Edgewater is a leading strategic consulting firm that focuses onhelping companies drive transformational change
Wakefield, MA – August 3, 2011 – Edgewater Technology, Inc. (NASDAQ: EDGW, www.edgewater.com, “Edgewater” or the “Company”), a strategic consulting firm that brings a synergistic blend of business advisory and product-based consulting services to its clients, today announced financial results for its second quarter ended June 30, 2011.
Financial results and utilization for the quarter ended June 30, 2011:
Total revenue increased 17.3% to $27.4 million compared to $23.4 million in the second quarter of 2010;
Service revenue increased 7.1% to $18.6 million compared to service revenue of $17.4 million in the second quarter of 2010;
Gross profit was $10.8 million, or 39.5% of total revenue, compared to $8.6 million, or 36.8% of total revenue, in the second quarter of 2010;
Gross margin related to service revenue was 36.3% compared to 39.2% in the second quarter of 2010;
Utilization was 72.2% compared to 75.7% for the second quarter of 2010;
Net income was $395 thousand, or $0.03 per diluted share, compared to a net loss of $(90) thousand, or $(0.01) per diluted share, in the second quarter of 2010;
Adjusted EBITDA amounted to $2.9 million, or 10.5% of total revenue and $0.23 per diluted share, compared to $1.5 million, or 6.4% of total revenue and $0.12 per diluted share, in the second quarter of 2010; and
Cash flow provided by operating activities was $2.9 million, compared to cash flow provided by operating activities of $3.7 million during the second quarter of 2010.
Financial results and utilization for the six months ended June 30, 2011:
Total revenue increased 16.9% to $51.0 million compared to $43.6 million during the first six months of 2010;
Service revenue increased 15.9% to $38.3 million compared to service revenue of $33.1 million during the first six months of 2010;
Gross profit was $19.4 million, or 38.1% of total revenue, compared to $15.3 million, or 35.1% of total revenue, during the first six months of 2010;
Gross margin related to service revenue was 37.4% compared to 36.8% during the first six months of 2010;
Utilization was 76.2% compared to 75.5% for the first six months of 2010;
Net income was $705 thousand, or $0.06 per diluted share, compared to a net loss of $(729) thousand, or $(0.06) per diluted share, during the first six months of 2010;
Adjusted EBITDA amounted to $4.0 million, or 7.9% of total revenue and $0.33 per diluted share, compared to $1.6 million, or 3.6% of total revenue and $0.13 per diluted share, during the first six months of 2010; and
Cash flow provided by operating activities was $1.7 million compared to cash flow used in operating activities of $(2.2) million during the first six months of 2010.
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.
“Edgewater’s bottom line and financial strength continue to improve. The year-over-year improvement in our second quarter operating results indicates that we are moving in the right direction and that we continue to gain operating leverage in connection with our revenue growth. On a year-over-year basis, we are reporting growth in total revenue and service revenue. We have increased operating profitability and have generated positive income and cash flows from operations in both the current quarter and year-to-date periods,” stated Shirley Singleton, Edgewater’s Chairman, President and Chief Executive Officer.
“As mentioned in our first quarter earnings call, we did anticipate volatility in the second quarter as it relates to sequential service revenue. One major factor was the planned ramp down of Fullscope’s process-related service contracts. Fullscope’s delivery excellence allowed the customer to take over their application earlier than originally planned. Another key factor was related to isolated customer decisions to delay the launch new projects. Both of these factors caused our bench headcount to rise, creating a drop in our sequential billable consultant utilization rate, and a decrease in our sequential service revenue and related service revenue gross margin,” continued Ms. Singleton.
“The end of the second quarter also marked the completion of the Fullscope earnout. Subsequent to June 30, 2011, the Company will no longer receive certain service revenue and royalty revenue related to the process-related contracts. During the quarter, the Company recorded a $1.4 million increase in the estimated fair value of contingent earnout consideration payable to the former stockholders of Fullscope, which was recorded as a current period increase to selling, general and administrative expense. This increase was a result of higher than anticipated royalty revenue received by the Company during the second quarter,” added Ms. Singleton.
“As we enter the third quarter, we note a number of positive trends. Strong second quarter software sales provide a strong foundation for third quarter ERP services, all offerings have maintained a high closure rate on proposed deals, while expanding their respective pipelines, average deal size values are increasing and we continue to post strong growth in our EPM offerings. Given this and consideration of traditional third quarter seasonality, we anticipate that third quarter service revenue will be slightly up, as compared to second quarter service revenue. We anticipate that service revenue will be up on a year-over-year basis,” concluded Ms. Singleton.
Edgewater has scheduled a conference call on Wednesday, August 3, at 10:00 a.m. (ET) to discuss its second quarter 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 82093347) from 1:00 p.m. ET Wednesday, August 3 through 11:59 p.m. ET Wednesday, August 17.
Edgewater is a strategic consulting firm that brings a synergistic blend of advisory and product-based consulting services to our client base. 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. We work with clients to reduce costs, improve process and increase revenue through the judicious use of technology.
Edgewater provides services under brand names such as Edgewater Technology, Edgewater Ranzal, Edgewater Fullscope and Edgewater SAP. To learn more, visit 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 expected third quarter service revenue on a sequential basis from the second quarter of 2011, our expected third quarter service revenue on a year-over-year basis from the third quarter of 2010, the continuation of bid and proposal activity across the enterprise and our ability to capitalize on our customer’s appetite for services. 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”); Enterprise Performance Management (“EPM”) and Enterprise Resource Planning (“ERP”) 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 critical accounting policies and estimates; (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) 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; (10) the failure of the marketplace to embrace advisory and product-based consulting services; and/or (11) 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 Item I “Business – Factors Affecting Finances, Business Prospects and Stock Volatility” in our 2010 Annual Report on Form 10-K filed with the SEC on March 31, 2011. 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