.

“Sales activity is up in all three major offerings. However, when long-term capital investment commitments are required, the pipeline is slow to convert to signed contracts.  The push to grow our business consulting and technical advisory services into the upper middle-market is closing in on this ‘failure to launch’ paralysis by providing critical decision-making assistance to C-level executives.

“We believe there is a fundamental shift in the consulting services marketplace.  Typically, people costs are now  the largest cost component of an IT project.  However, it appears that customers are looking for companies that can simultaneously deliver integrated product- and knowledge-based solutions by bringing not only talented people, but targeted intellectual property that can serve as an accelerator to the project.

“As we move through 2013, we plan to continue investing in IP that enables us to capitalize on this shift.  We believe that vertically focused IP, in combination with a deep understanding of product-based consulting services, will reinforce our brand and expand our channel influence.

“Highlighting this point, during the first quarter we acquired a Trade Promotions Management software solution from a software development company.  We believe this software will augment our recently developed customer relationship management add-on module that provides enhanced channel management for the chemical, life sciences, pharmaceutical, food and consumer product goods manufacturing industries.

Ms. Singleton concluded: “Looking ahead, with sales activity increasing in all three major offerings, we believe that service revenue in the second quarter of 2013 will be up from the first quarter of 2013.”

Selected Financial Data

Conference Call and Webcast Information

Edgewater has scheduled a conference call today (Wednesday, May 1, 2013) at 10:00 a.m. Eastern time to discuss its first quarter 2013 results.

Date: Wednesday, May 1, 2013
Time: 10:00 a.m. Eastern Time
Dial-in number: 1-877-713-9347
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. If you have any difficulty connecting with the conference call, please contact Liolios Group at 1-949-574-3860.

A replay of the conference call can be accessed via Edgewater's investor relations web site at http://ir.edgewater.com/ or by dialing 1-855-859-2056 (Conference ID#: 29452479) after 1:00 p.m. Eastern time through Wednesday, May 15, 2013.

About Edgewater

Edgewater Technology, Inc. (NASDAQ: EDGW) is a strategic consulting firm delivering a blend of classic consulting and product-based consulting services. Edgewater addresses the market both vertically by industry and horizontally by product and technology specialty, providing its client base with a wide range of business and technology solutions. As one of the largest IT consulting firms based in New England, the Company works with clients to reduce costs, improve processes and increase revenue through the judicious use of technology. Edgewater’s brand names include Edgewater Technology, Edgewater Consulting, Edgewater Ranzal and Edgewater Fullscope. To learn more, please visit www.edgewater.com.

Forward-Looking Statements

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 concerning our expected second quarter 2013 service revenue, a fundamental shift in the consulting services marketplace, intellectual property investments in 2013 and customer hesitancy to launch new projects where long-term capital commitments are required. 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) failure to obtain new customers or retain significant existing customers; (2) the loss of one or more key executives and/or employees; (3) changes in industry trends, such as a decline in the demand for Enterprise Resource Planning and Enterprise Performance Management solutions, custom development and system integration services and/or declines in industry-wide information technology spending, whether on a temporary or permanent basis and/or delays by customers in initiating new projects or existing project milestones; (4) inability to execute upon growth objectives, including new services and growth in entities acquired by our Company; (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 “Critical Accounting Policies” in our Annual Report on Form 10-K; (7) delays in, or the failure of, our sales pipeline being converted to billable work and recorded as revenue; (8) inability to recruit and retain professionals with the high level of information technology skills and experience needed to provide our services; (9) failure to expand outsourcing services to generate additional revenue; (10) any changes in ownership of the Company or otherwise that would result in a limitation of the net operating loss carry forward under applicable tax laws; (11) the failure of the marketplace to embrace classic consulting and product-based services; and/or (12) failure to make a successful claim against the Fullscope escrow account.  In evaluating these statements, you should specifically consider various factors described above as well as the risks outlined under “Part I - Item IA Risk Factors” in our 2012 Annual Report on Form 10-K filed with the SEC on March 8, 2013. 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. Except as required by law, we undertake no obligation to update any of the forward-looking statements after the date of this Press Release to conform such statements to actual results.