10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

x Quarterly report pursuant to Section 13 or 15 (d) of the Securities Exchange Act of 1934

For the quarterly period ended March 31, 2016

or

¨ Transition report pursuant to Section 13 or 15 (d) of the Securities Exchange Act of 1934

for the transition period from                  to                 

Commission file number: 000-20971

EDGEWATER TECHNOLOGY, INC.

(Exact Name of Registrant as Specified in its Charter)

Delaware	71-0788538
(State or Other Jurisdiction of Incorporation or Organization)	(I.R.S. Employer Identification No.)
200 Harvard Mill Square, Suite 210 Wakefield, MA	01880-3209
(Address of Principal Executive Offices)	(Zip Code)

Registrant’s telephone number, including area code: (781) 246-3343

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule

12b-2 of the Exchange Act (check one):

Large accelerated filer	¨	Accelerated filer	x
Non-accelerated filer	¨	Smaller reporting company	¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  x

The number of shares of Common Stock of the Registrant, par value $.01 per share, outstanding at May 2, 2016 was 12,137,137.

EDGEWATER TECHNOLOGY, INC.

FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 2016

INDEX

	Page
PART I—FINANCIAL INFORMATION
Item 1—Financial Statements
Unaudited Condensed Consolidated Balance Sheets as of March  31, 2016 and December 31, 2015		3
Unaudited Condensed Consolidated Statements of Comprehensive Loss for the Three Months Ended March 31, 2016 and 2015		4
Unaudited Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2016 and 2015		5
Notes to Unaudited Condensed Consolidated Financial Statements		6
Item  2—Management’s Discussion and Analysis of Financial Condition and Results of Operations
Business Overview		15
Results for the Three Months Ended March  31, 2016, Compared to Results for the Three Months Ended March 31, 2015		18
Liquidity and Capital Resources		22
Acquisitions, Earnout Payments and Commitments		23
Off Balance Sheet Arrangements, Contractual Obligations and Contingent Liabilities and Commitments		24
Critical Accounting Policies and Estimates		24
Recent Accounting Pronouncements		24
Risk Factors		24
Special Note Regarding Forward-Looking Statements		25
Item  3—Quantitative and Qualitative Disclosures About Market Risk		25
Item 4—Controls and Procedures
Evaluation of Disclosure Controls and Procedures		25
Changes in Controls and Procedures		26
PART II—OTHER INFORMATION
Item 1—Legal Proceedings		26
Item 1A—Risk Factors		26
Item  2—Unregistered Sales of Equity Securities and Use of Proceeds		26
Item 3—Defaults upon Senior Securities		27
Item 4—Mine Safety Disclosures		27
Item 5—Other Information		27
Item 6—Exhibits		27
Signatures		28

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PART I – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

EDGEWATER TECHNOLOGY, INC.

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(In Thousands, Except Per Share Data)

	March 31, 2016			December 31, 2015
ASSETS
Current assets:
Cash and cash equivalents	$	7,967		$	11,981
Accounts receivable, net of allowance of $150		28,926			27,753
Prepaid expenses and other current assets		2,308			704
Total current assets		39,201			40,438
		0
Property and equipment, net		721			824
Intangible assets, net		11,087			11,990
Goodwill		29,983			29,910
Deferred tax assets, net		24,655			24,032
Other assets		240			230
Total assets	$	105,887		$	107,424
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	961		$	586
Accrued liabilities		12,148			15,486
Short-term portion of contingent earnout consideration		7,536			7,072
Deferred revenue		2,035			2,428
Total current liabilities		22,680			25,572
Revolving credit facility		5,000			5,000
Long-term portion of contingent earnout consideration		3,737			3,468
Total liabilities		31,417			34,040
Stockholders’ equity:
Preferred stock, $.01 par value; 2,000 shares authorized, no shares issued or outstanding		—			—
Common stock, $.01 par value; 48,000 shares authorized, 29,736 shares issued as of March 31, 2016 and December 31, 2015, 12,085 and 11,862 shares outstanding as of March 31, 2016 and December 31, 2015, respectively		297			297
Paid-in capital		210,312			210,324
Treasury stock, at cost, 17,651 and 17,874 shares at March 31, 2016 and December 31, 2015, respectively		(114,657	)		(116,464	)
Accumulated other comprehensive loss		(499	)		(554	)
Retained deficit		(20,983	)		(20,219	)
Total stockholders’ equity		74,470			73,384
Total liabilities and stockholders’ equity	$	105,887		$	107,424

See notes to the unaudited condensed consolidated financial statements.

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EDGEWATER TECHNOLOGY, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(In Thousands, Except Per Share Data)

	Three Months
	Ended March 31,
	2016			2015
Revenue:
Service revenue	$	28,215		$	22,677
Software revenue		2,029			2,167
Reimbursable expenses		1,654			1,734
Total revenue		31,898			26,578
Cost of revenue:
Project and personnel costs		18,240			15,794
Software costs		1,254			1,405
Reimbursable expenses		1,654			1,734
Total cost of revenue		21,148			18,933
Gross profit		10,750			7,645
Operating expenses:
Selling, general and administrative		9,944			8,266
Direct acquisition costs		430			611
Depreciation and amortization		1,004			223
Total operating expenses		11,378			9,100
Operating loss		(628	)		(1,455	)
Other expense, net		625			120
Loss before income taxes		(1,253	)		(1,575	)
Tax benefit		(490	)		(635	)
Net loss	$	(763	)	$	(940	)
Comprehensive loss:
Currency translation adjustments		54			(155	)
Total comprehensive loss	$	(709	)	$	(1,095	)
Net loss per share:
Basic net loss per share of common stock	$	(0.06	)	$	(0.08	)
Diluted net loss per share of common stock	$	(0.06	)	$	(0.08	)
Shares used in computing basic net loss per share of common stock		11,790			11,345
Shares used in computing diluted net loss per share of common stock		11,790			11,345

See notes to the unaudited condensed consolidated financial statements.

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EDGEWATER TECHNOLOGY, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In Thousands)

	Three Months
	Ended March 31,
	2016			2015
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(763	)	$	(940	)
Adjustments to reconcile net loss to net cash used in operating activities, excluding the impact of acquisitions:
Depreciation and amortization		1,049			277
Share-based compensation expense		477			463
Deferred income taxes		(622	)		(678	)
Accretion of contingent earnout consideration		733			83
Recovery of doubtful accounts		(29	)		—
Excess tax benefit from stock options		101			—
Changes in operating accounts, net of acquisition:
Accounts receivable		(1,146	)		785
Prepaid expenses and other current assets		(1,614	)		(481	)
Accounts payable		375			205
Accrued liabilities and other liabilities		(3,339	)		(3,222	)
Deferred revenue		(375	)		89
Net cash used in operating activities		(5,153	)		(3,419	)
CASH FLOWS FROM INVESTING ACTIVITIES:
Net cash used to acquire Zero2Ten		—			(4,543	)
Net cash used to acquire M2 Dynamics		(93	)		—
Purchases of property and equipment		(43	)		(109	)
Net cash used in investing activities		(136	)		(4,652	)
CASH FLOWS FROM FINANCING ACTIVITES:
Proceeds from employee stock plans and stock option exercises		1,317			256
Excess tax benefit from stock options		(101	)		—
Net cash provided by financing activities		1,216			256
Effects of exchange rates on cash		59			(32	)
Net decrease in cash and cash equivalents		(4,014	)		(7,847	)
CASH AND CASH EQUIVALENTS, beginning of period		11,981			26,768
CASH AND CASH EQUIVALENTS, end of period	$	7,967		$	18,921
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid for income taxes	$	40		$	76
Issuance of restricted stock awards	$	—		$	620
Change in fair value of contingent earnout considerations	$	733		$	83

See notes to the unaudited condensed consolidated financial statements.

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EDGEWATER TECHNOLOGY, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. ORGANIZATION:

Edgewater Technology, Inc. helps C-suite executives drive transformational change through its unique selection of business and technology services and channel-based solutions.

Classic consulting disciplines (such as business advisory, process improvement, organizational change management, M&A due diligence, and domain expertise) are blended with technical services (such as digital transformation, technical roadmaps, data and analytics services, custom development and system integration) to help organizations leverage investments in legacy IT assets to create new digital business models.

Delivering both on premise and in the cloud, Edgewater offers two major channel-based services. In the Oracle channel, Edgewater Ranzal provides Business Analytics solutions leveraging Oracle EPM, BI and Big Data technologies. In the Microsoft channel, Edgewater Fullscope delivers Dynamics AX ERP, Business Intelligence and CRM solutions primarily in the manufacturing space.

In this Quarterly Report on Form 10-Q (the “Form 10-Q”), we use the terms “Edgewater,” “Edgewater Technology,” “we,” “our Company,” “the Company,” “our” and “us” to refer to Edgewater Technology, Inc. and its wholly-owned subsidiaries, which are described in our 2015 Annual Report on Form 10-K, as filed with the Securities and Exchange Commission (the “SEC”) on March 11, 2016 (the “2015 Form 10-K”).

2. BASIS OF PRESENTATION:

The accompanying unaudited condensed consolidated financial statements have been prepared by Edgewater pursuant to the rules and regulations of the SEC regarding interim financial reporting. Certain information and note disclosures normally included in annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been omitted pursuant to those rules and regulations, although we believe that the disclosures made are adequate to ensure the information presented is not misleading.

The accompanying unaudited condensed consolidated financial statements reflect all adjustments (which were of a normal, recurring nature) that, in the opinion of management, are necessary to present fairly our financial position, results of operations and cash flows as of and for the interim periods presented. All intercompany transactions have been eliminated in the accompanying unaudited condensed consolidated financial statements. These financial statements should be read in conjunction with the audited financial statements and notes thereto included in our 2015 Form 10-K.

The results of operations for the three months ended March 31, 2016 are not necessarily indicative of the results to be expected for any future period or the full fiscal year. Our revenue and earnings may fluctuate from quarter-to-quarter based on factors within and outside our control, including variability in demand for information technology professional services, the length of the sales cycle associated with our service offerings, the number, size and scope of our projects and the efficiency with which we utilize our employees.

Other comprehensive loss consists of net loss plus or minus any currency translation adjustments.

3. BUSINESS COMBINATIONS:

M2 Dynamics Inc. (“M2 Dynamics”): On December 21, 2015, the Company acquired substantially all of the assets and certain liabilities of M2 Dynamics Inc., pursuant to the terms of an Asset Purchase Agreement (the “M2 Dynamics Acquisition”). Headquartered in Irvine, California, M2 Dynamics is an Oracle Platinum Partner providing Oracle Enterprise Performance Management (“EPM”) and Business Intelligence (“BI”) solutions and services, primarily to the West Coast and southern regions of the United States. M2 Dynamics joined the Company’s Edgewater Ranzal business in providing clients with information technology consultancy services specializing in Business Analytics and encompassing EPM, BI and Big Data solutions.

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EDGEWATER TECHNOLOGY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

3. BUSINESS COMBINATIONS (Continued):

The Company initially estimated total fair value of the purchase price consideration to be $19.8 million. The initial cash consideration paid at close consisted of the $16.1 million base purchase price plus $596 thousand attributable to a net working capital adjustment. The total purchase price was increased by $3.0 million, representing the adjusted fair value estimate of additional contingent earnout consideration that may be earned by M2 Dynamics, which is described in more detail below.

During the quarter ended March 31, 2016, the Company increased total purchase price consideration of the M2 Dynamics Acquisition, resulting in an increase to the carrying value of goodwill, by $93 thousand. The increase is attributable to the final true-up of excess net working capital delivered by M2 Dynamics at the closing of the transaction.

The M2 Dynamics financial accounting measurement period was completed during the first quarter of 2016.

The Company, as of March 31, 2016, had accrued $3.3 million in potential future contingent earnout consideration payable to M2 Dynamics related to the completion of the one-year earnout period. The maximum amount of contingent earnout consideration that M2 Dynamics can earn during the earnout period is capped at $6.6 million (and is not impacted by continued employment status of M2 Dynamics shareholders).

In addition to the above payments, the Company incurred approximately $1.2 million in direct transaction costs. Direct acquisition costs were $430 thousand during the three-month period ended March 31, 2016 and $801 thousand during the three-month period ended December 31, 2015. The direct acquisition costs were expensed (within direct acquisition costs on the consolidated statement of comprehensive loss) as incurred.

In connection with the M2 Dynamics Acquisition, the Company made certain estimates related to the fair value of assets acquired, liabilities assumed, contingent earnout consideration, identified intangibles and goodwill.

The Company performed a fair value allocation of the purchase price among assets, liabilities and identified intangible assets. The allocation of the purchase price was as follows:

	Total			Life (In Years)
	(In Thousands)
Accounts receivable	$	2,785
Other assets		21
Accounts payable and accrued expenses		(753	)
Customer relationships		7,700			6 Years
Goodwill (deductible for tax purposes)		10,115
Total purchase price	$	19,868

The M2 Dynamics Acquisition was accounted for as a purchase transaction, and accordingly, the results of comprehensive loss, commencing December 21, 2015, are included in the Company’s accompanying consolidated statement of comprehensive loss.

The Company recorded total revenues of $3.1 million during the three-month period ended March 31, 2016. Non-cash expenses associated with amortization of purchased intangible assets as well as the accretion of contingent earnout consideration totaled $749 thousand, which was a significant factor in the overall net loss of M2 Dynamics of $(105) thousand during the three-month period ended March 31, 2016.

The following table sets forth supplemental pro forma financial information that assumes the acquisition of M2 Dynamics was completed at the beginning of 2015. The information for the quarter ended March 31, 2015 includes the historical results of Edgewater and M2 Dynamics. The pro forma results include estimates and assumptions regarding the amortization of intangible assets recognized as part of the acquisition and income taxes. The pro forma results, as presented, are not necessarily indicative of the results that would have occurred if the acquisition had occurred on the date indicated, or that may result in the future.

7

	Unaudited March 31, 2015
	(In Thousands)
Pro forma revenue	$	29,068
Pro forma net loss		(895	)
Pro forma basic net loss per share	$	(0.08	)
Pro forma diluted net loss per share	$	(0.08	)

Acquisition of Branchbird LLC (“Branchbird”): On August 17, 2015, the Company acquired substantially all of the assets and liabilities of Branchbird, pursuant to the terms of an Asset Purchase Agreement (the “Branchbird Acquisition”). Headquartered in Chicago, Illinois, Branchbird delivers Big Data solutions to their clients utilizing the Oracle Endeca and Big Data Discovery (BDD) products. The Branchbird Acquisition extends Ranzal’s presence in the Midwest.

The Company determined the total allocable purchase price consideration to be $4.2 million. The initial cash consideration paid at closing was $2.7 million, net of $19 thousand attributable to a net working capital adjustment. The total purchase price was increased by $1.4 million, representing our initial estimate of the fair value of additional contingent earnout consideration that may be earned by Branchbird, which is described in more detail below. In addition to the above payments, the Company incurred approximately $340 thousand in direct transaction costs, which were expensed (within direct acquisition costs on the consolidated statement of comprehensive loss) during the year ended December 31, 2015.

An earnout agreement was entered into in connection with the Branchbird Acquisition under which Branchbird is eligible to receive additional contingent consideration. Contingent earnout consideration to be paid, if any, to Branchbird will be based upon the achievement of certain performance measures (and is not impacted by continued employment status of Branchbird owners) over two consecutive one-year earnout periods, concluding on August 16, 2017. The Company has estimated the fair value of this obligation on the date of acquisition to be $1.4 million. The maximum amount of contingent earnout consideration that can be earned by Branchbird is capped at $2.4 million. As of March 31, 2016, the Company had recorded an accrual of $1.6 million related to Branchbird contingent earnout consideration.

In connection with the Branchbird Acquisition, the Company made certain estimates related to the fair value of assets acquired, liabilities assumed, contingent earnout consideration, identified intangibles and goodwill.

The Company performed a fair value allocation of the purchase price among assets, liabilities and identified intangible assets. The allocation of the purchase price was as follows:

	Total			Life (In Years)
	(In Thousands)
Accounts receivable	$	540
Other assets		16
Accounts payable and accrued expenses		(86	)
Customer relationships		2,100			5
Goodwill (deductible for tax purposes)		1,613
Total purchase price	$	4,183

The Branchbird Acquisition was accounted for as a purchase transaction, and accordingly, the results of operations, commencing August 17, 2015, are included in the Company’s accompanying consolidated statement of comprehensive loss. Pro forma financial information related to the Branchbird Acquisition is not presented as the effect of this acquisition was not material to the Company.

Acquisition of Zero2Ten, Inc. (“Zero2Ten”): On March 13, 2015, the Company acquired substantially all of the assets and liabilities of Zero2Ten, pursuant to the terms of an Asset Purchase Agreement (the “Zero2Ten Acquisition”). Headquartered in Alpharetta, Georgia, Zero2Ten is a specialty solution provider of Microsoft’s CRM Cloud product. Zero2Ten has delivered its services to organizations across various vertical markets with an emphasis on manufacturing. The acquisition of Zero2Ten continues our investment in service offerings that complement the Microsoft Dynamics product suite.

The Company determined the total allocable purchase price consideration to be $9.0 million. The initial cash consideration paid at closing was $4.5 million. The cash paid at closing consisted of the $5.0 million purchase price less $457 thousand attributable to a net working capital adjustment. The total purchase price was increased by $4.4 million, representing our initial estimate of the fair value estimate of additional contingent earnout consideration that may be earned by Zero2Ten, which is described in more detail below. In addition to the above payments, the Company incurred approximately $613 thousand in direct transaction costs, which were expensed (within direct acquisition costs on the consolidated statement of comprehensive loss) during the year ended December 31, 2015.

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An earnout agreement was entered into in connection with the Zero2Ten Acquisition under which Zero2Ten is eligible to receive additional contingent consideration. Contingent earnout consideration to be paid, if any, to Zero2Ten will be based upon the achievement of certain performance measures (and is not impacted by continued employment status of Zero2Ten shareholders) over two consecutive one-year earnout periods, concluding on March 13, 2017. The Company has estimated the fair value of this obligation on the date of acquisition to be $4.4 million. The maximum amount of contingent earnout consideration that can be earned by Zero2Ten is capped at $8.6 million. As of March 31, 2016, the Company had recorded an accrual of $6.4 million related to Zero2Ten contingent earnout consideration.

In connection with the Zero2Ten Acquisition, the Company made certain estimates related to the fair value of assets acquired, liabilities assumed, contingent earnout consideration, identified intangibles and goodwill.

The Company performed a fair value allocation of the purchase price among assets, liabilities and identified intangible assets. The allocation of the purchase price was as follows:

	Total			Life (In Years)
	(In Thousands)
Accounts receivable	$	1,596
Other assets		142
Deferred revenue		(1,158	)
Accounts payable and accrued expenses		(580	)
Customer relationships		2,800			5
Goodwill (deductible for tax purposes)		6,210
Total purchase price	$	9,010

The Zero2Ten Acquisition was accounted for as a purchase transaction, and accordingly, the results of operations, commencing March 13, 2015, are included in the Company’s accompanying consolidated statement of comprehensive loss. Pro forma financial information related to the Zero2Ten Acquisition is not presented as the effect of this acquisition was not material to the Company.

4. REVENUE RECOGNITION:

The Company recognizes revenue primarily through the provision of consulting services and the resale of third-party, off-the-shelf software and maintenance.

We generate revenue by providing consulting services under written service contracts with our customers. The service contracts we enter into generally fall into three specific categories: time and materials, fixed-price and retainer.

We consider amounts to be earned once evidence of an arrangement has been obtained, services are delivered, fees are fixed or determinable and collectability is reasonably assured. We establish billing terms at the time at which the project deliverables and milestones are agreed. Our standard payment terms are 30 days from invoice date. Out-of-pocket reimbursable expenses charged to customers are reflected as revenue.

When a customer enters into a time and materials, fixed-price or a periodic retainer-based contract, the Company recognizes revenue in accordance with its evaluation of the deliverables in each contract. If the deliverables represent separate units of accounting, the Company then measures and allocates the consideration from the arrangement to the separate units, based on vendor specific objective evidence (“VSOE”) of the value for each deliverable.

The revenue under time and materials contracts is recognized as services are rendered and performed at contractually agreed upon rates. Revenue pursuant to fixed-price contracts is recognized under the proportional performance method of accounting. We routinely evaluate whether revenue and profitability should be recognized in the current period. We estimate the proportional performance on our fixed-price contracts on a monthly basis utilizing hours incurred to date as a percentage of total estimated hours to complete the project. This method is used because reasonably dependable estimates of costs and revenue earned can be made, based on historical experience and milestones identified in any particular contract. If we do not have a sufficient basis to measure progress toward completion, revenue is recognized upon completion of performance, subject to any warranty provisions or other project management assessments as to the status of work performed.

Estimates of total project costs are continuously monitored during the term of an engagement. There are situations where the number of hours to complete projects may exceed our original estimate, as a result of an increase in project scope, unforeseen events that arise, or the inability of the client or the delivery team to fulfill their responsibilities. Accordingly, recorded revenues and costs are subject to revision throughout the life of a project based on current information and historical trends. Such revisions may result in increases or decreases to revenue and income and are reflected in the consolidated financial statements in the periods in which they are first identified.

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If our initial estimates of the resources required or the scope of work to be performed on a contract are inaccurate, or we do not manage the project properly within the planned time period, a provision for estimated losses on incomplete projects may be made. Any known or probable losses on projects are charged to operations in the period in which such losses are determined. A formal project review process takes place quarterly, although projects are continuously evaluated throughout the period. Management reviews the estimated total direct costs on each contract to determine if the estimated amounts are accurate, and estimates are adjusted as needed in the period identified. No losses were recognized on contracts during the three-month periods ended March 31, 2016 or 2015.

We also perform services on a periodic retainer basis under infrastructure service contracts, which include monthly hosting and support services. Revenue under periodic retainer-based contracts is recognized ratably over the contract period, as outlined within the respective contract. In the event additional services are required above the minimum retained or contracted amount, then such services are billed on a time and materials basis.

Typically, the Company provides warranty services on its fixed-price contracts related to providing customers with the ability to have any “design flaws” remedied and/or have our Company “fix” routine defects. The warranty services, as outlined in the respective contracts, are provided for a specific period of time after a project is complete. The Company values the warranty services based upon historical labor hours incurred for similar services at standard billing rates. Revenue related to the warranty provisions within our fixed-price contracts is recognized as the services are performed or the revenue is earned. The warranty period is typically for a 30-60 day period after the project is complete.

Customer prepayments, even if nonrefundable, are deferred (classified as deferred revenue on the condensed consolidated balance sheets) and recognized over future periods as services are performed.

Software revenue represents the resale of certain third-party off-the-shelf software and maintenance and is recorded on a gross basis provided we act as a principal in the transaction, which we have determined based upon several factors, including, but not limited to, the fact that we have credit risk and we set the price to the end user. In the event we do not meet the requirements to be considered a principal in the software sale transaction and act as an agent, software revenue is recorded on a net basis.

Substantially all of the software sold by the Company is delivered electronically. For software that is delivered electronically, we consider delivery to have occurred when the customer either (a) takes possession of the software via a download (that is, when the customer takes possession of the electronic data on its hardware), or (b) has been provided with access codes that allow the customer to take immediate possession of the software on its hardware pursuant to an agreement or purchase order for the software.

The Company enters into multiple element arrangements which typically include software, post-contract support (or maintenance), and consulting services. Consistent with the software described above, maintenance that is in the form of a pass through transaction is recognized upon delivery of the software, as all related warranty and maintenance is performed by the primary software vendor and not the Company. Maintenance fee revenue for the Company’s software products, which is inconsequential in all years presented, is recognized ratably over the term of the arrangements, which are generally for a one-year period. The Company has established VSOE with respect to the services and maintenance provided based on the price charged when the services are sold separately and the stated renewal rate.

5. SHARE-BASED COMPENSATION:

Share-based compensation expense under all of the Company’s share-based plans was $477 thousand and $463 thousand for the three-month periods ended March 31, 2016 and 2015, respectively.

Cash received from the employee stock purchase plan (“ESPP”) and through stock option exercises was $1.3 million and $256 thousand during the three-month periods ended March 31, 2016 and 2015, respectively. As of March 31, 2016, unrecognized compensation expense, net of estimated forfeitures, related to the unvested portion of all share-based compensation arrangements was approximately $1.4 million and is expected to be recognized over a weighted-average period of 1.0 years.

The Company intends to use previously purchased treasury shares for shares issued for options, restricted share awards and ESPP purchases. Shares may also be issued from authorized but unissued share reserves.

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6. INCOME TAXES:

The Company recorded tax benefits of $(490) thousand and $(635) thousand for the three-month periods ended March 31, 2016 and 2015, respectively. The reported tax benefits for the three-month periods ended March 31, 2016 and 2015, are based upon estimated annual effective tax rates of 39.1% and 40.3%, respectively. The effective tax rates reflected our combined Federal and state income tax rates, foreign income tax provisions and the recognition of U.S. deferred tax liabilities for differences between the book and tax basis of goodwill.

We assess the realizability of our deferred tax assets and assess the need for a valuation allowance on an ongoing basis. The periodic assessment of the net carrying value of our deferred tax assets under the applicable accounting rules is highly judgmental. We are required to consider all available positive and negative evidence in evaluating the likelihood that we will be able to realize the benefit of our deferred tax assets in the future. Such evidence includes scheduled reversals of deferred tax liabilities, projected future taxable income, tax planning strategies and the results of recent operations. Since this evaluation requires consideration of events that may occur some years into the future, there is significant judgment involved, and our conclusion could be materially different should certain of our expectations not transpire.

When assessing all available evidence, we consider the extent to which we have generated pre-tax income or losses over the most recent three-year period to be an important piece of objective evidence. As of March 31, 2016 and December 31, 2015, the recorded deferred tax asset valuation allowance balance was $4.5 million.

Our policy is to classify interest and penalties related to unrecognized tax benefits as income tax expense. This policy has been consistently applied in all periods. During the three-month period ended March 31, 2015 we recognized, as part of income tax expense, $2 thousand in interest and penalties related to our unrecognized tax benefits. No such amounts were recognized in the three-month period ended March 31, 2016. We have reviewed the tax positions taken, or to be taken, in our tax returns for all tax years currently open to examination by a taxing authority. We have identified no uncertain tax positions for which it is reasonably possible that the total amount of unrecognized tax benefits will significantly increase or decrease within the twelve months ending September 30, 2017. We remain subject to examination until the statute of limitations expires for each respective tax jurisdiction.

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7. FAIR VALUE MEASUREMENT:

We utilize the following valuation hierarchy for disclosure of the inputs to valuation used to measure fair value. This hierarchy prioritizes the inputs into three broad levels as follows:

• Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities.

• Level 2 inputs are quoted prices for similar assets and liabilities in active markets or inputs that are observable for the asset or liability, either directly or indirectly through market corroboration, for substantially the full term of the financial instrument.

• Level 3 inputs are unobservable inputs based on our own assumptions used to measure assets and liabilities at fair value.

A financial asset or liability’s classification within the hierarchy is determined based upon the lowest level input that is significant to the fair value measurement.

As of March 31, 2016 and December 31, 2015, our only financial assets and liabilities required to be measured on a recurring basis were our contingent earnout consideration liabilities.

The following table represents the Company’s fair value hierarchy for its financial assets and liabilities required to be measured on a recurring basis:

	Basis of Fair Value Measurements
	Balance		Quoted Prices in Active Markets for Identical Items (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	(In Thousands)
Balance at March 31, 2016:
Financial liabilities:
Contingent earnout consideration	$	11,273	$	—	$	—	$	11,273
Total financial liabilities	$	11,273	$	—	$	—	$	11,273
Balance at December 31, 2015:
Financial liabilities:
Contingent earnout consideration	$	10,540	$	—	$	—	$	10,540
Total financial liabilities	$	10,540	$	—	$	—	$	10,540

No financial instruments were transferred into or out of Level 3 classification during the three- month period ended March 31, 2016.

The Company has classified its net liability for contingent earnout considerations relating to its Zero2Ten, Branchbird and M2 Dynamics Acquisitions within Level 3 of the fair value hierarchy because the fair value is determined using significant unobservable inputs, which included probability weighted cash flows. A description of these acquisitions is included within Note 3. The contingent earnout payments for each acquisition are based on the achievement of certain revenue and earnings before interest, taxes, depreciation and amortization targets.

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A reconciliation of the beginning and ending Level 3 net liabilities for the three-month period ended March 31, 2016 is as follows:

	Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
	(In Thousands)
Balance at December 31, 2015	$	10,540
Accretion of contingent earnout consideration (included within other expense, net)		733
Ending balance at March 31, 2016	$	11,273

As of March 31, 2016 and December 31, 2015, the fair values of our other financial instruments, which include cash and cash equivalents, accounts receivable and accounts payable, approximate the carrying amounts of the respective asset and/or liability due to the short-term nature of these financial instruments.

8. GOODWILL AND INTANGIBLE ASSETS:

Goodwill increased to $30.0 million as of March 31, 2016 compared to $29.9 million as of December 31, 2015. This increase is the result of adjustments to the initial estimate of purchase price allocation of M2 Dynamics, which is further disclosed within Note 3. With the exception of the acquisition-related increase noted herein, there have been no other changes to the Company’s goodwill balance. Our annual goodwill and intangible assets measurement date is December 2.

We amortize our intangible assets that have finite lives using either the straight-line method or based on estimated future cash flows to approximate the pattern in which the economic benefit of the asset will be utilized. Amortization expense was $858 thousand and $74 thousand during the three-month periods ended March 31, 2016 and 2015, respectively. This amortization expense relates to certain non-competition covenants and customer lists, which expire at various times through 2021.

The Company recorded amortization from capitalized internally developed software (intellectual property) (reported as part of Cost of Revenue—software cost) of $45 thousand and $54 thousand during the three- month periods ended March 31, 2016 and 2015, respectively.

Estimated annual amortization expense of our intangible assets (including amortization expense associated with capitalized software costs) for the current year and the following four years ending December 31, is as follows:

	Amortization Expense
	(In Thousands)
2016	$	3,612
2017	$	2,804
2018	$	2,240
2019 and beyond	$	3,334

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9. ACCRUED EXPENSES AND OTHER LIABILITIES:

Accrued liabilities as of March 31, 2016 and December 31, 2015 consisted of the following:

	March 31, 2016		December 31, 2015
	(In Thousands)
Accrued bonuses		2,016		2,939
Accrued commissions		1,480		1,496
Accrued vacation		2,828		2,272
Accrued payroll related liabilities		497		2,423
Accrued software expense		741		1,284
Accrued contractor fees		1,144		1,132
Accrued professional service fees		344		1,016
Short-term portion of lease abandonment accrual		291		437
Deferred rent		187		220
Income tax related accruals		408		318
Other accrued expenses		2,212		1,949
Total	$	12,148	$	15,486

10. NET LOSS PER SHARE:

A reconciliation of net loss and weighted average shares used in computing basic and diluted net loss per share is as follows:

	Three Months Ended March 31,
	2016			2015
Basic net loss per share:
Net loss applicable to common shares	$	(763	)	$	(940	)
Weighted average common shares outstanding		11,790			11,345
Basic net loss per share of common stock	$	(0.06	)	$	(0.08	)
Diluted net loss per share:
Net loss applicable to common shares	$	(763	)	$	(940	)
Weighted average common shares outstanding		11,790			11,345
Dilutive effects of stock options		—			—
Weighted average common shares, assuming dilutive effect of stock options		11,790			11,345
Diluted net loss per share of common stock	$	(0.06	)	$	(0.08	)

Share-based awards, inclusive of all grants made under the Company’s equity plans, for which either the stock option exercise price or the fair value of the restricted share award exceeds the average market price over the period, have an anti-dilutive effect on earnings per share, and accordingly, are excluded from the diluted computations for all periods presented. Had such shares been included, shares for the diluted computation would have increased by approximately 109 thousand in the three-month period ended March 31, 2016. The diluted computation would have increased by approximately 69 thousand in the three- month period ended March 31, 2015. As of March 31, 2016 and 2015, there were approximately 3.7 million and 4.1 million share-based awards outstanding, respectively, under the Company’s equity plans. Options to purchase 1.7 million shares of common stock that were outstanding during the three months ended March 31, 2016 and 2015 were not included in the computation of diluted net loss per share due to the reported periodic loss.

11. STOCK REPURCHASE PROGRAM:

In December 2007, our Board of Directors (the “Board”) authorized a stock repurchase program for up to $5.0 million of common stock on the open market or through privately negotiated transactions from time-to-time through December 31, 2008 (the “Stock Repurchase Program”). The Board subsequently amended the Stock Repurchase Program, authorizing both an increase to and an extension of the Stock Repurchase Program. The Stock Repurchase Program, as amended, had a maximum purchase value of shares of $23.1 million (the “Purchase Authorization”) and was set to expire on September 19, 2015 (the “Repurchase Period”). On September 17, 2015, we announced that the Board had approved an extension of the Repurchase Period to September 23, 2016.

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The timing and amount of the purchases will be based upon market conditions, securities law considerations and other factors. The Stock Repurchase Program does not obligate the Company to acquire a specific number of shares in any period and may be modified, suspended, extended or discontinued at any time, without prior notice.

The Company did not repurchase any shares of common stock during the three-month periods ended March 31, 2016 or 2015.

12. REVOLVING LINE OF CREDIT:

In September 2013, the Company entered into a secured revolving credit facility (the “Credit Facility”). The Credit Facility was modified through an amendment in December 2015, which increased the borrowing base to $15 million (from the previous $10 million) with an additional accordion feature that allows the Company to request an additional $5.0 million as needed, extending the total credit facility borrowing capacity to $20 million over its three-year term. The Credit Facility is collateralized by substantially all assets of the Company and its domestic subsidiaries, and is subject to certain financial covenants. The Company was in compliance with the financial covenants (which are related to interest coverage and leverage) as of March 31, 2016. Under the terms of the Credit Facility, any advances will accrue interest at a variable per annum rate of interest equal to the LIBOR Rate plus 1.5%. Interest is due and payable, in arrears, on a monthly basis. The Company will be obligated to pay an annual commitment fee of 0.15% on the daily undrawn balance of the facility. Any amounts outstanding under the Credit Facility will be due on December 21, 2018. The Company had drawn down $5.0 million of this balance as of March 31, 2016.

13. GEOGRAPHIC INFORMATION

Total revenue to unaffiliated customers by geographic area were as follows:

	For the Three-Months Ended March 31,
	2016		2015
United States	$	26,445	$	22,504
Canada		3,750		2,989
Other International		1,703		1,085
Total Revenue	$	31,898	$	26,578

Substantially all of the Company’s long-lived assets are located within the United States.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following information should be read in conjunction with the information contained in the Unaudited Condensed Consolidated Financial Statements and notes thereto appearing elsewhere in this Quarterly Report on Form 10-Q. This Quarterly Report on Form 10-Q contains forward-looking statements that involve risks and uncertainties. See “Risk Factors” and “Special Note Regarding Forward-Looking Statements” included elsewhere herein. We use the terms “we,” “our,” “us,” “Edgewater” and “the Company” in this report to refer to Edgewater Technology, Inc. and its wholly-owned subsidiaries.

Business Overview

Edgewater Technology, Inc. helps C-suite executives drive transformational change through its unique selection of business and technology services and channel-based solutions.

Classic consulting disciplines (such as business advisory, process improvement, organizational change management, M&A due diligence, and domain expertise) are blended with technical services (such as digital transformation, technical roadmaps, data and analytics services, custom development and system integration) to help organizations leverage investments in legacy IT assets to create new digital business models.

Delivering both on premise and in the cloud, Edgewater offers two major channel-based services. In the Oracle channel, Edgewater Ranzal provides Business Analytics solutions leveraging Oracle EPM, BI and Big Data technologies. In the Microsoft channel, Edgewater Fullscope delivers Dynamics AX ERP, Business Intelligence and CRM solutions primarily in the manufacturing space.

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Our Services

Edgewater offers a full spectrum of services and expertise to ensure the success of our engagement. Our consulting services are consolidated into two major synergistic offerings: (1) Classic Consulting and (2) Product-Based Consulting.

The following diagram illustrates these offerings:

Edgewater has the proven expertise to plan, deliver and manage integration services that improve performance and maximize business results. We focus on deploying new systems and unlocking the value of the existing corporate assets. This proven expertise enables us to bring complex technologies and systems together while minimizing risk, leveraging our clients’ technology investments and delivering tailored solutions.

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Factors Influencing Our Results of Operations

Revenue. The Company derives its service revenue from time and materials-based contracts, fixed-price contracts and retainer-based arrangements. Time and materials-based contracts represented 80.9% of service revenue for the three-month period ended March 31, 2016. Time and materials-based contracts represented 86.3% of service revenue for the three-month period ended March 31, 2015. Revenue under time and materials contracts is recognized as services are rendered and performed at contractually agreed upon rates. Fixed-price contracts represented 14.7% of service revenue for the three-month period ended March 31, 2016. Fixed-price contracts represented 8.6% of service revenue for the three-month period ended March 31, 2015. Revenue pursuant to fixed-price contracts is recognized under the proportional performance method of accounting. Retainer-based contracts represented 4.4% of service revenue during the three-month period ended March 31, 2016. Retainer-based contracts represented 5.1% of service revenue during the three-month period ended March 31, 2015. Revenue under retainer-based contracts is recognized ratably over the contract period, as outlined within the respective contract.

Estimates of total project costs are continuously monitored during the term of an engagement. There are situations where the number of hours to complete projects may exceed (or be less than) our original estimate, as a result of an increase (or decrease) in project scope, unforeseen events that arise, or the inability of the client or the delivery team to fulfill their responsibilities. Accordingly, recorded revenues and costs are subject to revision throughout the life of a project based on current information and historical trends. Such revisions may result in increases or decreases to revenue and income and are reflected in the consolidated financial statements in the periods in which they are first identified.

We anticipate that software revenue will continue to be a significant portion of our revenues. Our reported software revenue represents the resale of certain third-party off-the-shelf software and related maintenance (primarily relates to the resale of Microsoft Dynamics AX product) and has historically been recorded on a gross basis provided we act as principal in the transaction, whereby we have credit risk and we set the price to the end user. In the event we do not meet the requirements to be considered a principal in the software sale transaction and act as an agent, software revenue is recorded on a net basis.

Software revenue is recognized upon delivery, except in the infrequent situation where the Company provides maintenance services, in which case the related maintenance is recognized ratably over the maintenance period (while the software revenue is recognized upon delivery). Software revenue is expected to fluctuate between quarters, dependent on our customers’ demand for such third-party off-the-shelf software. Fluctuations in software revenue may have an impact upon our periodic operating performance, including gross margin.

Operating Expenses. The largest portion of our operating expenses consists of cash and non-cash compensation and benefits associated with our project consulting personnel and related expenses. Non-cash compensation includes share-based compensation expense arising from restricted stock and option grants to employees. Project personnel expenses also consist of payroll costs and related benefits associated with our professional staff. Other related expenses include travel, subcontracting costs, third-party vendor payments and non-billable expenses associated with the delivery of services to our customers. We consider the relationship between project personnel expenses and revenue to be an important measure of our operating performance. The relationship between project personnel expenses and revenue is driven largely by the chargeability of our consultant base, the prices we charge our customers and the non-billable costs associated with securing new customer engagements and developing new service offerings. The remainder of our recurring operating expenses consists of expenses associated with the development of our business and the support of our customer-serving professionals, such as professional development and recruiting, marketing and sales, and management and administrative support. Professional development and recruiting expenses consist primarily of recruiting and training, content development and delivery costs. Marketing and sales expenses consist primarily of the costs associated with the development and maintenance of our marketing materials and programs. Management and administrative support expenses consist primarily of the costs associated with operations, including finance, information systems, human resources, facilities (including the rent of office space) and other administrative support for project personnel.

The Company regularly reviews its fees for services, professional compensation and overhead costs to ensure that its services and compensation are competitive within the industry and that its overhead costs are balanced with its revenue levels. In addition, we monitor the progress of customer projects with customer senior management. The Company manages the activities of its professionals by closely monitoring engagement schedules and staffing requirements. However, a rapid decline in the demand for the professional services that we provide could result in lower utilization of our professionals than we planned. In addition, because most of our customer engagements are terminable by our customers without penalty, an unanticipated termination of a customer project could require us to maintain underutilized employees. While professional staff levels must be adjusted to reflect active engagements, the Company must also maintain a sufficient number of consulting professionals to oversee existing customer engagements and to participate in sales activities to secure new customer assignments.

Direct Acquisition Costs. The Company incurred $430 thousand of direct acquisition costs related to the acquisition of substantially all of the assets of M2 Dynamics in the three-month period ended March 31, 2016. During the first quarter of 2015, the Company incurred approximately $611 thousand of direct acquisition costs associated with the March 13, 2015 Zero2Ten acquisition. Incurred expenses included investment banking fees, legal fees, accounting and other professional fees directly associated with completion of the acquisitions.

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Adjustments to Fair Value of Contingent Consideration. The Company remeasures the estimated carrying value of contingent consideration each quarter, with any changes (income or expense) in the estimated fair value recorded as an operating expense. No adjustments were made to the anticipated earnouts during the three-month period ended March 31, 2016. Accretion of the contingent earnout liability is classified as other expense on the consolidated statements of comprehensive loss. As of March 31, 2016 and December 31, 2015, the Company had $11.3 million and $10.5 million, respectively, accrued in connection with the contingent earnout obligations associated with the Zero2Ten, Branchbird, and M2 Dynamics acquisitions.

Company Performance Measurement Systems and Metrics. The Company’s management monitors and assesses its operating performance by evaluating key metrics and indicators on an ongoing basis. For example, we regularly review performance information related to annualized revenue per billable consultant, periodic consultant utilization rates, gross profit margins, average bill rates and billable employee headcount. Edgewater has also developed internal Enterprise Performance Management systems which aid us in measuring our operating performance and consultant utilization rates. The matching of sales opportunities to available skill sets in our consultant base is one of our greatest challenges and therefore, we monitor consultant utilization closely. These metrics, along with other operating and financial performance metrics, are used in evaluating management’s overall performance. These metrics and indicators are discussed in more detail under “Results for the Three Months Ended March 31, 2016, Compared to Results for the Three Months Ended March 31, 2015,” included elsewhere in this Quarterly Report on Form 10-Q.

Results for the Three Months Ended March 31, 2016, Compared to Results for the Three Months Ended March 31, 2015

The financial information that follows has been rounded in order to simplify its presentation. The amounts and percentages below have been calculated using the detailed financial information contained in the unaudited condensed consolidated financial statements, the notes thereto, and the other financial data included in this Quarterly Report on Form 10-Q.

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The following table sets forth the percentage of total revenue of items included in our unaudited condensed consolidated statements of comprehensive loss:

	Three Months Ended March 31,
	2016			2015
Revenue:
Service revenue		88.4	%		85.3	%
Software revenue		6.4	%		8.2	%
Reimbursable expenses		5.2	%		6.5	%
Total revenue		100.0	%		100.0	%
Cost of revenue:
Project and personnel costs		57.2	%		59.4	%
Software costs		3.9	%		5.3	%
Reimbursable expenses		5.2	%		6.5	%
Total cost of revenue		66.3	%		71.2	%
Gross profit		33.7	%		28.8	%
Operating expenses:
Selling, general and administrative		31.2	%		33.4	%
Direct acquisition		1.3	%		0.0	%
Depreciation and amortization		3.2	%		0.8	%
Total operating expenses		35.7	%		34.2	%
Operating loss		(2.0	)%		(5.4	)%
Other expense, net		(1.9	)%		0.4	%
Loss before income taxes		(3.9	)%		(5.8	)%
Income tax benefit		(1.5	)%		(2.3	)%
Net loss		(2.4	)%		(3.5	)%

Revenue. Total revenue increased by $5.3 million, or 20.0%, to $31.9 million during the three-month period ended March 31, 2016, compared to total revenue of $26.6 million in the three-month period ended March 31, 2015. Service revenue increased by $5.5 million, or 24.4%, to $28.2 million during the three-month period ended March 31, 2016, compared to service revenue of $22.7 million in the three-month period ended March 31, 2015.

Service revenue growth during the three-month period ended March 31, 2016 was the result of the contributions of the M2 Dynamics, Branchbird and Zero2Ten Acquisitions (Zero2Ten contributed a full quarter of service revenue in 2016 compared to a half month contribution during the first quarter of 2015), combined with the organic growth and one additional bill day during the first quarter of 2016 (compared to the first quarter of 2015). As previously disclosed, 2015 was affected by project start delays (instances where contracts were signed, but projects did not kick off when initially anticipated). During the first quarter of 2016, the Company was able to commence work on several of those engagements which began the process of converting those signed engagements into recognized service revenue. Billable consultant utilization increased to 72.7% in the three-month period ended March 31, 2016 compared to 70.4% in the three-month period ended March 31, 2015.

On a sequential quarterly basis, billable consultant utilization increased to 72.7% from 67.2% in the fourth quarter of 2015. Sequential quarterly service revenue growth of $3.9 million, or 15.9%, was driven by the full quarter contribution of M2 Dynamics (compared to a holiday impacted partial month included in the fourth quarter of 2015) as well as through our organic growth, primarily the result of the kick-off of previously delayed projects in the EPM/BI service offering.

Annualized service revenue per billable consultant, as adjusted for utilization, was $358 thousand and $344 thousand during the three-month periods ended March 31, 2016 and 2015, respectively. The periodic fluctuations in our annualized service revenue per billable consultant metric continue to reflect the changes in the mix of our service offering revenue generated by our current engagements.

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During the three-month period ended March 31, 2016, software revenue totaled $2.0 million, or 6.4% of total revenue, compared to software revenue of $2.2 million, or 8.2%, in the three-month period ended March 31, 2015. Our software revenue is primarily related to our resale of Microsoft Dynamics software, cloud-based licenses and maintenance. Software revenue is expected to fluctuate on a period-to-period basis dependent upon our customers’ demand for such third-party off-the-shelf software. We anticipate that software revenue will continue to represent a meaningful portion of revenues in future years. Because of this, we believe that periodic fluctuations in the amount of software revenue recognized by the Company may have a material impact upon our gross margins.

Generally, we are reimbursed for our out-of-pocket expenses incurred in connection with our customers’ consulting projects. Reimbursed expense revenue remained consistent at $1.7 million for both the three-month periods ended March 31, 2016 and 2015. The aggregate amount of reimbursed expenses will fluctuate from period-to-period depending on the number of billable consultants as well the location of our customers, the general fluctuation of travel costs, such as airfare, and the number of our projects that require travel.

The number of customers the Company served during the three-month period ended March 31, 2016 totaled 536, as compared to 544 customers during the three-month period ended March 31, 2015. The number of customers served in both 2016 and 2015 has benefited from the Zero2Ten, Branchbird and M2 Dynamics acquisitions. During the first three months of 2016, we secured first-time engagements with a total of 35 new customers, compared to 34 new customer engagements during the first three months of 2015.

Cost of Revenue. Cost of revenue primarily consists of project personnel costs principally related to salaries, payroll taxes, employee benefits, software costs and travel expenses for personnel dedicated to customer projects. These costs represent the most significant expense we incur in providing our services. In total, cost of revenue increased by $2.2 million, or 11.7%, to $21.1 million for the three-month period ended March 31, 2016, compared to $18.9 million in the comparable 2015 quarterly period.

The primary drivers of the 2016 year-over-year increase in total cost of revenue during the three-month periods ended March 31, 2016, on an absolute dollar basis, were related to increases in salary- and fringe-related expenses (primarily associated with the increase in billable consultant headcount from our recent acquisitions), combined with an increase in contractor expense (contractors are utilized in areas of specialty skill sets as well as during times of significant revenue growth as they allow for a flexible work force). The Company maintained 381 billable consultants (excluding contractors) as of the quarter ended March 31, 2016, compared to 361 billable consultants (excluding contractors) at the end of the first quarter of 2015.

Project and personnel costs represented 57.2% of total revenue during the three-month period ended March 31, 2016, as compared to 59.4% of total revenue during the three-month period ended March 31, 2015.

The decrease in project and personnel costs during the three-month period ended March 31, 2016, as a percentage of total revenue, was driven by the increased service revenue (as noted above), partially offset by the increase in salary-related expenses associated with the increase in billable consultant headcount as well as increased contractor expense associated with our reliance on contractor resources during 2016 (contractors were leveraged as a flexible staffing solution sacrificing margin in the short-term for flexibility in the long-term).

Software costs amounted to $1.3 million during the three-month period ended March 31, 2016. Software costs amounted to $1.4 million during the three-month period ended March 31, 2015. Software costs are expected to fluctuate between quarters depending on our customers’ demand for software. Reimbursable expenses were $1.7 million for both the three-month periods ended March 31, 2016 and 2015.

Gross Profit. During the three-month period ended March 31, 2016, total gross profit increased $3.1 million, or 40.6%, to $10.8 million, compared to gross profit of $7.6 million in the three-month period ended March 31, 2015. For purposes of further analysis, we refer to gross profit as a percentage of revenue generally as gross margin.

Total gross margin, as a percentage of total revenue, increased to 33.7% in the first quarter of 2016, compared to 28.8% in the first quarter of 2015. The year-over-year quarterly improvement in gross margin is directly attributable to the improvement in billable consultant utilization rate and growth in service revenue (from the combined impact of the Zero2Ten, Branchbird and M2 Dynamics acquisitions, organic growth and the additional bill day), partially offset by the salary-related expenses (resulting from headcount growth associated with those acquisitions).

Service revenue gross margins were 35.4% in the first quarter of 2016, compared to 30.4% in the first quarter of 2015. The increase in service revenue gross margin for the three-month period ended March 31, 2016 was similarly related to the improved billable consultant utilization rate and growth in service revenue, as described above.

We anticipate that software revenue will continue to be a meaningful part of our revenue in future periods. Additionally, our future gross margins may continue to be influenced by the recognition of our software revenue. We believe that our software revenue mix will continue to shift between arrangements under which we will report software revenue on either a gross or net basis (dependent upon the underlying circumstances of each individual resale arrangement). Changes in the nature of the terms of certain of our

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Microsoft Dynamics AX software resale arrangements as described in “Revenue” above will, in certain situations, extend the timing of the recognition period of the gross margin on software sales (from full, immediate recognition of the gross margin on the transaction to recognition of the gross margin on the transaction spread evenly over a three-year period) due to payment terms being spread over a multiple year period and result in a reduction in the amount of the software gross margin to be recognized by the Company.

Selling, General and Administrative (“SG&A”) Expenses. As a percentage of total revenue, SG&A expenses were 31.2% during the three-month period ended March 31, 2016, compared to 33.4% in the three-month period of 2015. On an absolute dollar-basis, SG&A expenses increased by $1.7 million, or 20.3%, to $9.9 million in the three-month period ended March 31, 2016, compared to SG&A expenses of $8.3 million in the three- month period ended March 31, 2015.

Selling, general and administrative expenses increased primarily as a result of the increase in professional services expenses combined with salary and salary-related expenses (including performance based bonus and commission expense).

Direct Acquisition Costs. During the first quarter of 2016, the Company incurred approximately $430 thousand of direct acquisition costs associated with the December 2015 acquisition of M2 Dynamics. During the first quarter of 2015, the Company incurred approximately $611 thousand of direct acquisition costs associated with the March 2015 Zero2Ten Acquisition. Incurred expenses included investment banking fees, legal fees, accounting and other professional fees directly associated with completion of the acquisition.

Depreciation and Amortization Expense. Depreciation and amortization expense increased $781 thousand, or 350.2%, to $1.0 million in the quarter ended March 31, 2016 as compared to $223 thousand in the quarter ended March 31, 2015. The increase in amortization expense during the first quarter of 2016 is primarily the result of the amortization expense associated with the intangible assets identified in connection with the Zero2Ten, Branchbird and M2 Dynamics acquisitions. The Company recognizes amortization expense over the periods in which it expects to realize the economic benefit.

Depreciation expense of $146 thousand recorded in the three-month period ended March 31, 2016, was consistent with depreciation expense recognized during the comparative 2015 quarterly period.

Operating Loss. Operating loss was $(628) thousand in the first quarter of 2016, compared to operating loss of $(1.5) million in the comparable 2015 quarterly period.

The 2016 first quarter improvement in operating loss is primarily attributable to the improvement in billable consultant utilization and the increase in service revenue, partially offset by the increased salary and salary-related expenses associated with headcount growth (headcount growth is primarily the result of the Zero2Ten, Branchbird and M2 Dynamic Acquisitions).

Other Expense, Net. Other expense, net, totaled $625 thousand during the three-month period ended March 31, 2016, while other expense, net, totaled $120 thousand during the comparable 2015 period. Other expense, net, for the three-months ended March 31, 2016 primarily represents the accretion of the contingent earnout liability recognized in connection with the Zero2Ten, Branchbird and M2 Acquisitions and also includes periodic foreign currency exchange gains and losses. Other expense, net for the three-months ended March 31, 2015 was related to periodic foreign currency exchange gains and losses and a partial quarter impact of accretion of contingent earnout liability recognized in connection with the Zerto2Ten acquisition.

Income Tax Benefit. We recorded a benefit from income taxes of $(490) thousand during the three-month period ended March 31, 2016. We recorded a benefit from income taxes of $(635) thousand during the three-month period ended March 31, 2015. Our periodic income tax benefit amounts are derived based upon an estimated annual effective income tax rate, inclusive of federal and state income taxes, of 39.1% and 40.3% during the three-month periods ended March 31, 2016 and 2015, respectively.

Reported income tax expense also includes expense amounts attributable to foreign income taxes, the recognition of U.S. deferred tax liabilities for differences between the book and tax basis of goodwill and interest and penalties.

We have deferred tax assets that have arisen primarily as a result of timing differences, net operating loss carryforwards and tax credits. Our ability to realize a deferred tax asset is based on our ability to generate sufficient future taxable income. We assess, on a routine periodic basis, the estimated future realizability of the gross carrying value of our deferred tax assets on a more likely than not basis. Our periodic assessments take into consideration both positive evidence (future profitability projections for example) and negative evidence (accumulated deficit) as it relates to evaluating the future recoverability of our deferred tax assets.

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The Company considers scheduled reversals of deferred tax liabilities, projected future taxable income, ongoing tax planning strategies and other matters, including the period over which our deferred tax assets will be recoverable, in assessing the need for and the amount of the valuation allowance. In the event that actual results differ from these estimates, or we adjust these estimates in the future periods, further adjustments to our valuation allowance may be recorded, which could materially impact our financial position and net income in the period of the adjustment.

Net Loss. We generated a net loss of $(763) thousand during the three-month period ended March 31, 2016, compared to a net loss of $(940) thousand during the three-month period ended March 31, 2015. The 2016 first quarter net loss is primarily attributable to the impact of the amortization of acquired intangible assets, the accretion expense associated with contingent earnouts and the additional professional service expenses, partially offset by the growth in service revenue.

Liquidity and Capital Resources

The following table summarizes our cash flow activities for the periods indicated:

	Three Months Ended March 31,
	2016			2015
	(In Thousands)
Cash flows (used in) provided by:
Operating activities	$	(5,153	)	$	(3,419	)
Investing activities		(136	)		(4,652	)
Financing activities		1,216			256
Effects of exchange rates on cash		59			(32	)
Total cash used in the period	$	(4,014	)	$	(7,847	)

As of March 31, 2016, we had cash and cash equivalents of $8.0 million, a $4.0 million decrease from the December 31, 2015 balance of $12.0 million. The primary drivers of the decrease in cash during 2016 are the bonus and commission payments related to the Company’s 2015 performance-based incentive programs, the funding of an additional payroll cycle during the first quarter and premium payments associated with the renewal of annual insurance policies. The Company partially offset these cash outflows through the recurring collection of customer receivables.

The earnout agreements entered into in connection with the acquisitions of Zero2Ten, Branchbird and M2 Dynamics may require significant cash payments upon the completion of the earnout periods in 2016 and 2017. Payments related to earnout period performance are expected to be made in second and fourth quarters of 2016 as well as the first, second and fourth quarters of 2017. The amounts of these payments will be determined by the financial performance of the acquired entities. As of March 31, 2016, the Company had accrued $11.3 million of contingent earnout consideration.

Working capital, which is defined as current assets less current liabilities, increased to $16.5 million as of March 31, 2016, as compared to $14.9 million as of December 31, 2015.

Historically, we have used our operating cash flows, available cash, available funds under our credit facility and periodic sales of our common stock to finance ongoing operations and business combinations. We believe that our cash and cash equivalents will be sufficient to finance our working capital needs for at least the next twelve months. We periodically reassess the adequacy of our liquidity position, taking into consideration current and anticipated operating cash flow, anticipated capital expenditures, and possible business combinations. The pace at which we will either generate or consume cash will be dependent upon future operations and the level of demand for our services on an ongoing basis.

Cash flow from operating activities is driven by collections of fees for our consulting services and the reselling of software products. Cash used in operations predominantly relates to employee compensation and payments to third-party software providers. Accrued payroll and related liabilities fluctuate from period to period based on the timing of our normal payroll cycle and the timing of variable compensation payments. Annual components of our variable compensation plans are paid in the first quarter of the following year, causing fluctuations in cash flow from quarter to quarter.

Accounts payable and accrued expenses are most significantly affected by the timing of payments required to be made to third-party software providers in connection with the resale of software products to our customers. Historically, a significant portion of our software sales has occurred at the end of the second quarter.

Net cash used in operating activities was $(5.2) million for the three-month period ended March 31, 2016, as compared to net cash used by operating activities of $(3.4) million for the three-month period ended March 31, 2015. The primary components of operating cash flows during the first three months of 2016 were driven by the payment of bonus and commissions under our 2015 performance-based bonus programs, the funding of an additional payroll cycle in the quarter and the timing of payments related to

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annual insurance-related premiums and third-party software expenses. Additionally, cash from operations was influenced by non-cash charges of $1.7 million (primarily changes in deferred income taxes, depreciation, amortization, stock-based compensation expense and accretion of contingent earnout consideration). The primary components of operating cash flows during the first three months of 2015 were the payment of bonus and commissions under our 2014 performance-based bonus programs, the increase in accounts receivable and, to a lesser extent, the increase in prepaid expenses and other current assets (primarily driven by the timing of insurance-related annual premium payments). These changes were partially offset by the non-cash charges of $62 thousand (primarily changes in deferred income taxes, depreciation, amortization and stock-based compensation expense).

Net cash used in investing activities was $(136) thousand during the three-month period ended March 31, 2016, compared to net cash used in investing activities of $(4.7) million in the three-month period ended March 31, 2015. Cash used in investing activities in the three-month period ended March 31, 2016 consisted of payments associated with the M2 Acquisition and, to a lesser extent, the purchases of property and equipment. Cash used in investing activities in the three-month period ended March 31, 2015 consisted of the Zero2Ten Acquisition and, to a lesser extent, the purchases of property and equipment.

All capital expenditures are discretionary as the Company currently has no long-term commitments for capital expenditures.

Net cash provided by financing activities was $1.2 million in the three-month period ended March 31, 2016, compared to net cash provided by financing activities of $256 thousand in the three-month period ended March 31, 2015. The 2016 and 2015 cash flows provided by financing activities are attributable to proceeds associated with our Employee Stock Purchase Plan and stock option exercises.

In September 2013, the Company entered into a secured revolving credit facility (the “Credit Facility”). The Credit Facility was modified through an amendment in December 2015, which increased the borrowing base to $15 million (from the previous $10 million) with an additional accordion feature that allows the Company to request an additional $5.0 million as needed, extending the total credit facility borrowing capacity to $20 million over its three-year term. The Credit Facility is secured by substantially all assets of the Company and its domestic subsidiaries, and is subject to normal covenants. Under the terms of the Credit Facility, any advances will accrue interest at a variable per annum rate of interest equal to the LIBOR Rate plus 1.5%. Interest is due and payable, in arrears, on a monthly basis. The Company will be obligated to pay an annual commitment fee of 0.15% on the daily undrawn balance of the facility. Any amounts outstanding under the Credit Facility will be due on December 21, 2018. The Company had drawn down $5.0 million of this balance as of March 31, 2016.

Acquisitions, Earnout Payments and Commitments

Acquisition of M2 Dynamics: As more fully described in “Item 1 – Financial Statements – Notes to the Unaudited Condensed Consolidated Financial Statements – Note 3”, included elsewhere herein, an earnout agreement was entered into in connection with the M2 Dynamics Acquisition under which M2 Dynamics is eligible to receive additional contingent consideration. Contingent earnout consideration to be paid, if any, to M2 Dynamics will be based upon the achievement of certain performance measures over one twelve-month earnout period, concluding in December 2016. Based upon initial fair value estimates, the Company has recorded contingent earnout consideration described above of $3.3 million. The maximum amount of contingent earnout consideration that can be earned by M2 Dynamics is capped at $6.6 million.

Acquisition of Branchbird: As more fully described in “Item 1 – Financial Statements – Notes to the Unaudited Condensed Consolidated Financial Statements – Note 3”, included elsewhere herein, an earnout agreement was entered into in connection with the Branchbird Acquisition under which Branchbird is eligible to receive additional contingent consideration. Contingent earnout consideration to be paid, if any, to Branchbird will be based upon the achievement of certain performance measures over two consecutive twelve-month earnout periods, concluding in August 2017. Based upon initial fair value estimates, the Company has recorded contingent earnout consideration described above of $1.6 million. The maximum amount of contingent earnout consideration that can be earned by Branchbird is capped at $2.4 million.

Acquisition of Zero2Ten: As more fully described in “Item 1 – Financial Statements – Notes to the Unaudited Condensed Consolidated Financial Statements – Note 3”, included elsewhere herein, an earnout agreement was entered into in connection with the Zero2Ten Acquisition under which Zero2Ten is eligible to receive additional contingent consideration. Contingent earnout consideration to be paid, if any, to Zero2Ten will be based upon the achievement of certain performance measures over two consecutive twelve-month earnout periods, concluding in March 2017. Based upon initial fair value estimates, the Company has recorded contingent earnout consideration described above of $6.4 million. The maximum amount of contingent earnout consideration that can be earned by Zero2Ten is capped at $8.6 million.

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Off Balance Sheet Arrangements

We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors.

Critical Accounting Policies and Estimates

We prepare our unaudited condensed consolidated financial statements in conformity with accounting principles generally accepted in the United States of America. As such, we are required to make certain estimates, judgments and assumptions that we believe are reasonable based upon the information available. These estimates and assumptions affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the periods presented. We reaffirm the critical accounting policies and estimates as reported in our 2015 Annual Report on Form 10-K, which was filed with the Securities and Exchange Commission on March 11, 2016.

Recent Accounting Pronouncements

In January 2016, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2016-01, “Recognition and Measurement of Financial Assets and Financial Liabilities” (“ASU 2016-01”). ASU 2016-01 amends the guidance on the classification and measurement of financial instruments. Although ASU 2016-01 retains many current requirements, it significantly revises accounting related to the classification and measurement of investments in equity securities and the presentation of certain fair value changes for financial liabilities measured at fair value. ASU 2016-01 also amends certain disclosure requirements associated with the fair value of financial instruments and is effective for us in the first quarter of fiscal year 2019. We are currently evaluating the impact of our pending adoption of ASU 2016-01 on our consolidated financial statements.

In March 2016, FASB issued ASU No. 2016-09, “Improvements to Employee Share-Based Payment Accounting” (“ASU 2016-09”). ASU 2016-09 simplifies the accounting for share-based awards issued to employees. ASU 2016-09 is effective for us in the first quarter of fiscal year 2017. We are currently evaluating the impact of our pending adoption of ASU 2016-09 on our consolidated financial statements.

Risk Factors

We operate in a rapidly changing environment that involves certain risks and uncertainties, some of which are beyond our control. You should carefully review and consider the information regarding certain risk factors that could materially affect our business, financial condition or future results set forth under “Part I – Item 1A – Risk Factors” in our Annual Report on Form 10-K, for the year ended December 31, 2015, which was filed with the Securities and Exchange Commission on March 11, 2016 and in this Quarterly Report on Form 10-Q under “Special Note Regarding Forward-Looking Statements.”

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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

Some of the statements in this Quarterly Report on Form 10-Q and elsewhere constitute forward-looking statements under Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These statements involve known and unknown risks, uncertainties and other factors that may cause results, levels of activity, growth, performance, tax consequences or achievements to be materially different from any future results, levels of activity, growth, performance, tax consequences or achievements expressed or implied by such forward-looking statements. Such factors include, among other things, those listed below, as well as those further set forth under the heading “Risk Factors” in our 2015 Annual Report on Form 10-K as filed with the SEC on March 11, 2016.

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) failure to obtain new customers or retain significant existing customers; (2) the loss of one or more key executives and/or employees; (3) changes in industry trends, such as a decline in the demand for Enterprise Resource Planning and Enterprise Performance Management solutions, custom development and system integration services and/or declines in industry-wide information technology spending, whether on a temporary or permanent basis and/or delays by customers in initiating new projects or existing project milestones; (4) inability to execute upon growth objectives, including new services and growth in entities acquired by our Company; (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) delays in, or the failure of, our sales pipeline being converted to billable work and recorded as revenue; (8) termination by clients of their contracts with us or inability or unwillingness of clients to pay for our services, which may impact our accounting assumptions; (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; (12) the possibility that activist stockholders may wage proxy or consent contests or gain representation on or control of our Board of Directors, causing uncertainty about the direction of our business; and/or (13) the failure of the marketplace to embrace advisory and product-based consulting services.

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. Except as otherwise required, we undertake no obligation to update any of the forward-looking statements after the date of this Form 10-Q to conform such statements to actual results.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Our primary financial instruments include investments in money market funds that are sensitive to market risks and interest rates. The investment portfolio is used to preserve our capital until it is required to fund operations, strategic acquisitions or distributions to stockholders. None of our market-risk sensitive instruments are held for trading purposes. We did not purchase derivative financial instruments in the three-month periods ended March 31, 2016 or 2015. Should interest rates on the Company’s investments fluctuate by 10% the impact would not be material to the financial condition, results of operations or cash flows.

The impact of inflation and changing prices has not been material on revenue or income from continuing operations during the three-month periods ended March 31, 2016 and 2015.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures, which we have designed to ensure that material information related to the Company, including our consolidated subsidiaries, is properly identified and evaluated on a regular basis and disclosed in accordance with all applicable laws and regulations. The Chairman, President and Chief Executive Officer and the Chief Financial Officer of Edgewater Technology, Inc. (its principal executive officer and principal financial officer, respectively) have concluded, based on their evaluations of the Company’s disclosure controls and procedures as of the end of the period covered by this report, that the Company’s disclosure controls and procedures are effective to ensure that information required to be disclosed by the Company in the reports filed or submitted by it under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission rules and forms, and include controls and procedures designed to ensure that information required to be disclosed by the Company in such reports is accumulated and communicated to the Company’s management as appropriate to allow timely decisions regarding required disclosure.

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Changes in Controls and Procedures

There were no changes in our internal control over financial reporting, as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act, during the period covered by this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II – OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

The Company is involved in legal proceedings, claims, and litigation arising in the ordinary course of business not specifically discussed herein. We have not formed an opinion that an unfavorable outcome in any of the actions is either “probable” or “remote” and are unable to estimate the magnitude or range of any potential loss.

ITEM 1A. RISK FACTORS

As discussed in “Part I—Item 1A—Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, 2015 and herein under “Special Note Regarding Forward-Looking Statements,” investors should be aware of certain risks, uncertainties and assumptions in our business. We encourage you to refer to our Annual Report on Form 10-K to carefully consider these risks, uncertainties and assumptions.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

In December 2007, our Board of Directors (the “Board”) authorized a stock repurchase program for up to $5.0 million of common stock on the open market or through privately negotiated transactions from time-to-time through December 31, 2008 (the “Stock Repurchase Program”). The Board subsequently amended the Stock Repurchase Program, authorizing both an increase to and an extension of the Stock Repurchase Program. The Stock Repurchase Program, as amended, had a maximum purchase value of shares of $23.1 million (the “Purchase Authorization”) and was set to expire on September 19, 2014 (the “Repurchase Period”). On September 18, 2014, we announced that the Board had approved an extension of the Repurchase period to September 25, 2015, and on September 17, 2015, we announced that the Board had approved a further extension of the Repurchase Period to September 23, 2016.

The timing and amount of the purchases will be based upon market conditions, securities law considerations and other factors. The Stock Repurchase Program does not obligate the Company to acquire a specific number of shares in any period and may be modified, suspended, extended or discontinued at any time, without prior notice.

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The following table provides information with respect to purchases of our common stock during the quarter ended March 31, 2016:

Issuer Purchases of Equity Securities

Period	Total Number of Shares Purchased		Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs		Maximum Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs
January 1 – 31, 2016		—	$	—		—	$	8,733,963
February 1 – 29, 2016		—	$	—		—	$	8,733,963
March 1 – 31, 2016		—	$	—		—	$	8,733,963
Total		—	$	—		—	$	8,733,963

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

None.

ITEM 6. EXHIBITS

10.1	Settlement Agreement by and between Edgewater Technology, Inc. and Lone Star Value Investors, LP and others, dated March 24, 2016 (Incorporated by reference from Exhibit 10.1 to the Company’s Form 8-K filed with the Securities and Exchange Commission on March 25, 2016)
10.2	Form of Indemnification Agreement between Edgewater Technology, Inc. and each of its directors and executive officers (Incorporated by reference from Exhibit 10.2 to the Company’s Form 8-K filed with the Securities and Exchange Commission on March 25, 2016)
10.3	Edgewater Technology, Inc. Amended and Restated 2000 Stock Option Plan, as amended*
31.1	13a-14 Certification – Chairman, President and Chief Executive Officer*
31.2	13a-14 Certification – Chief Financial Officer*
32	Section 1350 Certification**
101	Interactive Data Files Pursuant to Rule 405 of Regulation S-T: (i) Unaudited Condensed Consolidated Balance Sheets as of March 31, 2016 and December 31, 2015, (ii) Unaudited Condensed Consolidated Statements of Comprehensive Loss for the Three Months ended March 31, 2016 and 2015, (iii) Unaudited Condensed Consolidated Statements of Cash Flows for the Three Months ended March 31, 2016 and 2015 and (iv) Notes to Unaudited Condensed Consolidated Financial Statements.*

* - Filed herewith.

** - Furnished herewith.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	EDGEWATER TECHNOLOGY, INC.
Date: May 6, 2016	/s/ SHIRLEY SINGLETON
	Shirley Singleton
	Chairman, President and Chief Executive Officer (Principal Executive Officer)
Date: May 6, 2016	/s/ TIMOTHY R. OAKES
	Timothy R. Oakes Chief Financial Officer (Principal Financial and Accounting Officer)

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EX-10.3

Exhibit 10.3

EDGEWATER TECHNOLOGY, INC.

AMENDED AND RESTATED 2000 STOCK OPTION PLAN, AS AMENDED

SECTION 1. PURPOSE. The Plan (i) authorizes the Committee to provide to Employees and Consultants of the Corporation and its Subsidiaries, who are in a position to contribute materially to the long-term success of the Corporation, with grants of options to acquire common stock, par value $.01 per share, of the Corporation, and (ii) provides for the automatic grant of options to Non-Employee Directors of the Corporation, in accordance with the terms specified herein. The Corporation believes that this incentive program will cause those persons to increase their interest in the Corporation’s welfare, and aid in attracting and retaining Employees, Consultants and Directors of outstanding ability.

SECTION 2. DEFINITIONS. Unless the context clearly indicates otherwise, the following terms, when used in this Plan, shall have the meanings set forth in this Section:

(a) “Board” shall mean the Board of Directors of the Corporation.

(b) “Cause” shall mean, except to the extent specified otherwise by the Committee, a finding of the Committee that the Grantee (i) has breached his or her employment or service contract with the Corporation or its Subsidiaries, (ii) has engaged in disloyalty to the Corporation or its Subsidiaries, including, without limitation, fraud, embezzlement, theft, commission of a felony or proven dishonesty in the course of his or her employment or service, (iii) has disclosed trade secrets or confidential information of the Corporation or its Subsidiaries to persons not entitled to receive such information, (iv) has breached any noncompetition or nonsolicitation agreement between the Corporation or its Subsidiaries and the Grantee, or (v) has engaged in such other behavior detrimental to the interests of the Corporation or its Subsidiaries as the Committee determines.

(c) A “Change in Control” shall be deemed to have occurred if:

(i) any person, other than the Corporation or an employee benefit plan of the Corporation, acquires, directly or indirectly, the beneficial ownership of any voting security of the Corporation and immediately after such acquisition such person is, directly or indirectly, the beneficial owner of voting securities representing 50% or more of the total voting power of the then-outstanding voting securities of the Corporation;

(ii) the individuals (A) who, as of the adoption of this Plan, constitute the Board (the “Original Directors”) or (B) who thereafter are elected to the Board and whose election, or nomination for election, to the Board was approved by a vote of at least two-thirds (2/3) of the Original Directors then still in office (such directors becoming “Additional Original Directors” immediately following their election) or (C) who are elected to the Board and whose election, or nomination for election, to the Board was approved by a vote of at least two-thirds (2/3) of the Original Directors and Additional Original Directors then still in office (such

directors also becoming “Additional Original Directors” immediately following their election), cease for any reason to constitute a majority of the members of the Board;

(iii) the stockholders of the Corporation shall approve a merger, consolidation, recapitalization, or reorganization of the Corporation, a reverse stock split of outstanding voting securities, or consummation of any such transaction if stockholder approval is not sought or obtained, other than any such transaction which would result in at least 75% of the total voting power represented by the voting securities of the surviving entity outstanding immediately after such transaction being beneficially owned by at least 75% of the holders of outstanding voting securities of the Corporation immediately prior to the transaction, with the voting power of each such continuing holder relative to other such continuing holders not substantially altered in the transaction; or

(iv) the stockholders of the Corporation shall approve a plan of complete liquidation of the Corporation or an agreement for the sale or disposition by the Corporation of all or a substantial portion of the Corporation’s assets (i.e. 50% or more of the total assets of the Corporation).

(d) “Code” shall mean the Internal Revenue Code of 1986, as it may be amended from time to time.

(e) “Committee” shall mean the Board, or any committee of two or more Directors that may be designated by the Board to administer the Plan. The Committee may be comprised of “non-employee directors” within the meaning of Rule 16b-3 under the Exchange Act.

(f) “Consultant” shall mean (i) any person who is engaged to perform bona fide services for the Corporation or its Subsidiaries, other than as an Employee or Director, where the services are not in connection with the offer and sale of securities in a capital-raising transaction and the consultant does not directly or indirectly promote or maintain a market for the Corporation’s securities, or (ii) any person who has agreed to become a consultant within the meaning of clause (i).

(g) “Corporation” shall mean Edgewater Technology, Inc., a Delaware corporation.

(h) “Director” shall mean any member of the Board.

(i) “Employee” shall mean (i) any employee of the Corporation or its Subsidiaries (including Directors who are otherwise employed by the Corporation or its Subsidiaries), or (ii) any person who has agreed to become an employee within the meaning of clause (i).

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(j) “Exchange Act” shall mean the Securities Exchange Act of 1934 as it may be amended from time to time.

(k) “Fair Market Value” of the Stock on a given date shall be based upon: (i) if the Stock is listed on a national securities exchange or quoted in an interdealer quotation system, the last sales price or, if unavailable, the average of the closing bid and asked prices per share of the Stock on such date (or, if there was no trading or quotation in the Stock on such date, on the next preceding date on which there was trading or quotation) as provided by one of such organizations; or (ii) if the Stock is not listed on a national securities exchange or quoted in an interdealer quotation system, as determined by the Committee in good faith in its sole discretion.

(l) “Grant” shall mean a grant of an Option.

(m) “Grantee” shall mean a person granted an Option under the Plan.

(n) “1933 Act” shall mean the Securities Act of 1933, as amended.

(o) “Non-Employee Director” shall mean a Director of the Corporation who is not an Employee, and who was not an Employee at any time during the prior one year period.

(p) “Officer” shall mean an officer of the Corporation with the meaning of Rule 16a-(1)(f) under the Exchange Act.

(q) “Option” shall mean an option granted pursuant to Sections 6 and 7 of the Plan to purchase shares of Stock that is not an incentive stock option as described in Code Section 422.

(r) “Plan” shall mean this Edgewater Technology, Inc. Amended and Restated 2000 Stock Option Plan as set forth herein and as amended from time to time.

(s) “Stock” shall mean shares of the common stock par value $.01 per share of the Corporation.

(t) “Stock Option Agreement” shall mean a written agreement between the Corporation and the Grantee, or a certificate accepted by the Grantee, evidencing the grant of an Option hereunder and containing such terms and conditions, not inconsistent with the Plan, as the Committee shall approve.

(u) “Subsidiary” shall mean (i) any company (whether a corporation, partnership, joint venture or other entity) in which the Corporation owns, directly or indirectly, a majority of the shares of capital stock or other equity interest, or (ii) any entity which the Committee reasonably expects to become a subsidiary within the meaning of clause (i).

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SECTION 3. SHARES OF STOCK SUBJECT TO THE PLAN.

(a) Subject to adjustment as described in Section 10, the total amount of Stock that may be subject to Grants, determined immediately after the grant, shall not exceed four million (4,000,000) shares of Stock.

(b) All Employees and Non-Employee Directors (subject as to Non-Employee Directors to the limitations in Section 7) are eligible to receive Grants under the Plan. Notwithstanding the foregoing: (i) the aggregate number of Grants under the Plan to Officers and Directors shall be less than fifty percent (50%) of the total number of Grants to all persons under the Plan; and (ii) the aggregate of number of shares of Stock underlying Grants to Officers and Directors under the Plan shall be less than fifty percent (50%) of the total number of shares of Stock underlying Grants to all persons under the Plan, as determined in each of (i) and (ii) from the date of the amendment and restatement of the Plan to extend eligibility to Officers and Directors to the date of the third anniversary of such amendment and restatement (and to the date of each anniversary thereafter); provided, however, that there shall be excluded from the numerator and denominator of such calculations, (A) with respect to the item (i) test above, the number of Grants to Officers not previously employed by the Corporation pursuant to a Grant of Options as an inducement essential to such individuals entering into employment contracts with the Corporation; and (B) with respect to the item (ii) test above, Grants of Options for shares of Stock issued to Officers not previously employed by the Corporation pursuant to a Grant of Options as an inducement essential to such individuals entering into employment contracts with the Corporation.

(c) For purposes of the foregoing limits, shares subject to Grants shall not be deemed delivered if such grants are forfeited, expire or otherwise terminate without delivery of shares to the Grantee. Any shares of Stock delivered pursuant to a Grant may consist, in whole or in part, of authorized and unissued shares or treasury shares.

SECTION 4. ADMINISTRATION OF THE PLAN. The Plan shall be administered by the Committee. Subject to the express provisions of the Plan, the Committee shall have the authority to interpret the Plan, to prescribe, amend and rescind rules and regulations relating to the Plan, to determine the terms and provisions of Stock Option Agreements thereunder and to make all other determinations necessary or advisable for the administration of the Plan. Any controversy or claim arising out of or related to this Plan or the grants thereunder shall be determined unilaterally by, and at the sole discretion of, the Committee. Any action of the Committee with respect to the Plan shall be final, conclusive, and binding on all persons, including the Corporation, Subsidiaries of the Corporation, Grantees and any person claiming any rights under the Plan from or through any Grantee and stockholders. The express grant of any specific power to the Committee, and the taking of any action by the Committee, shall not be construed as limiting any power or authority of the Committee. The Committee may delegate to officers or managers of the Corporation or any Subsidiary the authority, subject to such terms as the Committee shall determine, to perform administrative functions to the extent permitted under Rule 16b-3, if applicable, and other applicable law.

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SECTION 5. TYPES OF OPTIONS. Options granted under the Plan shall be options to purchase shares of the Stock that are not incentive stock options as described in Code Section 422.

SECTION 6. GRANT OF OPTIONS TO EMPLOYEES AND CONSULTANTS.

(a) Employees and Consultants of the Corporation and its Subsidiaries shall be eligible to receive Options under the Plan.

(b) The exercise price per share of Stock subject to an Option shall be determined by the Committee and specified in the Stock Option Agreement. The exercise price shall be at least the Fair Market Value of a share of Stock on the date the Option is granted. In no case shall the exercise price be less than the par value of a share of Stock.

(c) The term of each Option granted to an Employee or Consultant shall be determined by the Committee and specified in a Stock Option Agreement, provided that no Option shall be exercisable more than ten years from the date such Option is granted.

(d) The Committee shall determine and designate from time to time Employees or Consultants who are to be granted Options, and shall specify in the Stock Option Agreement the nature of each Option granted and the number of shares of Stock subject to each such Option.

(e) The Committee shall determine whether any Option granted to an Employee or Consultant shall become exercisable in one or more installments and specify the installment dates in the Stock Option Agreement. The Committee may also specify in the Stock Option Agreement such other provisions, not inconsistent with the terms of this Plan, as it may deem desirable. The Committee shall determine the extent to which Options shall become exercisable upon a Change in Control, unless otherwise specified in the Stock Option Agreement.

(f) The Committee may, at any time, grant new or additional Options to any eligible Employee or Consultant who has previously received Options under this Plan, or options under other plans, whether such prior Options or other options are still outstanding, have been exercised previously in whole or in part, or have been canceled. Subject to Section 6(b), the exercise price of such new or additional Options may be established by the Committee without regard to such previously granted Options or other options.

(g) The Committee may provide that Options granted to persons who may be non-exempt employees under the Fair Labor Standards Act of 1938, as amended, shall have an exercise price not less than 85% of the Fair Market Value of the Stock on the date of grant, and may not be exercisable for at least six months after the date of grant (except that such Options may become exercisable, as determined by the Committee,

5

upon the Grantee’s death, disability or retirement, or upon a Change in Control or other circumstances permitted by applicable regulations).

SECTION 7. GRANTS OF OPTIONS TO NON-EMPLOYEE DIRECTORS.

(a) Non-Employee Directors of the Corporation shall be eligible to receive Options under the Plan only pursuant to the provisions of this Section 7. Each Non-Employee Director shall receive upon his or her first election to the Board, without the exercise of the discretion of any person, an Option under the Plan relating to the purchase of 20,000 shares of Stock. In the event that there are not sufficient shares available under this Plan to allow for the grant to each Non-Employee Director of an Option for the number of shares provided herein, each Non-Employee Director shall receive an Option for his pro rata share of the total number of shares of Stock available under the Plan.

(b) The exercise price of each share of Stock subject to an Option granted to a Non-Employee Director shall equal the Fair Market Value of a share of Stock on the date such Option is granted.

(c) Each initial election Option granted to a Non-Employee Director shall become exercisable in three equal installments on the date of grant and on each of the first two anniversaries of the date of grant, and shall have a term of five years from the date of grant. Notwithstanding the exercise period of any initial election Option granted to a Non-Employee Director, all such Options shall immediately become exercisable upon a Change in Control.

(d) This Section 7 shall be effective after the earlier of: (i) May 1, 2002, or (ii) the date the Corporation receives notification from The Nasdaq Stock Market, Inc. that amendments to the Plan to provide option grants to Non-Employee Directors do not require the approval of the stockholders of the Corporation.

SECTION 8. EXERCISE OF OPTIONS.

(a) Unless otherwise determined by the Committee, in the event that a Grantee is a “covered employee” as described in Code Section 162(m)(3), an Option shall not be exercisable by such Grantee in any taxable year to the extent that the exercise of such Option would cause the Grantee’s total compensation to exceed the limits for deductible compensation under Code Section 162(m) for the taxable year. However, in no event may the Grantee be prohibited from exercising the Option by reason of this Section 8(a) later than nine years from the date such Option is granted.

(b) Except as provided pursuant to Section 9, no Option shall be exercised unless at the time of such exercise the Grantee is then: (A) an Employee (determined with reference to Section 2(i)(i) only); or (B) a Consultant (determined with reference to Section 2(f)(i) only) of the Corporation or a Subsidiary (determined with reference to Section 2(u)(i) only).

6

(c) Except as provided in Section 9, no Option granted to a Non-Employee Director shall be exercised unless at the time of such exercise the Grantee is then a Non-Employee Director.

(d) A Grantee or other permitted holder shall exercise an Option by delivery of written notice to the Corporation setting forth the number of shares with respect to which the Option is to be exercised, together with cash, certified check, bank draft, wire transfer, or postal or express money order payable to the order of the Corporation for an amount equal to the Option price of such shares and any income tax which may be required to be withheld as determined by the Committee pursuant to Section 12. The Committee may, in its sole discretion, permit a Grantee to pay all or a portion of the exercise price by delivery of Stock held by the Grantee longer than six months or other property (including notes or other contractual obligations of Grantees to make payment on a deferred basis to the extent permitted by applicable law), or payment through a broker in accordance with procedures permitted by Regulation T of the Federal Reserve Board.

(e) Notwithstanding the foregoing, an Option shall become exercisable in accordance with such terms and conditions as may be determined by the Committee and specified in the Stock Option Agreement.

SECTION 9. EXERCISE OF OPTIONS UPON TERMINATION.

(a) Unless otherwise determined by the Committee, upon termination of a Grantee’s employment with the Corporation and its Subsidiaries for any reason other than Cause, death, disability or retirement, such Grantee may exercise any Options during the three-month period following such termination of employment, but only to the extent such Option was exercisable immediately prior to such termination of employment.

(b) Unless otherwise determined by the Committee, upon termination of a Grantee’s employment with the Corporation and its Subsidiaries on account of death or disability, such Grantee may exercise any Option during the one year period following such termination of employment, but only to the extent such Option was exercisable immediately prior to such termination of employment.

(c) Unless otherwise determined by the Committee, upon termination of a Grantee’s employment with the Corporation and its Subsidiaries on account of retirement after attainment of age 65, such Grantee may exercise any Option in accordance with the original Option term following such termination of employment, but only to the extent such Option was exercisable immediately prior to such termination of employment.

(d) If the Committee determines that such termination is for Cause, all Options held by the Grantee shall immediately terminate. In addition, all Options granted on the basis of clause (ii) of Section 2(f), Section 2(i) or Section 2(u) shall immediately terminate if the Committee determines, in its sole discretion, that the Consultant,

7

Employee, or Subsidiary, as the case may be, will not become a Consultant, Employee or Subsidiary within the meaning of clause (i) of such Sections.

(e) Unless otherwise determined by the Committee and specified in the Stock Option Agreement, in no event shall any Option be exercisable for more than the maximum number of shares that the Grantee was entitled to purchase at the date of termination of the relationship with the Corporation and its Subsidiaries. In no event shall any Option be exercisable later than the date of expiration of the Option term.

(f) Subject to the provisions of Section 6(e), the sale of any Subsidiary shall be treated as a termination of employment with respect to any Grantee employed by such Subsidiary.

(g) Subject to the foregoing, in the event of death, Options may be exercised by a Grantee’s legal representative. Options transferred pursuant to Section 14 may also be exercised by a permitted holder.

SECTION 10. ADJUSTMENT UPON CHANGES IN CAPITALIZATION. In the event any dividend or other distribution (whether in the form of cash, Stock, or other property), recapitalization, forward or reverse split, reorganization, merger, consolidation, spin-off, combination, repurchase, or share exchange, or other similar corporate transaction or event affects the Stock such that an adjustment is appropriate in order to prevent dilution or enlargement of the rights of Grantees under the Plan, then the Committee shall, in such manner as it may deem equitable, adjust any or all of (i) the number and kind of shares of Stock deemed to be available thereafter for Grants, (ii) the number and kind of shares of Stock that may be delivered or deliverable in respect of outstanding Grants, and (iii) the exercise price. If deemed appropriate, the Committee may make provision for a cash payment with respect to any conditions of, and the criteria included in, Grants (including, without limitation, cash payments in exchange for Grants or substitution of Grants using stock of a successor or other entity) in recognition of unusual or nonrecurring events (including, without limitation, events described in the preceding sentence) affecting the Corporation or any Subsidiary or the financial statements of the Corporation or any Subsidiary, or in response to changes in applicable laws, regulations, or accounting principles.

SECTION 11. RESTRICTIONS ON ISSUING SHARES. The Corporation shall not be obligated to deliver Stock upon the exercise or settlement of any Grant or take other actions under the Plan until the Corporation shall have determined that applicable federal and state laws, rules, and regulations have been complied with and such approvals of any regulatory or governmental agency have been obtained and contractual obligations to which the Grant may be subject have been satisfied. The Corporation, in its discretion, may postpone the issuance or delivery of Stock under any Grant until completion of such stock exchange listing or registration or qualification of such Stock or other required action under any federal or state law, rule, or regulation as the Corporation may consider appropriate, and may require any Grantee to make such representations and furnish such information as it may consider appropriate in connection with the issuance or delivery of Stock under the Plan.

8

SECTION 12. TAX WITHHOLDING. To the extent required by applicable federal, state, local or foreign law, a Grantee shall make arrangements satisfactory to the Corporation for the satisfaction of any withholding tax obligations that arise by reason of an Option exercise or any sale of shares. The Corporation shall not be required to issue shares until such obligations are satisfied. The Committee may permit these obligations to be satisfied by having the Corporation withhold the minimum applicable amounts from a portion of the shares of the Stock that otherwise would be issued to the Grantee, or to the extent permitted, by tendering shares previously acquired.

SECTION 13. DEFERRAL OF RECEIPT OF STOCK. Effective upon the amendment of the Corporation’s deferred compensation plan to expressly permit deferrals under this Section 13, a Grantee may, pursuant to the terms of such plan, as amended, defer receipt of Stock that would otherwise be delivered to such Grantee upon the exercise or settlement of any Option.

SECTION 14. TRANSFERABILITY.

(a) Except as provided below, no Grant shall be subject to anticipation, sale, assignment, pledge, encumbrance, charge or transfer except by will or the laws of descent and distribution, and an Option shall be exercisable during the Grantee’s lifetime only by the Grantee.

(b) Notwithstanding the foregoing, the Committee may provide, in a Stock Option Agreement, that the Grantee may transfer Options to family members or other persons or entities according to such terms as the Committee may determine; provided that the Grantee receives no consideration for the transfer of the Option and the transferred Option shall continue to be subject to the same terms and conditions as were applicable to the Option immediately before the transfer.

SECTION 15. NON-COMPETITION. If the Grantee breaches any non-competition agreement in effect with the Corporation or its Subsidiaries, all of the Grantee’s outstanding Grants shall immediately terminate, and the Corporation may require that the Grantee pay to the Corporation or its Subsidiaries (in Stock or cash) an amount equal to any gain arising from the exercise of Options during the forfeiture period. The forfeiture period is the period beginning on the date that is six months before the Grantee’s termination of employment or service with the Corporation and its Subsidiaries and ending upon the termination of such non-competition agreement. The gain to be reimbursed is the amount by which the Fair Market Value of the Stock on the date of the Committee’s determination (or the date of any earlier sale or other disposition of the Stock covered by the Option, if greater) exceeds the exercise price of the Option.

SECTION 16. GENERAL PROVISIONS.

(a) Each Grant shall be evidenced by a Grant instrument. The terms and provisions of such instruments may vary among Grantees and among different Grants granted to the same Grantee.

9

(b) A Grant in any year shall not give the Grantee any right to similar grants in future years, any right to continue such Grantee’s employment relationship with the Corporation or its Subsidiaries, or, until such unrestricted share certificates are issued, any rights as a stockholder of the Corporation. All Grantees shall remain subject to discharge to the same extent as if the Plan were not in effect.

(c) No Grantee, and no beneficiary or other persons claiming under or through the Grantee shall have any right, title or interest by reason of any Grant to any particular assets of the Corporation or its Subsidiaries, or any shares of Stock allocated or reserved for the purposes of the Plan or subject to any Grant except as set forth herein. The Corporation shall not be required to establish any fund or make any other segregation of assets to assure the payment of any Grant.

(d) The issuance of shares of Stock to Grantees, their legal representatives or other permitted holders shall be subject to any applicable taxes and other laws or regulations of the United States or of any state having jurisdiction thereof.

SECTION 17. AMENDMENT OR TERMINATION. The Board may, at any time, alter, amend, suspend, discontinue or terminate this Plan; provided, however, that no such action shall materially impair the rights of Grantees to Grants previously granted hereunder and, provided further, however, that any shareholder approval necessary or desirable in order to comply with other applicable law or regulation shall be obtained in the manner required therein. The Committee may waive any conditions or rights under, or amend, alter, suspend, discontinue, or terminate, any Grant theretofore granted and any Agreement relating thereto; provided, however, that, without the consent of an affected Grantee, no such action may materially impair the rights of such Grantee under such Grant. Upon termination of the Plan the Committee may (i) require that Grantees surrender their outstanding Options in exchange for a payment by the Corporation, in cash or Stock as determined by the Committee, in an amount equal to the amount by which the then Fair Market Value of the shares of Stock subject to the Grantee’s unexercised vested Options exceeds the exercise price of such Options or (ii) after giving Grantees an opportunity to exercise their unexercised vested Options, terminate any or all outstanding Options at such time as the Committee deems appropriate.

SECTION 18. EFFECTIVE DATE OF PLAN. This amended and restated Plan is effective upon the earlier of: (i) the date the Corporation receives notification from The Nasdaq Stock Market, Inc. that amendments to the Plan to provide option grants to Non-Employee Directors do not require the approval of the stockholders of the Corporation, or (ii) its approval by the stockholders of the Corporation. This Plan shall continue in effect until terminated by the Board. This Plan was originally adopted by the Board on August 31, 2000.

This Plan, prior to its amendment and restatement in February 2002, was originally adopted by the Board on August 31, 2000, which original adoption did not require stockholder approval.

10

This Plan, as amended and restated, was approved by the Board on February 27, 2002, which approval became effective on March 20, 2002, which was the date of The Nasdaq Stock Market, Inc. Letter. The approval of this Plan by the Board, as amended and restated, did not require stockholder approval.

Section 7 of the Plan was amended by the Board on May 22, 2002, which amendment did not require stockholder approval.

Section 6 of the Plan was amended by the Board on April 16, 2012, which amendment did not require stockholder approval.

Section 7 of the Plan was amended by the Board on April 21, 2016, which amendment did not require stockholder approval.

11

EX-31.1

Exhibit 31.1

13a-14 CERTIFICATION

I, Shirley Singleton, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Edgewater Technology, Inc. (the “Company”);

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Company as of, and for, the periods presented in this report;

4. The Company’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Company and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the Company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the Company’s internal control over financial reporting that occurred during the Company’s most recent fiscal quarter (the Company’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting; and

5. The Company’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Company’s auditors and the Audit Committee of the Company’s Board of Directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Company’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the Company’s internal control over financial reporting.

Date: May 6, 2016	/s/ SHIRLEY SINGLETON
	Shirley Singleton
	Chairman, President and Chief Executive Officer
	(Principal Executive Officer)

EX-31.2

Exhibit 31.2

13a-14 CERTIFICATION

I, Timothy R. Oakes, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Edgewater Technology, Inc. (the “Company”);

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Company as of, and for, the periods presented in this report;

4. The Company’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Company and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the Company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the Company’s internal control over financial reporting that occurred during the Company’s most recent fiscal quarter (the Company’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting; and

5. The Company’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Company’s auditors and the Audit Committee of the Company’s Board of Directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Company’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the Company’s internal control over financial reporting.

Date: May 6, 2016	/s/ TIMOTHY R. OAKES
	Timothy R. Oakes
	Chief Financial Officer
	(Principal Financial and Accounting Officer)

EX-32

Exhibit 32

1350 CERTIFICATION

Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. § 1350, as adopted), Shirley Singleton, the Chairman, President and Chief Executive Officer of Edgewater Technology, Inc. (the “Company”), and Timothy R. Oakes, the Chief Financial Officer of the Company, each hereby certifies that, to the best of her or his knowledge:

The Company’s Quarterly Report on Form 10-Q for the period ended March 31, 2016, to which this Certification is attached as Exhibit 32 (the “Periodic Report”), fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934, as amended; and the information contained in the Periodic Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: May 6, 2016	/s/ SHIRLEY SINGLETON
	Shirley Singleton
	Chairman, President and Chief Executive Officer (Principal Executive Officer)
Date: May 6, 2016	/s/ TIMOTHY R. OAKES
	Timothy R. Oakes
	Chief Financial Officer (Principal Financial and Accounting Officer)

A signed original of this written statement required by Section 906, or other document authenticating, acknowledging or otherwise adopting the signatures that appear in typed form within the electronic version of this written statement required by Section 906, has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

XML

Document and Entity Information - shares	3 Months Ended
	Mar. 31, 2016	May. 02, 2016
Document And Entity Information [Abstract]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Mar. 31, 2016
Document Fiscal Year Focus	2016
Document Fiscal Period Focus	Q1
Trading Symbol	EDGW
Entity Registrant Name	EDGEWATER TECHNOLOGY INC/DE/
Entity Central Index Key	0001017968
Current Fiscal Year End Date	--12-31
Entity Filer Category	Accelerated Filer
Entity Common Stock, Shares Outstanding		12,137,137

XML

Unaudited Condensed Consolidated Balance Sheets - USD ($) $ in Thousands	Mar. 31, 2016	Dec. 31, 2015
Current assets:
Cash and cash equivalents	$ 7,967	$ 11,981
Accounts receivable, net of allowance of $150	28,926	27,753
Prepaid expenses and other current assets	2,308	704
Total current assets	39,201	40,438
Property and equipment, net	721	824
Intangible assets, net	11,087	11,990
Goodwill	29,983	29,910
Deferred tax assets, net	24,655	24,032
Other assets	240	230
Total assets	105,887	107,424
Current liabilities:
Accounts payable	961	586
Accrued liabilities	12,148	15,486
Short-term portion of contingent earnout consideration	7,536	7,072
Deferred revenue	2,035	2,428
Total current liabilities	22,680	25,572
Revolving credit facility	5,000	5,000
Long-term portion of contingent earnout consideration	3,737	3,468
Total liabilities	$ 31,417	$ 34,040
Stockholders' equity:
Preferred stock, $.01 par value; 2,000 shares authorized, no shares issued or outstanding
Common stock, $.01 par value; 48,000 shares authorized, 29,736 shares issued as of March 31, 2016 and December 31, 2015, 12,085 and 11,862 shares outstanding as of March 31, 2016 and December 31, 2015, respectively	$ 297	$ 297
Paid-in capital	210,312	210,324
Treasury stock, at cost, 17,651 and 17,874 shares at March 31, 2016 and December 31, 2015, respectively	(114,657)	(116,464)
Accumulated other comprehensive loss	(499)	(554)
Retained deficit	(20,983)	(20,219)
Total stockholders' equity	74,470	73,384
Total liabilities and stockholders' equity	$ 105,887	$ 107,424

XML

Unaudited Condensed Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands	Mar. 31, 2016	Dec. 31, 2015
Statement of Financial Position [Abstract]
Accounts receivable, allowance	$ 150	$ 150
Preferred stock, par value	$ 0.01	$ 0.01
Preferred stock, shares authorized	2,000,000	2,000,000
Preferred stock, shares issued	0	0
Preferred stock, shares outstanding	0	0
Common stock, par value	$ 0.01	$ 0.01
Common stock, shares authorized	48,000,000	48,000,000
Common stock, shares issued	29,736,000	29,736,000
Common stock, shares outstanding	12,085,000	11,862,000
Treasury stock, shares	17,651,000	17,874,000

XML

Unaudited Condensed Consolidated Statements of Comprehensive Loss - USD ($) shares in Thousands, $ in Thousands	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Revenue:
Service revenue	$ 28,215	$ 22,677
Software revenue	2,029	2,167
Reimbursable expenses	1,654	1,734
Total revenue	31,898	26,578
Cost of revenue:
Project and personnel costs	18,240	15,794
Software costs	1,254	1,405
Reimbursable expenses	1,654	1,734
Total cost of revenue	21,148	18,933
Gross profit	10,750	7,645
Operating expenses:
Selling, general and administrative	9,944	8,266
Direct acquisition costs	430	611
Depreciation and amortization	1,004	223
Total operating expenses	11,378	9,100
Operating loss	(628)	(1,455)
Other expense, net	625	120
Loss before income taxes	(1,253)	(1,575)
Tax benefit	(490)	(635)
Net loss	(763)	(940)
Comprehensive loss:
Currency translation adjustments	54	(155)
Total comprehensive loss	$ (709)	$ (1,095)
Net loss per share:
Basic net loss per share of common stock	$ (0.06)	$ (0.08)
Diluted net loss per share of common stock	$ (0.06)	$ (0.08)
Shares used in computing basic net loss per share of common stock	11,790	11,345
Shares used in computing diluted net loss per share of common stock	11,790	11,345

XML

Unaudited Condensed Consolidated Statements of Cash Flows - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$ (763)	$ (940)
Adjustments to reconcile net loss to net cash used in operating activities, excluding the impact of acquisitions:
Depreciation and amortization	1,049	277
Share-based compensation expense	477	463
Deferred income taxes	(622)	(678)
Accretion of contingent earnout consideration	733	83
Recovery of doubtful accounts	(29)
Excess tax benefit from stock options	101
Changes in operating accounts, net of acquisition:
Accounts receivable	(1,146)	785
Prepaid expenses and other current assets	(1,614)	(481)
Accounts payable	375	205
Accrued liabilities and other liabilities	(3,339)	(3,222)
Deferred revenue	(375)	89
Net cash used in operating activities	(5,153)	(3,419)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment	(43)	(109)
Net cash used in investing activities	(136)	(4,652)
CASH FLOWS FROM FINANCING ACTIVITES:
Proceeds from employee stock plans and stock option exercises	1,317	256
Excess tax benefit from stock options	(101)
Net cash provided by financing activities	1,216	256
Effects of exchange rates on cash	59	(32)
Net decrease in cash and cash equivalents	(4,014)	(7,847)
CASH AND CASH EQUIVALENTS, beginning of period	11,981	26,768
CASH AND CASH EQUIVALENTS, end of period	7,967	18,921
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid for income taxes	40	76
Issuance of restricted stock awards		620
Change in fair value of contingent earnout considerations	733	83
Zero2Ten [Member]
CASH FLOWS FROM INVESTING ACTIVITIES:
Net cash used to acquire Zero2Ten/M2 Dynamics		$ (4,543)
M2 Dynamics [Member]
CASH FLOWS FROM INVESTING ACTIVITIES:
Net cash used to acquire Zero2Ten/M2 Dynamics	$ (93)

XML

Organization

3 Months Ended

Mar. 31, 2016

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Organization

1. ORGANIZATION:

Edgewater Technology, Inc. helps C-suite executives drive transformational change through its unique selection of business and technology services and channel-based solutions.

Classic consulting disciplines (such as business advisory, process improvement, organizational change management, M&A due diligence, and domain expertise) are blended with technical services (such as digital transformation, technical roadmaps, data and analytics services, custom development and system integration) to help organizations leverage investments in legacy IT assets to create new digital business models.

Delivering both on premise and in the cloud, Edgewater offers two major channel-based services. In the Oracle channel, Edgewater Ranzal provides Business Analytics solutions leveraging Oracle EPM, BI and Big Data technologies. In the Microsoft channel, Edgewater Fullscope delivers Dynamics AX ERP, Business Intelligence and CRM solutions primarily in the manufacturing space.

In this Quarterly Report on Form 10-Q (the “Form 10-Q”), we use the terms “Edgewater,” “Edgewater Technology,” “we,” “our Company,” “the Company,” “our” and “us” to refer to Edgewater Technology, Inc. and its wholly-owned subsidiaries, which are described in our 2015 Annual Report on Form 10-K, as filed with the Securities and Exchange Commission (the “SEC”) on March 11, 2016 (the “2015 Form 10-K”).

XML

Basis of Presentation

3 Months Ended

Mar. 31, 2016

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Basis of Presentation

2. BASIS OF PRESENTATION:

The accompanying unaudited condensed consolidated financial statements have been prepared by Edgewater pursuant to the rules and regulations of the SEC regarding interim financial reporting. Certain information and note disclosures normally included in annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been omitted pursuant to those rules and regulations, although we believe that the disclosures made are adequate to ensure the information presented is not misleading.

The accompanying unaudited condensed consolidated financial statements reflect all adjustments (which were of a normal, recurring nature) that, in the opinion of management, are necessary to present fairly our financial position, results of operations and cash flows as of and for the interim periods presented. All intercompany transactions have been eliminated in the accompanying unaudited condensed consolidated financial statements. These financial statements should be read in conjunction with the audited financial statements and notes thereto included in our 2015 Form 10-K.

The results of operations for the three months ended March 31, 2016 are not necessarily indicative of the results to be expected for any future period or the full fiscal year. Our revenue and earnings may fluctuate from quarter-to-quarter based on factors within and outside our control, including variability in demand for information technology professional services, the length of the sales cycle associated with our service offerings, the number, size and scope of our projects and the efficiency with which we utilize our employees.

Other comprehensive loss consists of net loss plus or minus any currency translation adjustments.

XML

Business Combinations

3 Months Ended

Mar. 31, 2016

Business Combinations [Abstract]

Business Combinations

3. BUSINESS COMBINATIONS:

M2 Dynamics Inc. (“M2 Dynamics”): On December 21, 2015, the Company acquired substantially all of the assets and certain liabilities of M2 Dynamics Inc., pursuant to the terms of an Asset Purchase Agreement (the “M2 Dynamics Acquisition”). Headquartered in Irvine, California, M2 Dynamics is an Oracle Platinum Partner providing Oracle Enterprise Performance Management (“EPM”) and Business Intelligence (“BI”) solutions and services, primarily to the West Coast and southern regions of the United States. M2 Dynamics joined the Company’s Edgewater Ranzal business in providing clients with information technology consultancy services specializing in Business Analytics and encompassing EPM, BI and Big Data solutions.

The Company initially estimated total fair value of the purchase price consideration to be $19.8 million. The initial cash consideration paid at close consisted of the $16.1 million base purchase price plus $596 thousand attributable to a net working capital adjustment. The total purchase price was increased by $3.0 million, representing the adjusted fair value estimate of additional contingent earnout consideration that may be earned by M2 Dynamics, which is described in more detail below.

During the quarter ended March 31, 2016, the Company increased total purchase price consideration of the M2 Dynamics Acquisition, resulting in an increase to the carrying value of goodwill, by $93 thousand. The increase is attributable to the final true-up of excess net working capital delivered by M2 Dynamics at the closing of the transaction.

The M2 Dynamics financial accounting measurement period was completed during the first quarter of 2016.

The Company, as of March 31, 2016, had accrued $3.3 million in potential future contingent earnout consideration payable to M2 Dynamics related to the completion of the one-year earnout period. The maximum amount of contingent earnout consideration that M2 Dynamics can earn during the earnout period is capped at $6.6 million (and is not impacted by continued employment status of M2 Dynamics shareholders).

In addition to the above payments, the Company incurred approximately $1.2 million in direct transaction costs. Direct acquisition costs were $430 thousand during the three-month period ended March 31, 2016 and $801 thousand during the three-month period ended December 31, 2015. The direct acquisition costs were expensed (within direct acquisition costs on the consolidated statement of comprehensive loss) as incurred.

In connection with the M2 Dynamics Acquisition, the Company made certain estimates related to the fair value of assets acquired, liabilities assumed, contingent earnout consideration, identified intangibles and goodwill.

The Company performed a fair value allocation of the purchase price among assets, liabilities and identified intangible assets. The allocation of the purchase price was as follows:

	Total			Life (In Years)
	(In Thousands)
Accounts receivable	$	2,785
Other assets		21
Accounts payable and accrued expenses		(753	)
Customer relationships		7,700			6 Years
Goodwill (deductible for tax purposes)		10,115
Total purchase price	$	19,868

The M2 Dynamics Acquisition was accounted for as a purchase transaction, and accordingly, the results of comprehensive loss, commencing December 21, 2015, are included in the Company’s accompanying consolidated statement of comprehensive loss.

The Company recorded total revenues of $3.1 million during the three-month period ended March 31, 2016. Non-cash expenses associated with amortization of purchased intangible assets as well as the accretion of contingent earnout consideration totaled $749 thousand, which was a significant factor in the overall net loss of M2 Dynamics of $(105) thousand during the three-month period ended March 31, 2016.

The following table sets forth supplemental pro forma financial information that assumes the acquisition of M2 Dynamics was completed at the beginning of 2015. The information for the quarter ended March 31, 2015 includes the historical results of Edgewater and M2 Dynamics. The pro forma results include estimates and assumptions regarding the amortization of intangible assets recognized as part of the acquisition and income taxes. The pro forma results, as presented, are not necessarily indicative of the results that would have occurred if the acquisition had occurred on the date indicated, or that may result in the future.

	Unaudited March 31, 2015
	(In Thousands)
Pro forma revenue	$	29,068
Pro forma net loss		(895	)
Pro forma basic net loss per share	$	(0.08	)
Pro forma diluted net loss per share	$	(0.08	)

Acquisition of Branchbird LLC (“Branchbird”): On August 17, 2015, the Company acquired substantially all of the assets and liabilities of Branchbird, pursuant to the terms of an Asset Purchase Agreement (the “Branchbird Acquisition”). Headquartered in Chicago, Illinois, Branchbird delivers Big Data solutions to their clients utilizing the Oracle Endeca and Big Data Discovery (BDD) products. The Branchbird Acquisition extends Ranzal’s presence in the Midwest.

The Company determined the total allocable purchase price consideration to be $4.2 million. The initial cash consideration paid at closing was $2.7 million, net of $19 thousand attributable to a net working capital adjustment. The total purchase price was increased by $1.4 million, representing our initial estimate of the fair value of additional contingent earnout consideration that may be earned by Branchbird, which is described in more detail below. In addition to the above payments, the Company incurred approximately $340 thousand in direct transaction costs, which were expensed (within direct acquisition costs on the consolidated statement of comprehensive loss) during the year ended December 31, 2015.

An earnout agreement was entered into in connection with the Branchbird Acquisition under which Branchbird is eligible to receive additional contingent consideration. Contingent earnout consideration to be paid, if any, to Branchbird will be based upon the achievement of certain performance measures (and is not impacted by continued employment status of Branchbird owners) over two consecutive one-year earnout periods, concluding on August 16, 2017. The Company has estimated the fair value of this obligation on the date of acquisition to be $1.4 million. The maximum amount of contingent earnout consideration that can be earned by Branchbird is capped at $2.4 million. As of March 31, 2016, the Company had recorded an accrual of $1.6 million related to Branchbird contingent earnout consideration.

In connection with the Branchbird Acquisition, the Company made certain estimates related to the fair value of assets acquired, liabilities assumed, contingent earnout consideration, identified intangibles and goodwill.

The Company performed a fair value allocation of the purchase price among assets, liabilities and identified intangible assets. The allocation of the purchase price was as follows:

	Total			Life (In Years)
	(In Thousands)
Accounts receivable	$	540
Other assets		16
Accounts payable and accrued expenses		(86	)
Customer relationships		2,100			5
Goodwill (deductible for tax purposes)		1,613
Total purchase price	$	4,183

The Branchbird Acquisition was accounted for as a purchase transaction, and accordingly, the results of operations, commencing August 17, 2015, are included in the Company’s accompanying consolidated statement of comprehensive loss. Pro forma financial information related to the Branchbird Acquisition is not presented as the effect of this acquisition was not material to the Company.

Acquisition of Zero2Ten, Inc. (“Zero2Ten”): On March 13, 2015, the Company acquired substantially all of the assets and liabilities of Zero2Ten, pursuant to the terms of an Asset Purchase Agreement (the “Zero2Ten Acquisition”). Headquartered in Alpharetta, Georgia, Zero2Ten is a specialty solution provider of Microsoft’s CRM Cloud product. Zero2Ten has delivered its services to organizations across various vertical markets with an emphasis on manufacturing. The acquisition of Zero2Ten continues our investment in service offerings that complement the Microsoft Dynamics product suite.

The Company determined the total allocable purchase price consideration to be $9.0 million. The initial cash consideration paid at closing was $4.5 million. The cash paid at closing consisted of the $5.0 million purchase price less $457 thousand attributable to a net working capital adjustment. The total purchase price was increased by $4.4 million, representing our initial estimate of the fair value estimate of additional contingent earnout consideration that may be earned by Zero2Ten, which is described in more detail below. In addition to the above payments, the Company incurred approximately $613 thousand in direct transaction costs, which were expensed (within direct acquisition costs on the consolidated statement of comprehensive loss) during the year ended December 31, 2015.

An earnout agreement was entered into in connection with the Zero2Ten Acquisition under which Zero2Ten is eligible to receive additional contingent consideration. Contingent earnout consideration to be paid, if any, to Zero2Ten will be based upon the achievement of certain performance measures (and is not impacted by continued employment status of Zero2Ten shareholders) over two consecutive one-year earnout periods, concluding on March 13, 2017. The Company has estimated the fair value of this obligation on the date of acquisition to be $4.4 million. The maximum amount of contingent earnout consideration that can be earned by Zero2Ten is capped at $8.6 million. As of March 31, 2016, the Company had recorded an accrual of $6.4 million related to Zero2Ten contingent earnout consideration.

In connection with the Zero2Ten Acquisition, the Company made certain estimates related to the fair value of assets acquired, liabilities assumed, contingent earnout consideration, identified intangibles and goodwill.

The Company performed a fair value allocation of the purchase price among assets, liabilities and identified intangible assets. The allocation of the purchase price was as follows:

	Total			Life (In Years)
	(In Thousands)
Accounts receivable	$	1,596
Other assets		142
Deferred revenue		(1,158	)
Accounts payable and accrued expenses		(580	)
Customer relationships		2,800			5
Goodwill (deductible for tax purposes)		6,210
Total purchase price	$	9,010

The Zero2Ten Acquisition was accounted for as a purchase transaction, and accordingly, the results of operations, commencing March 13, 2015, are included in the Company’s accompanying consolidated statement of comprehensive loss. Pro forma financial information related to the Zero2Ten Acquisition is not presented as the effect of this acquisition was not material to the Company.

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Revenue Recognition

3 Months Ended

Mar. 31, 2016

Text Block [Abstract]

Revenue Recognition

4. REVENUE RECOGNITION:

The Company recognizes revenue primarily through the provision of consulting services and the resale of third-party, off-the-shelf software and maintenance.

We generate revenue by providing consulting services under written service contracts with our customers. The service contracts we enter into generally fall into three specific categories: time and materials, fixed-price and retainer.

We consider amounts to be earned once evidence of an arrangement has been obtained, services are delivered, fees are fixed or determinable and collectability is reasonably assured. We establish billing terms at the time at which the project deliverables and milestones are agreed. Our standard payment terms are 30 days from invoice date. Out-of-pocket reimbursable expenses charged to customers are reflected as revenue.

When a customer enters into a time and materials, fixed-price or a periodic retainer-based contract, the Company recognizes revenue in accordance with its evaluation of the deliverables in each contract. If the deliverables represent separate units of accounting, the Company then measures and allocates the consideration from the arrangement to the separate units, based on vendor specific objective evidence (“VSOE”) of the value for each deliverable.

The revenue under time and materials contracts is recognized as services are rendered and performed at contractually agreed upon rates. Revenue pursuant to fixed-price contracts is recognized under the proportional performance method of accounting. We routinely evaluate whether revenue and profitability should be recognized in the current period. We estimate the proportional performance on our fixed-price contracts on a monthly basis utilizing hours incurred to date as a percentage of total estimated hours to complete the project. This method is used because reasonably dependable estimates of costs and revenue earned can be made, based on historical experience and milestones identified in any particular contract. If we do not have a sufficient basis to measure progress toward completion, revenue is recognized upon completion of performance, subject to any warranty provisions or other project management assessments as to the status of work performed.

Estimates of total project costs are continuously monitored during the term of an engagement. There are situations where the number of hours to complete projects may exceed our original estimate, as a result of an increase in project scope, unforeseen events that arise, or the inability of the client or the delivery team to fulfill their responsibilities. Accordingly, recorded revenues and costs are subject to revision throughout the life of a project based on current information and historical trends. Such revisions may result in increases or decreases to revenue and income and are reflected in the consolidated financial statements in the periods in which they are first identified.

If our initial estimates of the resources required or the scope of work to be performed on a contract are inaccurate, or we do not manage the project properly within the planned time period, a provision for estimated losses on incomplete projects may be made. Any known or probable losses on projects are charged to operations in the period in which such losses are determined. A formal project review process takes place quarterly, although projects are continuously evaluated throughout the period. Management reviews the estimated total direct costs on each contract to determine if the estimated amounts are accurate, and estimates are adjusted as needed in the period identified. No losses were recognized on contracts during the three-month periods ended March 31, 2016 or 2015.

We also perform services on a periodic retainer basis under infrastructure service contracts, which include monthly hosting and support services. Revenue under periodic retainer-based contracts is recognized ratably over the contract period, as outlined within the respective contract. In the event additional services are required above the minimum retained or contracted amount, then such services are billed on a time and materials basis.

Typically, the Company provides warranty services on its fixed-price contracts related to providing customers with the ability to have any “design flaws” remedied and/or have our Company “fix” routine defects. The warranty services, as outlined in the respective contracts, are provided for a specific period of time after a project is complete. The Company values the warranty services based upon historical labor hours incurred for similar services at standard billing rates. Revenue related to the warranty provisions within our fixed-price contracts is recognized as the services are performed or the revenue is earned. The warranty period is typically for a 30-60 day period after the project is complete.

Customer prepayments, even if nonrefundable, are deferred (classified as deferred revenue on the condensed consolidated balance sheets) and recognized over future periods as services are performed.

Software revenue represents the resale of certain third-party off-the-shelf software and maintenance and is recorded on a gross basis provided we act as a principal in the transaction, which we have determined based upon several factors, including, but not limited to, the fact that we have credit risk and we set the price to the end user. In the event we do not meet the requirements to be considered a principal in the software sale transaction and act as an agent, software revenue is recorded on a net basis.

Substantially all of the software sold by the Company is delivered electronically. For software that is delivered electronically, we consider delivery to have occurred when the customer either (a) takes possession of the software via a download (that is, when the customer takes possession of the electronic data on its hardware), or (b) has been provided with access codes that allow the customer to take immediate possession of the software on its hardware pursuant to an agreement or purchase order for the software.

The Company enters into multiple element arrangements which typically include software, post-contract support (or maintenance), and consulting services. Consistent with the software described above, maintenance that is in the form of a pass through transaction is recognized upon delivery of the software, as all related warranty and maintenance is performed by the primary software vendor and not the Company. Maintenance fee revenue for the Company’s software products, which is inconsequential in all years presented, is recognized ratably over the term of the arrangements, which are generally for a one-year period. The Company has established VSOE with respect to the services and maintenance provided based on the price charged when the services are sold separately and the stated renewal rate.

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Share-Based Compensation

3 Months Ended

Mar. 31, 2016

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Share-Based Compensation

5. SHARE-BASED COMPENSATION:

Share-based compensation expense under all of the Company’s share-based plans was $477 thousand and $463 thousand for the three-month periods ended March 31, 2016 and 2015, respectively.

Cash received from the employee stock purchase plan (“ESPP”) and through stock option exercises was $1.3 million and $256 thousand during the three-month periods ended March 31, 2016 and 2015, respectively. As of March 31, 2016, unrecognized compensation expense, net of estimated forfeitures, related to the unvested portion of all share-based compensation arrangements was approximately $1.4 million and is expected to be recognized over a weighted-average period of 1.0 years.

The Company intends to use previously purchased treasury shares for shares issued for options, restricted share awards and ESPP purchases. Shares may also be issued from authorized but unissued share reserves.

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Income Taxes

3 Months Ended

Mar. 31, 2016

Income Tax Disclosure [Abstract]

Income Taxes

6. INCOME TAXES:

The Company recorded tax benefits of $(490) thousand and $(635) thousand for the three-month periods ended March 31, 2016 and 2015, respectively. The reported tax benefits for the three-month periods ended March 31, 2016 and 2015, are based upon estimated annual effective tax rates of 39.1% and 40.3%, respectively. The effective tax rates reflected our combined Federal and state income tax rates, foreign income tax provisions and the recognition of U.S. deferred tax liabilities for differences between the book and tax basis of goodwill.

We assess the realizability of our deferred tax assets and assess the need for a valuation allowance on an ongoing basis. The periodic assessment of the net carrying value of our deferred tax assets under the applicable accounting rules is highly judgmental. We are required to consider all available positive and negative evidence in evaluating the likelihood that we will be able to realize the benefit of our deferred tax assets in the future. Such evidence includes scheduled reversals of deferred tax liabilities, projected future taxable income, tax planning strategies and the results of recent operations. Since this evaluation requires consideration of events that may occur some years into the future, there is significant judgment involved, and our conclusion could be materially different should certain of our expectations not transpire.

When assessing all available evidence, we consider the extent to which we have generated pre-tax income or losses over the most recent three-year period to be an important piece of objective evidence. As of March 31, 2016 and December 31, 2015, the recorded deferred tax asset valuation allowance balance was $4.5 million.

Our policy is to classify interest and penalties related to unrecognized tax benefits as income tax expense. This policy has been consistently applied in all periods. During the three-month period ended March 31, 2015 we recognized, as part of income tax expense, $2 thousand in interest and penalties related to our unrecognized tax benefits. No such amounts were recognized in the three-month period ended March 31, 2016. We have reviewed the tax positions taken, or to be taken, in our tax returns for all tax years currently open to examination by a taxing authority. We have identified no uncertain tax positions for which it is reasonably possible that the total amount of unrecognized tax benefits will significantly increase or decrease within the twelve months ending September 30, 2017. We remain subject to examination until the statute of limitations expires for each respective tax jurisdiction.

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Fair Value Measurement

3 Months Ended

Mar. 31, 2016

Fair Value Disclosures [Abstract]

Fair Value Measurement

7. FAIR VALUE MEASUREMENT:

We utilize the following valuation hierarchy for disclosure of the inputs to valuation used to measure fair value. This hierarchy prioritizes the inputs into three broad levels as follows:

• Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities.

• Level 2 inputs are quoted prices for similar assets and liabilities in active markets or inputs that are observable for the asset or liability, either directly or indirectly through market corroboration, for substantially the full term of the financial instrument.

• Level 3 inputs are unobservable inputs based on our own assumptions used to measure assets and liabilities at fair value.

A financial asset or liability’s classification within the hierarchy is determined based upon the lowest level input that is significant to the fair value measurement.

As of March 31, 2016 and December 31, 2015, our only financial assets and liabilities required to be measured on a recurring basis were our contingent earnout consideration liabilities.

The following table represents the Company’s fair value hierarchy for its financial assets and liabilities required to be measured on a recurring basis:

	Basis of Fair Value Measurements
	Balance		Quoted Prices in Active Markets for Identical Items (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	(In Thousands)
Balance at March 31, 2016:
Financial liabilities:
Contingent earnout consideration	$	11,273	$	—	$	—	$	11,273
Total financial liabilities	$	11,273	$	—	$	—	$	11,273
Balance at December 31, 2015:
Financial liabilities:
Contingent earnout consideration	$	10,540	$	—	$	—	$	10,540
Total financial liabilities	$	10,540	$	—	$	—	$	10,540

No financial instruments were transferred into or out of Level 3 classification during the three- month period ended March 31, 2016.

The Company has classified its net liability for contingent earnout considerations relating to its Zero2Ten, Branchbird and M2 Dynamics Acquisitions within Level 3 of the fair value hierarchy because the fair value is determined using significant unobservable inputs, which included probability weighted cash flows. A description of these acquisitions is included within Note 3. The contingent earnout payments for each acquisition are based on the achievement of certain revenue and earnings before interest, taxes, depreciation and amortization targets.

A reconciliation of the beginning and ending Level 3 net liabilities for the three-month period ended March 31, 2016 is as follows:

	Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
	(In Thousands)
Balance at December 31, 2015	$	10,540
Accretion of contingent earnout consideration (included within other expense, net)		733
Ending balance at March 31, 2016	$	11,273

As of March 31, 2016 and December 31, 2015, the fair values of our other financial instruments, which include cash and cash equivalents, accounts receivable and accounts payable, approximate the carrying amounts of the respective asset and/or liability due to the short-term nature of these financial instruments.

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Goodwill and Intangible Assets

3 Months Ended

Mar. 31, 2016

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill and Intangible Assets

8. GOODWILL AND INTANGIBLE ASSETS:

Goodwill increased to $30.0 million as of March 31, 2016 compared to $29.9 million as of December 31, 2015. This increase is the result of adjustments to the initial estimate of purchase price allocation of M2 Dynamics, which is further disclosed within Note 3. With the exception of the acquisition-related increase noted herein, there have been no other changes to the Company’s goodwill balance. Our annual goodwill and intangible assets measurement date is December 2.

We amortize our intangible assets that have finite lives using either the straight-line method or based on estimated future cash flows to approximate the pattern in which the economic benefit of the asset will be utilized. Amortization expense was $858 thousand and $74 thousand during the three-month periods ended March 31, 2016 and 2015, respectively. This amortization expense relates to certain non-competition covenants and customer lists, which expire at various times through 2021.

The Company recorded amortization from capitalized internally developed software (intellectual property) (reported as part of Cost of Revenue—software cost) of $45 thousand and $54 thousand during the three- month periods ended March 31, 2016 and 2015, respectively.

Estimated annual amortization expense of our intangible assets (including amortization expense associated with capitalized software costs) for the current year and the following four years ending December 31, is as follows:

	Amortization Expense
	(In Thousands)
2016	$	3,612
2017	$	2,804
2018	$	2,240
2019 and beyond	$	3,334

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Accrued Expenses and Other Liabilities

3 Months Ended

Mar. 31, 2016

Payables and Accruals [Abstract]

Accrued Expenses and Other Liabilities

9. ACCRUED EXPENSES AND OTHER LIABILITIES:

Accrued liabilities as of March 31, 2016 and December 31, 2015 consisted of the following:

	March 31, 2016		December 31, 2015
	(In Thousands)
Accrued bonuses		2,016		2,939
Accrued commissions		1,480		1,496
Accrued vacation		2,828		2,272
Accrued payroll related liabilities		497		2,423
Accrued software expense		741		1,284
Accrued contractor fees		1,144		1,132
Accrued professional service fees		344		1,016
Short-term portion of lease abandonment accrual		291		437
Deferred rent		187		220
Income tax related accruals		408		318
Other accrued expenses		2,212		1,949
Total	$	12,148	$	15,486

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Net Loss Per Share

3 Months Ended

Mar. 31, 2016

Earnings Per Share [Abstract]

Net Loss Per Share

10. NET LOSS PER SHARE:

A reconciliation of net loss and weighted average shares used in computing basic and diluted net loss per share is as follows:

	Three Months Ended March 31,
	2016			2015
Basic net loss per share:
Net loss applicable to common shares	$	(763	)	$	(940	)
Weighted average common shares outstanding		11,790			11,345
Basic net loss per share of common stock	$	(0.06	)	$	(0.08	)
Diluted net loss per share:
Net loss applicable to common shares	$	(763	)	$	(940	)
Weighted average common shares outstanding		11,790			11,345
Dilutive effects of stock options		—			—
Weighted average common shares, assuming dilutive effect of stock options		11,790			11,345
Diluted net loss per share of common stock	$	(0.06	)	$	(0.08	)

Share-based awards, inclusive of all grants made under the Company’s equity plans, for which either the stock option exercise price or the fair value of the restricted share award exceeds the average market price over the period, have an anti-dilutive effect on earnings per share, and accordingly, are excluded from the diluted computations for all periods presented. Had such shares been included, shares for the diluted computation would have increased by approximately 109 thousand in the three-month period ended March 31, 2016. The diluted computation would have increased by approximately 69 thousand in the three- month period ended March 31, 2015. As of March 31, 2016 and 2015, there were approximately 3.7 million and 4.1 million share-based awards outstanding, respectively, under the Company’s equity plans. Options to purchase 1.7 million shares of common stock that were outstanding during the three months ended March 31, 2016 and 2015 were not included in the computation of diluted net loss per share due to the reported periodic loss.

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Stock Repurchase Program

3 Months Ended

Mar. 31, 2016

Equity [Abstract]

Stock Repurchase Program

11. STOCK REPURCHASE PROGRAM:

In December 2007, our Board of Directors (the “Board”) authorized a stock repurchase program for up to $5.0 million of common stock on the open market or through privately negotiated transactions from time-to-time through December 31, 2008 (the “Stock Repurchase Program”). The Board subsequently amended the Stock Repurchase Program, authorizing both an increase to and an extension of the Stock Repurchase Program. The Stock Repurchase Program, as amended, had a maximum purchase value of shares of $23.1 million (the “Purchase Authorization”) and was set to expire on September 19, 2015 (the “Repurchase Period”). On September 17, 2015, we announced that the Board had approved an extension of the Repurchase Period to September 23, 2016.

The timing and amount of the purchases will be based upon market conditions, securities law considerations and other factors. The Stock Repurchase Program does not obligate the Company to acquire a specific number of shares in any period and may be modified, suspended, extended or discontinued at any time, without prior notice.

The Company did not repurchase any shares of common stock during the three-month periods ended March 31, 2016 or 2015.

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Revolving Line of Credit

3 Months Ended

Mar. 31, 2016

Debt Disclosure [Abstract]

Revolving Line of Credit

12. REVOLVING LINE OF CREDIT:

In September 2013, the Company entered into a secured revolving credit facility (the “Credit Facility”). The Credit Facility was modified through an amendment in December 2015, which increased the borrowing base to $15 million (from the previous $10 million) with an additional accordion feature that allows the Company to request an additional $5.0 million as needed, extending the total credit facility borrowing capacity to $20 million over its three-year term. The Credit Facility is collateralized by substantially all assets of the Company and its domestic subsidiaries, and is subject to certain financial covenants. The Company was in compliance with the financial covenants (which are related to interest coverage and leverage) as of March 31, 2016. Under the terms of the Credit Facility, any advances will accrue interest at a variable per annum rate of interest equal to the LIBOR Rate plus 1.5%. Interest is due and payable, in arrears, on a monthly basis. The Company will be obligated to pay an annual commitment fee of 0.15% on the daily undrawn balance of the facility. Any amounts outstanding under the Credit Facility will be due on December 21, 2018. The Company had drawn down $5.0 million of this balance as of March 31, 2016.

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Geographic Information

3 Months Ended

Mar. 31, 2016

Text Block [Abstract]

Geographic Information

13. GEOGRAPHIC INFORMATION

Total revenue to unaffiliated customers by geographic area were as follows:

	For the Three-Months Ended March 31,
	2016		2015
United States	$	26,445	$	22,504
Canada		3,750		2,989
Other International		1,703		1,085
Total Revenue	$	31,898	$	26,578

Substantially all of the Company’s long-lived assets are located within the United States.

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Business Combinations (Tables)

3 Months Ended

Mar. 31, 2016

M2 Dynamics [Member]

Summary of Purchase Price Allocation

The Company performed a fair value allocation of the purchase price among assets, liabilities and identified intangible assets. The allocation of the purchase price was as follows:

	Total			Life (In Years)
	(In Thousands)
Accounts receivable	$	2,785
Other assets		21
Accounts payable and accrued expenses		(753	)
Customer relationships		7,700			6 Years
Goodwill (deductible for tax purposes)		10,115
Total purchase price	$	19,868

Summary of Supplemental Pro Forma Financial Information

The following table sets forth supplemental pro forma financial information that assumes the acquisition of M2 Dynamics was completed at the beginning of 2015. The information for the quarter ended March 31, 2015 includes the historical results of Edgewater and M2 Dynamics. The pro forma results include estimates and assumptions regarding the amortization of intangible assets recognized as part of the acquisition and income taxes. The pro forma results, as presented, are not necessarily indicative of the results that would have occurred if the acquisition had occurred on the date indicated, or that may result in the future.

	Unaudited March 31, 2015
	(In Thousands)
Pro forma revenue	$	29,068
Pro forma net loss		(895	)
Pro forma basic net loss per share	$	(0.08	)
Pro forma diluted net loss per share	$	(0.08	)

Branchbird [Member]

Summary of Purchase Price Allocation

The Company performed a fair value allocation of the purchase price among assets, liabilities and identified intangible assets. The allocation of the purchase price was as follows:

	Total			Life (In Years)
	(In Thousands)
Accounts receivable	$	540
Other assets		16
Accounts payable and accrued expenses		(86	)
Customer relationships		2,100			5
Goodwill (deductible for tax purposes)		1,613
Total purchase price	$	4,183

Zero2Ten [Member]

Summary of Purchase Price Allocation

The Company performed a fair value allocation of the purchase price among assets, liabilities and identified intangible assets. The allocation of the purchase price was as follows:

	Total			Life (In Years)
	(In Thousands)
Accounts receivable	$	1,596
Other assets		142
Deferred revenue		(1,158	)
Accounts payable and accrued expenses		(580	)
Customer relationships		2,800			5
Goodwill (deductible for tax purposes)		6,210
Total purchase price	$	9,010

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Fair Value Measurement (Tables)

3 Months Ended

Mar. 31, 2016

Fair Value Disclosures [Abstract]

Company's Fair Value Hierarchy for its Financial Assets and Liabilities

The following table represents the Company’s fair value hierarchy for its financial assets and liabilities required to be measured on a recurring basis:

	Basis of Fair Value Measurements
	Balance		Quoted Prices in Active Markets for Identical Items (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	(In Thousands)
Balance at March 31, 2016:
Financial liabilities:
Contingent earnout consideration	$	11,273	$	—	$	—	$	11,273
Total financial liabilities	$	11,273	$	—	$	—	$	11,273
Balance at December 31, 2015:
Financial liabilities:
Contingent earnout consideration	$	10,540	$	—	$	—	$	10,540
Total financial liabilities	$	10,540	$	—	$	—	$	10,540

Reconciliation of the Beginning and Ending Level 3 Net Liabilities

A reconciliation of the beginning and ending Level 3 net liabilities for the three-month period ended March 31, 2016 is as follows:

	Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
	(In Thousands)
Balance at December 31, 2015	$	10,540
Accretion of contingent earnout consideration (included within other expense, net)		733
Ending balance at March 31, 2016	$	11,273

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Goodwill and Intangible Assets (Tables)

3 Months Ended

Mar. 31, 2016

Goodwill and Intangible Assets Disclosure [Abstract]

Estimated Annual Amortization Expense of our Intangible Assets

Estimated annual amortization expense of our intangible assets (including amortization expense associated with capitalized software costs) for the current year and the following four years ending December 31, is as follows:

	Amortization Expense
	(In Thousands)
2016	$	3,612
2017	$	2,804
2018	$	2,240
2019 and beyond	$	3,334

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Accrued Expenses and Other Liabilities (Tables)

3 Months Ended

Mar. 31, 2016

Payables and Accruals [Abstract]

Components of Accrued Liabilities

Accrued liabilities as of March 31, 2016 and December 31, 2015 consisted of the following:

	March 31, 2016		December 31, 2015
	(In Thousands)
Accrued bonuses		2,016		2,939
Accrued commissions		1,480		1,496
Accrued vacation		2,828		2,272
Accrued payroll related liabilities		497		2,423
Accrued software expense		741		1,284
Accrued contractor fees		1,144		1,132
Accrued professional service fees		344		1,016
Short-term portion of lease abandonment accrual		291		437
Deferred rent		187		220
Income tax related accruals		408		318
Other accrued expenses		2,212		1,949
Total	$	12,148	$	15,486

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Net Loss Per Share (Tables)

3 Months Ended

Mar. 31, 2016

Earnings Per Share [Abstract]

Reconciliation of Net Loss and Weighted Average Shares used in Computing Basic and Diluted Net Loss Per Share

A reconciliation of net loss and weighted average shares used in computing basic and diluted net loss per share is as follows:

	Three Months Ended March 31,
	2016			2015
Basic net loss per share:
Net loss applicable to common shares	$	(763	)	$	(940	)
Weighted average common shares outstanding		11,790			11,345
Basic net loss per share of common stock	$	(0.06	)	$	(0.08	)
Diluted net loss per share:
Net loss applicable to common shares	$	(763	)	$	(940	)
Weighted average common shares outstanding		11,790			11,345
Dilutive effects of stock options		—			—
Weighted average common shares, assuming dilutive effect of stock options		11,790			11,345
Diluted net loss per share of common stock	$	(0.06	)	$	(0.08	)

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Geographic Information (Tables)

3 Months Ended

Mar. 31, 2016

Text Block [Abstract]

Schedule of Geographic Information

Total revenue to unaffiliated customers by geographic area were as follows:

	For the Three-Months Ended March 31,
	2016		2015
United States	$	26,445	$	22,504
Canada		3,750		2,989
Other International		1,703		1,085
Total Revenue	$	31,898	$	26,578

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Business Combinations - Additional Information (Detail) - USD ($)				3 Months Ended			12 Months Ended
	Dec. 21, 2015	Aug. 17, 2015	Mar. 13, 2015	Mar. 31, 2016	Dec. 31, 2015	Mar. 31, 2015	Dec. 31, 2015
Business Acquisition [Line Items]
Direct acquisition costs				$ 430,000		$ 611,000
M2 Dynamics [Member]
Business Acquisition [Line Items]
Acquisition date				Dec. 21, 2015
Purchase price consideration	$ 19,800,000
Initial cash consideration	16,100,000			$ 93,000
Working capital adjustment	596,000
Increase in total purchase price	3,000,000
Increase in carrying value of goodwill				93,000
Business combination, contingent earnout considerations accrual				3,300,000
Earnout consideration				6,600,000
Direct transaction costs				1,200,000
Direct acquisition costs				430,000	$ 801,000
Business combination revenue recorded				3,100,000
Non-cash expenses associated with amortization of purchased intangible assets and accretion of contingent earnout consideration				749,000
Business combination net loss recorded				$ (105,000)
Purchase price consideration	$ 19,868,000
Branchbird [Member]
Business Acquisition [Line Items]
Acquisition date				Aug. 17, 2015
Purchase price consideration		$ 4,200,000
Initial cash consideration		2,700,000
Working capital adjustment		19,000
Increase in total purchase price		1,400,000
Business combination, contingent earnout considerations accrual				$ 1,600,000
Earnout consideration		2,400,000
Direct acquisition costs							$ 340,000
Estimated earnout consideration, Fair value		1,400,000
Purchase price consideration		$ 4,183,000
Zero2Ten [Member]
Business Acquisition [Line Items]
Acquisition date				Mar. 13, 2015
Initial cash consideration			$ 4,500,000			$ 4,543,000
Working capital adjustment			457,000
Increase in total purchase price			4,400,000
Business combination, contingent earnout considerations accrual				$ 6,400,000
Earnout consideration			8,600,000
Direct acquisition costs							$ 613,000
Estimated earnout consideration, Fair value			4,400,000
Purchase price consideration			9,010,000
Gross cash consideration			$ 5,000,000

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Business Combinations - Summary of Purchase Price Allocation (Detail) - USD ($) $ in Thousands	Dec. 21, 2015	Aug. 17, 2015	Mar. 13, 2015
Branchbird [Member]
Business Acquisition [Line Items]
Customer relationships		5 years
Accounts receivable		$ 540
Other assets		16
Accounts payable and accrued expenses		(86)
Customer relationships		2,100
Goodwill (deductible for tax purposes)		1,613
Total purchase price		$ 4,183
Zero2Ten [Member]
Business Acquisition [Line Items]
Customer relationships			5 years
Accounts receivable			$ 1,596
Other assets			142
Deferred revenue			(1,158)
Accounts payable and accrued expenses			(580)
Customer relationships			2,800
Goodwill (deductible for tax purposes)			6,210
Total purchase price			$ 9,010
M2 Dynamics [Member]
Business Acquisition [Line Items]
Customer relationships	6 years
Accounts receivable	$ 2,785
Other assets	21
Accounts payable and accrued expenses	(753)
Customer relationships	7,700
Goodwill (deductible for tax purposes)	10,115
Total purchase price	$ 19,868

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Business Combinations - Summary of Supplemental Pro Forma Financial Information (Detail) $ / shares in Units, $ in Thousands	3 Months Ended
	Mar. 31, 2015 USD ($) $ / shares
Business Acquisition, Pro Forma Information [Abstract]
Pro forma revenue | $	$ 29,068
Pro forma net loss | $	$ (895)
Pro forma basic net loss per share | $ / shares	$ (0.08)
Pro forma diluted net loss per share | $ / shares	$ (0.08)

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Revenue Recognition - Additional Information (Detail) - USD ($)	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Revenue Recognition, Multiple-deliverable Arrangements [Line Items]
Standard payment terms to customers	30 days
Losses recognized on fixed-price contracts	$ 0	$ 0
Maintenance fee revenue recognition period	1 year
Minimum [Member]
Revenue Recognition, Multiple-deliverable Arrangements [Line Items]
Warranty period on fixed-price contracts	30 days
Maximum [Member]
Revenue Recognition, Multiple-deliverable Arrangements [Line Items]
Warranty period on fixed-price contracts	60 days

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Share-Based Compensation - Additional Information (Detail) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Share-based Compensation [Abstract]
Stock-based compensation expense under share based plans	$ 477	$ 463
Unrecognized compensation expense	$ 1,400
Expected weighted-average recognition period for unrecognized compensation expense	1 year
Proceeds from employee stock purchase plans and stock option exercises	$ 1,317	$ 256

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Income Taxes - Additional Information (Detail) - USD ($)	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015	Dec. 31, 2015
Income Tax Disclosure [Abstract]
Income tax benefits	$ (490,000)	$ (635,000)
Effective tax rate	39.10%	40.30%
Deferred tax asset valuation allowance	$ 4,500,000		$ 4,500,000
Pre-tax income or losses period	3 years
Unrecognized tax benefits, penalties and interest expense	$ 0	$ 2,000
Uncertain tax positions increase (decrease)	$ 0

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Fair Value Measurement - Company's Fair Value Hierarchy for its Financial Assets and Liabilities (Detail) - Fair Value, Measurements, Recurring [Member] - USD ($) $ in Thousands	Mar. 31, 2016	Dec. 31, 2015
Financial liabilities:
Total financial liabilities	$ 11,273	$ 10,540
Zero2Ten and Branchbird Contingent Earnout Consideration [Member]
Financial liabilities:
Total financial liabilities	11,273	10,540
Significant Unobservable Inputs (Level 3) [Member]
Financial liabilities:
Total financial liabilities	11,273	10,540
Significant Unobservable Inputs (Level 3) [Member] | Zero2Ten and Branchbird Contingent Earnout Consideration [Member]
Financial liabilities:
Total financial liabilities	$ 11,273	$ 10,540

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Fair Value Measurement - Additional Information (Detail)	3 Months Ended
	Mar. 31, 2016 USD ($)
Fair Value Disclosures [Abstract]
Financial instruments transferred into or out of Level 3 classification	$ 0

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Fair Value Measurement - Reconciliation of the Beginning and Ending Level 3 Net Liabilities (Detail) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Accretion of contingent earnout consideration (included within other expense, net)	$ (733)	$ (83)
Significant Unobservable Inputs (Level 3) [Member] | Zero2Ten and Branchbird Contingent Earnout Consideration [Member]
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Beginning balance	10,540
Accretion of contingent earnout consideration (included within other expense, net)	733
Ending balance	$ 11,273

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Goodwill and Intangible Assets - Additional Information (Detail) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015	Dec. 31, 2015
Goodwill and Intangible Assets Disclosure [Abstract]
Goodwill	$ 29,983		$ 29,910
Amortization expense of intangible assets	$ 858	$ 74
Expiration of amortization	Various times through 2021
Amortization from capitalized internally developed software	$ 45	$ 54

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Goodwill and Intangible Assets - Estimated Annual Amortization Expense of our Intangible Assets (Detail) $ in Thousands	Mar. 31, 2016 USD ($)
Finite-Lived Intangible Assets, Net, Amortization Expense, Fiscal Year Maturity [Abstract]
2016	$ 3,612
2017	2,804
2018	2,240
2019 and beyond	$ 3,334

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Accrued Expenses and Other Liabilities - Components of Accrued Liabilities (Detail) - USD ($) $ in Thousands	Mar. 31, 2016	Dec. 31, 2015
Components of accrued liabilities
Accrued bonuses	$ 2,016	$ 2,939
Accrued commissions	1,480	1,496
Accrued vacation	2,828	2,272
Accrued payroll related liabilities	497	2,423
Accrued software expense	741	1,284
Accrued contractor fees	1,144	1,132
Accrued professional service fees	344	1,016
Short-term portion of lease abandonment accrual	291	437
Deferred rent	187	220
Income tax related accruals	408	318
Other accrued expenses	2,212	1,949
Total	$ 12,148	$ 15,486

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Net Loss Per Share - Reconciliation of Net Loss and Weighted Average Shares used in Computing Basic and Diluted Net Loss Per Share (Detail) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Basic net loss per share:
Net loss applicable to common shares	$ (763)	$ (940)
Weighted average common shares outstanding	11,790	11,345
Basic net loss per share of common stock	$ (0.06)	$ (0.08)
Diluted net loss per share:
Net loss applicable to common shares	$ (763)	$ (940)
Weighted average common shares outstanding	11,790	11,345
Dilutive effects of stock options	0	0
Weighted average common shares, assuming dilutive effect of stock options	11,790	11,345
Diluted net loss per share of common stock	$ (0.06)	$ (0.08)

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Net Loss Per Share - Additional Information (Detail) - shares shares in Thousands	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Earnings Per Share, Basic, by Common Class, Including Two Class Method [Line Items]
Diluted computation increased	109	69
Share-based awards outstanding under equity plans	3,700	4,100
Option Plans [Member]
Earnings Per Share, Basic, by Common Class, Including Two Class Method [Line Items]
Diluted computation increased	1,700	1,700

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Stock Repurchase Program - Additional Information (Detail) - USD ($)	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015	Dec. 31, 2008	Dec. 31, 2007
Equity, Class of Treasury Stock [Line Items]
Stock repurchase program			$ 23,100,000	$ 5,000,000
Stock repurchase program expiration date	Sep. 19, 2015
Repurchase of common stock	0	0
Prior Stock Repurchase Program [Member]
Equity, Class of Treasury Stock [Line Items]
Stock repurchase program expiration date	Sep. 23, 2016

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Revolving Line of Credit - Additional Information (Detail) - USD ($)	3 Months Ended
	Mar. 31, 2016	Dec. 31, 2015	Sep. 30, 2013
Line of Credit Facility [Line Items]
Amount drawn under credit facility	$ 5,000,000	$ 5,000,000
Revolving Credit Facility [Member]
Line of Credit Facility [Line Items]
Additional borrowing credit facility			$ 5,000,000
Total credit facility borrowing capacity			20,000,000
Revolving credit facility period	3 years
Variable interest rate	The LIBOR Rate plus 1.5%
LIBOR Rate plus	1.50%
Annual commitment fee	0.15%
Due date of amounts outstanding under credit facility	Dec. 21, 2018
Amount drawn under credit facility	$ 5,000,000
Borrowing credit facility		$ 15,000,000	$ 10,000,000

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Geographic Information - Schedule of Geographic Information (Detail) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Segment Reporting Information [Line Items]
Total revenue	$ 31,898	$ 26,578
UNITED STATES
Segment Reporting Information [Line Items]
Total revenue	26,445	22,504
CANADA
Segment Reporting Information [Line Items]
Total revenue	3,750	2,989
Non-US [Member]
Segment Reporting Information [Line Items]
Total revenue	$ 1,703	$ 1,085