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Edgewater Reports Fourth Quarter And Full Year 2012 Results

WAKEFIELD, Mass., Feb. 27, 2013 (GLOBE NEWSWIRE) -- Edgewater Technology, Inc. (Nasdaq:EDGW), a leading consulting firm that brings a blend of classic consulting and product-based consulting services to its clients, reported financial results for the fourth quarter and full year ended December 31, 2012.

Fourth Quarter 2012 Highlights
  • Generated $3.9 million in cash flow from operations, compared to a cash outflow of $25,000 in the fourth quarter of 2011;
  • Increased cash and cash equivalents to $16.7 million, compared to $10.3 million in the fourth quarter of 2011; and
  • Repurchased 126,000 shares of common stock at an aggregate purchase price of $461,000, or $3.65 per share.

Fourth Quarter 2012 Financial Results
  • Total revenue was $24.2 million compared to $26.4 million in the fourth quarter of 2011;
  • Service revenue was $19.5 million compared to $20.8 million in the fourth quarter of 2011;
  • Gross profit was $8.4 million, or 34.8% of total revenue, compared to $9.9 million, or 37.5% of total revenue, in the fourth quarter of 2011;
  • Gross profit margin related to service revenue was 36.0% compared to 41.6% in the fourth quarter of 2011;
  • Utilization was 67.7% compared to 75.6% in the fourth quarter of 2011;
  • Net income was $345,000, or $0.03 per diluted share, compared to a net loss of $1.9 million, or $(0.17) per diluted share, in the fourth quarter of 2011. The reported net loss in the fourth quarter of 2011 included a $2.2 million non-cash lease abandonment charge; and
  • Adjusted EBITDA (a non-GAAP measure) was $1.4 million, or 5.7% of total revenue and $0.12 per diluted share (see "Non-GAAP Financial Measures" below for further discussion of this non-GAAP term), compared to adjusted EBITDA of $1.6 million, or 6.2% of total revenue and $0.14 per diluted share, in the fourth quarter of 2011.

Full Year 2012 Highlights
  • Increased organic service revenue by 5% to $83.1 million compared to $79.2 million in 2011;
  • Generated $8.8 million in cash flow from operations compared to $5.8 million in 2011;
  • Repurchased 694,000 shares of common stock at an aggregate purchase price of $2.6 million, or $3.81 per share; and
  • Sold Fullscope's Process Industries 2 ("PI2") software and intellectual property to Microsoft for $3.25 million. As part of the agreement, Microsoft engaged Edgewater in additional development and training services.

Full Year 2012 Financial Results
  • Total revenue decreased to $100.9 million compared to $102.4 million in 2011. Total revenue in 2011 included $2.7 million of process-related royalties that did not recur in 2012;
  • Service revenue increased 4.9% to $83.1 million compared to $79.2 million in 2011;
  • Gross profit was $35.3 million, or 35.0% of total revenue, compared to $38.7 million, or 37.8% of total revenue, in 2011;
  • Gross profit margin related to service revenue was 37.9% compared to 39.3% in 2011;
  • Utilization was 71.5% compared to 75.8% in 2011;
  • Net income was $1.4 million, or $0.13 per diluted share, compared to net income of $344,000, or $0.03 per diluted share, in 2011.  Net income in 2011 includes $2.7 million of process-related royalties that did not recur in 2012, and a $2.2 million non-cash lease abandonment charge; and
  • Adjusted EBITDA was $5.7 million, or 5.6% of total revenue and $0.49 per diluted share, compared to adjusted EBITDA of $7.9 million, or 7.7% of total revenue and $0.66 per diluted share, in 2011.

Management Commentary

"Our pipeline remains robust, but many planned launches of new projects were delayed by customers who cited uncertainty of budgets and general economic concerns," said Shirley Singleton, Edgewater's chairman, president and CEO. "We secured first-time engagements with 16 new customers during the fourth quarter of 2012, however, we typically see between 25 to 30 new customers per quarter. This statistic illustrates the 'failure to launch' mentality that was a factor in the latter stages of 2012. The strength of the first half of 2012 was enough to offset the softness in the latter half of the year, resulting in 5% organic service revenue growth for the year. The majority of the business in the fourth quarter pipeline remains active, and I am pleased to see several projects have now closed in the first quarter of 2013.

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