Exhibit 99.1
Edgewater Achieves Record Service Revenue
Company Doubles Earnings in 2006; Cash EPS of $0.39
WAKEFIELD, Mass.--(BUSINESS WIRE)--Feb. 14, 2007--A technology
management consulting firm specializing in providing premium
information technology ("IT") services, 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, 2006.
Edgewater reported record service revenue for the fourth quarter
and year-end 2006 of $14.6 million and $56.5 million, respectively. In
addition, earnings increased due to strong utilization of 81.1% during
the fourth quarter. Earnings per diluted share for the fourth quarter
amounted to $0.10, which contributed to $0.27 for the full year. The
Company also generated positive cash flow from operations in the
fourth quarter of $5.5 million and $8.4 million for the full year
2006.
Fourth Quarter Results
Actual financial results and utilization for the quarter ended
December 31, 2006:
-- Total revenue increased 4% to $15.7 million compared to $15.2
million in total revenue reported during the third quarter of
2006 and increased 30% compared to $12.1 million in the fourth
quarter of 2005;
-- Total service revenue increased 1% to $14.6 million compared
to $14.4 million in the third quarter of 2006 and increased
26% compared to service revenue of $11.5 million in the fourth
quarter of 2005;
-- Gross profit increased 4% to $6.8 million, or 43.4% of total
revenue, compared to $6.5 million, or 43.2 % of total revenue,
in the third quarter of 2006 and increased 44% from $4.7
million, or 39.1% of total revenue, in the fourth quarter of
2005;
-- Gross profit margin related to service revenue improved to
46.3% compared to 45.2% in the third quarter of 2006 and 40.9%
in the fourth quarter of 2005;
-- Utilization improved to 81.1% compared to 79.9% during the
third quarter of 2006 and 78.5% for the fourth quarter of
2005;
-- Operating income increased to $1.6 million, or 10.5% of total
revenue compared to $1.5 million in the third quarter of 2006
and $152 thousand in the fourth quarter of 2005;
-- Net income increased by 17% to $1.2 million, or $0.10 cents
per diluted share, compared to $1.1 million, or $0.09 cents
per diluted share, during the third quarter of 2006 and
increased by 343% from $281 thousand, or $0.03 cents per
diluted share, in the fourth quarter of 2005;
-- Cash Net Income increased by 12% to $1.6 million, or $0.13
cents per diluted share, compared to $1.4 million, or $0.12
cents per diluted share, during the third quarter of 2006 and
increased 288% from $407 thousand, or $0.04 cents per diluted
share, in the fourth quarter of 2005;
-- Adjusted EBITDA increased 10% to $2.4 million, or $0.20 cents
per diluted share, compared to $2.2 million, or $0.19 cents
per diluted share, during the third quarter of 2006 and
increased 417% from $462 thousand, or $0.04 cents per diluted
share, in the fourth quarter of 2005; and
-- Cash flow provided by operating activities improved to $5.5
million in the fourth quarter compared to cash flow provided
by operating activities of $2.2 million in the third quarter
of 2006 and cash flow used in operating activities of $(222)
thousand during the fourth quarter of 2005.
"While Edgewater increased revenues slightly despite the effects
of typical fourth quarter seasonality, the operational team performed
an outstanding job of managing utilization. Their control of this key
metric caused our Company's services gross margin to remain strong at
46.3% compared to reported services gross margin of 45.2% in third
quarter of 2006, resulting in an updraft in profitability," stated
Shirley Singleton, Edgewater's President and Chief Executive Officer.
Full Year Consolidated Results
Actual financial results and utilization for the fiscal year ended
December 31, 2006:
-- Total revenue increased 39% to $60.1 million compared to $43.1
million in fiscal 2005;
-- Service revenue increased 42% to $56.5 million compared to
$39.8 million in fiscal 2005;
-- Gross profit increased 36% to $24.5 million, or 40.8% of total
revenue, compared to $18.0 million, or 41.7% of total revenue,
in fiscal 2005;
-- Gross profit margin related to service revenue was 43.0%
compared to 45.1% in fiscal 2005;
-- Utilization was 79.2% compared to 81.1% in fiscal 2005;
-- Net income from continuing operations increased 151% to $3.2
million, or $0.27 per diluted share, compared to net income
from continuing operations of $1.3 million, or $0.12 per
diluted share, in fiscal 2005;
-- Net income increased 100% to $3.2 million, or $0.27 per
diluted share, compared to net income of $1.6 million, or
$0.15 per diluted share, in fiscal 2005;
-- Cash Net Income increased by 169% to $4.6 million, or $0.39
cents per diluted share, compared to $1.7 million, or $0.16
cents per diluted share, in fiscal 2005;
-- Adjusted EBITDA increased 198% to $7.0 million, or $0.58 cents
per diluted share, compared to $2.3 million, or $0.22 cents
per diluted share, in fiscal 2005; and
-- Cash flow provided by operating activities was $8.4 million
compared to cash flow provided by operating activities of $1.8
million in fiscal 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.
Shirley Singleton commented on the Company's full year 2006
financial results, "Edgewater's 42% year-over-year increase in
services revenue and dramatic improvement in profitability is evidence
that our strategy of focusing on the premium IT service segment
continues to gain traction."
Highlights for 2006:
-- Completed the acquisition of National Decision Systems
("NDS");
-- Added 61 new customer relationships and managed over 300
projects;
-- Renewed Synapse Development Support Agreement extending the
long-term relationship into its 12th year;
-- Listed on the Russell Microcap Index; and
-- Secured partnerships with industry leaders such as Informatica
Corporation; IB Systems and Blue Agave.
Outlook for 2007
"During 2006, we consolidated our premium IT services into three
major synergistic offerings: (1) business consulting, (2) Corporate
Performance Management ("CPM"), and (3) technical consulting. We have
focused our go-to-market message for customers and acquisition
opportunity search efforts within these three slices of business.
Edgewater is strategically positioned for further premium IT services
growth," said Singleton.
Singleton concluded, "The 2007 sales pipeline is solid and sales
activity is accelerating. Our technical consulting offering is off to
a great start this year. We are pleased to renew our contract with
Synapse for another year, however, their spend rate will be
approximately 20% lower than in 2006. Overall, revenue is being
partially subdued by traditional slowness that occurs at the beginning
of the year for our CPM offering. Staff headcount was slightly down
during the fourth quarter and we continue to watch turnover rates due
to strengthening market conditions. Taking everything into account, we
believe that service revenue will be up modestly in the first
quarter."
Fourth Quarter and Full Year Conference Call Details
Edgewater Technology will host a conference call on Wednesday,
February 14, at 10:00 a.m. (ET) to discuss fourth quarter and full
year 2006 financial results. To listen to the call, you can
participate by webcast at www.edgewater.com - Investor Relations
section or you can dial 800-659-2056 (pass code 16309924)
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 76946070) from 12:00 p.m. ET
Wednesday, February 14 through 11:59 p.m. ET Wednesday, February 28.
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 Twelve Months Ended
--------------------------- -------------------
December September December
31, 30, 31, December 31,
-------------------
2006 2006 2005 2006 2005
-------- --------- -------- ---------- --------
Revenue:
Service revenue $14,580 $14,367 $11,546 $56,523 $39,788
Software 572 225 70 1,304 1,528
Reimbursable
expenses 570 571 495 2,256 1,810
-------- --------- -------- ---------- --------
Total revenue 15,722 15,163 12,111 60,083 43,126
Cost of revenue:
Project and
personnel costs* 7,829 7,872 6,825 32,206 21,841
Software costs 507 176 54 1,120 1,475
Reimbursable
expenses 570 571 495 2,256 1,810
-------- --------- -------- ---------- --------
Total cost of
revenue 8,906 8,619 7,374 35,582 25,126
-------- --------- -------- ---------- --------
Gross profit 6,816 6,544 4,737 24,501 18,000
Selling, general and
administrative* 4,675 4,621 4,377 18,721 15,883
Depreciation and
amortization 495 454 208 1,755 1,046
-------- --------- -------- ---------- --------
Operating
income 1,646 1,469 152 4,025 1,071
Interest income and
other, net 398 304 317 1,283 1,054
-------- --------- -------- ---------- --------
Income before income
taxes and
discontinued operations 2,044 1,773 469 5,308 2,125
Provision for income
taxes 800 709 188 2,105 850
-------- --------- -------- ---------- --------
Income from continuing
operations
before discontinued
operations 1,244 1,064 281 3,203 1,275
Income from operations
of discontinued
divisions - - - - 325
-------- --------- -------- ---------- --------
Net income $1,244 $1,064 $281 $3,203 $1,600
======== ========= ======== ========== ========
BASIC EARNINGS PER SHARE:
From continuing
operations $0.11 $0.10 $0.03 $0.29 $0.13
Discontinued
operations - - - - 0.03
-------- --------- -------- ---------- --------
Net income $0.11 $0.10 $0.03 $0.29 $0.16
======== ========= ======== ========== ========
Weighted-Average
Shares Outstanding -
Basic 11,205 11,132 10,346 10,980 10,241
======== ========= ======== ========== ========
DILUTED EARNINGS PER SHARE:
From continuing
operations $0.10 $0.09 $0.03 $0.27 $0.12
Discontinued
operations - - - - 0.03
-------- --------- -------- ---------- --------
Net income $0.10 $0.09 $0.03 $0.27 $0.15
======== ========= ======== ========== ========
Weighted-Average
Shares Outstanding -
Diluted 11,839 11,659 11,210 11,956 10,653
======== ========= ======== ========== ========
* - Includes the following amounts related
to equity-based compensation expense:
Cost of revenue -
Project and
personnel costs $58 $46 $- $265 $-
Selling, general
and
administrative
expenses 189 196 102 936 229
-------- --------- -------- ---------- --------
Total $247 $242 $102 $1,201 $229
======== ========= ======== ========== ========
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, Cash
Earnings Per Diluted Share (Non-GAAP)
Three Months Ended Twelve Months Ended
--------------------------- -------------------
December September December
31, 30, 31, December 31,
-------------------
2006 2006 2005 2006 2005
-------- --------- -------- ----------- -------
Reported GAAP Net
Income $1,244 $1,064 $281 $3,203 $1,600
Less: Income from
Discontinued
Operations - - - - (325)
Add: Amortization of
Intangibles 314 327 108 1,185 515
Add: Stock-based
Compensation 247 242 102 1,201 229
Less: Related Tax
Effect (224) (228) (84) (954) (298)
-------- --------- -------- ----------- -------
Cash Net Income $1,581 $1,405 $407 $4,635 $1,721
======== ========= ======== =========== =======
Cash Earnings per
Diluted Share $0.13 $0.12 $0.04 $0.39 $0.16
======== ========= ======== =========== =======
Reconciliation of GAAP Net Income to EBITDA, Adjusted EBITDA and
Adjusted EBITDA per Diluted Share (Non-GAAP)
Reported GAAP Net
Income $1,244 $1,064 $281 $3,203 $1,600
Less: Income from
Discontinued
Operations - - - - (325)
Add: Income Tax
Provision 800 709 188 2,105 850
Add: Depreciation and
Amortization Expense 495 454 208 1,755 1,046
Less: Interest Income
and Other Net (398) (304) (317) (1,283) (1,054)
-------- --------- -------- ----------- -------
EBITDA(2) $2,141 $1,923 $360 $5,780 $2,117
Add: Stock-based
Compensation 247 242 102 1,201 229
-------- --------- -------- ----------- -------
Adjusted EBITDA(2) $2,388 $2,165 $462 $6,981 $2,346
======== ========= ======== =========== =======
Adjusted EBITDA per
Diluted Share(2) $0.20 $0.19 $0.04 $0.58 $0.22
======== ========= ======== =========== =======
1 - Cash Earnings per Share on a fully diluted basis 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 Share measures
presented may not be comparable to similarly titled measures presented
by other companies. Cash Earnings per Share is defined as Net Income,
less Income from Discontinued Operations, plus Amortization of
Intangibles and Stock-based Compensation, less related stock effect,
divided by shares used in computing Diluted Net Income per 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 Diluted Net Income per 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)
December 31,
---------------------
2006 2005
(Unaudited) (Audited)
----------- ---------
Assets
Cash and marketable securities $33,141 $33,381
Accounts receivable, net 10,883 9,858
Deferred taxes, current 1,760 1,323
Prepaid expenses and other assets, current 441 1,367
----------- ---------
Total current assets 46,225 45,929
Fixed assets, net 3,391 1,364
Deferred taxes, net 16,789 20,168
Goodwill and intangible assets, net 29,163 17,076
Other assets 52 52
----------- ---------
Total Assets $95,620 $84,589
=========== =========
Liabilities and Stockholders' Equity
- -------------------------------------------------
Accounts payable and accrued liabilities $3,914 $3,159
Accrued payroll and related liabilities 4,242 3,085
Deferred revenue and other liabilities 252 260
Capital lease obligations, current 184 -
----------- ---------
Total current liabilities 8,592 6,504
Capital lease obligations 778 -
----------- ---------
Total liabilities 9,370 6,504
Stockholders' Equity 86,250 78,085
----------- ---------
Total Liabilities and Stockholders' Equity $95,620 $84,589
=========== =========
Shares Outstanding 11,522 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 2007
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: Edgewater Technology, Inc.
Kevin Rhodes, 781-246-3343
Chief Financial Officer
or
Barbara Warren-Sica, 781-246-3343
Investor Relations
ir@edgewater.com