QUARTER: DIL: Quarterly Update - Second Quarter 2010

13 Jul 2010 8:30 am

DIL 13/07/2010 QUARTER

REL: 0830 HRS Diligent Board Member Services INC (NS)

QUARTER: DIL: Quarterly Update - Second Quarter 2010

DILIGENT BOARD MEMBER SERVICES, INC. Quarterly Update -- Second Quarter 2010 (all amounts in USD) Issued: 13 July 2010

To download the full PDF version with graphs of this Quarterly Update, go to www.boardbooks.com and select the "Investor Center" tab, then click on "Shareholder Reporting," then "2010 2nd Quarter Report."

REVENUE -- Second Quarters Compared

Net Sales Revenue - $US (000s) 2010 2nd Quarter: 1,919 2009 2nd Quarter: 1,156 % Change Quarterly: 66%

2010 YTD: 3,666 2009 YTD: 2,154 % Change YTD: 70%

Notes: 1. Net Sales Revenue definition: Revenue from Annualized License Fees and Installation Fees recorded ratably over the contract period.

LICENSE FEES -- Second Quarters Compared

Additional Annualized License Fees (ALF) - Net - $US (000s)

2010 2nd Quarter: 690 2009 2nd Quarter: 465 % Change Quarterly: 48%

2010 YTD: 1,281 2009 YTD: 993 % Change YTD: 29%

Foreign Exchange Adjustments

2010 2nd Quarter: (29) 2009 2nd Quarter: 53 % Change Quarterly: n/a

2010 YTD: (53) 2009 YTD: 46 % Change YTD: n/a

Cumulative Annualized License Fees (ALF) - Period End - $US (000s)

2010 YTD: 7,549 2009 YTD: 4,885 % Change YTD: 55%

Upgrades/(Downgrades) included in New ALF - $US (000s)

2010 2nd Quarter: 115 2009 2nd Quarter: 78 % Change Quarterly: 47%

2010 YTD: 198 2009 YTD: 180 % Change YTD: 10%

Notes: 1. Foreign exchange adjustments for prior period sales are reported quarterly and included only in Cumulative ALF numbers. 2. Upgrade/Downgrade numbers are included in Net ALFs calculation.

LICENSE SALES -- Second Quarters Compared

Net License Agreements

2010 2nd Quarter: 36 2009 2nd Quarter: 20 % Change Quarterly: 80%

2010 YTD: 72 2009 YTD: 39 % Change YTD: 85%

Cumulative License Agreements -- Period End

2010 YTD: 356 2009 YTD: 213 % Change YTD: 67%

Notes: 1. Because license values constantly fluctuate, we consider License Sales to be a "growth indicator." We place greater importance on Net Sales Revenue and Annualized License Fees, which we consider to be key "growth benchmarks." 2. Net License Agreements definition: Signed License Agreements net of cancellations and reclassifications.

OTHER METRICS -- Second Quarters Compared

Annualized License Fees By Sales Region at Period End - $US (000s)

US - 2010 2nd Quarter: 479 US - 2009 2nd Quarter: 312 % Change Quarterly: 54%

Canada - 2010 2nd Quarter: 77 Canada - 2009 2nd Quarter: 66 % Change Quarterly: 17%

UK/Asia Pac - 2010 2nd Quarter: 134 UK/Asia Pac - 2009 2nd Quarter: 87 % Change Quarterly: 54%

Q2 Total - 2010 2nd Quarter: 690 Q2 Total - 2009 2nd Quarter: 465 % Change Quarterly: 48%

Total Sales Personnel (as of June 30th) 2010 2nd Quarter: 8 2009 2nd Quarter: 9 % Change Quarterly: -11%

LICENSE FEE GROWTH

Additional Annualized License Fees (ALF) - By Quarter - $US (000s)

2010 2nd Quarter: 690 2010 1st Quarter: 591 2009 4th Quarter: 749 2009 3rd Quarter: 656 2009 2nd Quarter: 465 2009 1st Quarter: 528 2008 4th Quarter: 567 2008 3rd Quarter: 512 2008 2nd Quarter: 490 2008 1st Quarter: 321 2007 4th Quarter: 405 2007 3rd Quarter: 217 2007 2nd Quarter: 252 2007 1st Quarter: 61 2006 4th Quarter: 182 2006 3rd Quarter: 219 2006 2nd Quarter: 87 2006 1st Quarter: 62

Cumulative Annualized License Fees (ALF) - By Quarter - $US (000s)

2010 2nd Quarter: 7,549 2010 1st Quarter: 6,888 2009 4th Quarter: 6,321 2009 3rd Quarter: 5,556 2009 2nd Quarter: 4,885 2009 1st Quarter: 4,367 2008 4th Quarter: 3,846 2008 3rd Quarter: 3,382 2008 2nd Quarter: 2,870 2008 1st Quarter: 2,381 2007 4th Quarter: 2,060 2007 3rd Quarter: 1,655 2007 2nd Quarter: 1,439 2007 1st Quarter: 1,187 2006 4th Quarter: 1,125 2006 3rd Quarter: 944 2006 2nd Quarter: 725 2006 1st Quarter: 637

Note: Totals reflect Additional Quarterly ALF and foreign exchange adjustments to prior periods' cumulative ALF.

SECOND QUARTER MANAGEMENT COMMENTARY

Diligent Board Member Services, Inc. (Diligent) announces the following sales results for the quarter ended 30 June 2010.

Second Quarter Results

- Net Sales Revenue was $US 1.92 million for the Second Quarter of 2010, compared to $US 1.16 million for the Second Quarter of 2009 -- a growth of 66%.

- Annualized License Fees increased $US 0.69 million for the Second Quarter of 2010, compared to $US 0.47 million for the Second Quarter of 2009 -- an improvement of 48%.

- Total Annualized License Fees were $US 7.55 million at the end of the Second Quarter of 2010, compared to $US 4.89 million at the end of the Second Quarter of 2009 -- a growth of 55% annual recurring revenue.

- A net of 36 New Licenses were added during the Second Quarter of 2010 which compares to 20 for the Second Quarter of 2009 -- an improvement of 80%.

Performance Review

Diligent is pleased to report that the Q2 2010 net added license fees represent the second highest quarterly figure in its eight year history. In addition, what is most encouraging about this result is the fact that it comes in what traditionally has been a slow quarter in the yearly sales cycle and this quarter's $US 0.69 million in Annualized License Fees is well in excess of the $US 0.47 million achieved in the second quarter of 2009.

This result continues the strong sales momentum which has been building over the past three (3) quarters, and demonstrates the continued success in the marketplace of the Diligent Boardbooks portal.

At the half way mark of the 2010 year Diligent has added license fees of $US 1.28 million, up significantly over the $US 0.99 million from the same time in 2009 and $US 0.81 in 2008.

An important point to note is that the company's growth has occurred while the number of sales staff has remained constant at eight in 2010, versus nine in 2009 and sixteen in 2008. This reflects a number of factors including:

- Sales staff have become more skilled at selling the Boardbooks product;

- Diligent Boardbooks growing reputation has facilitated the marketing effort to increase inbound inquiries/leads for our product;

- Diligent's target market is showing increasing sophistication and acceptance of the Software-as-a-Service (SaaS) model and technology offered by Diligent;

- Potential clients are demonstrating greater understanding of the benefits of board portals in terms of time, space and energy of managing board and administration processes online.

In addition to experiencing accelerated acquisition rates, Diligent notes that signings from client referrals are making up an increasing proportion of its sales. These referral sales mean Diligent is able to grow its revenue base with greatly reduced marginal customer acquisition costs.

Also of note is that during Q2 2010, Diligent saw significant sales growth in both the UK and the Canadian region, with relatively modest expense. This growth in sales outside the company's core market of the US further validates Diligent's position as the global leader in board portals. The potential to further penetrate into global markets remains a real growth opportunity.

Another key driver behind the latest performance is that existing users are upgrading their services - this alone added $US 0.12 million to the Q2 2010 net added license fees, the highest level of upgrades that Diligent has ever recorded in a single quarter.

Diligent's management is continuing to see an increasingly diverse mix of industry groups signing up to use its Boardbooks board portal -- with the private sector and organizations associated with Healthcare and Education featuring strongly among the new signings. Due to confidentiality arrangements, Diligent is not able to disclose its full list of clients -- many of whom are well-known "blue chip" companies.

With the addition of 36 new license agreements from the Second Quarter, Diligent now has 356 worldwide clients and over 9,500 users of its Boardbooks products. Diligent's income consists of subscription-based revenue that recurs each year and increases with each new license agreement or upgrade. With these Second Quarter sales results, Diligent's cumulative Annualized License Fees now stands at $US 7.55 million.

Summary

With a 70% revenue increase over last year's half year results, Diligent continues to deliver consistent growth in what remains a very sluggish worldwide economy. Encouragingly, sales momentum generated in the first two quarters of this year is expected to continue through the remainder of 2010.

Diligent's continuing ability to significantly expand its client base reinforces its position as the market leader in providing company directors, executives and administrators with an easy-to-use system of compiling, viewing, monitoring and archiving board materials within a SaaS model.

Looking forward, sales momentum continues to build nicely and Diligent continues to be focused on ensuring that the entire organisation is performing at its fullest potential. As a result, Diligent remains firmly on track to deliver on its stated aim to achieve "cash flow" break even in Q3 2010.

Note: In addition to historical information, this quarterly update contains "forward-looking statements." The words "forecast," "estimate," "project," "intend," "expect," "should," "believe" and similar expressions are intended to identify forward-looking statements. These forward-looking statements involve known and unknown risks, uncertainties, assumptions and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. The forward-looking statements included herein are made only as of the date of this quarterly update, and we do not undertake any obligation, other than as required by law and the NZX Listing Rules, to release publicly any revisions to such forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events. End CA:00197187 For:DIL Type:QUARTER Time:2010-07-13:08:30:23

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