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Diligent, online board papers provider, moves closer to positive cash flow

Tuesday 13th April 2010

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Diligent Board Member Services, the New Zealand-listed, New York-headquartered provider of online services to company boards, reported a 58% increase to $6.88 million in annualised licence fees.

The company’s 12 person product development arm in Christchurch helps provide Diligent’s income through subscription-based revenue that recurs each year and increases with each new license agreement or upgrade. It provides company directors, executives and administrators with an easy-to-use system that compiles, views, monitors and archives board materials.

Diligent aims to be cash flow positive in the third quarter of 2010, and for the first quarter of 2010 new sales growth lifted 75% to US$1.75 million from just under US$1 million as its additional license sales jumped to 36 from 19.

“With annualised license fees now approaching US$7 million, Diligent has delivered strong revenue growth with little increase in costs,” the company said. “This reflects the inherent leverage in its software-as-a-service business model and Diligent’s position as the highest quality, best board portal solution on the market.”

Diligent now has 320 worldwide clients and 8,500 users of its Boardbooks products across blue chip and private companies, as well as healthcare and educational signings.

McDouall Stuart analyst Roger Paterson said Diligent’s improving numbers confirm the ‘buy’ recommendation the brokerage made a month ago. ‘Results are in-line with predictions,” he said.

There are a reasonable number of free float Diligent shares available but that not many are being traded at the moment, Paterson said. “Most people who have them have gone through the tough times with the share price and are now looking to see that out,” he said.

The shares rose 8.5% to 51 cents on the NZX today, having last traded a week ago. A year ago the stock was at 10 cents a share, having originally listed in last 2007 at $1.

The company could be attractive as a takeover option, particularly for a bigger, global media group with existing interests in putting together company books.

“For anyone to replicate what Diligent’s done, it would be cheaper to buy them out,” Paterson said. He speculates that the people to watch are the Wall Street bankers who invested in Diligent late last year. “They’ll have an end game in mind, they’re the ones to watch for any indication.”

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