Diligent Boardbooks IPO

[MAC]

No sign of a European led pick up in customer growth but that may take a little time.

5727

Still, 18% new customer growth is not too shabby for any product, but perhaps lower than the 40% p.a growth previously seen in it's hay days.

IMO Diligent are just way overdue for putting that cash to work, a second overlapping product cycle would have been looking pretty good right now, but then if a company just can’t find a second winning development then they are probably best to keep it in the bank, "post it’s" won’t cut it as a product, needs to be something big.

I sold after seeing increased competition and two confirming quarters of lower growth, a fundamental shift and sell signal, but if you are in at $4 then you are holding a company which still has a lot of potential to the up side as a speculative play and the cash to make it happen, a spark, and a new product and they may just do it over again.

Disc: Hold if you’re in

[Harvey Specter]

Q1 2014 out
Shudder. New clients 113 eekThats net new customers. If you believe the reason, they suffered a loss in clients due to M&A acquisition (ie. boards being disolved rather than choosing to leave the platform).

Cashflow still seems very strong (hard to tell with all the new 'one off' expenses).

[Whipmoney]

The relevant numbers I have, from Q2 2012 (which is calculated as "Customer Growth" = "net change in quarterly customers"/"total customers from previous quarter") is:

17.6%
11.6%
11.9%
11.1%
8.6%
5.6%
6.3%
4.6%

5728
which for a "growth company" I would say is a real concern.

The question is though, is this still being priced as a growth company? The company has a sh*tload of free cashflow and when I chuck these numbers into a DCF calculation I get $5-$5.50 based on some fairly conservative estimates.

There is still some decent prospects for growth ahead.

[winner69]

Solid but not spectacular set of numbers.

Key one is FCF of $4.6m and suppose could add $1.5m of restatement costs to come up with a "normalised" FCF of $6.1m

This included some investment in European data centre so a pretty healthy FCF which could reach $30m for the year. Enough to support a $4-$5 shareprice

Announcement won't set the world on fire - but then again not that many really interested or watching DIL now - that's what happens when you are unloved and unwanted by the market. One downside is that this might be the last straw for those hanging in there for a really spectacular announcement which could put pressure on the shareprice

[iceman]

The relevant numbers I have, from Q2 2012 (which is calculated as "Customer Growth" = "net change in quarterly customers"/"total customers from previous quarter") is:
17.6%
11.6%
11.9%
11.1%
8.6%
5.6%
6.3%
4.6%

which for a "growth company" I would say is a real concern.

Fair enough turmeric but that completely ignores upgrade sales to existing customers which they claim to be "strong worldwide". With the much bigger customer number after recent years growth, this and the retention rate becomes more and more important.
Another number of interest is that the number of Boards serviced by DIL has increased by 180, much higher than the new client agreements so this must be sales to existing clients which one assumes are large organisations that have multiple companies and Boards.

The cash position has improved pretty nicely, despite the US 5.1M lost on the restatements and Special Committee fiascos.

A shame this update did not include any hard revenue numbers though. Overall these numbers look OK at first glance.

[iceman]

Interesting to see both highest bids and lowest asks have increased slightly after the announcement this morning. Hopefully an indication the market is not unhappy with the numbers !!!

[winner69]

agree with what you are saying except why would anyone be holding DIL exspecting a spetaculer announcement.
I will be a happy buyer of DIL if the share price drops too much today.

Those that bought in the $7 range and been holding in hope of such announcement to trim their losses or give them more hope

They may now realise hoping is a lost cause and give up on DIL once and for all, knowing that normality has arrived and $4 plus or minus is their lot

[bull....]

pretty lofty pe multiple dont ya think considering sales growth is slowing?

[Balance]

Solid but not spectacular set of numbers.

Key one is FCF of $4.6m and suppose could add $1.5m of restatement costs to come up with a "normalised" FCF of $6.1m

This included some investment in European data centre so a pretty healthy FCF which could reach $30m for the year. Enough to support a $4-$5 shareprice

Announcement won't set the world on fire - but then again not that many really interested or watching DIL now - that's what happens when you are unloved and unwanted by the market. One downside is that this might be the last straw for those hanging in there for a really spectacular announcement which could put pressure on the shareprice

Company has not done a Q1/Q1 comparison which would say DIL is aware growth rate is becoming problematic for a high growth stock.

At a point, DIL will be seen as making a transition to a growth stock with good and reliable earnings - much like Sky TV in the old days as an analogy.

PE ratio will shrink but earnings will grow - a balance between the two will drive the share price.

Meanwhile, the high growth shareholders will bail out and one suspects funds like Wasatch will take the opportunity to keep adding to their shareholding.

[winner69]

Yup absolutely Iceman, I agree. Mine is simply a mathematical exercise (as winner would say) and I think it is one which people might want to take a bit of notice in but obviously everything else should be put in context too, which I acknowledge I am not doing (or attempting to do). Like I said, my numbers got rubbished last time, but things actually look a bit worse now.

Definitely a growth decay factor there eh turmeric

DIL now a more mature growth company ......from lower numbers of new clients and squeezing as much as possible of the existing ones. Not a bad strategy .....but a sustainable one?

[couta1]

fair comment ..... lets hope they dump today all at once.
Not me $7.16 buy still holding,thinking 2 year timeframe here:cool:

[Balance]

Definitely a growth decay factor there eh turmeric

DIL now a more mature growth company ......from lower numbers of new clients and squeezing as much as possible of the existing ones. Not a bad strategy .....but a sustainable one?

As written, slow down of high growth does not necessarily mean a lower share price if you take a look at Sky TV.

Will be massive movements in shareholder mix however as company makes transition from high growth.

[muss1]

Bull and moosie, what are the PEs you are using? If you put some effort into actually calculating it conservatively accounting for one-offs it's pretty in line with the current SP.

I suppose there's no convincing the "unbiased" doomsdayers though

[Whipmoney]

Another number of interest is that the number of Boards serviced by DIL has increased by 180, much higher than the new client agreements so this must be sales to existing clients which one assumes are large organisations that have multiple companies and Boards.

Yeah after watching their youtube video about Barclays I got the feel that they are achieving penetration at multiple layers amongst some of their clients.

Originally I had thought that the Boardbook product would be for the board only and that they would also release a senior management product suite however I am now under the impression that the Boardbooks product can and does flow down to senior management.

Potentially this might lead to greater user numbers once Win 8 Surface/Desktop solutions gain more traction.

[psychic]

Company has not done a Q1/Q1 comparison which would say DIL is aware growth rate is becoming problematic for a high growth stock.

At a point, DIL will be seen as making a transition to a growth stock with good and reliable earnings - much like Sky TV in the old days as an analogy.

PE ratio will shrink but earnings will grow - a balance between the two will drive the share price.

Meanwhile, the high growth shareholders will bail out and one suspects funds like Wasatch will take the opportunity to keep adding to their shareholding.

I'm not surprised they didn't give the comparison. New client growth q1 2013 202 New client growth Q1i2014 113
Not sure how SP supports p/e up around the 50's ?

[robbo24]

The "growth" aspect of the term "growth company" is a reference to growth in revenue, is it not?

New clients is only one indicator of that...

[Baddarcy]

I'm struggling to understand the broad obsession with the Number of clients number? Surely the number of users is what is really important here? The net increase in users has been in the 4000's for a fair few quarters in a row now.

Perhaps someone can enlighten me as to why the number of new clients is more important that the net increase in new users.....please?

[robbo24]

And DIL is back above its magic 425... Where to from here?

[couta1]

Market seems a bit more optimistic than a lot of you:cool:

[Baddarcy]

Market seems a bit more optimistic than a lot of you:cool:

Suspect they liked the R&D bit in the announcement

[iceman]

I'm struggling to understand the broad obsession with the Number of clients number? Surely the number of users is what is really important here? The net increase in users has been in the 4000's for a fair few quarters in a row now.

Perhaps someone can enlighten me as to why the number of new clients is more important that the net increase in new users.....please?

That's my way of thinking to Baddarcy. There seems to be an obsession with new client numbers and ignoring anything else. I am disappointed that DIL did not give us revenue numbers in this announcement

[bull....]

it bounced last time too at $5 then has drifted down to $4 since I think you wont get judgement today

[bull....]

Bull and moosie, what are the PEs you are using? If you put some effort into actually calculating it conservatively accounting for one-offs it's pretty in line with the current SP.

I suppose there's no convincing the "unbiased" doomsdayers though

I get anywhwere between 30 - 50 depends how i massage the numbers lol

[Balance]

Market seems a bit more optimistic than a lot of you:cool:

DIL is making transition so high growth expect-ants will bail out but long stayers like Wasatch will be buying up.

That's my take on the announcement and the sp reaction.

Have a look at Sky TV - there is a good analogy there.

[sharp]

A reflection that all this chit-chat on an internet forum doesn't necessary reflect market sentiments.

[couta1]

DIL is making transition so high growth expect-ants will bail out but long stayers like Wasatch will be buying up.

That's my take on the announcement and the sp reaction.
Diligent is still a good company and I'm willing to give them a couple of years to get their s--t together,they have been their own worst enemies over the last while but the product is outstanding as is their customer service,a new product would be good sometime around now though.

[GizyGold]

Fair enough turmeric but that completely ignores upgrade sales to existing customers which they claim to be "strong worldwide". With the much bigger customer number after recent years growth, this and the retention rate becomes more and more important.
Another number of interest is that the number of Boards serviced by DIL has increased by 180, much higher than the new client agreements so this must be sales to existing clients which one assumes are large organisations that have multiple companies and Boards.

The cash position has improved pretty nicely, despite the US 5.1M lost on the restatements and Special Committee fiascos.

A shame this update did not include any hard revenue numbers though. Overall these numbers look OK at first glance.

Agree all above. A good longterm play especially considering improving European Economy and Quality Product with limited future competition. Looking at the NZX there are not many other good longterm options with profitable growth companies (excluding Wynard/Xero) - hopefully Vend and Serko can list too. Diligent and Serko could work well together...:t_up:

[Mista_Trix]

A reflection that all this chit-chat on an internet forum doesn't necessary reflect market sentiments.

For better or worse?

[muss1]

I'm struggling to understand the broad obsession with the Number of clients number? Surely the number of users is what is really important here? The net increase in users has been in the 4000's for a fair few quarters in a row now.

Perhaps someone can enlighten me as to why the number of new clients is more important that the net increase in new users.....please?

Sounds a bit like xero don't you think? Client growth is the positive way of measuring a loss making company. Whereas revenue/profit growth has historically been a good way to evaluate a company. DILs profit growth has been exceptional in the past 2 years (taking out restatement). Granted it won't be as good moving forward, but it'll be a hell of a lot better than what client number growth will tell us

[Mista_Trix]

this happens to all growth companies eventually.
I look forward to steady growth going forward but admit it will be a long time before those who paid $7 plus get there money back.

I honestly would have thought their growth trajectory would have lasted longer - given market penetration and how much further they (potentially) have to go... it strikes me as odd that the numbers have slowed so much at a point I would have considered to be 'this early in the game' ... confuzzled.

[muss1]

Denying it has an effect on the SP is different to acknowledging the fundamentals. In the long term if you get the fundamentals right the SP will take care of itself.

Also the future growth prospects are better than you are giving credit for.

I know you blend your TA and FA moosie, whereas I'm talking purely fundamentals. So we are unlikely to agree on this..

[Balance]

I would say a P/E (fully diluted) of 20-25 is pretty fair value for a company on high margins and still growing slightly. Those that deny new client growth is not a driver of the sp right now are being a bit naive imho (Noah Fence!).

DIL was transition into a mature company over the coming months as no new product is forthcoming. However, with Sodi's bonus being tagged to 5%+ growth per annum by the Board, you can bet your bottom dollar he's going to ride those R&D boys hard this coming year to churn something out!

Anyone looking to buy today might have ill founded thoughts. I can see a bull trap forming; up too fast on too low a volume. The big boys pulled their asks to suck everyone in then sell down once they've piled in.

You have been warned!!!

Good warning, Moose - let's see what happens in the next few days.

Quick one broker's update - numbers better than expected. Revision upwards likely to $5.00 plus valuation.

All comes down to the big boys' expectations.

[MAC]

I see it as more of tenuous confirmation that annualised growth may be plateauing (at about 20%) and a bit of an associated relief step back toward fundamental valuation.

I’ve a valuation of HY14 $5.90, although I think the SP will stabilise close to that for 6 to 12 months. A new product, if we see one soon, or an acquisition will take time to translate into revenues.

Disc: Hold if you’re in

[robbo24]

DIL thru the magic 450... Next stop 470 then 510?

[Monty]

Maybe I'm reading a little too much into this but there are a couple of interesting things from their report:
1. " Management will provide further information on Diligent’s operating highlights and financial results for the first quarter after it files its Form 10-Q with the U.S. Securities and Exchange Commission for the fiscal quarter ended March 31, 2014. " is there something being held back for the moment?
2. "The Company’s client base is now comprised of 52% public companies and 48% private entities " previously Diligent have given a breakdown of how big their markets are in each part of the world - hopefully this will happen again
3 "Diligent closed the first quarter of 2014 with $US 60.6 million in cash balances and short-term investments and no bank debt, an increase of $US 4.5 million as compared to the cash and short-term investments on December 31, 2013. " This a fast accumulating pile of money increasing at nearly $5m per quarter and growing. The company will at some point need to have a strategy for this pile of money. By the end of the financial year it may be close to $70m. Then what - aim for $100m in the bank by end of the 2014-15 financial year?
4 Diligent increased its research and development headcount as the Company focused additional resources on product development. " understandably this is all very secret but it must mean that something is in the wings. All will be revealed when the product is ready, but the owners must be acutely aware that they need to do something to boost the share price and rebuild their credibility.

No mention of listing on the NASDAQ but now that the restatement is just about behind them when final audit complete, the focus can return to kick starting the growth again. Overall I still think this is a great company that has over the past year worked through some self inflicted problems. I can only see the company going onwards and upwards from here

[sharp]

DIL thru the magic 450... Next stop 470 then 510?

Depends what the big boys (the instos) will be doing - I have no doubt they are waiting on the research firms to stifle through the financial statements (now) due on 30 April before they decide whether to buy into DIL.

You will no doubt remember Milford pulled out of DIL due to the restatement issues - only takes one blurb from Brian Gaynor to say DIL is back in their favour and for the SP to go above the $7 dollar mark.

Once the SP gains momentum it will be hard to stop as everyone piles in - hopefully on realisation that DIL is one of few tech stocks to generate a profit!

My 2 cents.

[Baddarcy]

Better volume coming through this afternoon.

[Lorne Ranger]

Nice cap on $4.50 now. If it doesn't break tomorrow on higher volume I'd be concerned...

I would be happy for it to stand at these levels, it doesnt have to break 4.50, and given there will be some traders buying after the QR even some mild retrenchment would be understandable. But you can be concerned if it suits you.

[sharp]

I would be happy for it to stand at these levels, it doesnt have to break 4.50, and given there will be some traders buying after the QR even some mild retrenchment would be understandable. But you can be concerned if it suits you.

Agree. There is more activity ahead with filing of the latest financial statement due on 30 April 2014.

Excepting trading activity to increase.

Will be interesting to see what DIL does now that reinstatement issues have passed and what they will be focusing on next...

[Whipmoney]

Nice cap on $4.50 now. If it doesn't break tomorrow on higher volume I'd be concerned...

Moosie if I recall correctly you were looking for a confirmation of an up-trend when DIL was still recovering from its dip below $3. The stock is now up ~50% since then yet you have been bearish on it the whole way..

Is you're TA skills failing you or have you decided to start using FA again..?

[Mista_Trix]

Moosie if I recall correctly you were looking for a confirmation of an up-trend when DIL was still recovering from its dip below $3. The stock is now up ~50% since then yet you have been bearish on it the whole way..

Is you're TA skills failing you or have you decided to start using FA again..?

Fool me once, shame on you
Fool me twice ... ... well you know the rest.

I'm sure he's being careful of the stock that probably cost him more than he'd like to remember :-S

[Whipmoney]

Nice cap on $4.50 now. If it doesn't break tomorrow on higher volume I'd be concerned...

Moosie if I recall correctly you were looking for a confirmation of an up-trend when DIL was still recovering from its dip below $3. The stock is now up ~50% since then yet you have been bearish on it the whole way..

Is you're TA skills failing you or have you decided to start using FA again..?

[Balance]

I was bullish for a bit to be fair! Two times testing and failure both at $5.00 does not bode well, especially as new client growth is still on the decline. You can't escape that unmissable fact!

You will be interested to know that the numbers today are better than some brokers' expected and their forecasts*already provide for a declining growth rate.

On their (current, yet to be updated and upgraded) forecasts, DIL will trade at a discount to the market from 2005 - PER or EV multiple.

[winner69]

It looks like Q1 cash flows are much stronger than last year (based on the restated Q113 numbers) even allowing for extra restatement costs and that European investment

All points to significantly higher revenues number than last year (the cash has to come from somewhere eh)

Sparky always used something like $35k per new client in his modelling - so that's about $4m on the sales base and then add on 96% of last years revenues retained

So Q1 revenues I reckon $18-$20m. That's a decent increase on the $14m restated figure for last year

Maybe these are the sort if calculations the market is using today, not just the new client numbers

[iceman]

It looks like Q1 cash flows are much stronger than last year (based on the restated Q113 numbers) even allowing for extra restatement costs and that European investment

All points to significantly higher revenues number than last year (the cash has to come from somewhere eh)

Sparky always used something like $35k per new client in his modelling - so that's about $4m on the sales base and then add on 96% of last years revenues retained

So Q1 revenues I reckon $18-$20m. That's a decent increase on the $14m restated figure for last year

Maybe these are the sort if calculations the market is using today, not just the new client numbers

Exactly winner. I think the revenue and profit is no longer as much reliant on increases in new client numbers as they were in the past. Retention and getting more out of each existing customer is equally important (and a lot less costly) and seems to be working well, based on what we can glean from the limited numbers provided this morning.

[Whipmoney]

It looks like Q1 cash flows are much stronger than last year (based on the restated Q113 numbers) even allowing for extra restatement costs and that European investment

All points to significantly higher revenues number than last year (the cash has to come from somewhere eh)

It will be a combination of revenue/deferred revenue however the revenue should be quite a bit higher than last year, and deferred revenue should almost be falling now that growth is tapering off.




Sparky always used something like $35k per new client in his modelling - so that's about $4m on the sales base and then add on 96% of last years revenues retained

Again the problem with using last years revenue is that it excludes net cash that come through as deferred revenues.

In terms of modelling it should almost be done on a per user number. E.g. calculate the average revenue per user then multiple that by the 4,500 to get new revenue generated.

[Balance]

Exactly winner. I think the revenue and profit is no longer as much reliant on increases in new client numbers are they were in the past. Retention and getting more out of each existing customer is equally important (and a lot less costly) and seems to be working well, based on what we can glean from the limited numbers provided this morning.

Think Sky TV.

[iceman]

Think Sky TV.

Agree Balance that there are strong similarities. But there also big differences whereas Sky TV operates in a small market where they have a near monopoly but DIL is in the World competing with some very big names. DIL has to be much smarter than Sky and can not afford to relax for one moment.

[Whipmoney]

Agree Balance that there are strong similarities. But there also big differences whereas Sky TV operates in a small market where they have a near monopoly but DIL is in the World competing with some very big names. DIL has to be much smarter than Sky and can not afford to relax for one moment.

I think there is much more upside that the likes of SkyTV. They still have a great product are are achieving reasonable growth in user numbers through both new clients and further penetration into existing clients.

They are bringing in boatloads of cash each quarter and as per their announcement have increased their headcount in their R&D team to focus additional resources on product development.

Whilst i'm not sure how their competitors are faring i'm sure that there's scope for DIL to consider acquisitions in order to improve their revenues.

[iceman]

Yes DIL is doing well in bringing in all that cash and I also agree the growth potential is much higher than Sky today. Balance has pointed to a good example though of a fast growing company turning to a real cash cow even though client numbers don't keep growing at the same rate.
All I am saying is that we have serious competitors with the likes of Thomson Reuters, BoardVantage, Nasdaq and Computershare and need to stay ahead of the pack continuously. The management stuff ups recently have taken too much valuable energy, cash and time and we need to get over it, move on and bring out new products very soon.
Acquisitions are definitely part of the game and I am sure some of the competitors are looking at DIL's cash growth with envy !!!

[couta1]

If Diligent has a share price equal to Sky TVs current $6.27 in a few months id be happy .And remember it costs 3 times as much to obtain a new customer than to retain an existing one so Diligent have got that right:cool:

[Balance]

If Diligent has a share price equal to Sky TVs current $6.27 in a few months id be happy .And remember it costs 3 times as much to obtain a new customer than to retain an existing one so Diligent have got that right:cool:

Don't forget 67.4% of Fortune 1000 and over 4,500 Nasdaq companies still to embrace DIL's Boardbook. This is where DIL's R&D and product development team can help improve penetration, and the Windows version will also help.

[Baddarcy]

Nice cap on $4.50 now. If it doesn't break tomorrow on higher volume I'd be concerned...

Looks like you might get to rest easy this Easter :-) Looking like a solid open is on the cards...atm

[Balance]

Just received updated report from broker - they like the results.

On their current forecasts (to be properly updated after audited results released), DIL is already trading at under cashflow multiple of 10 times next year.

[Monty]

what multiple (range) should a company such as diligent be trading at ?
and given the revenue and the number of shares what would be the appropriate share price range?
Does the price tend to factor in the potential growth into Europe where it might take a little time to get the momentum that the USA enjoyed?

[Baddarcy]

what multiple (range) should a company such as diligent be trading at ?
and given the revenue and the number of shares what would be the appropriate share price range?
Does the price tend to factor in the potential growth into Europe where it might take a little time to get the momentum that the USA enjoyed?

No one else is answering so i'll have a stab and guess it should be similar to PE Ratio...so maybe approx 17-20 for a non growth company?

[muss1]

Retest of $5 it us then. Third time lucky?

I don't understand the negatively moosie. From a TA point of view $5 is 20% up from yesterday. From an FA point of view it doesn't matter

[Whipmoney]

I don't understand the negatively moosie. From a TA point of view $5 is 20% up from yesterday. From an FA point of view it doesn't matter

It's a function of TA... it seems that you have to wait for it to move 20% before you can confirm an uptrend.

FA Perspective: Still undervalued.

[Dilbert]

what multiple (range) should a company such as diligent be trading at ?
and given the revenue and the number of shares what would be the appropriate share price range?
Does the price tend to factor in the potential growth into Europe where it might take a little time to get the momentum that the USA enjoyed?

I agree with others, still a growth company, PE of 25 is what I'm using. My thinking is revenue in 2014 should be around 80m. If they can keep a lid on costs, we should expect earnings of $20m at least. Work that out with diluted shares at 122m. Remember also revenues are US$. I figure a share price of NZ$4.70-$5.50 is about right.

[Whipmoney]

Wow massive support with 159k shares at $4.60.

[youngatheart]

Just realized that it's public holidays tomorrow and Monday so after today no trading till Tuesday. Tuesday has in the past been the day that news gets released so perhaps we could see some good news this very next trading day. Will top up now methinks! I'm not wanting to miss this boat yet again...

[couta1]

Teamtalk has just replaced Diligent as the worst performing share in my portfolio,go Dil:cool:

[Balance]

Teamtalk has just replaced Diligent as the worst performing share in my portfolio,go Dil:cool:

Haha - interesting how sentiment turns around.

If you apply Facebook multiples to DIL, you will probably get a $10.00 plus stock!

[winner69]

Noticed the change in tone in the latest announcement ....Diligent’s client retention rate remained among what we believe to be the best-in-class for “Software-as-a-Service” companies. As of the end of the first quarter of 2014, Diligent’s retention rate in terms of the number of client agreements was 96%, and the revenue retention rate remained above 97%.

I linked some research a while ago that showed 96%/97% retention rate is pretty normal for SaaS companies .... maybe somebody has challenged them about being the best and hence the 'we believe'

Whatever the retention rate is high .... that's good

[Yoda]

Can someone explain why some sites have different p/e for DIL..? Findata has 25 and ASB has 62 ( adjusted )...

[blackcap]

Why not do your own with the latest figures using a fully diluted share float for peace of mind?

Yeah good call Moosie. I never trust any data that is published on broker or other sites. Too many ambiguities. Always go back to the Ann Report or similar and do your own research.

[winner69]

Yeah good call Moosie. I never trust any data that is published on broker or other sites. Too many ambiguities. Always go back to the Ann Report or similar and do your own research.

On the reported $6.376m NPAT and weighted average shares used by DIL the PE are 62.5 on ord shares and 91.3 when adding in preferred stock

Not too bad eh

Ask same question this time next year the answer about 20 if shareprice still under 5 bucks

[couta1]

Hopefully when all this nonsense is behind them med-long term they can still do the business,looking for a share price starting with $6 end of this year early next year,streamlining board meetings aint going away anytime soon and Diligent have the Product/S? to get the business done:cool:

[winner69]

Haha not bad at all. Problem is that is a rear-looking P/E with huge one off costs factored in!

Whip, what are your projections for NPAT this year with say the same growth rate and stable margins?

Moosie, I am distraught - you didn't ask me

For what's worth my model as $26.3m NPAT for F14 (Whips probably a bit higher as he more optimistic)

But I believe cash flow multiples are what the real punters will be looking at

[Whipmoney]

Haha not bad at all. Problem is that is a rear-looking P/E with huge one off costs factored in!

Whip, what are your projections for NPAT this year with say the same growth rate and stable margins?

For what it's worth I barely even look at NPAT and I definitely don't give a sh*t about P/E Multiples.

You have to remember that this is a subscription based recurring revenue (SaaS) business where cash is received up-front then "earned" through-out the ensuing year.

By default NPAT (and P/E ratios) only picked up the profit that has been "earned" through an accrual accounting sense, which whilst this can be a good quick & dirty measure of profitability, I don't believe it is the best or most accurate measure for this business.

What it fails to account is the profit that is essentially booked up-front which is a significant item on their balance sheet. If you take the deferred revenues balance then multiply it by their gross margin (say 76-80%) then you get a signifiacnt amount of gross profit that has essentially been received up-front.

As time goes by and sales growth slows as a percentage of total revenue, the deferred revenue component will drop (relative to revenue) and at that point NPAT may start to become a more accurate measure of ultimate profitability.

Either way I look at FCFF which takes into account movements in deferred revenue.

[Whipmoney]

Whip, have you not, over the past year or so, been of the thinking that the market may be using a different valuation to the one you are? Absolutely nothing wrong with your calculations, but the market seems tp think your valuations are way off! I know, the market can be irrational and such, but why would you not give a **** about PE multiples when pretty much the entire world uses them to value companies?

I'm not sure how I can respond to this Moosie, but I have to ask, how do you know what the market is actually thinking?

With regard to my valuation methods (primarily DCF) this is pretty much the basis of every broker report that I have read on DIL. In fact I haven't seen even one price target that was primarily based on DCF Analysis as DCF analysis is relevant (yet still specific) to any company.

P/E ratios of the other hand don't measure cash-flow (which is king!). I'm sure you could find all sorts of similar companies that trade at a lower P/E to DIL, yet which generate significantly less or potentially negative cash-flow..

[kizame]

I personally think we need to stop second guessing all the multiples,at a glance this company is sitting on a rearward looking PE of 61,i personally think thats too high,until such time that it can justify this sort of sky high multiple again it should consolidate where it is.
the only real way in my opinion to value this company is via PE,luckily unlike lots of tech stocks it is Profitable,And in my opinion Profit is King,not cash flow,you can have great cashflow and still go to the wall.

[muss1]

I personally think we need to stop second guessing all the multiples,at a glance this company is sitting on a rearward looking PE of 61,i personally think thats too high,until such time that it can justify this sort of sky high multiple again it should consolidate where it is.
the only real way in my opinion to value this company is via PE,luckily unlike lots of tech stocks it is Profitable,And in my opinion Profit is King,not cash flow,you can have great cashflow and still go to the wall.

What are your thoughts on the huge one off costs and how they impact the PE? And the cash pile? I'm lead to believe the PE is actually closer to 30 and probably lower. And that's with some conservative estimates about the one offs. Second guessing the multiples (or calculating your own numbers that you can trust) is, in my opinion, the only to come up with an accurate valuation.

[youngatheart]

T-4 days and countin' :D

[winner69]

the only real way in my opinion to value this company is via PE,luckily unlike lots of tech stocks it is Profitable,And in my opinion Profit is King,not cash flow,you can have great cashflow and still go to the wall.

I would have thought cash flow was much more important than profit .... isn't the old adage CASH IS KING

Cash flows are hard to manipulate .... you can make profit anything you want it to be

[winner69]

Just putting it out there that if the window dressing at days end didn't happen today the chart would have been looking very sick yet again. Buyers have fled (yet again...),.and if tomorrow is a downer with no recovery after the restatement then we confirmed double top at $5.00 with lower highs and lower lows.

I suggest trading accordingly!

Don't know about the window dressing bit but agree stuff all buying support - just what you would expect from an unloved and unwanted stock .... what was the term again

[Baddarcy]

The negativity seems to be creeping back into this thread.

My expectation is that once all this accounting rubbish is out of the way next week, we can start all start speculating about 1) nasdaq listings, 2) uses for the ever growing pile of cash, 3)new product again.

My assumption has been that 1 & 2 have been put on hold by DIL while they got all the accounts in order so once the accounts are sorted we can expect some news from them. I also assumed 3) was too but the windows 8.1 app proved otherwise.

So why all the negativity?

[SimonHouse]

I tend to agree with Baddarcy.

The windows 8.1 app is a new platform, not a new product.

I also agree that once Diligent has released all the information the market expects, they will want to announce some "good news", since they will no longer be legally constrained.

[winner69]

DIL just like a new rave restaurant in Parnell

Great food, great service. great place to be seen at, always fill ..... but they kept a few punters waiting one night for their drinks and pissed them off ...... and everybody now goes to the other brand spanking new joint down the road .... while the original hot spot still serves up great food and is a great place still a lot quieter than a while ago .... but the old faithful still love it .... but even the number of those are steadily dimimishing

[blobbles]

HY is the big one for me, would be good to see them keeping their costs under control more.

Interestingly in their last report, they stated that the money for the European data centre is coming out of ongoing subscription revenues. They did not take it from their cash pile. While the reason for this might be tax efficiency, it does show that they just want to keep their cash pile intact. But without a plan for this cash, I don't see why they are wanting to do that. Me thinks they have a plan, hopefully they will share with us...

Personally I think the outlook for DIL is rosy, providing they can keep their costs down. A new market in Europe, the Windows 8.1 app removing sales blocks... I am hoping we start to see some bigger numbers from their sales reports soon.

[SimonHouse]

DIL just like a new rave restaurant in Parnell

Great food, great service. great place to be seen at, always fill ..... but they kept a few punters waiting one night for their drinks and pissed them off ...... and everybody now goes to the other brand spanking new joint down the road .... while the original hot spot still serves up great food and is a great place still a lot quieter than a while ago .... but the old faithful still love it .... but even the number of those are steadily dimimishing

oh dear.... this is such a bad analogy. Have you been drinking?

[Baddarcy]

DIL just like a new rave restaurant in Parnell

Great food, great service. great place to be seen at, always fill ..... but they kept a few punters waiting one night for their drinks and pissed them off ...... and everybody now goes to the other brand spanking new joint down the road .... while the original hot spot still serves up great food and is a great place still a lot quieter than a while ago .... but the old faithful still love it .... but even the number of those are steadily dimimishing

But then it turned out the owner had $USD60 million burning a hole in his pocket so implemented "happy hour" and rolled out a new menu and what do you know the punters came rushing back !!

[winner69]

HY is the big one for me, would be good to see them keeping their costs under control more.

Interestingly in their last report, they stated that the money for the European data centre is coming out of ongoing subscription revenues. They did not take it from their cash pile. While the reason for this might be tax efficiency, it does show that they just want to keep their cash pile intact. But without a plan for this cash, I don't see why they are wanting to do that. Me thinks they have a plan, hopefully they will share with us...

Personally I think the outlook for DIL is rosy, providing they can keep their costs down. A new market in Europe, the Windows 8.1 app removing sales blocks... I am hoping we start to see some bigger numbers from their sales reports soon.

Where did you get that bit about not paying for the data centre out of the cash pile?

All they seem to say was - Additionally, during the first quarter, the Company paid $US 1.6 million of the $US 2.3 million estimated cost of building out its European data center.

Of course the cash came from revenues, does all the time

To me that investment just part of ongoing cash flows. If they hadn't spent that $1.6m the cash pile would have been $1.6m higher at $62.2m

Blobbles - you seem to make out some masterstroke here - as Simon says you been drinking as well

[robbo24]

Charts looking very sickly again...

Everyone stop drinking please.

[Harvey Specter]

Where did you get that bit about not paying for the data centre out of the cash pile?My interpretation of DIL comment is that there cashflow is so strong, they were able to do capex while still growing their cashpile. So it was out of the cashpile, but they were putting the cash in faster than they were taking it out.

Imagine Scrooge McDucks vault. More gold coins were flowing in from sales than were flowing out to pay for the new data center and all the other stuff ups they have to pay for as well.

[Whipmoney]

the only real way in my opinion to value this company is via PE,luckily unlike lots of tech stocks it is Profitable,And in my opinion Profit is King,not cash flow,you can have great cashflow and still go to the wall.

How exactly is a P/E multiple the 'ONLY' way to measure/value DIL. As I stated earlier one can fairly easily do a DCF valuation by taking the statement of cash-flow, making a few assumptions about growth and by plugging in their required return. Quite easy really..

With regard to your comment about profit being more important than Cash-flow, well.. I'm not quite sure if you actually understand the concepts.

When I say cash-flow I am talking about their positive cash inflows, which greatly exceed their both their operating and investment expenditure.

A positive cash-flow figure is far more important than a positive profit figure as it demonstrates that a company can pay its bills, invest in growth and still make a surplus whereas there have been plenty of companies that made paper profits but didnt actually generate positive cash-flow (think Enron or Worldcom).

Cash is king no matter how you skin it as you cant payout dividends when you don't have any money in the bank.

[SimonHouse]

Problem is DIL ain't paying a divvy and they ain't doing buybacks (if anything theyre expanding the float through option conversion!). Better hope that "new product" we've been hoping fir for over 2 YEARS now is pretty darn spectacular!

Sodi's bonus depends on growth, just remember that ;)

Who says they aren't going to do any buybacks? I reckon its front and centre of their mind, they just can't say anything until all the restatement and US SEC related forms are done and dusted. I think that was supposed to be by the end of next week?

[SimonHouse]

You need to go back a few pages and see what others said about the conference call and read the FY report Simon...

I read the report. I presume you mean the preliminary FY announcement linked below, as the annual FY report is not due until end of April.

https://www.nzx.com/files/attachments/190284.pdf

I saw nothing that precluded a buyback.

[zspoon]

The CFO during the teleconference specifically dismissed the option of a share buyback when questioned by an analyst over whether this was a potential use of the Diligent cash pile, instead stating that it would be used for growth, and refusing to rule out acquisitions.

[couta1]

The one irk I have with Dil other than being severely in the red for nearly a year is they so far haven't offered anything to loyal shareholders for all the crap we've had to put up with,a divvy would go a long way to reward the loyal but not likely to happen

[winner69]

The one irk I have with Dil other than being severely in the red for nearly a year is they so far haven't offered anything to loyal shareholders for all the crap we've had to put up with,a divvy would go a long way to reward the loyal but not likely to happen

I don't think that shareholders (not including the insiders) even rate with DIL ....probably a bloody nuisance having them in their eyes ....maybe a necessary evil they once needed

[zigzag]

The one irk I have with Dil other than being severely in the red for nearly a year is they so far haven't offered anything to loyal shareholders for all the crap we've had to put up with,a divvy would go a long way to reward the loyal but not likely to happen

I don't think a divvy would be any use. By the time you paid tax in US, and your personal tax, you would be left with Sweet Fanny Adams. i.e. It would be a waste of shareholders funds.

[iceman]

The negativity seems to be creeping back into this thread.

My expectation is that once all this accounting rubbish is out of the way next week, we can start all start speculating about 1) nasdaq listings, 2) uses for the ever growing pile of cash, 3)new product again.

My assumption has been that 1 & 2 have been put on hold by DIL while they got all the accounts in order so once the accounts are sorted we can expect some news from them. I also assumed 3) was too but the windows 8.1 app proved otherwise.

So why all the negativity?

I don't think DIL will be able to list on the Nasdaq in the near future due to the regulatory breaches.
This is from their Amended Annual Report on 8 April:

" As a result of the delayed filing of our Quarterly Reports on Form 10-Q for the fiscal quarters ended June 30 and September 30, and our Annual Report
on Form 10-K for the fiscal year ended December 31, 2013 with the SEC, we will not be eligible to register the offer and sale of our securities using a registration
statement on Form S-3 until we have timely filed all periodic reports required under the Securities Exchange Act of 1934 for one year and there can be no
assurance that we will be able to timely file such reports in the future
. Should we wish to register the offer and sale of our securities to the public, our transaction costs would increase and the amount of time required to complete the transaction could increase, making it more difficult to execute any such transaction successfully and potentially harming our financial condition"

[winner69]

I don't think DIL will be able to list on the Nasdaq in the near future due to the regulatory breaches.
This is from their Amended Annual Report on 8 April:

" As a result of the delayed filing of our Quarterly Reports on Form 10-Q for the fiscal quarters ended June 30 and September 30, and our Annual Report
on Form 10-K for the fiscal year ended December 31, 2013 with the SEC, we will not be eligible to register the offer and sale of our securities using a registration
statement on Form S-3 until we have timely filed all periodic reports required under the Securities Exchange Act of 1934 for one year and there can be no
assurance that we will be able to timely file such reports in the future
. Should we wish to register the offer and sale of our securities to the public, our transaction costs would increase and the amount of time required to complete the transaction could increase, making it more difficult to execute any such transaction successfully and potentially harming our financial condition"

That not a good read is it iceman

Real mess they got themselves into eh ....one they can give "no
assurance" that they can get themselves out off

[iceman]

That not a good read is it iceman

Real mess they got themselves into eh ....one they can give "no
assurance" that they can get themselves out off

Yes they have got themselves int a real mess, which they are hopefully getting themselves out of. But given that they are still not up to date with the SEC and won't be until mid May at the earliest, there is no chance of any Nasdaq listing or possibly even preparation until May next year, subject to no further breaches.

[couta1]

So the only real thing that shareholders can look forward to over the next year is a supposed new product, possibly a break of the slowing growth trend or a murder and execution (a la Mr Bateman)...
Smaller Red arrows Moosie:cool:

[iceman]

So the only real thing that shareholders can look forward to over the next year is a supposed new product, possibly a break of the slowing growth trend or a murder and execution (a la Mr Bateman)...

You forgot the ever increasing cash pile :)

[Dilbert]

So the only real thing that shareholders can look forward to over the next year is a supposed new product, possibly a break of the slowing growth trend or a murder and execution (a la Mr Bateman)...

Once the the accounting issues are finally put to bed, how about increased sales, based off expansion in Europe and Asia? Or addressing different markets in the US? This stock is still very much a growth story with a pile of cash to fund its activities. Rumours of new products and NASDAQ listings are beside the point, although would be interesting developments.

[Whipmoney]

Problem is DIL ain't paying a divvy and they ain't doing buybacks (if anything theyre expanding the float through option conversion!). Better hope that "new product" we've been hoping fir for over 2 YEARS now is pretty darn spectacular!


Sitting on the cash is not harmful and shouldn't have any adverse effect on the share price as cash is risk neutral. Apple sits on plenty of cash and people don't seem to complain.

I guess your point is valid though in that if they are 't doing anything that will generate positive NPV then they should return it to shareholders however dividends could niggly on the tax front given the bulk of their corporate tax will be paid in the US meaning that the distribution would have been double taxed which is inefficient.

If DIL have some new products, projects, acquisition targets etc then I'm happy for them to keep the cash in the bank. Hopefully something does turn up soon. With all their cash and talent they could build an amazing company.

[Harvey Specter]

I think the problem is that Diligent has been sitting on the cash so long and not given us a clear direction of what they want to do with it that everyone has become complacent to the fact it won't be used any time soon.

Sure cash is great, but it is not building further shareholder wealth through growth, hence why the market loves growth stocks like Xero (and always will). With a Nasdaq listing out for at least a year, no buyback and no new product on the horizon (read the exact wording of the R&D section...), what is there to get excited about? Growth? Nope, it's still in decline! That's why we're seeing it as a mature company valued on PE multiples (it's not different this time unfortunately...). So, near term, Dil is going to be boring as hell and I feel the sp will fall unless those big boy(s) step up and prop the sp.

Until we get some clear guidance and direction, and there is a lot to be said for clear goals and communication with shareholders, I expect it to flounder.XRO - they have $200m in the bank - the difference is that that balance is going backwards.

NASDAQ and buybacks dont add value per se.

Growth or a new product is what is needed. Hopefully they can now focus on that now they have the past behind them.

[kizame]

I really can't see them developing a totally new product,if there is a new product of sorts it will just be an enhancement to boardbooks(a clip on) imop.
They are too focused(or should be) on their customer base so will be trying to keep ahead of any competitors,so to think outside that spectrum will be difficult. The cash pile might be better used to aquire a seriously good little company with a great idea.

[blobbles]

I aren't sure how they can NOT have a new product. $4 million on R&D... well... lets just say that isn't chump change in the IT world and would run a startup very well. Average IT salary for good staff might be $120k. You could have 10 IT people working on this, plus their direct support costs would come to about $1.5 million. Add in some servers and office space, you might get to $2 million.

10 IT people and a few managers could easily create something big, most startups have started with less. And they have been spending this much on R&D for over a year... if not something new, then what are they researching and developing?

[zigzag]

Don't forget that they are expanding into continental Europe at the moment. Servers? in Germany. Call centres to set up, etc. I think they more than likely are working on something else as well, but give it time. Some posters seem to think everything must happen yesterday.

[kizame]

DB website says historical PE of 59 NZX says 60,to me that is a bit trumped up even with the cash in the bank,and until growth rates show a continuation rather than a flattening,it's a bit of a punt at todays prices I think.

[couta1]

DB website says historical PE of 59 NZX says 60,to me that is a bit trumped up even with the cash in the bank,and until growth rates show a continuation rather than a flattening,it's a bit of a punt at todays prices I think.
Yes sir there's some big time punters around here alright, we bought in at $7 hoping to get to $10 but went to $4 instead, oh well good things take time aye:cool:

[zigzag]

DB website says historical PE of 59 NZX says 60,to me that is a bit trumped up even with the cash in the bank,and until growth rates show a continuation rather than a flattening,it's a bit of a punt at todays prices I think.

PE ratios are probably a bit misleading at the moment, owing to large abnormal expenses from the restatement process. If you were to ignore the abnormal items, then the PE would not seem quite so stretched. Also remember that this is still a growth company. Even though the growth rate is not accelerating, the company is still growing. The growth rate could never keep on accelerating, unless they had Captain Kirk and Spock on the bridge, and could step up to warp overdrive.

[Dilbert]

I aren't sure how they can NOT have a new product. $4 million on R&D...

Not necessarily. They have to maintain and grow the products they have, improve and add features etc to keep them market leading.They have to maintain a web portal, an ipad app, and now a windows application. Its not surprising to me the increase in cost here.

[hairofthedog]

I miss Sparky. About now he would post a thoughtful, well constructed message of reassurance that would make things all right again. :cool:

[winner69]

Just for you hairofthedog

Bit sad you seek solace from a clown who deleted himself ......after he obviously led you up the garden path

From Xmas -


Sparky wrote this over Xmas

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.

[winner69]

Lot debate lately of what a realistic / fair PE ratio for DIL is

Let us allow Sparky's hero Benjamin Graham tell us

Ben would say 78.5 is what it should be to get an Intrinsic Value, assuming long term growth of 35% pa

Ben did a revised formula adjusting for prevailing bond rates - that gives a number of 60

So there it is ...can't argue with Ben ....as he said "Our study of the various methods has led us to suggest a foreshortened and quite simple formula for the evaluation of growth stocks, which is intended to produce figures fairly close to those resulting from the more refined mathematical calculations."

[SimonHouse]

Just for you hairofthedog

Bit sad you seek solace from a clown who deleted himself ......after he obviously led you up the garden path

From Xmas -

That's a quite good report actually. Be interesting to see what happens between the release of all outstanding reports and info releases and the AGM. I presume this is normally held in June?

[couta1]

Sparky is obviously a very savvy investor(notice I didn't say trader) with a truck load of Diligent bought at a good price,he has done due diligence in studying the company inside out and shared that with us which we can be thankful for, we must form our own opinions about the long term future of the company and Sparky thinks it has a bright one and I agree with him albeit with a much higher buy in price

[winner69]

In defence of Sparky, he did not lead us up the garden path. He did his homework, carefully balanced the possibilities for cash and gave us his answer.

Problem is, as with others, the wrong valuations are being relied on. I've said it before and I'll say it again: GROWTH RATE. Note that the PSR value is much closer to the current price than the "traditional values". (It shouldn't be on 8-10 for a maturing company btw...).

This is a tech company and it needs to keep growing if its not retyrning shareholder wealth, simple as that.

You seem to be getting real anti towards DIL moosie. Past experiences impacting emotions and affecting you ability to think objectively about them?

In 2012 DIL made $10.6m profit (restated). A 2013 'normalised' figure about $16m - 50% growth.

The Q1 brief announcement and indicative cash flow suggests heading to $25m profit (normalised) this year - growth of 55%

So isn't DIL still going strongly ....even better than Sparky's 35% pa

Growth is coming from new clients, increasing number of users and probably ever increasing margins.

Moosie, I don't know where you get the idea that DIL is not a growth company. To me they are still growing very strongly and look like they will for several years to come, even if no whizz bang product never eventuates. Maturity, as you put it, is some years off

Methinks you are missing opportunities here. You have read DIL price movements very well since your unfortunate selling episode. You could have made heaps here. I forgot to thank you a few months ago when I started another trade at 330 odd - I was going to buy anyway but you convinced me to buy even more, thanks.

Spose everybody has their own views. Conviction to ones views is generally a good trait but sometimes one needs to be more objective.

DIL - yes a pariah of the sharemarket. Unwanted and unloved - by you moosie and many others

Me, I just have a morbid fascination with the down and out. Sometimes creates oportunities

[iceman]

You seem to be getting real anti towards DIL moosie. Past experiences impacting emotions and affecting you ability to think objectively about them?

In 2012 DIL made $10.6m profit (restated). A 2013 'normalised' figure about $16m - 50% growth.

The Q1 brief announcement and indicative cash flow suggests heading to $25m profit (normalised) this year - growth of 55%

So isn't DIL still going strongly ....even better than Sparky's 35% pa

Growth is coming from new clients, increasing number of users and probably ever increasing margins.

Moosie, I don't know where you get the idea that DIL is not a growth company. To me they are still growing very strongly and look like they will for several years to come, even if no whizz bang product never eventuates. Maturity, as you put it, is some years off

Methinks you are missing opportunities here. You have read DIL price movements very well since your unfortunate selling episode. You could have made heaps here. I forgot to thank you a few months ago when I started another trade at 330 odd - I was going to buy anyway but you convinced me to buy even more, thanks.

Spose everybody has their own views. Conviction to ones views is generally a good trait but sometimes one needs to be more objective.

DIL - pariah of the sharemarket. Unwanted and unloved - by you and many more.

Me, I just have a morbid fascination with the down and out. Sometimes creates oportunities

A very good post that I wholeheartedly agree with winner69 !

[SimonHouse]

You seem to be getting real anti towards DIL moosie. Past experiences impacting emotions and affecting you ability to think objectively about them?

In 2012 DIL made $10.6m profit (restated). A 2013 'normalised' figure about $16m - 50% growth.

The Q1 brief announcement and indicative cash flow suggests heading to $25m profit (normalised) this year - growth of 55%

So isn't DIL still going strongly ....even better than Sparky's 35% pa

Growth is coming from new clients, increasing number of users and probably ever increasing margins.

Moosie, I don't know where you get the idea that DIL is not a growth company. To me they are still growing very strongly and look like they will for several years to come, even if no whizz bang product never eventuates. Maturity, as you put it, is some years off

Methinks you are missing opportunities here. You have read DIL price movements very well since your unfortunate selling episode. You could have made heaps here. I forgot to thank you a few months ago when I started another trade at 330 odd - I was going to buy anyway but you convinced me to buy even more, thanks.

Spose everybody has their own views. Conviction to ones views is generally a good trait but sometimes one needs to be more objective.

DIL - yes a pariah of the sharemarket. Unwanted and unloved - by you moosie and many others

Me, I just have a morbid fascination with the down and out. Sometimes creates oportunities

Thanks for this post - sums it up quite clearly that DIL is still a growing company. Just not hyper growth like 2012.

[sharp]

We'll no doubt see some action tomorrow?

[Monty]

We'll no doubt see some action tomorrow?

I am unsure we will see any action until the Board make some announcements on
1. New Product
2. NASDAQ listing
3. What they intend to do with the big pile of money that is growing bigger
4. Sales date for their venture into Europe gets traction.

[noodles]

We'll no doubt see some action tomorrow?
Excuse my ignorance, but what is happening tomorrow?

[winner69]

Excuse my ignorance, but what is happening tomorrow?

It's Tuesday .....announcement time I believe

[Monty]

announcement for what?

[BlackPeter]

announcement for what?

well - not really following DIL, but from memory is their latest deadline for filing their audited financial statements sort of rapidly approaching (wasn't it by end of April - 2014?). Unless I missed this announcement, than tomorrow would be a good time for them to either drop the trousers and ask for another extension (which wouldn't be unheard of ...), or alternatively to announce and no doubt duly celebrate the filing of their well overdue financial records (it always depends on the perspective)!

[Carpenterjoe]

Yeah, but all the financial information has already been released.

Diligent expects to file the annual report with the audited financial
statements for the period ended 31 December 2013 by 30 April 2014. The NZX
has indicated that it does not intend to take action to suspend trading of
Diligent's shares if Diligent provides the annual report by 30 April 2014 as
currently expected.

[skid]

Currently expected--Holy mac ,I would certainly hope so:)---otherwise theres just that small matter of being suspended from trading:scared:

[Baddarcy]

Well they've missed their favourite time to announce. One more day.

Somehow I think the NZX won't sink its gums into DIL if they are late...

Suspect they won't even get out their wet bus ticket.

[skid]

Why would they be late?
Was'nt it accounting problems that got them into trouble before?
Cant say Im an expert on DIL but after the past screw ups I would be making sure everything is squeaky clean and up to date.

[Whipmoney]

Why would they be late?
Was'nt it accounting problems that got them into trouble before?
Cant say Im an expert on DIL but after the past screw ups I would be making sure everything is squeaky clean and up to date.

I suspect they would have asked for an extension Mon morning if they needed it. Expecting results late today (2-3pm) otherwise tomorrow morning

[sharp]

Now waiting on statements to be released 8am - 9am tomorrow - 30 April 2014 and expecting postive market sentiments.

[zigzag]

Now waiting on statements to be released 8am - 9am tomorrow - 30 April 2014 and expecting postive market sentiments.

Any delay would be price sensitive, so they would have had to of informed the market by now. That's my theory anyway, and have topped this afternoon on the strength of it.

[sharp]

Any delay would be price sensitive, so they would have had to of informed the market by now. That's my theory anyway, and have topped this afternoon on the strength of it.

I concur with your view and have also topped up - specially with the end of month selling at below vwap.

[youngatheart]

As have I. Lets hope we did the right thing!

[sommelier]

If it's good, buy early as possible tomorrow. If it doesn't come through, watch it plummet like last time.

[sharp]

If it's good, buy early as possible tomorrow. If it doesn't come through, watch it plummet like last time.

If DIL anticipated further delays it should have announced it to the market soon as it realised - if it didn't then, yes, DIL will no doubt be punished by the market.

[Carpenterjoe]

I hope its punished, ill be buying.
I doubt it will tho, as all the important financial information has already been reported.
Twelve to eighteen months time this company will be hitting 100million in revenue and enjoying 20-25% of that in profit.

[drswag]

So what exactly would be a "good" result? (please don't punish me :()

Also what's the best way to know when the announcement comes out, currently I'm just refreshing the NZX page

[robbo24]

So what exactly would be a "good" result? (please don't punish me :()

Also what's the best way to know when the announcement comes out, currently I'm just refreshing the NZX page

Do you have a smartphone?

[drswag]

Do you have a smartphone?

Yes. Is there an app that messages me when an announcement takes place (though I'd prefer email)

[robbo24]

Yes. Is there an app that messages me when an announcement takes place (though I'd prefer email)

I think if you make an NZX account then you can make it email you with announcements.

[winner69]

I sense some trepidation

What you guys all worried about

[cyclist]

Do you have a smartphone?

"Tied to the phone like an expectant father. Your carnation will rot in a vase".

(Apologies. A Fish/Marilion quote that just feels kinda appropriate at the moment)

[Harvey Specter]

I sense some trepidation

What you guys all worried about

Carl Blandino will step down from his position as Chief Financial Officer to pursue other opportunities once the Company becomes current with its financial reporting obligations for the year ended December 31, 2013, which the Company anticipates to be by May 30, 2014.https://www.nzx.com/companies/DIL/announcements/249894

[longy]

The annual report is also out but I can't seem to view it. Is it some kind of time delay?

[Lorne Ranger]

It open in your browser window. If you cant, try downloading instead

[Baddarcy]

Didn't spot anything of real interest in the Annual Report....presume the 30 May date reference in the CFO announcement is referring the full March 14 quarterly report?

[couta1]

Yep as I've felt for a while now she's a long term investment now especially for those of us with a higher buy in price but I think its success in Europe may surprise eventually

[Harvey Specter]

And most were expecting a huge rise on a known event. Meanwhile they are missing out on the unknown event over at Xero. Just proves the difference between the two...
I dont think we (I) were hoping for a rise, just not a fall. As long term holders, we just want it to trickle up till they announce the good news which we pray will come.

To catch those unknown events, you have to be in. You weren't in Xero either so missed that jump.

[youngatheart]

Dil shares (based on past experience) tend not to rise immediately after an announcement until 2-3 days later when overseas investors put their buy orders in...

[zigzag]

Looks like they still have to complete their American filings before they finally finish the reinstatement. Once that is finally over, I hope that institutional investors will be more comfortable about buying in. As long is there are no penalties on top of all this.

[sharp]

Looks like they still have to complete their American filings before they finally finish the reinstatement. Once that is finally over, I hope that institutional investors will be more comfortable about buying in. As long is there are no penalties on top of all this.

Let's hope. Instos don't buy on a whim and have to do their dd unlike most retail investors - so will take days before the instos act

[Harvey Specter]

Right, I hope you're all happy, I've just rejoined the DIL cheerleading club. Let's see where this goes eh? :pWhat - why the hell would you buy now?

For a long timeframe yes but not for a short timeframe unless you are expecting an unexpected good news announcement.

[Balance]

Right, I hope you're all happy, I've just rejoined the DIL cheerleading club. Let's see where this goes eh? :p

Oh oh - time to sell!












Just joking :D

[robbo24]

I'll buy in during mid may, at circa $4..

[youngatheart]

If the NASDAQ does well overnight, I predict a very robust opening price tomorrow morning :0) Welcome onboard the DIL Love Train Moosie...

https://www.youtube.com/watch?v=Kc6WPFok94w

[In4a$]

I'll buy in during mid may, at circa $4..
It'll be circa $5 in May

[robbo24]

It'll be circa $5 in May

Oh silly me then

[sharp]

Oh silly me then

Silly you.

[Lorne Ranger]

[QUOTE=youngatheart;478060]If the NASDAQ does well overnight, I predict a very robust opening price tomorrow morning :0) Welcome onboard the DIL Love Train Moosie...

Wow. Talk about dance like no ones watching. Looks like they're being electrocuted in a strong squall.

Somehow I dont visualise the Dil board this way, but I guess its possible. At least up until they realised they needed to restate.

[In4a$]

Oh silly me then
Oh silly me if its not $5 mid May, Ill be wishing I never touched that buy button.

[robbo24]

Big, proper institutions (other than the Moosie Fund) require certainty of information on which to justify using other people's money to invest.

The restatement process is not over yet. In NZ or the US.

I like DIL, always have. If you're a trader it doesn't matter but if you're looking for a solid entry point as an investor you need certainty of information too (and the benefit of big, proper institutions (other than the moosie fund) to maintain the share price.

I like the way DIL has answered the risks section of their annual report. A lot of these concerns are priced in, I believe.

[youngatheart]

Curious, where is one looking exactly when they talk about 'NASDAQ FUTURES?' I only see a few news headlines on Bloomsberg. Or is there specifically NASDAQ futures index? Please provide links.

[youngatheart]

Nice one Moosie. This was useful too... http://money.cnn.com/data/premarket/

[iceman]

Big, proper institutions (other than the Moosie Fund) require certainty of information on which to justify using other people's money to invest.

The restatement process is not over yet. In NZ or the US.

I like DIL, always have. If you're a trader it doesn't matter but if you're looking for a solid entry point as an investor you need certainty of information too (and the benefit of big, proper institutions (other than the moosie fund) to maintain the share price.

I like the way DIL has answered the risks section of their annual report. A lot of these concerns are priced in, I believe.

I havent had a chance to thoroughly read the report yet but I thought DIL was now up to date with their NZ filings. What is there still to restate robbo 24 ?

[bull....]

4.75 is key level for bigger advance

[robbo24]

4.75 is key level for bigger advance

Indeed, the two attempt rule is your ruler.

[Baddarcy]

not bad volume again today, but it seems fairly evenly balanced. Not sure we are going to get much movement either way today.

[sharp]

not bad volume again today, but it seems fairly evenly balanced. Not sure we are going to get much movement either way today.

As with instos watch closely towards end of the trading day.

[robbo24]

Very much like macking a top notch female, you have to spit the right game at the right time otherwise you will lose your appearance of confidence and therefore bargaining power.

Nobody wants to come across as a simpish, square trick.

[In4a$]

Wish it would hurry up and break $5, I am back in the green just, :) but want to get my money back on the ones I foolishly paid $4.85 for in early April.
Todays Tip: Dont buy shares on whim and a fancy or a quick gamble, - research and wait, wait, and wait for the price to drop then buy.

[sharp]

Last minute trades coming through... as anticipated.

[In4a$]

Good to hear bud, and a very good tip there as well!

Charts churning upwards on higher volume. Moose Fund happy for the day :)
Thanks Moosie, good to hear you are making some nice returns also.

[jonu]

Big boys selling up large in the morning then dropping support to flush out more weak hands for a buy up. Expecting yet another late day run and looking for an exit. Trading to it!

Or maybe people doing exactly what you are doing Moosie, just a few hours earlier. I wish you well with your trading but I fear your flippant analysis is going to see you come unstuck.

[robbo24]

Or maybe people doing exactly what you are doing Moosie, just a few hours earlier. I wish you well with your trading but I fear your flippant analysis is going to see you come unstuck.

Haha.. Moosie are you going to take this indignity???

[jonu]

Haha.. Moosie are you going to take this indignity???

Robbo you scurrilous pot stirrer you. By the way you should be giving photoshop tutorials going by the imagery you created on another thread which in delicate deference to the Moose will go un-named.

[robbo24]

I'll buy in during mid may, at circa $4..

See you then robbo24.

[bull....]

out yesterday for some chip money, why bearish close double top 4.61 hourly, doji bearish close daily, big resistance 4.75......

[youngatheart]

Really looking forward to the AGM next month :)

[youngatheart]

DIL today has held it's value quite nicely comparative to other NZX tech stocks. Would be lovely to see a Tuesday announcement of some sort - like the days of olde :0)

[bull....]

4.30 look key support , while 4.75 resistance

[youngatheart]

I fear that the lack of news will see the share price drift lower. One would have thought that with the restatement issues out of the way that a more aggressive news approach like in years past might have restarted. Unless of course there is no new news to report!

[robbo24]

I fear that the lack of news will see the share price drift lower. One would have thought that with the restatement issues out of the way that a more aggressive news approach like in years past might have restarted. Unless of course there is no new news to report!

Restatement process is not over yet. See you at $4.

[Baddarcy]

DIL is getting a bit more love today from Mr Market.

[SimonHouse]

Nice little bounce off 4.30. I think Wasatch may be playing games in the range to make profits until a new announcement. Pretty thin trades...


Thats a pretty bold claim Moosie. Where's your evidence that Wasatch are trading in and out?

[SimonHouse]

Actually, I take that back Moosie. I don't need to be so aggressive. There's too much of that from others on Sharetrader posters.

but I would love to know what your evidence was for you to post your theory that a Wisconsin based fund focused on long term holds was trading a spread in diligent.

[Harvey Specter]

F'n DIL - All executive bonuses should be cancelled - they are a pack of muppets

[robbo24]

STILL can't get things in on time!!!

Read the form, it's not that bad. 3 weeks late is all, and it shows the progress made to date.

Time to change to Nasdaq to avoid this dual compliance shiz :)

[Balance]

If the reaction of share trading to late filings in the past is any guide, good opportunity to pick up a few cheap shares today.

[Harvey Specter]

Read the form, it's not that bad. 3 weeks late is all, and it shows the progress made to date.

Time to change to Nasdaq to avoid this dual compliance shiz :)Goes to show all the money in the world ($50m is a lot) cant buy you everything.

This one in my opinion is inexcusable as the whole period is after they identified the issue so there is technically nothing to restate and they should have had the processes in place as they were already recalculating the historical stuff.

[silu]

I keep on watching this clown car but as until all the clowns have escaped I just can't fathom investing in this.

[Balance]

I keep on watching this clown car but as until all the clowns have escaped I just can't fathom investing in this.

Definitely one for you to stay well clear off as the 'clowns' will be in charge until it lists on the Nasdaq.

Funny but you are starting to sound like Dr Who who decried DIL when its sp dropped to 12c a few years ago?

[Balance]

Holy shiat!

Who would want to invest in this dog?

Diligent operating loss

4:30AM Friday Feb 27, 2009

Software company Diligent Board Member Services yesterday announced a US$11.8 million operating loss for the 2008 financial year.

Diligent produces Diligent Boardbooks, a web-based system to simplify board meeting materials.

It moved its software division from New York to Christchurch in 2001.
The 2008 financial year was its first full year as a listed company on the NZ exchange.

Sales for the 2008 year of US$2.93 million were up on
US$1.73 million for the previous year. But operating expenses were US$12.87 million, including US$6.2 million for marketing and US$5.4 million in general expenses.

SP then was 12 cents.

Some of us really miss Dr Who - he was the best contrarian poster we ever had.

[silu]

Definitely one for you to stay well clear off as the 'clowns' will be in charge until it lists on the Nasdaq.

Funny but you are starting to sound like Dr Who who decried DIL when its sp dropped to 12c a few years ago?

I've only been watching since early 2013. I am sure it was a good investment at some stage.

[couta1]

If the reaction of share trading to late filings in the past is any guide, good opportunity to pick up a few cheap shares today.

I doubt very much this will have any effect on the share price, pretty much status quo and whats another few weeks after the long wait we have already had, plus up day for techs today in general

[Whipmoney]

Goes to show all the money in the world ($50m is a lot) cant buy you everything.

This one in my opinion is inexcusable as the whole period is after they identified the issue so there is technically nothing to restate and they should have had the processes in place as they were already recalculating the historical stuff.

I think you're over-reacting. The historical balance sheets all had to be restated and as such they couldn't prepare a formal Q1 report as their starting position was still being clarified.

The good news is that they are catching up and the restatement process is nearing its conclusion.

[couta1]

I doubt very much this will have any effect on the share price, pretty much status quo and whats another few weeks after the long wait we have already had, plus up day for techs today in general
As I was saying plus some being up an all:cool:

[Whipmoney]

As I was saying plus some being up an all:cool:

Not a bad close!

[couta1]

Some extremely weak and thin volume today...
? Moosie 204k shares changed hands not far off a mill in dollar value, do I hear the stock knocking bell a ringing:scared:

[winner69]

? Moosie 204k shares changed hands not far off a mill in dollar value, do I hear the stock knocking bell a ringing:scared:

No emotional stuff with moosie now .... he just a cold blooded killer trader (and emotionless)

[Balance]

More than 3/4s of which was off market at the end of day on the days low. There was only 6 other trades all day as well!

What does that tell you?

[couta1]

What does that tell you?
It tells me someone likes the stock enough to buy a truckload of it:cool:

[muss1]

Someone is using thin volume to up the price and get a better a price for their large parcel(s).

Is no one buying those shares that are being sold off market? I'm getting a bit confused about how the market works. This seller sounds very clever that they are getting a buyer to buy at a price that they aren't happy with.

I think it depends which tint your glasses are. I take it you wear transition lenses

[robbo24]

Look, you couldn't rely on any financials last year when Gaynor the Gay has sell down and rant.

Read the notice, see what financials you can rely on now.

Just wait until you can rely on all of the financials.

[Balance]

The only number I need to look at is that of new client numbers. If its down yet again...

You have a lot to learn, Moose, if you think that's what will be driving the sp next.

Read Derek Handley's book again - I think you will find that what he wrote is not as important as what he did NOT write.

[Whipmoney]

Someone is using thin volume to up the price and get a better a price for their large parcel(s).

Interestingly enough bidder depth has increased again this morning so someone out there is interested in accumulating.

I suspect that once all the financials have been restated we should see it move towards $5.

Q2 results will be interesting however.

[Whipmoney]

Read Derek Handley's book again - I think you will find that what he wrote is not as important as what he did NOT write.

Can you elaborate?

What do you (personally) think will drive the SP? For me it's going to be FCFF / the cash accumulation rate as whilst sales growth is relatively important its the growth in their cash inflows which will be really material as it is this will allow them to acquire competitors or develop other products.

[muss1]

The only number I need to look at is that of new client numbers. If its down yet again...

Moosie, client numbers is not everything. See the below graph which explains why DIL profit will grow more than client growth indicates. I'm sure you know this already. Also, the future avenues of client growth may not show for a few quarters (Europe/Asia), but once they do (IMO it is once they do, not if) I think that cash pile might grow at a rate of knots.

http://accountingexplained.com/managerial/cost-behavior/images/fixed-cost-behavior.png

[muss1]

They are open to M&A activity, and obviously not being perilous about it which is good. I don't believe the new operating system for their current product is the "new product". The latest delay is due to the chronological order in which the restatement has occurred - not a big deal considering the whole mess in the first place.

Far point about competition, but I believe they have got to a point which is close to market saturation with the big dogs. Not all are going to want a board books product. Will be interesting to see their success rate with the small to medium companies once their focus shifts more to these as well

[Balance]

Can you elaborate?

What do you (personally) think will drive the SP? For me it's going to be FCFF / the cash accumulation rate as whilst sales growth is relatively important its the growth in their cash inflows which will be really material as it is this will allow them to acquire competitors or develop other products.

Agreed, Whipmoney.

Think Sky TV - inevitable growth of customer numbers will slow down to be replaced by strong growth in cash generation. Retention of customer another factor to watch out for.

[Balance]

Someone is using thin volume to up the price and get a better a price for their large parcel(s).

Action today says it is a buyer 'suppressing' the sp on small volume, but taking large parcels when available.

[couta1]

Action today says it is a buyer 'suppressing' the sp on small volume, but taking large parcels when available.
Charts look Bullish:ohmy:

[muss1]

I'm no TA expert, but are we approaching the tip of a triangle pattern? Price strength over the last two days may imply a breakout to the upside

[bull....]

still in the range

[Whipmoney]

Seems like the safest investment to be in these days, ironically!

That's because it already took a hell of a lickin' prior to the Nasdaq biotech/SaaS retracement.

To be fair I still think it's undervalued relative to the instrinsic valuation of its cash-flows even before you start factoring in possibilities such as a second product or acquisition.

[Baddarcy]

2013 Quarterlies all filed, just one more to go !!!

[bull....]

threatening to break down with no buyers around

[Whipmoney]

threatening to break down with no buyers around

I wouldn't worry. There's not much happening so it'll bounce around for a while until the quarterly is out.

[winner69]

threatening to break down with no buyers around

Maybe waiting for the next quarterly numbers

Maybe the eagle eyed saw something they didn't like in the restated quarterlies for last year

Who knows but if goes below 420 things could be 'dire' and it 'could hurt' as moosie puts it

[robbo24]

Who knows but if goes below 420 things could be 'dire' and it 'could hurt' as moosie puts it

Moosie is from Canada, 420 doesn't hurt him at all! :cool:

[robbo24]

Harbour Asset Management eh..

Looks like the institutions are coming back following restatement.

Can't wait for the final.

[Balance]

Harbour Asset Management eh..

Looks like the institutions are coming back following restatement.

Can't wait for the final.

Institutions buy in volume so they have to be very 'strategic'. A little panic in the market always help their course!

[sommelier]

Diligent Announces the Appointment of Hans Kobler to the Board of Directors
Diligent Board Member Services, Inc. ("Diligent" or the "Company") (NZX: DIL) today announced that Hans Kobler was appointed to the Company’s Board of Directors effective as of May 23, 2014 (Eastern Daylight Time, United States). Mr. Kobler has also been nominated to be elected to the Board of Directors on June 24, 2014 at the Company’s Annual Meeting of Shareholders.
Mr. Kobler is the Founder & Managing Partner of Tensor Technology Partners, an investment and advisory firm focused on transformational technologies. He also serves as Managing Director and Senior Advisor for Jenzabar Innovations, a provider of innovative enterprise software and solutions for higher education. Before that, Mr. Kobler served first as Chief Executive Officer and later up to its sale as Executive Chairman, of ICx Technologies, a formerly NASDAQ listed advanced technology company he co-founded. Prior to ICx, Mr. Kobler was the Chief Executive Officer of Digital Power Capital LLC, a private equity investment firm focused on advanced technologies. Mr. Kobler’s tenure includes senior-level positions with GE Capital as Head of Energy Technology Investing and Chief Quality Officer in their equity group and with Bain & Company where he advised corporate institutions in Europe, Asia and America.
Mr. Kobler replaces Joe Carrabino who resigned from the Board of Directors effective as of May 23, 2014 (Eastern Daylight Time, United States).
Mr. David Liptak, Chairman of the Board, said: “Hans’ leadership and experience in the software and technology industries, as well as his extensive experience in corporate finance and strategy, will be a valuable asset to Diligent going forward and makes him an excellent fit for our Board. We would also like to thank Joe for his many contributions to Diligent, and we wish him all the best in his future endeavours.”
Mr. Carrabino commented: "After two years on Diligent’s Board of Directors, including serving on the Audit Committee through the completion the Company’s restatement process, I have decided that it is now time for me to devote more effort to my other commitments. I am proud of the work we have done, and believe the Board’s efforts during the past two years have put Diligent on a path to a stronger future.”

[sommelier]

This guy sounds pretty great. CEO of a private equity investment firm, CEO of a NASDAQ listed company that was bought out by FLIR. That's all I need. Time to get in.

[Lazza]

A new director with 132,000 shares and good credentials sounds fine by me.

[blobbles]

A new director with 132,000 shares and good credentials sounds fine by me.

Agree, sails into his directorship role and bets over half a million on the company. Going by his credentials he knows value when he sees it, very happy to be buying more as the price weakens today.

[blobbles]

The other thing that wasn't talked about much on here was the CFO leaving after the restatement seeming was completed. Seems like he was bought in to fix the whole mess, coming in May last year to replace Steven Ruse then out again about a year later once the financials are sorted.

[winner69]

Going to be back below 4 bucks soon.

Unloved and unwanted so probably will continue to trend down for some time still

[Bilbo]

PE of 25 is my call. Where's our quarterly? MIA as usual!!!

Hmm, I don't think the quarterly is due until mid July is it? Last quarterly was released 16 April.

[couta1]

Great 2 horse race been going on in my portfolio between TTK and DiL each horse has been vieing for the lead on the largest paper loss, Dil currently in the lead by a half a head at 42.8% to TTks 40.8% I wonder who will win could be a long race:scared:

[winner69]

Great 2 horse race been going on in my portfolio between TTK and DiL each horse has been vieing for the lead on the largest paper loss, Dil currently in the lead by a half a head at 42.8% to TTks 40.8% I wonder who will win could be a long race:scared:

I put money on DIL winning that race couta...at what level no idea

Even from here you need a 75% increase to get back into credit

I admire your patience

[blobbles]

PE of 25 is my call. Where's our quarterly? MIA as usual!!!

My spreadsheet of lies and distortions tells me this year they will be making approx 30c per share after tax (based on 45% growth, on track according to their last quarterly, and 122 million shares). That gives them a P/E at current SP of ~14, so not bad buying right now in my books. End of year forward looking value at over $7. They have (I think!) jumped over the $20m a quarter now in revenue.

My feeling is once all the restatement is out of the way we should be up and away again. Am looking forward to them getting back to their better laid out more professional looking quarterly reports to so we don't have to do multiple calculations to see how they are faring...

Things to look out for will be their European growth and the (hopefully) drop in OpExp on the back of the ~$10m one off restatement costs. Hopefully OpExp won't be exceeding $40m this year, but I might be dreaming!

Their growth in their current markets appears to be coming from new users at the moment too, not from new customers. Hopefully European growth will increase new customer growth a bit more to push their finances up a bit. I am picking they will be making $26m per quarter by the end of the year, a $100m company. Right where PEB wants to be :)

[blobbles]

My spreadsheet of DIstortions and Lies!

[Monty]

Diligent does continue to disappoint. The shares are about half of what they were about 12 months ago. Still I's doing better that if I had the money in the bank earning about 3%. and the ride is more fun.

When ever I become disheartened I look back at the fundamentals of this stock
97% retention
great product and loved by its customers
new product in development (when will we hear something about that)
buckets of money in the bank (what the hell are they going to do with all that dosh)
continues to sell to new clients (and the subsequent upgrades and more user added for organisations)
NASDAQ listing (or is this a red herring?)

There has been so much talk about these shares having been undersold for a long time. Now hopefully with all the restatement behind them and the distraction that this has caused, hopefully at the upcoming AGM (24 June 2014) we might see some progress and some announcements - or am I being hopeful?

[Banksie]

Still I's doing better that if I had the money in the bank earning about 3%.

That's not really true. $1000 would have got you ~127 shares a year ago, now worth $520.70, while your bank balance would now be $1030, and you could buy 251 shares with that today.

Edit: don't worry I's in the same boat ;)

[Monty]

i's bought my shares a couple of years ago at $3:40. so still in front. I was going to top up a few when around $7:00 before the Diligent shares went to $8;20 and then dropping and bouncing around a bit in the $3:50 to $5:00 range. - so I bought other shares. I still hold my faith in Arria NLG and am hoping they will start to do something exciting one day.

[Carpenterjoe]

My spreadsheet of lies and distortions tells me this year they will be making approx 30c per share after tax (based on 45% growth, on track according to their last quarterly, and 122 million shares). That gives them a P/E at current SP of ~14, so not bad buying right now in my books. End of year forward looking value at over $7. They have (I think!) jumped over the $20m a quarter now in revenue.

My feeling is once all the restatement is out of the way we should be up and away again. Am looking forward to them getting back to their better laid out more professional looking quarterly reports to so we don't have to do multiple calculations to see how they are faring...

Things to look out for will be their European growth and the (hopefully) drop in OpExp on the back of the ~$10m one off restatement costs. Hopefully OpExp won't be exceeding $40m this year, but I might be dreaming!

Their growth in their current markets appears to be coming from new users at the moment too, not from new customers. Hopefully European growth will increase new customer growth a bit more to push their finances up a bit. I am picking they will be making $26m per quarter by the end of the year, a $100m company. Right where PEB wants to be :)


I agree, I'm also surprised the sp is still so low and have enjoyed purchasing small amounts over the last six months.

I'm excited for Q2 results due next month, its possible the windows product might give sales a massive boost.

And by years end this company will have roughly 100 million in cash, yet only worth 360 million.

[blobbles]

I agree, I'm also surprised the sp is still so low and have enjoyed purchasing small amounts over the last six months.

I'm excited for Q2 results due next month, its possible the windows product might give sales a massive boost.

And by years end this company will have roughly 100 million in cash, yet only worth 360 million.

I think they will be pushing it to have 100 million in cash by the end of the year Carpenterjoe, maybe by the end of next year! Hopefully they would have used it to accelerate growth or acquire something by them though!

[iceman]

I think they will be pushing it to have 100 million in cash by the end of the year Carpenterjoe, maybe by the end of next year! Hopefully they would have used it to accelerate growth or acquire something by them though!

Agree. I hope we are not going to end up with $100 million sitting idle in the bank. That would be a waste. Thanks for sharing your workings blobbles. I am hoping for very similar (slightly less optimistic) results in the next 3 years. I have little doubt DIL's sp will recover quickly in the medium term future, to better represent the bright times ahead !

[Carpenterjoe]

Agree. I hope we are not going to end up with $100 million sitting idle in the bank. That would be a waste. Thanks for sharing your workings blobbles. I am hoping for very similar (slightly less optimistic) results in the next 3 years. I have little doubt DIL's sp will recover quickly in the medium term future, to better represent the bright times ahead !


Roughly One hundred million in cash by years end sounds pretty ridiculous.

But in Q1 they banked 4.5million add on the unusual expenses 1.8 million from the audit committee add on the 1.6 from the European data centre

That comes to around 7.9 million for the quarter just gone plus a little growth (100 clients x 30000 = 3mil x .25 = 750k

They could bank 8.5 mil for the quarter just gone, multiply that out for the three quarters = 25.5mil + 60.6mil = 86.1million plus the exchange rate 10% = 94mil.

Im not sure of their tax payment arrangements and if they are made quarterly or at end of year. and I know the CEO is getting a fat cash check towards the end of year.

The pile of cash is definitely starting to mound, I'm betting/trusting they have a good plan for it.

I'm hoping the windows product kicks the growth rate back towards the 150 per quarter range.

[Carpenterjoe]

My spreadsheet of DIstortions and Lies!

Thanks for putting this up, one question tho. How do U get to your 2014 cash amount of 78mil.
I thought it would be 2013 cash of 55mil plus 35 mil profit of 2014 = cash of 90mil 2014

Thoughts?

[blobbles]

Thanks for putting this up, one question tho. How do U get to your 2014 cash amount of 78mil.
I thought it would be 2013 cash of 55mil plus 35 mil profit of 2014 = cash of 90mil 2014

Thoughts?

Oh I have a bit of a method, I swap optimism in the top bit (concerning revenue growth) with a bit more pessimism in the cash growth line. That way I hopefully temper them out somewhat. Its entirely possible they will have ~$80-$90 million USD in the bank at the end of the year, probably likely if they don't buy something (after tax). Remember though that the $35m is in NZD while the $55m is in USD.

It doesn't sound like they have a plan for the cash yet, but should one become available, it sounds like they will follow it aggressively. Whether this is a buy out or a product push, its hard to know! I think really they will be looking for acquisitions, some new product in the corporate/board member space that looks like it will be successful so they can market it alongside boardbooks. Or if they get a new product out, they could dump $10-$20 million into a massive marketing blitz to push growth. Either plan is good and the increasingly large mountain of cash they have gives them more and more options. A share buy back doesn't sound on the cards to me, sure they could knock 20m shares off the register at todays prices but that doesn't help grow their revenues (which is what they have said they want).

[blobbles]

97% client retention and many costumers are signing up multiple entities what better marketing do you want and why would you spend 10's of millions on marketing when your product is doing all the talking for you.
Most directors have multiple directorships this is paying off for DIL.

The marketing spend would only be on a new product, if you read what I wrote. But in saying that, a big marketing dump wouldn't be too bad of an idea if they are wanting to take market share off their competition whose pockets may not be as deep... anyone know what sort of market saturation we have for these products?

[Monty]

Does anyone expect updates at the AGM on NASDAQ, new product and what are their intentions for the $80m plus sitting in the bank? Market expansion into Asia and Europe (strong penetration into Asia and Europe would be useful is there is a second product being developed (about o be released??)

Is restatement now 100% behind them?

can we view online or listen to the AGM via a phone hookup?

Any other key issues?

[Carpenterjoe]

Does anyone expect updates at the AGM on NASDAQ, new product and what are their intentions for the $80m plus sitting in the bank? Market expansion into Asia and Europe (strong penetration into Asia and Europe would be useful is there is a second product being developed (about o be released??)

Is restatement now 100% behind them?

can we view online or listen to the AGM via a phone hookup?

Any other key issues?

I'm thinking restatement will be addressed, with a strong message of its over, time to move on.

I wouldn't be hopeful about new products, that will happen whenever in occurs.

I'm thinking uptake on the windows product will be addressed.

[robbo24]

http://www.boardbooks.com/news-events/in-the-news/archive/2014

There's some nice tidbits here about new clients and the likes.

[Carpenterjoe]

http://www.boardbooks.com/news-events/in-the-news/archive/2014

There's some nice tidbits here about new clients and the likes.

Thanks Robbo

From an article in May.

"According to the 2012 Board Practices Report from Deloitte & Touche LLC, more company boards are using board books and doing away with paper: two-thirds, or 66 percent of public companies surveyed said their boards were using a board portal in 2012."

The opportunity in the market is well and truly shrinking,

"Some 70 percent of Fortune 400 companies are using Diligent Board Books, including Exxon Mobile Corp., Walmart and J.P. Morgan"

"More than 100 of the nation’s largest insurance companies are protecting their sensitive information by using Diligent Board Books"

Sounds like the product and service they offer is right up there.

I'm thinking Diligent cash pile will be applied to acquisitions at some stage(years away), good way to grow, start purchasing clients.

[Monty]

Thanks Robbo


The opportunity in the market is well and truly shrinking,

.

I am not so sure that is the case
a quick google search found that in 2007 there were 11,408 publically listed companies in the AMericas, 20,627 in Asia Pacific, and 14,474 in Europe, Africa and Middle east. That is (in 2007) a total of 46,509 publically listed companies listed on exchanges world wide.

Add into these numbers the private companies, Government organisations, education institutions (9,000 universities), Hospitals (18,000), churches, local authorities and I think that Diligent is merely touching the tip of a massive market. Diligent are servicing something in the order of 3,500 companies. True there are competitors, but from what I have read Diligent is the market leader.

[Harvey Specter]

And remember each large multinational has subsidaries. A list for Coke:
http://www.sec.gov/Archives/edgar/data/21344/000119312508041768/dex211.htm

My guess is that every listed company would have on average 10 subsidaries. Now they wont necessarily have different boards (requiring extra licenses) but the big ones will.

[Monty]

I did not realise a big company like Coca-Cola was so large, and then at the bottom of that table it noted amongst other thing 180 consolidated wholly owned foreign companies. Large international banks would have large structures and like coke companies within companies spread across the globe. it seems that there are around an average of 20 Diligent users per company. surely the ambition of Diligent must be to increase and leverage off the existing 75,000 users (across the 2500 client agreements) to 750,000 users maybe via the new product. I keep wondering if there is a road block to the exponential growth that MIGHT be possible.


I continue to have faith that something exciting is in the pipeline.

[Carpenterjoe]

I am not so sure that is the case
a quick google search found that in 2007 there were 11,408 publically listed companies in the AMericas, 20,627 in Asia Pacific, and 14,474 in Europe, Africa and Middle east. That is (in 2007) a total of 46,509 publically listed companies listed on exchanges world wide.

Add into these numbers the private companies, Government organisations, education institutions (9,000 universities), Hospitals (18,000), churches, local authorities and I think that Diligent is merely touching the tip of a massive market. Diligent are servicing something in the order of 3,500 companies. True there are competitors, but from what I have read Diligent is the market leader.

I think the term "market leader" is debatable, companies like board effect (2200 plus clients), Directors Desk and board vantage would definitely argue that. Board vantage have three products that cater from directors to leadership teams to dispersed teams. (I'm not sure if diligent have this diversity in the product they offer, they might?). With board vantage having clients like Facebook, linked in, UPS I would be careful not to loose sight of the competitions penetration.

There is defiantly room for growth, but it will become more difficult and I think the acquisition concept shouldn't be lost.

Hopefully diligent are targeting large user clients and hopefully we can get the 100000 user in the next four to five quarters.

[iceman]

I think the term "market leader" is debatable, companies like board effect (2200 plus clients), Directors Desk and board vantage would definitely argue that. Board vantage have three products that cater from directors to leadership teams to dispersed teams. (I'm not sure if diligent have this diversity in the product they offer, they might?). With board vantage having clients like Facebook, linked in, UPS I would be careful not to loose sight of the competitions penetration.

There is defiantly room for growth, but it will become more difficult and I think the acquisition concept shouldn't be lost.

Hopefully diligent are targeting large user clients and hopefully we can get the 100000 user in the next four to five quarters.

I believe there is still huge growth opportunity in this market. Many of the Directors using Boardbooks (and competitors products) sit on multiple Boards and will be spreading the word. Then we have different layers within these companies, senior and middle management for example.
Next big market is Government and Local Authorities Boards and committees. The World is our oyster.

Yes carpenterjoe, acquisitions are definitely part of the concept and future speculation. The question is will it be by DIL or of DIL !!!

[Carpenterjoe]

Makes for some interesting reading, Staff unhappy and over paid.

http://www.glassdoor.com.au/Reviews/Diligent-Boardbooks-Reviews-E500821.htm

Not sure of relevance or reliability, but management of all companies need to be aware of sites like these, if they want to attract the best!

[robbo24]

Makes for some interesting reading, Staff unhappy and over paid.

http://www.glassdoor.com.au/Reviews/Diligent-Boardbooks-Reviews-E500821.htm

Not sure of relevance or reliability, but management of all companies need to be aware of sites like these, if they want to attract the best!

I love these fictional diaries, written by nerds pretending to be: (a) tormented geniuses who truly deserve more, or; (b) socially inept, unconfident no hopers who cannot seize the initiative in their own careers.

Interesting link CJoe, but I don't give much weight to garbage like this.