The following is a discussion of the financial condition and results of operations for our fiscal quarter and year to date period ended March 31, 2009. As used herein, the "Company," "we," "us," or "our" means DDi Corp. and its wholly-owned subsidiaries. This discussion and analysis should be read in conjunction with Management's Discussion and Analysis of Financial Condition and Results of Operations set forth in DDi Corp.'s Annual Report on Form 10-K for the year ended December 31, 2008.

Some of the statements in this section contain forward-looking statements regarding our assumptions, projections, expectations, targets, intentions or beliefs about future events, which involve risks and uncertainties. All statements other than statements of historical facts included in this section relating to expectation of future financial performance, continued growth, changes in economic conditions or capital markets and changes in customer usage patterns and preferences, are forward-looking statements. In some cases, you can identify forward-looking statements by terms such as may, will, should, expect, plan, intend, forecast, anticipate, believe, estimate, predict, potential, continue or the negative of these terms or other comparable terminology. The forward-looking statements contained in this section involve known and unknown risks, uncertainties and situations that may cause our or our industry's actual results, level of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these statements. Factors that might cause actual events or results to differ materially from those indicated by these forward-looking statements may include the matters listed under "Risk Factors" in Item 1A in our most recently filed 10-K including, but not limited to, changes in general economic conditions in the markets in which we may compete and fluctuations in demand in the electronics industry; increased competition; increased costs; our ability to retain key members of management; our ability to address changes to environmental laws and regulations; risks associated with acquisitions; adverse state, federal or foreign legislation or regulation or adverse determinations by regulators; and other factors identified from time to time in our filings with the U. S. Securities and Exchange Commission ("SEC").

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.

Our Company

We provide time-critical, technologically-advanced printed circuit board ("PCB") engineering and manufacturing services. We specialize in engineering and fabricating complex multi-layer PCBs on a quick-turn basis, with lead times as short as 24 hours, and on manufacturing products with high levels of complexity and reliability with low-to-moderate production volumes. We have approximately 1,000 PCB customers in various market segments including communications, computing, military/aerospace, industrial electronics, instrumentation, medical, and high-durability commercial markets. Our customers include both original equipment manufacturers ("OEMs"), electronic manufacturing services ("EMS") providers, and military/aerospace companies. With such a broad customer base and approximately 40 to 50 new PCB designs tooled per day, we have accumulated significant process and engineering expertise. Our core strength is developing innovative, high-performance solutions for customers during the engineering, test and launch phases of their new electronic product development. Our entire organization is focused on rapidly and reliably filling complex customer orders and building long-term customer relationships. Our engineering capabilities and manufacturing facilities located in the United States and Canada enable us to respond to time-critical orders and technology challenges for our customers.

Industry Overview

Printed circuit boards are a fundamental component of virtually all electronic equipment. A PCB is comprised of layers of laminate and copper and contains patterns of electrical circuitry to connect electronic components. The level of PCB complexity is determined by several characteristics, including size, layer count, density, materials and functionality. High-end commercial and military/aerospace equipment manufacturers require complex PCBs fabricated with higher layer counts, greater density and advanced materials, and demand highly complex and sophisticated manufacturing capabilities. By contrast, other PCBs, such as those used in non-wireless consumer electronic products, are generally less complex and have less sophisticated manufacturing requirements.

We see several significant trends within the PCB manufacturing industry, including:

• Short product life cycles for electronics. Rapid advances in technology are significantly shortening product life-cycles and placing increased pressure on OEMs to develop new products in shorter periods of time. In response to these pressures, OEMs look to PCB manufacturers to offer design and engineering support and quick-turn manufacturing services to reduce

• Increasing complexity of electronic equipment. OEMs are continually designing more complex and higher performance electronic equipment, which requires sophisticated PCBs that accommodate higher signal speeds and frequencies and increased component densities and operating temperatures. In turn, OEMs rely on PCB manufacturers that can provide advanced engineering and manufacturing services early in the new product development cycle. OEMs are also requiring more lead-free materials and other "green" products which add to the complexity of the materials utilized in the manufacturing of PCBs.

• Increasing demand for aerospace and defense products. The aerospace and defense market is characterized by time-consuming and complex certification processes, long product life cycles, and a unique combination of demand for leading-edge technology with extremely high reliability and durability. An increased focus on incorporating technology in products for reconnaissance and intelligence combined with continued spending on military communications, aerospace, and weapons systems applications are anticipated to drive steady end-market growth. Success in the military/aerospace market is generally achieved only after manufacturers demonstrate the long-term ability to pass extensive OEM and government certification processes, numerous product inspections, audits for quality and performance, and extensive administrative requirements associated with participation in government programs. Export controls represent a barrier to entry for international competition as they restrict the overseas export of defense-related materials, services, and sensitive technologies that are associated with government programs. In addition, the complexity of the end products serves as a barrier to entry to potential new suppliers.

• Increased demand volatility in commercial end-markets. As a result of the continued downturn in the global economic environment, demand for PCBs from the commercial sector, including the communications, computing, industrial electronics, and instrumentation markets, continues to be volatile. Companies operating in these industries, including existing or potential DDi customers, are experiencing deterioration in their businesses, which in turn may cause them to delay or cancel orders from PCB manufacturers. It is still unclear when this downward trend will begin to abate but, until it does, continued demand volatility and softness in the commercial end-markets is expected.

• Shifting of high volume production to Asia. Asian-based PCB manufacturers have been able to capitalize on lower labor costs and to increase their market share on production of PCBs used in higher-volume consumer electronics applications, such as personal computers and cell phones. Asian-based manufacturers have generally been unable to meet the lead time requirements for the production of complex PCBs on a quick-turn basis.

Results of Operations

The following tables set forth select data from our Condensed Consolidated
Statements of Operations (in thousands):



                                                     Three Months Ended
                                                         March 31,
                                                     2009           2008        $ Change       % Change
Net sales                                         $   39,275      $ 47,352      $  (8,077 )       (17.1 )%
Cost of goods sold                                    32,015        37,609         (5,594 )       (14.9 )%
Gross profit                                           7,260         9,743         (2,483 )       (25.5 )%
Gross profit as a percentage of net sales               18.5 %        20.6 %

Net Sales

Net sales are derived from the engineering and manufacture of complex, technologically-advanced multi-layer PCBs.

Net sales decreased $8.1 million, or 17.1%, to $39.3 million for the first quarter of 2009, from $47.4 million for the same period in 2008. The decrease in net sales was primarily due to a decrease in volume of shipments resulting from a decline in customer demand as general economic conditions have continued to deteriorate. While net sales decreased in a number of our primary markets, we experienced continued growth in the military/aerospace market, both in terms of absolute dollars and as a percentage of net sales, and it represented approximately 32% of total first quarter 2009 net sales. The overall softening in customer demand was partially offset by a modest improvement in average unit pricing related to a shift in the mix of products shipped.

Gross Profit

Gross profit for the first quarter of 2009 was $7.3 million, or 18.5% of net sales, compared to $9.7 million, or 20.6% of net sales, for the same period in 2008. The decrease in gross profit was primarily due to less efficient absorption of fixed costs on lower net sales, partially offset by decreases in material and labor costs.

Non-cash Compensation



                                                     Three Months Ended
                                                         March 31,
                                                     2009         2008
             Non-cash compensation:
             Cost of goods sold                    $     139    $     128
             Sales and marketing expenses                 88           70
             General and administrative expenses         393          452

             Total non-cash compensation           $     620    $     650

Non-cash compensation expense related to stock awards was recorded in accordance with the fair value recognition provisions of Statement of Financial Accounting Standards ("SFAS") No. 123R, Share-Based Payment ("SFAS 123R").

Sales and Marketing Expenses



                                      Three Months Ended
                                           March 31,
                                       2009          2008        $ Change      % Change
     Sales and marketing expenses   $    2,905      $ 3,276     $     (371 )      (11.3 )%
     Percentage of net sales               7.4 %        6.9 %

Sales and marketing expenses decreased on an absolute dollar basis by $371,000, or 11.3%, to $2.9 million, or 7.4 % of net sales, for the first quarter of 2009, from $3.3 million, or 6.9% of net sales, for the first quarter of 2008. The dollar decrease was primarily due to lower commissions and management incentives compensation expense. The increase in sales and marketing expenses as a percentage of net sales was primarily due to the negative operating leverage that results from lower sales levels.

General and Administrative Expenses



                                         Three Months Ended
                                              March 31,
                                          2009          2008        $ Change      % Change
 General and administrative expenses   $    3,424      $ 3,838     $     (414 )      (10.8 )%
 Percentage of net sales                      8.7 %        8.1 %

General and administrative expenses decreased on an absolute dollar basis by $414,000, or 10.8%, to $3.4 million, or 8.7% of net sales, for the first quarter of 2009, from $3.8 million, or 8.1% of net sales, for the first quarter of 2008. The dollar decrease was primarily due to reductions in several cost categories including wages, non-cash compensation expense and management incentives compensation expense, offset somewhat by higher depreciation expense. The increase in general and administrative expenses as a percentage of net sales was primarily due to the negative operating leverage that results from lower sales levels.

Amortization of Intangibles

Amortization of intangible assets relates to customer relationships identified during the allocation of the reorganized value of the Company subsequent to our emergence from bankruptcy in December 2003 and to customer relationships identified in connection with the acquisition of our Ohio facility in the fourth quarter of 2006. These intangible assets are being amortized using the straight-line method over an estimated useful life of five years resulting in $1.3 million of amortization expense per quarter through November 2008, when the customer relationships identified in the bankruptcy became fully amortized, and thereafter $190,000 per quarter for the remaining acquisition-related customer relationships through October 2011.

Restructuring and Other Related Charges

The restructuring and other related charges in the first quarter of 2008 were the result of the fees and expenses related to litigation with the landlord of two buildings in connection with the closing of our Arizona facility in 2005. We completed

remediation of the Arizona facility (encompassing three separate buildings) and exited the last building in the third quarter of 2006 but had continued expenses related to the litigation through its resolution in December 2008.

Interest Expense

Interest expense consists of amortization of debt issuance costs, fees related to our asset-based revolving credit facility (the "Credit Facility"), interest on our note payable on our Ohio facility, and interest expense associated with long-term leases. Interest expense was essentially flat at $198,000 for the first quarter of 2009 compared to $195,000 for the same period in 2008.

Interest Income

Interest income consists of interest earned on our cash balances and decreased by $100,000 to $56,000 for the first quarter of 2009 from $156,000 for the first quarter of 2008. Although the Company's average cash balances during both the first quarter of 2009 and 2008 were relatively consistent, reduced interest rates resulted in an overall reduction in interest income.

Other Income, Net

Net other income consists of foreign exchange transaction gains or losses related to our Canadian operations and other miscellaneous non-operating items. For the first quarter of 2009, net other income was $45,000 compared to net other income of $87,000 in the first quarter of 2008.

Income Tax Expense

For the first quarter of 2009, income tax expense was $131,000 compared to $435,000 in the prior year comparable period. Our income tax expense consists of both U.S. and Canadian jurisdictional taxes. The decrease was primarily related to a decrease in Canadian income tax expense for the first quarter of 2009.

Liquidity and Capital Resources



                                                          March 31,     December 31,
                                                            2009            2008
                                                            (Dollars in thousands)
 Working capital                                         $    39,688   $       37,682
 Current ratio (current assets to current liabilities)     3.1 : 1.0        2.7 : 1.0
 Cash and cash equivalents                               $    18,935   $       20,081
 Short term borrowings                                   $        -    $           -
 Long term debt, including current portion               $     1,455   $        1,516

As of March 31, 2009, we had total cash and cash equivalents of $18.9 million. Management defines cash and cash equivalents as highly liquid deposits with original maturities of 90 days or less when purchased. We maintain cash and cash equivalents at certain financial institutions in excess of amounts insured by federal agencies. Management does not believe this concentration subjects the Company to any unusual financial risk beyond the normal risk associated with commercial banking relationships. We frequently monitor the third-party depository institutions that hold our cash and cash equivalents. Our emphasis is primarily on safety of principal and secondarily on maximizing yield on those funds.

The increase in our working capital and related improvement to our current ratio from December 31, 2008 was primarily due to a decrease in our current liabilities including accounts payable, as a result of our reduced production levels, accrued expenses and income taxes payable, as a result of the timing of Canadian income tax payments, offset partially by a decrease in cash generated from operations. The decrease in our cash and cash equivalents of $1.1 million from December 31, 2008 was primarily due to our investments in capital equipment during the first quarter of 2009.

Our principal sources of liquidity to fund ongoing operations have been existing cash on hand, cash generated from operations and, if needed, our Credit Facility, along with proceeds from various equity offerings and asset sales. We believe that our current cash balance, in combination with net cash expected to be generated from operations and the availability of our Credit Facility, will fund ongoing operations for at least the next twelve months. In the event that we require additional funding during the next twelve months, we will attempt to raise capital through either debt or equity arrangements. We cannot provide assurance that the required capital would be available on acceptable terms, if at all, or that any financing activity would not be dilutive to our current stockholders.

Revolving Credit Facility

Availability under our $25 million revolving Credit Facility with General Electric Capital Corporation is based on various liquidity and borrowing base tests including our eligible accounts receivable and inventories. Our wholly-owned operating subsidiaries are the borrowers under the Credit Facility. The Credit Facility is guaranteed by DDi Corp. and all of its subsidiaries that are not borrowers under the Credit Facility. The Credit Facility is collateralized by the accounts receivable, inventories and other tangible and intangible personal property (other than property, plant and equipment) of the borrowers, and by a pledge of the stock of our subsidiaries. Revolving credit advances under the Credit Facility bear interest at the prime rate (3.25% at March 31, 2009). We can elect to have any new revolving credit advances, or convert any outstanding revolving credit advances, in excess of $1.0 million and in increments of $500,000, made as a LIBOR-based loan with a term of one, two, or three months at a rate of LIBOR plus 1.5%. The Credit Facility contains customary covenants including financial covenants regarding our fixed charge ratios and capital expenditures if Liquidity, as defined in the agreement, falls below a certain threshold. Through March 31, 2009, Liquidity has been consistently above the financial covenant measurement threshold. There are also negative covenants regarding incurrence of additional debt, liquidation, merger or asset sales or changes in our business. The Credit Facility restricts our ability to pay cash dividends on our common stock and restricts our subsidiaries' ability to pay dividends to us without the lender's consent. At March 31, 2009, we were in compliance with all required covenants.

As of March 31, 2009, there were no amounts outstanding and the borrowing capacity under the Credit Facility was approximately $16.0 million.

Stock Repurchase Program

Our Board of Directors (the "Board") previously authorized a common stock repurchase program of up to 3,000,000 shares of our common stock in the open market at prevailing market prices or in privately-negotiated transactions. In February 2009, the Board amended the stock repurchase program to increase the amount of shares of common stock authorized to be repurchased by up to an additional $10 million worth of shares. The stock repurchase program is subject to applicable legal and regulatory requirements, including obtaining the consent of the lender for our Credit Facility. If we are unable to obtain the lender's consent, we would be restricted from repurchasing the additional $10 million worth of shares authorized. The stock repurchase authorization does not have an expiration date, and the stock repurchase program may be modified or discontinued at any time. We will continue to review the value in repurchasing shares after considering our cash levels and operating needs as well as other uses for our cash that could create greater shareholder value.

No shares were repurchased during the quarter ended March 31, 2009 and, as of this date, we had repurchased a total of 2,946,986 shares since the inception of the program.

Consolidated Cash Flows

The following table summarizes our statements of cash flows for the three months
ended March 31, 2009 and 2008 (in thousands):



                                                       Three Months Ended
                                                            March 31,
                                                        2009          2008
         Net cash provided by (used in):
         Operating activities                        $      162     $  4,932
         Investing activities                            (1,284 )     (2,763 )
         Financing activities                               (61 )     (5,093 )
         Effect of exchange rates on cash                    37          226

         Net decrease in cash and cash equivalents   $   (1,146 )   $ (2,698 )

Net cash provided by operating activities represents net income adjusted for non-cash charges and working capital changes. The $4.8 million decrease in net cash provided by operating activities for the three months ended March 31, 2009 compared to the same period in 2008 was primarily due to decreases in accounts receivable, inventories, and accounts payable, reflecting our reduced revenue and production levels in the first quarter of 2009, as well as decreases in accrued expenses and income taxes payable, as a result of the timing of payments made.

The $1.5 million decrease in net cash used in investing activities for the three months ended March 31, 2009 compared to the same period in 2008 was primarily due to a decrease in capital equipment investments.

The $5.0 million decrease in net cash used in financing activities for the three months ended March 31, 2009 compared to the same period in 2008 was primarily due to no repurchases of our common stock during the first quarter of 2009.

Critical Accounting Policies and Use of Estimates

The condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States which require us to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the consolidated financial statements and revenues and expenses during the periods reported. Actual results could differ from those estimates. Information with respect to our critical accounting policies which we believe could have the most significant effect on our reported results and require subjective or complex judgments by management is contained on pages 25 to 27 in Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations, of the Company's Annual Report on Form 10-K for the year ended December 31, 2008. We believe that at March 31, 2009 there had been no material changes to this information.

Recent Accounting Pronouncements

In April 2009, the Financial Accounting Standards Board ("FASB") issued FASB Staff Position FAS 107-1 and APB 28-1, Interim Disclosures about Fair Value of Financial Instruments ("FSP FAS 107-1 and APB 28-1"). FSP FAS 107-1 and APB 28-1 requires fair value disclosures in both interim as well as annual financial statements in order to provide more timely information about the effects of current market conditions on financial instruments. FSP FAS 107-1 and APB 28-1 is effective for interim and annual periods ending after June 15, 2009. The implementation of this standard is not expected to have a material impact on our consolidated financial statements.