Diligent shares jump as first-quarter figures show growth slowing less than feared
UPDATED: Diligent Board Member Services [NZX: DIL] stock rose as much as 12 percent after the governance app developer posted quarterly figures showing sales growth hasn't slowed as much as some investors had expected.
The New York-based, New Zealand-listed company added a net 113 new client agreements in the three months ended March 31, taking its total number of customers to 2,563. That's up 28 percent from the same quarter of 2013, when it added 201 customers.
Diligent shares rose 9.4 percent to $4.43 and earlier touched $4.55 after the figures were released. The stock sank in the second half of 2013 as sales missed targets and the company was distracted by administrative errors that forced it to restate revenue for the 2010 through 2013 financial years. It had previously been forced to revise executive options that exceeded company guidelines.
"They're back to reasonable news, versus the flood of bad news over the last while, this is going back towards more business as usual," said James Lindsay, who holds Diligent among $450 million of equities he helps manage at Tyndall Investment Management.
"Although new additions were a lower number, it probably wasn't as low as some people had thought," Lindsay said. "At some stage it will reach maturity or saturation point in the US market - that hasn't transpired immediately."
The share's 15 percent gain this year is twice the pace of the NZX 50 Index. The company is rated an average of 'buy' according to four analysts surveyed by Reuters, with a median price target of $4.72.
Diligent said it incurred costs of about US$5.1 million for the restatement and re-auditing of its accounts, including US$1.8 million incurred in the latest three months. It also spent US$1.6 million of the estimated US$2.3 million earmarked for building a European data centre, the company said today.
Lindsay said Diligent hasn't reached the same level of saturation in Europe as in its US market.
Diligent is among New Zealand tech stocks caught up in a global sell off over the past month as investors questioned the ability of companies to deliver the profits implied in their high valuations. Big movements in the tech-heavy Nasdaq Composite Index on Wall Street have flowed through to the local stock market.
Still, Diligent's selloff has "mostly been related to its own woes rather than that of the market," Lindsay said.
Xero, the cloud-based accounting software, slipped 0.7 percent to $28.25. Pacific Edge, the Dunedin-based biotech company, was up 5.6 percent to $1.13 while outside the benchmark index security software firm Wynyard Group has risen 4.3 percent to $2.43.
Diligent’s pace of growth slows in first quarter, client retention dips on M and A activity
EARLIER: Diligent Board Member Services [NZX: DIL], the governance app developer which was forced to restate its financial statements, has slowed its pace of new customer growth in the first three months of the year, and had a small dip in client retention amid increased merger and acquisition activity in the US.
The New York-based, New Zealand-listed company added a net 113 new client agreements in the three months ended March 31, taking its total number of customers to 2,563. That's up 28 percent from a year earlier, though its new additions shrank from 201 in the first quarter of 2013.
Diligent's customer retention rate slipped to 96 percent from 97 percent, with a "record level of client merger and acquisition activity or situations in which the board operations ceased during the first quarter, representing approximately two-thirds of client cancellations during the quarter and occurring primarily within its US client base," the company said. Revenue retention stayed above 97 percent.
The company is emerging from protracted 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 chief executive Alex Sodi.
Diligent continued to build its cash balance, adding a further US$4.5 million in the quarter to US$60.6 million. The company has been mulling what to do with the cash, and last month Sodi said the company is looking at growth opportunities, including potential acquisitions.
The company added six staff to its research and development in the quarter as it continues to work on new product development.
The shares fell 1.7 percent to $4.05 yesterday, and have increased 6.6 percent this year.