EX-99.1 2 a5195741ex99-1.txt EXHIBIT 99.1 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