Diligent Boardbooks IPO

[Harvey Specter]

Chalkies interesting article today has some interest for DIL investors.

http://www.stuff.co.nz/business/opin...y-in-money-out (http://www.stuff.co.nz/business/opinion-analysis/9710256/Money-in-money-out)For historical purposes maybe.

He has very little/no involvement any more and the share is based on forward looking growth/cashflows.

In relation to Arria, it is not currently clear who got ripped off, the latest group of shareholders or the Edinburgh University. Like DIL, that will be determined based on forward growth and cashflows.

[Xerof]

ol' buzz-o-bumble the price suppressor must be running out of ammo, it's down to 1 and 2 shares every three minutes now. I guess the end of Feb can't come soon enough

Why the NZX allows this sort of ****, I do not know.

[robbo24]

With the technicals showing a worrying neutral with short term price rises...accumulation should not an option so close to a major resistance (risk)..It may seem stupid and illogical to many but buying/accumulating at $5.10 is a safer option than buying at $4.90

Hi Hoop, I like your noisy chart.

I have one question: Why do you have an orange line drawn underneath $4.80 with $4.90 next to it?

[nextbigthing]

Sorry it's off topic, but Hoop/other chartists, would you ever buy into a dead cat bounce as a quick trade?

[Hoop]

Hi Hoop, I like your noisy chart.

I have one question: Why do you have an orange line drawn underneath $4.80 with $4.90 next to it?

well spotted..
My Irish ancestory is still in high regard as I have a logical explanation for this:)

Its a support zone 4.75 - 4.90 ..the 4.90 end is the end of resistance...I don't know how many TAer's use this type of thing..most would simply put a line at 4.90....So really I should've added another line, one at 4.75 and another at 4.90 and shaded the in between....I think of a zone as a place where a share price makes hardwork getting through..a bit like driving a car down a highway then reaching an area of 1/2 metre high mud its the previous momentum that determines whether you make it through...If the share price loses momentum (weak buyer momentum) the chances it could fail anywhere within the zone are increased and not always at that precise 4.90... therefore care is needed when 4.75 is reached.

When mentioning "care is needed", for me, the method in handling this is to measure the momentum (chart) and frequently check the depth (on-line)to see how strong this S&R zone (fuzzy area) is... I also use this method not only for zones but for more precise S&R lines as well.

Many investors are told the theory behind the strength of chart drawn S&R lines is the number of times the price line touches those lines ...what I have observed over my lifetime of life experiences is what works in theory sometimes fails to work in practice...why?? ...regarding drawn theoretical S&R lines, in real situations they actually wax and wane in strength in relation with the ever changing buyer/seller pressure.. e.g a price passing over a major resistance line without hesitation is viewed as very bullish but it may just be at that specific time the S&R was at its weakest moment and it took minimal buying pressure to cross the line...if that weakness lasts it also indicates the resistance now a support could also be weak as the shareprice could just as easily reverse below that line equally as quick........ Also at the other end of the argument a new resistance may apear where there isn't one on a chart...like everything in nature, being born (created) and dying is a normal occurrence....

When charting a share that I'm interested in I make it a habit to check the depth on-line frequently to see if these support/resistances match up and at what strength...

[Hoop]

Sorry it's off topic, but Hoop/other chartists, would you ever buy into a dead cat bounce as a quick trade?

yes..

I'm a more of a pattern chartist so when I get bored or an opportunity presents itself I dabble the shorter term pattern stuff. I've got a thing about dead cat trading patterns, the success rate is high 70+%, the courage to enter gives one a buzz..all the negative media pumps the adrenalin ....but due to capitulation risk you can't afford to get carried away, discipline must be strictly adhered to..There are specific parameters within the patterns that the rules of buying and selling are based around. (see Bulkowski)
I did it a few times last year...The results of the two I've mentioned in detail on ST are:
1....RAK .....dead cat bounce failed ,,,reason:.due to pessimism, lack of buyer enthusiasm ( lack of buyer momentum) lost 8%.
2....DIL .......Twice....both succeeded ... my other entry into DIL was a very boring more conventional medium term investment on a trend change (not a dead cat) and got wacked around the ears..sold out in the plunge..I had to fight my negative emotions to buy back in two days later and got most of my losses back using the short term dead cat......

..should have kept to do what I was doing best with DIL.. dropping dead cats off very high buildings

[Baddarcy]

So this week then...?

[Schrodinger]

Might put some money aside just in case they fail to meet expectations and there is a huge fall.

[zigzag]

Might put some money aside just in case they fail to meet expectations and there is a huge fall.

Been thinking that same thing myself. It won't be a good look if they need still more time, but it won't be the end of the world either. Nothing too
bad has emerged so far, so the restatement is more a technical thing, of interest mostly to accountants with PHD's in software accounting. Of more interest will be the latest quarterly, the final result for 2013, the annual report and then the AGM.

[Baddarcy]

I think the restatement long term will actually be a good thing for diligent. They have tightened themselves up and hired, by all accounts much more experienced staff and gotten themselves proper accountants.

[Harvey Specter]

generic tabulation software research has long ago moved beyond the control of ACCOUNTANTS and is the IP of private companies....

you have no idea how far accountants are no longer included in this game ...
I love reading your post Steve - i normally read posts without looking at the author to avoid bias and I can always pick yours.

As a person who sits inside a team of 20+ accountants, I have no idea what your talking about.

Back to DIL, to restate my view from above, in my view the restatement isn't important, what is is that we will be able to see how their growth trend, margins etc are going.

[Monty]

I just looked on the NZX site. There have been nil trades today? Is that co-incidence or has there been a halt on trade. That is most unusual.

[Jay]

Beat me to it Monty - No notice issued - has there?? -not that I can see
Seems to be stand off between buyers @ 4.60 and sellers @ 4.65 last time I looked

[Whipmoney]

Everyone is holding steady until restatement (or delay...) announcement. Any day now...

Hopefully this Friday... i'm sick of waiting lol.

[blobbles]

Going off previous restatement of restatement dates (???) they have given notice 8-9 days before the due date that there will be a delay. So my guess is if its all quiet by the end of the week, I will have confidence they will get it out by the end of next week.

[pierre]

Going off previous restatement of restatement dates (???) they have given notice 8-9 days before the due date that there will be a delay. So my guess is if its all quiet by the end of the week, I will have confidence they will get it out by the end of next week.

In their market announcement of 4 December DIL said " The Company currently expects that it
will provide its preliminary half year announcement, half year report and
preliminary full year report by 28 February 2014."

Based on their previous history I certainly wouldn't be confident of receiving news any earlier than 28 February. I'd also like to think that the current silence from the company means that the they wont report any later than that date either, but......................................

[Xerof]

Two weeks ago, they reaffirmed that they still expect to deliver by 28 February. You would think if that was going to be clearly in the too hard basket, then they wouldn't have made the re-affirmation.

I am expecting delivery of the goods before the 28th

I have it in the back of my mind that failure to deliver will mean suspension from quotation by NZX, but can't find anything in writing that confirms that. Does anyone have the ann that included that to hand?

[In4a$]

Two weeks ago, they reaffirmed that they still expect to deliver by 28 February. You would think if that was going to be clearly in the too hard basket, then they wouldn't have made the re-affirmation.

I am expecting delivery of the goods before the 28th
Got my finger on the BUY button, ready for the good news !!

[Balance]

Two weeks ago, they reaffirmed that they still expect to deliver by 28 February. You would think if that was going to be clearly in the too hard basket, then they wouldn't have made the re-affirmation.

I am expecting delivery of the goods before the 28th

Agree with your assessment, Xerof.

All the more reason to get set before 28 Feb as market highly highly skeptical after a disastrous year in 2013.

[Xerof]

looks to have gone bid all of a sudden. Light volume so far but the buyer keeps filling the 465 line

[winner69]

Seeing Sparky's been deleted thought I would resurrect the post that many of you thought was fantastic ....the one fom over Xmas


.
Originally Posted by SparkyTheClown
Readers will know already that I greatly like this company and its potential, and hold a healthy amount. It won’t come as a great surprise that I have been accumulating more DIL on recent pricing weakness as investors fled the company due to

1. Revenue Restatement unknowns
2. Revenue Restatement delays and letdowns in finishing this work
3. Concerns over slowing new client growth

The lack of news would clearly put a number of people off, and so I don’t seek to criticize those who left the DIL registry because of their concerns not being able to be allayed.

However, I firmly believe that DIL is significantly undervalued relative to its sales, earnings and growth, even when you make very conservative assumptions about those factors.

There are a number of areas I’ll touch on before I make some assumptions about value and a target price, being new client numbers per quarter, average revenue per client, and how that translates into the bottom line.

1) My thoughts on client numbers

The limited information release by the company in October spooked a number of Sharetrader members. The figure of 122 seemed quite low and kicked off a number of hypotheses about DIL, such as a) customer growth had genuinely slowed as they were reaching market saturation, or b) some kind of issue like a change in personnel, or management were distracted by the restatement, or clients didn’t want to do business with a company whose market disclosures were messy.

Obviously, the overarching concern was that the drop in numbers was a concern for future quarters, and not a one-off problem. My view, and I acknowledge that it may be because I have rose tinted views of the company, is that in the limited information release in October, the company was at pains to stress that the months of July and August were slower than normal. However, it would seem that September’s global sales were NOT an issue. This suggests that the nature of the slow quarter was more attributable to one off issues than an ongoing issue.

2) Revenue per new client, and what does it all mean?

My spreadsheet work suggests that DIL’s new clients bring in around $33k USD each based on previous quarter disclosures. This is a very simplistic figure as the new revenue per month also includes upgrades, but it’s a good enough indicator that helps us understand how much extra revenue is generated per client. This means:

Q42012 – 193 new clients, $6.36m in new revenue, or $32.95k per client
Q12013 – 201 new clients, $6.65m in new revenue, or just over $33k per client
Q22013 – 173 new clients, or approx $5.7m in new revenue
Q32013 – 122 new clients, minimum $4m in new revenue (likely more than this as they had significant upgrades in this quarter)
Q42013 – let us assume 155 new clients, with approx $5.1m in new revenue

3) Getting to the bottom line

So, if DIL made $43.74m in revenue in 2012, and we assume that they have earned a further $21.45m in new client revenue (as my Q1-Q42013 assumptions outline above), then they are good for $65m USD in revenue.

This will likely result in NPAT of around $15.5m USD, or roughly $19m NZD at the 0.82c NZDUSD rate. With 120m shares on the register, this works out at about 15.8c in EPS NZD.

This gives a YOY NPAT growth of about 80%. HOWEVER, the revenue restatement, big office shift, and associated professional/logistical expenses will have greatly cut into DIL’s 2013 earnings. Note though, these will be one off costs, though DIL may have to spend more on enterprise level systems to prevent these kinds of accounting headaches again. So when the 2013 earnings are released, expect some shock over how the approx $19m in NZD looks more like $10m due to one-offs.

Diligent may also have some increased ongoing costs in terms of new and improved accounting systems, and hiring more or better staff to oversee the financial controls.

So what’s a target price for DIL then?

Using my good old Ben Graham formula for the enterprising investor, with the following inputs:

Growth rate = 35% over the next 5 years
2012 earnings = 9.1cps (confirmed)
2013 earnings = 15.9cps

Risk free rate of 5.5%, being the 20-year rate that NZ Treasury use. This is about right for sourcing a municipal type bond with higher security.

The BG formula gives a price thus:

Based on known 2012 EPS = $5.61
Based on estimated 2013 EPS = $9.73

Now that 2013 is over, we can expect intrinsic value to look a lot more like $9.73 than $5.61, perhaps with some further discounting of the price to reflect changes in revenue as it falls into different time periods. Note that restatement doesn’t affect actual cash held, merely how it is accounted for in different periods due to the nature of SaaS businesses.

So if the current price is $3.43, a fair price based on the assumptions I’ve given above is at least $5.61, and more like $9.73. That’s why I maintain that Diligent is woefully underpriced.

More target price methods

Xero is on a price/sales ratio of 90
GeoOp has a PSR of 400
SLI has a PSR of 5.5
WYN has a PSR of 90

If DIL has a market cap of $287m, and will have revenue of $65m USD (or $79m NZD), then it is on a PSR of 3.63 for FY2013. It should be on a PSR of closer to 8 or 10 in my view, especially if new client growth looks good in January’s limited announcement. A PSR of 8 = $5.26, and a PSR of 10 = $6.58.

Future Catalysts

Second product

We know that Diligent is working on a second product, We don’t know exactly what this is like, but hints dropped by the CEO at the 2013 AGM suggest it is some kind of “publishing” feature aimed down the corporate food chain from the board room to higher and middle management. Obviously, Diligent’s success in selling upgrades to existing clients is a positive hint that they will be successful at selling this new product to their existing client base. I’m loathe to speculate on how this might affect their bottom line as the pricing and margins will be completely different to the existing Boardbooks product, but we can assume it will be good for DIL in terms of earnings growth. Hence why I am comfortable assuming a minimum annual average growth rate of 35% over the next five years.

Cash, cash, as far as the eye can see.

We know DIL had around $47.4m USD in cash in Q32013. They are doing really well in building up this reservoir of cash. This will have to be used at some point for one of the following outcomes:
- Acquisition (unlikely, as DIL are innovators and not shy of R&D)
- Takeover (all that cash in the bank makes it easier for a purchaser to pay off their predatory behavior)
- Dividend (unlikely, as this is more for companies that has stopped growing, and dividends paid in NZD may not be attractive to US based shareholders)
- Buybacks (more likely, as this is a popular US method of improving shareholder value)

Diligent’s board will want to improve shareholder value. They’ll be hurting themselves as they will all be embarrassed and keen to improve their standing with shareholders. The chairman, via Spring Street Partners, is DIL’s biggest holder, so they’ll be self-interested in putting that cash to better use too.

Nasdaq beckons?

The Diligent board will be heartily sick of the NZX given their headaches and dramas this year. Accounting for two separate bourses with two different methods, and a NZ bourse that has been less than helpful will have weighed heavily on the directors. It has been noted that DIL’s board committees now require directors to have Nasdaq awareness as well as NZX awareness (a change from previous years), which suggests that they are preparing for the possibility of some kind of listing change in the future. Moving to the USA, where funds will be much happier about buying in, than dealing with a small country on the other side of the planet can only be good for Diligent holders.

Timeframes:

First timeframe of note will be the limited information release by the company on new client numbers, cash on hand and other information that was likewise released in Q32013. The date for releasing Q4 results is usually the second Tuesday of January (NZT). This suggests this info will be released prior to market opening on Tuesday 14th of January. As others have noted, new client numbers of 120 or so would be viewed negatively by the market, probably seeing Diligent drop to $3 or just under again for brief moments. In excess of 150 new clients would be viewed positively, and possibly see DIL see $5.50-$6.00 again.

Second timeframe of note will be sometime prior to the end of February 2014. This is revenue restatement, where I don’t anticipate any material changes to DIL’s position (+/- 5% or so). Some things will be for the better, some will be for the worse, but only in an accounting treatment sense. We have been assured that cash has not changed, and there has been no more material matters discovered, other than the need to restate (see December 4 statement to the market). Positive restatement will see DIL jump to back up to around $7.50.

Third timeframe of note will be between the finish of restatement and the AGM. During this time, I would anticipate Diligent making a number of material announcements along the line of:
- buyback/dividend/cash return (likely in some form)
- NZX and Nasdaq intentions (less likely, this is a disruptive corporate activity, and they’ve just come through a big period of corporate activity)
- Second product (highly likely, they’ve foreshadowed this at the last AGM)

The above will see Diligent improve its price to closer to the $9 mark, as I have suggested based on 2013 intrinsic value.

Summary:

Growth investors and those who follow technical analysis may be spooked by the restatement and vagueness over new client numbers. Value investors like myself should see Diligent as a huge opportunity to at least double your money, thanks to the negative perceptions around restatement.

Seventeen days to go to the first timeframe.

Disc: Holding and continuing to accumulate DIL on pricing weakness.

EDIT: 6:45pm, 28/12/13

To clarify - my figures above do not include the fact that 2012 revenue has churned by around 3%, as DIL has a 97% client retention rate. If we reduce 2012 revenue by 3%, we get total revenue of around $63.8m, and estimated EPS of around 15.6c instead of 15.9c. Somewhat immaterial at the margin, but I felt I should make this note.

[Balance]

Counting down to 28 February.

5 more working days to go.

[iceman]

Counting down to 28 February.

5 more working days to go.

It will be good to get the restatement out of the way, but I don't expect any material changes. Just that yes they have to change the way they accounted for the revenue and have done so. Cash still the same in the bank and business as usual. Possibly some weakness in SP as for some reason sections of the market seemed to be expecting a game changing announcement.

Then hopefully we will see some big announcements in the following couple of weeks, which should put a rocket under the SP :)

[Schrodinger]

Looks like a pure ramp to me. Can't fault a man for trying.

All of his/her numbers mean nothing if they can't keep a lid on this restatement.

I disagree with Sparky's value v growth analysis on the basis of unknown past growth rates in revenue and earnings (apart from cash) and a much higher risk factor than he applies.

Also skeptical of the future growth rate forecast however he might be right. This will depend on the quality of the business and trustworthy management will play a big part.

[robbo24]

Looks like a pure ramp to me. Can't fault a man for trying.

All of his/her numbers mean nothing if they can't keep a lid on this restatement.

I disagree with Sparky's value v growth analysis on the basis of unknown past growth rates in revenue and earnings (apart from cash) and a much higher risk factor than he applies.

Also skeptical of the future growth rate forecast however he might be right. This will depend on the quality of the business and trustworthy management will play a big part.

I disagree with you.

Prior to restatement, instos unlikely to buy because information is unable to be relied upon.

Restatements of 2010 to 2013 are not uncommon. There's plenty of examples for you to peruse.

Let the games begin I say.

[Xerof]

Counting down to 28 February.

5 more working days to go.

Balance, IYO, is this likely to be a Trading Halt event prior to Friday?

[Balance]

Balance, IYO, is this likely to be a Trading Halt event prior to Friday?

There will have to be a trading halt but I believe they will announce on 28 February itself.

Get all the i's and t's dotted and crossed, and avoid any future embarrassment around the accounts restatement.

[Balance]

Looks like a pure ramp to me. Can't fault a man for trying.

All of his/her numbers mean nothing if they can't keep a lid on this restatement.

I disagree with Sparky's value v growth analysis on the basis of unknown past growth rates in revenue and earnings (apart from cash) and a much higher risk factor than he applies.

Also skeptical of the future growth rate forecast however he might be right. This will depend on the quality of the business and trustworthy management will play a big part.

Most uncalled for to accuse STC of a ramp, let alone a pure ramp!

Those of us who have followed and interacted with STC know him as a poster who is informative, analytical and willing to share information and his thoughts, all the while disclosing his interest.

If you want to see a pure ramp, try the Snakk thread.

[tosspot]

Most uncalled for to accuse STC of a ramp, let alone a pure ramp!

Those of us who have followed and interacted with STC know him as a poster who is informative, analytical and willing to share information and his thoughts, all the while disclosing his interest.

If you want to see a pure ramp, try the Snakk thread.
Or better yet the entire Hot Copper website

[Whipmoney]

Or better yet the entire Hot Copper website

Or just read my diligent posts lol..

[klid]

There will have to be a trading halt but I believe they will announce on 28 February itself.

Get all the i's and t's dotted and crossed, and avoid any future embarrassment around the accounts restatement.

Agree on the date, definitely the most likely case!

[pierre]

Just for fun - anyone interested in participating in a little poll on what will happen with DIL this week?

1 Will they announce restatement results on or before 28 February?
2 Assuming they do - what do you anticipate the SP will be at close on the announcement date?

My entry is:

1 Yes
2 540

[Monty]

yes restatement will be this week (Moosie is wrong and the reason is that they would have advised by now if they would not meet the revised deadline)
$5.00 ( but I think it will climb over next couple of week and will be $7:00 by easter.)

I also expect some other positive announcements over the coming months re Nasdaq and second product)

[Harvey Specter]

1 Will they announce restatement results on or before 28 February?
2 Assuming they do - what do you anticipate the SP will be at close on the announcement date?

1 - yes - Friday morning before opening.
2 - Will bounce of $6 to end up high $5's. Will be very volitile after that as the likes of Moosie have their fun.

[noodles]

2. hmmmm, me thinks the shareprice will lift slightly in a relief of the deadline being meet then tank once every realise's that previous to the reinstatement DIL had front loaded income from long term contracts instead of spreading the income out over the years the service contract was for.

I think it will underline the importance of reading the cash flow statement. I will reserve judgement on what will happen, but if I am to invest in this stock in the future, it will only be because of increasing cashflows.

[Harvey Specter]

Once the market realise's this and the reinstatement does adjust the eps growth to much lower than previously thought me thinks the share's will justifiably be revalued down.Looking at XRO, I dont think people are too concerned with eps growth, provided there is still Revenue growth. The big story will be the Revenue growth trajectory.

[Xerof]

Snap, it relates to INSTALLATION revenues, which I understand represent <10% of revenues. They are to be amortised over 9 years. Material, but hardly earth shatteringly detrimental. Someone has already done a rough restatement on this thread I think. They are also going to capitalise some software expenses which were expensed, so that is a favourable adjustment.

The CASH has not left the building.......of more interest will be the reporting and commentary with detail of recent activity

Friday, pre-open
$5.50 close

[Harvey Specter]

I dont think the long term contract payments were front loaded, only allocated to the full month rather than a partial month.

It is only installation fees that were front loaded which now have to be spread over the estimated life of the contract - "unfortunately" for DIL it has 97% customer retention so that is a long time. Remember that this income is 'earned' (in the contractual and cash sense, not the accounting fiction sense), regardless of whether they stay and I assume it would be released to the p&L early should the customer end their contract earlier than expected.

[Whipmoney]

I dont think the long term contract payments were front loaded, only allocated to the full month rather than a partial month.

It is only installation fees that were front loaded which now have to be spread over the estimated life of the contract - "unfortunately" for DIL it has 97% customer retention so that is a long time. Remember that this income is 'earned' (in the contractual and cash sense, not the accounting fiction sense), regardless of whether they stay and I assume it would be released to the p&L early should the customer end their contract earlier than expected.

This is correct. Contract payments were recognised monthly albeit they were recognised at the start of the month as opposed to pro-rated to a specific day.

Installation revenues (<10% of total revenue) was front-loaded and will now be recognised over a term of 9 years.

To be honest though who cares if it was front-loaded. They receive the cash up-front and I would assume that the client forfeits this money if they change providers at the end of their contract.

[Whipmoney]

IF this is the case that means 10% of DIL's revenue has been falsely stated(manipulated) which once corrected will have a material effect on the previous revenue trajectery.

Manipulated is a pretty strong word and considering that the accounts were actually audited I would suggest that their was a mis-interpretation of the accounting standards at the time.

Many companies get their financials restated (it happens quite a lot to non-listed companies) for a multitude of reasons including the fact that the international accounting standards aren't exactly that prescriptive and are open to a lot of interpretation.

In my own opinion accounting is a bit of a joke hence why I place a lot more emphasis on cash-flow analysis.



But consider that DIL is way off the high's this could be priced in already.

Agreed.



For those investors who wish to make themselve's fell better because DIL has $50 million in the bank that only represents roughly $1 per share and much of DIL'S share price is revenue growth priced and driven therefore if they do come out with a reinstatement that move's the revenue growth trend line lower the share price should react negatively.

The $50m in the bank may represent $1 per share but it also represents a significant war-chest to the company should they wish to pursue either an acquisition (of say a competitor) or an expansion (new products/markets) strategy. Obviously they have ample cash on hand that can be used to fund growth if need be.



If other revenue was front loaded, it really does matter for revenue growth stocks, then the growth trendline will lowered even more and the shareprice will fall. ouch!!!

I suggest you re-read their announcement dated 20 June 2013:


On June 20, 2013, New Zealand time, Diligent Board Member Services, Inc. (the “Company”) announced that senior management has identified and communicated to the Audit Committee of the Board of Directors of the Company an error in a Company revenue recognition practice affecting certain customer agreements. The error identified is that the Company incorrectly recognized revenue from new customer agreements and upgrades from the beginning of the month in which an agreement or upgrade was entered into, rather than pro rata based on the number of days in the month for which the agreement was in effect as required by US Generally Accepted Accounting Principles (GAAP). This error does not affect the total revenues ultimately earned or to be earned, the amount or timing of cash received or to be received from individual customer agreements, or the Company's liquidity or overall cash flow.


As for your mention of "front loading"... it's not like this revenue suddenly dissapears.

Any revenue that is no longer elligble to be recognised will be transferred to their deferred revenue balance and recognised at a later period. Given the company already has a fairly high level of deferred revenue then pricing it off revenue multiples would lead to an understated value (unless you are taking deferred revenues into account).

As such I would suggest a Free Cash Flow valuation using the Statement of Cash-flows as a starting point.

[The Grinch]

I'm going to be outrageous and say.

1. Yes Pre-Open Friday.
2. $6.28

looking for loose change down the back of the sofa :p

[Balance]

Snap, it relates to INSTALLATION revenues, which I understand represent <10% of revenues. They are to be amortised over 9 years. Material, but hardly earth shatteringly detrimental. Someone has already done a rough restatement on this thread I think. They are also going to capitalise some software expenses which were expensed, so that is a favourable adjustment.

The CASH has not left the building.......of more interest will be the reporting and commentary with detail of recent activity

Friday, pre-open
$5.50 close

Strategically, DIL should report after market close on Thursday so markets have time to analyze and digest announcement before markets open on Friday.

The fund managers who have been on the sidelines can have their investment committee meetings on Friday morning and decide what to do.

Imagine if DIL reports not only the restatement but a second product launch as well as a Nasdaq listing - all at the same time.

My pick of share price then will be $6.50.

[Xerof]

I'd prefer they go into a TH on Wednesday and give you guys a few days to work through it.

I don't believe they qualify to join the Nasdaq, but if someone can conclusively prove they would qualify, then I'll up my price expectation to over $10 :)

An update on entry to European markets would be helpful

Snap, mate, you have declared you hold PEB and DIL, yet you have declared a lack of confidence in both of them. Funny investment philosophy!!

Whip, job well done on explaining the restatement effects, but it's falling on deaf ears

[winner69]

I'll be looking at the Cash Flow Statement to see how it's made up.

FCF in FY12 was roughly the same as FY11 and FY13 doesn't look to be much different(even allowing for zillions of one off costs)

It worries me that huge sales growth and the supposedly increasing margins just doesn't seem to be reflected in ever increasing cash flows.

Friday will tell us one way or the other

[Whipmoney]

thanks whipmoney but in no way does the statement you provide give me any confidents that service contracts have not been front loaded in some way.
As usual company statements can be interpreted in many ways and the shareprice reaction since this announcement clearly shows the broader market believe's that DIL,as a company is worth a lot less now and given it is a revenue growth stock one would assume it is the major concerns over that growth that has seen it share priced smashed.
Going by what you are saying there is nothing much to worry about and the broader markets have got it very wrong.
Well we will all know soon, I hope you are right and my small holdings purchased for an average of $3.41 are going to take off.

Snapiti - if you are already an active holder of this share then I don't really see why I should have to recite excerpts of the public NZX announcement back to you.

That being said your point about front-loading is again incorrect. As per their statement on August 6th:

• The Company previously disclosed that revenue attributable to particular customer agreements was recognized from the beginning of a month rather than from the date of contract signing, and that the Company failed to defer revenue recognition until customers are provided access to the Company's hosting environment, as required by U.S. GAAP. The Company will correct these errors. The effect of the errors was to accelerate the time when revenues were recognized under the Company’s customer agreements.
• The Company will make an additional correction as a result of a comment letter received from the Staff of the Division of Corporation Finance of the SEC in connection with its review of the Company’s filings. In response to the comment, the Company plans to recognize revenue from installation fees under the Company’s customer agreements over the period during which the customer receives the benefit of the installation services, which will be a longer period than the twelve month contract term over which the Company previously recognized such revenue. The effect of the Company’s prior policy also was to accelerate the time when revenues (in this case installation fees) were recognized.
• The Company will properly capitalize certain costs associated with software developed for internal use. These costs were previously expensed.

[Xerof]

Both DIL and PEB sit firmly in my highly speculative portfolio and anything that sits in there you cant be completely confident of.

DIL will move to my growth portfolio if their reinstatement goes well and I will add to my holdings.

Me thinks having an average buy in of $3.41 for DIL and $0.51 for PEB means my investment philosophy could be considered more successful than funny.
Sorry forgot to mention the other holdings in my speculative protfolio is WYN with an average buy in of $1.16.
All of which are in my picks for the nzx comp which is sitting at 40% compared to your 12%, could not have them in the ASX comp but seems my funny investment philosophy is doing me pretty good there too with 42% compared to your - 7%.:p

Every dog has his day Snapiti, I won the NZX comp in 2011 and 2012

[Whipmoney]

Every dog has his day Snapiti, I won the NZX comp in 2011 and 2012

How'd the real portfolio go % wise? Ironically I find that my comp bets are quite different as there is no risk of loss so I swing for the fences so to speak.

[Xerof]

During those two years, the only NZX share I actually owned was DIL.

diversification sux :scared:

[zigzag]

I compared DIL and XRO for obvious reasons. They both have this 'saas' model, and the media also do it.
But I do realize that the comparison only goes so far. XRO does have potentially more customers, and DIL's costs of maintaining each customer is much higher. But the fact still remains that DIL is generating more revenue, and XRO having 23 mill. in the bank only accounts for some of the gap in their respective mkt caps.
I'm not saying that DIL is undervalued, but I do think that some people have just dismissed it because of it's bad debut and subsequent price collapse. Maybe it's time to put DIL back on the radar screen and give it a bit more atte ntion. Remember, they have been increasing their revenues right through the GFC. This could bode well for more normal trading conditions.
By the way, I got in at 30c so I am feeling a bit more comfortable now.

Since Xerof is in the mood for blowing his own trumpet, I can't resist joining in for a duet. Here's a post from 2010. I think most people were still heaping scorn on this stock, apart from Xerof, Roadrunner, myself and a few others. I apologise for my immodesty.

[Xerof]

Since Xerof is in the mood for blowing his own trumpet, I can't resist joining in for a duet. Here's a post from 2010. I think most people were still heaping scorn on this stock, apart from Xerof, Roadrunner, myself and a few others. I apologise for my immodesty.

Just answering a question, the trumpet is nowhere in sight.

You forgot Balance, who was a strong supporter, and I think, like me, he is once more supportive?

and don't apologise for your insightful calls......you should only apologise for bad ones!

[Mobius]

To confirm: Unless the policy has changed at DIL since my time, all installation and set-up fees are non-refundable.

[Harvey Specter]

Edit: Ignore me..

[Xerof]

are you a day early, or do you know more than the rest of us?

Steady and sneaky buying observed today, and some naughty person ran a few stops yesterday.......

[Harvey Specter]

are you a day early, or do you know more than the rest of us?

Steady and sneaky buying observed today, and some naughty person ran a few stops yesterday.......monumental stuff up on my part. Wishing the weekend was sooner!

[Xerof]

monumental stuff up on my part. Wishing the weekend was sooner!

lol, bugger, I was hoping for the latter

[Monty]

And noting so far this morning - so I guess in about 24 hours from now, there will be a large number of posts on the consequences of any announcements (there better be announcements! )

What I'm noting is that the price has been very stable, and there has not been a lot of pressure. Hopefully all that will change tomorrow and our nine month wait will be worth the effort. No matter what the roller coaster for this novice investor is fun and better than having the money in the bank at 3%.

[Monty]

And noting so far this morning - so I guess in about 24 hours from now, there will be a large number of posts on the consequences of any announcements (there better be announcements! )

What I'm noting is that the price has been very stable, and there has not been a lot of pressure. Hopefully all that will change tomorrow and our nine month wait will be worth the effort. No matter what the roller coaster for this novice investor is fun and better than having the money in the bank at 3%.

[JohnnyTheHorse]

And noting so far this morning - so I guess in about 24 hours from now, there will be a large number of posts on the consequences of any announcements (there better be announcements! )

What I'm noting is that the price has been very stable, and there has not been a lot of pressure. Hopefully all that will change tomorrow and our nine month wait will be worth the effort. No matter what the roller coaster for this novice investor is fun and better than having the money in the bank at 3%.

If Diligent are smart they will release it after market close either today or tomorrow (more likely tomorrow I'd say). Would be silly for them to release it pre-market.

[Balance]

And noting so far this morning - so I guess in about 24 hours from now, there will be a large number of posts on the consequences of any announcements (there better be announcements! )

What I'm noting is that the price has been very stable, and there has not been a lot of pressure. Hopefully all that will change tomorrow and our nine month wait will be worth the effort. No matter what the roller coaster for this novice investor is fun and better than having the money in the bank at 3%.

Holding your breath?

Let's hope the directors and management have properly reviewed how they have so badly stuffed up in the last year, and in one go, allay the concerns and fears of the market.

Not holding my breath though as they have that free loading good time Mark Weldon as director.

That guy only knows how to run a monopoly and based on his NZX track record, does not have a clue how to connect with others.

http://www.nbr.co.nz/article/diligent-nabs-weldon-board-role-wb-118726

[Whipmoney]

Holding your breath?

Let's hope the directors and management have properly reviewed how they have so badly stuffed up in the last year, and in one go, allay the concerns and fears of the market.

Not holding my breath though as they have that free loading good time Mark Weldon as director.

That guy only knows how to run a monopoly and based on his NZX track record, does not have a clue how to connect with others.

http://www.nbr.co.nz/article/diligent-nabs-weldon-board-role-wb-118726

Whilst I don't know much about the background of Mark Weldon I wouldn't write the whole board off as David Liptak (their Chairman) is an exceptionally shrewd individual.

[Monty]

Whilst I don't know much about the background of Mark Weldon I wouldn't write the whole board off as David Liptak (their Chairman) is an exceptionally shrewd individual.

Hopefully smart and shrewd and smart enough to ensure the share price has a substantial recovery and regains all its lost ground, that the new product will be a "must have" for every business on the planet (well we can dream can't we) and smart enough to rebuild the confidence in the company that has taken a regular bashing for the past 9 months.

I think the Board will be well aware that their reputation has taken a hammering. However all be forgotten and forgiven if the share price gets back to where it was once upon a time.

[Balance]

Whilst I don't know much about the background of Mark Weldon I wouldn't write the whole board off as David Liptak (their Chairman) is an exceptionally shrewd individual.

I have DIL shares so I am not by any means writing the whole board off!

David Liptak has invested well but he had his eye off the ball when he appointed Mark Weldon - more preoccupied with Weldon's 'connections' than the proper internal workings of DIL.

One reason why the last 12 months have been disastrous for DIL.

[zigzag]

Just what are you accusing Weldon of? I've been a shareholder for 4-5 years and I have no problem with Mark Weldon. He was only appointed a couple of years ago, and these problems are largely legacy issues, that have their roots a long time before he came on board. My impression is that he has been part of the solution, not part of the problem.

[Balance]

Just what are you accusing Weldon of? I've been a shareholder for 4-5 years and I have no problem with Mark Weldon. He was only appointed a couple of years ago, and these problems are largely legacy issues, that have their roots a long time before he came on board. My impression is that he has been part of the solution, not part of the problem.

I am saying he is a useless piece of meat, given his track record at NZX and his handling of DIL at the time of the IPO.

[Whipmoney]

I am saying he is a useless piece of meat, given his track record at NZX and his handling of DIL at the time of the IPO.

What exaclty happened pre-IPO? I heard he was touting the stock then fled as soon as it was floated although apparantly there were a few names behind it that weren't revealed right up until IPO day (Brian Henry...?) so maybe that gave him the jitters.

[Balance]

What exaclty happened pre-IPO? I heard he was touting the stock then fled as soon as it was floated although apparantly there were a few names behind it that weren't revealed right up until IPO day (Brian Henry...?) so maybe that gave him the jitters.

http://www.stuff.co.nz/business/4012/NZX-lines-up-US-company-for-latest-listing

Weldon took full credit for bringing DIL to list at NZX - a lot of backscratching and chest beating. Presentations where Weldon waxed lyrical about what a great company DIL was etc.

Investors piled in and then, NBR then revealed Brian Henry was involved in Energycorp in the 1980s, a company which raised millions from investors, did nothing except bought a fleet of BMWs, charter corporate jets to fly executives around, lavish parties etc - and then, went broke.

Weldon did not want to know about DIL after that and did not even bother to turn up for the listing.

His behavior tells you everything you ever want to know about his character - self serving and a glory taker.

Talk to any ex-NZX staff under his reign and you will know even more!

DIL should have known better than to appoint him.

[pierre]

It's so close you can taste it now...

Let's hope it's not a Chinese takeaway - sweet and sour!

[Crow]

Let's hope it's not a Chinese takeaway - sweet and sour!

Ha ha ha :t_up: classic. But i'll take the sweet...lol

[Whipmoney]

http://www.stuff.co.nz/business/4012/NZX-lines-up-US-company-for-latest-listing

Weldon took full credit for bringing DIL to list at NZX - a lot of backscratching and chest beating. Presentations where Weldon waxed lyrical about what a great company DIL was etc.

Investors piled in and then, NBR then revealed Brian Henry was involved in Energycorp in the 1980s, a company which raised millions from investors, did nothing except bought a fleet of BMWs, charter corporate jets to fly executives around, lavish parties etc - and then, went broke.

Weldon did not want to know about DIL after that and did not even bother to turn up for the listing.

His behavior tells you everything you ever want to know about his character - self serving and a glory taker.

Talk to any ex-NZX staff under his reign and you will know even more!

DIL should have known better than to appoint him.


Fair enough but I hardly think that damages the overall credibility of the board. Whose knows.. maybe Mr Liptak forsaw this whole restatement crisis and needed someone with solid connections to the NZX.

Ironically didn't Brian Henry get seriously burned on DIL as a party to SSH holdings? I'm pretty sure this was the outfit that Spring Street Capital (Liptak etc) lent money to against their shares then ended up calling in the shares in consideration for a write-down in the debt.

[pierre]

Just for fun - anyone interested in participating in a little poll on what will happen with DIL this week?

1 Will they announce restatement results on or before 28 February?
2 Assuming they do - what do you anticipate the SP will be at close on the announcement date?

My entry is:

1 Yes
2 540

Here's a table of the estimates of tomorrow's closing prices for DIL - assuming they report their restatement (and possibly other news) tomorrow morning.

Moosie $2.50 (Uncharacteristically negative)
Monty $5.00
Pierre (me) $5.40
Xerof $5.50
Harvey Specter $5.90 (My interpretation of his guess at high 5s)
The Grinch $6.28
Balance $6.50

Anyone else in for a punt?

The prize for the winner is gloating rights for 24 hours about your forecasting skill.

[In4a$]

Here's a table of the estimates of tomorrow's closing prices for DIL - assuming they report their restatement (and possibly other news) tomorrow morning.

Moosie $2.50 (Uncharacteristically negative)
Monty $5.00
Pierre (me) $5.40
Xerof $5.50
Harvey Specter $5.90 (My interpretation of his guess at high 5s)
The Grinch $6.28
Balance $6.50

Anyone else in for a punt?

The prize for the winner is gloating rights for 24 hours about your forecasting skill.
$4.95 on Friday but $5.90 on Monday

[hairofthedog]

$4.92 but I hope it starts with a bigger number.....

[tosspot]

what if they delay it again, I wouldn't be surprised. they always wait until the due date to delay it

[Lost in space]

Restatement announcement only: flat price.

Restatement with other (good) announcement (elaboration on product, etc): mid fives so stake in ground @ $5.60

[robbo24]

Anyone else in for a punt?

The prize for the winner is gloating rights for 24 hours about your forecasting skill.

$10.50 because the restatement will allow the company to start making real announcements about the future.

It's been a long time since they've had the freedom to do so without the cloud hanging over them.

Beast mode, activated.

[Mobius]

[Investors piled in and then, NBR then revealed Brian Henry was involved in Energycorp in the 1980s, a company which raised millions from investors, did nothing except bought a fleet of BMWs, charter corporate jets to fly executives around, lavish parties etc - and then, went broke.

That is pretty mischievious Balance, and mischaracterises what actually happened from what I know.

Early on in the DIL IPO preparations, Brian specifically asked the IPO lawyers and team if it should be divulged that he was involved in Energycorp in the prospectus. They were informed by very expensive lawyers that this was not necessary. There was absolutely no intention to deceive anyone.

Brian has made many people millions of dollars over the last 5 years, and will produce many more millionaires in the coming years via his ARRIA NLG and Data2Text startup. Bashing him here is below the belt in my view.

Without Brian, there would be no DIL, and that is a fact.

[Xerof]

what if they delay it again, I wouldn't be surprised. they always wait until the due date to delay it

said by 28 Oct, on 17 Oct extended to 12 Dec
on 4 Dec extended to 28 Feb
reaffirmed late Jan that will publish 28 Feb

please quote facts, they HAVE NEVER waited until the due date to delay it,

but tomorrow might be a first....:scared:

can't see it personally but proof is in the pudding

[Xerof]

Mobius, yes that is correct. The expensive lawyer is still on the Board though.....

[Whipmoney]

Wouldn't mind an announcement tonight (say 6pm) so I run it through my model and have a strategy in place before tomorrow.

[pierre]

Wouldn't mind an announcement tonight (say 6pm) so I run it through my model and have a strategy in place before tomorrow.

You should have let DIL know a few days ago Whip - I'm sure they would have been only too happy to oblige if they'd had some prior notice of your requirements.

[Roadrunner]

Here's a table of the estimates of tomorrow's closing prices for DIL - assuming they report their restatement (and possibly other news) tomorrow morning.

Moosie $2.50 (Uncharacteristically negative)
Monty $5.00
Pierre (me) $5.40
Xerof $5.50
Harvey Specter $5.90 (My interpretation of his guess at high 5s)
The Grinch $6.28
Balance $6.50

Anyone else in for a punt?

The prize for the winner is gloating rights for 24 hours about your forecasting skill.

$6.05 after touching $6.30 intraday..........next week $6.50.Thats without any sweeteners :)

[blobbles]

Here's a table of the estimates of tomorrow's closing prices for DIL - assuming they report their restatement (and possibly other news) tomorrow morning.

Moosie $2.50 (Uncharacteristically negative)
Monty $5.00
Pierre (me) $5.40
Xerof $5.50
Harvey Specter $5.90 (My interpretation of his guess at high 5s)
The Grinch $6.28
Balance $6.50

Anyone else in for a punt?

The prize for the winner is gloating rights for 24 hours about your forecasting skill.


I am up for it, $5.20 I say! Just a little nudge due to people being more certain about DILs finances, but no surprises.

But I am guess they might come out with some other positive news in the following weeks which will push it up to the $6-$7 range. Since the restatement cloud is out of the way, they will be free to announce other things. Hopefully this will mean the 2nd product we are all hoping for... it must have been in development for a long time now if the mutterings are true, about time they released it!

[Whipmoney]

You should have let DIL know a few days ago Whip - I'm sure they would have been only too happy to oblige if they'd had some prior notice of your requirements.

I did! They told me to go f**k myself.

DISC: Just joking.

[Balance]

That is pretty mischievious Balance, and mischaracterises what actually happened from what I know.

Early on in the DIL IPO preparations, Brian specifically asked the IPO lawyers and team if it should be divulged that he was involved in Energycorp in the prospectus. They were informed by very expensive lawyers that this was not necessary. There was absolutely no intention to deceive anyone.

Brian has made many people millions of dollars over the last 5 years, and will produce many more millionaires in the coming years via his ARRIA NLG and Data2Text startup. Bashing him here is below the belt in my view.

Without Brian, there would be no DIL, and that is a fact.

Just stating the facts as I recall them.

Legally Brian Henry did not have to disclose. Ethically and morally, he should have disclosed.

"The Sunday Star-Times revealed Brian Henry was also a director of EnergyCorp, which was notorious for its expensive cars for executives, a corporate jet and subsidiary companies that failed to deliver. Diligent's promoters and directors, including director Mark Russell of law firm Buddle Findlay, knew of Brian Henry's connection with Energycorp, but decided not to disclose it. Coincidentally, Mr Russell in the 1980s worked for the Bank of New Zealand and helped wind up Energycorp."

He could have made a wonderful story of making good after the disaster of Energycorp, but chose not to disclose.

As for him making millions for others - that is blatant BS as DIL was just about ready to go under until the Americans bought in. They not only brought in funding but connections as well.

For the record, I met some of the players in DIL after the IPO and told them I felt sorry for Brian and that he was badly advised. The reply was that he could have preempt the disclosure article and avoided the disastrous aftermath. DIL always needed more funding to get to its end goal of becoming profitable, and Brian effectively shut off that avenue by his foolish attempt to hide his past from investors. Nothing wrong with failures - my mentor who is an American always told me that you will not be sufficiently tested until you have tasted failure.

If you want to congratulate someone who stuck with DIL through thick and thin, talk to Peter Hujlich. He stands out as someone who kept his head when everyone around him were losing theirs.

The expensive lawyers can kiss my arse.

[SimonHouse]

Just stating the facts as I recall them.

Legally Brian Henry did not have to disclose. Ethically and morally, he should have disclosed.

He could have made a wonderful story of making good after the disaster of Energycorp, but chose not to disclose.

As for him making millions for others - that is blatant BS as DIL was just about ready to go under until the Americans bought in. They not only brought in funding but connections as well.

For the record, I met some of the players in DIL after the IPO and told them I felt sorry for Brian and that he was badly advised. The reply was that he could have preempt the NBR article and avoided the disastrous aftermath. DIL always needed more funding to get to its end goal of becoming profitable, and Brian effectively shut off that avenue by his foolish attempt to hide his past from investors.

If you want to congratulate someone who stuck with DIL through thick and thin, talk to Peter Hujlich. He stands out as someone who kept his head when everyone around him were losing theirs.

The expensive lawyers can kiss my arse.

Interesting post. Can you explain more about Peter Huljich and Diligent, or is that too sensitive to discuss?

[Balance]

Interesting post. Can you explain more about Peter Huljich and Diligent, or is that too sensitive to discuss?

Peter put in money before the IPO, bought more shares in the IPO, bought more after the IPO and increased his stake even further during its darkest days.

Interesting individual, I must say.

He has also done very very well with PEB.

[iceman]

I expect a restatement only. It will confirm all is in order now and business going well. New announcement (new product, share buy back and possibly Nasdaq)will then come out during the next couple of months and these will boost the price significantly.
But calm tomorrow with a closing price of $ 5.24 :cool:

[JayRiggs]

Only a matter of hours away from the restatement. So many months of waiting, it's almost here!
I want to see TWO new products, share buy back, introduction of dividends, Nasdaq listing, +500 new clients, 99% client retention rate, and a takeover bid from Microsoft all at once tomorrow.
And a share price of $10. :eek2:

[blobbles]

Only a matter of hours away from the restatement. So many months of waiting, it's almost here!
I want to see TWO new products, share buy back, introduction of dividends, Nasdaq listing, +500 new clients, 99% client retention rate, and a takeover bid from Microsoft all at once tomorrow.
And a share price of $10. :eek2:

I think if all those things happened tomorrow, you might be looking at a share price of $30! I would like them to announce they will be taking over Apple too :)

One interesting thought - does anyone think DIL could potentially use the cash pile they have for an acquisition? Has there been any suggestions that they are going to use it to acquire a new product (through buying a company making one) instead of building one themselves?

[Whipmoney]

I think if all those things happened tomorrow, you might be looking at a share price of $30! I would like them to announce they will be taking over Apple too :)

One interesting thought - does anyone think DIL could potentially use the cash pile they have for an acquisition? Has there been any suggestions that they are going to use it to acquire a new product (through buying a company making one) instead of building one themselves?

Yeah i had mentioned that they could buy growth through an acquisition strategy which is fairly common when a market gets saturated. Theres a few smaller players out there that they could probably snap up.

I still think that their second product will be a management suite, and will hopefully be announced soon.

[JayRiggs]

Lol no another delay!!!!

Diligent Board Member Services will release its 2013 Interim Results and preliminary 2013 Full Year Results later today, Friday February 28, 2014.
https://www.nzx.com/companies/DIL/announcements/247617

[winner69]

Lol no another delay!!!!

https://www.nzx.com/companies/DIL/announcements/247617

Prob one of those infamous 5.01pm on a Friday announcement

And we know what that means eh

[JohnnyTheHorse]

Lol no another delay!!!!

https://www.nzx.com/companies/DIL/announcements/247617

No, not a delay. They are being SMART by releasing it after market close so that people actually have time to go through the information. Nice move by them announcing that it will be released later today, clears up any confusion.

[Whipmoney]

If it comes out during trading hours would you expect a trading halt?

[pierre]

Lol no another delay!!!!

https://www.nzx.com/companies/DIL/announcements/247617

Well, better a few hours than a few weeks or months.

In light of this news and as we don't know whether the release will be during the day or after the close, we'll now use the closing price on Monday to determine the winner of our "pick the price" competition. All picks received prior to the announcement are eligible so there's still time to enter.

[robbo24]

Lol no another delay!!!!

https://www.nzx.com/companies/DIL/announcements/247617

You scared me there for a second.

[tosspot]

that smells fishy to me. Its near impossible that they haven't finished yet but will be finished on the day its due unless they are pulling an all nighter leaving it until the last minute, I assume its ready but they are leaving it until after market on purpose, I freed up some funds for this but definitely not buying in until its out.

Also It doesnt mention restatement just results, Im Guess they mean the restatements aswell are included. Mind you cant take anything for granted

[winner69]

No, not a delay. They are being SMART by releasing it after market close so that people actually have time to go through the information. Nice move by them announcing that it will be released later today, clears up any confusion.

Assuming they already know they could have released it last nigh then

Grasping at straws now but hopefully they need to get board sign off an the board meeting is in progress now (US time)

That would make sense ...so good news ...but then they could have said that in the announcement

Being SMART does not leave you open to speculation when you have pissed punters off for so longer

[Whipmoney]

http://www.marketwatch.com/story/diligent-announces-global-iso-27001-certification-board-portal-attains-industrys-highest-security-standard-2014-02-27?reflink=MW_news_stmp

[winner69]

http://www.marketwatch.com/story/diligent-announces-global-iso-27001-certification-board-portal-attains-industrys-highest-security-standard-2014-02-27?reflink=MW_news_stmp

Wonderful news

Would have been more impressed if they had said "We have some news about our ISO Accreditations but we will you you later today"

[robbo24]

Get your homework pads out and cancel the romantic dinner with wifey/partner/pet dog boys, time to hoe into those numbers this weekend!

But moosie_900 I thought we were going to out on the lash to celebrate the restatement???

[Harvey Specter]

well moosie this is not the US and NZ history shows us if it is released today either after market close or with a trading halt until monday it is usually not to rosy.But this is a US company. Anyway, did anyone pick they would release at the end of the day (still not confirmed - it could be during trading in which a short? trading holt would be called) or did we all expect it this morning or not at all.

I also wonder from a continuous disclosure perspective why they didn't release this morning. That suggests there is still something to be done, otherwise they are holding out on price sensitive news.

Lets see if we get any insider trading. It has been drifting up from below $4.50 at the start of the month.

[SimonHouse]

If they are a US company, with a fair chunk of US based shareholders, wouldn't it make sense to release after the close of business so everyone gets treated equally in terms of the release of large amounts of information that would need some analysis?

[Harvey Specter]

If they are a US company, with a fair chunk of US based shareholders, wouldn't it make sense to release after the close of business so everyone gets treated equally in terms of the release of large amounts of information that would need some analysis?Good point but it is stil there work day there. It is currently 3.50pm in New York (1.50pm in San Fran) so in theory, they are still at work and would have the same amount of time as those in NZ to analyse before the market opens.

[iceman]

If they are a US company, with a fair chunk of US based shareholders, wouldn't it make sense to release after the close of business so everyone gets treated equally in terms of the release of large amounts of information that would need some analysis?

Yes that makes perfect sense and lets hope that is the reason, i.e. that they want to give everyone interested a fair chance over the weekend to digest the restatements.

[Harvey Specter]

Market likes the news - up 7c ;)

[iceman]

Market likes the news - up 7c ;)

You mean the market likes the NO news !! Up 15c now !

[In4a$]

You mean the market likes the NO news !! Up 15c now !
News will be good, as insider traders buying ??? no just me being cynical

[Balance]

You mean the market likes the NO news !! Up 15c now !

The news is that they will release the restatement on time.

In the States, the big IT companies tend to release their results after market close to give the market time to analyse the news.

I support DIL doing the same thing - especially when it has been such a huge exercise.

Company is putting on an investors' conference on Monday with CEO and CFO to answer all questions.

GAME ON!

[Harvey Specter]

You mean the market likes the NO news !! Up 15c now !


News will be good, as insider traders buying ??? no just me being cynical


The news is that they will release the restatement on time.

GAME ON!Exactly. the 'news' is no more delays. A further delay would have seen the price fall again, so that risk has been removed. The risk that remains in that the updated figures are no good.

GAME ON!

[Whipmoney]

Actually quite pleased to see an investors conference for once so potentially there's more commentary/discussion around their potential second product.

[Balance]

Actually quite pleased to see an investors conference for once so potentially there's more commentary/discussion around their potential second product.

You can be sure that they will not be having the conference if they are not confident about fronting up with the restatement & accounting issues behind them.

New CFO in attendance is a good indication.

So expect CFO to handle accounting issues, and CEO to handle company specific business issues.

[In4a$]

Oh well what the hell, another 2000 at $4.85 wont hurt !

[Balance]

Oh well what the hell, another 2000 at $4.85 wont hurt !

On Monday you may be wondering why you did not mortgage the house and buy another 20,000 shares? :D

[Harvey Specter]

On Monday you may be wondering why you did not mortgage the house and buy another 20,000 shares? :DWhy stop at mortgaging it. You should have sold it and your Porsche!

[Balance]

Well that clears it up. I call $4.70 closing price!

Moosie, you are sounding like a possum caught in the headlights!

Jump in or else you are going to miss the ride to $10.00 at least.

The game has changed - notice how the algorithm trades are now on the BUY side?

Means institutions have taken out their buy pads, and it's bye bye to downside and $4.70

[RTM]

GULP
for those that dont know what winner is trying to say.
Most announcements that give you the weekend to digest are not very good for share holders

Yes....I would bet that way as well. And yes, I do hold some.

[Balance]

Yes....I would bet that way as well. And yes, I do hold some.

In which case, you should get out while the buying is there.

[In4a$]

On Monday you may be wondering why you did not mortgage the house and buy another 20,000 shares? :D
Wouldnt get that excited, I reckon price will finish at about $4.90 today, taking a gamble $5+ next week. The ones I brought back in Jan looking good though.

[RTM]

In which case, you should get out while the buying is there.

Yep, you're probably right Balance, but I am a tiger for punishment. Still hold the shares in NZOG from the time it floated.....

Cheers
RTM.

[MAC]

Wouldnt get that excited, I reckon price will finish at about $4.90 today, taking a gamble $5+ next week. The ones I brought back in Jan looking good though.

I think you could be right In4a$, there has been a very long time indeed for the market to mostly build in a consensus expectation, the insto’s wont all reposition in just a day either.

We should all at last be able to re-value DIL over the weekend and although I’m confident that the valuation will remain higher than $4.90, I don’t think the SP will pop straight to it as some may anticipate, we’re more likely to see a primary tend form over the next few weeks.

Looking forward to the result, a big humble apology from Sodi, and putting all this in the past

[PlatnuM195]

Some results are out:
https://www.nzx.com/companies/DIL/announcements/247670
https://www.nzx.com/companies/DIL/announcements/247669

[Harvey Specter]

Some results are out:
https://www.nzx.com/companies/DIL/announcements/247670
https://www.nzx.com/companies/DIL/announcements/247669Can someone give a 1 paragraphy summary ASAP!

How long is the trading halt? 20m?

[Harvey Specter]

Looks like 2012 revenue reduced from $43,732 to $39,127 so a 10.5% reduction.

$7.8m of one off costs in a profit of $10.3 (operation before tax) - [Actually the one offs may not be 'operating' so may not be included. - Ignore this, non operation is forex movement etc)

$56m cash

$38m deferred revenue

They also got their sales tax wrong - extra $1.2m liability/provision

[Snow Leopard]

What a mess they got themselves into, and have not quite completely got themselves out of yet.

Seems the Special Committee has a few more million dollars yet to consume.

General and Administrative Expenses nearly doubled and the one-offs are categorized separately !

These accounts are not yet Audited !!

The cash in the bank seems to be have been real :)

Best Wishes
Paper Tiger

[winner69]

H1 revenues up 83% to $29.3m
H2 revenues up 53% to $35.4m

Even if next years revenue is only up 40% that will still come to $95m

Forget about the one off costs (they don't really count for the future do they) jeez $90m revenues with ever expanding margins and world class retention rates will generate $25m to $30m NPAT

GAME ON as Balance says

[Monty]

Even if next years revenue is only up 40% that will still come to $95m

Forget about the one off costs (they don't really count for the future do they) jeez $90m revenues with ever expanding margins and world class retention rates will generate $25m to $30m NPAT

GAME ON as Balance says
It is for this reason that I have held onto my modest holding. out 2-3 years with new product the future can only look bright.

I also see positive growth as Diligent expand into Europe, and Asia. I am struggling to see downside here. Will Diligent now be ready for a NASDAQ listing and what would that do to share price?

Are there any negatives ahead?

[Whipmoney]

It is for this reason that I have held onto my modest holding. out 2-3 years with new product the future can only look bright.

I also see positive growth as Diligent expand into Europe, and Asia. I am struggling to see downside here. Will Diligent now be ready for a NASDAQ listing and what would that do to share price?

Are there any negatives ahead?

I don't see much downside with holding at the moment as sure there will be volatility until a longer-term price is established however I'm expecting a bit of upside to be announced on the monday call.

[artemis]

121 users browsing this thread right now. A record?

[Monty]

The price is wobbling around $4.90. That says to me that the restatements are pretty much as expected. (I am not a technical investor, but rather go on advice (including what the feeling is here) and follow the guidance of my sharebroker.

What I believe now is that the market is awaiting the next announcements and releases that may come out of the Monday meeting. Maybe the market needs to recover and assess the reports and investors will come back in in carefully once they have all the facts.

saying that 263,000 shares traded today is quite high. and I see there is a bundle available at $4.99. I wonder if the shares close at $5.00 for the day. (does that mean I win a chocolate fish)

[muss1]

Take the 7.7m one off costs off operating income and you've got an increase of over 100%..

[bull....]

thats a pretty good pe ratio the stock carries lol

[Theracay]

Take the 7.7m one off costs off operating income and you've got an increase of over 100%..

A lot of it was administrative costs.

Would their move to their new office space be related to this which was necessary for further growth, which may explain the slowing growth because they didn't have a large enough capacity?

[winner69]

Take the 7.7m one off costs off operating income and you've got an increase of over 100%..

A lot driven on increasing Gross Margins on increasing revenues

GM the last 4 quarters have been 73% / 78% /80% and 80% (FY13 was 80.4% v 75.6% year prior)

That 5% points increase on $64m sales is over $3m more margin last year

What a margin .... forever now

Probably will creep up a bit more

[winner69]

thats a pretty good pe ratio the stock carries lol

Even if added $5m to the NPAT to allow for the non recurring stuff only a PE of 35 or 50 (diluted)

Not too bad for such an illustrious profit making high growth company, lol

[Snow Leopard]

You will recall that other one -offs mentioned in their limited announcement of Jan 14th 2014 included the CEO's compensation of $4.4m USD, I suspect that is in the big rise in general and admin expenses. They also shifted office to new premises in NYC, which suggests that there are costs associated in the general and admin expenses there too. Probably in excess of $2m, maybe $3m

On reflection, the result doesn't look too bad, but as someone said above, they could have done a much better job explaining themselves.

The management comments details that $2.2M of the CEO thing is in the one offs, the remainder?
As regard to shifting offices - do not know the total cash spent but some will be expensed and fit-out etc would be capitalised.

Of course if they had managed to avoid most of the one-offs the real profit would be (at a guess) $11.3M.

Best Wishes
Paper Tiger

[blobbles]

You will recall that other one -offs mentioned in their limited announcement of Jan 14th 2014 included the CEO's compensation of $4.4m USD, I suspect that is in the big rise in general and admin expenses. They also shifted office to new premises in NYC, which suggests that there are costs associated in the general and admin expenses there too. Probably in excess of $2m, maybe $3m

On reflection, the result doesn't look too bad, but as someone said above, they could have done a much better job explaining themselves.

Seriously? They are paying the CEO $4.4 million??? My god, does anyone else think these sort of pay amounts are simply ridiculous? The company only had revenues of $64 million and they paid the CEO almost 7% of total revenues. Or over half the profits the owners (us) will benefit from. Wow. How stupid the world has become. Particularly when the CEO oversaw a stuff up of monumental proportions that could have seen the company delisted. Frankly this is poor form. How about paying him a decent salary of $1 million and be done with it? Is he really worth $4.4 million???

Report looks OK, not the best. It appears this exercise of restating accounts has cost them what $7 million? That is pretty damn high.

The Operating Expenses has risen dramatically, even when taking out the $7 million for the restatement (I am guessing this is how much, might pay to ask on Monday), its still $35 million with an almost doubling of "General and Admin" expenses. That seems way too high for me, how much are their new offices? Are we seeing some decadence here? Revenues went up just over 60% yet they virtually doubled Op Exp. R&D has almost doubled also to $4.4 million, yet there is nothing to show for it. There better be news of an imminent product release or something smells fishy. $4 million to develop a solid product over 2 years (plus another couple of million in the past) should be pretty easy.

I think I will be halving my holdings at this point, the reports so far do not instil me with the greatest of confidence. Maybe I am in a negative mood today?

[SimonHouse]

Seriously? They are paying the CEO $4.4 million??? My god, does anyone else think these sort of pay amounts are simply ridiculous? The company only had revenues of $64 million and they paid the CEO almost 7% of total revenues. Or over half the profits the owners (us) will benefit from. Wow. How stupid the world has become. Particularly when the CEO oversaw a stuff up of monumental proportions that could have seen the company delisted. Frankly this is poor form. How about paying him a decent salary of $1 million and be done with it? Is he really worth $4.4 million???

Report looks OK, not the best. It appears this exercise of restating accounts has cost them what $7 million? That is pretty damn high.

The Operating Expenses has risen dramatically, even when taking out the $7 million for the restatement (I am guessing this is how much, might pay to ask on Monday), its still $35 million with an almost doubling of "General and Admin" expenses. That seems way too high for me, how much are their new offices? Are we seeing some decadence here? Revenues went up just over 60% yet they virtually doubled Op Exp. R&D has almost doubled also to $4.4 million, yet there is nothing to show for it. There better be news of an imminent product release or something smells fishy. $4 million to develop a solid product over 2 years (plus another couple of million in the past) should be pretty easy.

I think I will be halving my holdings at this point, the reports so far do not instil me with the greatest of confidence. Maybe I am in a negative mood today?

That $4.4m for the CEO is over a number of years I believe.

[robbo24]

Sparky got it right... 65m revenue...

BTW, the DIL numbers are in US$, right?



3) Getting to the bottom line

So, if DIL made $43.74m in revenue in 2012, and we assume that they have earned a further $21.45m in new client revenue (as my Q1-Q42013 assumptions outline above), then they are good for $65m USD in revenue.

This will likely result in NPAT of around $15.5m USD, or roughly $19m NZD at the 0.82c NZDUSD rate. With 120m shares on the register, this works out at about 15.8c in EPS NZD.

This gives a YOY NPAT growth of about 80%. HOWEVER, the revenue restatement, big office shift, and associated professional/logistical expenses will have greatly cut into DIL’s 2013 earnings. Note though, these will be one off costs, though DIL may have to spend more on enterprise level systems to prevent these kinds of accounting headaches again. So when the 2013 earnings are released, expect some shock over how the approx $19m in NZD looks more like $10m due to one-offs.

Diligent may also have some increased ongoing costs in terms of new and improved accounting systems, and hiring more or better staff to oversee the financial controls.

So what’s a target price for DIL then?

Using my good old Ben Graham formula for the enterprising investor, with the following inputs:

Growth rate = 35% over the next 5 years
2012 earnings = 9.1cps (confirmed)
2013 earnings = 15.9cps

Risk free rate of 5.5%, being the 20-year rate that NZ Treasury use. This is about right for sourcing a municipal type bond with higher security.

The BG formula gives a price thus:

Based on known 2012 EPS = $5.61
Based on estimated 2013 EPS = $9.73

Now that 2013 is over, we can expect intrinsic value to look a lot more like $9.73 than $5.61, perhaps with some further discounting of the price to reflect changes in revenue as it falls into different time periods. Note that restatement doesn’t affect actual cash held, merely how it is accounted for in different periods due to the nature of SaaS businesses.

So if the current price is $3.43, a fair price based on the assumptions I’ve given above is at least $5.61, and more like $9.73. That’s why I maintain that Diligent is woefully underpriced.

More target price methods

Xero is on a price/sales ratio of 90
GeoOp has a PSR of 400
SLI has a PSR of 5.5
WYN has a PSR of 90

If DIL has a market cap of $287m, and will have revenue of $65m USD (or $79m NZD), then it is on a PSR of 3.63 for FY2013. It should be on a PSR of closer to 8 or 10 in my view, especially if new client growth looks good in January’s limited announcement. A PSR of 8 = $5.26, and a PSR of 10 = $6.58.

[Monty]

Question. On Monday morning there is an investor conference call at 9:00am NZ time. There are a selection of number to call in. As a shareholder, is that conference call available to all investors / shareholders, even for modest shareholders such as myself?

[winner69]

Snapiti - I see it Cavalier who did the 5.06 Friday afternoon announcement ....including a "trimming" of profit guidance.

A couple asked significance of this ....CAV a good example

[MAC]

My DCF provides a HY14 valuation of $5.90 (+22%) on the basis below.

An estimate of forward growth remains a challenge, we don’t yet have much guidance on the proposed new product, and it is uncertain IMO as to whether the proposed ramp up in activity in Europe and Asia will offset the dropping growth rate in existing markets.

The marketplace for the present Boardbook product is significantly more saturated now by competitor products than it was, and if the proposed new product is targeted at upper corporate management then Diligent may to some degree have a functional overlap with existing but partial competition from major corporates such as Oracle and others. For this reason IMHO such a second product is unlikely to be a market leader to the same extent as the first product has been.

It may take another couple of quarters to demonstrate if Diligent can confidently start to increase their growth rate again. Similarly, the present trend cannot be ignored and that trend is downward, perhaps reflecting a maturing of the product cycle, refer to plot below.

The forward growth rate will also require reconsideration if we receive some guidance on whether there is a reinvestment intention for the cash pile.

For now I’ve taken a neutral position as a base case and have applied a new customer growth rate of 24% for FY14 and similarly a 24% new customer growth rate for FY15.

Now that we can quantify the degree to which installation fees are recognised we can better estimate anticipated revenues per new customer as they arise, which I now determine to be in the order of $30,200. I’ve adopted and applied a per annum revenue per existing customer of $23,700.

This valuation is $1.25 lower than my pre-restatement era valuation of $7.15 sympathetically perhaps reflecting the effect of both the redistribution of revenues and the drop off or maturing of product cycle growth rate.

5562

[Hawkeye]

http://www.nbr.co.nz/article/restatement-costs-eat-diligent-db-152641

Not sure if anyone has already posted this.....

[In4a$]

NZX has DIL close at $4.85 on Friday, not sure if you guys earned your chocolate fish !

[JohnnyTheHorse]

All looks okay to me. Margins are getting better and revenues are increasing greatly. Lots of one off costs that hit the NPAT, but we all knew that would happen. Lots of cash in the bank so all is well.

Double top not good, but I suspect this may not be relevant as the insto's will be going over the accounts this weekend and will be starting to initiate positions on Monday (if of course they decide to).

Disc: Not holding. Will get in if there is a good break of $5.

[Jay]

On my rough chart it looks like an ascending triangle?? - flat on top with an upward sloping line - nearly at the pointy end so higher probability that it will break above the $5 IMHO
Hopefully some of the insto's will start buying as you say JohnnyTH

[Whipmoney]

Seriously? They are paying the CEO $4.4 million??? My god, does anyone else think these sort of pay amounts are simply ridiculous? The company only had revenues of $64 million and they paid the CEO almost 7% of total revenues. Or over half the profits the owners (us) will benefit from. Wow. How stupid the world has become. Particularly when the CEO oversaw a stuff up of monumental proportions that could have seen the company delisted. Frankly this is poor form. How about paying him a decent salary of $1 million and be done with it? Is he really worth $4.4 million???

Report looks OK, not the best. It appears this exercise of restating accounts has cost them what $7 million? That is pretty damn high.

The Operating Expenses has risen dramatically, even when taking out the $7 million for the restatement (I am guessing this is how much, might pay to ask on Monday), its still $35 million with an almost doubling of "General and Admin" expenses. That seems way too high for me, how much are their new offices? Are we seeing some decadence here? Revenues went up just over 60% yet they virtually doubled Op Exp. R&D has almost doubled also to $4.4 million, yet there is nothing to show for it. There better be news of an imminent product release or something smells fishy. $4 million to develop a solid product over 2 years (plus another couple of million in the past) should be pretty easy.

I think I will be halving my holdings at this point, the reports so far do not instil me with the greatest of confidence. Maybe I am in a negative mood today?


I must admit, after my first reading I wasn't exactly impressed however after reading through all of the notes in the HY13 statement, looking at the statement of cash-flows, and re-running my DCF I was pleasantly surprised by the output.

This company generates a ton of cash and now that the restatement and compliance issues (and associated expenses) are past us FY14 is likely to see a net cash inflow in excess of US$45m which is a fair chunk of coin for company with a market cap of only ~US$340,653,954 and a cool US$55m cash on hand.

It seems the company has incurred a fair amount of expenses in the last year in moving to a larger premises, increasing both the headcount and pay and benefits for staff members.

I will be very interested to hear what the executive team has to say on Monday's conference call. Hopefully their European expansion is on track and it would be an added bonus if they were to announce the launch of a second product.

DISC: Continuing to hold.

[Whipmoney]

Ironically my DCF analysis gives a spot NZD $5 base case, which is based on two years growth at 15% p.a. then 4% to perpetuity. That's also without stripping out this years non-recurring costs which are at least $5m...

Obviously growth will be a lot higher so there's plenty of upside in this one, even with just one product.

[Corporate]

Whip, the market cap is no where near US340m. You need to look at DIL on a fully diluted basis...around 120m shares.


I must admit, after my first reading I wasn't exactly impressed however after reading through all of the notes in the HY13 statement, looking at the statement of cash-flows, and re-running my DCF I was pleasantly surprised by the output.

This company generates a ton of cash and now that the restatement and compliance issues (and associated expenses) are past us FY14 is likely to see a net cash inflow in excess of US$45m which is a fair chunk of coin for company with a market cap of only ~US$340,653,954 and a cool US$55m cash on hand.

It seems the company has incurred a fair amount of expenses in the last year in moving to a larger premises, increasing both the headcount and pay and benefits for staff members.

I will be very interested to hear what the executive team has to say on Monday's conference call. Hopefully their European expansion is on track and it would be an added bonus if they were to announce the launch of a second product.

DISC: Continuing to hold.

[Whipmoney]

Whip, the market cap is no where near US340m. You need to look at DIL on a fully diluted basis...around 120m shares.

That makes no sense. The market cap is the market cap. It's the price per share that is relative to the number of shares outstanding, whether basic (undilluted) or fully diluted.

[zigzag]

I agree with Corporate.The ordinary shares and the preferentials both should be regarded as equity, so you need to do your calculations based on 120 mill. shares.

[Corporate]

That makes no sense. The market cap is the market cap. It's the price per share that is relative to the number of shares outstanding, whether basic (undilluted) or fully diluted.

So how many shares are you using in your calculation then....this is fundamental

The fully diluted number of shares on issue is 122m @ 4.85 per share * .83 = us$491m

You are out by a significant amount.

[Whipmoney]

So how many shares are you using in your calculation then....this is fundamental

The fully diluted number of shares on issue is 122m @ 4.85 per share * .83 = us$491m

You are out by a significant amount.

Not really..

The Current Market Cap is NZD ~$406.31m which when multiplied by the going USD cross rate gives a USD Market Cap of ~US$340,653,954.

Divide this by the number of fully diluted shares (~122m) and you will get the fully diluted stock price in USD (Sorry don't have a calculator handy).

Where you're going wrong is that you are treating the current share price of $4.85 as a constant, whereas it is this figure (the share price) that will get diluted by conversion of the 30m pref shares and not the market cap.

Basically more shares means the market cap gets sliced more ways means the share-price drops. This has no bearing on the market cap initially, at least until the market reacts.

[winner69]

Not really..

The Current Market Cap is NZD ~$406.31m which when multiplied by the going USD cross rate gives a USD Market Cap of ~US$340,653,954.

Divide this by the number of fully diluted shares (~122m) and you will get the fully diluted stock price in USD (Sorry don't have a calculator handy).

Where you're going wrong is that you are treating the current share price of $4.85 as a constant, whereas it is this figure (the share price) that will get diluted by conversion of the 30m pref shares and not the market cap.

Basically more shares means the market cap gets sliced more ways means the share-price drops. This has no bearing on the market cap initially, at least until the market reacts.

So you saying that although the paper says the shareprice is now 485 it really is only 333.

Because one day, maybe one day next week, those prefs wil get converted and overnight the shareprice will fall.

Spooky stuff ....esp seeing that 333 is an old Buffet (attributed to) valuation. Just keeps pooping up that number.

[zigzag]

But what if the market already knows about the pref's, so the dilution will be already factored into the current price???

[Whipmoney]

So you saying that although the paper says the shareprice is now 485 it really is only 333.

Because one day, maybe one day next week, those prefs wil get converted and overnight the shareprice will fall.

Spooky stuff ....esp seeing that 333 is an old Buffet (attributed to) valuation. Just keeps pooping up that number.

That's exactly what i'm saying. Conversion of the Pref shares on a 1:1 basis will lead to a significant dilution of the Market Cap.

It's just like how a rights issue dilutes the share-price as the total market cap is divided by a higher number of shares however the benefit of a rights issue is that it provides the company with cash to fund growth, R&D or acquisitions etc.

That's why when I run my DCF analysis I use the potential (fully diluted) number of shares outstanding which is ~122m. Using this I still got an NZD value of around $5 per share assuming average growth of 15% in the next two years and 4% growth to perpetuity.

[Whipmoney]

But what if the market already knows about the pref's, so the dilution will be already factored into the current price???

Yeah of course. It should be factored into any DCF analysis.

Personally I can't see Spring Street Capital converting until it gets back into the $8's to $9's, as they are currently getting around US$330k per year in pref dividend income.

Potentially they may also wait until the stock is listed on the Nasdaq as it would provide them with a more liquid market to offload their position.

[Harvey Specter]

Yeah of course. It should be factored into any DCF analysis.

Personally I can't see Spring Street Capital converting until it gets back into the $8's to $9's, as they are currently getting around US$330k per year in pref dividend income.

Potentially they may also wait until the stock is listed on the Nasdaq as it would provide them with a more liquid market to offload their position.
In theory they won't convert till they want to sell or DIL starts paying a dividend greater than the pref rate.

I do think the share price factors in the prefs so the market value will 'jump' rather than the share price 'plummet' once converted.

[winner69]

Generally all the restatement is almost a non event and doesn't really change my view of DIL worth.

The Cash Flow Statements are essentially unchanged from previous reporting.

The thing to note from the two announcements on Friday is that after a pathetic cash flow in H113 of only US$5.8m the H213 number was US$17.4m (with the one off impacts included). They did say they collected heaps of debt in Q3 but to boost cash flows but it looks like Q4 might have been a boomer for other reasons (sales driven cash).

My DCF starts with a normalised FCF of US$28.3m (taking a punt on what cash one off expenses after tax might have been). On a fully diluted basis (ie 120m shares) I have a EV value of $5.85 (NZD) which if allow for the mountain of cash is $6.35.

This is for a one product company. Under a scenario that the product is dead in the water in 5 years and only a minimal residual value (say some ongoing licence fees still coming in) probably worth about $3.56

Anyway here is how cash flows are tracking (with an gues for cash one offs / non recurring)

[Harvey Specter]

One other restatement they have done which I don't remember being discussed is they have recognised the deferred tax asset on losses from the look of it.

That explains the large tax benefit in the p&l in 2013 and the assets in the balance sheet. Notably split into current asset ( used in the next 12 months) and non current. Once those have gone, tax will become a cash cost.

[Whipmoney]

One other restatement they have done which I don't remember being discussed is they have recognised the deferred tax asset on losses from the look of it.

That explains the large tax benefit in the p&l in 2013 and the assets in the balance sheet. Notably split into current asset ( used in the next 12 months) and non current. Once those have gone, tax will become a cash cost.

At a guess this is due to the large amount of revenue that was backed out of the P&L and treated as a balance sheet item (deferred revenue). Invariably this reclassification will lead to a decline income tax on the P&L.

[Xerof]

What will really be of interest to me is the PA mid to late next week, once the insto's have done their number crunching, and establish a long term view (either way). Forget Fridays activity in the sense that it was firstly anticipation, then some profit-taking by short term traders. Buzz-o-bumble was active both ways, and was very intent on getting as weak a close as was possible. B-O-B was frustrated to some extent by some decent bids returning each time the volume had been worked through at each level.

I won't be able to get on the Monday call as otherwise engaged, so would be appreciative if someone could post salient points in here afterwards

TIA

[psychic]

Has anyone whined about what was resolved re CEO remun etc? Is it reasonable?

Am I right reading into all this that we spent US$2.3M (special committee) to June 2013 determining that CEO received 1.6 million options in 2009 and 2.5 million in 2010 in excess of what had been approved? How hard could it be?

The Special Committee then suggests an alternative remun package.
In lieu of this he gets a :
- 10 year option of 1.6m shares at US$2.79 (closing price NZX - very nice timing having driven down by inept management) and
- a performance cash award of US$ 4.2 million providing he can drive revenue growth of at least 7% in the 12 months to June 2014.
-a further 2.25 million shares, again if he achieves 7% growth to June 2014 (lol)
- a further 250000 shares if he achieves 15%pa EPS growth over the next 4 years (or if he resigns early for good reason etc..)

Nice work if you can get it!

[Whipmoney]

Has anyone whined about what was resolved re CEO remun etc? Is it reasonable?

Am I right reading into all this that we spent US$2.3M (special committee) to June 2013 determining that CEO received 1.6 million options in 2009 and 2.5 million in 2010 in excess of what had been approved? How hard could it be?

The Special Committee then suggests an alternative remun package.
In lieu of this he gets a :
- 10 year option of 1.6m shares at US$2.79 (closing price NZX - very nice timing having driven down by inept management) and
- a performance cash award of US$ 4.2 million providing he can drive revenue growth of at least 7% in the 12 months to June 2014.
-a further 2.25 million shares, again if he achieves 7% growth to June 2014 (lol)
- a further 250000 shares if he achieves 15%pa EPS growth over the next 4 years (or if he resigns early for good reason etc..)

Nice work if you can get it!

Yeah personally I think the package is joke when taking into account the size of the company. This is probably a better deal than what most of the CEO's of the NZX50 would get, in fact probaly comparable to some of those of the top ASX listed companies.

I guess the one advantage is that the company is fairly flush with cash and in terms of generating shareholder wealth it is the constant increase in FCFF that really matters.

[zigzag]

Don't forget he was originally paid in options, which I believe were cancelled as they were not issued correctly, so he lost out big time there. So there will be some extra to make up for that fiasco. And Mr Sodi has done a brilliant job, created lots of value for shareholders, so I do not begrudge him his salary package. In fact, I would like to add a million hugs and kisses to his earnings!

[Roadrunner]

Looking forward to having a listen in on the global conference call tomorrow morning at 9am NZ time.Maybe a good time for DIL to announce the long awaited new product to a worldwide audience now that the restatement has finally arrived and is being digested??

[Whipmoney]

Generally all the restatement is almost a non event and doesn't really change my view of DIL worth.

The Cash Flow Statements are essentially unchanged from previous reporting.

The thing to note from the two announcements on Friday is that after a pathetic cash flow in H113 of only US$5.8m the H213 number was US$17.4m (with the one off impacts included). They did say they collected heaps of debt in Q3 but to boost cash flows but it looks like Q4 might have been a boomer for other reasons (sales driven cash).

My DCF starts with a normalised FCF of US$28.3m (taking a punt on what cash one off expenses after tax might have been). On a fully diluted basis (ie 120m shares) I have a EV value of $5.85 (NZD) which if allow for the mountain of cash is $6.35.

This is for a one product company. Under a scenario that the product is dead in the water in 5 years and only a minimal residual value (say some ongoing licence fees still coming in) probably worth about $3.56

Anyway here is how cash flows are tracking (with an gues for cash one offs / non recurring)


I hadn't actually looked at the split of cash-flows for FY13 within the year. I know there's a fair amount of one off cost in terms of the special commitee and some in the G&A expenses (which probably fell within HY113) however the $17m in HY213 is mighty impressive. If you annualise that they sure have a pretty decent FCFF!

[Whipmoney]

Read tge R&D blurb again. Not going to happen anytime soon. Too busy upgrading their post-it notes.

Presuming that a second product could be in the works then I don't believe the company is required to disclose this to the market in either their Annual Reports or by way of announcement under the NZX Continous Disclosure rules as it likely that information would be a deemed a 'Trade Secret' as per rule 10.1.1 (a)(iii)(e).

They may also be exempt from disclosure under rule 10.1.1 (a)(iii)(b) as it may represent an incomplete proposal or negotiation.

If such a product were in the pipeline then I would imagine they will announce it when they are ready for commercialisation.

[psychic]

Relatively new You Tube promo vids from Barclays, Lomin and MN reviewing transition to Boardbbooks. Pretty convincing for UK/Europe drive

https://www.youtube.com/channel/UCwhfeX5jITNgzv-8igKIIwA
https://www.youtube.com/watch?v=OrjyxgFDrSc
https://www.youtube.com/watch?v=wvH8A0gfi6M

[Jay]

#5640 Moosie
Yes looks set to go one way or the other, was my point really
Wish I was holding cash!

[zspoon]

R&D Expenses

2007: $1.3m
2008: $1.0m (leveling off of expenses after key enhancements hit)
2009: $0.7m (key enhancements hit, reduction in staffing)
2010: $1.0m (increase in staffing due to new product development including Boardbooks for iPad, plus more NY R&D staff)
2011: $1.5m (increase in staffing due to new product development including Boardbooks for iPad, plus more NY R&D staff)
2012: $2.3m (increase in staffing due to product upgrades and enhancements, plus more NY R&D staff, flagged increased 2013 R&D expenditure to 'expand market share by increasing investment in R&D')
2013: $4.5m (no commentary provided, HY commentary [HY R&D expense approximately 40% of y/e] mentions only 'increased staffing')

Quick thoughts:

For secret new product:

- Decrease in meaningful commentary from 2012 onward, the point at which R&D expenditure began to significantly depart the previous 'norm'
- General massive increase in staffing and R&D costs, particularly at the period in time at which the product is somewhat mature (i.e. iPad product released to market, product release being September 2011)
- R&D expenses have not increased in proportion with customer numbers, but rather reduced incremental customer growth matches increased R&D spend

Against secret new product:

- Nothing specifically pointing to new product development, when previously new product development has been specifically mentioned (although in the context of Boardbooks for iPads iteration being a 'new product')
- It may simply be that reduction in incremental customer growth is forcing Diligent to dig harder into product enhancements to ensure customer retention occurs
- 2012 reference relates to 'expanding market share', debatable that this could suggest growth in existing market, rather than viewing a new product situation as being two separate markets in which market share could be obtained

Personally I think something is cooking - Monday investor chat and full 2013 year end commentary for management may shed additional light. I also agree with Whipmoney's take on continuous disclosure.

I further note that I personally do not believe an auditor would compel them to disclose new product development as part of the significant accounting policies. Significant accounting policies is typically reserved for discussing the accounting treatment of items. Diligent have changed from historically chatting about how they would capitalise expenditure when commercial feasibility is proven (i.e. compliance with NZ IAS 38 requirement for capitalisation of R&D costs) and that Diligent has concurrently timed proving commercial feasibility with product release, to general chat around the fact the R&D expenses are essentially expensed as incurred with general vague chat around what the expense category is made up of. Technically, they are required expenses by 'nature' or 'function', whichever is more descriptive. Where function is applied, there is a requirement 'disclose additional information on the nature of expenses'. However, in practice this really just requires a split out depreciation, amortisation and employee benefit expenses, and no blatant mislabeling of expense categories. In short, I don't believe they would be forced to mention they were developing a new product in 'Significant Accounting Policies', particularly if they were not required to disclose this to the market, and considered not doing so was commercially advantageous.

As a new shareholder, hoping for new product development.

[psychic]

Don't forget he was originally paid in options, which I believe were cancelled as they were not issued correctly, so he lost out big time there. So there will be some extra to make up for that fiasco. And Mr Sodi has done a brilliant job, created lots of value for shareholders, so I do not begrudge him his salary package. In fact, I would like to add a million hugs and kisses to his earnings!

Hmmm. Probably one or two others here with me that have lost a lot of money on Diligent with various badly timed plays, so I'm not sure it would be all hugs and kisses. But for those that sold out at $8 and bought in again at $3 he'd be a bloody legend I would think.

And is Sodi not the winner here?? His new "package" approved at the AGM included him buying 1.6m shares at market value - which at the time was 7 or 8 bucks. He oversaw the delays and price crash and deftly executed this option for his 1.6m Shares Xmas eve when the price hit rock bottom at US$2.79!

The performance "goal" of revenue growth of 7% to June 2014 is a joke yet he gets US$ 4.2m in cash plus a further 2.25m shares.

I probably have the wrong end of the stick but it stinks if so, :mad ;:

[muss1]

Just trying to nail down a number to put to one of costs for FY13. Is the 8mil in the statements inclusive of all special committee costs, the CEO compensation package and the restatement? On top of this there is the one off moving costs as well.

[Monty]

is anyone trying to get thru to the conference call 0800 452 782? I'm on hold and struggling to get thru. being told to wait for operator grrrr
maybe too much interest

EDIT - thru now and waiting. I hope it is worth the long long wait. 9 month wait in fact:confused:

[Whipmoney]

is anyone trying to get thru to the conference call 0800 452 782? I'm on hold and struggling to get thru. being told to wait for operator grrrr
maybe too much interest

EDIT - thru now and waiting. I hope it is worth the long long wait. 9 month wait in fact:confused:

I finally got through after 4 mins 38.

[Harvey Specter]

For those on the call, do they elaborate on these two points:


– Addressing new verticals and new geographies
– Multiple growth opportunities beyond current business which Diligent intends to address
I assume it is all secret squirrel.

[Whipmoney]

For those on the call, do they elaborate on these two points:

I assume it is all secret squirrel.

I doubt it. I wish Sodi provided a bit more detail on this, hopefully its covered in the closing notes but then again they did mention that they can only provide limited detail until the final full year report is completed.

Very interesting though.

[SimonHouse]

On the call. But for the special costs and restatement, they would have doubled EBITDA.

[Crow]

Did they just say announcement of new features in coming months?

[Snail]

Did they just say announcement of new features in coming months?

That's what I heard. Yes.

[SimonHouse]

yes, in the next few months they will announce something, is what i thought i heard

[nextbigthing]

Did they just say announcement of new features in coming months?

Yes. Post it notes will now come in four different highlighter colours :p

[Crow]

Thanks all. Thought i had misheard for a second.:)

[bonne vie]

From questions at presentation

Pile of cash - best use growth not Share purchase plan
Nasdaq - NZX not most efficient and obviously discussing/looking at Nasdaq
Innovation - Feel progessing but not announcing anything at the moment (with competitors in mind also)

[Balance]

Happy with the conference call.

I think they answered all the questions pertaining to the restatement well and there should be no lingering doubts. The cost is increased admin and legal expenses.

A quick assessment of the results show that the numbers are very much in line with that of a few analysts.

Expect brokers to reaffirm their valuations.

[zspoon]

Sounds like acquisitions are a definite possibility, it'll be interesting to see whether they acquire horizontally or vertically.

Also found in particularly interesting that they disclosed they've hired 16 new staff in the NZ arm, which is typically where new product/significant feature development has occurred (I do wonder if the R&D staff at the NY office are primarily focused on bug fixes supporting markets). Do you really need 16 new staff to add a new range of highlight and pastel coloured post-it notes? The fact they alluded to there being announcements made in the coming months makes me think no.

Currently I'm going out on a limb and saying:

- March: Expect finalised annual report
- April: Conclusion of restatements
- May/June: Announcement of new product

In regards to growth, I do wonder whether we are now going to see a stabilisation in growth from this point.

[Whipmoney]

Happy with the conference call.

I think they answered all the questions pertaining to the restatement well and there should be no lingering doubts. The cost is increased admin and legal expenses.

A quick assessment of the results show that the numbers are very much in line with that of a few analysts.

Expect brokers to reaffirm their valuations.

Yeah pretty happy also. I think it put a few lingering doubts to bed and its good to know that there's a few non-recurring costs embedded into the G&A expense line.

Good to see that they're focused on growth, they mentioned multiple times that they are focused on the verticals (sector education/opportunities), geographic opportunities (EU) and a potential second product although they were rather coy about this.

It was interesting to see them dismiss their competitors second tier product as a simple "slap-on". From the sound of it Diligent may have something quite impressive up their sleeve in this space which may blow their competitors out of the water.

[Whipmoney]

DIL have been playing the new product coming card(hype card) for a very long time now so dissapointing not to get a new product launch date today.
Without that announcement it will take the shareprice even longer to recover.
Most insto's know that DIL need new product launches to maintain the very good growth and to propel the share price up.

I recall the CFO mentioning something about some of the headcount in NZ being professional consultants for a new product and based on other comments they made a second product could emerge sometime in the next few months.

What was interesting however was that they challenged the analysts understanding on what a second product would actually look like. After reading some of the brokers reports it seemed that this was expected to come in the form of a lower tiered product for middle/senior management however the CFO quickly dismissed their competitors (Boardvantage/ICSA's) products as just a simple slap-on that offers minimal advantages over existing software packages already out in the market.

This begs the question.. if they are putting together a second product then what exactly would it look like?

Another interesting comment was that discussion on addressable market. One fund manager mentioned that sell side reports suggested that DIL was already had half of their addressable market, and they completely dismissed this saying that there is significant organic growth in their market as boards realised there is another alternative to paper and that there are approximately 30,000 boards in the US alone, with DIL having only 2,450.

DISC: Holding as there is still plenty of upside.

[Dilbert]

http://www.nbr.co.nz/article/diligent-sitting-cash-mulls-growth-options-acquisitions-152700

[SimonHouse]

Sorry to say it but ater RAK I am very wary of companies playing the rhectoric cant say to much secret squirrel screen.


I think there is a psychological term for applying the bias from bad experiences unfairly towards new experiences!

It would be very unfair, in my opinion, to compare a company whose EBITDA has doubled (excluding one offs) with a company whose EBITDA is collapsing.

You are right to demand high governance standards from all companies. It looks like DIL has noted its problems and from the call, outlined its efforts to ensure they are not replicated (new enterprise software, more accounting staff). You missed a useful conference call.

[Whipmoney]

Thanks whipmoney.
I agree that there is plenty of upside in DIL. I believe revenue growth for 2013 prove's that.
By all accounts the conference lack the specific's required to regain the faith in the market place(no surprise there)
Really pleased I did not pay $7-$8 for DIL share's as I have seen nothing that will move the SP to that level in the next 6 month's.
Anyone interested in a small wager on where the DIL SP will be in 6 months.
Disc holding

Hmmm I wouldn't write a potential SP recovery off yet as it will probably take the instos several hours/days to get sign off to enter if position if they see value in the stock.

One take out of the call was that there was quite a few US investors/funds who were on the line which is a really good sign considering that its Sunday afternoon/evening over there (depending on the coast).

We may see a rally over the coming week which could take the stock to $5.50 plus.

For a $7-$8 we would really need to see another good quarter (190+ new contracts) or clarity around a second product.

[Xerof]

I think there is a psychological term for applying the bias from bad experiences unfairly towards new experiences!

it's called the Eeyore Syndrome.....

price is currently battling with the 200 day MA, as expected

IMO only a matter of days, not weeks, before we close above it, and race back to fair value, which, according to Balance's most credible broker is over $7

[Hoop]

Hmmm I wouldn't write a potential SP recovery off yet as it will probably take the instos several hours/days to get sign off to enter if position if they see value in the stock.

One take out of the call was that there was quite a few US investors/funds who were on the line which is a really good sign considering that its Sunday afternoon/evening over there (depending on the coast).

We may see a rally over the coming week which could take the stock to $5.50 plus.

For a $7-$8 we would really need to see another good quarter (190+ new contracts) or clarity around a second product.

"....Hmmm I wouldn't write a potential SP recovery off yet ......."
Lets get rid of all this ST forum noise and get DIL back into perspective..... DIL's shareprice has been in a general uptrend for 3 months now (+~50%)..and is continuing to confirm it's new bull market cycle status..Friday and today's prices have added more weight to that confirmation process.... since my last chart up to the 27th February nothing much has happened with the shareprice or with DIL itself, its been in suspended animation.....................you would be excused if you didn't realise that after being bombarded by 200 posts during DIL's sleep or worse still 1000 posts mostly negative posts during its +50% shareprice climb to now
see my last chart (12 Feb) (http://www.sharetrader.co.nz/showthread.php?5408-Diligent-Boardbooks-IPO/page363) post #5441....its still revelant

[Whipmoney]

"....Hmmm I wouldn't write a potential SP recovery off yet ......."
Lets get rid of all this ST forum noise and get DIL back into perspective..... DIL's shareprice has been in a general uptrend for 3 months now (+~50%)..and is continuing to confirm it's new bull market cycle status..Friday and today's prices have added more weight to that confirmation process.... since my last chart up to the 27th February nothing much has happened with the shareprice or with DIL itself, its been in suspended animation.....................you would be excused if you didn't realise that after being bombarded by 200 posts during DIL's sleep or worse still 1000 posts mostly negative posts during its +50% shareprice climb to now
see my last chart (12 Feb) (http://www.sharetrader.co.nz/showthread.php?5408-Diligent-Boardbooks-IPO/page363) post #5441....its still revelant

Thanks for that hindsight.. the real question is are you in yet?

[robbo24]

Thanks for that hindsight..

It is my view that there are certain events unfolding in eastern Europe that are having an impact on market confidence too...

[Hoop]

thanks hoop
yep your chart pretty much says it all.
Would I be correct in assuming a close over $5 shortly would confirm continuation of up trend.

Yep...thats if you use including the intraday highs/lows as S&R points..this gives you a 4.75 to 4.90/maybe 5.00 S&R blurred zone ....but if one is a DOW theory chartist who uses closing price points it is a sharp 4.84 which DIL retested last night after its earlier break out.... and confirmed at opening today.....chances are (56%) it may retest 4.84 again within the next few days,who knows...

Personally I'm with you here Snapiti I would use the more conservative blurred zone with illiquid stocks such as DIL or if a stock has a behavioual habit of creating bull/bear traps..so yeah, at 4.90 it's still a bit of a worry....but a "happy" worry :)

[Hoop]

Thanks for that hindsight.. the real question is are you in yet?

No I'm not
If I was going to enter it would've been on the 3rd/4th of January when DIL fired off a mass of buy signals around the 3.80 level.. To get in it realistically would've
been probably 4.20 price after the jump up (breakout)...

I had many choices back then and went and bought a gold miner/explorer instead :) Its a bit difficult to buy everything when ones mostly "in" the market with little trading cash left

[Whipmoney]

Well $4.84 sure got tested but I see it was on low volumes and it doesn't look like any instos have made moves yet...

[Hoop]

Maybe that's them now :-)
went away for half an hour and missed the action My depth doesn't go back far enough....did DIL experience a shake out? .....I hope NZX was watching

[Xerof]

went away for half an hour and missed the action My depth doesn't go back far enough....did DIL experience a shake out? .....I hope NZX was watching

comical really - doubt the NZX would be watching. But this sort of thing happened late last week - being charitable, I blame it on illiquidity, and lousy broking

[blackcap]

comical really - doubt the NZX would be watching. But this sort of thing happened late last week - being charitable, I blame it on illiquidity, and lousy broking

Yeah lousy broking can happen. Back in the day a dealer I knew sold 300,000 of a stock at market instead of 3,000. That certainly dented the price of that particular stock for a moment. Some of the trades were reversed but it does happen from time to time. Simple error really.

[Whipmoney]

went away for half an hour and missed the action My depth doesn't go back far enough....did DIL experience a shake out? .....I hope NZX was watching

I'm not sure if this is right but it appears it dropped on from the sale of 8 shares..?




Trade No.

Time

Price

Volume

Value

Conditions



1

103

2:53:28 pm

489

1,500

$7,335




2

102

2:50:38 pm

488

14,300

$69,784

Off Market



3

101

2:44:54 pm

488

35

$171

Market Trade (too small for price setting)



4

100

2:43:30 pm

488

225

$1,098




5

99

2:43:07 pm

488

4,740

$23,131




6

98

2:42:05 pm

476

8

$38

Market Trade (too small for price setting)



7

97

2:40:34 pm

488

260

$1,269




8

96

2:40:20 pm

488

2,000

$9,760




9

95

2:40:20 pm

488

600

$2,928




10

94

2:40:20 pm

488

1,140

$5,563






Maybe a trading bot?

[Xerof]

have a look at the course of trades on stocknessmonster.com, if you are interested in seeing how poorly some of the orders are executed. The ones I mean are those down to 470, which were earlier than Whips list shows

a sell of 10k shares moved it 20 cents

[Whipmoney]

Winner69 clear your inbox.

[muss1]

Ok so what is going on here? Not much volume yesterday, a bit more today. Are we seeing some bigger players trying to drive the price down on small volume before making some big orders? Could someone please enlighten me?

[muss1]

Thanks KW. We are quite close to the tip of the triangle though aren't we? I guess I am expecting action because after removing one offs I'm of the opinion that it's undervalued

[Hoop]

DIL testing its resistance and EMA200 ...If it breaks out, target price is $5.45

http://i458.photobucket.com/albums/qq306/Hoop_1/DIL05032014.gif (http://s458.photobucket.com/user/Hoop_1/media/DIL05032014.gif.html)

[nextbigthing]

Where does the figure of $5.45 come from (for us non-chartists) :)

[Hoop]

Where does the figure of $5.45 come from (for us non-chartists) :)

Sorry NBT... Target Price is a chart behavioural thing that chart traders use... it assumes a similar rise from previous breakout move......Remember though it is a line drawn in the sand, it has no resistance effect just a point saying that the NZX50 index has an ~ 70% chance (as long as there are no major resistances in the way) of reaching here 4.84 + (4.84 - 4.25) = 5.43 (5.45 in round figures)....Shifting that point up or down changes the odds...The odds are calculated from thousands of accumulated results from historical similar patterns or S&R lines...

[robbo24]

DIL failed at 5.10 as per Hoops chart. Everyone get out, quick!

[robbo24]

Conversion of preferential stock.. Nearly 3 mil. Intriguing.

[MAC]

It will be interesting to see if this becomes an isolated one off or whether it’s a start of a larger holding conversion.

The preferred stock is income bearing and while DIL have no intention at this time of paying a dividend, it is most likely the conversion has transpired for the intentions of pursuing a market disposal.

https://www.nzx.com/files/attachments/190639.pdf

[robbo24]

I was about to say, starting to convert! :O

What does that mean? Converting to sell?

[Snow Leopard]

Given that it leaves precisely 30,000,000 pref shares this looks like an exercise in making the numbers look very tidy.

Best Wishes
Paper Tiger

[zigzag]

Given that it leaves precisely 30,000,000 pref shares this looks like an exercise in making the numbers look very tidy.

Best Wishes
Paper Tiger

I think they've sold the stock they received in lieu of the dividend/interest, so they are now left with their original holding.

[robbo24]

Given that it leaves precisely 30,000,000 pref shares this looks like an exercise in making the numbers look very tidy.

Best Wishes
Paper Tiger

Why would they want to tidy in such a way?

[zigzag]

Maybe it is a tax thing. The stock received in lieu of the dividend would be income. and the original prefs would be capital. NB I am not an accountant, so this is just a guess.

[robbo24]

Maybe it is a tax thing. The stock received in lieu of the dividend would be income. and the original prefs would be capital. NB I am not an accountant, so this is just a guess.

Nek minnit a big juicy 20,000 sell order at 478 appeared not long after.

[Whipmoney]

Maybe a tidy up for nasdaq listing? I.e start to remove the pref share overhang..

[Xerof]

Prior to giving this notice Spring Street Partners L.P. (Spring Street) held 21,777,904 Series A Preferred Stock and 4,172,403 ordinary shares.

In accordance with the terms of the Series A Preferred Stock, Spring Street has exercised its right to convert 1,777,904 of securities to ordinary shares on a one to one basis.

The number of Preferred shares converted reflects the number of Series A Preferred Stock that Spring Street received as "Payment in Kind", or PIK shares, in lieu of cash dividend payments for the year 2009.

Under the terms of issue, the company has the right to retire Series A Preferred Stock issued as PIK shares at the original issue price after March 11, 2014.

it pays to read the detail..... If Spring St hadn't converted by March 11, they ran the risk of being paid out by the Company at the original issue price, as determined back in 2009. Doesn't require much thought on the part of SSP to decide what to do

Merely paperwork and doesn't necessarily lead to any conclusive evidence that they are for sale

[zigzag]

it pays to read the detail..... If Spring St hadn't converted by March 11, they ran the risk of being paid out by the Company at the original issue price, as determined back in 2009. Doesn't require much thought on the part of SSP to decide what to do

Merely paperwork and doesn't necessarily lead to any conclusive evidence that they are for sale

Give yourself an A for reading and comprehension. The rest of us get a big fat F and an eye test at Spec-savers.

[robbo24]

Looking for fall back to $3.70 - $3.80 level

$3.80 is old school strong support. Could be some good buying up in here.

[couta1]

This stock is a tough one for me,I think I'll end up taking a loss if there is no improvement in the share price in a few months,probably sell half instead of taking a full bath,purchase price $7.16

[Whipmoney]

I can't see her falling too far given that we will likely have final FY13 results sometime in the next few weeks (which include a management commentary) and Q1 results in early April.

That being said the market ofeten mis-prices stocks relative to their fundamentals. I still think she's a bargain.

[SimonHouse]

This stock is a tough one for me,I think I'll end up taking a loss if there is no improvement in the share price in a few months,probably sell half instead of taking a full bath,purchase price $7.16

Really? You've stuck with it through thick and thin, only to sell down before likely announcements on a new product? That's a terrible shame.

[couta1]

Really? You've stuck with it through thick and thin, only to sell down before likely announcements on a new product? That's a terrible shame.
I've learnt some hard lessons about over exposure so must keep an open mind about these things,but not giving up yet

[Whipmoney]

Whip, buyers almost always flee and let the price fall before a scheduled announcement (followed by a run upwards in the good old days!). Look back over the past 2 years; these dips are pretty obvious...

Now that may be true but then again it may also open me up to a fairly sizeable tax liability for trading the stock. Presuming the stock responds favourably post annoucement then im better off holding long term.

Ps: the market be cray cray.

[KiwiGreen]

My opinion is that the huge increase in operating expenses and subsequent reduction in FCF has just spooked people in the short term. Even though we know the special committee costs of $7.77m and probably (probably being a key word regarding the spooking) about $8m of the General and administrative expenses are one offs, it still looks scary when you throw that in your DCF and consider how much less value the company would have if it wasn't able to achieve at least 50% margin on total Opex come 2016.

In the mean time who knows what new value they can create. There are heaps of companies, especially in IT, that spray bull-sh*t about striving to achieve excellence blah blah blah, but Dil really have done that. They are the bench mark and are best in class by a mile. The stats say it, the customers say it and the financials say it. I think this financial mishap will be a good learning experience (from a business point of view) and has probably shaken them up just the right amount (if that exists).

Looking forward to reading Final results and commentary.

[Schrodinger]

Might take a look if it drops below $3

[Snail]

I have no TA skills like many of you, but having some DIL shares on which I have both made and lost money in the past year, feel slightly qualified to comment.


Where are the buyers? With nothing to get excited about, last week's restatement news so lacklustre, and no positive price reaction following it, there is absolutely no pressure to buy. In fact as a buyer why wouldn't you wait for a distinct uptrend to form, or some seriously GOOD news? People are suspicious of this company’s management given their track record so why would you buy without something positive to balance the horrid past few months of uncertainty?


Sellers by definition already own this stock. Many have owned it a long time and were waiting for the big day with anticipation. It all came and went last Monday - a bit of a fizzer I thought. I for one had been holding my position in the expectation (read “hope”) of a significant lift in price after the restatement announcement. I was all ready to take my profit and get rid of these last week; got disappointed - then started worrying about “what if this is as good as it gets?”. All that pent up desire to take a profit, or just get out at a reasonable price has probably now turned to resignation. Fear, grumpiness and impatience rule the sell side now.


My theory is that with thin volumes the sellers will depress prices to about $4.00 and if next announcement isn't great it will flail around for a few months. If you are patient I reckon it will come back. But that may be a year away, and may not regain those heyday levels of $7 to $8 we all wanted to see till next year or later.

[iceman]

I have no TA skills like many of you, but having some DIL shares on which I have both made and lost money in the past year, feel slightly qualified to comment.


Where are the buyers? With nothing to get excited about, last week's restatement news so lacklustre, and no positive price reaction following it, there is absolutely no pressure to buy. In fact as a buyer why wouldn't you wait for a distinct uptrend to form, or some seriously GOOD news? People are suspicious of this company’s management given their track record so why would you buy without something positive to balance the horrid past few months of uncertainty?


Sellers by definition already own this stock. Many have owned it a long time and were waiting for the big day with anticipation. It all came and went last Monday - a bit of a fizzer I thought. I for one had been holding my position in the expectation (read “hope”) of a significant lift in price after the restatement announcement. I was all ready to take my profit and get rid of these last week; got disappointed - then started worrying about “what if this is as good as it gets?”. All that pent up desire to take a profit, or just get out at a reasonable price has probably now turned to resignation. Fear, grumpiness and impatience rule the sell side now.


My theory is that with thin volumes the sellers will depress prices to about $4.00 and if next announcement isn't great it will flail around for a few months. If you are patient I reckon it will come back. But that may be a year away, and may not regain those heyday levels of $7 to $8 we all wanted to see till next year or later.

Hi Snail. I am not sure I agree the restatement was a " bit of a fizzer". I think some had high expectation of some very good news announcements, when in fact this announcement was strictly about restating the financial accounts. Nothing more. For me it is a huge disappointment how management has stuffed this up and it was even worse than I had expected with getting silly stuff like sales taxes wrong in some states in the USA, as well as the incorrect revenue recognition/recording. But what is done is done and this is now hopefully behind us, although they have stated that there will be some additional costs relating to the restatements in the 1st quarter 2014. It was disappointing that they gave no indication of the expected numbers.
I pretty much agree with KiwiGreen´s post above.
I am a long term and generally happy holder although very disappointed with this issue. But I am looking forward to the next 2-6 months for some significant positive announcements such as a new successful (hopefully) product, Nasdaq listing and possibly an aquisition. And of course ongoing growth and cash generation from Boardbooks.
Meanwhile I am holding tight. As you say, "fear, grumpiness and impatience rule the sell side now".
" When others are fearful, be greedy" !
Couta1 I hope you stay with us on this rollercoaster ride but only you can make that decision.

[Hoop]

This stock is a tough one for me,I think I'll end up taking a loss if there is no improvement in the share price in a few months,probably sell half instead of taking a full bath,purchase price $7.16

Couta1.....Ask yourself this question Does it seem correct what I am doing (investing in DIL)? I won't accept hindsight as an excuse...
See my chart (http://www.sharetrader.co.nz/showthread.php?5408-Diligent-Boardbooks-IPO/page380) If you bought at 7.16 I hope that was in May and not June when it was in an uptrend thats OK (buy in uptrends, sell in downtrends)..You didn't sell in the established downtrend!!!...DIL reversed into an uptrend in December and that uptrend line is not broken (yet?) and you want to sell.......maybe the uptrend will break maybe not..your decision


I have no TA skills like many of you, but having some DIL shares on which I have both made and lost money in the past year, feel slightly qualified to comment.


Where are the buyers? With nothing to get excited about, last week's restatement news so lacklustre, and no positive price reaction following it, there is absolutely no pressure to buy. In fact as a buyer why wouldn't you wait for a distinct uptrend to form, or some seriously GOOD news? People are suspicious of this company’s management given their track record so why would you buy without something positive to balance the horrid past few months of uncertainty?


Sellers by definition already own this stock. Many have owned it a long time and were waiting for the big day with anticipation. It all came and went last Monday - a bit of a fizzer I thought. I for one had been holding my position in the expectation (read “hope”) of a significant lift in price after the restatement announcement. I was all ready to take my profit and get rid of these last week; got disappointed - then started worrying about “what if this is as good as it gets?”. All that pent up desire to take a profit, or just get out at a reasonable price has probably now turned to resignation. Fear, grumpiness and impatience rule the sell side now.


My theory is that with thin volumes the sellers will depress prices to about $4.00 and if next announcement isn't great it will flail around for a few months. If you are patient I reckon it will come back. But that may be a year away, and may not regain those heyday levels of $7 to $8 we all wanted to see till next year or later.

Well done Snail you just explained the buyer/seller market psychology ...You have just shown TA skills :t_up:

[Leftfield]

Good post Snail - very good summation.
Disc - do not hold (but watching for the good news to come before I consider buying)

[Xerof]

Couta1.....Ask yourself this question Does it seem correct what I am doing (investing in DIL)? I won't accept hindsight as an excuse...
See my chart (http://www.sharetrader.co.nz/showthread.php?5408-Diligent-Boardbooks-IPO/page380) If you bought at 7.16 I hope that was in May and not June when it was in an uptrend thats OK (buy in uptrends, sell in downtrends)..You didn't sell in the established downtrend!!!...DIL reversed into an uptrend in December and that uptrend line is not broken (yet?) and you want to sell.......maybe the uptrend will break maybe not..your decision



Well done Snail you just explained the buyer/seller market psychology ...You have just shown TA skills :t_up:

agree with all Hoop says. Personally, I sold my 'trader' position after the third failure above $5, but see $4.25 as a level to reconsider longs at

[couta1]

Thanks Hoop for your challenging thoughts,yes most I bought in May but made the mistake of buying some more in the downtrend,basically holding because I believe Dil is fundamentally a good company,just looking at things as i rebalance my whole portfolio with a wider spread of companies and will need to off load some Dil to avoid being over exposed at some point hopefully when it is at or above my purchase price depending when and how long it will take for that time to come,cheers

[Whipmoney]

What's the expected date for the final annual accounts?

[Mista_Trix]

Thanks Hoop for your challenging thoughts,yes most I bought in May but made the mistake of buying some more in the downtrend,basically holding because I believe Dil is fundamentally a good company,just looking at things as i rebalance my whole portfolio with a wider spread of companies and will need to off load some Dil to avoid being over exposed at some point hopefully when it is at or above my purchase price depending when and how long it will take for that time to come,cheers

If you haven't already, give this a read, it'll give you some food for thought when rebalancing;
http://www.fxf1.com/english-books/The%20Intelligent%20Investor%20-%20BENJAMIN%20GRAHAM.pdf

[couta1]

Thanks Mista Trix,looks like a whole lot of good reading to do ;)

[SimonHouse]

Here's a nice article about Diligent selling its software into British Gas

http://www.computerweekly.com/news/2240215933/British-Gas-puts-board-documents-on-mobile-devices-to-save-time-and-costs

Perhaps part of the mentioned push into European markets?

[robbo24]

Here's a nice article about Diligent selling its software into British Gas

http://www.computerweekly.com/news/2240215933/British-Gas-puts-board-documents-on-mobile-devices-to-save-time-and-costs

Perhaps part of the mentioned push into European markets?

Diligent should release a court document filing system.

That is all.

[iceman]

Here's a nice article about Diligent selling its software into British Gas

http://www.computerweekly.com/news/2240215933/British-Gas-puts-board-documents-on-mobile-devices-to-save-time-and-costs

Perhaps part of the mentioned push into European markets?

Good article for DIL. Interesting that British Gas' parent Centrica was already using Boardbooks which has now lead to 70 British Gas board members and 12 administrators using it.
The person preparing the Board papers states that “Nobody likes to carry so much paper around with them. The board packs were hefty, and some of the directors who sit on multiple boards had to attend meetings with armfuls of paper."
We can then expect some of these Directors to push for use of Boardbooks on the other Boards they sit on. The great "word of mouth" effect which is a great strength of Boardbooks.

[Monty]

....... and some of the directors who sit on multiple boards had to attend meetings with armfuls of paper."
We can then expect some of these Directors to push for use of Boardbooks on the other Boards they sit on. The great "word of mouth" effect which is a great strength of Boardbooks.

This here is the reason why Diligent has been successful and will continue to be successful. Directors usually get what they want and this is a classic example of the multiplier effect in action. I believe that Boardbooks will become as common place in boardrooms as adobe, word and excel. The battle will be similar to the VHS vs Beta. Diligent will be the winner with the superior product and security. I will hold my modest interest.

[TimmyTP]

Looking very weak again. Quarterly report is still a month away, and it will be the telling one as to whether growth is going up again or stagnating. Pretty sure we'll see a 3 out in front again soon for those looking to pick up...
Moosie, as your wrote your comment, fewer than 15,000 shares had changed hands, for a drop of 1.3%, on a generally negative day on the market. We're now at 176,000 odd for a 2.4% drop - still not a big volume day so far and I would argue not a significant divergence from the market as a whole.

My charting skills are not up to much, but from what I can see, there is no particularly strong short-term indication in any direction - please would you help me understand what makes you confident in your prediction of DIL falling so much further "soon"? Is your charting crystal ball giving you a strong message?

Thanks

[JayRiggs]

Directors have just been issued their "free" shares.
https://www.nzx.com/companies/DIL/announcements/248211

86,497 issued at NZ$4.77 per share.

Booooooo I say! After this restatement mess, they don't deserve more shares.
On the other hand, good they increasing their stakes, which provides me with a bit of confidence.

[JohnnyTheHorse]

Moosie, as your wrote your comment, fewer than 15,000 shares had changed hands, for a drop of 1.3%, on a generally negative day on the market. We're now at 176,000 odd for a 2.4% drop - still not a big volume day so far and I would argue not a significant divergence from the market as a whole.

My charting skills are not up to much, but from what I can see, there is no particularly strong short-term indication in any direction - please would you help me understand what makes you confident in your prediction of DIL falling so much further "soon"? Is your charting crystal ball giving you a strong message?

Thanks

Support at 450, 425 and 400. Looks like 450 will get blown through. I doubt 425 will hold either. Good money to be made once it reaches the bottom again though. Buy low, sell high :)

[robbo24]

Moosie, as your wrote your comment, fewer than 15,000 shares had changed hands, for a drop of 1.3%, on a generally negative day on the market. We're now at 176,000 odd for a 2.4% drop - still not a big volume day so far and I would argue not a significant divergence from the market as a whole.

My charting skills are not up to much, but from what I can see, there is no particularly strong short-term indication in any direction - please would you help me understand what makes you confident in your prediction of DIL falling so much further "soon"? Is your charting crystal ball giving you a strong message?

Thanks

I'm no expert but I've seen this happen a few times in the past on this and other stocks.

The concern to me would be the lack of buyers filling the ranks in any capacity.

It seems to me to show a lack of confidence or interest in the stock at its current price.

Twitchy sellers might sell cheap though, because they can't easily jump ship!

[Snow Leopard]

Looking very weak again. Quarterly report is still a month away, and it will be the telling one as to whether growth is going up again or stagnating. Pretty sure we'll see a 3 out in front again soon for those looking to pick up...


Moosie, as your wrote your comment, fewer than 15,000 shares had changed hands, for a drop of 1.3%, on a generally negative day on the market. We're now at 176,000 odd for a 2.4% drop - still not a big volume day so far and I would argue not a significant divergence from the market as a whole.

My charting skills are not up to much, but from what I can see, there is no particularly strong short-term indication in any direction - please would you help me understand what makes you confident in your prediction of DIL falling so much further "soon"? Is your charting crystal ball giving you a strong message?

Thanks

You have heard the term "market noise"? On ShareTrader moosie is the market noise.

He is, in fact, the Murray Walker of ShareTrader " I'd make prophecies which immediately turned out to be wrong".

Best Wishes
Paper Tiger

[Jay]

Buyers seem to have vanished as at time of writing, 1st buyer showing is at 4.31 and some cheeky person wants to buy 2000 @ 2.99
How long will the impaass last and which way will it go?
I will tell you - go down or go up or stay the same, I hope for the last 2, preferably the second option:)

[winner69]

Methinks DIL have become a share market pariah ......despised and rejected by the masses.

What happens when you piss so many off for so long, no matter how fantastic the story is.

Enough info out there now for instos to take a stake if they are keen but seemingly no takers.

Unloved and unwanted not a good place to be and it takes years, if ever, to lose a tag of pariah

[Xerof]

looks like the huljich funds no longer want to be on the selling radar, disclosure notice today indicating sell down of investment too 4.90% from 7%.
Now free to off load as many as they like without disclosure.

Do I have to translate once again?

The last notice was 2012. Since that date, they have sold a few shares (less than 1%, otherwise we would know about it already, and perhaps that was in 2012?), secondly, there has been a change in control of non-beneficial interest, (amount not known, but not a sale), and thirdly, they were diluted a few days ago, by the conversion of PIK notes, again, not a sale, but probably the event that has triggered the issue of the notice.

To say they have sold to get themselves under the radar is simply crap