Diamond Management & Technology Consultants, Inc. (NASDAQ: DTPI), a premier global management and technology consulting firm, today announced results for its first quarter of fiscal year 2010 (ended June 30, 2009).
(1) Information regarding the employee tender offer is available in the Schedule TO-I/A filed on March 10, 2009.
“We are pleased to start the new fiscal year with strong results. Net revenue and EPS were at the high end of guidance, driven by strength in our financial services practice. Free cash flow of $3.6 million significantly exceeded expectations as a result of improved collections and diligent expense management,” said Adam Gutstein, President and CEO of Diamond.
“The demand environment has improved and our business is healthier. Client discussions today are less about strict cost reduction and quick return on investment and more about strategic initiatives. Our clients recognize that we have reached a new normalcy, and it is clear that competing more effectively relative to attracting and retaining customers is critical,” continued Gutstein. “The people of Diamond have particular expertise in helping companies realize value from their information, customer relationships, and by improving their business operations to improve their competitive positioning in this new environment.”
The following financial information includes both reported and adjusted financial metrics, which exclude the impact of the Tender Offer completed in the fourth quarter of fiscal year 2009. Management believes this presentation better reflects recurring operations of the Company.
The Company’s first quarter financial results are summarized as follows:
(1) Excluding the fourth quarter non-cash charge related to the Tender Offer of $16.7 million ($10.5 million net of related $6.2 million tax benefit).
First Quarter 2010
Net revenue for the quarter ended June 30, 2009 was $37.9 million up 6%, or 5% on a constant currency basis, compared with $35.9 million in the fourth quarter of fiscal year 2009 and down 2%, or flat on a constant currency basis, compared with $38.8 million reported in the first quarter of the prior fiscal year.
Pretax income was $1.9 million in the first quarter compared with $0.3 million in the fourth quarter of fiscal year 2009 excluding the impact of the Tender Offer. Including the impact of the Tender Offer, the reported pretax loss was $16.4 million in the prior quarter. The pretax loss in the first quarter of fiscal year 2009 was $1.0 million.
Income from continuing operations after taxes was $0.8 million, or $0.03 per diluted share. This compares with $0.5 million, or $0.02 per diluted share, excluding the impact of the Tender Offer, or $0.01 per diluted share, excluding both the impact of the Tender Offer and a one-time tax benefit of $0.3 million in the fourth quarter of fiscal year 2009. The reported loss from continuing operations after income taxes in the fourth quarter was $10.1 million, or $0.39 per diluted share. Income from continuing operations after taxes in the first quarter of 2009 was $0.7 million. Diluted weighted average shares outstanding was 27.4 million compared with 26.1 million in the fourth quarter of fiscal year 2009 and 27.3 million in the first quarter of fiscal year 2009.
The effective tax rate was 55% in the first quarter compared with an effective tax rate of 56% in the fourth quarter of fiscal year 2009, excluding the impact of the Tender Offer and the one-time tax benefit. The reported effective tax rate was 39% in the fourth quarter of fiscal year 2009.
Free cash flow (cash flow provided by operating activities less capital expenditures) in the first quarter of fiscal year 2010 was $3.6 million compared with $4.4 million in the fourth quarter and negative $3.2 million in the first quarter of fiscal year 2009. The Company ended the quarter with a cash and cash equivalents balance of $48.1 million.
The Company’s business metrics are summarized as follows:
Second Quarter 2010
The Company expects second quarter net revenue to increase and be in the range of $38 to $40 million, pretax income of $2.0 to $2.6 million and GAAP EPS to be in the range of $0.03 to $0.05 per diluted share. The Company expects its stock based compensation expense to be $1.3 million, tax expense to be in a range of $1.2 to $1.4 million, and its weighted average share count to be approximately 27.5 million shares. Free cash flow is expected to be $4 million to $6 million.
Diamond will host a conference call today, August 6, 2009, at 8:00 am CT to discuss the results of the quarter. The dial-in number for the conference call is 800-763-1505 for North American callers and 212-231-2902 for international callers. The replay will be available until August 13, 2009, and can be accessed by calling 402-977-9140, then entering passcode number 21431811. The call will be broadcast live and archived on Diamond’s web site at www.diamondconsultants.com.
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.