Diligent’s pace of growth slows in 1Q, client retention dips on M and A activity

Wednesday 16th April 2014

Diligent Board Member Services, the governance app developer which was forced to restate its financial statements, has slowed its pace of new customer growth in the first three months of the year, and had a small dip in client retention amid increased merger and acquisition activity in the US.

The New York-based, New Zealand-listed company added a net 113 new client agreements in the three months ended March 31, taking its total number of customers to 2,563. That's up 28 percent from a year earlier, though its new additions shrank from 201 in the first quarter of 2013.

Diligent's customer retention rate slipped to 96 percent from 97 percent, with a "record level of client merger and acquisition activity or situations in which the board operations ceased during the first quarter, representing approximately two-thirds of client cancellations during the quarter and occurring primarily within its US client base," the company said. Revenue retention stayed above 97 percent.

The company is emerging from protracted administrative errors that forced it to restate its accounts for the 2010 through 2013 financial years after incorrectly recognising revenue, having also had to backtrack after granting too many options to chief executive Alex Sodi.

Diligent continued to build its cash balance, adding a further US$4.5 million in the quarter to US$60.6 million. The company has been mulling what to do with the cash, and last month Sodi said the company is looking at growth opportunities, including potential acquisitions.

The company added six staff to its research and development in the quarter as it continues to work on new product development.

The shares fell 1.7 percent to $4.05 yesterday, and have increased 6.6 percent this year.

BusinessDesk.co.nz

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