Edgewater is a leading strategic consulting firm that focuses onhelping companies drive transformational change
Wakefield, MA – March 2, 2011 – 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 fourth quarter and fiscal year ended December 31, 2010, which results are preliminary and subject to a final review as it relates to software product revenue recognition.
Preliminary financial results and utilization for the quarter ended December 31, 2010:
Total revenue increased 107% to $23.5 million compared to $11.4 million in the fourth quarter of 2009;
Service revenue increased 65% to $17.7 million compared to service revenue of $10.7 million in the fourth quarter of 2009;
Gross profit was $9.0 million, or 38.0% of total revenue, compared to $4.1 million, or 36.2% of total revenue in the fourth quarter of 2009;
Gross profit margin related to service revenue was 39.5% compared to 38.4% in the fourth quarter of 2009;
Utilization was 75.6% compared to 66.5% for the fourth quarter of 2009;
Net income (loss) was $675 thousand, or $0.06 per diluted share, compared to $(1.9) million, or $(0.15) per diluted share, in the fourth quarter of 2009;
Adjusted EBITDA amounted to $1.5 million, or $0.12 per diluted share, compared to $(165) thousand, or $(0.01) per diluted share, in the fourth quarter of 2009; and
Cash flow provided by operating activities was $1.6 million compared to cash flow provided by operating activities of $57 thousand during the fourth quarter of 2009.
Preliminary financial results and utilization for the fiscal year ended December 31, 2010:
Total revenue increased 76.8% to $88.5 million compared to $50.1 million in fiscal 2009;
Service revenue increased 49.3% to $68.8 million compared to $46.1 million in fiscal 2009;
Gross profit was $32.1 million, or 36.2% of total revenue, compared to $16.1 million, or 32.1% of total revenue in fiscal 2009;
Gross profit margin related to service revenue was 38.1% compared to 34.5% in fiscal 2009;
Utilization was 73.5% compared to 65.5% in fiscal 2009;
Net loss amounted to $(22.7) million, or $(1.86) per diluted share, compared to net loss of $(3.8) million, or $(0.32) per diluted share, in fiscal 2009. Our 2010 full year net loss was primarily the result of a third quarter non-cash charge of $21.9 million in connection with an increase to our previously established deferred tax valuation allowance;
Adjusted EBITDA amounted to $3.4 million, or $0.28 per diluted share, compared to Adjusted EBITDA of $(1.7) million, or $(0.14) per diluted share, in fiscal 2009; and
Cash flow provided by operating activities was $698 thousand compared to cash flow used in operating activities of $(243) thousand in fiscal 2009.
We are issuing these preliminary results because we are in the process of completing a final review of our software product revenue recognition procedures. We will issue our final financial results for the fourth quarter and full year 2010 upon the completion of this review, which will occur before the filing of our Annual Report on Form 10-K, which is due on March 31, 2011.
The Company acquired Fullscope, Inc. and Meridian Consulting International (the “Acquired Companies”) on December 31, 2009 and May 17, 2010, respectively. The operating results associated with the Acquired Companies have been included in Edgewater’s consolidated operating results since the dates of the respective acquisitions.
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 2010, Edgewater met several strategic goals that we set, namely: returning to double-digit organic growth, improving operational performance, providing positive cash flow and developing our own intellectual property assets,” stated Shirley Singleton, Edgewater’s Chairman, President and Chief Executive Officer. “We are pleased to report improved and/or sustained quarterly operating metrics on both a sequential and year-over-year basis. The fourth quarter and overall improvements in our business are directly attributable to the strategic initiatives we planned in 2009 and executed in 2010. We introduced a new EPM service offering, added a large Microsoft ERP-centric business and augmented our custom service offerings with product-based consulting."
Ms. Singleton continued, “The cumulative effect of these changes is reflected in our year-over-year growth in total revenue and service revenue, improvement in our billable consultant utilization rate and improvement in our gross margin. We look forward to 2011 as a year of continuing growth,” stated Ms. Singleton.
“Traditionally, we have entered the first quarter with anticipated seasonal softness in our first quarter sequential service revenues. This has historically been attributable to our EPM-related service offerings. Entering the first quarter of 2011, we are not seeing seasonal softness in our EPM-related service offerings. Based upon this and in consideration of our fourth quarter bid and proposal activity, we are anticipating first quarter 2011 service revenue to be up on a sequential basis from the fourth quarter of 2010,” concluded Ms. Singleton.
As previously reported, during the second quarter of 2010 the Company identified fraudulent activities within its recently acquired Fullscope Division. We are in the final stages of our investigation of this matter. The consolidated financial statements as of December 31, 2010 include an estimated liability accrual of $950 thousand for underpayment of sales and use tax liabilities in the Fullscope Division during the years 2003 through 2009 and a corresponding receivable in the same amount. We expect to be able to recover amounts related to this estimated liability through a fully funded escrow account as provided for under the indemnification provisions of the Agreement and Plan of Merger and Reorganization entered into in connection with the Fullscope acquisition.
Edgewater has scheduled a conference call on Wednesday, March 2, at 10:00 a.m. (ET) to discuss its preliminary fourth quarter and full year 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 42519083) from 1:00 p.m. ET Wednesday, March 2 through 11:59 p.m. ET Wednesday, March 16.
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 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 growth in 2011, the recoverability of funds from Fullscope escrow, and the expected increase in first quarter 2011 service revenue on a sequential basis from the fourth quarter of 2010. 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 forwardlooking 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; (11) the failure of the marketplace to embrace specialty consulting 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 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. 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.