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10-Q - FORM 10-Q - DIAMOND MANAGEMENT & TECHNOLOGY CONSULTANTS, INC. | c04124e10vq.htm |
EX-32.2 - EXHIBIT 32.2 - DIAMOND MANAGEMENT & TECHNOLOGY CONSULTANTS, INC. | c04124exv32w2.htm |
EX-32.1 - EXHIBIT 32.1 - DIAMOND MANAGEMENT & TECHNOLOGY CONSULTANTS, INC. | c04124exv32w1.htm |
EX-31.1 - EXHIBIT 31.1 - DIAMOND MANAGEMENT & TECHNOLOGY CONSULTANTS, INC. | c04124exv31w1.htm |
EX-31.2 - EXHIBIT 31.2 - DIAMOND MANAGEMENT & TECHNOLOGY CONSULTANTS, INC. | c04124exv31w2.htm |
Exhibit 99.1
News Release
FOR IMMEDIATE RELEASE
Investor Contact:
Christian Sadlier
312-255-5711
christian.sadlier@diamondconsultants.com
Christian Sadlier
312-255-5711
christian.sadlier@diamondconsultants.com
Media Contact:
David Moon
312-255-4560
david.moon@diamondconsultants.com
David Moon
312-255-4560
david.moon@diamondconsultants.com
DIAMOND REPORTS FIRST QUARTER FISCAL YEAR 2011 RESULTS
Increases First Quarter Net Revenue by 37% Year Over Year
Generates Free Cash Flow of $8.8 million
Declares Quarterly Dividend of $0.09 per share
Increases First Quarter Net Revenue by 37% Year Over Year
Generates Free Cash Flow of $8.8 million
Declares Quarterly Dividend of $0.09 per share
CHICAGO, Aug 4, 2010Diamond Management & Technology Consultants, Inc. (NASDAQ: DTPI), a premier
global management and technology consulting firm, today announced results for its first quarter of
fiscal year 2011.
Net revenue for the first quarter ended June 30, 2010 was $52.0 million, an increase of 3% compared
with $50.3 million in the fourth quarter of fiscal year 2010, and an increase of 37% compared with
$37.9 million reported in the first quarter of the prior fiscal year.
Pretax income was $6.3 million in the first quarter of fiscal year 2011 compared with $5.8 million
in the fourth quarter of fiscal year 2010 and $1.9 million in the first quarter of fiscal year
2010. Pretax margin increased to 12.2%, up from 11.5% in the previous quarter and 5% in the first
quarter last year.
Income from continuing operations after taxes in the first quarter of fiscal year 2011 was $3.3
million, or $0.12 per diluted share. This compares to $7.2 million, or $0.26 per diluted
share, in the fourth quarter of fiscal year 2010 which included a one-time valuation allowance
reversal benefit, and $0.8 million, or $0.03 per diluted share, in the first quarter of fiscal year
2010. Diluted weighted average shares outstanding was 28.4 million compared with 27.8 million in the
fourth quarter of fiscal year 2010 and 27.4 million in the first quarter of fiscal year 2010,
driven primarily by an increase in stock price.
1
Diamond Reports First Quarter Fiscal Year 2011 Results
The reported effective tax rate was 48% in the first quarter of fiscal year 2011 compared with
negative 25% in the fourth quarter of fiscal year 2010 and 55% in the first quarter of fiscal year
2010. During the fourth quarter of fiscal 2010, the company reversed a deferred tax asset valuation
allowance in the United Kingdom resulting in a one-time income tax benefit of $3.4 million, which
caused the negative reported effective tax rate for the quarter.
EBITDA (defined as income from continuing operations before interest, taxes, depreciation, and
amortization) was $6.7 million in the first quarter of fiscal year 2011 compared with $6.2 million
in the fourth quarter of fiscal year 2010 and $2.4 million in the first quarter of fiscal year
2010.
Free cash flow (cash flow provided by operating activities less capital expenditures) was $8.8
million in the first quarter of fiscal year 2011 compared with $7.8 million in the fourth quarter
of fiscal year 2010 and $3.6 million in the first quarter of fiscal year 2010. The Company ended
the quarter with cash and cash equivalents of $60.2 million. The $60.2 million cash balance does
not include $4.1 million in restricted cash that was released in July.
During the first quarter, Diamond repurchased approximately 240,000 shares at an average price of
$8.19 per share for a total amount of $2 million. As of June 30th, 2010 total share
repurchase authorization was $20.1 million.
The Company also announced that its Board of Directors declared on July 29, 2010, a quarterly dividend of $0.09 per
share of common stock, payable on September 15, 2010 to shareholders of record at the close of
business on September 1, 2010.
Our business is performing well and the first quarter results represent strong year over year
growth and sequential improvement, said Adam Gutstein, President & CEO of Diamond. Demand for our
services remains healthy across each of our industry verticals and we anticipate continued revenue
and earnings growth for the remainder of fiscal 2011. Our performance and outlook are driven by a
combination of Diamond having the right positioning, skills and services, while continuing to work
with the very best clients.
The Companys first quarter fiscal 2011 financial results are summarized as follows:
Financial Results ($ in millions except Earnings Per Share)
Q1 FY10 | Q4 FY10 | Q1 FY11 | ||||||||||
Net Revenue |
$ | 37.9 | $ | 50.3 | $ | 52.0 | ||||||
Income from Continuing
Operations before Income
Tax (Pretax Income) |
$ | 1.9 | $ | 5.8 | $ | 6.3 | ||||||
Diluted Earnings Per
Share from Continuing
Operations |
$ | 0.03 | $ | 0.26 | $ | 0.12 | ||||||
Adjusted Diluted
Earnings Per Share
from Continuing
Operations(1) |
$ | 0.03 | $ | 0.11 | $ | 0.12 | ||||||
EBITDA |
$ | 2.4 | $ | 6.2 | $ | 6.7 | ||||||
Free Cash Flow |
$ | 3.6 | $ | 7.8 | $ | 8.8 |
(1) | Excluding the one-time tax benefit from an income tax valuation allowance
reversal in the UK and using a 49% tax rate from the preceding quarter, fourth
quarter fiscal year 2010 EPS would have been $0.11 per share. |
2
Diamond Reports First Quarter Fiscal Year 2011 Results
The Companys business metrics are summarized as follows:
Q1 FY10 | Q4 FY10 | Q1 FY11 | ||||||||||
Total Clients |
61 | 66 | 67 | |||||||||
Top 5 Client Concentration (% of Net
Revenue) |
34 | % | 42 | % | 42 | % | ||||||
New Clients Added |
10 | 16 | 13 | |||||||||
Revenue Generated from New Clients |
6 | % | 4 | % | 3 | % | ||||||
Days Receivables Outstanding |
31 | 35 | 32 | |||||||||
Client-Serving Professionals (Quarter
End) |
441 | 527 | 532 | |||||||||
Revenue per Professional (Annualized, $
in thousands) |
$ | 335 | $ | 393 | $ | 393 | ||||||
Chargeability |
74 | % | 77 | % | 75 | % | ||||||
Voluntary Attrition (Annualized) |
13 | % | 14 | % | 17 | % | ||||||
Total Headcount (Quarter End) |
551 | 643 | 652 |
Revenue By Industry
Q1 FY10 | Q4 FY10 | Q1 FY11 | ||||||||||
Financial Services |
33 | % | 32 | % | 30 | % | ||||||
Insurance |
24 | % | 25 | % | 26 | % | ||||||
Healthcare |
19 | % | 20 | % | 21 | % | ||||||
Enterprise* |
18 | % | 19 | % | 19 | % | ||||||
Public Sector |
6 | % | 4 | % | 4 | % |
* | The enterprise vertical includes telecommunications,
consumer packaged goods, travel and entertainment, retail
and distribution, and manufacturing and logistics. |
Q2 and FY2011 Guidance
Second quarter net revenue is anticipated to be in the range of $52 to $54 million, pretax income
is anticipated to be in the range of $6.3 to $7 million and GAAP EPS to be in the range of $0.12 to $0.14 per diluted share. The company expects
stock based compensation to be $1.3 million, reported tax expense to be in the range of $2.9 to $3.1
million, weighted average share count of approximately 28.5 million and free cash
flow of $12 to $14 million. The company expects to end the September quarter with 575 to 585
consultants.
3
Diamond Reports First Quarter Fiscal Year 2011 Results
For the full fiscal year of 2011, Diamond anticipates net revenue to be in the range of $214 to
$220 million, up 21% to 24% year-over-year. The Company expects
pretax income in the range of $28 to $29.5
million, GAAP EPS in the range of $0.53 to $0.57 and stock based compensation expense to be $5.3
million. Reported tax expense is projected to be in the range of
$12.7 to $13.2 million, and
weighted average share count is expected to be 28.8 million. Free cash flow is expected to be at
least $20 million.
Q2 and FY2011 Guidance
(in millions, except Earnings Per Share)
Q2 FY11 | FY11 | |||||||
Revenue |
$52 $54 | $214 $220 | ||||||
Pretax Income |
$6.3 $7.0 | $28 $29.5 | ||||||
Reported Tax Expense |
$2.9 $3.1 | $12.7 $13.2 | ||||||
Weighted Avg. Share Count |
28.5 | 28.8 | ||||||
Earnings Per Share |
$ | 0.12 $0.14 | $ | 0.53 $0.57 | ||||
Free Cash Flow |
$12 $14 | > $20 |
Conference Call
Diamond will host a conference call today, August 4, 2010, at 8:00 am CT to discuss the results of
the quarter. The dial-in number for the conference call is (800) 926-6734 for North American
callers and (212) 231-2903 for international callers. A replay of the call will be available over
the Internet beginning shortly after the call ends. The call will be broadcast live and archived on
Diamonds web site at www.diamondconsultants.com. You may also listen to a telephonic replay of the
discussion beginning approximately one hour after the completion of the call through 9:00 AM CT on
August 11, 2010. The replay can be accessed by calling (800) 633-8284 or (402) 977-9140, then
entering passcode number 21477133.
About Diamond
Clients engage Diamond Management & Technology Consultants, Inc. (NASDAQ: DTPI) to help their
companies grow, improve margins, and increase the productivity of their investments. Working
together to design and execute business strategies that capitalize on changing market forces and
technology, Diamonds consultants are experts in helping clients attract and retain customers,
increase the value of their information, and plan and execute projects that turn strategy into
measurable results.
Diamonds capabilities are rooted in deep strategy, technology, operations, and industry
experience. The firms approach to client service is based on objectivity, collaboration, and an
unwavering commitment to its clients best interests. Headquartered in Chicago, Diamond has offices
in New York, Washington, D.C, Hartford, London, and Mumbai. To learn more, visit:
www.diamondconsultants.com.
4
Diamond Reports First Quarter Fiscal Year 2011 Results
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.
Non-GAAP Financial Measures
The press release includes non-GAAP financial measures. For a description of these non-GAAP
financial measures, including the reasons management believes the non-GAAP measures are useful to
investors, and reconciliations of these non-GAAP financial measures to the most directly comparable
financial measures prepared in accordance with U.S. generally accepted accounting principles
(GAAP), please see the section entitled Unaudited Reconciliations of GAAP to Non-GAAP Financial
Measures.
5
Diamond Reports First Quarter Fiscal Year 2011 Results
DIAMOND MANAGEMENT & TECHNOLOGY CONSULTANTS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
For the Three Months | ||||||||
Ended June 30, | ||||||||
2009 | 2010 | |||||||
(Unaudited) | (Unaudited) | |||||||
Revenue: |
||||||||
Net revenue |
$ | 37,892 | $ | 52,002 | ||||
Reimbursable expenses |
7,080 | 9,171 | ||||||
Total revenue |
44,972 | 61,173 | ||||||
Project personnel expenses: |
||||||||
Project personnel costs before reimbursable expenses |
28,621 | 35,740 | ||||||
Reimbursable expenses |
7,080 | 9,171 | ||||||
Total project personnel expenses |
35,701 | 44,911 | ||||||
Gross margin |
9,271 | 16,262 | ||||||
Other operating expenses: |
||||||||
Professional development and recruiting |
706 | 2,133 | ||||||
Marketing and sales |
541 | 804 | ||||||
Management and administrative support |
6,103 | 6,925 | ||||||
Total other operating expenses |
7,350 | 9,862 | ||||||
Income from Operations |
1,921 | 6,400 | ||||||
Other expense, net |
(19 | ) | (57 | ) | ||||
Income from continuing operations before income taxes |
1,902 | 6,343 | ||||||
Income tax expense |
1,055 | 3,037 | ||||||
Income from continuing operations after income taxes |
847 | 3,306 | ||||||
Discontinued operations: |
||||||||
Income from discontinued operations, net of income taxes |
85 | | ||||||
Net Income |
$ | 932 | $ | 3,306 | ||||
Basic income per share of common stock: |
||||||||
Income from continuing operations |
$ | 0.03 | $ | 0.12 | ||||
Income from discontinued operations |
0.00 | | ||||||
Net income |
$ | 0.03 | $ | 0.12 | ||||
Diluted income per share of common stock: |
||||||||
Income from continuing operations |
$ | 0.03 | $ | 0.12 | ||||
Income from discontinued operations |
0.00 | | ||||||
Net income |
$ | 0.03 | $ | 0.12 | ||||
Shares used in computing basic income per share |
27,273 | 27,105 | ||||||
Shares used in computing diluted income per share |
27,369 | 28,394 |
The following amounts of stock-based compensation expense (SBC) are included in each of the
respective expense categories
reported above:
For the Three Months | ||||||||
Ended June 30, | ||||||||
2009 | 2010 | |||||||
(Unaudited) | (Unaudited) | |||||||
Project personnel costs before reimbursable expenses |
$ | 842 | $ | 840 | ||||
Professional development and recruiting |
12 | 13 | ||||||
Marketing and sales |
90 | 107 | ||||||
Management and administrative support |
373 | 367 | ||||||
Total SBC |
$ | 1,317 | $ | 1,327 | ||||
6
Diamond Reports First Quarter Fiscal Year 2011 Results
DIAMOND MANAGEMENT & TECHNOLOGY CONSULTANTS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
March 31, | June 30, | |||||||
2010 | 2010 | |||||||
(Unaudited) | ||||||||
ASSETS |
||||||||
Current assets: |
||||||||
Cash and cash equivalents |
$ | 55,834 | $ | 60,204 | ||||
Restricted Cash |
4,104 | 4,104 | ||||||
Accounts receivable, net of allowance of $477 and $510
as of March 31 and June 30, 2010, respectively |
22,947 | 21,378 | ||||||
Income taxes receivable |
| 2,682 | ||||||
Deferred tax asset current portion |
6,888 | 2,754 | ||||||
Prepaid expenses and other current assets |
3,066 | 3,236 | ||||||
Total current assets |
92,839 | 94,358 | ||||||
Computers, equipment, leasehold improvements and
software, net |
3,667 | 3,858 | ||||||
Deferred tax asset long-term portion |
7,911 | 7,237 | ||||||
Other assets |
1,584 | 1,316 | ||||||
Total assets |
$ | 106,001 | $ | 106,769 | ||||
LIABILITIES AND STOCKHOLDERS EQUITY |
||||||||
Current liabilities: |
||||||||
Accounts payable |
$ | 5,613 | $ | 3,922 | ||||
Income taxes payable current portion |
2,752 | | ||||||
Accrued compensation |
17,741 | 22,044 | ||||||
Accrued benefits |
2,355 | 2,986 | ||||||
Other accrued liabilities |
5,632 | 5,909 | ||||||
Total current liabilities |
34,093 | 34,861 | ||||||
Deferred rent long term portion |
1,613 | 1,573 | ||||||
Accrued income tax liabilities long-term portion |
585 | 585 | ||||||
Total liabilities |
36,291 | 37,019 | ||||||
Commitments and contingencies |
||||||||
Stockholders equity: |
||||||||
Common stock, net, 27,252 and 27,278 shares issued
and outstanding
as of March 31 and June 30, 2010, respectively |
511,650 | 511,008 | ||||||
Accumulated other comprehensive loss |
(4,423 | ) | (4,593 | ) | ||||
Accumulated deficit |
(437,517 | ) | (436,665 | ) | ||||
Total stockholders equity |
69,710 | 69,750 | ||||||
Total liabilities and stockholders equity |
$ | 106,001 | $ | 106,769 | ||||
7
Diamond Reports First Quarter Fiscal Year 2011 Results
DIAMOND MANAGEMENT & TECHNOLOGY CONSULTANTS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (1)
(In thousands)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (1)
(In thousands)
For the Three Months | ||||||||
Ended June 30, | ||||||||
2009 | 2010 | |||||||
(Unaudited) | (Unaudited) | |||||||
Cash flows from operating activities: |
||||||||
Net income |
$ | 932 | $ | 3,306 | ||||
Adjustments to reconcile net income to net cash
provided by operating activities: |
||||||||
Depreciation and amortization |
489 | 431 | ||||||
Stock-based compensation |
1,317 | 1,327 | ||||||
Deferred income taxes |
6,839 | 4,786 | ||||||
Excess tax benefits from employee stock plans |
(5 | ) | (324 | ) | ||||
Changes in assets and liabilities: |
||||||||
Accounts receivable |
1,020 | 1,549 | ||||||
Prepaid expenses and other |
(110 | ) | (316 | ) | ||||
Accounts payable |
(904 | ) | (1,512 | ) | ||||
Accrued compensation |
331 | 4,298 | ||||||
Income taxes payable / receivable |
(6,512 | ) | (5,283 | ) | ||||
Other assets and liabilities |
677 | 1,304 | ||||||
Net cash provided by operating activities |
4,074 | 9,566 | ||||||
Cash flows from investing activities: |
||||||||
Increase in restricted cash |
(2 | ) | | |||||
Capital expenditures, net |
(480 | ) | (816 | ) | ||||
Net cash used in investing activities |
(482 | ) | (816 | ) | ||||
Cash flows from financing activities: |
||||||||
Stock option and employee stock purchase plan proceeds |
397 | 443 | ||||||
Payment of employee withholding taxes from equity transactions |
(106 | ) | (612 | ) | ||||
Common stock cash dividends |
(1,921 | ) | (2,453 | ) | ||||
Excess tax benefits from employee stock plans |
5 | 324 | ||||||
Purchase of treasury stock |
(280 | ) | (1,963 | ) | ||||
Net cash used in financing activities |
(1,905 | ) | (4,261 | ) | ||||
Effect of exchange rate changes on cash |
276 | (119 | ) | |||||
Net increase in cash and cash equivalents |
1,963 | 4,370 | ||||||
Cash and cash equivalents at beginning of period |
46,112 | 55,834 | ||||||
Cash and cash equivalents at end of period |
$ | 48,075 | $ | 60,204 | ||||
(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 three month period ended June 30, 2009. |
8
Diamond Reports First Quarter Fiscal Year 2011 Results
DIAMOND MANAGEMENT & TECHNOLOGY CONSULTANTS, INC.
UNAUDITED RECONCILIATIONS OF GAAP TO NON-GAAP FINANCIAL MEASURES
(In thousands)
RECONCILIATION OF INCOME FROM CONTINUING OPERATIONS AFTER INCOME TAXES TO EBITDA :
For the Three Months | For the Three Months | |||||||||||
Ended March 31, | Ended June 30, | |||||||||||
2010 | 2009 | 2010 | ||||||||||
(Unaudited) | (Unaudited) | (Unaudited) | ||||||||||
Income from continuing operations after income taxes |
$ | 7,221 | $ | 847 | $ | 3,306 | ||||||
Depreciation and amortization expense |
410 | 489 | 431 | |||||||||
Interest income, net |
(5 | ) | (10 | ) | (27 | ) | ||||||
Income tax expense (benefit) |
(1,426 | ) | 1,055 | 3,037 | ||||||||
EBITDA (1) |
$ | 6,200 | $ | 2,381 | $ | 6,747 | ||||||
(1) | EBITDA, defined as income from continuing operations before interest, taxes, depreciation and
amortization, is not a measure of financial performance under U.S. generally accepted accounting
principles (GAAP). Management believes EBITDA is a useful indicator of the Companys financial and
operating performance and its ability to generate cash flows from operations that are available for
share repurchases and capital expenditures. Investors should recognize that EBITDA might not be
comparable to similarly-titled measures of other companies. This measure should be considered in
addition to, and not as a substitute for or superior to, any measure of performance prepared in
accordance with GAAP. |
RECONCILIATION OF CASH PROVIDED BY OPERATING ACTIVITIES TO FREE CASH FLOW (2):
For the Three Months | For the Three Months | |||||||||||
Ended March 31, | Ended June 30, | |||||||||||
2010 | 2009 | 2010 | ||||||||||
(Unaudited) | (Unaudited) | (Unaudited) | ||||||||||
Net cash provided by operating activities |
$ | 8,090 | $ | 4,074 | $ | 9,566 | ||||||
Capital expenditures |
(304 | ) | (480 | ) | (816 | ) | ||||||
Free cash flow |
$ | 7,786 | $ | 3,594 | $ | 8,750 | ||||||
(2) | Free cash flow, defined as net cash provided by operating activities less capital expenditures,
is a non-GAAP term. Management believes that by providing more visibility on free cash flow and
reconciling to net cash provided by operating activities, the Company provides a consistent metric
from which the quality of its business may be monitored. This measure
should be considered in addition to, and not as a substitute for or superior to, any measure of
performance prepared in accordance with GAAP. |
9