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 June 30, 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 July 27, 2016 was 12,312,596.

EDGEWATER TECHNOLOGY, INC.

FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 2016

INDEX

	Page
PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
Unaudited Condensed Consolidated Balance Sheets as of June 30, 2016 and December 31, 2015		3
Unaudited Condensed Consolidated Statements of Comprehensive Income (Loss) for the Three and Six Months Ended June 30, 2016 and 2015		4
Unaudited Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 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		16
Results for the Three and Six Months Ended June 30, 2016, Compared to Results for the Three and Six Months Ended June 30, 2015		18
Liquidity and Capital Resources		22
Acquisitions, Earnout Payments and Commitments		24
Off Balance Sheet Arrangements, Contractual Obligations and Contingent Liabilities and Commitments		24
Critical Accounting Policies and Estimates		25
Recent Accounting Pronouncements		25
Risk Factors		25
Special Note Regarding Forward-Looking Statements		26
Item 3 - Quantitative and Qualitative Disclosures About Market Risk		26
Item 4 - Controls and Procedures
Evaluation of Disclosure Controls and Procedures		26
Changes in Controls and Procedures		27
PART II - OTHER INFORMATION
Item 1 - Legal Proceedings		27
Item 1A - Risk Factors		27
Item 2 - Unregistered Sales of Equity Securities and Use of Proceeds		27
Item 3 - Defaults upon Senior Securities		27
Item 4 - Mine Safety Disclosures		28
Item 5 - Other Information		28
Item 6 - Exhibits		28
Signatures		29

2

PART I – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

EDGEWATER TECHNOLOGY, INC.

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(In Thousands, Except Per Share Data)

	June 30, 2016			December 31, 2015
ASSETS
Current assets:
Cash and cash equivalents	$	10,737		$	11,981
Accounts receivable, net of allowance of $150		29,093			27,753
Prepaid expenses and other current assets		1,623			704
Total current assets		41,453			40,438
Property and equipment, net		755			824
Intangible assets, net		10,184			11,990
Goodwill		29,983			29,910
Deferred tax assets, net		23,731			24,032
Other assets		238			230
Total assets	$	106,344		$	107,424
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	831		$	586
Accrued liabilities		14,642			15,486
Short-term portion of contingent earnout consideration		6,053			7,072
Deferred revenue		2,146			2,428
Total current liabilities		23,672			25,572
Revolving credit facility		5,000			5,000
Long-term portion of contingent earnout consideration		899			3,468
Total liabilities		29,571			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 June 30, 2016 and December 31, 2015, 12,275 and 11,862 shares outstanding as of June 30, 2016 and December 31, 2015, respectively		297			297
Paid-in capital		209,794			210,324
Treasury stock, at cost, 17,461 and 17,874 shares at June 30, 2016 and December 31, 2015, respectively		(113,133	)		(116,464	)
Accumulated other comprehensive loss		(516	)		(554	)
Retained deficit		(19,669	)		(20,219	)
Total stockholders’ equity		76,773			73,384
Total liabilities and stockholders’ equity	$	106,344		$	107,424

See notes to the unaudited condensed consolidated financial statements.

3

EDGEWATER TECHNOLOGY, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(In Thousands, Except Per Share Data)

	Three Months Ended June 30,						Six Months Ended June 30,
	2016			2015			2016			2015
Revenue:
Service revenue	$	28,564		$	24,622		$	56,779		$	47,299
Software revenue		3,636			4,116			5,665			6,283
Reimbursable expenses		1,824			1,789			3,478			3,523
Total revenue		34,024			30,527			65,922			57,105
Cost of revenue:
Project and personnel costs		17,288			16,220			35,528			32,014
Software costs		2,098			2,105			3,352			3,510
Reimbursable expenses		1,824			1,789			3,478			3,523
Total cost of revenue		21,210			20,114			42,358			39,047
Gross profit		12,814			10,413			23,564			18,058
Operating expenses:
Selling, general and administrative		9,783			8,963			19,727			17,229
Change in fair value of contingent earnout consideration		(928	)		—			(928	)		—
Direct acquisition costs		—			—			430			611
Fullscope embezzlement costs (loss recovery)		—			(250	)		—			(250	)
Depreciation and amortization		1,004			323			2,008			546
Total operating expenses		9,859			9,036			21,237			18,136
Operating income (loss)		2,955			1,377			2,327			(78	)
Other expense, net		568			504			1,193			624
Income (loss) before income taxes		2,387			873			1,134			(702	)
Tax provision (benefit)		1,074			379			584			(256	)
Net income (loss)	$	1,313		$	494		$	550		$	(446	)
Comprehensive income (loss):
Currency translation adjustments		(17	)		(27	)		38			(182	)
Total comprehensive income (loss)	$	1,296		$	467		$	588		$	(628	)
Net income (loss) per share:
Basic net income (loss) per share of common stock	$	0.11		$	0.04		$	0.05		$	(0.04	)
Diluted net income (loss) per share of common stock	$	0.09		$	0.04		$	0.04		$	(0.04	)
Shares used in computing basic net income (loss) per share of common stock		12,126			11,473			11,959			11,410
Shares used in computing diluted net income (loss) per share of common stock		14,032			13,230			13,876			11,410

See notes to the unaudited condensed consolidated financial statements.

4

EDGEWATER TECHNOLOGY, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In Thousands)

	Six Months Ended June 30,
	2016			2015
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)	$	550		$	(446	)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities, excluding the impact of acquisitions:
Depreciation and amortization		2,102			648
Share-based compensation expense		779			850
Recovery of doubtful accounts		(24	)		—
Deferred income taxes		301			(317	)
Change in fair value of contingent earnout consideration		(928	)		—
Accretion of contingent earnout consideration		1,246			579
Excess tax benefit from stock options		(158	)		(173	)
Changes in operating accounts, net of acquisition:
Accounts receivable		(1,320	)		(475	)
Prepaid expenses and other current assets		(927	)		(250	)
Accounts payable		245			95
Accrued liabilities and other liabilities		(1,506	)		(3,133	)
Deferred revenue		(282	)		148
Net cash provided by (used in) operating activities		78			(2,474	)
CASH FLOWS FROM INVESTING ACTIVITIES:
Net cash used to acquire Zero2Ten		—			(4,645	)
Net cash used to acquire M2 Dynamics		(93	)		—
Purchases of property and equipment		(223	)		(240	)
Net cash used in investing activities		(316	)		(4,885	)
CASH FLOW FROM FINANCING ACTIVITES:
Proceeds from employee stock plans and stock option exercises		2,022			774
Payment of contingent earnout consideration		(3,226	)		—
Purchase of treasury stock		—			(114	)
Excess tax benefit from stock options		158			173
Net cash provided by financing activities		(1,046	)		833
Effects of exchange rates on cash		40			(22	)
Net decrease in cash and cash equivalents		(1,244	)		(6,548	)
CASH AND CASH EQUIVALENTS, beginning of period		11,981			26,768
CASH AND CASH EQUIVALENTS, end of period	$	10,737		$	20,220
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid for income taxes	$	159		$	170
Issuance of restricted stock awards	$	—		$	728

See notes to the unaudited condensed consolidated financial statements.

5

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 Enterprise Performance Management (“EPM”), Business Intelligence (“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 and six months ended June 30, 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 income (loss) consists of net income (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 EPM and 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.

6

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 June 30, 2016, had accrued $3.5 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 income (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 income (loss), commencing December 21, 2015, are included in the Company’s accompanying condensed consolidated statement of comprehensive income (loss).

The Company recorded total revenues of $3.3 million and $6.2 million during the three- and six-month periods ended June 30, 2016, respectively. Non-cash expenses associated with amortization of purchased intangible assets as well as the accretion of contingent earnout consideration totaled $740 thousand and $1.5 million, which was a significant factor in the overall net income of M2 Dynamics of $134 thousand and $35 thousand during the three- and six-month periods ended June 30, 2016, respectively.

7

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 three- and six-month periods ended June 30, 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 Three-Month Period June 30, 2015		Unaudited Six-Month Period June 30, 2015
	(In Thousands)		(In Thousands)
Pro forma total revenue	$	33,337	$	62,405
Pro forma net income (loss)		604		(291	)
Pro forma basic net income (loss) per share	$	0.05	$	(0.03	)
Pro forma diluted net income (loss) per share	$	0.05	$	(0.03	)

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 condensed consolidated statement of comprehensive income (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 maximum amount of contingent earnout consideration that can be earned by Branchbird is capped at $2.4 million. The Company continuously examines actual results in comparison to financial metrics utilized in the earnout calculation and assesses the carrying value of the contingent earnout consideration. During the three-month period ended June 30, 2016 the Company recorded a change in fair value of the estimated earnout consideration to be achieved (as a result of lower than forecasted revenue performance). This change in estimate resulted in a reversal of $798 thousand (which was recorded as a component of change in fair value of contingent earnout consideration in the accompanying condensed consolidated statements of comprehensive income (loss)). As of June 30, 2016, the Company had recorded an accrual of $899 thousand 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 income (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.

8

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 income (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.

In March 2016, Zero2Ten completed its first twelve-month earnout period, during which the required performance measurements were achieved. Accordingly, the former Zero2Ten stockholders received additional contingent consideration related to the first earnout period in the amount of $3.9 million.

The Company continuously examines actual results in comparison to financial metrics utilized in the earnout calculation and assesses the carrying value of the contingent earnout consideration. During the six-month period ended June 30, 2016, we reversed $130 thousand of accrued contingent earnout consideration (reported as a part of change in fair value of contingent earnout consideration in our condensed consolidated statements of comprehensive income(loss)) associated with the completion of the first earnout period and the projected completion of the second earnout period, as it was determined that current forecasts are slightly below those originally utilized in determining the fair value of the contingent earnout consideration.

The Company, as of June 30, 2016, has accrued $2.6 million in potential future contingent earnout consideration payable to Zero2Ten in connection with the second twelve-month earnout period. The maximum amount of contingent earnout consideration that can be earned by Zero2Ten during the remaining earnout period is capped at $4.3 million.

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.

9

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 continuously 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 its 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 material losses were recognized on contracts during the three- or six-month periods ended June 30, 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.

The majority 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.

10

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 $302 thousand and $779 thousand for the three- and six-month periods ended June 30, 2016, respectively. Share-based compensation expense under all of the Company’s share-based plans was $387 thousand and $850 thousand for the three- and six-month periods ended June 30, 2015, respectively.

Cash received from the employee stock purchase plan (“ESPP”) and through stock option exercises was $708 thousand and $2.0 million during the three- and six-month periods ended June 30, 2016, respectively. Cash received from ESPP and stock option exercises was $518 thousand and $774 thousand during the three- and six-month periods ended June 30, 2015, respectively.

As of June 30, 2016, unrecognized compensation expense, net of estimated forfeitures, related to the unvested portion of all share-based compensation arrangements was approximately $962 thousand and is expected to be recognized over a weighted-average period of 1.2 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.

6. INCOME TAXES:

The Company recorded a tax provision of $1.1 million and $584 thousand for the three- and six-month periods ended June 30, 2016, respectively. The Company recorded a tax provision (benefit) of $379 thousand and $(256) thousand for the three- and six-month periods ended June 30, 2015, respectively. The reported tax provision for the three- and six-month periods ended June 30, 2016 is based upon an estimated annual effective tax rate of 45.0% and 51.5%, 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 June 30, 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. Interest and penalties related to our unrecognized tax benefits were insignificant for all periods presented. No such amounts were recognized in the three- or six-month period ended June 30, 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 June 30, 2017. We remain subject to examination until the statute of limitations expires for each respective tax jurisdiction.

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.

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• 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 June 30, 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 June 30, 2016:
Financial liabilities:
Contingent earnout consideration	$	6,952	$	—	$	—	$	6,952
Total financial liabilities	$	6,952	$	—	$	—	$	6,952
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- or six-month periods ended June 30, 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, and depreciation and amortization targets.

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A reconciliation of the beginning and ending Level 3 net liabilities for the six-month period ended June 30, 2016 is as follows:

	Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
	(In Thousands)
Balance at December 31, 2015	$	10,540
Payment of contingent earnout consideration		(3,906	)
Adjustment to estimated fair value of contingent earnout consideration (included within Selling, general and administrative expense)		(928	)
Accretion of contingent earnout consideration (included within other expense, net)		1,246
Ending balance at June 30, 2016	$	6,952

As of June 30, 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 June 30, 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. The Company continuously evaluates for any triggering events and no such events have occurred during the three or six month periods ended June 30, 2016. 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 $1.7 million during the three- and six-month periods ended June 30, 2016, respectively. Amortization expense was $165 thousand and $239 thousand during the three- and six-month periods ended June 30, 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 within the condensed consolidated statements of comprehensive income (loss)) of $49 thousand and $94 thousand during the three- and six-month periods ended June 30, 2016, respectively. The Company recorded amortization from capitalized internally developed software of $47 thousand and $101 thousand during the three- and six-month periods ended June 30, 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 five years ending December 31, is as follows:

	Amortization Expense
	(In Thousands)
2016	$	3,612
2017	$	2,804
2018	$	2,240
2019	$	1,712
2020	$	1,057
2021	$	565

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9. ACCRUED EXPENSES AND OTHER LIABILITIES:

Accrued liabilities as of June 30, 2016 and December 31, 2015 consisted of the following:

	June 30, 2016		December 31, 2015
	(In Thousands)
Accrued bonuses		2,585		2,939
Accrued commissions		1,601		1,496
Accrued vacation		3,057		2,272
Accrued payroll related liabilities		2,487		2,423
Accrued software expense		1,563		1,284
Accrued contractor fees		778		1,132
Accrued professional service fees		339		1,016
Short-term portion of lease abandonment accrual		146		437
Deferred rent		129		220
Income tax related accruals		507		318
Other accrued expenses		1,450		1,949
Total	$	14,642	$	15,486

10. NET INCOME (LOSS) PER SHARE:

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

	Three Months Ended June 30,				Six Months Ended June 30,
	2016		2015		2016		2015
	(In Thousands, Except Per Share Data)
Basic net income (loss) per share:
Net income (loss) applicable to common shares	$	1,313	$	494	$	550	$	(446	)
Weighted average common shares outstanding		12,126		11,473		11,959		11,410
Basic net income (loss) per share of common stock	$	0.11	$	0.04	$	0.05	$	(0.04	)
Diluted net income (loss) per share:
Net income (loss) applicable to common shares	$	1,313	$	494	$	550	$	(446	)
Weighted average common shares outstanding		12,126		11,473		11,959		11,410
Dilutive effects of stock options		1,906		1,757		1,917		—
Weighted average common shares, assuming dilutive effect of stock options		14,032		13,230		13,876		11,410
Diluted net income (loss) per share of common stock	$	0.09	$	0.04	$	0.04	$	(0.04	)

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 77 thousand shares and 71 thousand shares in the three- and six-month periods ended June 30, 2015, respectively. There were no such anti-dilutive shares outstanding for the three- and six-month periods ended June 30, 2016. As of June 30, 2016 and 2015, there were approximately 3.5 and 4.1 million share-based awards outstanding, respectively, under the Company’s equity plans. Options to purchase 1.8 million shares of common stock that were outstanding during the six months ended June 30, 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

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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- or six-month periods ended June 30, 2016. The Company repurchased 16,000 shares at an aggregate price of $114 thousand during the three- and six-month periods ended June 30, 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 June 30, 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 June 30, 2016.

13. GEOGRAPHIC INFORMATION

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

	Three Months Ended June 30,				Six Months Ended June 30,
	2016		2015		2016		2015
United States	$	29,227	$	26,115	$	55,686	$	48,611
Canada		2,989		2,603		6,740		5,592
Other International		1,808		1,809		3,496		2,902
Total revenue	$	34,024	$	30,527	$	65,922	$	57,105

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

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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.

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 85.5% and 83.2% of service revenue for the three- and six-month periods ended June 30, 2016, respectively. Time and materials-based contracts represented 83.8% and 85.1% of service revenue for the three- and six-month periods ended June 30, 2015, respectively. Revenue under time and materials contracts is recognized as services are rendered and performed at contractually agreed upon rates. Fixed-price contracts represented 9.9% and 12.2% of service revenue for the three- and six-month periods ended June 30, 2016, respectively. Fixed-price contracts represented 11.8% and 10.3% of service revenue for the three- and six-month periods ended June 30, 2015, respectively. Revenue pursuant to fixed-price contracts is recognized under the proportional performance method of accounting. Retainer-based contracts represented 4.6% and 4.6% of service revenue during the three- and six-month periods ended June 30, 2016, respectively. Retainer-based contracts represented 4.4% and 4.6% of service revenue during the three- and six-month periods ended June 30, 2015, respectively. 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 service revenue to be an important measure of our operating performance. The relationship between project personnel expenses and service 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 expense is composed 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.

We regularly review our fees for services, professional compensation and overhead costs to ensure that our services and compensation are competitive within the industry and that our overhead costs are balanced with our revenue levels. In addition, we monitor the progress of customer projects with customer senior management. We manage the activities of our 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, we 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.

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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 six-month period ended June 30, 2016. Incurred expenses included investment banking fees, legal fees, accounting and other professional fees directly associated with completion of the acquisitions.

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 (classified as change in fair value of contingent earnout consideration). Accretion of the contingent earnout liability is classified as other expense on the consolidated statements of comprehensive loss. As of June 30, 2016 and December 31, 2015, the Company had $7.0 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 and Six Months Ended June 30, 2016, Compared to Results for the Three and Six Months Ended June 30, 2015,” included elsewhere in this Quarterly Report on Form 10-Q.

Results for the Three and Six Months Ended June 30, 2016, Compared to Results for the Three and Six Months Ended June 30, 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 income (loss):

	Three Months Ended June 30,						Six Months Ended June 30,
	2016			2015			2016			2015
Revenue:
Service revenue		84.0	%		80.7	%		86.1	%		82.8	%
Software revenue		10.7	%		13.5	%		8.6	%		11.0	%
Reimbursable expenses		5.3	%		5.8	%		5.3	%		6.2	%
Total revenue		100.0	%		100.0	%		100.0	%		100.0	%
Cost of revenue:
Project and personnel costs		50.8	%		53.2	%		53.9	%		56.1	%
Software costs		6.2	%		6.9	%		5.1	%		6.1	%
Reimbursable expenses		5.3	%		5.8	%		5.3	%		6.2	%
Total cost of revenue		62.3	%		65.9	%		64.3	%		68.4	%
Gross profit		37.7	%		34.1	%		35.7	%		31.6	%
Operating expenses:
Selling, general and administrative		28.8	%		29.4	%		29.9	%		30.1	%
Change in fair value of contingent earnout consideration		(2.8	)%		—	%		(1.4	)%		—	%
Direct acquisition costs		—	%		—	%		0.7	%		1.1	%
Fullscope embezzlement costs (loss recovery)		—	%		(0.9	)%		—	%		(0.4	)%
Depreciation and amortization		3.0	%		1.1	%		3.0	%		0.9	%
Total operating expenses		29.0	%		29.6	%		32.2	%		31.7	%
Operating income (loss)		8.7	%		4.5	%		3.5	%		(0.1	)%
Other expense, net		1.7	%		1.6	%		1.8	%		1.1	%
Income (loss) before income taxes		7.0	%		2.9	%		1.7	%		(1.2	)%
Income tax (benefit) provision		3.1	%		1.3	%		0.9	%		(0.4	)%
Net income (loss)		3.9	%		1.6	%		0.8	%		(0.8	)%

Revenue. Total revenue increased by $3.5 million, or 11.5%, to $34.0 million during the three-month period ended June 30, 2016, compared to total revenue of $30.5 million in the three-month period ended June 30, 2015. Total revenue increased by $8.8 million, or 15.4%, to $65.9 million during the six-month period ended June 30, 2016, compared to total revenue of $57.1 million in the six-month period ended June 30, 2015. Service revenue increased by $3.9 million, or 16.0%, to $28.6 million during the three-month period ended June 30, 2016, compared to service revenue of $24.6 million in the three-month period ended June 30, 2015. Service revenue increased by $9.5 million, or 20.0%, to $56.8 million during the six-month period ended June 30, 2016, compared to service revenue of $47.3 million in the six-month period ended June 30, 2015.

The changes in service revenue during the three- and six-month periods ended June 30, 2016, as compared to the three- and six-month periods ended June 30, 2015 reflect the contributions of our recently completed acquisitions of M2 Dynamics and Branchbird (as well as the full six-month period contribution from Zero2Ten which was acquired at the end of the first quarter of 2015), combined with the overall increase in billable consultant utilization. Further, the six-month period ended June 30, 2016 included one additional billable day when compared to the six-month period ended June 30, 2015.

Billable consultant utilization increased to 75.6% and 74.2% during the three- and six-month periods ended June 30, 2016 compared to 69.8% and 70.1% during the three- and six-month periods ended June 30, 2015. Billable headcount, excluding contractors, increased by 19, to 381 as of June 30, 2016, compared to 362 as of June 30, 2015.

On a sequential quarterly basis, service revenue growth is the result of the additional billable day in the three-month period ended June 30, 2016 compared to the three-month period ended March 31, 2016.

Annualized service revenue per billable consultant, as adjusted for utilization, was $355 thousand and $353 thousand during the three-month periods ended June 30, 2016 and 2015, respectively. Annualized service revenue per billable consultant, as adjusted for utilization, was $358 thousand and $349 thousand during the six-month periods ended June 30, 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- and six-month periods ended June 30, 2016, software revenue totaled $3.6 million and $5.7 million, or 10.7% and 8.6% of total revenue, respectively, compared to software revenue of $4.1 million and $6.3 million, or 13.5% and 11.0%, respectively, in the three- and six-month periods ended June 30, 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.

As we experience a transition within our EPM and ERP channels from on premise to hybrid to cloud-based we may experience a disruption in the timing of our customer purchasing habits. This transition may cause fluctuations in our software revenue and related margin contributions in the coming quarters. 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 was $1.8 million for each of the three-month periods ended June 30, 2016 and 2015, respectively. Reimbursed expense revenue was $3.5 million for each of the six-month periods ended June 30, 2016 and 2015, respectively. 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 six-month period ended June 30, 2016 totaled 578, as compared to 554 customers during the six-month period ended June 30, 2015. During the first six months of 2016, we secured first-time engagements with a total of 75 new customers, compared to 70 new customer engagements during the first six 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 $1.1 million, or 5.4%, to $21.2 million for the three-month period ended June 30, 2016, compared to $20.1 million in the comparative 2015 quarterly period. Cost of revenue increased by $3.3 million, or 8.5%, to $42.4 million during the year-to-date period ended June 30, 2016 compared to $39.0 million in the comparative 2015 year-to-date period.

The primary drivers of the 2016 year-over-year increase in total cost of revenue during the three- and six-month periods ended June 30, 2016, on an absolute dollar basis, were related to increases in salary and salary-related expenses, inclusive of incentive compensation (primarily associated with the increase in billable consultant headcount). The Company maintained 381 billable consultants (excluding contractors) as of the quarter ended June 30, 2016, compared to 362 billable consultants (excluding contractors) at the end of the second quarter of 2015.

Project and personnel costs represented 50.8% and 53.9% of total revenue during the three- and six-month periods ended June 30, 2016, respectively, as compared to 53.2% and 56.1% of total revenue during the three- and six-month periods ended June 30, 2015, respectively.

The decrease in project and personnel costs for the three-month period ended June 30, 2016, as a percentage of total revenue, is the result of the increased service revenue generated by our core operations as well as our recent acquisitions, partially offset by salary and related expenses associated with the increase in billable consultant headcount. The decrease in project and personnel costs during the six-month period ended June 30, 2016, as a percentage of total revenue, was similarly driven by the increase in service revenue, partially offset by salary and related expenses associated with the increase in billable consultant headcount.

Software costs amounted to $2.1 million and $3.4 million during the three- and six-month periods ended June 30, 2016, respectively. Software costs amounted to $2.1 million and $3.5 million during the three- and six-month periods ended June 30, 2015, respectively. Software costs are expected to fluctuate between quarters depending on our customers’ demand for software. Reimbursable expenses were $1.8 million and $3.5 million for the three- and six-month periods ended June 30, 2016, respectively, compared to $1.8 million and $3.5 million in the comparative periods of 2015, respectively.

Gross Profit. During the three-month period ended June 30, 2016, total gross profit increased $2.4 million, or 23.1%, to $12.8 million compared to gross profit of $10.4 million in the three-month period ended June 30, 2015. During the six-month period ended June 30, 2016, total gross profit increased $5.5 million, or 30.5%, to $23.6 million compared to total gross profit of $18.1 million in the six-month period ended June 30, 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 37.7% in the second quarter of 2016, compared to 34.1% in the second quarter of 2015. Total gross margin increased to 35.7% in the six-month period ended June 30, 2016, compared to 31.6%

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in the comparative 2015 year-to-date period. The year-over-year quarterly and year-to-date increases in total gross margin are primarily the result of the contributions of the M2 Dynamics Acquisition combined with the full period impact of the Zero2Ten Acquisition. To a lesser extent, the gross margin improvements are attributable to the increase in billable consultant utilization rate.

Service revenue gross margins were 39.5% in the second quarter of 2016, compared to 34.1% in the second quarter of 2015. Service revenue gross margins were 37.4% in the six-month period ended June 30, 2016, compared to 32.3% in the comparative 2015 year-to-date period. The increase in service gross margin for the three- and six-month periods ended June 30, 2016 are directly related to the contributions of M2 Dynamics and Zero2Ten as well as the increase in billable consultant utilization, as described above.

We anticipate that software revenue will continue to be a significant part of our revenue in future periods. Our software revenue has historically influenced, and we anticipate that it will continue to influence in the future, our quarterly gross margins. We believe, in connection with changes in the nature of the terms of certain of our Microsoft Dynamics AX software resale arrangements as described in “Revenue” above, that anticipated changes in the terms of the resale arrangements will, in certain situations, extend the timing of the recognition period of the gross margin on software sales (from, immediate recognition of the gross margin on the transaction to recognition of the gross margin on the transaction spread over a three-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 28.8% and 29.9% during the three- and six-month periods ended June 30, 2016, respectively, compared to 29.4% and 30.1% in the three- and six-month periods of 2015, respectively. On an absolute dollar-basis, SG&A expenses increased by $820 thousand, or 9.1%, and increased by $2.5 million, or 14.5%, to $9.8 million and $19.7 million in the three- and six-month periods ended June 30, 2016, respectively, compared to SG&A expenses of $9.0 million and $17.2 million in the three- and six-month period ended June 30, 2015, respectively.

Selling, general and administrative expense increased, during both the three- and six-month periods ended June 30, 2016 as a result of salary and salary-related expenses (inclusive of incentive compensation). The increase in salary and salary-related expenses were driven by the increase in non-billable headcount (which is a direct result of our recent acquisitions and overall growth).

Change in Fair Value of Contingent Earnout Consideration. The Company continuously examines actual results in comparison to financial metrics utilized in each of our earnout calculations and assesses the carrying value of the contingent earnout consideration. During the three-month period ended June 30, 2016, the Company recorded a change in fair value of the estimated earnout consideration to be achieved (as a result of delays in the timing of forecasted revenue). This change in estimate resulted in a reversal of $798 thousand related to the Branchbird contingent earnout as well as a reversal of $130 thousand related to the Zero2Ten contingent earnout.

Direct Acquisition Costs. During the six-month period ended June 30, 2016, the Company incurred approximately $430 thousand of direct acquisition costs associated with the December 2015 acquisition of M2 Dynamics. During the six-month period ended June 30, 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 $681 thousand, or 210.8%, to $1.0 million in the quarter ended June 30, 2016 as compared to $323 thousand in the quarter ended June 30, 2015. Similarly, depreciation and amortization expense increased $1.5 million, or 267.8%, to $2.0 million in the six-month period ended June 30, 2016 compared to $546 thousand in the comparative 2015 year-to-date period.

Amortization expense was $858 thousand and $1.7 million during the three- and six-month periods ended June 30, 2016, respectively, compared to amortization expense of $165 thousand and $239 thousand in the three- and six-month periods ended June 30, 2015, respectively. The increase in amortization expense during the second quarter of 2016 is primarily the result of the amortization expense associated with the intangible assets identified in connection with the 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 and $293 thousand recorded in the three- and six-month periods ended June 30, 2016, respectively, were consistent with depreciation expense recognized during the comparative 2015 quarterly and year-to-date periods.

Operating Income. Operating income was $3.0 million in the second quarter of 2016, compared to operating income of $1.4 million in the comparative 2015 quarterly period. Operating income for the six-month period ended June 30, 2016 was $2.3 million, compared to operating loss of $(78) thousand in the comparative 2015 year-to-date period.

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The 2016 second quarter and year-to-date increase in operating metrics are primarily attributable to the contributions of the Zero2Ten and M2 Dynamics Acquisitions, combined with the increase in billable consultant utilization, partially offset by the increased salary and salary-related expenses associated with the increase in headcount, as described above.

Other Expense, Net. Other expense, net, totaled $568 thousand and $1.2 million during the three- and six-month periods ended June 30, 2016, respectively, while other expense, net, totaled $504 thousand and $624 thousand during the comparative 2015 periods, respectively. Other expense, net, for the three- and six-months ended June 30, 2016 are primarily the result of the accretion of the contingent earnout liability recognized in connection with the Zero2Ten, Branchbird and M2 Dynamics Acquisitions and also includes periodic foreign currency exchange gains and losses. Other expense, net for the three- and six-months ended June 30, 2015 was related to the accretion of the contingent earnout liability recognized in connection with the Zero2Ten Acquisition combined with periodic foreign currency exchange gains and losses.

Income Tax Provision (Benefit). We recorded a provision for income taxes of $1.1 million and $584 thousand during the three- and six-month periods ended June 30, 2016, respectively. We recorded a provision (benefit) for income taxes of $379 thousand and $(256) thousand during the three- and six-month periods ended June 30, 2015, respectively. Our periodic income tax provision amounts are derived based upon an estimated annual effective income tax rate, inclusive of federal and state income taxes, of 45.0% and 51.5% during the three- and six-month periods ended June 30, 2016, respectively. Our periodic income tax provision (benefit) amounts are derived based upon an estimated annual effective income tax rate, inclusive of federal and state income taxes, of 43.5% and (36.4)% during the three- and six-month periods ended June 30, 2015, respectively.

Reported income tax expense during the comparative 2016 and 2015 quarterly periods 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.

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 Income (Loss). We generated net income of $1.3 million and $550 thousand during the three- and six-month periods ended June 30, 2016, respectively, compared to net income of $494 thousand and net loss of $(446) thousand during the three- and six-month periods ended June 30, 2015, respectively. The 2016 second quarter and year-to-date increases in net income are primarily attributable to the contributions of the Zero2Ten and M2 Dynamics Acquisitions combined with the comparative increases in billable consultant utilization, which were partially offset by the increase in salary and salary-related expense, as described above.

Liquidity and Capital Resources

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

	Six Months Ended June 30,
	2016			2015
	(In Thousands)
Cash flows provided by (used in):
Operating activities	$	78		$	(2,474	)
Investing activities		(316	)		(4,885	)
Financing activities		(1,046	)		833
Effects of exchange rates on cash		40			(22	)
Total cash used in the period	$	(1,244	)	$	(6,548	)

As of June 30, 2016, we had cash and cash equivalents of $10.7 million, a $(1.2) million decrease from the December 31, 2015 balance of $12.0 million. The primary drivers of the decrease in cash during 2016 are the contingent earnout consideration payment

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related to the Zero2Ten Acquisition, bonus and commission payments related to the Company’s 2015 performance-based incentive programs 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, which benefited from the increase in total revenue.

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. Future payments related to earnout performance are expected to be made in 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 June 30, 2016, the Company had accrued $7.0 million of contingent earnout consideration.

Working capital, which is defined as current assets less current liabilities, increased to $17.8 million as of June 30, 2016, as compared to $14.9 million as of December 31, 2015.

Historically, we have used our operating cash flows, available cash 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 impacted 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 provided by operating activities was $78 thousand for the six-month period ended June 30, 2016, as compared to net cash used in operating activities of $(2.5) million for the six-month period ended June 30, 2015. The primary components of operating cash flows during the first six months of 2016 were driven by the collection of receivables on a growing total revenue base, partially offset by the payment of bonus and commissions under our 2015 performance-based bonus programs and the timing of payments related to annual insurance-related premiums and third-party software expenses. Additionally, cash from operations was influenced by non-cash charges of $4.2 million (primarily accretion of contingent earnout obligations combined with change in fair value of contingent earnout consideration and changes in deferred income taxes, depreciation, amortization, and stock-based compensation expense). The primary components of operating cash flows during the first six months of 2015 were driven by the payment of bonus and commissions under our 2014 performance-based bonus programs, and, to a lesser extent, the timing of annual insurance-related premium payments and the payment of software-related expenses to third party providers. Additionally, cash from operations was influenced by non-cash charges of $1.6 million (primarily changes in deferred income taxes, depreciation, amortization, stock-based compensation expense and accretion of contingent earnout consideration).

Net cash used in investing activities was $(316) thousand during the six-month period ended June 30, 2016, compared to net cash used in investing activities of $(4.9) million in the six-month period ended June 30, 2015. Cash used in investing activities in the six-month period ended June 30, 2016 included the purchases of property and equipment. Cash used in investing activities in the six-month periods ended June 30, 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 (used in) provided by financing activities was $(1.0) million in the six-month period ended June 30, 2016, compared to net cash provided by financing activities of $833 thousand in the six-month period ended June 30, 2015. The 2016 cash used in financing activities was driven by the payment of the contingent earnout consideration related to the Zero2Ten Acquisition, partially offset by the proceeds attributable to our Employee Stock Purchase Plan and stock option exercises. The 2015 cash flows provided by financing activities are attributable to proceeds associated with our Employee Stock Purchase Plan and stock option exercises, partially offset by the repurchase of treasury stock.

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

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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 June 30, 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 recorded contingent earnout consideration described above of $3.5 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. During the three-month period ended June 30, 2016, the Company recorded a change in fair value of the estimated earnout consideration to be achieved (as a result of lower than forecasted revenue performance). This change in estimate resulted in a reversal of $798 thousand (which was recorded as a component of change in fair value of contingent earnout consideration in the accompanying condensed consolidated statements of comprehensive income). As of June 30, 2016, the Company had recorded an accrual of $899 thousand related to Branchbird contingent earnout consideration.

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. In March 2016, Zero2Ten completed its first twelve-month earnout period, during which the required performance measurements were achieved. Accordingly, Zero2Ten received additional contingent consideration related to the first earnout period in the amount of $3.9 million. During the three-month period ended June 30, 2016, the Company recorded a change in fair value of the estimated earnout consideration to be achieved (as a result of revised future forecasted revenue performance). This change in estimate resulted in a reversal of $130 thousand (which was recorded as a component of change in fair value of contingent earnout consideration in the accompanying condensed consolidated statements of comprehensive income). The Company, as of June 30, 2016, has accrued $2.6 million in potential future contingent earnout consideration payable to Zero2Ten related to the completion of the second twelve-month earnout period.  The maximum remaining amount of contingent earnout consideration that can be earned by Zero2Ten is capped at $4.3 million.

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.

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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; (13) the increased emphasis on a cloud strategy may give rise to risks that could harm our business; and/or (14) 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 June 30, 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 June 30, 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.

The following table provides information with respect to purchases of our common stock during the quarter ended June 30, 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
April 1 – 30, 2016		—	$	—		—	$	8,733,963
May 1 – 31, 2016		—	$	—		—	$	8,733,963
June 1 – 30, 2016		—	$	—		—	$	8,733,963
Total		—	$	—		—	$	8,733,963

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

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ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

None.

ITEM 6. EXHIBITS

10.1	Edgewater Technology, Inc. Amended and Restated 2000 Stock Option Plan, as amended (Incorporated by reference from Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2016 filed with the Securities and Exchange Commission on May 6, 2016)
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 June 30, 2016 and December 31, 2015, (ii) Unaudited Condensed Consolidated Statements of Comprehensive Income (Loss) for the Three and Six Months ended June 30, 2016 and 2015, (iii) Unaudited Condensed Consolidated Statements of Cash Flows for the Six Months ended June 30, 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: August 5, 2016	/s/ SHIRLEY SINGLETON
	Shirley Singleton
	Chairman, President and Chief Executive Officer (Principal Executive Officer)
Date: August 5, 2016	/s/ TIMOTHY R. OAKES
	Timothy R. Oakes
	Chief Financial Officer (Principal Financial and Accounting Officer)

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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: August 5, 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: August 5, 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 June 30, 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: August 5, 2016	/s/ SHIRLEY SINGLETON
	Shirley Singleton
	Chairman, President and Chief Executive Officer (Principal Executive Officer)
Date: August 5, 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.

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Document and Entity Information - shares	6 Months Ended
	Jun. 30, 2016	Jul. 27, 2016
Document And Entity Information [Abstract]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Jun. 30, 2016
Document Fiscal Year Focus	2016
Document Fiscal Period Focus	Q2
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		12,312,596

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Unaudited Condensed Consolidated Balance Sheets - USD ($) $ in Thousands	Jun. 30, 2016	Dec. 31, 2015
Current assets:
Cash and cash equivalents	$ 10,737	$ 11,981
Accounts receivable, net of allowance of $150	29,093	27,753
Prepaid expenses and other current assets	1,623	704
Total current assets	41,453	40,438
Property and equipment, net	755	824
Intangible assets, net	10,184	11,990
Goodwill	29,983	29,910
Deferred tax assets, net	23,731	24,032
Other assets	238	230
Total assets	106,344	107,424
Current liabilities:
Accounts payable	831	586
Accrued liabilities	14,642	15,486
Short-term portion of contingent earnout consideration	6,053	7,072
Deferred revenue	2,146	2,428
Total current liabilities	23,672	25,572
Revolving credit facility	5,000	5,000
Long-term portion of contingent earnout consideration	899	3,468
Total liabilities	29,571	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 June 30, 2016 and December 31, 2015, 12,275 and 11,862 shares outstanding as of June 30, 2016 and December 31, 2015, respectively	297	297
Paid-in capital	209,794	210,324
Treasury stock, at cost, 17,461 and 17,874 shares at June 30, 2016 and December 31, 2015, respectively	(113,133)	(116,464)
Accumulated other comprehensive loss	(516)	(554)
Retained deficit	(19,669)	(20,219)
Total stockholders' equity	76,773	73,384
Total liabilities and stockholders' equity	$ 106,344	$ 107,424

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Unaudited Condensed Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands	Jun. 30, 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	12,275,000	11,862,000
Treasury stock, shares	17,461,000	17,874,000

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Unaudited Condensed Consolidated Statements of Comprehensive Income (Loss) - USD ($) shares in Thousands, $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015
Revenue:
Service revenue	$ 28,564	$ 24,622	$ 56,779	$ 47,299
Software revenue	3,636	4,116	5,665	6,283
Reimbursable expenses	1,824	1,789	3,478	3,523
Total revenue	34,024	30,527	65,922	57,105
Cost of revenue:
Project and personnel costs	17,288	16,220	35,528	32,014
Software costs	2,098	2,105	3,352	3,510
Reimbursable expenses	1,824	1,789	3,478	3,523
Total cost of revenue	21,210	20,114	42,358	39,047
Gross profit	12,814	10,413	23,564	18,058
Operating expenses:
Selling, general and administrative	9,783	8,963	19,727	17,229
Change in fair value of contingent earnout consideration	(928)		(928)
Direct acquisition costs			430	611
Fullscope embezzlement costs (loss recovery)		(250)		(250)
Depreciation and amortization	1,004	323	2,008	546
Total operating expenses	9,859	9,036	21,237	18,136
Operating income (loss)	2,955	1,377	2,327	(78)
Other expense, net	568	504	1,193	624
Income (loss) before income taxes	2,387	873	1,134	(702)
Tax provision (benefit)	1,074	379	584	(256)
Net income (loss)	1,313	494	550	(446)
Comprehensive income (loss):
Currency translation adjustments	(17)	(27)	38	(182)
Total comprehensive income (loss)	$ 1,296	$ 467	$ 588	$ (628)
Net income (loss) per share:
Basic net income (loss) per share of common stock	$ 0.11	$ 0.04	$ 0.05	$ (0.04)
Diluted net income (loss) per share of common stock	$ 0.09	$ 0.04	$ 0.04	$ (0.04)
Shares used in computing basic net income (loss) per share of common stock	12,126	11,473	11,959	11,410
Shares used in computing diluted net income (loss) per share of common stock	14,032	13,230	13,876	11,410

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Unaudited Condensed Consolidated Statements of Cash Flows - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)	$ 550	$ (446)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities, excluding the impact of acquisitions:
Depreciation and amortization	2,102	648
Share-based compensation expense	779	850
Recovery of doubtful accounts	(24)
Deferred income taxes	301	(317)
Change in fair value of contingent earnout consideration	(928)
Accretion of contingent earnout consideration	1,246	579
Excess tax benefit from stock options	(158)	(173)
Changes in operating accounts, net of acquisition:
Accounts receivable	(1,320)	(475)
Prepaid expenses and other current assets	(927)	(250)
Accounts payable	245	95
Accrued liabilities and other liabilities	(1,506)	(3,133)
Deferred revenue	(282)	148
Net cash provided by (used in) operating activities	78	(2,474)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment	(223)	(240)
Net cash used in investing activities	(316)	(4,885)
CASH FLOW FROM FINANCING ACTIVITES:
Proceeds from employee stock plans and stock option exercises	2,022	774
Payment of contingent earnout consideration	(3,226)
Purchase of treasury stock		(114)
Excess tax benefit from stock options	158	173
Net cash provided by financing activities	(1,046)	833
Effects of exchange rates on cash	40	(22)
Net decrease in cash and cash equivalents	(1,244)	(6,548)
CASH AND CASH EQUIVALENTS, beginning of period	11,981	26,768
CASH AND CASH EQUIVALENTS, end of period	10,737	20,220
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid for income taxes	159	170
Issuance of restricted stock awards		728
Zero2Ten [Member]
CASH FLOWS FROM INVESTING ACTIVITIES:
Net cash used to acquire Zero2Ten/M2 Dynamics		$ (4,645)
M2 Dynamics [Member]
CASH FLOWS FROM INVESTING ACTIVITIES:
Net cash used to acquire Zero2Ten/M2 Dynamics	$ (93)

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Organization

6 Months Ended

Jun. 30, 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 Enterprise Performance Management (“EPM”), Business Intelligence (“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”).

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Basis of Presentation

6 Months Ended

Jun. 30, 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 and six months ended June 30, 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 income (loss) consists of net income (loss) plus or minus any currency translation adjustments.

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Business Combinations

6 Months Ended

Jun. 30, 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 EPM and 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 June 30, 2016, had accrued $3.5 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 income (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 income (loss), commencing December 21, 2015, are included in the Company’s accompanying condensed consolidated statement of comprehensive income (loss).

The Company recorded total revenues of $3.3 million and $6.2 million during the three- and six-month periods ended June 30, 2016, respectively. Non-cash expenses associated with amortization of purchased intangible assets as well as the accretion of contingent earnout consideration totaled $740 thousand and $1.5 million, which was a significant factor in the overall net income of M2 Dynamics of $134 thousand and $35 thousand during the three- and six-month periods ended June 30, 2016, respectively.

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 three- and six-month periods ended June 30, 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 Three-Month Period June 30, 2015		Unaudited Six-Month Period June 30, 2015
	(In Thousands)		(In Thousands)
Pro forma total revenue	$	33,337	$	62,405
Pro forma net income (loss)		604		(291	)
Pro forma basic net income (loss) per share	$	0.05	$	(0.03	)
Pro forma diluted net income (loss) per share	$	0.05	$	(0.03	)

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 condensed consolidated statement of comprehensive income (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 maximum amount of contingent earnout consideration that can be earned by Branchbird is capped at $2.4 million. The Company continuously examines actual results in comparison to financial metrics utilized in the earnout calculation and assesses the carrying value of the contingent earnout consideration. During the three-month period ended June 30, 2016 the Company recorded a change in fair value of the estimated earnout consideration to be achieved (as a result of lower than forecasted revenue performance). This change in estimate resulted in a reversal of $798 thousand (which was recorded as a component of change in fair value of contingent earnout consideration in the accompanying condensed consolidated statements of comprehensive income (loss)). As of June 30, 2016, the Company had recorded an accrual of $899 thousand 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 income (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 income (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.

In March 2016, Zero2Ten completed its first twelve-month earnout period, during which the required performance measurements were achieved. Accordingly, the former Zero2Ten stockholders received additional contingent consideration related to the first earnout period in the amount of $3.9 million.

The Company continuously examines actual results in comparison to financial metrics utilized in the earnout calculation and assesses the carrying value of the contingent earnout consideration. During the six-month period ended June 30, 2016, we reversed $130 thousand of accrued contingent earnout consideration (reported as a part of change in fair value of contingent earnout consideration in our condensed consolidated statements of comprehensive income(loss)) associated with the completion of the first earnout period and the projected completion of the second earnout period, as it was determined that current forecasts are slightly below those originally utilized in determining the fair value of the contingent earnout consideration.

The Company, as of June 30, 2016, has accrued $2.6 million in potential future contingent earnout consideration payable to Zero2Ten in connection with the second twelve-month earnout period. The maximum amount of contingent earnout consideration that can be earned by Zero2Ten during the remaining earnout period is capped at $4.3 million.

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

6 Months Ended

Jun. 30, 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 continuously 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 its 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 material losses were recognized on contracts during the three- or six-month periods ended June 30, 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.

The majority 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

6 Months Ended

Jun. 30, 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 $302 thousand and $779 thousand for the three- and six-month periods ended June 30, 2016, respectively. Share-based compensation expense under all of the Company’s share-based plans was $387 thousand and $850 thousand for the three- and six-month periods ended June 30, 2015, respectively.

Cash received from the employee stock purchase plan (“ESPP”) and through stock option exercises was $708 thousand and $2.0 million during the three- and six-month periods ended June 30, 2016, respectively. Cash received from ESPP and stock option exercises was $518 thousand and $774 thousand during the three- and six-month periods ended June 30, 2015, respectively.

As of June 30, 2016, unrecognized compensation expense, net of estimated forfeitures, related to the unvested portion of all share-based compensation arrangements was approximately $962 thousand and is expected to be recognized over a weighted-average period of 1.2 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

6 Months Ended

Jun. 30, 2016

Income Tax Disclosure [Abstract]

Income Taxes

6. INCOME TAXES:

The Company recorded a tax provision of $1.1 million and $584 thousand for the three- and six-month periods ended June 30, 2016, respectively. The Company recorded a tax provision (benefit) of $379 thousand and $(256) thousand for the three- and six-month periods ended June 30, 2015, respectively. The reported tax provision for the three- and six-month periods ended June 30, 2016 is based upon an estimated annual effective tax rate of 45.0% and 51.5%, 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 June 30, 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. Interest and penalties related to our unrecognized tax benefits were insignificant for all periods presented. No such amounts were recognized in the three- or six-month period ended June 30, 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 June 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

6 Months Ended

Jun. 30, 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 June 30, 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 June 30, 2016:
Financial liabilities:
Contingent earnout consideration	$	6,952	$	—	$	—	$	6,952
Total financial liabilities	$	6,952	$	—	$	—	$	6,952
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- or six-month periods ended June 30, 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, and depreciation and amortization targets.

A reconciliation of the beginning and ending Level 3 net liabilities for the six-month period ended June 30, 2016 is as follows:

	Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
	(In Thousands)
Balance at December 31, 2015	$	10,540
Payment of contingent earnout consideration		(3,906	)
Adjustment to estimated fair value of contingent earnout consideration (included within Selling, general and administrative expense)		(928	)
Accretion of contingent earnout consideration (included within other expense, net)		1,246
Ending balance at June 30, 2016	$	6,952

As of June 30, 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

6 Months Ended

Jun. 30, 2016

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill and Intangible Assets

8. GOODWILL AND INTANGIBLE ASSETS:

Goodwill increased to $30.0 million as of June 30, 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. The Company continuously evaluates for any triggering events and no such events have occurred during the three or six month periods ended June 30, 2016. 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 $1.7 million during the three- and six-month periods ended June 30, 2016, respectively. Amortization expense was $165 thousand and $239 thousand during the three- and six-month periods ended June 30, 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 within the condensed consolidated statements of comprehensive income (loss)) of $49 thousand and $94 thousand during the three- and six-month periods ended June 30, 2016, respectively. The Company recorded amortization from capitalized internally developed software of $47 thousand and $101 thousand during the three- and six-month periods ended June 30, 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 five years ending December 31, is as follows:

	Amortization Expense
	(In Thousands)
2016	$	3,612
2017	$	2,804
2018	$	2,240
2019	$	1,712
2020	$	1,057
2021	$	565

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Accrued Expenses and Other Liabilities

6 Months Ended

Jun. 30, 2016

Payables and Accruals [Abstract]

Accrued Expenses and Other Liabilities

9. ACCRUED EXPENSES AND OTHER LIABILITIES:

Accrued liabilities as of June 30, 2016 and December 31, 2015 consisted of the following:

	June 30, 2016		December 31, 2015
	(In Thousands)
Accrued bonuses		2,585		2,939
Accrued commissions		1,601		1,496
Accrued vacation		3,057		2,272
Accrued payroll related liabilities		2,487		2,423
Accrued software expense		1,563		1,284
Accrued contractor fees		778		1,132
Accrued professional service fees		339		1,016
Short-term portion of lease abandonment accrual		146		437
Deferred rent		129		220
Income tax related accruals		507		318
Other accrued expenses		1,450		1,949
Total	$	14,642	$	15,486

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Net Income (Loss) Per Share

6 Months Ended

Jun. 30, 2016

Earnings Per Share [Abstract]

Net Income (Loss) Per Share

10. NET INCOME (LOSS) PER SHARE:

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

	Three Months Ended June 30,				Six Months Ended June 30,
	2016		2015		2016		2015
	(In Thousands, Except Per Share Data)
Basic net income (loss) per share:
Net income (loss) applicable to common shares	$	1,313	$	494	$	550	$	(446	)
Weighted average common shares outstanding		12,126		11,473		11,959		11,410
Basic net income (loss) per share of common stock	$	0.11	$	0.04	$	0.05	$	(0.04	)
Diluted net income (loss) per share:
Net income (loss) applicable to common shares	$	1,313	$	494	$	550	$	(446	)
Weighted average common shares outstanding		12,126		11,473		11,959		11,410
Dilutive effects of stock options		1,906		1,757		1,917		—
Weighted average common shares, assuming dilutive effect of stock options		14,032		13,230		13,876		11,410
Diluted net income (loss) per share of common stock	$	0.09	$	0.04	$	0.04	$	(0.04	)

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 77 thousand shares and 71 thousand shares in the three- and six-month periods ended June 30, 2015, respectively. There were no such anti-dilutive shares outstanding for the three- and six-month periods ended June 30, 2016. As of June 30, 2016 and 2015, there were approximately 3.5 and 4.1 million share-based awards outstanding, respectively, under the Company’s equity plans. Options to purchase 1.8 million shares of common stock that were outstanding during the six months ended June 30, 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

6 Months Ended

Jun. 30, 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- or six-month periods ended June 30, 2016. The Company repurchased 16,000 shares at an aggregate price of $114 thousand during the three- and six-month periods ended June 30, 2015.

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Revolving Line of Credit

6 Months Ended

Jun. 30, 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 June 30, 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 June 30, 2016.

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Geographic Information

6 Months Ended

Jun. 30, 2016

Text Block [Abstract]

Geographic Information

13. GEOGRAPHIC INFORMATION

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

	Three Months Ended June 30,				Six Months Ended June 30,
	2016		2015		2016		2015
United States	$	29,227	$	26,115	$	55,686	$	48,611
Canada		2,989		2,603		6,740		5,592
Other International		1,808		1,809		3,496		2,902
Total revenue	$	34,024	$	30,527	$	65,922	$	57,105

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

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Business Combinations (Tables)

6 Months Ended

Jun. 30, 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 three- and six-month periods ended June 30, 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 Three-Month Period June 30, 2015		Unaudited Six-Month Period June 30, 2015
	(In Thousands)		(In Thousands)
Pro forma total revenue	$	33,337	$	62,405
Pro forma net income (loss)		604		(291	)
Pro forma basic net income (loss) per share	$	0.05	$	(0.03	)
Pro forma diluted net income (loss) per share	$	0.05	$	(0.03	)

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)

6 Months Ended

Jun. 30, 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 June 30, 2016:
Financial liabilities:
Contingent earnout consideration	$	6,952	$	—	$	—	$	6,952
Total financial liabilities	$	6,952	$	—	$	—	$	6,952
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 six-month period ended June 30, 2016 is as follows:

	Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
	(In Thousands)
Balance at December 31, 2015	$	10,540
Payment of contingent earnout consideration		(3,906	)
Adjustment to estimated fair value of contingent earnout consideration (included within Selling, general and administrative expense)		(928	)
Accretion of contingent earnout consideration (included within other expense, net)		1,246
Ending balance at June 30, 2016	$	6,952

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Goodwill and Intangible Assets (Tables)

6 Months Ended

Jun. 30, 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 five years ending December 31, is as follows:

	Amortization Expense
	(In Thousands)
2016	$	3,612
2017	$	2,804
2018	$	2,240
2019	$	1,712
2020	$	1,057
2021	$	565

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Accrued Expenses and Other Liabilities (Tables)

6 Months Ended

Jun. 30, 2016

Payables and Accruals [Abstract]

Components of Accrued Liabilities

Accrued liabilities as of June 30, 2016 and December 31, 2015 consisted of the following:

	June 30, 2016		December 31, 2015
	(In Thousands)
Accrued bonuses		2,585		2,939
Accrued commissions		1,601		1,496
Accrued vacation		3,057		2,272
Accrued payroll related liabilities		2,487		2,423
Accrued software expense		1,563		1,284
Accrued contractor fees		778		1,132
Accrued professional service fees		339		1,016
Short-term portion of lease abandonment accrual		146		437
Deferred rent		129		220
Income tax related accruals		507		318
Other accrued expenses		1,450		1,949
Total	$	14,642	$	15,486

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Net Income (Loss) Per Share (Tables)

6 Months Ended

Jun. 30, 2016

Earnings Per Share [Abstract]

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

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

	Three Months Ended June 30,				Six Months Ended June 30,
	2016		2015		2016		2015
	(In Thousands, Except Per Share Data)
Basic net income (loss) per share:
Net income (loss) applicable to common shares	$	1,313	$	494	$	550	$	(446	)
Weighted average common shares outstanding		12,126		11,473		11,959		11,410
Basic net income (loss) per share of common stock	$	0.11	$	0.04	$	0.05	$	(0.04	)
Diluted net income (loss) per share:
Net income (loss) applicable to common shares	$	1,313	$	494	$	550	$	(446	)
Weighted average common shares outstanding		12,126		11,473		11,959		11,410
Dilutive effects of stock options		1,906		1,757		1,917		—
Weighted average common shares, assuming dilutive effect of stock options		14,032		13,230		13,876		11,410
Diluted net income (loss) per share of common stock	$	0.09	$	0.04	$	0.04	$	(0.04	)

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Geographic Information (Tables)

6 Months Ended

Jun. 30, 2016

Text Block [Abstract]

Schedule of Geographic Information

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

	Three Months Ended June 30,				Six Months Ended June 30,
	2016		2015		2016		2015
United States	$	29,227	$	26,115	$	55,686	$	48,611
Canada		2,989		2,603		6,740		5,592
Other International		1,808		1,809		3,496		2,902
Total revenue	$	34,024	$	30,527	$	65,922	$	57,105

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Business Combinations - Additional Information (Detail)				1 Months Ended	3 Months Ended			6 Months Ended		12 Months Ended
	Dec. 21, 2015 USD ($)	Aug. 17, 2015 USD ($)	Mar. 13, 2015 USD ($)	Mar. 31, 2016 USD ($)	Jun. 30, 2016 USD ($)	Mar. 31, 2016 USD ($)	Dec. 31, 2015 USD ($)	Jun. 30, 2016 USD ($) Earnout_Period	Jun. 30, 2015 USD ($)	Dec. 31, 2015 USD ($)
Business Acquisition [Line Items]
Increase in total purchase price					$ (928,000)			$ (928,000)
Direct acquisition costs								430,000	$ 611,000
Payment of contingent earnout consideration								$ 3,226,000
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					3,500,000			$ 3,500,000
Earnout period								1 year
Earnout consideration								$ 6,600,000
Direct transaction costs					1,200,000			1,200,000
Direct acquisition costs						$ 430,000	$ 801,000
Business combination revenue recorded					3,300,000			6,200,000
Non-cash expenses associated with amortization of purchased intangible assets and accretion of contingent earnout consideration					740,000			1,500,000
Business combination net income (loss) recorded					134,000			$ 35,000
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					899,000			$ 899,000
Earnout period								1 year
Earnout consideration		2,400,000
Direct acquisition costs										$ 340,000
Number of consecutive earnout period | Earnout_Period								2
Purchase price consideration		$ 4,183,000
Branchbird [Member] | Restatement Adjustment [Member]
Business Acquisition [Line Items]
Increase in total purchase price					798,000
Zero2Ten [Member]
Business Acquisition [Line Items]
Acquisition date								Mar. 13, 2015
Initial cash consideration			$ 4,500,000						$ 4,645,000
Working capital adjustment			457,000
Increase in total purchase price			4,400,000
Earnout period								1 year
Direct acquisition costs										$ 613,000
Number of consecutive earnout period | Earnout_Period								2
Purchase price consideration			9,010,000
Gross cash consideration			$ 5,000,000
Business combination, accrued contingent earnout considerations reversed					130,000			$ 130,000
Remaining earnout consideration					4,300,000			4,300,000
Zero2Ten [Member] | First Earnout Period [Member]
Business Acquisition [Line Items]
Earnout period completed				12 months
Payment of contingent earnout consideration				$ 3,900,000
Zero2Ten [Member] | Second Earnout Period [Member]
Business Acquisition [Line Items]
Business combination, contingent earnout considerations accrual					$ 2,600,000			$ 2,600,000
Earnout period completed								12 months

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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) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended	6 Months Ended
	Jun. 30, 2015	Jun. 30, 2015
Business Acquisition, Pro Forma Information [Abstract]
Pro forma total revenue	$ 33,337	$ 62,405
Pro forma net income (loss)	$ 604	$ (291)
Pro forma basic net income (loss) per share	$ 0.05	$ (0.03)
Pro forma diluted net income (loss) per share	$ 0.05	$ (0.03)

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Revenue Recognition - Additional Information (Detail) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015
Revenue Recognition, Multiple-deliverable Arrangements [Line Items]
Standard payment terms to customers			30 days
Losses recognized on fixed-price contracts	$ 0	$ 0	$ 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		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015
Share-based Compensation [Abstract]
Stock-based compensation expense under share based plans	$ 302	$ 387	$ 779	$ 850
Proceeds from employee stock purchase plans and stock option exercises	708	$ 518	2,022	$ 774
Unrecognized compensation expense	$ 962		$ 962
Expected weighted-average recognition period for unrecognized compensation expense			1 year 2 months 12 days

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Income Taxes - Additional Information (Detail) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015	Dec. 31, 2015
Income Tax Disclosure [Abstract]
Income tax provision (benefit)	$ 1,074,000	$ 379,000	$ 584,000	$ (256,000)
Effective tax rate	45.00%		51.50%
Deferred tax asset valuation allowance	$ 4,500,000		$ 4,500,000		$ 4,500,000
Pre-tax income or losses period			3 years
Interest and penalties related to unrecognized tax benefits	0		$ 0
Uncertain tax portions	$ 0		$ 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	Jun. 30, 2016	Dec. 31, 2015
Financial liabilities:
Total financial liabilities	$ 6,952	$ 10,540
Zero2Ten and Branchbird Contingent Earnout Consideration [Member]
Financial liabilities:
Total financial liabilities	6,952	10,540
Significant Unobservable Inputs (Level 3) [Member]
Financial liabilities:
Total financial liabilities	6,952	10,540
Significant Unobservable Inputs (Level 3) [Member] | Zero2Ten and Branchbird Contingent Earnout Consideration [Member]
Financial liabilities:
Total financial liabilities	$ 6,952	$ 10,540

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Fair Value Measurement - Additional Information (Detail) - USD ($)	3 Months Ended	6 Months Ended
	Jun. 30, 2016	Jun. 30, 2016
Fair Value Disclosures [Abstract]
Financial instruments transferred into or out of Level 3 classification	$ 0	$ 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	6 Months Ended
	Jun. 30, 2016	Jun. 30, 2016	Jun. 30, 2015
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Payment of contingent earnout consideration		$ (3,226)
Adjustment to estimated fair value of contingent earnout consideration (included within Selling, general and administrative expense)	$ 928	928
Accretion of contingent earnout consideration (included within other expense, net)		(1,246)	$ (579)
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
Payment of contingent earnout consideration		(3,906)
Adjustment to estimated fair value of contingent earnout consideration (included within Selling, general and administrative expense)		(928)
Accretion of contingent earnout consideration (included within other expense, net)		1,246
Ending balance	$ 6,952	$ 6,952

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Goodwill and Intangible Assets - Additional Information (Detail) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015	Dec. 31, 2015
Goodwill and Intangible Assets Disclosure [Abstract]
Goodwill	$ 29,983		$ 29,983		$ 29,910
Amortization expense of intangible assets	858	$ 165	$ 1,700	$ 239
Expiration of amortization			Various times through 2021
Amortization from capitalized internally developed software	$ 49	$ 47	$ 94	$ 101

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Goodwill and Intangible Assets - Estimated Annual Amortization Expense of our Intangible Assets (Detail) $ in Thousands	Jun. 30, 2016 USD ($)
Finite-Lived Intangible Assets, Net, Amortization Expense, Fiscal Year Maturity [Abstract]
2016	$ 3,612
2017	2,804
2018	2,240
2019	1,712
2020	1,057
2021	$ 565

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Accrued Expenses and Other Liabilities - Components of Accrued Liabilities (Detail) - USD ($) $ in Thousands	Jun. 30, 2016	Dec. 31, 2015
Components of accrued liabilities
Accrued bonuses	$ 2,585	$ 2,939
Accrued commissions	1,601	1,496
Accrued vacation	3,057	2,272
Accrued payroll related liabilities	2,487	2,423
Accrued software expense	1,563	1,284
Accrued contractor fees	778	1,132
Accrued professional service fees	339	1,016
Short-term portion of lease abandonment accrual	146	437
Deferred rent	129	220
Income tax related accruals	507	318
Other accrued expenses	1,450	1,949
Total	$ 14,642	$ 15,486

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Net Income (Loss) Per Share - Reconciliation of Net Income and Weighted Average Shares used in Computing Basic and Diluted Net Income (Loss) Per Share (Detail) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015
Basic net income (loss) per share:
Net income (loss) applicable to common shares	$ 1,313	$ 494	$ 550	$ (446)
Weighted average common shares outstanding	12,126	11,473	11,959	11,410
Basic net income (loss) per share of common stock	$ 0.11	$ 0.04	$ 0.05	$ (0.04)
Diluted net income (loss) per share:
Net income (loss) applicable to common shares	$ 1,313	$ 494	$ 550	$ (446)
Weighted average common shares outstanding	12,126	11,473	11,959	11,410
Dilutive effects of stock options	1,906	1,757	1,917
Weighted average common shares, assuming dilutive effect of stock options	14,032	13,230	13,876	11,410
Diluted net income (loss) per share of common stock	$ 0.09	$ 0.04	$ 0.04	$ (0.04)

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Net Income (Loss) Per Share - Additional Information (Detail) - shares	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015
Earnings Per Share, Basic, by Common Class, Including Two Class Method [Line Items]
Diluted computation increased	0	77,000	0	71,000
Share-based awards outstanding under equity plans	3,500,000	4,100,000	3,500,000	4,100,000
Option Plans [Member]
Earnings Per Share, Basic, by Common Class, Including Two Class Method [Line Items]
Diluted computation increased				1,800,000

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Stock Repurchase Program - Additional Information (Detail) - USD ($)		3 Months Ended		6 Months Ended		12 Months Ended
	Sep. 17, 2015	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 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	16,000	0	16,000
Aggregate purchase price common stock			$ 114,000		$ 114,000
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 ($)	6 Months Ended
	Jun. 30, 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		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015
Segment Reporting Information [Line Items]
Total revenue	$ 34,024	$ 30,527	$ 65,922	$ 57,105
UNITED STATES
Segment Reporting Information [Line Items]
Total revenue	29,227	26,115	55,686	48,611
CANADA
Segment Reporting Information [Line Items]
Total revenue	2,989	2,603	6,740	5,592
Non-US [Member]
Segment Reporting Information [Line Items]
Total revenue	$ 1,808	$ 1,809	$ 3,496	$ 2,902