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Edgewater Technology, Inc. Q2 2010 Earnings Call Transcript

Edgewater Technology, Inc. Q2 2010 Earnings Call Transcript

Edgewater Technology, Inc. (EDGW)

Q2 2010 Earnings Call

August 4, 2010; 10:00 am ET

Management

TST Recommends

Shirley Singleton - Chairman, President & Chief Executive Officer

David Clancey - Executive Vice President & Chief Strategy and Technology Officer

Timothy Oakes - Chief Financial Officer.

Shira Charles - Investor Relations

Analysts

Arnie Ursaner - CJS Securities

Presentation

Operator

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Previous Statements by EDGW
» Edgewater Technology Inc. Q1 2010 Earnings Call Transcript
» Edgewater Technology, Inc. Q4 2009 Earnings Call Transcript
» Edgewater Technology Inc. Q3 2009 Earnings Call Transcript

Good day, ladies and gentlemen, and welcome to the Q2, 2010 Edgewater Technology financial results conference call. At this time, I would like to inform you that this conference is being recorded for re-broadcast and that all participants are on a listen-only mode. At the request of the company, we’ll open this conference up for questions and answers following the presentation.

I will now turn the conference over to Ms. Shira Charles of Investor Relations for introductions.

Shira Charles

Thank you. Good morning everyone and welcome to Edgewater second quarter financial results call. I am here today with Shirley Singleton, Edgewater’s Chairman, President, and CEO; David Clancey, Edgewater’s EVP and Chief Strategy and Technology Officer; and Timothy Oakes, Edgewater’s Chief Financial Officer.

Before we begin, I would like to remind everyone that today’s call may contain forward-looking statements as described under the Securities Act. Investors are cautioned that such statements could involve risk and uncertainties that could cause actual results to differ from current expectations with respect to such statements.

These types of statements and the underlying factors related to these statements are listed and are reported in filed information with the Securities and Exchange Commission, as well as in the company's press release that was distributed earlier this morning.

The statements made during today's call are made only as of the date of today's call and the company undertakes no obligation to update the forward-looking statements to reflect subsequent events or circumstances.

With that, I will now turn the call over to Shirley.

Shirley Singleton

Thanks, Shira. Good morning, everyone. In a nutshell, we actually had a really great quarter. I’m very pleased to report results today. During Q2, we secured business from 25 new customers and when I look down the list, I pulled out some names that I thought you might recognize Osram Sylvania is one of our new customers, Four Seasons Hotel, Williams-Sonoma, Miami Children’s Hospital, and [Reily Foods] those are the ones that I’ve chosen to talk about today.

We’ve shown positive sequential organic growth in all three offerings. If I had to pick on one of them, the EPM was a little slow off the dime compared to the previous several years where their recovery was a lot slower than normal, but they’ve had a hot June for us.

EdgeTech which is our original technical services offering, they had a wonderful quarter, bid and win ratios are up large in that offering. In Fullscope, I can’t say enough about that acquisition that we did in December, they continue to grow sequentially.

A lot of our available headcount increase is a result of Fullscope growing. They just won the Microsoft AX Manufacturing Partner of the Year for the second straight year, which is a terrific award. Lastly, in terms of organic growth and Dave was talking to me about we really need to look at an ERP play and the synergy between potential ERP company and the original EdgeTech offerings, our synergy expectations have been more than met. Why do you think that is, Dave?

Dave Clancey

Well, not only the software replacement due to age, we talked about last quarter, but what we are also seeing is some synergy between a prior acquisition, which worked quite a bit in the private equity space and the Edgewater Tech side; what’s going on there is, is private equity goes through divestitures, buys new companies or talks to larger companies and they go through a divestiture.

Many times, they are going to need in effect a shake and bake company, an instant company. So you are going to need all of the services of Fullscope in terms of putting an ERP and you will also need Edgewater to provide the infrastructure services, and really knit together the glue in terms of reporting, etcetera, to get a company up very quickly.

So, in this space we can see this taking off in the coming years, and its providing a great synergy point between the operation as a whole.

Shirley Singleton

Okay, but let’s get into the detail. So, you folks can hear some of the detailed numbers underneath.

Timothy Oakes

Thank you, Shirley. As Shirley touched upon, our second quarter results reflect a continued improvement in our business and what we believe to be another step on our path to recovery. We note that our operating metrics are turning back towards our historical operating ranges.

Total revenue and service revenue are up on both the year-over-year and sequential business, and our other profitability metrics such as gross profit margin, billable consultant utilization and adjusted EBITDA have either improved during the current quarter or remain consistent with the first quarter of 2010.

In the short term, as we evaluate and describe changes in our business during this call, we are going to focus more upon sequential and organic changes rather than year-over-year changes, as we believe, given where we were in 2009, that the sequential and organic changes are more meaningful when discussing current trends in our business.

Total revenue for the quarter was $23.4 million, compared to $12 million in the year-ago quarter. Service revenue was $17.4 million during the second quarter compared to service revenue of $11 million in the second quarter of 2009. The primary driver of the year-over-year growth in total revenue and service revenue is related to the incremental revenue generated by Fullscope and to a lesser extent growth in our core service offerings.

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