EX-99.1 2 c23507exv99w1.htm PRESS RELEASE exv99w1
 

Exhibit 99.1
(DIAMOND LOGO)
News Release
FOR IMMEDIATE RELEASE
Investor Contact:
Margaret Boyce
312-255-5784
margaret.boyce@diamondconsultants.com
Media Contact:
David Moon
312-255-4560
david.moon@diamondconsultants.com
DIAMOND REPORTS THIRD QUARTER 2008 RESULTS
Net Revenue of $46.7 million and free cash flow of $19.1 million
Board of Directors approves an additional $25 million stock buy-back authorization
CHICAGO, February 5, 2008—Diamond Management & Technology Consultants, Inc. (Nasdaq: DTPI), a premier global management and technology consulting firm, today announced results for its third quarter of fiscal year 2008 (ended December 31, 2007).
Financial Review
“We are pleased to announce that we delivered a solid third quarter with net revenue and earnings at the high-end of our previous guidance,” said Adam Gutstein, President and CEO of Diamond. “Revenue per professional, chargeability, and cash collections improved on both a year-over-year and sequential basis.”
Net revenue for the quarter ended December 31, 2007 increased 7% to $46.7 million, compared with $43.7 million for the same period in the prior fiscal year. For the first nine months ended December 31, 2007, net revenue was $139.9 million, up 11% compared with $125.8 million reported in the first nine months of last fiscal year.
Income from continuing operations before income taxes was $6.1 million, up from $5.2 million reported in the third quarter of the prior fiscal year. Income from continuing operations after income taxes was $2.8 million, compared with $2.5 million reported in the same period last year. The Company reported diluted earnings per share from continuing operations of $0.09 per diluted share compared with $0.08 per diluted share in the same period last year. Diluted weighted average shares outstanding decreased by three million shares from 33.7 million to 30.6 million compared with the year-ago period.

 

 

Free cash flow (cash flow provided by operating activities less capital expenditures) in the third quarter of fiscal year 2008 was $19.1 million. The strong free cash flow from continuing operations for the third quarter was the result of particularly strong cash collections which included some September quarter receivables collected during the first two days of October. The Company also declared and paid its second annual cash dividend. The dividend was paid on December 6, 2007 in the amount of $0.35 per share for a total cash payout of $10.8 million, a 17% increase over the previous annual dividend. The Company ended the third quarter with cash and cash equivalents of $65.1 million and no borrowings.
The Company’s effective tax rate was 53% in the third quarter compared with a 51% effective tax rate in the same period last year.
Share Repurchase
During the third quarter, the Company repurchased approximately 1.2 million shares of its common stock for $9.7 million. On February 4, 2008, the Company’s Board of Directors approved an increase of $25 million to the stock repurchase authorization, bringing the total authorization outstanding to over $56 million.
Business Metrics
The Company served 65 clients during the third quarter of fiscal year 2008, an increase from 60 clients served in the third quarter last year and 63 clients served in the prior quarter. The Company added 18 new clients, compared to the same number in the year-ago period and 20 in the prior quarter. The top five clients represented 41% of revenue during the third quarter of fiscal year 2008 compared to 39% in both the third quarter of the year-ago period and the prior quarter.
The Company ended the third quarter with 512 client-serving professionals, compared with 503 in the year-ago period and 518 in the prior quarter. Chargeability was 65% in the third quarter of fiscal year 2008, compared with 60% in both the year-ago period and the prior quarter. Annualized net revenue per professional was $363 thousand, compared with $348 thousand in the year-ago period and $357 thousand in the prior quarter. Annualized voluntary attrition was 10% in the third quarter, the same as the third quarter last year.

 

 

Revenue by industry practice in the third quarter was: Financial Services: 31%; Insurance: 25%; Healthcare: 21%; Enterprise: 15%; Telecom: 5%; and Public Sector: 3%.
Business Outlook
“We have a good deal of confidence in the long-term prospects of our business given the strength of our client relationships, the high-impact work we deliver and our extraordinarily talented group of professionals,” said Gutstein. “However, in the short-term, the uncertainty in the market we spoke of last quarter is being reflected in our outlook. We are seeing some lengthening in sales cycles and some modest delays in project starts. Our clients and prospects continue to invest, even if at a slower rate.”
The Company expects fourth quarter net revenue in the range of $42 to $44 million, pretax income of $1 million to $2 million and earnings per diluted share of $0.05 to $0.07. This guidance includes an international tax benefit of $1.4 million in the fourth quarter. Excluding this international tax benefit, the Company expects earnings per diluted share of $0.01 to $0.03. Free cash flow is expected to be zero to $2 million. All guidance estimates exclude any impact from discontinued operations.
The Company will provide fiscal year 2009 guidance during its May, 2008 earnings conference call.
Conference Call
Diamond management will host a conference call today, February 5, 2008 at 8:00 am CT to discuss the results of the quarter. The dial-in number for the conference call is 800-954-1052 for North American callers and 212-231-2900 for international callers. The replay will be available until February 12, 2008 and can be accessed by calling 402-977-9140, then entering passcode number 21372083. The call will be broadcast live and archived on Diamond’s web site at www.diamondconsultants.com.
About Diamond
Diamond is a management and technology consulting firm. Recognizing that information and technology shape market dynamics, Diamond’s small teams of experts work across functional and organizational boundaries to improve growth and profitability. Since the greatest value in a strategy, and its highest risk, resides in its implementation, Diamond also provides proven execution capabilities. We deliver three critical elements to every project: fact-based objectivity, spirited collaboration, and sustainable results. Diamond is headquartered in Chicago, with offices in New York, Washington, D.C., Hartford, London and Mumbai. Diamond is publicly traded on the Nasdaq Global Select Market under the symbol “DTPI.” To learn more, visit www.diamondconsultants.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 estimates, projections, assumptions, risks and uncertainties and speak only as of the date of this release based on information available to the Company as of the date of this release, and the Company assumes no obligation to update any forward-looking statements. Actual results may differ materially from the results projected in any forward-looking statement. For a discussion of some of the risks and uncertainties that could cause actual results to differ materially, please refer to the risks and uncertainties identified in our filings with the SEC.

 

 

DIAMOND MANAGEMENT & TECHNOLOGY CONSULTANTS, 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,  
    2007     2006     2007     2006  
    (Unaudited)     (Unaudited)     (Unaudited)     (Unaudited)  
REVENUE:
                                
Net revenue
   $ 46,724     $ 43,736     $ 139,923     $ 125,795  
Reimbursable expenses
     5,710       5,422       17,250       16,203  
 
                        
Total revenue
     52,434       49,158       157,173       141,998  
 
                                
PROJECT PERSONNEL EXPENSES:
                                
Project personnel costs before reimbursable expenses
     30,817       28,797       94,938       89,280  
Reimbursable expenses
     5,710       5,422       17,250       16,203  
 
                        
Total project personnel expenses
     36,527       34,219       112,188       105,483  
 
                                
 
                        
GROSS MARGIN
     15,907       14,939       44,985       36,515  
 
                        
 
                                
OTHER OPERATING EXPENSES:
                                
Professional development and recruiting
     2,732       2,662       7,283       6,914  
Marketing and sales
     1,019       1,182       2,423       2,541  
Management and administrative support
     6,804       6,892       19,839       20,840  
Restructuring recovery
     —       —       —       (24 )
 
                        
Total other operating expenses
     10,555       10,736       29,545       30,271  
 
                        
 
                                
INCOME FROM OPERATIONS
     5,352       4,203       15,440       6,244  
 
                                
OTHER INCOME, NET
     699       972       2,639       2,952  
 
                        
 
                                
INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES
     6,051       5,175       18,079       9,196  
 
                                
INCOME TAX EXPENSE
     3,209       2,631       8,420       4,546  
 
                        
 
                                
INCOME FROM CONTINUING OPERATIONS AFTER INCOME TAXES
     2,842       2,544       9,659       4,650  
 
                                
DISCONTINUED OPERATIONS:
                                
Gain (loss) on disposal of discontinued operations including income tax benefit of $574 for the nine months ended December 31, 2006
     —       (147 )     —       22,889  
Income (loss) from discontinued operations, net of income taxes
     (311 )     457       (727 )     1,329  
 
                        
DISCONTINUED OPERATIONS, NET OF INCOME TAXES
     (311 )     310       (727 )     24,218  
 
                                
NET INCOME
   $ 2,531     $ 2,854     $ 8,932     $ 28,868  
 
                        
 
                                
BASIC INCOME (LOSS) PER SHARE OF COMMON STOCK:
                                
INCOME FROM CONTINUING OPERATIONS
   $ 0.09     $ 0.08     $ 0.31     $ 0.14  
INCOME (LOSS) FROM DISCONTINUED OPERATIONS
     (0.01 )     0.01       (0.02 )     0.75  
 
                        
NET INCOME
   $ 0.08     $ 0.09     $ 0.29     $ 0.90  
 
                        
 
                                
DILUTED INCOME (LOSS) PER SHARE OF COMMON STOCK:
                                
INCOME FROM CONTINUING OPERATIONS
   $ 0.09     $ 0.08     $ 0.30     $ 0.14  
INCOME (LOSS) FROM DISCONTINUED OPERATIONS
     (0.01 )     0.01       (0.02 )     0.72  
 
                        
NET INCOME
   $ 0.08     $ 0.08     $ 0.28     $ 0.85  
 
                        
 
                                
SHARES USED IN COMPUTING BASIC INCOME (LOSS) PER SHARE
     30,012       31,647       30,690       32,120  
 
                                
SHARES USED IN COMPUTING DILUTED INCOME (LOSS) PER SHARE
     30,627       33,675       32,027       33,771  
The following amounts of stock-based compensation expense (“SBC”) 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,  
    2007     2006     2007     2006  
    (Unaudited)     (Unaudited)     (Unaudited)     (Unaudited)  
Project personnel costs before reimbursable expenses
   $ 3,710     $ 2,580     $ 11,376     $ 8,323  
Professional development and recruiting
     40       21       99       77  
Marketing and sales
     82       95       257       262  
Management and administrative support
     594       697       2,010       2,260  
 
                        
SBC from continuing operations
   $ 4,426     $ 3,393     $ 13,742     $ 10,922  
SBC included in income (loss) from discontinued operations
     —       —       —       527  
 
                        
 
   $ 4,426     $ 3,393     $ 13,742     $ 11,449  
SBC recorded against the gain on disposal of discontinued operations
     —       —       —       1,379  
 
                        
 
                                
Total SBC
   $ 4,426     $ 3,393     $ 13,742     $ 12,828  
 
                        

 

 

DIAMOND MANAGEMENT & TECHNOLOGY CONSULTANTS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
                 
    December 31,     March 31,  
    2007     2007  
    (Unaudited)          
ASSETS
                
 
                
Current assets:
                
Cash and cash equivalents
   $ 65,095     $ 84,125  
Accounts receivable, net of allowance of $809 and $573 as of December 31, 2007 and March 31, 2007, respectively
     9,626       14,883  
Deferred tax asset — current portion
     802       865  
Prepaid expenses and other current assets
     4,169       3,333  
 
            
Total current assets
     79,692       103,206  
 
                
Restricted cash
     6,764       6,095  
Computers, equipment, leasehold improvements and software, net
     4,069       2,750  
Deferred tax asset — long-term portion
     6,696       7,826  
Other assets
     1,320       998  
 
            
 
                
Total assets
   $ 98,541     $ 120,875  
 
            
 
                
LIABILITIES AND STOCKHOLDERS’ EQUITY
                
 
                
Current liabilities:
                
Accounts payable
   $ 1,533     $ 1,656  
Income taxes payable — current portion
     —       1,743  
Share repurchase payable
     795       1,172  
Accrued compensation
     3,757       7,916  
Deferred revenue
     1,943       1,430  
Other accrued liabilities
     7,093       7,384  
 
            
 
                
Total current liabilities
     15,121       21,301  
 
                
Restructuring accrual — long-term portion
     173       340  
Net tax indemnification obligation
     4,552       3,307  
Accrued income tax liabilities — long-term portion
     1,338       —  
 
            
 
                
Total liabilities
     21,184       24,948  
 
                
Stockholders’ equity:
                
Common stock, 29,983 shares outstanding as of December 31, 2007 and 31,698 shares outstanding as of March 31, 2007
     517,079       533,875  
Accumulated other comprehensive loss
     (2,707 )     (2,771 )
Accumulated deficit
     (437,015 )     (435,177 )
 
            
 
                
Total stockholders’ equity
     77,357       95,927  
 
            
 
                
Total liabilities and stockholders’ equity
   $ 98,541     $ 120,875  
 
            

 

 

DIAMOND MANAGEMENT & TECHNOLOGY CONSULTANTS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (1)
(In thousands)
                                 
    For the Three Months     For the Nine Months  
    Ended December 31,     Ended December 31,  
    2007     2006     2007     2006  
    (Unaudited)     (Unaudited)     (Unaudited)     (Unaudited)  
Cash flows from operating activities:
                                
Net income
   $ 2,531     $ 2,854     $ 8,932     $ 28,868  
Adjustments to reconcile net income to net cash provided by operating activities:
                                
Restructuring recovery
     —       —       —       (478 )
Depreciation and amortization
     383       481       1,101       1,410  
Stock-based compensation
     4,426       3,393       13,742       11,449  
Loss (gain) on sale of discontinued operations
     —       147       —       (22,315 )
Deferred income taxes
     1,511       2,246       1,193       1,212  
Changes in assets and liabilities:
                                
Accounts receivable
     12,382       4,112       5,355       (5,359 )
Prepaid expenses and other
     113       21       (765 )     (249 )
Accounts payable
     (222 )     (394 )     (215 )     (948 )
Accrued compensation
     1,216       835       (4,154 )     3,304  
Restructuring accrual
     (55 )     (64 )     (165 )     (1,255 )
Other assets and liabilities
     (2,478 )     (1,887 )     (204 )     3,523  
 
                        
 
                                
Net cash provided by operating activities
     19,807       11,744       24,820       19,162  
 
                        
 
                                
Cash flows from investing activities:
                                
Increase in restricted cash
     (34 )     (724 )     (97 )     (817 )
Net proceeds from sale of discontinued operations
     —       (129 )     —       27,920  
Capital expenditures, net
     (753 )     (279 )     (2,204 )     (1,934 )
Other assets
     —       —       44       47  
 
                        
 
                                
Net cash provided by (used in) investing activities
     (787 )     (1,132 )     (2,257 )     25,216  
 
                        
 
                                
Cash flows from financing activities:
                                
Stock option and employee stock purchase plan proceeds
     691       4,518       3,814       5,959  
Payment of employee withholding taxes from equity transactions
     (1,056 )     (1,622 )     (3,119 )     (4,021 )
Tender offer cash distributions
     —       (1,805 )     —       (1,805 )
Common stock cash dividends
     (10,770 )     (9,716 )     (10,770 )     (9,716 )
Proceeds due to employees from employee sales of common stock
     —       (2,431 )     —       —  
Tax benefits from employee stock plans, net of adjustments
     (661 )     823       345       2,088  
Purchase of treasury stock
     (9,492 )     (18,414 )     (31,955 )     (26,967 )
 
                        
 
                                
Net cash used in financing activities
     (21,288 )     (28,647 )     (41,685 )     (34,462 )
 
                        
 
                                
Effect of exchange rate changes on cash
     (32 )     166       92       283  
 
                        
 
                                
Net increase (decrease) in cash and cash equivalents
     (2,300 )     (17,869 )     (19,030 )     10,199  
Cash and cash equivalents at beginning of period
     67,395       100,291 (2)     84,125       72,223 (2)
 
                        
 
                                
Cash and cash equivalents at end of period
   $ 65,095     $ 82,422     $ 65,095     $ 82,422  
 
                        
 
                                
Non-cash financing activities:
                                
Treasury stock repurchase obligation
   $ 795     $ —     $ 795     $ —  
Tender offer purchase obligation
     —       1,805       —       1,805  
 
(1)   The Condensed Consolidated Statements of Cash Flows is prepared on a combined basis and the reported results include both continuing and discontinued operations for the nine month periods ended December 31, 2006 and 2007.
 
(2)   Cash and cash equivalents includes $2,324 of cash and cash equivalents classified as discontinued operations as of March 31, 2006.