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Edgewater Reports Second Quarter 2014 Results
Wakefield, MA – July 30, 2014 – Edgewater Technology, Inc. (NASDAQ: EDGW), a leading consulting firm that brings a blend of classic and product-based consulting services to its clients, reported financial results for the second quarter ended June 30, 2014.
Service revenue increased 14% to a record $24.5 million;
Introduced Fullscope EDGE for AX, intellectual property designed to complement existing functionality in Microsoft Dynamics AX 2012 enterprise resource planning;
Recognized as 2014 Microsoft Dynamics Industry Partner of the Year;
Received the inaugural 2014 Customer Reference Excellence Award from the U.S. Microsoft Dynamics Customer Reference Team; and
Received $1.9 million in connection with the successful resolution of Fullscope Acquisition-related escrow claims.
Total revenue was $29.2 million compared to $27.9 million;
Service revenue was $24.5 million compared to $21.6 million;
Gross profit was $10.9 million, or 37.3% of total revenue, compared to $10.0 million, or 36.0% of total revenue;
Gross profit margin related to service revenue was 40.5% compared to 37.7%;
Utilization was 77.6% compared to 75.0%;
Net income was $1.7 million, or $0.13 per diluted share, compared to net income of $1.4 million, or $0.12 per diluted share;
Adjusted EBITDA (a non-GAAP measure) was $2.7 million, or 9.4% of total revenue and $0.21 per diluted share (see "Non-GAAP Financial Measures" below for further discussion of this non-GAAP term), compared to adjusted EBITDA of $2.4 million, or 8.7% of total revenue and $0.21 per diluted share; and
Cash flow provided by operating activities was $3.5 million compared to cash flow used in operating activities of $(1.4) million.
Total revenue was $56.8 million compared to $51.4 million;
Service revenue was $48.0 million compared to $41.3 million;
Gross profit was $21.0 million, or 36.9% of total revenue, compared to $17.2 million, or 33.4% of total revenue;
Gross profit margin related to service revenue was 39.7% compared to 35.2%;
Utilization was 77.8% compared to 72.5%;
Net income was $2.4 million, or $0.19 per diluted share, compared to net income of $525,000, or $0.05 per diluted share;
Adjusted EBITDA (a non-GAAP measure) was $4.7 million, or 8.3% of total revenue and $0.36 per diluted share, compared to adjusted EBITDA of $2.6 million, or 5.1% of total revenue and $0.23 per diluted share; and
Cash flow provided by operating activities was $819,000 compared to cash flow used in operating activities of $(3.6) million.
"The second quarter of 2014 was a very busy and productive quarter with numerous awards and significant growth in all of our important operating metrics," said Shirley Singleton, Edgewater's chairman, president and CEO. "We experienced organic growth in each of our service offerings —on both a year-over-year and sequential quarterly basis— and converted a significant amount of pipeline activity to signed projects during the first six months, leading us to add to our billable headcount to meet the demand.
"With an eye towards future growth, we continue to expand and invest in the breadth of our offerings on many fronts. In fact, we recently announced an alliance with three top Microsoft Dynamics providers in Belgium, Germany and New Zealand, which will help better serve our growing international base of process manufacturing customers. Additionally, our investment in Oracle's Planning and Budgeting Cloud Service is gaining traction not only as an internal tool, but also assisting with our new customer acquisition.
"Our sales and marketing teams are actively filling our sales pipeline with new opportunities, providing favorable momentum heading into the third quarter. However, we remain cautious in our ability to drive service revenue growth in the third quarter given the influence of summer vacations on our utilization rates. Taking this into consideration, we still anticipate that service revenue in the third quarter of 2014 will be slightly up sequentially and grow double-digits compared to the third quarter of 2013."
Edgewater has scheduled a conference call today (Wednesday, July 30, 2014) at 10:00 a.m. Eastern time to discuss its second quarter 2014 results.
Date: Wednesday, July 30, 2014Time: 10:00 a.m. Eastern TimeDial-in number: 1-877-713-9347Webcast: http://ir.edgewater.com/
Date: Wednesday, July 30, 2014
Time: 10:00 a.m. Eastern Time
Dial-in number: 1-877-713-9347
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#: 63823304) after 1:00 p.m. Eastern time through August 13, 2014.
Edgewater Technology, Inc. (NASDAQ: EDGW) is a strategic consulting firm delivering a blend of classic 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 Ranzal and Edgewater Fullscope. To learn more, please visit www.edgewater.com.
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 2014 service revenue, changes in our third quarter 2014 service revenue on both a sequential and year-over-year basis, the success of future growth initiatives and investments, and improvements in sales pipeline activity and our ability to successfully convert sales pipeline opportunities to signed contracts. 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 2013 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) termination by clients of their contracts with us or inability or unwillingness of clients to pay for our services, which may impact our accounting assumptions; (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 carry forward under applicable tax laws; (12) the failure of the marketplace to embrace advisory and product-based consulting services; (13) changes in our utilization levels; and/or (14) 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 2013 Annual Report on Form 10-K filed with the SEC on March 10, 2014. 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 the Company believes that the expectations in the forward-looking statements are reasonable, they cannot guarantee future results, levels of activity, performance, growth, earnings per share or achievements. However, neither the Company nor any other person assumes responsibility for the accuracy and completeness of such statements. Except as required by law, the Company undertakes no obligation to update any of the forward-looking statements after the date of this Press Release to conform such statements to actual results.