Diamond Mgt. & Technology Consultants Inc. F4Q10 (Qtr End 03/31/10) Earnings Call Transcript

Diamond Mgt. & Technology Consultants Inc. F4Q10 (Qtr End 03/31/10) Earnings Call Transcript
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Diamond Mgt. & Technology Consultants Inc. (DTPI)

F4Q10 (Qtr End 03/31/10) Earnings Call

May 6, 2010 9:00 a.m. ET


Margaret Boyce - Director, IR

Adam Gutstein - President & CEO

Karl Bupp - CFO


Ed Caso - Wells Fargo Securities

Kevin Steinke - Barrington Research



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Ladies and Gentlemen, thank you for standing by. Welcome to the Fourth Quarter 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 today Thursday, May 6, 2010.

I would now like to turn the conference over to Margaret Boyce, Director, Investor Relations. Please go ahead, ma'am.

Margaret Boyce

Thank you, Martin. Good morning everyone, this is Margaret Boyce, Director of Investor Relations for Diamond. Also with me today is Adam Gutstein, our President and CEO and Karl Bupp, our Chief Financial Officer. Adam will begin with a discussion of the March quarter in our fiscal year 2010 results. Karl will provide the financial details and then we'll open up the call for questions.

We have supporting slides available on our website that accompany our remarks today. I would also like you to note that the financial results we will discuss today are related to continuing operations of the company, unless otherwise noted.

As a reminder during today's call, we will make both historical and forward-looking statements in order to help you better understand our business. You should realize that our actual results may differ materially. Any forward-looking statements speak only as of today's date, May 6, 2010, and we undertake no duty to update this information in the future. The risks and uncertainties associated with our business are highlighted in our filings with the SEC, including our annual report on Form 10-K for the year ended March 31, 2009.

Before turning it over to Adam, I'd like you to know that we will be presenting at B. Riley 11th Annual Investor Conference on May 26th in Santa Monica and the Sidoti & Company Semi-Annual Micro-Cap Conference on June 25th in New York.

With that, I'll turn it over to Adam.

Adam Gutstein

Thanks Margaret, and thank you all for joining us this morning. Before we get started, let me share you with, this is Margaret's last call. Margaret has decided to leave to spend more time with her family. This is not the first time we've seen Margaret leave us. We hope to see Margaret return. We want to thank Margaret for her service and wish her the very best.

We're pleased to share results and outlook. Our business is performing well. We're optimistic about the near term and even more positive about the long-term. Let's start with the highlights. We finished fiscal year 2010 with an outstanding fourth quarter, our fourth consecutive quarter of growth.

Net revenue, EPS and free cash flow all exceeded our previous guidance. I'll cover the fourth quarter details in a moment. We continue to see a strong demand for our services and we expect this trend to continue for the foreseeable future.

Looking to the June quarter, we're projecting continued growth and expect net revenue to be in the range of $51 million to $53 million, reflecting the strength of our business and stability of the pipeline with returning to our practice of providing annual guidance. For fiscal 2011, we expect net revenue to grow 20% to 25%. Pretax income increased at least 65%, and free cash flow to be greater than $20 million.

And finally the Board has approved the quarterly dividend of $0.09 per share, an increase of $0.02 over the previous quarter. Now let's review the fourth quarter. Net revenue $50.3 million increased 40% year-over-year and 11% sequentially. We delivered GAAP EPS of $0.26 and $0.11 on an as adjusted basis, a penny above the high end of our previous guidance.

Karl will explain the adjustments in his section momentarily. We generated free cash flow to $7.8 million, well above our previous guidance of $3 million to $5 million. We continue to make progress expanding our margins with pretax margin into 11.5% from 9.6% in the previous quarter driven by modest improvements in pricing, strong chargeability and appropriate expense management.

We continue to see increase demand for our services. While many of our client's prospects remain focused on the cost structures and competitive positioning, they were also accelerating their investments to ensure their businesses are prepared for and deliver growth.

One interesting example of the client investing for both growth and improved cost performance is the development of a mobile strategy for one of the largest health insurance companies. This strategy when executed will review administrative costs and enable improve care management and better differentiate their customer service.

In addition, an important qualitative benefit will be to improve the Company's brand as an innovator. Looking at the revenue by geography. U.S. was strong and Europe was particularly strong, one of the best quarters in the firm's history. In India, revenue remain flat yet we remain committed to growing our presence in this important area.

From a global vertical perspective, growth was strong in our financial services and enterprise verticals. In financial services, we continue to be well positioned in the payment segment where we are helping clients to adapt to new industry regulations and will be worked cross traditional and digital channels.

In addition, we continue to see good demand in capital markets that will make them strides in asset management and banking. In enterprise, our travel and transportation segment continued to grow, and we're seeing spending in our CPG segment as well.

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