Diamond Management & Technology Consultants, Inc. (DTPI)
F1Q11 (Qtr End 06/30/10) Earnings Call Transcript
August 4, 2010 9:00 am ET
Christian Sadlier – Director, IR
Adam Gutstein – President and CEO
Karl Bupp – CFO
Kevin Steinke – Barrington Research
Kevin Liu – B. Riley & Co.
Ed Caso – Wells Fargo
James Friedman – Susquehanna
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Ladies and gentlemen, thank you for standing by. Welcome to the Diamond Management & Technology Consultants’ first quarter fiscal-year 2011 conference call. During the presentation, all participants will be in a listen-only mode. Afterwards we will conduct a question-and-answer session. (Operator instructions)
As a reminder, this conference is being recorded Wednesday, August 4, 2010. I would now like to turn the conference over to Christian Sadlier, Director, Investor Relations for Diamond. Please go ahead, sir.
Good morning, everyone. This is Christian Sadlier, Director of Investor Relations for Diamond. This morning we will discuss our financial results for the first quarter of our fiscal-year 2011 ended June 30, 2010. With me today is Adam Gutstein, President and Chief Executive Officer and Karl Bupp, Chief Financial Officer. Adam will begin with an overview of the quarter and our outlook for the remainder of the year. Karl will then cover the financials in greater detail. After that, we'll open up the lines for Q&A.
We have provided supporting slides on our Web site to accompany our remarks. Please note that financial results discussed today are related to continuing operations of the company, unless otherwise noted.
During this call, we will make both historical and forward-looking statements in order to help you better understand our business. Our actual results may differ materially and any forward-looking statements speak only as of today's date, August 4, 2010. We undertake no duty to update any forward-looking statements. The risks and uncertainties associated with our business are highlighted in our filings with the SEC.
Before turning it over to Adam, please note that we will be presenting at the Rodman & Renshaw Global Investment Conference on September 15 and the Kaufman Brothers Conference on September 16, both in New York.
With that, I'll turn the call over to Adam.
Thanks, Christian, and thank you all for joining us. We are pleased to share our first quarter results and discuss our outlook for the remainder of fiscal-year 2011. Our business is performing well and the first quarter results represent strong year-over-year growth and sequential improvement. 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 year 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.
Getting to the metrics, net revenue was $52 million, an increase of 37% year-over-year and GAAP EPS of $0.12, up from $0.03 last year. We generated free cash flow of $8.8 million at the high end of the guidance of $7 million to $9 million; as a result, our balance sheet has only grown stronger.
In terms of margins, we delivered our fifth consecutive quarter of pretax margin expansion with pretax margin increasing to 12.2% from 11.5% in the previous quarter and up from 5% in the first quarter last year. We are well on our way to our targeted 18%.
We continue to see increased demand for our services from both new and existing clients. This quarter, we served 67 clients, of which, 13 represent new clients on top of the 16 new clients from last quarter. Our average length of relationship is three years demonstrating the durability of our business.
Looking at our revenue by geography; the United States which represents roughly 90% of our business continued strong, up 38% year-over-year and 6% sequentially. Europe was down from last quarter, yet still came in well above our first quarter from the prior year. While India remains a small and developing part of our business, we believe it's an important source of growth over the long term and we are pleased to see that our September quarter is shaping up well.
From a global vertical perspective, healthcare delivered the most robust growth with a 49% year-over-year increase. Financial services, insurance and enterprise all generated very strong year-over-year growth, up at least 30% each.
Our smallest vertical, public sector, was down 11% compared to the same quarter last year, consistent with weakening public sector spending. That said, our partner, Erik Garr, who is on leave the last year serving in the FCC has returned to Diamond. We anticipate that this will have a positive impact on our public sector practice.
Turning to our business metrics; global annualized revenue per professional was $393,000 and over $400,000 in North America. The $400,000 revenue per professional is an important benchmark for us because it reflects both the value we provide to our clients and the nature of the work that we perform.
Chargeability in the first quarter was 75% down from 77% last quarter. Chargeability should trend downward towards our 71% target as we add our campus recruits over the course of the summer and fall.
Annualized voluntary attrition was 17%, which is higher than we like, reflective of the quality of our people and the opportunities they have. While we are certainly pleased that our annualized attrition has declined over each of the past several years, it's clear that this is an area we must continue to monitor and manage carefully.