Edgewater Reports Third Quarter 2013 Results

Edgewater Reports Third Quarter 2013 Results

WAKEFIELD, Mass., Oct. 30, 2013 (GLOBE NEWSWIRE) -- Edgewater Technology, Inc.
(Nasdaq:EDGW), a leading consulting firm that brings a blend of classic and
product-based consulting services to its clients, reported financial results
for the third quarter ended September 30, 2013.

Third Quarter 2013 Highlights

  *Generated $5.9 million in cash flow from operations;
  *Secured first time engagements with 28 new customers;
  *Approved a $7.0 million increase and extension of the stock repurchase
    program to $23.1 million; and
  *Secured a $10.0 million credit facility to fund strategic growth
    initiatives.

Third Quarter 2013 Financial Results vs. Same Year-Ago Quarter

  *Total revenue was $25.4 million compared to $24.2 million;
  *Service revenue was $21.4 million compared to $20.2 million;
  *Gross profit was $9.7 million, or 38.0% of total revenue, compared to $8.8
    million, or 36.5% of total revenue;
  *Gross profit margin related to service revenue was 38.9% compared to
    38.7%;
  *Utilization was 71.1% compared to 69.5%;
  *Net income was $1.8 million, or $0.14 per diluted share, compared to net
    income of $793,000, or $0.07 per diluted share;
  *Adjusted EBITDA (a non-GAAP measure) was $2.5 million, or 9.9% of total
    revenue and $0.21 per diluted share (see "Non-GAAP Financial Measures"
    below for further discussion of this non-GAAP term), compared to adjusted
    EBITDA of $1.4 million, or 5.8% of total revenue and $0.12 per diluted
    share; and
  *Cash flow provided by operating activities was $5.9 million compared to
    cash flow provided by operating activities of $5.4 million.

First Nine Months of 2013 Financial Results vs. Same Year-Ago Period

  *Total revenue was $76.8 million compared to $76.6 million;
  *Service revenue was $62.7 million compared to $63.6 million;
  *Gross profit was $26.8 million, or 35.0% of total revenue, compared to
    $26.8 million, or 35.0% of total revenue;
  *Gross profit margin related to service revenue was 36.4% compared to
    38.5%;
  *Utilization was 72.0% compared to 72.7%;
  *Net income was $2.3 million, or $0.19 per diluted share, compared to net
    income of $1.1 million, or $0.10 per diluted share;
  *Adjusted EBITDA (a non-GAAP measure) was $5.1 million, or 6.7% of total
    revenue and $0.44 per diluted share (see "Non-GAAP Financial Measures"
    below for further discussion of this non-GAAP term), compared to adjusted
    EBITDA of $4.3 million, or 5.6% of total revenue and $0.36 per diluted
    share; and
  *Cash flow provided by operating activities was $2.3 million compared to
    cash flow provided by operating activities of $4.9 million.

Management Commentary

"The third quarter was highlighted by improved year-over-year financial
metrics including gross margins, net income, earnings per share and adjusted
EBITDA," said Shirley Singleton, Edgewater's chairman, president and CEO. "In
addition to the financial improvements, we were also able to secure a $10
million credit facility to fund strategic growth initiatives.

"We entered the third quarter with a healthy amount of signed engagements to
support sequential service revenue growth; however, this growth was hindered
by a delay in the start of several of our ERP-related service offering
engagements. Although these engagements kicked off during the third quarter,
the start of the engagements occurred later than originally anticipated,
limiting the amount of third quarter service revenue generation.

"Looking towards the fourth quarter, we are mindful that the timing of this
year's holidays may impact our ability to generate service revenue. Our
EPM-related service offering, which represents our largest percentage of
revenues, tends to be more affected by seasonality than our other service
offerings, as clients typically delay or shutdown projects near the holidays.
In spite of this trend, we still anticipate fourth quarter service revenue to
experience high single-digit growth compared to the fourth quarter of 2012."

Conference Call and Webcast Information

Edgewater has scheduled a conference call today (Wednesday, October 30, 2013)
at 10:00 a.m. Eastern time to discuss its third quarter 2013 results.

Date: Wednesday, October 30, 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#: 72329904) after 1:00 p.m. Eastern time through November 13,
2013.

About Edgewater

Edgewater Technology, Inc. (Nasdaq:EDGW) is a strategic consulting firm
delivering a blend of classic 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 Ranzal and
Edgewater Fullscope. To learn more, please visit www.edgewater.com.

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 fourth quarter 2013 service revenue, improvements in
sales pipeline activity, conversion of our sales pipeline to signed contracts
and customer project delays. 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 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" in our 2012 Annual Report on
Form 10-K; (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 failure
of the marketplace to embrace advisory and product-based consulting services;
(13) changes in our utilization levels; and/or (14) failure to make a
successful claim against the Fullscope escrow account.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
2012 Annual Report on Form 10-K filed with the SEC on March 8, 2013. 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)
                                                        
                                           September 30, December 31,
                                           2013          2012
Assets                                                  
Cash and cash equivalents                   $17,487     $16,651
Accounts receivable, net                    19,001        18,281
Prepaid expenses and other current assets   1,150         1,418
Total current assets                       37,638        36,350
Property and equipment, net                 1,613         1,949
Goodwill and intangible assets, net         13,164        13,243
Other assets                                249           247
Total Assets                               $52,664     $51,789
                                                        
Liabilities and Stockholders' Equity                     
Accounts payable                            $598        $593
Accrued liabilities                         14,369        14,280
Deferred revenue                           1,462         2,969
Total current liabilities                  16,429        17,842
Other long-term liabilities                 832           1,272
Total liabilities                          17,261        19,114
Stockholders' Equity                        35,403        32,675
Total Liabilities and Stockholders' Equity $52,664     $51,789
                                                        
Shares Outstanding                          10,911        10,897
                                                        


EDGEWATER TECHNOLOGY, INC.
Condensed Consolidated Statement of Operations
(In thousands, except per share amounts)
(Unaudited)
                                                                 
                                      Three Months Ended  Nine Months Ended
                                      September 30,       September 30,
                                      2013      2012      2013      2012
Revenue:                                                         
Service revenue                        $21,389 $20,232 $62,684 $63,615
Software                               2,260     2,032     8,568     7,038
Reimbursable expenses                  1,750     1,901     5,523     5,980
Total revenue                          25,399    24,165    76,775    76,633
                                                                 
Cost of revenue:                                                  
Project and personnel costs           13,071    12,401    39,837    39,107
Software costs                         921       1,051     4,577     4,709
Reimbursable expenses                  1,750     1,901     5,523     5,980
Total cost of revenue                  15,742    15,353    49,937    49,796
Gross profit                           9,657     8,812     26,838    26,837
                                                                 
Selling, general and administrative   7,556     7,740     23,125    23,672
Embezzlement costs                     34        5         106       575
Changes in fair value of contingent    --       (246)     --       (246)
consideration
Depreciation and amortization          302       452       925       1,342
Operating income                       1,765     861       2,682     1,494
                                                                 
Other (income) expense, net            (81)      (95)      92        10
Income before income taxes             1,846     956       2,590     1,484
                                                                 
Tax provision                          74        163       293       382
Net income                             $1,772  $793    $2,274  $1,102
                                                                 
BASIC EARNINGS PER SHARE:                                         
Basic earnings per share               $0.17   $0.07   $0.21   $0.10
Weighted average shares outstanding –  10,732    11,137    10,800    11,258
Basic
                                                                 
DILUTED EARNINGS PER SHARE:                                       
Diluted earnings per share             $0.14   $0.07   $0.19   $0.10
Weighted average shares outstanding –  12,233    11,677    11,785    11,680
Diluted
                                                                 


EDGEWATER TECHNOLOGY, INC.
Condensed Consolidated Statements of Cash Flows
(In Thousands)
(Unaudited)
                                                                  
                                         Three Months Ended Nine Months Ended
                                         September 30,      September 30,
                                         2013      2012     2013     2012
Cash flow provided by (used in):                                   
Operating activities                      $5,870  $5,422 $2,319 $4,914
Investing activities                      (238)     (124)    (769)    (528)
Financing activities                      377       (1,224)  (720)    (1,746)
Effect of exchange rates on cash          11        7        6        1
Net increase in cash andcash equivalents $6,020  $4,081 $836   $2,641

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 Nine Months Ended
                                Ended
                               September 30,        September 30,
                               2013       2012      2013         2012
                                                              
Reported GAAP net income        $1,772     $793      $2,297       $1,102
Add: Income tax provision       74         163       293          382
Add: Depreciation and           379        505       1,183        1,437
amortization
Add: Stock-based compensation   336        281       1,174        987
expense
Add: Adjustments to contingent
consideration earned, at fair   --        (246)     --          (231)
value
Add: Fullscope embezzlement     34         5         106          575
costs
Less: Other (income) expense,   (81)       (95)      92           10
net
Adjusted EBITDA^1               $2,514     $1,406    $5,145       $4,262
Adjusted EBITDA per diluted     $0.21      $0.12     $0.44        $0.36
share^1
Diluted shares outstanding      12,233     11,677    11,785       11,680
                                                              
Adjusted EBITDA as a % of total 9.9%       5.8%      6.7%         5.6%
revenue^1
Total revenue                   $25,399    $24,165   $76,775      $76,633
                                                              

^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 or Greg Falesnik
         1-949-574-3860
         EDGW@liolios.com

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