Edgewater is a leading strategic consulting firm that focuses onhelping companies drive transformational change
Wakefield, MA – February 26, 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 fourth quarter and full year ended December 31, 2013.
Service revenue increased 12% to $21.9 million;
Adjusted EBITDA increased 97% to $2.7 million;
Increased cash and cash equivalents to $20.3 million, compared to $16.7 million in the fourth quarter of 2012; and
Successfully completed Microsoft Process Industries 2 ("PI2") development and training services.
Total revenue was $26.8 million compared to $24.2 million;
Service revenue was $21.9 million compared to $19.5 million;
Gross profit was $10.7 million, or 40.1% of total revenue, compared to $8.4 million, or 34.8% of total revenue;
Gross profit margin related to service revenue was 41.2% compared to 36.0%;
Utilization was 73.7% compared to 67.7%;
Net income was $32.4 million, or $2.55 per diluted share, compared to net income of $345,000, or $0.03 per diluted share. The reported net income for the fourth quarter of 2013 included a $30.4 million tax benefit in connection with the reversal of a majority of the Company's valuation allowance against the carrying value of its gross deferred tax assets;
Adjusted EBITDA (a non-GAAP measure) was $2.7 million, or 10.1% 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 $1.4 million, or 5.7% of total revenue and $0.12 per diluted share; and
Cash flow provided by operating activities was $2.4 million compared to cash flow provided by operating activities of $3.9 million.
Adjusted EBITDA increased 39% to $7.9 million;
Secured first time engagements with 92 new customers;
Repurchased 365,000 shares of common stock at an aggregate purchase price of $1.5 million, or $4.14 per share;
Secured a $10.0 million credit facility to fund strategic growth initiatives; and
Acquired a Microsoft Dynamics-based Trade Promotion Management software asset and intellectual property.
Total revenue was $103.6 million compared to $100.9 million;
Service revenue was $84.6 million compared to $83.1 million;
Gross profit was $37.6 million, or 36.3% of total revenue, compared to $35.3 million, or 35.0% of total revenue;
Gross profit margin related to service revenue was 37.7% compared to 37.9%;
Utilization was 72.4% compared to 71.5%;
Net income was $34.7 million, or $2.88 per diluted share, compared to net income of $1.4 million, or $0.13 per diluted share. The reported net income for full year 2013 included a $30.4 million tax benefit in connection with the reversal of a majority of the Company's valuation allowance against the carrying value of its gross deferred tax assets;
Adjusted EBITDA (a non-GAAP measure) was $7.9 million, or 7.6% of total revenue and $0.65 per diluted share (see "Non-GAAP Financial Measures" below for further discussion of this non-GAAP term), compared to adjusted EBITDA of $5.7 million, or 5.6% of total revenue and $0.49 per diluted share; and
Cash flow provided by operating activities was $4.7 million compared to cash flow provided by operating activities of $8.8 million.
"During the fourth quarter of 2013, our profitability was in part fueled by an improvement in billable consultant utilization and software sales," said Shirley Singleton, Edgewater's chairman, president and CEO. "We continued to experience organic revenue growth while keeping our expenses in-line and generated leverage by combining our consulting services with the development and monetization of intellectual property. Further, we were encouraged by the robust sales activity and closings we experienced across each of our service offering channels during the quarter.
"Our Microsoft Dynamics AX ERP offering was particularly strong during the fourth quarter and helped secure many of the large-scale engagements we closed in late December. As we have stated, we will continue to expand our expertise in the Microsoft channel by using vertically focused intellectual property that can serve as a branded sales differentiator and delivery accelerant.
"Given the strength of our fourth quarter signings, we anticipate that service revenue in the first quarter of 2014 will be up sequentially and will experience double-digit growth compared to the first quarter of 2013."
The Company has deferred tax assets that have arisen as a result of timing differences (primarily generated in connection with historical goodwill and intangible asset impairment charges), net operating loss carryforwards and tax credits. Since 2010, the Company has provided a full valuation allowance against its deferred tax assets, reducing the carrying value of these assets on its balance sheet to zero.
Edgewater is required to continually evaluate the need for a valuation allowance and has determined it is more likely than not that in the future the Company will generate sufficient pre-tax income to utilize substantially all of its deferred tax assets. An important factor in the assessment was that during 2013, the Company moved into a three-year cumulative pre-tax profit position. Therefore, as required by the applicable accounting rules, the Company reduced the previously established valuation allowance, which has resulted in a non-cash income tax benefit during the fourth quarter of $30.4 million.
Edgewater has scheduled a conference call today (Wednesday, February 26, 2014) at 10:00 a.m. Eastern time to discuss its fourth quarter and full year 2013 results.
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#: 35316343) after 1:00 p.m. Eastern time through March 12, 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 first quarter 2014 service revenue, development and monetization of intellectual property, sales of our Dynamics AX ERP service offering, our ability to expand our expertise in the Microsoft channel by using vertically focused intellectual property that can serve as a branded sales differentiator and delivery accelerant, improvements in sales pipeline activity and the conversion of our sales pipeline 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 2012 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 2012 Annual Report on Form 10-K filed with the SEC on March 8, 2013. 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.