Edgewater is a leading strategic consulting firm that focuses onhelping companies drive transformational change
Wakefield, MA – February 25, 2015 – 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 periods ended December 31, 2014.
Service revenue increased 7% to $23.5 million;
Year-over-year service revenue grew across all offerings; and
Continued strong growth trend in Dynamics AX ERP service offering.
Total revenue was $27.4 million compared to $26.8 million;
Service revenue was $23.5 million compared to $21.9 million;
Gross profit was $10.0 million, or 36.3% of total revenue, compared to $10.7 million, or 40.1% of total revenue;
Gross profit margin related to service revenue was 36.9% compared to 41.2%;
Utilization was 73.9% compared to 73.7%;
Net income was $656,000, or $0.05 per diluted share, compared to net income of $32.4 million, or $2.55 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 deferred tax assets;
Adjusted EBITDA (a non-GAAP measure) was $1.8 million, or 6.4% of total revenue, and $0.13 per diluted share (see "Non-GAAP Financial Measures" below for further discussion of this non-GAAP term), compared to adjusted EBITDA of $2.7 million, or 10.1% of total revenue, and $0.21 per diluted share; and
Cash flow provided by operating activities was $380 thousand compared to $2.4 million.
Service revenue increased 14% to a record $96.6 million;
Adjusted EBITDA increased 14% to $8.9 million;
Generated $5.8 million in operating cash flow; and
Repurchased 142,798 shares of common stock for an aggregate purchase price of $967,000, or $6.77 per share.
Total revenue was $113.0 million compared to $103.6 million;
Service revenue was $96.6 million compared to $84.6 million;
Gross profit was $41.4 million, or 36.6% of total revenue, compared to $37.6 million, or 36.3% of total revenue;
Gross profit margin related to service revenue was 39.0% compared to 37.7%;
Utilization was 76.7% compared to 72.4%;
Net income was $4.1 million, or $0.31 per diluted share, compared to net income of $34.7 million, or $2.88 per diluted share. The reported net income for the 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 was $9.0 million, or 7.9% of total revenue, and $0.68 per diluted share, compared to adjusted EBITDA of $7.9 million, or 7.6% of total revenue, and $0.65 per diluted share; and
Cash flow provided by operating activities was $5.8 million compared to $4.7 million.
"During 2014, we indicated that we were striving for double-digit service revenue growth," said Shirley Singleton, Edgewater's chairman, president and CEO. "I am pleased to report a 14% year-over-year increase in full year service revenue and a meaningful increase in service gross margin. The strong organic growth and the associated gross margin generated from this growth enabled us to offset the absence of the significant margin contribution that we generated in 2013 from the sale of internally generated intellectual property.
"Despite a challenging holiday season, fourth quarter service revenue increased 7% on a year-over-year basis, with our Dynamics AX ERP offering driving the lion's share of the growth. As highlighted during our third quarter earnings call, some of our customers did delay the start of newly signed projects.
"The project start delays, which occurred primarily in our EPM service offering, continued throughout January, creating a slow start in converting backlog into revenue in the early stages of the first quarter of 2015. Projects have now started and sales wins have been very strong, creating a nice uptick in our backlog. However, the timing of the projects starts has made it challenging to convert available backlog in to first quarter service revenue. Given this, we anticipate that service revenue will be flat sequentially and flat compared to the first quarter of 2014.
"Demand for our specialty services remains strong and we expect to continue to see organic growth in 2015. We will look to expand cloud-based services in our channels and as always, we remain open to tuck-in acquisitions that expand our base of specialty services."
Edgewater has scheduled a conference call today (Wednesday, February 25, 2015) at 10:00 a.m. Eastern time to discuss its fourth quarter and full year 2014 financial results.
Date: Wednesday, February 25, 2015Time: 10:00 a.m. Eastern TimeDial-in number: 1-877-713-9347Webcast: http://ir.edgewater.com/
Date: Wednesday, February 25, 2015
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 1-404-537-3406 (Conference ID#: 70999244) after 1:00 p.m. Eastern time through March 11, 2015.
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 2015 service revenue, changes in our first quarter 2015 service revenue on both a sequential and year-over-year basis, the timing of the start of delayed projects, our ability to convert backlog into service revenue, sales pipeline activity, our ability to successfully convert sales pipeline opportunities to signed contracts, 2015 organic growth in specialty services and expansion of cloud-based 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 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; (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; and/or (13) changes in our utilization levels. 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, it 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.