Exhibit 99.1
Edgewater Reports Cash EPS of $0.12;
Service Revenue Gain of 37%
WAKEFIELD, Mass.--(BUSINESS WIRE)--Oct. 25, 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 third quarter ended September 30, 2006.
Third Quarter Results
Actual financial results and utilization for the quarter ended
September 30, 2006:
-- Total revenue increased to $15.2 million or 2% above the $14.9
million in revenue reported during the second quarter of 2006
and increased 32% compared to $11.5 million in the third
quarter of 2005;
-- Total service revenue increased 2% to $14.4 million compared
to $14.1 million in the second quarter of 2006 and increased
37% compared to service revenue of $10.5 million in the third
quarter of 2005;
-- Gross profit increased 9% to $6.5 million, or 43.2% of total
revenue, compared to $6.0 million, or 40.2 % of total revenue,
in the second quarter of 2006. Gross profit increased by 35%
from $4.9 million, or 42.2% of total revenue, in the third
quarter of 2005;
-- Gross profit margin related to service revenue was 45.2%
compared to 42.2% in the second quarter of 2006 and 46.0% in
the third quarter of 2005;
-- Utilization was 79.9% compared to 77.0% during the second
quarter of 2006 and 80.3% for the third quarter of 2005;
-- Operating income increased to $1.5 million, or 9.7% of total
revenue, during the third quarter compared to $447 thousand in
the second quarter of 2006 and $431 thousand in the third
quarter of 2005;
-- Net income from continuing operations increased 145% to $1.1
million, or $0.09 per diluted share, compared to $435
thousand, or $0.04 per diluted share, in the second quarter of
2006 and increased 158% compared to $414 thousand, or $0.04
per diluted share, reported in the third quarter of 2005;
-- Net income increased by 145% to $1.1 million, or $0.09 cents
per diluted share, during the third quarter 2006 compared to
$435 thousand, or $0.04 cents per diluted share, during the
second quarter of 2006 and increased 44% from $739 thousand,
or $0.07 cents per diluted share, in the third quarter of
2005;
-- Cash Net Income increased by 54% to $1.4 million, or $0.12
cents per diluted share, during the third quarter 2006
compared to $913 thousand, or $0.08 cents per diluted share,
during the second quarter and increased 176% from $509
thousand, or $0.05 cents per diluted share, in the third
quarter of 2005;
-- Adjusted EBITDA increased 57% to $2.2 million, or $0.19 cents
per diluted share, during the third quarter 2006 compared to
$1.4 million, or $0.12 cents per diluted share, during the
second quarter in 2006 and increased 182% from $769 thousand,
or $0.07 cents per diluted share, in the third quarter of
2005; and
-- Cash flow provided by operating activities was $2.2 million in
the third quarter of 2006 compared to cash flow used in
operating activities of $(716) thousand in the second quarter
of 2006 and cash flow provided by operating activities of $822
thousand during the third quarter of 2005.
First Nine Months of 2006
Actual financial results and utilization for the nine months ended
September 30, 2006:
-- Total revenue increased 43% to $44.4 million compared to $31.0
million during the first nine months of 2005;
-- Service revenue increased 49% to $41.9 million compared to
$28.2 million during the first nine months of 2005;
-- Gross profit increased 33% to $17.7 million, or 39.9% of
revenues, compared to $13.3 million, or 42.8% of revenues,
during the first nine months of 2005;
-- Gross profit margin related to service revenue was 41.9%
compared to 46.8% during the first nine months of 2005;
-- Utilization was 78.5% compared to 81.9% during the first nine
months of 2005;
-- Net income from continuing operations increased 97% to $2.0
million, or $0.17 per diluted share, compared to net income
from continuing operations of $1.0 million, or $0.09 per
diluted share, during the first nine months of 2005;
-- Net income increased 49% to $2.0 million, or $0.17 per diluted
share, compared to net income of $1.3 million, or $0.12 per
diluted share, during the first nine months of 2005;
-- Cash Net Income increased by 132% to $3.1 million, or $0.26
cents per diluted share, during the first nine months of 2006
compared to $1.3 million, or $0.12 cents per diluted share,
during the first nine months of 2005;
-- Adjusted EBITDA increased 144% to $4.6 million, or $0.39 cents
per diluted share, during the first nine months of 2006
compared to $1.9 million, or $0.17 cents per diluted share,
during the first nine months of 2005; and
-- Cash flow provided by operating activities was $2.9 million
during the first nine months of 2006 compared to cash flow
provided by operating activities of $2.1 million during the
first nine months of 2005.
Cash Net Income, Cash Earnings per Diluted Share, Adjusted EBITDA
and Adjusted EBITDA per Diluted Share 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.
As discussed in our last conference call, Edgewater's second
quarter financial results were impacted by higher stock-based
compensation expense, as well as a delivery issue on a customer
engagement. The stock-based compensation expense contributed to $192
thousand in higher SG&A expenses. During the third quarter, Edgewater
was able to resolve the delivery issue, resulting in $203 thousand of
the previously deferred service revenue being realized. Also, the
Company did not incur the stock-based compensation expense that
increased SG&A expense in the previous quarter. As a result of these
items, third quarter 2006 results were favorably impacted by $0.02 per
diluted share compared to the previous quarter.
"We are pleased with the Company's third quarter year-over-year
service revenue growth of 37%," commented Shirley Singleton, President
and CEO of Edgewater Technology. "Most importantly, Edgewater is
beginning to benefit from economies of scale due to our revenue
growth. As a result, for the third quarter, we generated $0.12 in Cash
Earnings per Diluted Share, a 160% increase, and $2.2 million in
Adjusted EBITDA, a 182% increase, compared to the third quarter of
2005. Even excluding the third quarter variance items, these
profitability metrics improved over 100% compared to the third quarter
of 2005."
Singleton concluded, "While we have the sales pipeline to support
continued revenue growth, given traditional seasonality, we believe
our service revenue will be flat with an upward bias during the fourth
quarter."
Third Quarter Conference Call Details
Edgewater Technology will host a conference call on Wednesday,
October 25, at 10:00 a.m. (ET) to discuss third-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
800-638-5439 (pass code 98849348) 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 57881375) from 12:00 p.m. ET Wednesday,
October 25 through 11:59 p.m. ET Wednesday, November 1.
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 Nine Months Ended
---------------------------- -------------------
September June September September September
30, 30, 30, 30, 30,
2006 2006 2005 2006 2005
--------- -------- --------- --------- ---------
Revenue:
Service revenue $14,367 $14,074 $10,525 $41,943 $28,242
Software 225 214 440 732 1,458
Reimbursable
expenses 571 602 532 1,686 1,315
--------- -------- --------- --------- ---------
Total revenue 15,163 14,890 11,497 44,361 31,015
Cost of revenue:
Project and
personnel costs(a) 7,872 8,137 5,683 24,377 15,016
Software costs 176 170 432 613 1,421
Reimbursable
expenses 571 602 532 1,686 1,315
--------- -------- --------- --------- ---------
Total cost of
revenue 8,619 8,909 6,647 26,676 17,752
--------- -------- --------- --------- ---------
Gross profit 6,544 5,981 4,850 17,685 13,263
Selling, general
and
administrative(a) 4,621 5,073 4,131 14,046 11,506
Depreciation and
amortization 454 461 288 1,260 838
--------- -------- --------- --------- ---------
Operating
income 1,469 447 431 2,379 919
Interest income and
other, net 304 282 258 885 737
--------- -------- --------- --------- ---------
Income before income
taxes and
discontinued
operations 1,773 729 689 3,264 1,656
Provision for income
taxes 709 294 275 1,305 662
--------- -------- --------- --------- ---------
Income from continuing
operations
before discontinued
operations 1,064 435 414 1,959 994
Income from operations
of discontinued
divisions - - 325 - 325
--------- -------- --------- --------- ---------
Net income $1,064 $435 $739 $1,959 $1,319
========= ======== ========= ========= =========
BASIC EARNINGS PER SHARE:
From continuing
operations $0.10 $0.04 $0.04 $0.18 $0.10
Discontinued
operations - - 0.03 - 0.03
--------- -------- --------- --------- ---------
Net income $0.10 $0.04 $0.07 $0.18 $0.13
========= ======== ========= ========= =========
Weighted-Average
Shares Outstanding
- Basic 11,132 10,961 10,401 10,914 10,354
========= ======== ========= ========= =========
DILUTED EARNINGS PER SHARE:
From continuing
operations $0.09 $0.04 $0.04 $0.17 $0.09
Discontinued
operations - - 0.03 - 0.03
--------- -------- --------- --------- ---------
Net income $0.09 $0.04 $0.07 $0.17 $0.12
========= ======== ========= ========= =========
Weighted-Average
Shares Outstanding
- Diluted 11,659 12,156 10,944 11,868 10,785
========= ======== ========= ========= =========
(a) - Includes the following amounts related to stock-based
compensation expense:
Cost of revenue
- Project and
personnel costs $46 $69 $- $207 $-
Selling, general
and
administrative
expenses 196 400 50 747 127
--------- -------- --------- --------- ---------
Total $242 $469 $50 $954 $127
========= ======== ========= ========= =========
Edgewater's management believes that cash performance is the
primary driver of long-term share value. As such, Edgewater views Cash
Net Income, Cash Earnings per Diluted Share, EBITDA, Adjusted EBITDA
and Adjusted EBITDA per Diluted Share as important indicators of
performance that 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)
(Unaudited)
Reconciliation of GAAP Net Income to Cash Net Income and
Cash Earnings Per Diluted Share (Non-GAAP)
Three Months Ended Nine Months Ended
--------------------------- -------------------
September June September September September
30, 30, 30, 30, 30,
2006 2006 2005 2006 2005
--------- ------- --------- --------- ---------
Reported GAAP Net
Income $1,064 $435 $739 $1,959 $1,319
Less: Income from
Discontinued
Operations - - (325) - (325)
Add: Amortization of
Intangibles 327 327 108 871 407
Add: Stock-based
Compensation 242 469 50 954 127
Less: Related Tax
Effect (228) (318) (63) (730) (214)
--------- ------- --------- --------- ---------
Cash Net Income $1,405 $913 $509 $3,054 $1,314
========= ======= ========= ========= =========
Cash Earnings per
Diluted Share(1) $0.12 $0.08 $0.05 $0.26 $0.12
========= ======= ========= ========= =========
Reconciliation of GAAP Net Income to EBITDA, Adjusted EBITDA and
Adjusted EBITDA per Diluted Share (Non-GAAP)
Reported GAAP Net
Income $1,064 $435 $739 $1,959 $1,319
Less: Income from
Discontinued
Operations - - (325) - (325)
Add: Income Tax
Provision 709 294 275 1,305 662
Add: Depreciation and
Amortization 454 461 288 1,260 838
Less: Interest Income
and Other, Net (304) (282) (258) (885) (737)
--------- ------- --------- --------- ---------
EBITDA(2) $1,923 $908 $719 $3,639 $1,757
Add: Stock-based
Compensation 242 469 50 954 127
--------- ------- --------- --------- ---------
Adjusted EBITDA(2) $2,165 $1,377 $769 $4,593 $1,884
========= ======= ========= ========= =========
Adjusted EBITDA per
Diluted Share(2) $0.19 $0.12 $0.07 $0.39 $0.17
========= ======= ========= ========= =========
1 - Cash Earnings per Diluted Share is a Non-GAAP performance
measure and is not intended to be a performance measure that should be
regarded as an alternative to, or more meaningful than, GAAP Diluted
Earnings per Share. Cash Earnings per Diluted Share measures presented
may not be comparable to similarly titled measures presented by other
companies. Cash Earnings per Diluted Share is defined as Net Income,
less Income from Discontinued Operations, plus Amortization of
Intangibles and Stock-based Compensation, less related the tax effect,
divided by shares used in computing Net Income per Diluted Share.
2 - EBITDA, Adjusted EBITDA and Adjusted EBITDA per Diluted Share
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, either GAAP Operating Income, GAAP Net Income
and Net Income per Diluted Share. EBITDA, Adjusted EBITDA and Adjusted
EBITDA per Diluted Share measures presented may not be comparable to
similarly titled measures presented by other companies.
EDGEWATER TECHNOLOGY, INC.
Summary Consolidated Balance Sheet Information
(In thousands)
September December
30, 31,
2006 2005
(Unaudited) (Audited)
----------- ---------
Assets
- -------------------------------------------------
Cash and marketable securities $28,249 $33,381
Accounts receivable, net 12,167 9,858
Deferred taxes, current 1,323 1,323
Prepaid expenses and other assets, current 764 1,367
----------- ---------
Total current assets 42,503 45,929
Fixed assets, net 1,540 1,364
Deferred taxes, net 19,058 20,168
Goodwill and intangible assets, net 28,118 17,076
Other assets 45 52
----------- ---------
Total Assets $91,264 $84,589
=========== =========
Liabilities and Stockholders' Equity
- -------------------------------------------------
Accounts payable and accrued liabilities $3,743 $3,159
Accrued payroll and related liabilities 3,045 3,085
Deferred revenue and other liabilities 99 260
----------- ---------
Total current liabilities 6,887 6,504
Stockholders' Equity 84,377 78,085
----------- ---------
Total Liabilities and Stockholders' Equity $91,264 $84,589
=========== =========
Shares Outstanding 11,444 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 Diluted Share are included in the unaudited
consolidated statements of operations attached to this release.
CONTACT: For Edgewater Technology
Kevin Rhodes, Chief Financial Officer
Barbara Warren-Sica, Investor Relations
781-246-3343
ir@edgewater.com