Edgewater Reports Fourth Quarter and Full Year 2012 Results

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.

"During 2012, we also strengthened Edgewater's brand and reach in the Oracle
and Microsoft product-based consulting channels. We continued to expand
critical mass in these channels and leverage our brand name recognition as a
means to facilitate growth.Additionally, we successfully capitalized upon our
expertise in the Microsoft channel through the development of intellectual
property, which we use as a branded sales differentiator and delivery
accelerant.As a result of these efforts, we were awarded the 2012 Microsoft
Dynamics Manufacturing Partner of the Year.

"As we look toward 2013, we intend to continue our investments in intellectual
property, which is a key component of product-based consulting.We believe
that vertically focused IP, in combination with a deep understanding of
product-based consulting services, will reinforce our brand and expand our
channel influence."

Ms. Singleton concluded: "We are seeing signs of traction with respect to new
deal signings in the middle of the first quarter of 2013.Given this, we
believe that our first quarter 2013 service revenue will be up from the fourth
quarter of 2012."

Conference Call and Webcast Information

Edgewater has scheduled a conference call today (Wednesday, February 27, 2013)
at 10:00 a.m. Eastern time to discuss its fourth quarter and full year 2012
results.

Date: Wednesday, February 27, 2013
Time: 10:00 a.m. Eastern Time
Dial-in number: 1-877-713-9347
Webcast: http://ir.edgewater.com/

Please call the conference telephone number 5-10 minutes prior to the start
time. An operator will register your name and organization. If you have any
difficulty connecting with the conference call, please contact Liolios Group
at 1-949-574-3860.

A replay of the conference call can be accessed via Edgewater's investor
relations web site at http://ir.edgewater.com/ or by dialing 1-855-859-2056
(Conference ID#: 95227617) after 1:00 p.m. Eastern time through Wednesday,
March 13, 2013.

About Edgewater

Edgewater Technology, Inc. (Nasdaq:EDGW) is a strategic consulting firm
delivering a blend of classic consulting and product-based consulting
services. Edgewater addresses the market both vertically by industry and
horizontally by product and technology specialty, providing its client base
with a wide range of business and technology solutions. As one of the largest
IT consulting firms based in New England, the Company works with clients to
reduce costs, improve processes and increase revenue through the judicious use
of technology. Edgewater's brand names include Edgewater Technology, Edgewater
Consulting, Edgewater Ranzal and Edgewater Fullscope. To learn more, please
visit www.edgewater.com.

The Edgewater Technology logo is available at
http://www.globenewswire.com/newsroom/prs/?pkgid=3783

Forward-Looking Statements

This Press Release contains certain forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended, and Section
21E of the Securities Exchange Act of 1934, as amended, including statements
concerning our expected first quarter 2013 service revenue, intellectual
property investments in 2013 and expand channel influence. These
forward-looking statements inherently involve certain risks and uncertainties,
although they are based on our current plans or assessments which are believed
to be reasonable as of the date of this Press Release. 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 Business Intelligence ("BI"), Enterprise Performance Management
("EPM") and Enterprise Resource Planning ("ERP") solutions, custom development
and system integration services and/or declines in industry-wide information
technology ("IT") 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 economic, geopolitical or technology market conditions;
(6) unanticipated events or the occurrence of fluctuations or variability in
critical accounting policies and estimates; (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) 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; (11) the failure of the marketplace to
embrace advisory and product-based consulting services; (12) changes in the
market for leased office space and/or (13) failure to make a successful claim
against the Fullscope escrow accounts. In evaluating these statements, you
should specifically consider various factors described above as well as the
risks outlined under "Part I - Item IA Risk Factors" in our 2011 Annual Report
on Form 10-K filed with the SEC on March 12, 2012. These factors may cause our
actual results to differ materially from those contemplated, projected,
anticipated, planned or budgeted in any such forward-looking statements.

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 required by law, we undertake no obligation to
update any of the forward-looking statements after the date of this Press
Release to conform such statements to actual results.


EDGEWATER TECHNOLOGY, INC.
Condensed Consolidated Balance Sheets
(In Thousands)
(Unaudited)

                                          December 31, December 31,
                                           2012         2011
Assets                                                 
Cash and cash equivalents                  $ 16,651     $ 10,333
Accounts receivable, net                   18,281       23,307
Prepaid expenses and other current assets  1,418        763
Total current assets                       36,350       34,403
Property and equipment, net                1,949        2,429
Goodwill and intangible assets, net        13,243       14,128
Other assets                               247          238
Total Assets                               $ 51,789     $ 51,198
                                                      
Liabilities and Stockholders' Equity                   
Accounts payable                           $ 593        $ 1,858
Accrued liabilities                        14,280       13,934
Accrued contingent earnout consideration   --           126
Deferred revenue                           2,969        1,569
Capital lease obligations, current         --           52
Total current liabilities                  17,842       17,539
Accrued contingent earnout consideration   --           105
Other long-term liabilities                1,272        1,841
Total liabilities                          19,114       19,485
Stockholders' Equity                       32,675       31,713
Total Liabilities and Stockholders' Equity $ 51,789     $ 51,198
                                                      
Shares Outstanding                         10,897       11,311



EDGEWATER TECHNOLOGY, INC.
Condensed Consolidated Statement of Operations
(In thousands, except per share amounts)
(Unaudited)

                                       Three Months Ended Twelve Months Ended
                                       December 31,       December 31,
                                       2012     2011      2012      2011
Revenue:                                                          
Service revenue                         $ 19,522 $ 20,841  $ 83,137  $ 79,239
Software                                3,152    3,772     10,190    13,064
Process royalties                       --       --        --        2,734
Reimbursable expenses                   1,574    1,792     7,554     7,406
Total revenue                           24,248   26,405    100,881   102,443
                                                                 
Cost of revenue:                                                  
Project and personnel costs             12,487   12,170    51,594    48,078
Software costs                          1,745    2,537     6,454     8,262
Reimbursable expenses                   1,574    1,792     7,554     7,406
Total cost of revenue                   15,806   16,499    65,602    63,746
Gross profit                            8,442    9,906     35,279    38,697
                                                                 
Selling, general and administrative     7,545    8,622     31,202    32,019
Embezzlement costs                      17       18        592       144
Changes in fair value of contingent     --      50       (231)    144
consideration
Lease abandonment charge                --       2,230     --        2,230
Depreciation and amortization           459      723       1,801     2,846
Operating income (loss)                 421      (1,737)   1,915     1,314
                                                                 
Other (income) expense, net             57      (23)     67        127
Income (loss) before income taxes       364      (1,714)   1,848     1,187
                                                                 
Tax provision                           19       192       401       843
Net income (loss)                       $ 345    $ (1,906) $ 1,447   $ 344
                                                                 
BASIC EARNINGS (LOSS) PER SHARE:                                  
Basic earnings (loss) per share         $ 0.03   $ (0.17)  $ 0.13    $0.03
Weighted average shares outstanding –   10,947   11,339    11,180    12,038
Basic
                                                                 
DILUTED EARNINGS (LOSS) PER SHARE:                                
Diluted earnings (loss) per share       $ 0.03   $ (0.17)  $ 0.13    $ 0.03
Weighted average shares outstanding –   11,358   11,339    11,589    12,048
Diluted
                                                                 


EDGEWATER TECHNOLOGY, INC.
Condensed Consolidated Statements of Cash Flows
(In Thousands)
(Unaudited)

                                       Three Months Ended Twelve Months Ended
                                       December 31,       December 31,
                                       2012     2011      2012      2011
                                                                 
Cash flow provided by (used in):                                  
Operating activities                    $3,922  $(25)    $8,836   $5,833
Investing activities                    (63)    (2,912)  (591)    (3,498)
Financing activities                    (186)   (40)     (1,932)  (2,894)
Effect of exchange rates on cash        4       (11)      5        (11)
Net increase (decrease) in cash and     $3,677  $(2,988) $6,318   $(570)
cash equivalents

Non-GAAP Financial Measures

Edgewater reports its financial results in accordance with generally accepted
accounting principles ("GAAP"). Management believes, however, that certain
non-GAAP financial measures used in managing the Company's business may
provide users of this financial information with additional meaningful
comparisons between current results and prior reported results. Certain of the
information set forth herein and certain of the information presented by the
Company from time to time may constitute non-GAAP financial measures within
the meaning of Regulation G adopted by the Securities and Exchange Commission.
We have presented herein a reconciliation of these measures to the most
directly comparable GAAP financial measure. The non-GAAP measures presented
herein may not be comparable to similarly titled measures presented by other
companies. As noted below, the foregoing measures have limitations and do not
serve as a substitute and should not be construed as a substitute for GAAP
performance, but provide supplemental information concerning our performance
that our investors and we find useful.

Edgewater views Adjusted EBITDA, Adjusted EBITDA per Diluted Share and
Adjusted EBITDA as a Percentage of Total Revenue as important indicators of
performance, consistent with the manner in which management measures and
forecasts the Company's performance. We believe Adjusted EBITDA measures are
important performance metrics because they facilitate the analysis of our
results, exclusive of certain non-cash items, including items which do not
directly correlate to our business operations.

The non-GAAP adjustments, and the basis for excluding them, are outlined
below:

Income tax provision. The exit of our former significant unrelated operations
in 2000 and 2001 created significant net operating loss carry-forwards and
deferred tax assets, and the tax provisions that we take under GAAP, for which
there is no corresponding federal tax payment obligation for us, and the
adjustments that we make to our deferred tax asset, based on the prospects and
anticipated future profitability of our ongoing operations, can be significant
and can obscure, either significantly, or in part, period-to-period changes in
our core operating results.

Depreciation and amortization. We incur expense associated with the
amortization of intangible assets that is primarily related to the various
acquisitions we have completed. We believe that eliminating this expense from
our non-GAAP financial measures is useful to investors because the
amortization of intangible assets can be inconsistent in amount and frequency,
and is significantly impacted by the timing and magnitude of the individual
acquisition transactions, which also vary substantially in frequency from
period-to-period.

Stock-based compensation expense. We incur stock-based compensation expense
under Financial Accounting Standards Board Accounting Standards Codification
Topic 718, "Compensation – Stock Compensation."We exclude this non-cash
expense as we do not believe it is reflective of business performance. The
nature of stock-based compensation expense also makes it very difficult to
estimate prospectively, since the expense will vary with changes in the stock
price and market conditions at the time of new grants, varying valuation
methodologies, subjective assumptions and different award types, making the
comparison of current results with forward-looking guidance potentially
difficult for investors to interpret. Edgewater believes that non-GAAP
financial measures of profitability, which exclude stock-based compensation,
are widely used by analysts and investors.

Adjustments to contingent consideration earned, at fair value. We are required
to remeasure the fair value of our contingent consideration liability related
to acquisitions each reporting period until the contingency is settled. Any
changes in fair value are recognized as a current period operating expense.
The Company believes that excluding these adjustments from its non-GAAP
financial measures is useful to investors because they are related to
acquisition events and make it difficult to evaluatecore operating results.

Direct acquisition costs. We incur direct transaction costs related to
acquisitions which are expensed in our GAAP financial statements. Our non-GAAP
financial measures exclude the effects of direct acquisition-related costs as
we believe these transaction-specific expenses are inconsistent in amount and
frequency and make it difficult to make period-to-period comparisons of our
core operating results.

Fullscope embezzlement costs. During the second quarter of 2010, we discovered
embezzlement activities within Fullscope, Inc. The Company, since the
discovery, has incurred non-routine professional services-related expenses
addressing the embezzlement issue. Our non-GAAP financial measures exclude the
effects of the embezzlement-related expenses as we believe excluding these
costs from our non-GAAP financial measures is useful to investors because
these expenses are not directly associated with the Company's operations and
are inconsistent in amount and frequency, causing difficulties in comparisons
of our core operating results.

Lease abandonment charge. During 2011, we recorded a non-cash charge of $2.2
million in connection with the abandonment of certain excess office space at
our corporate headquarters. Our non-GAAP financial measures exclude expense
associated with the lease abandonment charge as we believe such expense is
associated with a non-routine charge, causing difficulties in comparisons of
our core operating results.

Interest and other (income) expense, net. We record periodic interest and
other (income) and expense amounts in connection with our cash and cash
equivalents, capital lease obligations and (gains) and losses on foreign
currency transactions. Our non-GAAP financial measures exclude (income)
expense associated with these items as we believe such (income) expense is
inconsistent in amount and frequency and makes it difficult to make
period-to-period comparisons of our core operating results.

We believe that Adjusted EBITDA metrics provide qualitative insight into our
current performance; we use these measures to evaluate our results, the
performance of our management team and our management's entitlement to
incentive compensation; and we believe that making this information available
to investors enables them to view our performance the way that we view our
performance and thereby gain a meaningful understanding of our core operating
results, in general, and from period to period.


EDGEWATER TECHNOLOGY, INC.
Reconciliation of GAAP Net Income to Non-GAAP Adjusted EBITDA
(In Thousands, except per share amounts)
(Unaudited)

                             For The Three Months For The Twelve Months Ended
                             Ended                December 31,
                              December 31,
                             2012      2011       2012           2011
Reported GAAP net income      $345     $(1,906)   $1,447        $344
(loss)
Add: Income tax provision     19        192       401            843
Add: Depreciation and         520       737       1,957          2,886
amortization
Add: Stock-based compensation 414       327       1,419          1,201
expense
Add: Adjustments to
contingent consideration      --       50        (231)         144
earned, at fair value
Add: Fullscope embezzlement   17        18         592            144
costs
Add: Lease abandonment charge --       2,230     --             2,230
Less: Other (income) expense, 57      (23)     67             127
net
Adjusted EBITDA^1             $1,372   $1,625    $5,652        $7,919
Adjusted EBITDA per diluted   $0.12    $0.14     $0.49         $0.66
share^1
Diluted shares outstanding    11,358    11,352     11,589         12,048
                                                              
Adjusted EBITDA as a % of     5.7%      6.2%       5.6%           7.7%
total revenue^1
Total revenue                 $24,248   $26,405    $100,881      $102,443

  1- Adjusted EBITDA, Adjusted EBITDA Per Diluted Share and Adjusted EBITDA as
  a Percentage of Total Revenue are Non-GAAP performance measures and are not
  intended to be performance measures that should be regarded as an
  alternative to, or more meaningful than GAAP Net Income and Diluted Earnings
  Per Share. Adjusted EBITDA and Adjusted EBITDA per Diluted Share measures
  presented may not be comparable to similarly titled measures presented by
  other companies. Adjusted EBITDA is defined as net income less interest and
  other (income) expense, net, plus taxes, depreciation and amortization,
  stock-based compensation expense, adjustments to contingent consideration
  earned, goodwill and intangible asset impairment charges, direct acquisition
  costs, costs associated with the Fullscope embezzlement issue and the lease
  abandonment charge. Adjusted EBITDA per Diluted Share is defined as Adjusted
  EBITDA divided by the diluted common shares outstanding used in Diluted
  Earnings per Share calculations, while Adjusted EBITDA as a % of Total
  Revenue is defined as Adjusted EBITDA divided by Total Revenue.

CONTACT: Company Contact:
         Timothy R. Oakes
         Chief Financial Officer
         1-781-246-3343
        
         Investor Relations:
         Liolios Group, Inc.
         Cody Slach
         1-949-574-3860
         EDGW@liolios.com

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