Strong US sales boost Diligent's profit

Brian Stafford, chief executive, Diligent.

Governance software developer shows best quarter for sales in two years and expects faster revenue growth.

Diligent Corp, the governance software developer, lifted first-half profit 11 per cent as it generated stronger sales in the United States in the second quarter and is picking faster revenue growth through the rest of the year.

Net profit after minorities rose to US$4.9 million ($7.5 million), or 4c per share, in the six months ended June 30, from US$4.4 million a year earlier, the New York-based, NZX-listed company said.

Revenue rose 19 per cent to US$46.9 million, in line with expectations from Forsyth Barr, after Diligent reported its best quarterly sales performance in two years.

The company increased its forecast for annual revenue to be between US$98.5 million and $99.2 million in the 12 months ending December 31, up from a previous range of between US$97 million and $99 million, though a strengthening US dollar was a headwind to sales.

"We are building solid momentum in the core business. We had a strong second quarter, highlighted by revenue growth which exceeded the top end of our guidance," said chief executive Brian Stafford.

"We had our best quarter in new sales in two years, both overall and in the Americas, driven by continued strong demand for Diligent Boards and improved execution on our growth initiatives."

Diligent is ramping up its investment on sales and marketing, and research and development as it seeks to grow the value of the business.

It plans to launch a new Diligent Teams product, to let companies use the firm's workflow and security software to improve collaboration, by the end of the year. Stafford told analysts the early feedback from customers was positive.

The company, which has faced censure by the sharemarket three times in the past two years, plans to add a new directors and officers questionnaire module to its BoardBooks governance product next month, and will have a better idea about potential upselling from the new module once it's available to customers, Stafford said.

"We have a great core boards product, and we're creating additional modules to upsell and grow."

Diligent reported a net cash outflow of US$6.5 million in the half, including an operational outflow of US$475,000 as some invoicing was delayed by a new IT system. The company had cash and equivalents of US$64.3 million as at June 30.

Stafford said Diligent is still looking at potential acquisitions.

The company's shares closed down 1.4 per cent at $5.65 yesterday.

Diligent Corp

• Six months ended June 30.
• US$4.9 million net profit, up from US$4.4 million.
• US$46.9 million revenue, up 19%.
• US$98.5-$99.2 million forecast for annual earnings.