Edgewater Technology Management Discusses Q3 2010 Results – Earnings Call Transcript
Edgewater Technology, Inc. (
)
Q3 2010 Earnings Call
November 3, 2010; 10:00 am ET
Executives
Shirley Singleton - Chairman, President & Chief Executive Officer
David Clancey - Executive Vice President, Chief Strategy Officer & Technology Officer
Timothy Oakes - Chief Financial Officer
Shira Charles - Investor Relations
Analysts
Arnie Ursaner - CJS Securities
Bob Poole - Bricoleur Capital
Presentation
Operator
Compare to:
Previous Statements by EDGW
»
Edgewater Technology, Inc. Q2 2010 Earnings Call Transcript
»
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 morning and welcome ladies and gentlemen to Edgewater Technology Inc. quarter 2010 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 in a listen-only mode. At the request of the company, we will open the 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 Technology’s third 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 Acts. 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. For Q3 we have guided that services revenue would be flat with an upward bias and I’m happy to report that we grew 4% sequentially on service revenue and that we have year-over-year double-digit organic growth. During Q3, we secured business from 23 new customers; new wins included such names as Harris Peter, Kraft Foods, Catterton Partners, ING Americas and Terry International.
If I look at the summer I can break it down for you. June we were coming strong, July, it looks strong and then we hit the soft part and continue to moving in to August and then August started to take off and September continued the lift.
So I would characterize it as a little bit of a hockey stick in the summer, but slow and steady improvement as time went on. EPM continues to grow, they looked for this quarter.
I mentioned in previous earnings call that I thought that there was going to be some synergy vis-à-vis cross-selling with our new acquisition Fullscope and that did come to bear with a large project in the PE space where a company was divesting of one of their assets and the PE firm was picking it up and we actually, EdgeTech and Fullscope worked together to put bring up a brand new company in a 120 days, which is complete with financials and infrastructure and best practices, which we are very proud of and that was delivered during the quarter as well.
But let’s get – have Tim get into the details.
Timothy Oakes
Thanks Shirley. Good morning everyone. There is quite a bit to talk about as it relates to our third quarter results. As we have done in recent calls, we will focus some of our comments related to changes in our operating performance upon sequential and organic changes rather than year-over-year changes. Given the year-over-year change in our business, we believe that this approach is more meaningful to investors when discussing trends in our business.
Excluding the effects of the current quarter $21.9 million non-cash charge associated with an increase of valuation allowance of fight against the carrying value of our deferred tax assets, third quarter results reflects growth in our
service revenue and a continued stabilization in our operating metrics.
Total revenue and service revenue are up on a year-over-year basis and service revenue, both consolidated and organic is up on a sequential quarterly basis. As we proceed with our review of the third quarter, we would like to highlight the fact that third quarter operating performance does not include approximately $220,000 of service revenue and $659,000 of software revenue, with services and software delivered and sold during the current quarter.
The revenue amounts were deferred in accordance with the company’s revenue recognition policy and were primarily based upon payment contingencies and deemed delivery of software. Have these amounts been recognized, the reported gross profit adjusted EBITDA amount would have increased by $546,000 representing gross profit contribution associated with the deferred revenue items.
Total revenue for the third quarter was $21.4 million, compared to $11.8 million in the year ago quarter. Service revenue was $18.1 million during the third quarter, compared to service revenue of $10.9 million in the third quarter of 2009. Incremental revenue generated by Fullscope and growth in our core service offerings, drove our third quarter year-over-year growth in total revenue and service revenue.
Revenue increases in our core service offerings reflects the current year improvement in bidding proposal activity and the cross-selling synergies resulting from the combination of our technology and management service offerings with Fullscope’s ERP related service offerings. These are the primary drivers of a 20.7% current quarter year-over-year service revenue increase in our organic core service offerings.
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