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DDi Corp. Announces Fourth Quarter and Full Year 2006 Results

ANAHEIM, Calif.--(BUSINESS WIRE)--March 1, 2007--DDi Corp. (NASDAQ:DDIC), a leading provider of time-critical, technologically advanced PCB engineering and manufacturing services, today reported financial results for its fourth quarter and full year ended December 31, 2006.

Fourth Quarter Highlights

The Company reported fourth quarter 2006 net sales of $43.3 million, adjusted EBITDA of $4.3 million, and net loss of $95,000.

On October 23, 2006, DDi completed its acquisition of Sovereign Circuits, Inc. ("Sovereign") for $5.2 million in cash, 1.2 million shares of DDi common stock, and the assumption of Sovereign's net debt of approximately $1.7 million (net of cash acquired of $0.6 million). As a result, fourth quarter results include the operations of Sovereign from October 23, 2006 through December 31, 2006.

Also in October, the Company repurchased the remaining balance of $11.0 million face value of Series B Preferred Stock for $5.5 million in cash and the issuance of 731,737 shares of DDi common stock. As a result of these transactions, the Company has now retired all shares of its Series B Preferred Stock.

Fourth Quarter Results

Fourth quarter 2006 net sales of $43.3 million decreased 10 percent over the same period in 2005 due to the sale of the assembly business in the third quarter of 2006. Fourth quarter PCB sales were up 3 percent compared to PCB sales of $41.9 million in the fourth quarter of 2005 and were essentially flat from third quarter 2006 PCB sales of $43.2 million. Excluding the impact of the Sovereign acquisition, fourth quarter 2006 PCB sales were down due to a slight softening in the market.

Gross margin for the fourth quarter improved to 19.6 percent of net sales from 13.8 percent of net sales in the prior year fourth quarter primarily due to lower non-cash compensation expense in 2006 compared to 2005 and the sale of the lower margin assembly business in September 2006. PCB gross margin increased 4.5 points from 15.1 percent of net PCB sales in the fourth quarter of 2005 but was sequentially down from 20.8 percent of net PCB sales in the third quarter of 2006. The year over year increase in the PCB gross margin percentage was primarily due to the lower non-cash compensation expense. The decrease in the PCB gross margin percentage on a sequential basis is primarily due to a slight softening in PCB sales as well as operating inefficiencies associated with the holiday season and plant maintenance.

Total sales and marketing expenses for the fourth quarter of 2006 were $3.1 million, or 7.1 percent of net sales, down from $4.3 million, or 8.9 percent of net sales, in the fourth quarter of 2005, primarily due to the sale of the assembly business and lower non-cash compensation expense in 2006. Sequentially, sales and marketing expenses were down from $3.9 million, or 7.6 percent of net sales, for the third quarter of 2006 primarily due to the sale of the assembly business.

Total general and administrative expenses decreased to $4.0 million, or 9.1 percent of net sales compared to $5.4 million, or 11.2 percent of net sales, for the fourth quarter of 2005. The decrease is primarily due to lower officer's severance as well as the sale of the assembly business and lower Sarbanes-Oxley compliance costs in 2006 compared to 2005. Sequentially, general and administrative expenses increased by $0.6 million from $3.3 million, or 6.5 percent of net sales, for the third quarter of 2006 primarily due to the timing of Sarbanes-Oxley costs and an accrual for management incentives in the fourth quarter, partially offset by the sale of the assembly business.

Adjusted EBITDA (excluding non-cash compensation and restructuring charges) for the fourth quarter was $4.3 million, a 12 percent improvement over the adjusted EBITDA (excluding non-cash compensation, restructuring charges, and officer's severance) in the fourth quarter of 2005 of $3.8 million, but down slightly from the $4.7 million of adjusted EBITDA (excluding non-cash compensation, restructuring charges, and loss on sale of assembly business) for the third quarter of 2006.

Net loss was $95,000 for the fourth quarter of 2006 compared to a net loss of $5.6 million in the fourth quarter of 2005, an improvement of 98 percent. Sequentially, the net loss improved from a net loss of $4.5 million in the third quarter of 2006, primarily due to the loss on sale of the assembly business recorded in the third quarter of 2006 of $4.5 million. The net loss applicable to common stockholders for the fourth quarter of 2006 was $11.1 million, or $0.50 net loss per share, compared to $7.4 million, or $0.41 net loss per share, for the same period in 2005. The increase in net loss applicable to common stockholders was due to a $10.7 million one-time, non-cash reduction in earnings applicable to common stockholders used in the calculation of earnings per share in the fourth quarter related to the Series B repurchase in October 2006. For accounting purposes, this reduction is included when calculating earnings per share applicable to common stockholders and does not represent a charge that was recorded in our results of operations or cash flows.

Mikel Williams, President and Chief Executive Officer of DDi Corp., stated, "I am extremely pleased with the progress we have made this year. We have improved the financial performance of the company, strategically realigned around our core PCB business, finished the financial restructuring and made significant improvements to the management team. More recently, we have taken significant steps to strengthen the sales organization with the addition of Jerry Barnes as our SVP Sales in January. Jerry and other recent additions to our sales team add additional depth and experience to the company. Going forward, we will continue to focus on exceeding customer demand through exceptional operational performance and growing our market share."

2006 Full Year Results

The Company reported 2006 net sales of $198.1 million, a 7 percent increase over 2005 net sales of $184.6 million. PCB sales were $174.4 million, up 14 percent compared to PCB sales of $153.5 million in 2005. The increase in PCB sales was primarily due to an increase in volume of layers shipped and in increase in average layer pricing as well as the acquisition of Sovereign in the fourth quarter.

Gross margin for 2006 improved to 19.1 percent of net sales from 14.4 percent of net sales in 2005 primarily due to the improved operating efficiencies and loading of the facilities in the PCB business, lower non-cash compensation expense in 2006 compared to 2005, and no inventory impairment in 2006 as well as the impact of the sale of the lower margin assembly business in September 2006. PCB gross margin increased to 20.5 percent of net PCB sales compared to 16.2 percent of net PCB sales in 2005 primarily due to improved operating performance and lower non-cash compensation expense.

Total sales and marketing expenses for 2006 were $15.2 million, or 7.7 percent of net sales, up slightly from $15.0 million, or 8.1 percent of net sales, in 2005. The improvement in expenses as a percentage of net sales is due primarily to improved leverage of our fixed sales costs across a higher volume of sales.

Total general and administrative expenses were $14.5 million, or 7.3 percent of net sales, for 2006, a decrease of 8 percent compared to $15.7 million, or 8.5 percent of net sales, for 2005. The decrease is primarily due to lower executive compensation and severance, as well as the sale of the assembly business and lower Sarbanes-Oxley costs in 2006 compared to 2005, partially offset by the acquisition of Sovereign.

Adjusted EBITDA (excluding non-cash compensation, restructuring charges, legal reserve and loss on sale of assembly business) for 2006 was $19.8 million, a 55 percent improvement over the adjusted EBITDA (excluding non-cash compensation, restructuring charges, officer's severance and goodwill impairment) in 2005 of $12.8 million.

Net loss was $7.2 million for 2006 compared to a net loss of $64.0 million for 2005. This improvement was primarily due to the goodwill impairment of $54.7 million in 2005 as well as better overall operating performance in 2006. The net loss applicable to common stockholders for 2006 was $23.7 million, or $1.21 net loss per share, compared to $70.4 million, or $8.76 net loss per share, for 2005. Included in the 2006 net loss applicable to common stockholders was a $10.7 million one-time, non-cash reduction in earnings applicable to common stockholders used in the calculation of earnings per share in the fourth quarter related to the Series B repurchase in October 2006. For accounting purposes, this reduction is included when calculating earnings per share applicable to common stockholders and does not represent a charge that was recorded in our results of operations or cash flows.

Liquidity

As of December 31, 2006, DDi had total cash and cash equivalents of $15.9 million and no borrowings outstanding under its revolving credit facility which had a borrowing capacity of $15.3 million. Our revolving credit facility expires on March 31, 2007. We are currently in the process of negotiating its renewal which we anticipate will be finalized prior to its expiration.

Conference Call and Webcast

A conference call with simultaneous webcast to discuss fourth quarter and full year 2006 financial results will be held today at 5:00 p.m. Eastern / 2:00 p.m. Pacific. The call is being webcast and can be accessed at the Company's web site: www.ddiglobal.com/investor. Participants should access the website at least 15 minutes early to register and download any necessary audio software. A telephone replay of the conference call will be available through March 8, 2007 by dialing 888-286-8010 (domestic) or 617-801-6888 (international) and entering the conference ID 89868855. An online replay of the webcast will be available for 12 months at www.ddiglobal.com/investor under "Financial Calendar." For more information, visit the www.ddiglobal.com.

About DDi

DDi is a leading provider of time-critical, technologically advanced, electronics manufacturing services. Headquartered in Anaheim, California, DDi and its subsidiaries offer PCB engineering, fabrication and manufacturing services to leading electronics OEMs and contract manufacturers worldwide from its facilities across North America and with manufacturing partners in Asia.

Non-GAAP Financial Measures

This release includes 'adjusted EBITDA', a non-GAAP financial measures as defined in Regulation G of the Securities Exchange Act of 1934. Management believes that the disclosure of non-GAAP financial measures, when presented in conjunction with the corresponding GAAP measure, provides useful information to the Company, investors and other users of the financial statements and other financial information in identifying and understanding operating performance for a given level of net sales and business trends. Management believes that adjusted EBITDA is an important factor of the Company's business because it reflects financial performance that is unencumbered by debt service and other non-recurring or unusual items. This financial measure is commonly used in the Company's industry. It is also used by the Company's lenders to determine components of covenant compliance. However, adjusted EBITDA should not be considered as an alternative to cash flow from operating activities, as a measure of liquidity or as alternatives to net income as a measure of operating results in accordance with generally accepted accounting principles. The Company's definition of adjusted EBITDA may differ from definitions of such financial measure used by other companies. The Company has provided a reconciliation of adjusted EBITDA to GAAP financial information in the attached Schedule of Non-GAAP reconciliations.

"Safe Harbor" Statement under the Private Securities Litigation Reform Act of 1995

Except for historical information contained in this release, statements in this release may constitute forward-looking statements regarding the Company's assumptions, projections, expectations, targets, intentions or beliefs about future events. Words or phrases such as "anticipates," "believes," "estimates," "expects," "intends," "plans," "predicts," "projects," "targets," "will likely result," "will continue," "may," "could" or similar expressions identify forward-looking statements. Forward-looking statements include, but are not limited to, DDi's ability to extend its presence in other markets which it believes are less vulnerable to other manufacturers, and the anticipated benefits of the acquisition of Sovereign Circuits. Forward-looking statements involve risks and uncertainties, which could cause actual results or outcomes to differ materially from those expressed. We caution that while we make such statements in good faith and we believe such statements are based on reasonable assumptions, including without limitation, management's examination of historical operating trends, data contained in records, and other data available from third parties, we cannot assure you that the Company's projections will be achieved. In addition to other factors and matters discussed from time to time in the Company's filings with the U.S. Securities and Exchange Commission, or the SEC, some important factors that could cause actual results or outcomes for DDi or its subsidiaries to differ materially from those discussed in forward-looking statements include changes in general economic conditions in the markets in which we may compete and fluctuations in demand in the electronics industry; the Company's ability to sustain historical margins; increased competition; increased costs; loss or retirement of key members of management; increases in the Company's cost of borrowings or unavailability of additional debt or equity capital on terms considered reasonable by management; and adverse state, federal or foreign legislation or regulation or adverse determinations by regulators. Any forward-looking statement speaks only as of the date on which such statement is made, and, except as required by law, we undertake no obligation to update any forward-looking statement to reflect events or circumstances after the date on which such statement is made or to reflect the occurrence of unanticipated events. New factors emerge from time to time, and it is not possible for management to predict all such factors.


                              DDi Corp.
           Condensed Consolidated Statements of Operations
               (In thousands, except per share amounts)
                             (Unaudited)

                              Qtr. Ended    Qtr. Ended    Qtr. Ended
                             Dec. 31, 2006 Dec. 31, 2005 Sep. 30, 2006
                             ------------- ------------- -------------

Net sales                         $43,277       $48,164       $51,374
Cost of goods sold                 34,812        41,535        42,263
                             ------------- ------------- -------------

     Gross profit                   8,465         6,629         9,111

Operating expenses:
  Sales and marketing               3,060         4,291         3,879
  General and administrative        3,956         5,374         3,331
  Amortization of
   intangibles                      1,295         1,150         1,150
  Loss on sale of assembly
   business                             -             -         4,544
  Restructuring and other
   related charges                    148           131           120
                             ------------- ------------- -------------
     Operating income (loss)            6        (4,317)       (3,913)
Interest and other expense,
 net                                  337           668           265
                             ------------- ------------- -------------
     Loss before income
      taxes                          (331)       (4,985)       (4,178)
Income tax (benefit) expense         (236)          621           307
                             ------------- ------------- -------------
     Net loss                         (95)       (5,606)       (4,485)
Less: Series B preferred
 stock dividends, accretion
 and repurchase charge            (11,021)       (1,804)       (1,798)
                             ------------- ------------- -------------
     Net loss applicable to
      common stockholders        $(11,116)      $(7,410)      $(6,283)
                             ============= ============= =============

Net loss per common share
 applicable to common
 stockholders - basic and
 diluted                           $(0.50)       $(0.41)       $(0.32)
Weighted-average shares used
 in per share computations -
 basic and diluted                 22,045        18,240        19,819
                              DDi Corp.
           Condensed Consolidated Statements of Operations
               (in thousands, except per share amounts)
                             (Unaudited)

                                            Year Ended    Year Ended
                                           Dec. 31, 2006 Dec. 31, 2005
                                           ------------- -------------
Net sales                                      $198,115      $184,625
Cost of goods sold                              160,188       157,959
                                           ------------- -------------

     Gross profit                                37,927        26,666

Operating expenses:
  Sales and marketing                            15,228        14,993
  General and administrative                     14,543        15,728
  Amortization of intangibles                     4,744         4,598
  Loss on sale of assembly business               4,544             -
  Litigation reserve                              1,727             -
  Restructuring and other related charges         1,140         4,703
  Goodwill impairment                                 -        54,669
                                           ------------- -------------
     Operating loss                              (3,999)      (68,025)
Interest and other expense, net                   1,406         4,756
                                           ------------- -------------
     Loss from continuing operations
      before income taxes                        (5,405)      (72,781)
Income tax expense                                1,828         1,429
                                           ------------- -------------
     Loss from continuing operations             (7,233)      (74,210)
Income from discontinued operations                   -        10,236
                                           ------------- -------------
     Net loss                                    (7,233)      (63,974)
Less: Series B preferred stock dividends,
 accretion and repurchase charge                (16,419)       (6,473)
                                           ------------- -------------
     Net loss applicable to common
      stockholders                             $(23,652)     $(70,447)
                                           ============= =============

Loss per common share from continuing
 operations applicable to common
stockholders - basic and diluted                 $(1.21)      $(10.04)
Net loss per common share applicable to
 common stockholders - basic and diluted         $(1.21)       $(8.76)
Weighted-average shares used in per share
 computations - basic and diluted                19,623         8,039
                               DDi Corp
                Condensed Consolidated Balance Sheets
                            (In thousands)
                             (Unaudited)

                                             December 31, December 31,
                                                2006         2005
                                             ------------ ------------
                   Assets
Current assets:
  Cash and cash equivalents                      $15,920      $25,985
  Cash and cash equivalents, restricted                -        2,972
  Accounts receivable, net                        24,593       29,710
  Inventories                                     14,559       16,117
  Prepaid expenses and other                       1,146        1,506
                                             ------------ ------------
      Total current assets                        56,218       76,290
Property, plant and equipment, net                31,162       31,063
Goodwill and intangibles, net                     51,696       55,256
Other assets                                         535        1,719
                                             ------------ ------------
     Total assets                               $139,611     $164,328
                                             ============ ============

 Liabilities, Mandatorily Redeemable
  Preferred Stock and Stockholders' Equity
Current liabilities:
   Revolving credit facility                          $-      $19,929
   Accounts payable                               12,884       15,443
   Accrued expenses and other current
    liabilities                                   12,104       14,709
                                             ------------ ------------
     Total current liabilities                    24,988       50,081
Other long-term liabilities                        5,056        4,745
                                             ------------ ------------
     Total liabilities                            30,044       54,826
                                             ------------ ------------

Series B mandatorily redeemable preferred
 stock                                                 -        1,513

Stockholders' equity:
  Common stock and additional paid-in-
   capital                                       240,379      231,839
  Deferred compensation                                -         (349)
  Accumulated other comprehensive income             268          346
  Accumulated deficit                           (131,080)    (123,847)
                                             ------------ ------------
     Total stockholders' equity                  109,567      107,989
                                             ------------ ------------
     Total liabilities, mandatorily
      redeemable preferred stock and
      stockholders' equity                      $139,611     $164,328
                                             ============ ============
                              DDi Corp.
                 Schedule of Non-GAAP Reconciliations
                            (In thousands)
                             (Unaudited)

                              Qtr. Ended    Qtr. Ended    Qtr. Ended
                             Dec. 31, 2006 Dec. 31, 2005 Sep. 30, 2006
                             ------------- ------------- -------------
Adjusted EBITDA:
GAAP net loss applicable
 to common stockholders          $(11,116)      $(7,410)      $(6,283)
Add back:
  Interest and other
   expense, net                       337           668           265
  Income tax expense
   (benefit)                         (236)          621           307
  Depreciation                      2,335         2,609         2,372
  Amortization of
   intangibles                      1,295         1,150         1,150
  Non-cash compensation               496         3,225           384
  Officer's severance                   -         1,031             -
  Restructuring and other
   related charges                    148           131           120
  Loss on sale of assembly
   business                             -             -         4,544
  Series B preferred stock
   dividends, accretion and
   repurchase charge               11,021         1,804         1,798
                            -------------- ------------- -------------
Adjusted EBITDA(a)                 $4,280        $3,829        $4,657
                             ============= ============= =============

                              Year Ended    Year Ended
                             Dec. 31, 2006 Dec. 31, 2005
                             ------------- -------------
Adjusted EBITDA:
GAAP net loss applicable
 to common stockholders          $(23,652)     $(70,447)
Add back:
  Interest and other
   expense, net                     1,406         4,756
  Income tax expense                1,828         1,429
  Depreciation                      9,848         9,927
  Amortization of
   intangibles                      4,744         4,598
  Loss on sale of assembly
   business                         4,544             -
  Goodwill impairment                   -        54,669
  Non-cash compensation             1,547         4,602
  Officer's severance                 240         1,031
  Restructuring and other
   related charges                  1,140         5,956
  Litigation reserve                1,727             -
  Income from discontinued
   operations                           -       (10,236)
  Series B preferred stock
   dividends, accretion and
   repurchase charge               16,419         6,473
                             ------------- -------------
Adjusted EBITDA(a)                $19,791       $12,758
                             ============= =============


(a) Earnings before interest and other expense, income taxes,
 depreciation, amortization, non-cash compensation, Officer's
 severance, restructuring and other related charges, goodwill
 impairment, litigation reserve, loss on sale of assembly business and
 income from discontinued operations

CONTACT: DDi Corp.
Mikel H. Williams, Chief Executive Officer
714-688-7200
Sally Goff, Chief Financial Officer
714-688-7200
or
NMC Partners
Investor/Analyst Information
Kathleen Buczko
562-366-1552
SOURCE: DDi Corp.

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