Diligent lifts first half profit 30%, raises annual revenue expectations

Diligent Board Member Services Chief executive Alex Sodi
Diligent Board Member Services 12-month price history (NZX.com)

Diligent Board Member Services [NZX: DIL], the governance app maker forced to restate its accounts, lifted first-half profit 30 percent and has raised its expectations for annual revenue growth, as it embarks on winning over new industries.

Net profit rose to US$4.28 million, or 4 cents per share, in the six months ended June 30 from US$3.28 million, or 3 cents, a year earlier, the New York-based, NZX-listed company said in a statement. That was below First NZ Capital's forecast for profit of US$5 million. Revenue climbed 35 percent to US$39.5 million, and adjusted earnings before interest, tax, depreciation and amortisation gained 29 percent to US$12.3 million.

Diligent anticipates annual sales of between US$81.5 million and US$82.5 million, up from previous guidance of between US$80.5 million and US$82 million. The firm added 5,500 users in the quarter, ending the period with more than 82,600 users, and kept a client retention rate above 95 percent.

"Demand for our Boardbooks product remains strong as companies continue to embrace the use of electronic board portals worldwide," chief executive Alex Sodi said in a statement. "We will remain focused on our growth strategies of entering new markets and expanding our product functionality and related use cases."

The shares climbed 2.9 percent to $4.32, the highest since June 24, and have gained 11 percent this year. The stock is rated an average 'buy' based on four analyst recommendations compiled by Reuters, with a median target price of $4.56.

Sodi told an analyst briefing the company has branched out into new customer territory, attracting a major hospital operator in the US, with more than 500 users in the quarter.

"These other industries are very exciting - it's not what you think are the boardroom, but they still need to communicate to their committees," he said.

Diligent continued to build its cash position, with an operating cash inflow of US$9.29 million in the half, leaving it sitting on cash and equivalents of US$61.7 million.

Sodi said the board's priority for cash is to continue to grow the company, and hasn't got any plans to return that to shareholders.

Diligent opened a new research and development centre in Charlotte, North Carolina in the second quarter, hiring 14 staff and is aiming to have 30 programmers at the location by the end of the year.

Sodi said the Charlotte site was primarily to reduce the cost of hiring programmers, which is expensive and protracted in New York.

The company is emerging from administrative errors that forced it to restate its accounts for the 2010 through 2013 financial years after incorrectly recognising revenue, having also had to backtrack after granting too many options to Sodi.

General and administration costs of US$7.8 million in the quarter are expected to be lower in future, as the period captured one-off costs related to the restatements and executive bonuses, interim chief financial officer Alex Sanchez told the briefing.

(BusinessDesk)

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2 Comments & Questions

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Great result by Diligent. I had low expectations on revenue growth after their previous three quarterly results, but it looks like the sale team is back on top of its game now they are past all the revenue restatement hassles.

The North Carolina R&D centre intrigues me. Do they need a Christchurch R&D centre as well as one in North Carolina?

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North Carolina announcement shows this company is starting to lose the plot and forgotten their humble beginings. Plenty of developers in ChCh - and they have a base there already.

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