EX-99 2 c97043exv99.htm PRESS RELEASE exv99
 

Exhibit 99
News Release
FOR IMMEDIATE RELEASE
Investor Contact:
Laura J. Cinat
(312) 255-6167
laura.cinat@diamondcluster.com
Media Contact:
David Moon
312-255-4560
david.moon@diamondcluster.com
DIAMONDCLUSTER INTERNATIONAL REPORTS FIRST QUARTER
FISCAL YEAR 2006 RESULTS
One million shares repurchased during the quarter
CHICAGO, July 27, 2005—DiamondCluster International, Inc. (Nasdaq: DTPI), a premier global management consulting firm, today announced results for its first quarter of fiscal year 2006 (ended June 30, 2005).
Net revenue for the first quarter was $48.3 million, compared with $44.9 million for the first quarter of fiscal year 2005. Revenue in North America represented 72% of total net revenue and grew 27% from the year ago period. The Company reported pretax income of $1.7 million, and a net loss of $1.5 million or ($0.04) per diluted share for the first quarter, which resulted from an unusually high reported tax rate of 189% caused by accounting standards that prohibit the Company from recognizing tax benefits in certain international locations.
The Company ended the first quarter with a cash and short-term investment balance of $88.2 million, up from $72.7 million in the year-ago period. Days billings outstanding, a key measure of client satisfaction, were 33 days in the quarter, improved from 35 days in the prior quarter and 51 days in the same quarter last year. Free cash flow (cash flow from operating activities less capital expenditures) was negative ($2.6) million in the quarter due to payment of fiscal year 2005 bonuses in April. DiamondCluster repurchased more than 1 million shares of stock in the quarter, for $12.4 million, which is the highest quarterly share repurchase amount in the Company’s history.

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“Revenue and earnings for the quarter came in within the revised guidance we provided in June, and free cash flow was better than expected,” said Mel Bergstein, chairman and CEO of DiamondCluster International. “Proposal activity is strong. We added a number of significant new clients in the first quarter, and in the first month of the second quarter. We believe these new clients, combined with our strong base of existing clients, will return us to our target growth trajectory. Our clients are asking us to help with strategically important initiatives, and our intellectual capital is generating interest with prospects.”
DiamondCluster served 72 clients in the first quarter of 2006 and added 20 new clients representing 11% of revenue during the quarter. Global annualized revenue per consultant was $340 thousand during the quarter. As of June 30, 2005, DiamondCluster had 570 client-serving professionals.
The Company anticipates net revenue in the September quarter to be in the range of $49 to $52 million, pretax income to be between $3 and $6 million, earnings per diluted share of $0.01 to $0.06, and free cash flow of $1 to $2 million. For fiscal year 2006, we expect net revenue of $210 to $220 million, pretax income of $19 to $24 million, earnings per diluted share of $0.14 to $0.23, and free cash flow of $13 to $22 million.
About DiamondCluster International
DiamondCluster International (Nasdaq: DTPI) is a premier global management consulting firm that helps leading organizations develop and implement growth strategies, improve operations, and capitalize on technology. Mobilizing multidisciplinary teams from our highly skilled strategy, technology, and operations professionals worldwide, DiamondCluster works collaboratively with clients, unleashing the power within their own organizations to achieve sustainable business advantage. DiamondCluster is headquartered in Chicago, with offices across Europe, North America, the Middle East and South America. To learn more, visit www.diamondcluster.com.
Conference Call
Management from DiamondCluster International will host a conference call today, July 27, 2005, at 4:00 pm CT to discuss the results of the quarter. The call will be broadcast live and archived on DiamondCluster’s web site at www.diamondcluster.com.
Forward-Looking Statements
Statements in this press release that do not involve strictly historical or factual matters are forward-looking statements within the meaning of the “safe harbor” provisions of the federal securities laws. Forward-looking statements involve risks and uncertainties and speak only as of the date of this release. Actual results may differ materially due to such factors as the ability of the Company to maintain its pricing and utilization rates and control its costs, the sustainability of the economic recovery in the U.S. and Northern European markets, recruitment and retention of personnel, possible termination of projects by major clients, variations in the timing, initiation or completion of client assignments,

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absence of long-term contracts with clients, growth management, project risks, and technological advances. The risks and uncertainties associated with our business are highlighted in our filings with the SEC, including our annual report on Form 10-K for the fiscal year 2005, ended March 31, 2005.

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PRESS RELEASE
DIAMONDCLUSTER INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
                 
    For the Three Months  
    Ended June 30,  
    2005     2004  
    (Unaudited)     (Unaudited)  
REVENUE:
                
Net revenue
   $ 48,304     $ 44,865  
Reimbursable expenses
     6,653       6,686  
 
            
Total revenue
     54,957       51,551  
 
                
PROJECT PERSONNEL EXPENSES:
                
Project personnel costs before reimbursable expenses
     35,126       30,921  
Reimbursable expenses
     6,653       6,686  
 
            
Total project personnel expenses
     41,779       37,607  
 
                
GROSS MARGIN
     13,178       13,944  
 
                
OTHER OPERATING EXPENSES:
                
Professional development and recruiting
     1,871       1,339  
Marketing and sales
     725       834  
Management and administrative support
     9,557       8,486  
 
            
 
                
Total other operating expenses
     12,153       10,659  
 
            
 
                
INCOME FROM OPERATIONS
     1,025       3,285  
 
                
OTHER INCOME, NET
     681       315  
 
            
 
                
INCOME BEFORE INCOME TAXES
     1,706       3,600  
 
                
INCOME TAX EXPENSE
     3,228       159  
 
            
 
                
NET INCOME (LOSS)
   $ (1,522 )   $ 3,441  
 
            
 
                
BASIC INCOME (LOSS) PER SHARE OF COMMON STOCK
   $ (0.04 )   $ 0.10  
 
            
 
                
DILUTED INCOME (LOSS) PER SHARE OF COMMON STOCK
   $ (0.04 )   $ 0.10  
 
            
 
                
SHARES USED IN COMPUTING BASIC INCOME (LOSS) PER SHARE
     33,977       33,385  
 
                
SHARES USED IN COMPUTING DILUTED INCOME (LOSS) PER SHARE
     33,977       35,299  
The following amounts of stock-based compensation expense are included in each of the respective expense categories reported above:
                 
    For the Three Months  
    Ended June 30,  
    2005     2004  
    (Unaudited)     (Unaudited)  
 
                
Project personnel costs before reimbursable expenses
   $ 3,439     $ 3,155  
Professional development and recruiting
     12       27  
Marketing and sales
     107       48  
Management and administrative support
     490       291  
 
            
 
                
Total stock-based compensation
   $ 4,048     $ 3,521  
 
            

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PRESS RELEASE
DIAMONDCLUSTER INTERNATIONAL, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
                 
    June 30,     March 31,  
ASSETS   2005     2005  
             
    (Unaudited)     (Unaudited)  
Current assets:
                
Cash and cash equivalents
   $ 88,225     $ 42,270  
Short-term investments
     —       55,975  
Accounts receivable, net of allowance of $992 and $1,079 as of June 30, 2005 and March 31, 2005, respectively
     19,464       22,044  
Deferred tax asset — current portion
     9,181       9,819  
Prepaid expenses and other current assets
     6,262       6,005  
 
            
 
                
Total current assets
     123,132       136,113  
 
                
Computers, equipment, leasehold improvements and software, net
     4,681       5,145  
Deferred tax asset — non-current portion
     8,833       10,841  
Other assets
     1,736       1,573  
 
            
 
                
Total assets
   $ 138,382     $ 153,672  
 
            
 
                
LIABILITIES AND STOCKHOLDERS’ EQUITY
                
 
                
Current liabilities:
                
Accounts payable
   $ 3,855     $ 4,652  
Share repurchase payable
     3,676       —  
Income taxes payable
     642       1,611  
Restructuring accrual, current portion
     2,499       2,848  
Other accrued liabilities
     14,971       22,916  
 
            
 
                
Total current liabilities
     25,643       32,027  
 
                
Restructuring accrual, less current portion
     3,200       3,700  
 
            
 
                
Total liabilities
     28,843       35,727  
 
                
Stockholders’ equity:
                
Common stock, 34,112 shares outstanding as of June 30, 2005 and 34,436 shares outstanding as of March 31, 2005
     555,012       563,753  
Stock-based compensation
     —       (2,174 )
Accumulated other comprehensive income
     2,343       2,660  
Accumulated deficit
     (447,816 )     (446,294 )
 
            
Total stockholders’ equity
     109,539       117,945  
 
            
 
                
Total liabilities and stockholders’ equity
   $ 138,382     $ 153,672  
 
            

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PRESS RELEASE
DIAMONDCLUSTER INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
                 
    For the Three Months  
    Ended June 30,  
    2005     2004  
    (Unaudited)     (Unaudited)  
Cash flows from operating activities:
                
Net income (loss)
   $ (1,522 )   $ 3,441  
Adjustments to reconcile net income (loss) to net cash used in operating activities:
                
Depreciation and amortization
     714       875  
Write-down of net book value of property, plant, and equipment
     —       16  
Stock-based compensation
     4,048       3,521  
Deferred income taxes
     2,585       —  
Changes in assets and liabilities:
                
Accounts receivable
     1,772       (6,055 )
Prepaid expenses and other
     (542 )     3,576  
Accounts payable
     (627 )     (1,216 )
Restructuring accrual
     (849 )     (982 )
Other assets and liabilities
     (7,760 )     (8,440 )
 
            
 
                
Net cash used in operating activities
     (2,181 )     (5,264 )
 
            
 
                
Cash flows from investing activities:
                
Net redemptions of short-term investments
     55,975       5,100  
Capital expenditures, net
     (379 )     (345 )
Other assets
     60       54  
 
            
 
                
Net cash provided by investing activities
     55,656       4,809  
 
            
 
                
Cash flows from financing activities:
                
Common stock issued, net
     1,702       678  
Tax benefits from employee stock plans
     41       42  
Purchase of treasury stock
     (8,683 )     (3,725 )
 
            
 
                
Net cash used in financing activities
     (6,940 )     (3,005 )
 
            
 
                
Effect of exchange rate changes on cash
     (580 )     (43 )
 
            
 
                
Net increase (decrease) in cash and cash equivalents
     45,955       (3,503 )
Cash and cash equivalents at beginning of period
     42,270       39,004  
 
            
Cash and cash equivalents at end of period
   $ 88,225     $ 35,501  
 
            
 
                
Non-cash financing activities:
                
Treasury stock repurchase obligation
     3,676       —  
Transfer of stock-based compensation balance to additional paid-in capital upon adoption of SFAS No. 123R
     2,174       —  

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