Edgewater Technology, Inc. (NASDAQ:EDGW), a leading consulting firm
that helps business leaders drive transformational change through
its unique selection of business and technology services and
specialized product-based solutions, reported financial results for
the quarter ended September 30, 2017.
Third Quarter 2017 Financial Results vs. Same Year-Ago
Quarter
- Total revenue was $27.4 million compared to $30.8 million;
- Service revenue was $23.6 million compared to $27.0
million;
- Gross profit was $10.3 million, or 37.7% of total revenue,
compared to $10.6 million, or 34.5% of total revenue;
- Gross profit margin related to service revenue was 39.8%
compared to 36.6%;
- Utilization was 71.3% compared to 72.9%;
- Net loss was $(172,000), or $(0.01) per diluted share, compared
to net income of $43 thousand, or $0.00 per diluted share;
- Cash flow used in operating activities was $(602,000) compared
to cash provided by operating activities of $88 thousand.
Third quarter 2017 operating cash flow was impacted by $0.9 million
in connection with severance payments made to former executive
officers of the Company; and
- Adjusted EBITDA (a non-GAAP financial measure) was $199,000, or
0.7% of total revenue (see “Non-GAAP Financial Measures” below for
further discussion of this non-GAAP term), compared to Adjusted
EBITDA of $2.0 million, or 6.5% of total revenue.
First Nine Months of 2017 Financial Results vs. Same
Year-Ago Period
- Total revenue was $86.8 million compared to $96.7 million;
- Service revenue was $73.1 million compared to $83.8
million;
- Gross profit was $31.8 million, or 36.7% of total revenue,
compared to $34.2 million, or 35.4% of total revenue;
- Gross profit margin related to service revenue was 37.7%
compared to 37.2%;
- Utilization was 73.1% compared to 73.7%;
- Net loss was $(3.7) million, or $(0.28) per diluted share,
compared to net income of $593,000, or $0.04 per diluted
share. Net loss in 2017 is impacted by $4.2 million in
severance-related charges associated with the termination of former
executive officers of the Company, $1.1 million in connection with
the termination of an investment banking services agreement, a $1.1
million increase in the valuation allowance provided against the
gross carrying value of certain deferred tax attributes and
$666,000 in consent solicitation expenses;
- Cash flow used in operating activities was $(5.8) million
compared to cash flow provided by operations of $166 thousand. 2017
cash flow was impacted by $8.1 million in acquisition-related
contingent earnout consideration payments, $2.6 million in
connection with severance payments made to former executive
officers of the Company and a $1.1 million payment as a result of
the termination of an investment banking agreement; and
- Adjusted EBITDA was $3.2 million, or 3.7% of total revenue,
compared to Adjusted EBITDA of $6.8 million, or 7.0% of total
revenue.
Management Commentary
“During the third quarter of 2017, the Company continued to
consider all options and to take steps to realize shareholder
value,” commented Jeffrey Rutherford, Edgewater’s chairman, interim
president and interim CEO. “Subsequent to second quarter of
2017, we have taken several steps towards that goal.
“We have taken several strategic actions within the technology
consulting group, transitioning certain offerings to the Microsoft
Dynamics and the Oracle business units. Furthermore, we are
evaluating the remaining service offerings to determine potential
additional steps for improving returns and increasing shareholder
value.
“The Microsoft Dynamics unit is having a solid year and
continues to be a premier middle-market manufacturing and
distribution systems and CRM implementer.
“We have made management changes in our Oracle EPM unit and are
leveraging the strength of the remaining management team to drive
the business. The Oracle EPM unit continues to adapt to
Oracle’s merger of ERP and EPM into a single channel. We
continue to believe that we have one of the premier stand-alone
Oracle EPM business units, which is well positioned to benefit from
the opportunities arising from the Oracle and EPM markets.
“As we look to the fourth quarter, considering both the wind
down of certain tech consulting projects and the seasonal impact of
the holiday season, we anticipate that fourth quarter service
revenue will be down compared to the third quarter of 2017 and the
fourth quarter of 2016.”
Conference Call and Webcast Information
Edgewater has scheduled a conference call today (Thursday,
November 2, 2017) at 10:00 a.m. Eastern time to discuss its third
quarter 2017 results.
Date: Thursday, November 2, 2017Time: 10:00 a.m. Eastern
timeDial-in number: 1-877-713-9347 / Passcode:
95624211Webcast: 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.
A replay of the conference call can be accessed via Edgewater’s
investor relations web site at http://ir.edgewater.com/ or by
dialing 1-404-537-3406 (Conference ID#: 95624211) after 1:00 p.m.
Eastern time on the same day through Wednesday, November 15,
2017.
About Edgewater
Edgewater (NASDAQ:EDGW) helps business leaders drive
transformational change through its unique selection of business
and technology services and specialized product-based
solutions.
Classic consulting disciplines (such as business advisory,
process improvement, organizational change management, M&A due
diligence, and domain expertise) are blended with technical
services (such as digital transformation, technical roadmaps, data
and analytics services, custom development, and system integration)
to help organizations get the most out of their existing IT assets
while creating new digital business models.
Delivering both on premise and in the cloud, Edgewater partners
with Oracle and Microsoft to offer Business Analytics, BI, ERP, and
CRM solutions. Edgewater Ranzal, an Oracle Platinum Consulting
Partner, provides Business Analytics solutions leveraging Oracle
EPM, BI, and Big Data technologies. As an award-winning Microsoft
partner, Edgewater Fullscope delivers Dynamics AX ERP, Business
Intelligence, and CRM solutions, with a specialty in
manufacturing.
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 2017 service revenue, the success of the steps taken to
realize shareholder value, the operating performance on the
Microsoft Dynamics business unit and its position as a premier
middle-market manufacturing and distribution systems and CRM
implementer, our ability to leverage the strength of the remaining
Oracle EPM management team, the Oracle EPM business units position
as one of the premier stand-alone Oracle EPM implementers, and the
Oracle EPM business units ability to benefit from the opportunities
arising from the Oracle and EPM markets. 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;
(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 2016 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 the
Company or inability or unwillingness of clients to pay for the
Company's services, which may impact the Company's accounting
assumptions; (9) inability to recruit and retain professionals with
the high level of information technology skills and experience
needed to provide the Company's 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 possibility that activist
stockholders may wage proxy contests or gain representation on or
control of the Board of Directors, causing disruption and/or
uncertainty to the Company's business, customer relationships and
employee retention; (13) the failure of the marketplace to embrace
advisory and product-based consulting services; (14) difficulties
and costs associated with transitioning to the cloud; (15) the
inability to achieve the expected synergies from our 2015
acquisitions; and/or (16) changes in the Company's utilization
levels. 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
2016 Annual Report on Form 10-K filed with the SEC on March 15,
2017. 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 the Company believes that the expectations in the
forward-looking statements are reasonable, it 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.
|
EDGEWATER TECHNOLOGY, INC. |
Condensed Consolidated Balance
Sheets |
(In Thousands) |
(Unaudited) |
|
September
30,2017 |
|
December 31,2016 |
Assets |
|
|
|
|
|
Cash and cash
equivalents |
$ |
12,796 |
|
$ |
19,693 |
Accounts receivable,
net |
|
25,584 |
|
|
25,661 |
Prepaid expenses and
other current assets |
|
1,173 |
|
|
1,208 |
Total
current assets |
|
39,553 |
|
|
46,562 |
Property and equipment,
net |
|
464 |
|
|
623 |
Goodwill and intangible
assets, net |
|
36,256 |
|
|
38,361 |
Deferred tax assets,
net |
|
23,181 |
|
|
19,031 |
Other assets |
|
218 |
|
|
228 |
Total
Assets |
$ |
99,672 |
|
$ |
104,805 |
|
|
|
|
|
|
Liabilities and
Stockholders’ Equity |
|
|
|
|
|
Accounts payable |
$ |
453 |
|
$ |
634 |
Accrued
liabilities |
|
13,697 |
|
|
13,497 |
Short-term portion of
contingent earnout consideration |
|
- |
|
|
8,089 |
Deferred revenue |
|
2,056 |
|
|
1,811 |
Total
current liabilities |
|
16,206 |
|
|
24,031 |
Long-term debt |
|
5,000 |
|
|
5,000 |
Total
liabilities |
|
21,206 |
|
|
29,031 |
Stockholders'
Equity |
|
78,466 |
|
|
75,774 |
Total
Liabilities and Stockholders' Equity |
$ |
99,672 |
|
$ |
104,805 |
|
|
|
|
|
|
Shares Outstanding |
|
13,959 |
|
|
12,878 |
|
|
|
|
|
|
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, |
|
|
2017 |
|
2016 |
|
2017 |
|
2016 |
|
Revenue: |
|
|
|
|
|
|
|
|
|
|
|
Service
revenue |
$ |
23,562 |
|
$ |
27,032 |
|
$ |
73,132 |
|
$ |
83,811 |
|
|
Software |
|
2,385 |
|
|
2,090 |
|
|
9,339 |
|
|
7,755 |
|
|
Reimbursable expenses |
|
1,414 |
|
|
1,704 |
|
|
4,325 |
|
|
5,182 |
|
|
Total
revenue |
|
27,361 |
|
|
30,826 |
|
|
86,796 |
|
|
96,748 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Project
and personnel costs |
|
14,185 |
|
|
17,141 |
|
|
45,574 |
|
|
52,669 |
|
|
Software
costs |
|
1,441 |
|
|
1,341 |
|
|
5,079 |
|
|
4,693 |
|
|
Reimbursable expenses |
|
1,414 |
|
|
1,704 |
|
|
4,325 |
|
|
5,182 |
|
|
Total
cost of revenue |
|
17,040 |
|
|
20,186 |
|
|
54,978 |
|
|
62,544 |
|
|
Gross
profit |
|
10,321 |
|
|
10,640 |
|
|
31,818 |
|
|
34,204 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling,
general and administrative |
|
10,312 |
|
|
8,945 |
|
|
29,231 |
|
|
28,564 |
|
|
Executive
officer severance |
|
816 |
|
|
- |
|
|
4,187 |
|
|
- |
|
|
Direct
acquisition costs |
|
- |
|
|
- |
|
|
- |
|
|
430 |
|
|
Change in
contingent consideration |
|
(856 |
) |
|
- |
|
|
(252 |
) |
|
(928 |
) |
|
Consent
solicitation expenses |
|
- |
|
|
- |
|
|
666 |
|
|
108 |
|
|
Termination of investment banking agreement |
|
- |
|
|
- |
|
|
1,125 |
|
|
- |
|
|
Depreciation and amortization |
|
782 |
|
|
1,011 |
|
|
2,376 |
|
|
3,019 |
|
|
Operating
expenses |
|
11,054 |
|
|
9,956 |
|
|
37,333 |
|
|
31,193 |
|
|
Operating
(loss) income |
|
(733 |
) |
|
684 |
|
|
(5,515 |
) |
|
3,011 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other (income) expense,
net |
|
(33 |
) |
|
568 |
|
|
200 |
|
|
1,761 |
|
|
(Loss) income before
income taxes |
|
(700 |
) |
|
116 |
|
|
(5,715 |
) |
|
1,250 |
|
|
Tax (benefit)
provision |
|
(528 |
) |
|
73 |
|
|
(1,996 |
) |
|
657 |
|
|
Net
(loss) income |
$ |
(172 |
) |
$ |
43 |
|
$ |
(3,719 |
) |
$ |
593 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BASIC (LOSS) EARNINGS
PER SHARE: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
(loss) earnings per share |
$ |
(0.01 |
) |
$ |
0.00 |
|
$ |
(0.28 |
) |
$ |
0.05 |
|
|
Weighted
average shares outstanding – Basic |
|
13,924 |
|
|
12,253 |
|
|
13,497 |
|
|
12,057 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
DILUTED (LOSS) EARNINGS
PER SHARE: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
(loss) earnings per share |
$ |
(0.01 |
) |
$ |
0.00 |
|
$ |
(0.28 |
) |
$ |
0.04 |
|
|
Weighted
average shares outstanding – Diluted |
|
13,924 |
|
|
14,090 |
|
|
13,497 |
|
|
14,080 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EDGEWATER TECHNOLOGY, INC. |
|
Condensed Consolidated Statements of Cash
Flows |
|
(In Thousands) |
|
(Unaudited) |
|
|
|
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
|
|
September 30, |
|
|
September
30, |
|
|
|
2017 |
|
|
|
2016 |
|
|
2017 |
|
|
|
2016 |
|
Cash flow
provided by (used in): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
activities |
$ |
(602 |
) |
|
$ |
88 |
|
$ |
(5,790 |
) |
|
$ |
166 |
|
Investing
activities |
|
(64 |
) |
|
|
(104 |
) |
|
(116 |
) |
|
|
(420 |
) |
Financing
activities |
|
313 |
|
|
|
1,423 |
|
|
(1,089 |
) |
|
|
377 |
|
Effect of exchange
rates on cash |
|
57 |
|
|
|
3 |
|
|
98 |
|
|
|
43 |
|
Net (decrease) increase
in cash and cash equivalents |
$ |
(296 |
) |
|
$ |
1,410 |
|
$ |
(6,897 |
) |
|
$ |
166 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EDGEWATER TECHNOLOGY,
INC.Segment Information(In
Thousands)(Unaudited)
The Company maintains three reportable segments: Oracle
(Enterprise Performance Management (“EPM”)), Microsoft (Enterprise
Resource Planning (“ERP”)) and Classic Consulting. The EPM
segment provides Business Analytics solutions leveraging Oracle
EPM, BI and Big Data technologies. The ERP segment delivers
Dynamics AX ERP, Business Intelligence and CRM solutions, primarily
in the manufacturing space. The Classic Consulting segment
provides business advisory services that are blended with technical
services to help organizations leverage investments in legacy IT
assets to create new digital business models.
Segment information for the three-month periods ended September
30, 2017 and 2016 were as follows:
|
EPM |
|
ERP |
|
Classic Consulting |
|
Corporate |
|
Consolidated |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In Thousands) |
September 30,
2017 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
revenue |
$ |
12,273 |
|
$ |
12,927 |
|
$ |
2,161 |
|
|
$ |
- |
|
|
$ |
27,361 |
|
Operating
income (loss) |
$ |
166 |
|
$ |
1,599 |
|
$ |
(471) |
|
|
$ |
(2,027) |
|
|
$ |
(733) |
|
Depreciation and amortization expense |
$ |
559 |
|
$ |
200 |
|
$ |
- |
|
|
$ |
25 |
|
|
$ |
784 |
|
September 30,
2016 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
revenue |
$ |
16,117 |
|
$ |
10,960 |
|
$ |
3,749 |
|
|
$ |
- |
|
|
$ |
30,826 |
|
Operating
income (loss) |
$ |
2,303 |
|
$ |
676 |
|
$ |
187 |
|
|
$ |
(2,482) |
|
|
$ |
684 |
|
Depreciation and amortization expense |
$ |
717 |
|
$ |
243 |
|
$ |
45 |
|
|
$ |
48 |
|
|
$ |
1,053 |
|
Segment information for the nine-month periods ended September
30, 2017 and 2016 were as follows:
|
EPM |
|
ERP |
|
Classic Consulting |
|
|
Corporate |
|
|
Consolidated |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In Thousands) |
September 30, 2017 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
revenue |
$ |
39,271 |
|
$ |
38,881 |
|
$ |
8,644 |
|
|
$ |
- |
|
|
$ |
86,796 |
|
Operating
income (loss) |
$ |
1,689 |
|
$ |
5,138 |
|
$ |
(404) |
|
|
$ |
(11,938) |
|
|
$ |
(5,515) |
|
Depreciation and amortization expense |
$ |
1,682 |
|
$ |
598 |
|
$ |
- |
|
|
$ |
104 |
|
|
$ |
2,384 |
|
September 30, 2016 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
revenue |
$ |
49,150 |
|
$ |
34,801 |
|
$ |
12,797 |
|
|
$ |
- |
|
|
$ |
96,748 |
|
Operating
income (loss) |
$ |
6,155 |
|
$ |
2,641 |
|
$ |
1,985 |
|
|
$ |
(7,770) |
|
|
$ |
3,011 |
|
Depreciation and amortization expense |
$ |
2,154 |
|
$ |
724 |
|
$ |
134 |
|
|
$ |
143 |
|
|
$ |
3,155 |
|
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 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.
Executive officer severance. We have incurred expense associated
with the termination of employment of certain named executive
officers of the Company. Our non-GAAP financial measures
exclude the severance-related expense associated with the
termination of these individuals as we believe that such expense as
it is consistent with the normally recurring operations of our
Company and it makes it difficult to make period-to-period
comparisons of our operating performance.
Consent solicitation expenses. Consent solicitation
expenses are expenses incurred to respond to activities and
inquiries of Lone Star Value Management, including its consent
solicitation and subsequent settlement agreement. The Company has
not incurred significant expenses in connection with such matters
in historical periods, and these costs are not considered core
operating activities. Management believes that it is appropriate to
exclude these costs in order to provide investors with the ability
to compare our period-over-period operating results from continuing
operations.
Other expense, net. We record periodic interest and other
(income) and expense amounts in connection with our cash and cash
equivalents, capital lease obligations, (gains) and losses on
foreign currency transactions and the recognition of the recorded
discount on accrued contingent earnout consideration. 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.
Termination of Investment Banking Agreement. During the second
quarter of 2017, we incurred expense related to the termination of
an investment banking services agreement. The expense in
included in our GAAP financial statements. Our non-GAAP financial
measures exclude the effects of the termination expense as we
believe this expense is inconsistent in amount and frequency and
make 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 (Loss) Income to
Non-GAAP Adjusted EBITDA |
|
(In Thousands) |
|
(Unaudited) |
|
|
|
|
For The Three Months
EndedSeptember 30, |
|
For The Nine Months
EndedSeptember 30, |
|
|
2017 |
|
2016 |
|
2017 |
|
2016 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reported GAAP net
(loss) income |
$ |
(172 |
) |
$ |
43 |
|
$ |
(3,719 |
) |
$ |
593 |
|
Add: Income tax
provision (benefit) |
|
(528 |
) |
|
73 |
|
|
(1,996 |
) |
|
657 |
|
Add: Depreciation and
amortization |
|
784 |
|
|
1,053 |
|
|
2,384 |
|
|
3,155 |
|
Add: Stock-based
compensation expense |
|
219 |
|
|
260 |
|
|
889 |
|
|
1,039 |
|
Add: Direct acquisition
costs |
|
- |
|
|
- |
|
|
- |
|
|
430 |
|
Add: Executive officer
severance2 |
|
785 |
|
|
- |
|
|
3,906 |
|
|
- |
|
Add: Consent
solicitation expenses |
|
- |
|
|
- |
|
|
666 |
|
|
108 |
|
Add: Other expense,
net |
|
(33 |
) |
|
568 |
|
|
200 |
|
|
1,761 |
|
Add: Termination of
investment banking agreement |
|
- |
|
|
- |
|
|
1,125 |
|
|
- |
|
Add (less): Adjustments
to contingent consideration earned, at fair value |
|
(856 |
) |
|
- |
|
|
(252 |
) |
|
(928 |
) |
Adjusted EBITDA1 |
$ |
199 |
|
$ |
1,997 |
|
$ |
3,203 |
|
$ |
6,815 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA as a %
of total revenue1 |
|
0.7 |
% |
|
6.5 |
% |
|
3.7 |
% |
|
7.0 |
% |
Total revenue |
$ |
27,361 |
|
$ |
30,826 |
|
$ |
86,796 |
|
$ |
96,748 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- Adjusted EBITDA 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 (Loss). Adjusted
EBITDA measures presented may not be comparable to similarly titled
measures presented by other companies. Adjusted EBITDA is defined
as net income (loss) less other expense, net, plus income tax
provision (benefit), depreciation and amortization, stock-based
compensation expense, adjustments to contingent consideration
earned, goodwill and intangible asset impairment charges, direct
acquisition costs, consent solicitation expenses, executive officer
severance and expense associated with the termination of an
investment banking services agreement. Adjusted EBITDA as a % of
Total Revenue is defined as Adjusted EBITDA divided by Total
Revenue.
- Executive officer severance excludes stock-based compensation
expense associated with the acceleration of vesting provisions on
certain equity awards as this expense is reported as a part of
stock-based compensation expense.
Company Contact: Timothy R. OakesChief
Financial Officer1-781-246-3343
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