Edgewater Reports Fourth Quarter and Full Year 2013 Results

Edgewater Reports Fourth Quarter and Full Year 2013 Results

Achieves Record Fourth Quarter and Full Year Service Revenue

WAKEFIELD, Mass., Feb. 26, 2014 (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 fourth quarter and full year ended December 31, 2013.

Fourth Quarter 2013 Highlights

  *Service revenue increased 12% to $21.9 million;
  *Adjusted EBITDA increased 97% to $2.7 million;
  *Increased cash and cash equivalents to $20.3 million, compared to $16.7
    million in the fourth quarter of 2012; and
  *Successfully completed Microsoft Process Industries 2 ("PI2") development
    and training services.

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

  *Total revenue was $26.8 million compared to $24.2 million;
  *Service revenue was $21.9 million compared to $19.5 million;
  *Gross profit was $10.7 million, or 40.1% of total revenue, compared to
    $8.4 million, or 34.8% of total revenue;
  *Gross profit margin related to service revenue was 41.2% compared to
    36.0%;
  *Utilization was 73.7% compared to 67.7%;
  *Net income was $32.4 million, or $2.55 per diluted share, compared to net
    income of $345,000, or $0.03 per diluted share. The reported net income
    for the fourth quarter of 2013 included a $30.4 million tax benefit in
    connection with the reversal of a majority of the Company's valuation
    allowance against the carrying value of its gross deferred tax assets;
  *Adjusted EBITDA (a non-GAAP measure) was $2.7 million, or 10.1% 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 5.7% of total revenue and $0.12 per diluted
    share; and
  *Cash flow provided by operating activities was $2.4 million compared to
    cash flow provided by operating activities of $3.9 million.

Full Year 2013 Highlights

  *Adjusted EBITDA increased 39% to $7.9 million;
  *Secured first time engagements with 92 new customers;
  *Repurchased 365,000 shares of common stock at an aggregate purchase price
    of $1.5 million, or $4.14 per share;
  *Secured a $10.0 million credit facility to fund strategic growth
    initiatives; and
  *Acquired a Microsoft Dynamics-based Trade Promotion Management software
    asset and intellectual property.

Full Year 2013 Financial Results vs. Same Year-Ago Period

  *Total revenue was $103.6 million compared to $100.9 million;
  *Service revenue was $84.6 million compared to $83.1 million;
  *Gross profit was $37.6 million, or 36.3% of total revenue, compared to
    $35.3 million, or 35.0% of total revenue;
  *Gross profit margin related to service revenue was 37.7% compared to
    37.9%;
  *Utilization was 72.4% compared to 71.5%;
  *Net income was $34.7 million, or $2.88 per diluted share, compared to net
    income of $1.4 million, or $0.13 per diluted share. The reported net
    income for full year 2013 included a $30.4 million tax benefit in
    connection with the reversal of a majority of the Company's valuation
    allowance against the carrying value of its gross deferred tax assets;
  *Adjusted EBITDA (a non-GAAP measure) was $7.9 million, or 7.6% of total
    revenue and $0.65 per diluted share (see "Non-GAAP Financial Measures"
    below for further discussion of this non-GAAP term), compared to adjusted
    EBITDA of $5.7 million, or 5.6% of total revenue and $0.49 per diluted
    share; and
  *Cash flow provided by operating activities was $4.7 million compared to
    cash flow provided by operating activities of $8.8 million.

Management Commentary

"During the fourth quarter of 2013, our profitability was in part fueled by an
improvement in billable consultant utilization and software sales," said
Shirley Singleton, Edgewater's chairman, president and CEO. "We continued to
experience organic revenue growth while keeping our expenses in-line and
generated leverage by combining our consulting services with the development
and monetization of intellectual property. Further, we were encouraged by the
robust sales activity and closings we experienced across each of our service
offering channels during the quarter.

"Our Microsoft Dynamics AX ERP offering was particularly strong during the
fourth quarter and helped secure many of the large-scale engagements we closed
in late December. As we have stated, we will continue to expand our expertise
in the Microsoft channel by using vertically focused intellectual property
that can serve as a branded sales differentiator and delivery accelerant.

"Given the strength of our fourth quarter signings, we anticipate that service
revenue in the first quarter of 2014 will be up sequentially and will
experience high single-digit growth compared to the first quarter of 2013."

Income Tax Benefit

The Company has deferred tax assets that have arisen as a result of timing
differences (primarily generated in connection with historical goodwill and
intangible asset impairment charges), net operating loss carryforwards and tax
credits. Since 2010, the Company has provided a full valuation allowance
against its deferred tax assets, reducing the carrying value of these assets
on its balance sheet to zero.

Edgewater is required to continually evaluate the need for a valuation
allowance and has determined it is more likely than not that in the future the
Company will generate sufficient pre-tax income to utilize substantially all
of its deferred tax assets. An important factor in the assessment was that
during 2013, the Company moved into a three-year cumulative pre-tax profit
position. Therefore, as required by the applicable accounting rules, the
Company reduced the previously established valuation allowance, which has
resulted in a non-cash income tax benefit during the fourth quarter of $30.4
million.

Conference Call and Webcast Information

Edgewater has scheduled a conference call today (Wednesday, February 26, 2014)
at 10:00 a.m. Eastern time to discuss its fourth quarter and full year 2013
results.

Date: Wednesday, February 26, 2014

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#: 35316343) after 1:00 p.m. Eastern time through March 12,
2014.

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 first quarter 2014 service revenue, development and
monetization of intellectual property, sales of our Dynamics AX ERP service
offering, our ability to expand our expertise in the Microsoft channel by
using vertically focused intellectual property that can serve as a branded
sales differentiator and delivery accelerant, improvements in sales pipeline
activity and the conversion of our sales pipeline to signed contracts. 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)

                                          December 31, December 31,
                                           2013         2012
Assets                                                 
Cash and cash equivalents                  $ 20,321     $ 16,651
Accounts receivable, net                   19,842       18,281
Deferred tax assets, net                   1,175        6
Prepaid expenses and other current assets  936          1,412
Total current assets                       42,274       36,350
Property and equipment, net                1,437        1,949
Goodwill and intangible assets, net        13,005       13,243
Deferred tax assets, net                   29,097       --
Other assets                               254          247
Total Assets                               $ 86,067     $ 51,789
                                                      
Liabilities and Stockholders' Equity                   
Accounts payable                           $ 680        $ 593
Accrued liabilities                        14,326       14,280
Deferred revenue                           1,715        2,969
Total current liabilities                  16,721       17,842
Other long-term liabilities                760          1,272
Total liabilities                          17,481       19,114
Stockholders' Equity                       68,586       32,675
Total Liabilities and Stockholders' Equity $ 86,067     $ 51,789
                                                      
Shares Outstanding                         11,049       10,897



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,
                                       2013      2012     2013       2012
Revenue:                                                           
Service revenue                         $ 21,932  $ 19,522 $ 84,616   $ 83,137
Software                                3,019     3,152    11,587     10,190
Reimbursable expenses                   1,830     1,574    7,353      7,554
Total revenue                           26,781    24,248   103,556    100,881
                                                                  
Cost of revenue:                                                   
Project and personnel costs             12,904    12,487   52,741     51,594
Software costs                          1,313     1,745    5,890      6,454
Reimbursable expenses                   1,830     1,574    7,353      7,554
Total cost of revenue                   16,047    15,806   65,984     65,602
Gross profit                            10,734    8,442    37,572    35,279
                                                                  
Selling, general and administrative     8,393     7,545    31,518     31,202
Embezzlement costs                      12       17       118       592
Changes in fair value of contingent     --        --       --        (231)
consideration
Depreciation and amortization           300       459      1,225      1,801
Operating income                        2,029     421      4,711      1,915
                                                                  
Other expense, net                      --     57      92         67
Income before income taxes              2,029     364    4,619      1,848
                                                                  
Tax (benefit) provision                 (30,382) 19       (30,089)  401
Net income                              $ 32,411  $ 345    $ 34,708   $ 1,447
                                                                  
BASIC EARNINGS PER SHARE:                                          
Basic earnings per share                $ 2.99    $ 0.03   $ 3.21     $ 0.13
Weighted average shares outstanding –   10,855    10,947   10,813     11,180
Basic
                                                                  
DILUTED EARNINGS PER SHARE:                                        
Diluted earnings per share              $ 2.55    $ 0.03   $ 2.88     $ 0.13
Weighted average shares outstanding –   12,723    11,358   12,031     11,589
Diluted



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

                                       Three Months Ended Twelve Months Ended
                                       December 31,       December 31,
                                       2013      2012     2013      2012
Cash flow provided by (used in):                                  
Operating activities                    $ 2,414   $ 3,922  $ 4,733   $ 8,836
Investing activities                    (38)      (64)     (807)     (592)
Financing activities                    454       (186)    (266)     (1,932)
Effect of exchange rates on cash        4         5        10        6
Net increase in cash andcash           $ 2,834   $ 3,677  $ 3,670   $ 6,318
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 Ended   For The Twelve Months Ended
                      December 31,                 December 31,
                     2013            2012         2013          2012
                                                             
Reported GAAP net     $ 32,411        $345        $ 34,708      $1,447
income
Add: Income tax       (30,383)       19           (30,089)     401
(benefit) provision
Add: Depreciation and 370             520          1,553         1,957
amortization
Add: Stock-based      295             415          1,469         1,419
compensation expense
Add: Adjustments to
contingent            --             --           --           (231)
consideration earned,
at fair value
Add: Fullscope        12              17           118           592
embezzlement costs
Less: Other expense,  --             57          92            67
net
Adjusted EBITDA^1     $2,705         $1,373      $7,851       $5,652
Adjusted EBITDA per   $0.21          $0.12       $0.65        $0.49
diluted share^1
Diluted shares        12,723          11,358       12,031        11,589
outstanding
                                                             
Adjusted EBITDA as a  10.1%           5.7%         7.6%          5.6%
% of total revenue^1
Total revenue         $ 26,781        $ 24,248     $ 103,556     $ 100,881

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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