Edgewater Technology Inc. has a market cap of $34 million; its shares were traded at around $2.78 with and P/S ratio of 0.7. EDGW is in the portfolios of Jim Simons of Renaissance Technologies LLC, John Rogers of ARIEL CAPITAL MANAGEMENT LLC.
This is the annual revenues and earnings per share of EDGW over the last 10 years. For detailed 10-year financial data and charts, go to 10-Year Financials of EDGW.
Highlight of Business Operations:Revenue. The Company derives its service revenue from time and materials-based contracts, fixed-price contracts and fixed-fee arrangements. Time and materials-based contracts represented 93.7% and 93.0% of service revenue for the three- and six-month periods ended June 30, 2010, respectively. Time and materials-based contracts represented 94.2% and 95.6% of service revenue for the three- and six-month periods ended June 30, 2009, respectively. Revenue under time and materials contracts is recognized as services are rendered and performed at contractually agreed upon rates. Revenue pursuant to fixed-price contracts is recognized under the proportional performance method of accounting. Fixed-price contracts represented 4.2% and 4.9% of service revenue for the three- and six-month periods ended June 30, 2010, respectively. Fixed-price contracts represented 3.1% and 2.0% of service revenue for the three- and six-month periods ended June 30, 2009, respectively. Revenue under fixed-fee contracts is recognized ratably over the contract period, as outlined within the respective contract. Fixed-fee contracts represented 2.1% of service revenue during the three- and six-month periods ended June 30, 2010. Fixed-fee contracts represented 2.7% and 2.4% of service revenue for the three- and six-month periods ended June 30, 2009, respectively.
Utilization, which is the rate at which we are able to generate revenue from our consultants, improved to 75.7% during the second quarter of 2010 compared to 62.5% during the second quarter of 2009. On a year-to-date basis, utilization for the first six months of 2010 improved to 75.5% compared to utilization of 65.2% during the first six months of 2009. We typically target utilization in a range from 78%-82%. This objective is influenced by a variety of factors, including customer demand for IT spending and general economic circumstances. The improvement in our current quarter and year-to-date utilization rates are the cumulative effects of the Fullscope Acquisition and the current and sequential quarterly growth in our Core Service Offerings service revenue.
Software revenue, on an annual basis, has traditionally represented less than 5% of our total revenue. During the three- and six-month periods ended June 30, 2010, software revenue totaled $3.8 million, or 16.1% of total revenue, and $6.7 million, or 15.3% of total revenue, respectively. During the three- and six-month periods ended June 30, 2009, software revenue totaled $94 thousand, or 0.8% of total revenue, and $463 thousand, or 1.7% of total revenue, respectively. The year-over-year increase in software revenue during the 2010 quarterly and year-to-date periods of 2010 is primarily driven by the Fullscope Acquisition. We anticipate that software revenue will continue to represent more than 10% of our total revenue in 2010. Software revenue is expected to fluctuate between quarters dependent upon our customers demand for such third party off-the-shelf software. Our historical gross margins related to software revenue have generally been much lower than those achieved on our consulting services. Fullscopes software revenue, which will represent the majority of our anticipated software revenue in 2010, has historically been sold at a higher margin than our EPM-related software. We believe that our future gross margins on software revenue will increase above our historically achieved margins as a result of the Fullscope Acquisition.
Cost of Revenue. Cost of revenue primarily consists of project personnel costs principally related to salaries, payroll taxes, employee benefits, software costs and travel expenses for personnel dedicated to customer projects. These costs represent the most significant expense we incur in providing our services. In total, cost of revenue increased by $5.9 million, or 65.9%, to $14.8 million for the three-month period ended June 30, 2010 compared to $8.9 million in the comparative 2009 quarterly period. Similarly, cost of revenue increased by $9.2 million, or 48.1%, to $28.3 million during the year-to-date period ended June 30, 2010 compared to $19.1 million in the comparative 2009 year-to-date period.
Project and personnel costs represented 45.2% and 47.9% of total revenue during the three- and six-month periods ended June 30, 2010, respectively, as compared to 65.7% and 62.9% of total revenue during the three- and six-month periods ended June 30, 2009, respectively. The decrease, as a percentage of total revenue, was primarily related to a reduction in salary and wages in the Companys Core Service Offerings and to a lesser extent the comparative improvement in billable consultant utilization.
Read the The complete Report