Edgewater Technology Inc. Reports Operating Results (10-Q)
Edgewater Technology Inc. is an e-business consulting and systems integration firm that specializes in providing middle-market companies with tailored solutions for today\'s Internet-centric environment. Edgewater has taken a partnership approach with its clients targeting strategic mission-critical applications. Edgewater Technology services its client base by leveraging a combination of leading-edge technologies and proven reengineering techniques provided by its network of national solutions centers strategically positioned across the United States. Edgewater Technology Inc. has a market cap of $33.7 million; its shares were traded at around $2.75 with a P/E ratio of 25 and P/S ratio of 0.5. Highlight of Business Operations: cost reductions. These cost saving measures resulted in severance obligations totaling $387 thousand, of which $201 thousand was paid during the second quarter, with the remaining $186 thousand scheduled to be paid during the third and fourth quarter of 2009. Severance costs recorded to cost of revenue and selling, general and administrative expenses totaled $375 thousand and $12 thousand, respectively. As the severance payments substantially offset the benefits of related lower salary expense, there was an immaterial amount of net cost savings impact during the current quarter. These cost savings measures should contribute towards annualized savings of approximately $3.9 million, from which the Company should begin to recognize a benefit during the third quarter of 2009.
Cash provided by operating activities was $1.4 million and $3.6 million for the three months ended June 30, 2009 and 2008, respectively. Net cash provided during the three months ended June 30, 2009 was largely attributable to the positive cash flow generated from the $2.1 million current quarter collection of accounts receivable, $694 thousand in depreciation and amortization, $684 thousand in accrued payroll and wage-related liabilities and $339 thousand in stock-based compensation expense. These cash inflows were offset by cash outflows related to the $1.3 million current quarter operating loss, a $935 thousand increase in deferred tax assets and a $521 thousand decrease in accounts payable and accrued expenses.
Cash used in operating activities was $1.0 million and $127 thousand for the six months ended June 30, 2009 and 2008, respectively. Net cash used in operating activities during the six months ended June 30, 2009 was the result of outflows attributable to the reported year-to-date loss of $1.7 million, an increase in the Companys deferred tax assets of $1.3 million in connection with the reported year-to-date net loss, an $812 thousand increase in prepaid expenses in connection with the annual renewal of the Companys current year insurance premiums, $743 thousand in net payments of salaries and wage- related
Net cash used in operating activities during the six months ended June 30, 2008 was the result of outflows attributable to the reported year-to-date loss of $19.9 million, an increase in the Companys deferred tax assets of $4.4 million in connection with the impairment charges and related net loss, a $1.0 million increase in accounts receivable balances in connection with the Companys revenue growth and $2.2 million in net payments of salaries and wage-related expenses including bonus payments under the Companys 2007 performance-based bonus plans and commissions. These outflows were largely offset by positive inflows of cash related to the $24.7 million goodwill and intangible asset impairment charge, $2.1 million in depreciation and amortization expense of which a significant portion of the amortization expense related to the 2007 Acquisitions and $913 thousand in stock-based compensation.
Net cash (used in) provided by investing activities was $(2.1) million and $1.6 million during the six months ended June 30, 2009 and 2008, respectively. Cash used in investing activities for the six months ended June 30, 2009 was primarily the result of $2.0 million in net purchases of marketable securities. Cash provided by investing activities for the six months ended June 30, 2008 was attributable to $1.9 million in net redemptions of marketable securities, which were offset by capital expenditures of $194 thousand and cash outlays related to other direct costs associated with the Vertical Pitch Acquisition of $114 thousand.
Net cash (used in) provided by financing activities was $(147) thousand and $467 thousand in the three-month periods ended June 30, 2009 and 2008, respectively. Additionally, net cash (used in) provided by financing activities was $(180) thousand and $654 thousand for the six months ended June 30, 2009 and 2008, respectively. The net cash provided by financing activities in each of the reported three- and six-month periods is primarily the result of inflows of cash received in connection with stock option exercises and proceeds from the Companys employee stock purchase program. These inflows were offset by outflows related to repurchases of common stock and principal payment on capital lease obligations in each of the respective three- and six-month periods ended June 30, 2009 and 2008. The Company repurchased 79 thousand and 114 thousand shares of its common stock during the three- and six-month periods ended June 30, 2009, respectively at an aggregate purchase value of $214 thousand and $311 thousand, respectively. During 2008, the Company did not repurchase any shares of its common stock during the three-month period ended June 30, 2008. During the six-month period ended June 30, 2008, the Company repurchased 500 shares of its common stock at an aggregate purchase value of $3 thousand.
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