Edgewater is a leading strategic consulting firm that focuses onhelping companies drive transformational change
Wakefield, MA – August 4, 2010 – Edgewater Technology, Inc. (NASDAQ: EDGW, http://www.edgewater.com/, “Edgewater” or the “Company”), a consulting firm that brings a synergistic blend of specialty services to its clients in the areas of business advisory, analytics, data management and technology, today announced financial results for its second quarter ended June 30, 2010.
Financial results and utilization for the quarter ended June 30, 2010:
Total revenue increased 94.0%, to $23.4 million, compared to $12.0 million in the second quarter of 2009;
Service revenue increased 57.9%, to $17.4 million, compared to $11.0 million in the second quarter of 2009;
Gross profit was $8.6 million, or 36.8% of total revenue, compared to $3.1 million, or 26.0% of total revenue in the second quarter of 2009;
Gross profit margin related to service revenue was 39.2%, compared to 28.2% in the second quarter of 2009;
Utilization was 75.7%, compared to 62.5% during the second quarter of 2009;
Net loss was $(90) thousand, or $(0.01) per diluted share, compared to a net loss of $(1.3) million, or $(0.11) per diluted share, in the second quarter of 2009. Current quarter net loss was impacted by $562 thousand in non-routine operating expenses associated with our acquisition of Meridian Consulting International and the discovery of employee embezzlement at Fullscope, Inc.;
Adjusted EBITDA amounted to $1.4 million, or 6.2% of total revenue and $0.12 per diluted share, compared to an Adjusted EBITDA loss of $(1.5) million, or $(0.13) per diluted share, during the second quarter of 2009; and
Cash flow provided by operating activities was $3.7 million, compared to cash flow provided by operating activities of $1.4 million during the second quarter of 2009.
Financial results and utilization for the six months ended June 30, 2010:
Total revenue increased 62.1%, to $43.6 million, compared to $26.9 million during the first six months of 2009;
Service revenue increased 34.7%, to $33.1 million, compared to $24.6 million during the first six months of 2009;
Gross profit was $15.3 million, or 35.1% of total revenue, compared to $7.8 million, or 28.9% of total revenue during the first six months of 2009;
Gross profit margin related to service revenue was 36.8%, compared to 31.1% during the first six months of 2009;
Utilization was 75.5%, compared to 65.2% during the first six months of 2009;
Net loss amounted to $(729) thousand, or $(0.06) per diluted share, compared to a net loss of $(1.7) million, or $(0.14) per diluted share, during the first six months of 2009. Our 2010 year-to-date net loss was impacted by $562 thousand in non-routine operating expenses associated with our acquisition of Meridian Consulting International and the discovery of employee embezzlement at Fullscope, Inc.;
Adjusted EBITDA amounted to $1.5 million, or 3.4% of total revenue and $0.12 per diluted share, compared to an Adjusted EBITDA loss of $(1.6) million, or $(0.13) per diluted share, during the first six months of 2009; and
Cash flow used in operating activities was $(2.2) million, compared to cash flow used in operating activities of $(1.0) million during the first six months of 2009.
Adjusted EBITDA and Adjusted 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 second quarter of 2010, the Company discovered embezzlement at Fullscope, Inc., one of our wholly-owned subsidiaries (the “Fullscope Embezzlement Issue”). We have completed our investigation as it relates to the embezzlement activities that occurred during 2010 and have concluded that the embezzlement activities did not have a material impact upon our previously issued 2010 financial statements. We did incur legal and accounting related expenses during the second quarter and anticipate that we may continue to incur additional expenses associated with this issue in the future. We believe that we may be able to recover some, if not all, of the receivable amounts embezzled, plus the professional expenses we have incurred to-date, or will incur in the future, addressing this situation.
“The second quarter was a very positive step for the Company on its road to recovery. We are reporting organic growth in revenue on both a sequential and year-over-year basis and related improvement in our gross margin and other profitability metrics,” commented Shirley Singleton, Edgewater’s Chairman, President and Chief Executive Officer.
“The improvement in our gross margin and profitability metrics in the second quarter was driven by the sequential increase in both service and total revenue, combined with our ability to maintain utilization at 75%, while adding 30 billable resources. From a revenue perspective, we were pleased to see the continuation of increased bid and proposal activity as it relates to our organic core service offerings. This activity, combined with the continued strong revenue performance of Fullscope’s ERP service offerings, has favorably impacted our second quarter revenue and profitability. Additionally, during the quarter, we began to see the anticipated cross selling synergies resulting from the combination of our technology and management service offerings with Fullscope’s ERP-related service offerings,” continued Ms. Singleton.
“Overall, as we enter the third quarter, our business appears to be headed in the right direction. As always, we continue to view forward looking service revenue with a conservative eye given the possibility of renewed economic uncertainty and the impact it may have upon our customer’s capital spending initiatives. Because of this, we are anticipating that third quarter service revenue will be flat with an upward bias compared to the second quarter of 2010,” concluded Ms. Singleton.
Edgewater has scheduled a conference call on Wednesday, August 4, at 10:00 a.m. (ET) to discuss its second quarter 2010 financial results and other matters. To listen to the call, you can participate by webcast on Edgewater’s investor relations website at http://ir.edgewater.com/ or you can dial 877-713-9347. Investors are advised to dial into the call at least ten minutes prior to the call to register.
A replay of the call can be accessed via Edgewater’s investor relations website at http://ir.edgewater.com/ or by dialing 800-642-1687 (domestic) and 706-645-9291 (international) (pass code 86977967) from 1:00 p.m. ET Wednesday, August 4 through 11:59 p.m. ET Wednesday, August 18.
Edgewater is a consulting firm that brings a synergistic blend of specialty services to its clients in the areas of business advisory, analytics, data management and technology. We develop business strategies and technology solutions that address our clients’ specific needs while providing them with an increased competitive advantage. Headquartered in Wakefield, MA, we typically go to market both vertically by industry and horizontally by product and technology specialty and provide our clients with a wide range of business and technology offerings. To learn more, visit http://www.edgewater.com/ or call 800-410-4014.
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 2010 outlook, future revenue and growth, cost savings and cost control efforts, customer spending outlook, general economic trends, IT service demand, future revenue and revenue mix, utilization, training and new service offerings, significant customers, backlog, competitive and strategic initiatives, growth plans, potential stock repurchases, future results, tax consequences and liquidity needs . In some cases, you can identify forward-looking statements by terminology such as “may,” “should,” “believe,” “anticipate,” “forecast,” “project,” “target,” “potential,” “estimate,” “encourage,” “opportunity,” “goal,” “objective,” “could,” “expect,” “intend,” “plan,” “focus,” “build,” “strategy,” “maximize,” “commitment,” “create,” “implement,” “seek,” “establish,” “pursue,” “continue,” “can,” or terms of similar meaning. 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 Business Intelligence (“BI”) and Enterprise Performance Management (“EPM”) solutions, custom development and system integration services and/or declines 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; (4) inability to execute upon growth objectives, including new services and growth in entities acquired by our Company; (5) adverse developments and volatility involving economic, geopolitical or technology market conditions; (6) unanticipated events or the occurrence of fluctuations or variability in the matters identified under “Critical Accounting Policies;” (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; and/or (11) the failure of the marketplace to embrace specialty consulting 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 2009 Annual Report on Form 10-K filed with the SEC on March 15, 2010. 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.