EX-99 2 c01881exv99.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 THIRD QUARTER
FISCAL YEAR 2006 RESULTS
Earnings of 2 cents per diluted share
More than one million shares repurchased for the third consecutive quarter
CHICAGO, January 26, 2006—DiamondCluster International, Inc. (Nasdaq: DTPI), a premier global management consulting firm, today announced results for its third quarter of fiscal year 2006 (ended December 31, 2005).
Net revenue for the third quarter was $49.6 million, compared with $49.0 million for the prior quarter and $50.2 million for the third quarter of fiscal year 2005. The Company reported pretax income of $2.1 million, and net income of $0.6 million, or $0.02 per diluted share, compared with pretax income of $5.6 million and earnings of $0.15 per diluted share in the year ago period.
“Our franchise remains strong and the business environment is healthy,” said Mel Bergstein, chairman and CEO of DiamondCluster International. “We added 28 new clients in the third quarter, in addition to the 31 new clients in the second quarter. Client concentration continues to decline, our core clients are staying with us, and pricing remains strong.”
DiamondCluster repurchased 1.0 million shares of stock in the third quarter, for $7.8 million. This is the third consecutive quarter that the Company has repurchased more than a million shares of stock. In the first nine months of the fiscal year, the Company repurchased more than 3.5 million shares for approximately $34.3 million. As of December 31, 2005 DiamondCluster had $18.5 million remaining on its Board-approved repurchase authorization. The Company ended the third quarter with a cash and cash equivalents balance of $71.2 million.

 

 

DiamondCluster International Third Quarter FY2006 Results/page 2
Free cash flow (cash flow from operating activities less capital expenditures) in the third quarter was ($0.5) million, reflecting $4.1 million of cash outflows related primarily to the international restructuring that took place in September 2005. Days billings outstanding were 40 days in the third quarter, at the midpoint of the Company’s target range of 35 to 45 days.
DiamondCluster served 94 clients in the third quarter of fiscal year 2006, including 28 new clients. The Company’s top five client concentration decreased to 33% of revenue in the December quarter, down from 40% in the year-ago period. Global annualized revenue per consultant was $331 thousand during the third quarter. As of December 31, 2005, the Company had 577 client-serving professionals, down from 620 last quarter, including the international staff reductions that took place as part of the September 2005 restructuring.
The Company anticipates net revenue in the March quarter to be in the range of $49.5 to $51.0 million, pretax income to be between $3.0 and $3.5 million, income tax expense of approximately $2.5 million, earnings per diluted share of $0.02 or $0.03, and free cash flow of $2.0 to $4.0 million. The March quarter guidance includes $3.2 million of cash outflows related to previous restructuring charges.
“In preparation for assuming the role of CEO on April 1, I have been working with Jay Norman, our COO-elect, and our global management team on the plan for fiscal year 2007,” said Adam Gutstein, Managing Director of International and CEO-elect. “With our anticipated net revenue growth of roughly 2 percent in fiscal year 2006, we are expecting to grow net revenue in the range of 15 to 17 percent in fiscal year 2007 and to achieve an annual pre-tax margin of 9 to 10 percent, with quarterly improvements throughout the year. We’ll provide more detailed guidance for fiscal year 2007 during our March quarter conference call.”
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, January 26, 2006, at 8:15 am 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

 

 

DiamondCluster International Third Quarter FY2006 Results/page 3
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, 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 Form 10-Q for the second quarter of fiscal year 2006, ended September 30, 2005.
###

 

 

DiamondCluster International Third Quarter FY2006 Results/page 4
DIAMONDCLUSTER INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
                                 
    For the Three Months     For the Nine Months  
    Ended December 31,     Ended December 31,  
    2005     2004     2005     2004  
 
   (Unaudited)   (Unaudited)   (Unaudited)   (Unaudited)
REVENUE:
                                
Net revenue
   $ 49,551     $ 50,168     $ 146,870     $ 141,149  
Reimbursable expenses
     6,541       6,454       20,007       19,522  
 
                        
Total revenue
     56,092       56,622       166,877       160,671  
 
                                
PROJECT PERSONNEL EXPENSES:
                                
Project personnel costs before reimbursable expenses
     35,181       32,381       104,551       94,281  
Reimbursable expenses
     6,541       6,454       20,007       19,522  
 
                        
Total project personnel expenses
     41,722       38,835       124,558       113,803  
 
                                
GROSS MARGIN
     14,370       17,787       42,319       46,868  
 
                                
OTHER OPERATING EXPENSES:
                                
Professional development and recruiting
     2,210       2,648       6,014       5,640  
Marketing and sales
     856       1,031       2,620       2,507  
Management and administrative support
     9,858       8,959       28,761       26,093  
Restructure expense
     36       —       11,023       —  
 
                        
Total other operating expenses
     12,960       12,638       48,418       34,240  
 
                        
 
                                
INCOME (LOSS) FROM OPERATIONS
     1,410       5,149       (6,099 )     12,628  
 
                                
OTHER INCOME, NET
     669       441       2,150       1,019  
 
                        
 
                                
INCOME (LOSS) BEFORE INCOME TAXES
     2,079       5,590       (3,949 )     13,647  
 
                                
INCOME TAX EXPENSE
     1,450       166       6,995       662  
 
                        
 
                                
NET INCOME (LOSS)
   $ 629     $ 5,424     $ (10,944 )   $ 12,985  
 
                        
 
                                
BASIC INCOME (LOSS) PER SHARE OF COMMON STOCK
   $ 0.02     $ 0.16     $ (0.33 )   $ 0.39  
 
                        
 
                                
DILUTED INCOME (LOSS) PER SHARE OF COMMON STOCK
   $ 0.02     $ 0.15     $ (0.33 )   $ 0.36  
 
                        
 
                                
SHARES USED IN COMPUTING BASIC INCOME (LOSS) PER SHARE
     32,521       33,491       33,254       33,436  
 
                                
SHARES USED IN COMPUTING DILUTED INCOME (LOSS) PER SHARE
     33,283       36,414       33,254       35,728  
The following amounts of stock-based compensation expense are included in each of the respective expense categories reported above:
                                 
    For the Three Months     For the Nine Months  
    Ended December 31,     Ended December 31,  
    2005     2004     2005     2004  
 
   (Unaudited)   (Unaudited)   (Unaudited)   (Unaudited)
Project personnel costs before reimbursable expenses
   $ 3,141     $ 3,349     $ 9,226     $ 9,550  
Professional development and recruiting
     24       (7 )     52       54  
Marketing and sales
     80       65       278       166  
Management and administrative support
     734       377       1,844       1,011  
 
                        
Total stock-based compensation expense
   $ 3,979     $ 3,784     $ 11,400     $ 10,781  
 
                        

 

 

DiamondCluster International Third Quarter FY2006 Results/page 5
DIAMONDCLUSTER INTERNATIONAL, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
                 
    December 31,     March 31,  
 
   2005     2005  
 
   (Unaudited)   (Unaudited)
ASSETS
            
Current assets:
                
Cash and cash equivalents
   $ 71,240     $ 42,270  
Short-term investments
     —       55,975  
Accounts receivable, net of allowance of $925 and $1,079 as of December 31, 2005 and March 31, 2005, respectively
     24,618       22,044  
Deferred tax asset — current portion
     6,115       9,819  
Prepaid expenses and other current assets
     5,522       6,005  
 
            
 
                
Total current assets
     107,495       136,113  
 
                
Computers, equipment, leasehold improvements and software, net
     3,739       5,145  
Deferred tax asset — non-current portion
     9,920       10,841  
Other assets
     1,842       1,573  
 
            
 
                
Total assets
   $ 122,996     $ 153,672  
 
            
 
                
LIABILITIES AND STOCKHOLDERS’ EQUITY
                
 
                
Current liabilities:
                
Accounts payable
   $ 3,704     $ 4,652  
Share repurchase payable
     1,625       —  
Income taxes payable
     1,678       1,611  
Restructuring accrual, current portion
     5,228       2,848  
Other accrued liabilities
     17,626       22,916  
 
            
 
                
Total current liabilities
     29,861       32,027  
 
                
Restructuring accrual, less current portion
     5,888       3,700  
 
            
 
                
Total liabilities
     35,749       35,727  
 
                
Stockholders’ equity:
                
Common stock, 32,245 shares outstanding as of December 31, 2005 and 34,436 shares outstanding as of March 31, 2005
     542,092       563,753  
Stock-based compensation
     —       (2,174 )
Accumulated other comprehensive income
     2,393       2,660  
Accumulated deficit
     (457,238 )     (446,294 )
 
            
 
                
Total stockholders’ equity
     87,247       117,945  
 
            
 
                
Total liabilities and stockholders’ equity
   $ 122,996     $ 153,672  
 
            

 

 

DiamondCluster International Third Quarter FY2006 Results/page 6
DIAMONDCLUSTER INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
                                 
    For the Three Months     For the Nine Months  
    Ended December 31,     Ended December 31,  
    2005     2004     2005     2004  
 
   (Unaudited)   (Unaudited)   (Unaudited)   (Unaudited)  
Cash flows from operating activities:
                              
Net income (loss)
   $ 629     $ 5,424     $ (10,944 )   $ 12,985  
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
                                
Restructuring charges
     36       —       11,023       —  
Depreciation and amortization
     685       790       2,103       2,474  
Write-down of net book value of property, plant, and equipment
     —       8       —       39  
Stock-based compensation
     3,979       3,784       11,400       10,781  
Deferred income taxes
     417       —       4,521       —  
Changes in assets and liabilities:
                                
Accounts receivable
     (3,380 )     2,739       (4,029 )     4,741  
Prepaid expenses and other
     568       (163 )     157       3,516  
Accounts payable
     189       (545 )     (516 )     (2,066 )
Restructuring accrual
     (4,072 )     (461 )     (4,976 )     (2,147 )
Other assets and liabilities
     720       263       (4,634 )     (5,307 )
 
                        
 
                                
Net cash provided by (used in) operating activities
     (229 )     11,839       4,105       25,016  
 
                        
 
                                
Cash flows from investing activities:
                                
Net redemptions (purchases) of short-term investments
     —       (9,250 )     55,975       (4,725 )
Capital expenditures, net
     (264 )     (423 )     (1,029 )     (1,236 )
Other assets
     —       5       60       96  
 
                        
 
                                
Net cash provided by (used in) investing activities
     (264 )     (9,668 )     55,006       (5,865 )
 
                        
 
                                
Cash flows from financing activities:
                                
Common stock issued, net
     (416 )     3,313       2,917       6,843  
Tax benefits from employee stock plans
     (23 )     103       26       236  
Purchase of treasury stock
     (7,237 )     (7,327 )     (32,711 )     (17,850 )
 
                        
 
                                
Net cash used in financing activities
     (7,676 )     (3,911 )     (29,768 )     (10,771 )
 
                        
 
                                
Effect of exchange rate changes on cash
     449       505       (373 )     568  
 
                        
 
                                
Net increase (decrease) in cash and cash equivalents
     (7,720 )     (1,235 )     28,970       8,948  
Cash and cash equivalents at beginning of period
     78,960       49,187       42,270       39,004  
 
                        
 
                                
Cash and cash equivalents at end of period
   $ 71,240     $ 47,952     $ 71,240     $ 47,952  
 
                        
 
                                
Non-cash financing activities:
                                
Treasury stock repurchase obligation
   $ 1,625     $ —     $ 1,625     $ —  
Transfer of stock-based compensation balance to additional paid-in capital upon adoption of SFAS No. 123R
     —       —       2,174       —