Exhibit 99.1
Edgewater Technology Announces Results for Fourth Quarter and Full
Year 2003; Full Year Revenue Growth of 34%
WAKEFIELD, Mass.--(BUSINESS WIRE)--Feb. 11, 2004--Custom
development and system integration consulting firm, Edgewater
Technology, Inc. (NASDAQ: EDGW, www.edgewater.com, "Edgewater
Technology" or the "Company") today announced financial results for
its fourth quarter and fiscal year ended December 31, 2003. The
Company reported a 34% increase in revenue and EPS from continuing
operations of $0.18 for the fiscal year 2003.
Fourth Quarter Results
Actual financial results and utilization for the December 31, 2003
quarter were as follows:
-- Revenue decreased 2% to $6.8 million, compared to $6.9 million
in the third quarter of 2003 and increased 45%, compared to
revenue of $4.7 million during the fourth quarter of 2002;
-- Gross profit was $3.0 million, compared to $3.2 million in the
third quarter of 2003 and $1.9 million for the fourth quarter
of 2002;
-- Gross profit margin was 45%, compared to 46% in the third
quarter of 2003 and 41% for the fourth quarter of 2002;
-- Utilization was 74% for the fourth quarter, compared to 80%
during the third quarter of 2003 and 73% for the fourth
quarter of 2002;
-- Income from continuing operations was $1.6 million, or $0.14
per share, which includes a $1.4 million tax benefit to record
an income tax refund receivable the Company expects to receive
for a tax carry back claim, compared to income from continuing
operations of $0.2 million, or $0.01 per share for the third
quarter and a loss from continuing operations during the
fourth quarter 2002 of ($7.5) million or ($0.65) per share;
-- Net loss amounted to ($5.8) million or ($0.51) per share,
which represents income from continuing operations of $1.6
million, offset by an accrual for discontinued operations for
the amount of $7.4 million, which relates to IRS assessments
regarding the Company's former staffing businesses (see
"Discontinued Operations" below);
-- Positive cash flow from operating activities of $2.0 during
the fourth quarter.
Full-Year Consolidated Results
Actual financial results and utilization for the full year of 2003
were as follows:
-- Revenue for 2003 was $25.1 million, a 34% increase over
revenue of $18.7 million in 2002;
-- Gross profit was $11.5 million for 2003 or 46% of revenue,
compared to gross profit of $6.8 million or 36% of revenue in
2002;
-- Utilization was 79% for 2003, compared to 67% during 2002;
-- Income from continuing operations amounted to $2.0 million, or
$0.18 per share in 2003, which included a $1.4 million tax
benefit to record an income tax refund receivable the Company
expects to receive for a tax carry back claim. Loss from
continuing operations was ($10.1) million, or ($0.87) per
share in 2002, which included a charge for goodwill impairment
of $7.4 million.
-- Net loss amounted to ($5.4) million or ($0.48) per share,
which represents income from continuing operations of $2.0
million, offset by an accrual for discontinued operations in
the amount of $7.4 million, which relates to IRS assessments
regarding the Company's former staffing businesses.
-- Positive cash flow from operations amounted to $2.6 million.
"Edgewater Delaware, the operating subsidiary, continues to make
strides. We ended the year meeting our financial goals with
double-digit revenue growth, a return to profitability and positive
cash flow. In addition, we completed a successful acquisition that
further enhances our capabilities and geographic reach, while
expanding our customer base," said Shirley Singleton, President and
CEO of Edgewater Technology. "The fourth quarter results, which were
in line with our expectations, reflected traditional seasonality in
revenue and utilization."
Discontinued Operations
During the fourth quarter of 2003, our Company disclosed that an
assessment notice was pending with the IRS related to our discontinued
operations staffing businesses that were sold in 2000 and 2001 (our
"Former Staffing Businesses"). The assessment, which we continue to
dispute, relates to purported discrepancies between amounts of
withholding and employment taxes reported on various employment tax
returns and employee W-2s and the related payroll tax deposits
actually received by the IRS. When we announced this uncertainty in
our quarterly report on Form 10-Q, we were not in possession of the
relevant records necessary to resolve the matter, and in accordance
with SFAS 5 "Accounting for Contingencies" we determined that it was
reasonably possible a contingent liability may exist of approximately
$6.5 million as of September 30, 2003, and we disclosed this
uncertainty. We may be ultimately responsible for all or part of this
assessment, plus penalties and interest that continue to accrue until
resolved.
During the fourth quarter of 2003, additional notices were
assessed in the form of civil penalties for the untimely filing of tax
information, all related to the Former Staffing Businesses. These new
assessments could not be resolved during the fourth quarter of 2003
since we could not obtain the relevant records to resolve this matter;
however, efforts will continue to locate the records at issue.
Based upon the uncertainty of the outcome of the assessments and
the potential that a notice could be issued by the IRS demanding
payment during 2004 while a search for the records at issue are
ongoing, the Company established, but has not paid to the IRS pending
resolution of the assessments, a reserve of $7.4 million to cover the
estimated amount of the potential assessments as of December 31, 2003.
This amount was recorded as a charge to discontinued operations.
Edgewater will continue to work vigorously to resolve the disputed
amounts underlying the assessments.
Outlook for 2004
Edgewater's vertical business focus has been driving a substantial
increase in strategy and design proposal opportunities, a key piece of
the Company's up-market strategy. Since strategy and design represent
the front end of a typical IT buying cycle, potential buyers are
contemplating initial procurement decisions longer, as they consider
the ROI of the total cost of future phases, which would include build,
deployment, and maintenance.
Singleton continued, "First quarter bids outstanding are
significantly greater than any one quarter in 2003. While new bid and
sales activity remains consistently healthy, we are observing
additional due diligence by customers prior to investing in IT
initiatives. During the first quarter, we are expecting strong year
over year revenue growth, although delayed decision cycles are causing
us to project sequentially lower revenue. We also believe that our
sales pipeline, even with the slow start in the first quarter, can
support double-digit revenue growth and continued operating income for
the full year 2004."
Stock Repurchase Program
During 2003, the Company repurchased approximately 304,195 shares
for $1.4 million. As a part of the Company's existing stock repurchase
program, the Company has established a stock purchase program under
Securities & Exchange Commission Rule 10b5-1. Under this Rule, the
repurchase program can operate without regard to traditional blackout
periods. The program became effective on February 14, 2003 and will
run through February, 2005, unless terminated earlier.
Conference Call
Edgewater Technology will host a conference call today, Wednesday,
February 11, at 10:00 a.m. (EST) to discuss the Company's fourth
quarter and 2003 year-end results. To listen to the live call via the
Internet, you can participate by logging onto the Web cast at
www.edgewater.com - Investor Relations section or you can dial
800-915-4836 approximately 15 minutes prior to start of the call. A
replay of the call can be accessed via www.edgewater.com - Investor
Relations section or by dialing 800-428-6051 (pass code 330088) from
12:00 p.m. EST Wednesday, February 11 through 11:59 p.m. EST
Wednesday, February 18.
About Edgewater Technology, Inc.
Founded in 1992, Edgewater Technology, Inc. is an award-winning
consulting and systems integration firm that specializes in tailored
technology solutions for middle-market companies and divisions of
Global 2000 companies. Headquartered in Wakefield, Massachusetts, the
Company has taken a partnership approach with its clients, targeting
strategic, mission-critical applications. Edgewater Technology
services its client base by leveraging a combination of leading-edge
technologies and proven reengineering techniques provided by its
network of national solutions centers strategically positioned across
the United States. For further information, visit www.edgewater.com or
call 781-246-3343.
Selected Financial Data:
EDGEWATER TECHNOLOGY, INC.
Statements of Operations
(In thousands, except per share amounts)
(Unaudited)
Three Months Twelve Months
Ended Ended
December 31, December 31,
2003 2002 2003 2002
Service revenues $6,773 $4,683 $25,054 $18,666
Cost of services 3,724 2,763 13,540 11,905
Gross profit 3,049 1,920 11,514 6,761
Selling, general and
administrative 2,623 1,898 10,080 8,833
Depreciation and
amortization expense 259 239 948 1,003
Impairment of goodwill - 7,411 - 7,411
Restructure costs - - - 349
Operating Income (loss) 167 (7,628) 486 (10,835)
Interest income and other, net 132 160 455 777
Income (loss) before income taxes 299 (7,468) 941 (10,058)
Benefit from tax (1,310) - (1,053) -
Net income (loss) from
continuing operations 1,609 (7,468) 1,994 (10,058)
Loss from discontinued
operations, net (7,435) (950) (7,435) (950)
Change in accounting
principle, net - - - (12,451)
Net income (loss) ($ 5,826) ($8,418) ($ 5,441) ($23,459)
BASIC EARNINGS PER SHARE
From continuing operations $0.14 ($0.65) $0.18 ($0.87)
Net income (loss) ($0.51) ($0.73) ($ 0.48) ($2.03)
Weighted Average Shares
Outstanding - Basic 11,401 11,507 11,381 11,575
EDGEWATER TECHNOLOGY, INC.
Summary Balance Sheet Information
(In thousands)
December 31, December 31,
Assets 2003 2002
Cash and marketable securities $ 44,259 $ 46,782
Accounts receivable, net 3,484 2,647
Fixed assets, net 1,309 1,606
Deferred tax asset, net 22,175 22,884
Intangible assets, net 13,183 11,614
Prepaid expenses and Other assets 2,121 960
Total Assets $ 86,531 $ 86,493
Liabilities and Equity
Accounts payable & accrued liabilities $ 9,969 $ 4,334
Accrued payroll & related liabilities 2,009 882
Other liabilities 84 240
Stockholders' Equity 74,469 81,037
Total Liabilities & Stockholders' Equity $ 86,531 $ 86,493
Shares Outstanding 11,366 11,485
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 made with respect to our 2004 outlook
concerning utilization, revenues, sales, profitability, backlog and
cash flow; tax disputes, estimated tax reserve accruals and potential
penalties and interest; growth opportunities and plans; and IT
spending trends. The forward looking statements included in the Press
Release relate to future events or our future financial conditions or
performance, Words such as "will," "provide," "focused," "believe,"
"continue," "remain," "optimistic," and "emerge," or the negative
thereof or variations thereon and similar expressions are intended to
identify forward-looking statements. These forward-looking statements
inherently involve certain risks and uncertainties, although they are
based on our current plans or assessments that 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, forecast, estimated,
anticipated, planned or budgeted in such forward-looking statements
include, among others, the following possibilities: (1) changes in
industry trends, such as decline in the demand for custom development
and system integration services and/or spending delays with existing
information technology services projects; (2) failure to obtain new
customers or retain significant existing customers; (3) loss of key
executives; (4) general economic and business conditions (whether
foreign, national, state or local) which include but are not limited
to changes in interest or currently exchange rates and the overall
demand for information technology services and/or spending delays for
existing information technology services; (5) failure of the general
economy or IT services spending to rebound or otherwise improve; (6)
lack of available growth opportunities; (7) the inability to maintain,
sustain or grow revenues; (8)the strength or visibility of the
Company's backlog of business for 2003; (9) any changes in ownership
of the Company or otherwise that would result in a limitation on the
use of the net operating loss carry forward under applicable tax laws;
and (10) the failure to obtain predecessor entity tax records that are
not in our control and successfully resolve outstanding tax disputes.
Actual events or results may differ materially from those discussed,
contemplated, forecasted, estimated, anticipated, planned or implied
in the forward-looking statements as a result of the various factors
described above and those further set forth under the heading
"Business- Factors Affecting Finances, Business Prospects and Stock
Volatility" in the Company's Form 10-K filed with the Securities and
Exchange Commission on March 28, 2003.
CONTACT: Edgewater Technology
Kevin Rhodes, Chief Financial Officer
or
Barbara Warren-Sica, Investor Relations
781-246-3343