Exhibit 99.1
Edgewater Achieves 50% Year-over-Year Service Revenue Growth
WAKEFIELD, Mass.--(BUSINESS WIRE)--July 26, 2006--A technology management
consulting firm specializing in providing premium IT services, Edgewater
Technology, Inc. (NASDAQ: EDGW, www.edgewater.com, "Edgewater Technology" or the
"Company"), today announced financial results for its second quarter ended June
30, 2006.
Second Quarter Results
Actual financial results and utilization for the quarter ended June 30,
2006:
-- Total revenue, including expense reimbursements, increased 4.1% to
$14.9 million compared to $14.3 million in the first quarter of 2006
and increased 41.0% compared to $10.6 million in the second quarter of
2005;
-- Total service revenue increased 4.2% to $14.1 million compared to
$13.5 million in the first quarter and increased 49.6% compared to
service revenue of $9.4 million in the second quarter of 2005;
-- Gross profit increased 15.9% to $6.0 million, or 40.2% of total
revenue, compared to $5.2 million, or 36.1% of total revenue, in the
first quarter of 2006. Gross profit increased by 30.3% from $4.6
million, or 43.5% of total revenue, in the second quarter of 2005;
-- Gross profit margin related to service revenue was 42.2% compared to
38.0% in the first quarter of 2006 and 48.6% in the second quarter of
2005. Gross profit margin related to service revenue included stock
compensation expense of approximately $69 thousand and $93 thousand in
the second and first quarter of 2006, respectively. No such stock
compensation expense was incurred in the second quarter 2005.
-- Utilization was 77.0% compared to 78.8% during the first quarter of
2006 and 84.0% for the second quarter of 2005;
-- Net income was $435 thousand, or $0.04 per diluted share, compared to
$460 thousand, or $0.04 per diluted share, in the first quarter of
2006 and $392 thousand, or $0.04 per diluted share, in the second
quarter of 2005; and
-- Cash flow used in operating activities was $(0.7) million in the
second quarter of 2006 compared to cash flow provided by operating
activities of $1.4 million in the first quarter of 2006 and cash used
in operating activities of $(0.2) million during the second quarter of
2005.
First Six Months of 2006
Actual financial results and utilization for the six months ended June 30,
2006:
-- Total revenue increased 49.6% to $29.2 million compared to $19.5
million during the first six months of 2005;
-- Service revenue increased 55.6% to $27.6 million compared to $17.7
million during the first six months of 2005;
-- Gross profit increased 32.4% to $11.1 million, or 38.2% of total
revenue, compared to $8.4 million, or 43.1% of total revenue during
the first six months of 2005;
-- Gross profit margin related to service revenue was 40.1% compared to
47.3% during the first six months of 2005;
-- Utilization was 77.9% compared to 82.8% during the first six months of
2005;
-- Net income amounted to $0.9 million, or $0.08 per diluted share,
compared to net income of $0.6 million, or $0.06 per diluted share
during the first six months of 2005; and
-- Cash flow provided by operating activities was $0.7 million compared
to cash flow provided by operating activities of $1.2 million during
the first six months of 2005.
"We are pleased with the Company's year-over-year growth for the second
quarter of 49.6% in service revenue, as well as 65% growth in cash earnings per
share and better than 90% growth in Adjusted EBITDA," said Shirley Singleton,
President and CEO of Edgewater Technology. "While utilization and revenue were
impacted by a delivery issue on a customer engagement, overall financial results
remained strong."
"We do have the pipeline to support continued revenue growth, but the third
quarter always has an impact in terms of traditionally seasonality. With that in
mind, we believe that the third quarter revenue could be flat. Even with flat
revenue, we believe we should post improved profitability," Singleton concluded.
Conference Call
Edgewater Technology will host a conference call on Wednesday, July 26, at
10:00 a.m. (ET) to discuss second-quarter 2006 financial results. To listen to
the call, you can participate by webcast at www.edgewater.com - Investor
Relations section or you can dial 866-383-8119 (pass code 31616595)
approximately 10 minutes prior to the call start. A replay of the call can be
accessed via www.edgewater.com -- Investor Relations section or by dialing
888-286-8010 (pass code 18403779) from 12:00 p.m. ET Wednesday, July 26 through
11:59 p.m. ET Wednesday, August 2.
About Edgewater Technology, Inc.
Edgewater Technology, Inc. is an innovative technology management
consulting firm. We provide a unique blend of premium IT services by leveraging
our proven industry expertise in strategy, technology and corporate performance
management. Headquartered in Wakefield, MA, we go to market by vertical industry
and provide our clients with a wide range of business and technology offerings.
To learn more, visit www.edgewater.com or call 800-410-4014.
Selected Financial Data:
EDGEWATER TECHNOLOGY, INC.
Consolidated Statements of Operations
(In thousands, except per share amounts)
(Unaudited)
Three Months Ended Six Months Ended
------------------------- -----------------
June March June June June
30, 31, 30, 30, 30,
2006 2006 2005 2006 2005
-------- -------- ------- -------- --------
Revenue:
Service revenue $14,074 $13,502 $9,408 $27,576 $17,717
Software 214 293 744 507 1,018
Reimbursable expenses 602 513 407 1,115 783
-------- -------- ------- -------- --------
Total revenue 14,890 14,308 10,559 29,198 19,518
Cost of revenue:
Project and personnel
costs(1) 8,137 8,368 4,832 16,505 9,333
Software costs 170 267 728 437 989
Reimbursable expenses 602 513 407 1,115 783
-------- -------- ------- -------- --------
Total cost of
revenue 8,909 9,148 5,967 18,057 11,105
-------- -------- ------- -------- --------
Gross profit 5,981 5,160 4,592 11,141 8,413
Selling, general and
administrative(1) 5,073 4,352 3,920 9,425 7,375
Depreciation and
amortization 461 345 246 806 550
-------- -------- ------- -------- --------
Operating income 447 463 426 910 488
Interest income and other,
net 282 299 227 581 479
-------- -------- ------- -------- --------
Income before income taxes 729 762 653 1,491 967
Provision for income taxes 294 302 261 596 387
-------- -------- ------- -------- --------
Net income $435 $460 $392 $895 $580
======== ======== ======= ======== ========
BASIC AND DILUTED EARNINGS PER SHARE:
Basic and diluted
earnings per share $0.04 $0.04 $0.04 $0.08 $0.06
======== ======== ======= ======== ========
Weighted Average Shares
Outstanding - Basic 10,961 10,635 10,321 10,802 10,331
======== ======== ======= ======== ========
Weighted Average Shares
Outstanding - Diluted 12,156 11,335 10,628 11,795 10,697
======== ======== ======= ======== ========
1 - Includes the following amounts related to stock-based compensation
expense:
Cost of revenue -
Project and
personnel costs $69 $93 $- $161 $-
Selling, general and
administrative
expense 400 150 44 551 77
-------- -------- ------- -------- --------
Total $469 $243 $44 $712 $77
======== ======== ======= ======== ========
Edgewater's management considers cash performance to be an
important performance measurement tool and could be an indicative
driver of long-term share value. As such, Edgewater's management
analyzes Cash net income, Cash earnings per share, EBITDA, Adjusted
EBITDA and Adjusted EBITDA per share as important indicators of the
quality of management's performance, particularly in light of
increased amortization of intangible assets related to recent
acquisitions, GAAP-based provisions for federal income tax
notwithstanding the absence of federal tax liability due to
Edgewater's net operating loss carry forward and expense recognition
of certain stock-based compensation expense for 2006 that was not
required to be reported under GAAP in prior periods. Thus, these
measures are being provided in order to help investors gain a
meaningful understanding of the Company's core operating results and
future prospects, consistent with the manner in which management
measures and forecasts the Company's performance.
Edgewater Technology, Inc.
Reconciliation of Non-GAAP Financial Measures
(In thousands, except per share data)
Reconciliation of Reported Net income to Cash net income (Non-GAAP)
Three Months Ended Six Months
Ended
---------------------- ---------------
June March June June June
30, 31, 30, 30, 30,
2006 2006 2005 2006 2005
------- ------- ------ ------- -------
Reported Net income 435 460 392 895 580
Add: Amortization of intangible
assets 327 217 108 544 299
Add: Stock-based compensation 469 243 44 712 77
Less: Related tax effect (318) (184) (61) (502) (150)
------- ------- ------ ------- -------
Cash net income(1) $913 $736 $483 $1,649 $806
======= ======= ====== ======= =======
Cash earnings per share(1) $0.08 $0.06 $0.05 $0.14 $0.08
======= ======= ====== ======= =======
Reconciliation of GAAP Net income to Adjusted EBITDA (Non-GAAP)
Reported Net income 435 460 392 895 580
Add: Provision for income taxes 294 302 261 596 387
Add: Depreciation & amortization
expense 461 345 246 806 550
Less: Interest income (282) (299) (227) (581) (479)
------- ------- ------ ------- -------
EBITDA(2) $908 $808 $672 $1,716 $1,038
======= ======= ====== ======= =======
Add: Stock-based compensation 469 243 44 712 77
Adjusted EBITDA(2) $1,377 $1,051 $716 $2,428 $1,115
======= ======= ====== ======= =======
Adjusted EBITDA per share(2) $0.11 $0.09 $0.07 $0.21 $0.10
======= ======= ====== ======= =======
1 - Cash net income and Cash earnings per share on a fully diluted
basis are Non-GAAP performance measures and are not intended to be
performance measures that should be regarded as an alternative to
or more meaningful than Net income or diluted earnings per share
amounts reported in our financial statements in accordance with
GAAP. Cash net income and Cash earnings per share measures
presented may not be comparable to similarly titled measures
presented by other companies. Cash earnings per share is defined
as (1) net income plus amortization of intangibles and stock-based
compensation expense (net of related tax) divided by (2) the
number of shares used in computing diluted net income per share.
2 - EBITDA, Adjusted EBITDA and Adjusted EBITDA per share are Non-GAAP
performance measures and are not intended to be regarded as an
alternative to or more meaningful than Operating income, Net
income or Earnings per share amounts reported in our financial
statements in accordance with GAAP. EBITDA, Adjusted EBITDA and
Adjusted EBITDA per share measures presented may not be comparable
to similarly titled measures presented by other companies.
Adjusted EBITDA per share is defined as (1) net income plus
provision for income taxes, plus depreciation and amortization
expense, less interest income, plus stock-based compensation
divided by (2) the number of shares used in computing diluted net
income per share.
EDGEWATER TECHNOLOGY, INC.
Summary Condensed Consolidated Balance Sheet Information
(In thousands)
June December
30, 31,
2006 2005
(Unaudited) (Audited)
----------- ---------
Assets
Cash and marketable securities $25,786 $33,381
Accounts receivable, net 14,404 9,858
Deferred taxes, current 1,323 1,323
Prepaid expenses and other assets, current 1,021 1,367
----------- ---------
Total current assets 42,534 45,929
Fixed assets, net 1,435 1,364
Deferred taxes, net 19,661 20,168
Intangible assets, net 28,479 17,076
Other assets 45 52
----------- ---------
Total Assets $92,154 $84,589
=========== =========
Liabilities and Stockholders' Equity
- -------------------------------------------------
Accounts payable and accrued liabilities $6,230 $3,159
Accrued payroll and related liabilities 2,890 3,085
Deferred revenue and other liabilities 292 260
----------- ---------
Total current liabilities 9,412 6,504
Stockholders' Equity 82,742 78,085
----------- ---------
Total Liabilities and Stockholders' Equity $92,154 $84,589
----------- ---------
Shares Outstanding 11,381 10,460
=========== =========
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 fiscal 2006 outlook. The forward looking statements
included in the Press Release relate to future events or our future financial
conditions or performance. In some cases, you can identify forward-looking
statements by terminology such as "may," "should," "believe," "anticipate,"
"future," "forward," "potential," "estimate," "encourage," "opportunity,"
"goal," "objective," " "growth," "could", "expect," "intend," "plan," "planned"
"expand," "focus," "build," " "strategy," "expiration," "represent,"
"commitment," "create," "implement," "result," "seeking," "increase," "add,"
"establish," "pursue," "feel," "work," "perform," "make," "continue," "can,"
"will," "ongoing," "include" or the negative of such terms or comparable
terminology. 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) inability to execute upon growth
objectives, including growth in entities acquired by our Company; (2) failure to
obtain new customers or retain significant existing customers; (3) the loss of
one or more key executives and/or employees; (4) changes in industry trends,
such as a decline in the demand for Business Intelligence ("BI") and Corporate
Performance Management ("CPM") solutions, custom development and system
integration services and/or delays 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; (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"; (7)
failure of our sales pipeline to be converted to billable work and recorded as
revenue; (8) failure of the middle market and the needs of middle-market
enterprises for business services to develop as anticipated; (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; and/or (12) the
failure of the marketplace to embrace CPM or BI services. 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 2005 Annual Report on Form 10-K
filed with the SEC on March 23, 2006. 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. We are under no duty to update any of the forward-looking
statements after the date of this Press Release to conform such statements to
actual results.
Use of Non-GAAP Financial Information:
The Company reports its financial results in accordance with generally
accepted accounting principles ("GAAP"). Management believes, however, that
certain non-GAAP financial measures used in managing the Company's business may
provide users of this financial information with additional meaningful
comparisons between current results and prior reported results. Certain of the
information set forth herein and certain of the information presented by the
Company from time to time may constitute non-GAAP financial measures within the
meaning of Regulation G adopted by the Securities and Exchange Commission. We
have presented herein a reconciliation of these measures to the most directly
comparable GAAP financial measure. The presentation of this additional
information is not meant to be considered in isolation or as a substitute for
comparable amounts determined in accordance with generally accepted accounting
principles in the United States. The Non-GAAP measures presented herein may not
be comparable to similarly titled measures presented by other companies. A
reconciliation of EBITDA and adjusted EBITDA to net income and a reconciliation
of net income to adjusted net income for Cash earnings per share are included in
the unaudited consolidated statements of operations attached to this release.
CONTACT: Edgewater Technology, Inc.
Kevin Rhodes, 781-246-3343
Chief Financial Officer
or
Barbara Warren-Sica, 781-246-3343
Investor Relations
ir@edgewater.com