Edgewater Reports Q4 2011 Results

18% Year-over-Year Growth in Fourth Quarter Service Revenue; Exceeds $100 Million in Full Year 2011 Total Revenue​

Wakefield, MA – February 29, 2012 – Edgewater Technology, Inc. (NASDAQ: EDGW, www.edgewater.com, “Edgewater” or the “Company”), a strategic consulting firm that brings a blend of business advisory and product-based consulting services to its clients, today announced financial results for its fourth quarter and fiscal year ended December 31, 2011.

Fourth Quarter Results

Financial results and utilization for the quarter ended December 31, 2011:

  • Total revenue increased 12.2% to $26.4 million compared to $23.5 million in the fourth quarter of 2010;

  • Service revenue increased 17.9% to $20.8 million compared to service revenue of $17.7 million in the fourth quarter of 2010;

  • Gross profit was $9.9 million, or 37.5% of total revenue, compared to $9.0 million, or 38.0% of total revenue, in the fourth quarter of 2010;

  • Gross profit margin related to service revenue was 41.6% compared to 39.5% in the fourth quarter of 2010;

  • Utilization was 75.6% in each of the fourth quarter of 2011 and the fourth quarter of 2010;

  • Net loss was $(1.9) million, or $(0.17) per diluted share, compared to a net loss of $(157) thousand, or $(0.01) per diluted share, in the fourth quarter of 2010.  The reported net loss in the fourth quarter of 2011 is attributable to a non-cash lease abandonment charge of $2.2 million, while the Company’s fourth quarter 2010 net loss was directly associated with the Company’s recording of $950 thousand of potential sales and use tax liability discovered in connection with our investigation into the Fullscope embezzlement issue as a period expense;

  • Adjusted EBITDA was $1.6 million, or 6.1% of total revenue and $0.14 per diluted share, compared to $2.0 million, or 8.3% of total revenue and $0.16 per diluted share, in the fourth quarter of 2010; and

  • Cash flow used in operating activities was $(25) thousand compared to cash flow provided by operating activities of $1.6 million during the fourth quarter of 2010.  Fourth quarter 2011 cash flow from operating activities was affected by the timing of collections on outstanding receivable balances at the end of the year.

Full Year Results

Financial results and utilization for the fiscal year ended December 31, 2011:

  • Total revenue increased 15.7% to $102.4 million compared to $88.5 million in fiscal 2010;

  • Service revenue increased 15.1% to $79.2 million compared to $68.8 million in fiscal 2010;

  • Gross profit was $38.7 million, or 37.8% of total revenue, compared to $32.1 million, or 36.2% of total revenue, in fiscal 2010;

  • Gross profit margin related to service revenue was 39.3% compared to 38.1% in fiscal 2010;

  • Utilization was 75.8% compared to 73.5% in fiscal 2010;

  • Net income was $344 thousand, or $0.03 per diluted share, compared to a net loss of $(23.6) million, or $(1.93) per diluted share, in fiscal 2010. Our 2011 full year net income was reduced by a fourth quarter non-cash lease abandonment charge of $2.2 million, while 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 and, to a lesser extent, our fourth quarter charge of $950 thousand of potential sales and use tax liability discovered in connection with our investigation into the Fullscope embezzlement issue as a period expense;

  • Adjusted EBITDA was $7.9 million, or 7.7% of total revenue and $0.65 per diluted share, compared to Adjusted EBITDA of $4.8 million, or 5.5% of total revenue and $0.40 per diluted share, in fiscal 2010; and

  • Cash flow provided by operating activities was $5.8 million compared to cash flow provided by operating activities of $698 thousand in fiscal 2010.

Adjusted EBITDA, Adjusted EBITDA per Diluted Share and Adjusted EBITDA as a Percentage of Total Revenue 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. 

Business Trends; Outlook

“2011 has been a banner year for Edgewater. For the full year, we achieved a significant milestone by exceeding $100 million in total revenues and are reporting double-digit growth in both total revenue and service revenue.  Other positive highlights for the year include improved gross margins, the stabilization of billable consultant utilization rates, improved Adjusted EBITDA performance and the generation of solid operating cash flow,” commented Shirley Singleton, Edgewater’s Chairman, President and Chief Executive Officer.“We are also pleased to see that we were able to hold the line during the fourth quarter of 2011, which is typically a soft quarter due to the seasonal influences of the holiday season.  We are reporting service revenue growth on both a year-over-year and sequential basis and are reporting Adjusted EBITDA of $1.6 million during the fourth quarter of 2011, despite the absence of quarterly revenue associated with the Fullscope process-related contracts and our strategic investment in the development of new intellectual property focused around the Microsoft Dynamics AX platform,” continued Ms. Singleton. “As for 2012, we continue to see expansion in the Microsoft and Oracle channels.  While the first quarter has historically been one of our lower service revenue quarters, we are anticipating first quarter 2012 service revenue to be flat on a sequential basis and up on a year-over-year basis.  For the 2012 full year, we are targeting double-digit organic service revenue growth, as compared to 2011 full year service revenue,” concluded Ms. Singleton.

Selected Financial Data
 

Fourth Quarter and Full Year Conference Call Details

Edgewater has scheduled a conference call for Wednesday, February 29, at 10:00 a.m. (ET) to discuss its fourth quarter and full year 2011 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 conference call can be accessed via Edgewater’s investor relations web site at http://ir.edgewater.com or by dialing 855-859-2056 (Conference ID: 49865055) from 1:00 p.m. ET Wednesday, February 29 through 11:59 p.m. ET Wednesday, March 14.

About Edgewater

Edgewater is a strategic consulting firm that brings a 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 and Edgewater Fullscope.  To learn more, visit www.edgewater.com or call 800-410-4014.

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 first quarter 2012 service revenue on both a sequential and year-over-year basis, our targeted 2012 full year service revenue growth on a year-over-year basis and our anticipated expansion in Microsoft and Oracle channels.  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; (11) changes in the market for leased office space 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 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.