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Edgewater Technology, Inc. (NASDAQ:EDGW)

Q4 2009 Earnings Call Transcript

March 3, 2010 10:00 am ET

Executives

Barbara Warren-Sica – VP, Corporate Communications

Shirley Singleton – Chairman, President and CEO

Timothy Oakes – CFO

Dave Clancey – EVP, Chief Strategy and Technology Officer

Analysts

Arnie Ursaner – CJS Securities

Amarish Mehta – Arcadia Capital

Operator

Good morning and welcome ladies and gentlemen, to Edgewater Technology Inc.'s fourth quarter and year-end 2009 financial results conference call. At this time I would like to inform you that this conference is being recorded for re-broadcast and that all participants are in a listen-only mode. At the request of the company, we will open the up the conference for questions and answers following the presentation.

I will now turn the conference over to Ms. Barbara Warren-Sica of Investor Relations for introductions.

Barbara Warren-Sica

Thank you. Good morning, everyone and welcome again to Edgewater Technology's fourth quarter and year-end 2009 financial results call. I am here today with Shirley Singleton, Edgewater's Chairman, President and CEO, David Clancey, Edgewater's Executive Vice President, Chief Strategy and Technology Officer and Timothy Oakes, Edgewater's Chief Financial Officer.

Before we begin, I would like to remind everyone that today's call may contain forward-looking statements as described under the securities acts. Investors are cautioned that such statements could involve risk and uncertainties that could cause actual results to differ from current expectations with respect to such statements. These types of statements and the underlying factors related to these statements are listed and are reported in the filed information with the Securities and Exchange Commission, as well with as in the company's press release that was distributed earlier this morning. The statements made during today's call are made only as of the date of today's call. And the company undertakes no obligation to update the forward-looking statements to reflect subsequent events or circumstances. With that, I will now turn the call over to Shirley. Shirley?

Shirley Singleton

Thanks, Barbara. Good morning, everyone. After five successive quarters of struggling with the effects of reduced IT spending, I am really pleased to tell you that we feel our business has stabilized and actually as I speak today, we are putting, showing some signs of organic growth.

We saw improvement in our pipeline at the tail end of Q3. I mentioned at the last earnings call I thought that we may be stabilizing and that trend continued into Q4. We're pleased to report that our revenues were in line. And that I think this is probably the big take away is that utilization continued to improve along the quarter. And that is a key metric of our business.

During Q4, we secured business from 11 new customers. I know you're going to recognize some of these names. The new wins came from Apple, Alaska National, AstraZeneca, University of British Columbia and Cummings. On the last day of the quarter, December 31, we worked really late that evening and we skipped the parties.

We closed a deal with Merck – with Fullscope Inc. who was a large Microsoft shop and we're going to talk about that in a few minutes. Fullscope has just been named the number one Microsoft dynamics AX provider in North America. And I am happy that they're joining our ranks along with another award-winning piece of business that we own which is our Oracle channel. Our planning, budgeting and consolidation business has been recognized as top five worldwide. But with that, let's have Tim get into the numbers. There's a lot to talk about. Go ahead, Tim.

Timothy Oakes

Thank you, Shirley. Good morning, everyone. We'll start the financial portion of this morning's earning call by first providing an overview of revenue for the fourth quarter, then move on to discussing our 2009 financial results, some key operating metrics, a few comments on some of our balance sheet items. And finally a quick review of some high level financial metrics related to Fullscope. After that, I'll pass the call back to Shirley for final comments.

Before we start, it is necessary to remind everyone of the timing of the Fullscope acquisition. The acquisition occurred after the close of business on December 31. It's an important fact to highlight, as it means that our fourth quarter revenues and operating results do not reflect or incorporate any of Fullscope's fourth quarter operating activities.

Fullscope's operating results will be reported in connection with Edgewater's operating results, beginning on January 1, 2010. Conversely, as the close of the transaction occurred prior to the end of our fiscal year, our year-end balance sheet does reflect our initial fair value purchase price estimates as they relate to the assets acquired, assumed liabilities, the identified and tangible assets and residual goodwill. In an attempt to assist your review of our year-end balance sheet information, we would like to point you to the press release we issued earlier this morning, which is posted on our Investor Relations website.

In our press release, we provided a summary of our initial fair value estimates, which can be used to isolate the impacts of the Fullscope transaction, that it has on our December 31 balance sheet information. With that, I'll begin a recap of the quarter.

Total revenue for the fourth quarter was $11.4 million, compared to $16.3 million in the fourth quarter of 2008. Service revenue was $10.7 million during the fourth quarter, compared to $15 million in the fourth quarter of 2008. The $4.9 million year-over-year decrease in total revenue is the result of the continued reduction in IT spending, associated with the economic downturn and to a lesser extent the reduction in spending by our legacy accounts. These accounts accounted for approximately 20% of the comparative quarterly decrease in our service revenue.

From a full year perspective, our total revenue decreased by $23.6 million from $73.7 million in 2008, to $50.1 million in 2009. Comparatively, service revenue decreased by $22 million on a year-over-year basis. As we have highlighted in our prior earnings calls, our comparative 2009 and 2008 service revenue has been significantly impacted by the loss of revenue associated with three of our historically significant legacy accounts. These three accounts combined accounted for 52% of the comparative year-over-year decrease in reported service revenue.

Our fourth quarter service revenue of $10.7 million meets the fourth quarter guidance, we issued in connection with our third quarter earnings call. At that time, given the current concerns we had with respect to the seasonal influences and their potential impact, limiting our ability to generate service revenue. We called for service revenue to be flat to slightly down. At the end of the fourth quarter, we are pleased to report that we were able to meet our service revenue expectations.

In addition to the positive news related to our meeting service revenue expectations, we noticed an uptick in business activity during the fourth quarter. We entered into a number of new engagements, most related to our classic IT service offering which had been lagging through most of 2009. Also with regard to building our pipeline, we had our strongest quarter of the year as it relates to bid and proposal activities. During the fourth quarter, we engaged on new projects with 11 new customers, giving us a total of 63 new customer engagements in the 2009 full year period. Comparatively, we secured business with 81 new customers in the 2008 full year period.

Breaking down service revenue for the current quarter, we note that EPM-related engagements represented approximately 70% of our fourth quarter service revenue, as compared to 61% in the fourth quarter of 2008. Technology consulting engagements represented 26% of our fourth quarter service revenue compared to 32% in the comparative 2008 quarter. Management consulting engagements represented 4% of fourth quarter service revenue as compared to 7% in the fourth quarter of 2008.

It should be noted that as a result of the Fullscope acquisition, we would expect a diversification of our 2010 service revenues as we incorporate Fullscope's ERP-related consulting services into our current offering mix. We believe that this will result in more evenly distributed service revenues across our offering base as we enter 2010.

Touching upon revenue concentration, on a year-over-year basis, our top ten customers represented 31.4 of our total service revenue. This is down from 2008, during which our top ten customers accounted for 35.9% of our total service revenue. We believe that this change reflects a shortening of the project cycle of our classic IT consulting engagements, combined with our higher concentration of EPM-related engagements, which is resulting in more evenly distributed service revenues across our entire customer base.

Now, I'll cover some operating results and metrics for the fourth quarter, starting with gross profit margin related to service revenue. Our gross profit margin on service revenue for the fourth quarter was 38.4%, compared to 41.2% in the fourth quarter of 2008. The primary driver of the year-over-year decrease is the decline in quarterly service revenue, and a reduction in our billable consultant utilization range. Utilization during the current quarter was 66.5%, compared to 68.3% in the fourth quarter of 2008.

It is worthwhile to mention that on a sequential quarterly basis, we managed to show a modest improvement in our billable consultant utilization rate, increasing from 65.1% in the third quarter to 66.5% in the fourth quarter. This increase came in a quarter in which we typically experience a sequential drop in utilization, as a result of the seasonal influences we experience in the fourth quarter.

As of the end of the current quarter, we have a total of 180 billable consultants which excludes any billable consultants acquired in connection with the Fullscope acquisition. On a year-over-year basis, we have reduced our billable consultant head count by 61 compared to total billables of 241 at the end of 2008. As a result of the Fullscope acquisition, we will increase our total number of billable consultants by 62.

It should be noted that this number includes 15 billable resources that are fully dedicated to Fullscope's business process unit which is the unit that will provide the services upon which Fullscope's earnout is based. This earnout is essentially a pass-through of the positive net income generated by the Fullscope business process unit, over an 18 month period, after close.

Moving on to SG&A expenses, fourth quarter SG&A expenses were $4.9 million, compared to $4.8 million during the fourth quarter of 2008. While we have managed to significantly reduce our SG&A expenses, our current quarter SG&A expense includes $583,000 in transaction costs, associated with the Fullscope acquisition. These costs, prior to our adoption of FAS 141R, were capitalizable. However, they are now treated as period costs in our expense in the period in which the services are performed. Excluding these costs, we would have decreased our comparative quarterly SG&A expenses in the fourth quarter by approximately $509,000.

On a year-over-year basis, as a direct result of our across the board cost-cutting initiatives, we have reduced SG&A expenses by $4.8 million. Quickly, touching upon depreciation and amortization, on a year-over-year basis, depreciation and amortization decreased by $195,000 during the fourth quarter. The current quarter decrease is related to the impairment charges recognized by the company during the second and fourth quarters of 2008, as well as the completion of the amortization process for certain intangible assets recognized in connection with our October 2004 acquisition of Ranzal & Associates.

As we move into the first quarter of 2010, we currently expect quarterly amortization expense to increase to approximately $770,000 per quarter, reflecting amortization of intangibles from the Fullscope acquisition. Net loss in the current quarter was $1.9 million, or $0.15 per diluted share, compared to a net loss of $27.9 million or $2.30 per diluted share in the fourth quarter of 2008. The comparative quarterly changes in reported net loss are attributable to the absence in the current quarter of the impairment charges recognized during the fourth quarter of 2008. And to a lesser extent the comparative quarterly decline in revenue in our billable consultant utilization rate.

Focusing briefly upon our non-GAAP results, adjusted EBITDA for the fourth quarter resulted in a loss of $752,000, primarily attributable to the transaction costs recognized in the current quarter, compared to adjusted EBITDA of $1.5 million or $0.12 per diluted share in the year ago quarter.

Stock-based compensation in the quarter amounted to $231,000 compared to $342,000 in the fourth quarter of 2008. With respect to cash flow, we generated positive cash flow of $57,000 in the current quarter, compared to $5.5 million in the comparative 2008 quarterly period. It should be noted that due to blackout restrictions associated with our acquisition-related discussions during the fourth quarter, we did not make any repurchases of our common stock under our stock repurchase program. As of December 31, we had a remaining stock repurchase authorization of $2.8 million.

As a result of our acquisition of Fullscope, our balance sheet has materially changed as of December 31. Working capital amounted to $15.7 million, with our cash and marketable securities representing $12.7 million, or $1.05 per diluted share. Our accounts receivable totaled $18 million as of the end of the fourth quarter, which includes $9.4 million in acquired receivables from Fullscope. Additionally, our DSO metric was 64 days, compared to 53 days at the end of the third quarter.

Before moving on to the Fullscope acquisition, we would like to emphasize that we are very pleased with how we are positioned as we enter 2010. We are coming off a traditionally tough quarter in which we maintained service revenue, saw an upward trend in utilization and see positive traction in bid and proposal activity, combined with the fact we have made the necessary changes to our cost structure. Each of these with the incremental effects of the Fullscope acquisition should, if current trends continue, provide us with the proper leverage to return to profitability. It will be a slow process as we begin the New Year, remembering that FICA limits reset during the first quarter. However, we have a fairly positive outlook as we enter the first quarter of 2010.

With respect to the Fullscope acquisition, as Fullscope is deemed to be a material acquisition, we are required to file both historical and pro forma financial information related to Fullscope. We anticipate that we will file this information with the SEC on or before the March 16 due date. Prior to the issuance of Fullscope's financial information, we think it is helpful to touch upon some of Fullscope's high-level metrics related to head count, revenue, gross profit margins and EBITDA. With respect to head count, we will increase our total full-time employee head count, excluding contractors, by 85. Of these, 62 are billable consultants. And as noted above, 15 of these consultants will be directly associated with Fullscope's business process unit.

Revenue in 2009, excluding amounts associated with Fullscope's business process unit, Fullscope had total revenues of approximately $27 million. Breaking this down, $13 million was related to service revenue, $12 million was related to software, and $2 million was related to reimbursable expenses.

As we stated in our earnings release, software revenue will become a greater part of our quarterly and annual revenue number. As a result, in the future we will focus more on total revenue rather than service revenue. With respect to gross profit margins, as we evaluate Fullscope's historical and pro forma operating results, we note that total gross profit margins have ranged in the mid to high 30s. Total gross profit margins on service revenues have historically been higher than those on software. Therefore, the mix between service and software revenues during a given period will impact – will have an impact on Fullscope's consolidated gross profit.

With respect to EBITDA, based on our current review of the financial information we note that Fullscope's EBITDA margins have ranged in the low double-digits. Again this information is high level. And in historical and pro forma information, we will file with the SEC later this month will provide more detail. However, we think it is important for investors to have some sense of how the Fullscope acquisition is expected to impact our future operating results.

That concludes our fourth quarter financial results and with that I'll now pass the call back to Shirley.

Shirley Singleton

Thanks, Tim. Good job. I mentioned that the last earnings call that we felt we had formed a new baseline. And given reasonable macro economic trends that we might have a chance to return to a growth story and I think that's where we are. Entering 2010, we are pleased with the opportunities that we see ahead of us, not only will we feel the effects of the full effect of the Fullscope acquisition but we believe that we are going to put up some high single-digit, if not double-digit, organic growth in 2010 and that's really exciting for us.

As Tim mentioned, Q1 has got some ramp-ups with FICA and all of that. And Robin's business, the EPM business tends to be a little bit slower in January and February that we've mentioned in many years past. So we anticipate that service revenue would be flat to up. I would – I'm biased towards the up, but we'll see what happens. Compared to Q1 2009 and that total revenue will be up year-over-year.

With that, Deana, we'd like to open it up for questions.

Question-and-Answer Session

Operator

Thank you. (Operator Instructions) And our first question will come from Arnie Ursaner with CJS Securities.

Arnie Ursaner – CJS Securities

Hi, good morning. My first question just as a clarification, Shirley, you mentioned service revenue in Q1 you thought would be flat to up year-over-year in Q1. Clearly, you have – and I believe are implying that's on a core basis not including the impact of the acquisition.

Shirley Singleton

That does include the acquisition on service revenue.

Arnie Ursaner – CJS Securities

Does include the acquisition?

Shirley Singleton

Yes.

Arnie Ursaner – CJS Securities

Do you expect your core revenue in service to be up in Q1 year-over-year?

Shirley Singleton

Yes. I do.

Timothy Oakes

Arnie, year-over-year or sequentially?

Shirley Singleton

Sequentially.

Arnie Ursaner – CJS Securities

Let's be clear. Year-over-year where, again you're going to be adding in somewhere in the neighborhood of 27 or more of revenue year-over-year, call it $12 million of service revenue. So to be up year-over-year, if you are including the acquisition is not very meaningful. So I just want to be absolutely clear, are you talking about on a core basis or up because you're including the acquisition?

Timothy Oakes

Arnie, that comment is made of because of the Fullscope acquisition. So if you look at the incremental increase to revenue on a year-over-year basis. The statement would be based with the inclusion of Fullscope. We would expect to be up over the service revenue number and the total revenue number that we reported in Q1 of '09.

Arnie Ursaner – CJS Securities

Okay.

Timothy Oakes

And I think that…

Arnie Ursaner – CJS Securities

You mentioned you expect your core number to be up in the high-single digits for the year. Do you expect it to be up year-over-year in Q1 on the core business?

Shirley Singleton

On the core, no.

Timothy Oakes

No. Arnie, I mean that is – I mean that is…

Shirley Singleton

The core business was 13 and change last…

Timothy Oakes

Yeah. That service revenue number in Q1 of '09 on the core business was $14.8 million, $14.9 million. So year-over-year core to core, no, we do not expect $14.9 million in service revenue.

Arnie Ursaner – CJS Securities

Okay. One more question on force, the acquisition Fullscope you mentioned it had $27 or so million of revenue, what was the growth rate in that revenue in 2009? Maybe give us a better feel for a two or three year growth rate. And at least give us your view of what you hope to have in revenue from that contribution this year.

Timothy Oakes

If you look at what we have seen so far is we've evaluated and observed Fullscope's historical financials. Their growth rate has been double-digit year-over-year. 2009 for them was a very good year, especially the second half of their 2009 year. So as we look at what they did for service revenue that we quoted, which was roughly $13 million. I mean the expectation here today is let's assume that's flat. That would be a reasonable baseline expectation entering what Q1 would be.

Arnie Ursaner – CJS Securities

Okay. And Shirley, take a minute perhaps and explain the strategic fit and how you see this impacting your core business and how you hope to merchandise the consolidated effort?

Shirley Singleton

Sure. Actually, I'm going to have Dave field that one.

Dave Clancey

Right. We think it's going to be sort of a game changer in and around the technology side of things for two reasons. One is that even though Fullscope holds a moniker of being ERP it's not your father's ERP. It's not the equivalent of say, Oracle or SAP. It's really a next generation style of ERP because of much advantage total cost to own.

So when you look at the way it's delivered, it's delivered a lot more along the lines of the way our EPM businesses delivered. In other words, we have on site consultants and the project typically goes in maybe nine months to a year. And there's a very strong software sales component to that. So when you look at that aspect of it, it's very, very strong. Another strategic aspect to it is that ERP is a prerequisite for our EPM and data analytics engagements.

So as we start to take advantage of Fullscope's move into the upper middle market and into the hub and spoke model in the global 2000. We expect to have a lot of synergistic business in terms of all the other products we do sell. From a technology point of view, we expect to be able to couple our CRM initiative from the technology subsidiary. And when you really look at it the share point aspect of it, which is additionally a Microsoft product, such that I think that having that ERP piece there, they're natural add-ons to the past customer base that Fullscope has.

So now we're going to be putting a lot of product in the hands of the Fullscope sales people, against their existing customer base. And we have great follow-on business feeds going into the Oracle organization as well. Even the SAP organization, BPC is a natural fit as well and is blessed by Microsoft. So overall, what we see is something that completes the spectrum of services that I think are going to sell very well to our classic customer.

Arnie Ursaner – CJS Securities

A couple more quick follow-up questions. I'm assuming there are not many analysts on the call. So you mentioned last year three accounts accounted for 52% of the decline. Do you have any major contracts that are coming to an end that could have a significant impact on revenue in the upcoming year?

Timothy Oakes

Yeah, Arnie. That's a fair question. And the answer is no. At this point in time, we don't. I think if you comparatively look at '08 to '09, yeah, the year-over-year decrease is significantly impacted by that customer concentration. If you look at as of 2009, top five customers represented 20% of the service revenue, top ten is down to 31%. So from a revenue diversification point of view, we think we've diversified revenue in both, in terms of customers and in terms of verticals that we have done a fairly good job of mitigating our exposure to that happening again.

Dave Clancey

Right. Also there's a strategic aspect to those three contracts. Those were in effect, the last three major contracts of what I would call the classic business of maintenance and enhancement, which to a large extent was in the process of most people shipping into offshore accounts et cetera. And I think what happened is the tough economic conditions through of '08, the end of '08 and '09 literally forced the last of that transition out of that business through our books really quickly. I mean we anticipated over time being out of that business. I don't think we anticipated being out of that business in several weeks.

Arnie Ursaner – CJS Securities

Just to clarify one more thing on Q1 revenue and obviously, the seasonal issues I'm sure people have had money in their budget trying to flush it through at year-end. You also in the EPN piece tend to not see a pick up until much later in the quarter. And you also have the normal pick up seasonally that occurs in January. So I am trying to get a feel sequentially on the core business, given you did have pretty good strength in Q4 and you have talked about what appears to be at a minimum a stabilization, if not a pretty good improvement in the underlying core business. Sequentially, do you expect Q1 to be up X the acquisition? Just from the core business alone sequentially, do you expect it to be up?

Shirley Singleton

I think we have a good shot at being up. But I've been saying flat to up because I'm trying to play it a little bit more conservative.

Arnie Ursaner – CJS Securities

I'll jump back in queue. Thank you.

Shirley Singleton

Okay.

Operator

We'll take our next question from Amarish Mehta with Arcadia Capital.

Amarish Mehta – Arcadia Capital

Hi, Tim, Shirley and Dave, how are you?

Shirley Singleton

Good. How are you?

Amarish Mehta – Arcadia Capital

Good. A couple of questions, wanted to understand now with the Fullscope acquisition. What is your sort of billable revenue per consultant look like?

Timothy Oakes

Billable revenue per consultant as we go forward with Fullscope incorporated into it. If you…

Amarish Mehta – Arcadia Capital

I guess two things, what was it for 2009 and then what do you expect for 2010?

Timothy Oakes

Yeah. And I think that's fair. If you look at 2009 full year was roughly annualized 348,000 for billable consultant. If you throw on Fullscope, which has the characteristics of our core IT offerings, that number is probably, it's going to be fairly close maybe 350. I think that's a reasonable number to throw out there.

Amarish Mehta – Arcadia Capital

Going forward for 2010?

Timothy Oakes

Yes.

Amarish Mehta – Arcadia Capital

Okay. In terms of with the Fullscope acquisition, how does that affect utilization rates? Affects of utilization rates?

Timothy Oakes

And I think it's a twofold answer. I think that we would anticipate or expect that our utilization rates would improve as we move into 2010.

Amarish Mehta – Arcadia Capital

But – and in the discussion with Arnie, it seems that your core business seems to be weaker. And so how do you expect to offset all of that with Fullscope?

Shirley Singleton

The core business is not weaker. The core business is stronger. I am sorry, if you took away that impression. The utilization is climbing, as I mentioned earlier and if we're going to put up organic growth and I am not considering adding headcount to the core growth then that implies the utilization rises. So with the addition of Fullscope in the mix, utilization will rise.

Amarish Mehta – Arcadia Capital

Okay. Now, with again the Fullscope, both the billable and the non-billable headcount that's added to your business, what is the revenue breakeven sort of quarterly revenue break even level now for the business?

Timothy Oakes

If you throw Fullscope in there, I'd say the quarterly breakeven from remember a total revenue because of the influence of software would be somewhere between 19 and 20 million in total revenue.

Amarish Mehta – Arcadia Capital

Per quarter?

Timothy Oakes

Per quarter.

Amarish Mehta – Arcadia Capital

Okay. So you're – and so if you expect to be flat to down in total for the quarter. It seems that you are not going be at breakeven for some time?

Shirley Singleton

We are – our revenue is going to be up year-over-year.

Timothy Oakes

I think the comment was flat, flat to up, not flat to down, Amarish.

Shirley Singleton

The total revenue will be definitely up.

Timothy Oakes

Correct.

Shirley Singleton

He's giving you a total revenue number.

Timothy Oakes

Right.

Amarish Mehta – Arcadia Capital

But if…

Timothy Oakes

Amarish, I think more to maybe I can answer your question this way. As you would look at Q1, I mean in Q1 from a cash flow perspective, it's historically a cash outflow quarter for us. We have resets of FICA limits, we have renewals of insurance policies. We have payments of quarterly bonus programs and whatnot. So if you look at Edgewater's historical cash flow Q1 is always negative and we improve as we go through the rest of the year.

In terms of looking at quarterly performance, I think you would expect to have a drag on earnings in Q1, because of resets of FICA and whatnot. But that Edgewater has traditionally accelerated through the year in the second, third and fourth quarters, which I think we would expect this year.

Dave Clancey

Right. I'm only a technologist, but I don't think our breakeven is $20 million.

Amarish Mehta – Arcadia Capital

Okay. I may have just – you guys said that not me. But if that is the case then I mean give us a sense, when do you think you can sort of get to, get to breakeven levels and stop burning cash? Can you give us a sense of when you expect that?

Shirley Singleton

Our cash from – okay. Let's look at it in two pieces. In 2009, which obviously was challenging, we were effectively breakeven on a cash flow basis. The money is that moved from the balance sheet was for the acquisition of Fullscope. So our management philosophy is one to not burn cash for operations. So that's an important take away. Secondly, we expect to generate cash.

Timothy Oakes

Correct.

Shirley Singleton

In 2010.

Amarish Mehta – Arcadia Capital

Okay. And in terms of so if you sort of look at again, Fullscope. How does their compensation and SG&A sort of philosophy fit with your organization?

Timothy Oakes

I think if you look at SG&A where Edgewater has been historically, again excluding the impacts of the decrease in revenue of 2009. Edgewater from an SG&A percentage of total revenue has been in the low 30's and with Fullscope, we would expect or anticipate that we would be able to turn back towards what our historical SG&A percentages have been.

Amarish Mehta – Arcadia Capital

Okay. And what is that?

Timothy Oakes

In the low 30s, it is a 30, 31, 32%. It has been in the low 30s.

Amarish Mehta – Arcadia Capital

Okay. Okay. So the – I guess one question I have is trying to understand if you're with Fullscope as a $27 million business. If you are saying that they, they did double digit on EBITDA margins 10% plus. So the question is, your business at least twice their size, why can't you get to their level? What's it going to take to get to their level?

Timothy Oakes

Plain and simple, Fullscope was not a public company and Edgewater is a public company. So for us to sort of achieve those margins that you're looking for, it's going to come through growth in which we can leverage the infrastructure we have to sort of get escape velocity against those public company costs.

Amarish Mehta – Arcadia Capital

Okay. Great. Thanks a lot. I appreciate the time.

Shirley Singleton

Thank you very much.

Operator

(Operator Instructions).

Shirley Singleton

Okay. So, Tim and I are going to be here all day. We would love to have you call in and ask any questions you might have. We are actually really pumped about this year very, very optimistic. Our next earnings call will be May 5, but we're here if you'd like to chat with us. Thank you very much, Deana.

Operator

Thank you. Ladies and gentlemen, if you wish to access the replay for this call, you may do so by dialing 888-203-1112 or 719-457-0820 and entering confirmation code 9419505. This concludes our conference for today. Thank you all for participating. And have a nice day. All parties may now disconnect.

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