Second Quarter 2014 Highlights
• Service revenue increased 14% to a record
Second Quarter 2014 Financial Results vs.
• Total revenue was
First Half of 2014 Financial Results vs. Same Year-Ago Period
• Total revenue was
"The second quarter of 2014 was a very busy and productive quarter with numerous awards and significant growth in all of our important operating metrics," said
"With an eye towards future growth, we continue to expand and invest in the breadth of our offerings on many fronts. In fact, we recently announced an alliance with three top
"Our sales and marketing teams are actively filling our sales pipeline with new opportunities, providing favorable momentum heading into the third quarter. However, we remain cautious in our ability to drive service revenue growth in the third quarter given the influence of summer vacations on our utilization rates. Taking this into consideration, we still anticipate that service revenue in the third quarter of 2014 will be slightly up sequentially and grow double-digits compared to the third quarter of 2013."
Conference Call and Webcast Information
Edgewater has scheduled a conference call today (
Dial-in number: 1-877-713-9347
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
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#: 63823304) after
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 third quarter 2014 service revenue, changes in our third quarter 2014 service revenue on both a sequential and year-over-year basis, the success of future growth initiatives and investments, and improvements in sales pipeline activity and our ability to successfully convert sales pipeline opportunities 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
Although the Company believes that the expectations in the forward-looking statements are reasonable, they cannot guarantee future results, levels of activity, performance, growth, earnings per share or achievements. However, neither the Company nor any other person assumes responsibility for the accuracy and completeness of such statements. Except as required by law, the Company undertakes no obligation to update any of the forward-looking statements after the date of this Press Release to conform such statements to actual results.
|Condensed Consolidated Balance Sheets|
|Cash and cash equivalents||$ 21,702||$ 20,321|
|Accounts receivable, net||23,922||19,842|
|Deferred tax assets, net||1,172||1,175|
|Prepaid expenses and other current assets||1,644||936|
|Total current assets||48,440||42,274|
|Property and equipment, net||1,235||1,437|
|Goodwill and intangible assets, net||12,748||13,005|
|Deferred tax assets, net||27,523||29,097|
|Total Assets||$ 90,190||$ 86,067|
|Liabilities and Stockholders' Equity|
|Accounts payable||$ 357||$ 680|
|Total current liabilities||16,809||16,721|
|Other long-term liabilities||702||760|
|Total Liabilities and Stockholders' Equity||$ 90,190||$ 86,067|
|Condensed Consolidated Statement of Operations|
|(In thousands, except per share amounts)|
|Three Months Ended ||Six Months Ended |
|Service revenue||$ 24,513||$ 21,599||$ 47,996||$ 41,295|
|Cost of revenue:|
|Project and personnel costs||14,580||13,456||28,937||26,766|
|Total cost of revenue||18,336||17,859||35,843||34,195|
|Selling, general and administrative||8,631||8,072||17,207||15,569|
|Lease abandonment charge||400||--||400||--|
|Depreciation and amortization||228||308||475||623|
|Other (income) expense, net||(45)||69||1||173|
|Income before income taxes||3,206||1,554||4,439||744|
|Net income||$ 1,721||$ 1,414||$ 2,432||$ 525|
|BASIC EARNINGS PER SHARE:|
|Basic earnings per share||$ 0.15||$ 0.13||$ 0.22||$ 0.05|
|Weighted average shares outstanding – Basic||11,108||10,791||11,038||10,834|
|DILUTED EARNINGS PER SHARE:|
|Diluted earnings per share||$ 0.13||$ 0.12||$ 0.19||$ 0.05|
|Weighted average shares outstanding – Diluted||13,144||11,428||12,896||11,447|
|Condensed Consolidated Statements of Cash Flows|
|Three Months Ended ||Six Months Ended |
|Cash flow provided by (used in):|
|Effect of exchange rates on cash||--||4||(2)||(5)|
|Net increase (decrease) in cash and 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
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 evaluate core 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.
Lease abandonment charge. During 2011 and again in the second quarter of 2014, we recorded a non-cash charge of
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.
|Reconciliation of GAAP Net Income to Non-GAAP Adjusted EBITDA|
|(In Thousands, except per share amounts)|
|For The Three Months Ended ||For The Six Months Ended |
|Reported GAAP net income||$ 1,721||$ 1,414||$ 2,432||$ 525|
|Add: Income tax provision||1,485||140||2,007||219|
|Add: Depreciation and amortization||282||426||582||804|
|Add: Stock-based compensation expense||424||346||811||838|
|Add: Lease abandonment charge||400||--||400||--|
|Less: Other (income) expense, net||(45)||69||1||173|
|Adjusted EBITDA1||$ 2,733||$ 2,433||$ 4,704||$ 2,631|
|Adjusted EBITDA per diluted share1||$ 0.21||$ 0.21||$ 0.36||$ 0.23|
|Diluted shares outstanding||13,144||11,428||12,896||11,447|
|Adjusted EBITDA as a % of total revenue1||9.4 %||8.7 %||8.3 %||5.1 %|
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 |
CONTACT: Company Contact:
Timothy R. OakesChief Financial Officer 1-781-246-3343 Investor Relations: Liolios Group, Inc. Cody Slachor Greg Falesnik1-949-574-3860 EDGW@liolios.com