Diligent Board Member Services, Inc. Announces Second-Quarter 2014 Financial Results
AUGUST 8,2014 — Diligent Board Member Services, Inc. (“Diligent” or the “Company”) (NZX:DIL) (www.boardbooks.com), provider of the world’s most widely used secure board portal, today announced financial results for the second-quarter and six months ended June 30, 2014.
Alessandro Sodi, President and Chief Executive Officer of Diligent, commented on the results: “Revenue growth exceeded our expectations for the second-quarter contributing to total revenue growth of 35% for the first half of the year. Demand for our Boardbooks product remains strong as companies continue to embrace the use of electronic board portals worldwide. Looking forward, we have entered the second half of the year with solid momentum. We will remain focused on our growth strategies of entering new markets and expanding our product functionality and related use cases. We continue to see real opportunities in these areas and remain confident of our ability to grow in a disciplined way.”
SECOND-QUARTER 2014 FINANCIAL HIGHLIGHTS
Revenue: For the quarter ended June 30, 2014, total revenue was $US 20.3 million, an increase of 30% compared with $US 15.6 million in the prior year.
Gross Profit: Gross profit for the second quarter was $US 16.4 million, an increase of 30% compared with $US 12.6 million in the prior year. Gross margin was 80.5% compared with 80.8% in the second quarter of 2013.
Adjusted EBITDA: For the quarter ended June 30, 2014, Adjusted EBITDA was $US 5.9 million, an increase of 14% compared with $US 5.2 million in the prior year. Adjusted EBITDA margin was 29.1% compared with 33.2% in the prior year.
Net Income: For the quarter ended June 30, 2014, net income was $US 2.5 million, an increase of 12% compared with $US 2.2 million in the prior year. Diluted earnings per share was $US 0.02, compared with $US 0.02 in the prior year. Adjusted Net Income for second quarter was $US 3.5 million, an increase of 21% compared with $US 2.9 million in the prior year. Adjusted Net Income per diluted share was $US 0.03, compared with $US 0.02 in the prior year.
Balance Sheet: As of June 30, 2014, Diligent had $US 61.7 million in cash balances and short-term investments and no bank debt, an increase of $US 1.1 million as compared to the cash and short-term investments on March 31, 2014.
SECOND QUARTER AND OTHER RECENT BUSINESS HIGHLIGHTS
Boardbooks Users: During the second quarter of 2014, the number of Diligent Boardbooks® users increased by approximately 5,500, to over 82,600 users.
Revenue Retention Rate: In the second quarter, Diligent’s annual revenue retention rate (excluding upsells into the existing customer base) continued to exceed 95%; which the Company believes places it among the best-in-class for SaaS companies.
Charlotte, NC Development Center: During the second quarter, Diligent opened a new Charlotte, North Carolina development center. To date, the Company has hired 14 research and development employees to work in the Charlotte, NC office and plans to expand the number of R&D staff in this location to approximately 30 by the end of 2014.
HALF-YEAR 2014 FINANCIAL HIGHLIGHTS
Revenue: For the six months ended June 30, 2014, total revenue was $US 39.5 million, an increase of 35% compared with $US 29.3 million in the prior year.
Gross Profit: Gross profit for the six months ended June 30 ,2014 was $US 31.8 million, an increase of 35% compared with $US 23.6 million in the prior year period. Gross margin was 80.5% compared with 80.3% in the prior year.
Adjusted EBITDA: Adjusted EBITDA for the six months ended June 30, 2014 was $US 12.3 million, an increase of 29% compared with $US 9.5 million in the prior year period. Adjusted EBITDA margin was 31.2% compared with 32.5% in the prior year.
Net Income: For the six months ended June 30, 2014, net income was $US 4.4 million, an increase of 29% compared with $US 3.5 million in the prior year. Diluted earnings per share was $US 0.04, compared with $US 0.03 in the prior year period. Adjusted Net Income for the six months ended June 30, 2014 was $US 7.2 million, an increase of 33% compared with $US 5.4 million in the prior year. Adjusted Net Income per diluted share was $US 0.06, compared with $US 0.04 in the prior year.
Cash Flow: The Company generated $US 9.3 million in cash from operations and invested $US 2.7 million in capital expenditures, yielding free cash flow of $US 6.6 million for the six months ended June 30, 2014. Free cash flow was $US 5.8 million in the prior year period. Reconciliation of GAAP to non-GAAP financial measures has been provided in the financial statement tables included in this press release. An explanation of these measures is also included below under the heading “Non-GAAP Financial Measures.”
As of August 8, 2014, Diligent is initiating revenue guidance for the third-quarter 2014 and increasing guidance for the full year 2014, as follows: T
hird-Quarter 2014: The Company expects revenue to be between $US 20.7 million and $US 21.0 million, or an increase of 20% to 22% year over year.
Full Year 2014: The Company is increasing its annual revenue guidance to between $US 81.5 million and $US 82.5 million, or an increase of 26% to 27% over full year 2013, compared with the prior outlook for revenue of between $US 80.5 million and $US 82.0 million.
QUARTERLY CONFERENCE CALL
Diligent will host a conference call today at 9:30a.m. NZST (5:30 pm. USET) to review the Company’s financial results for the second-quarter and six months ended June 30, 2014. To access this call, participants should dial 0800-452-092 (New Zealand), 1-855- 327-6837 (U.S.) or +1-631-982-4565 (international). A live webcast of the conference call will be accessible from the investor relations section of Diligent’s website at http://boardbooks.com/investor-relations. A replay of this conference call can also be accessed through August 15, 2014, by dialing 0800-452-092 (New Zealand), 1-800-319-6413 (U.S.). The replay pass code is 78523.
Over 82,600 individual directors, executives and board teams worldwide rely on Diligent Board Member Services,Inc (NZX:DIL) to speed and simplify how board materials are produced, delivered, reviewed and voted on. Providing the world’s most widely used secure board portal via iPad, Windows devices and browsers – Diligent has pioneered ease of use, stringent security, and superior training and support since 2001. Diligent Boardbooks provides directors and management with immediate access to their most time-sensitive and confidential information along with the tools to review, discuss and collaborate on it. It also helps administrative staff accelerate production and delivery, and corporate executives streamline board communications and decisions. Diligent uses the Software-as-a-Service (SaaS) model to distribute its Diligent Boardbooks application to the market and maintain the security and integrity of its clients’ data. Under this model, Diligent offers annual renewable subscriptions for customer access to its Diligent Boardbooks product which is hosted on Diligent’s secure servers, and offers a complete suite of related services including training, support, data migration and data security/backup.
NON-GAAP FINANCIAL MEASURES
This earnings release presents Adjusted EBITDA, Adjusted Net Income, Adjusted Net Income per share, and Free Cash Flow information, which are provided to investors to supplement the results of operations reported in accordance with accounting principles generally accepted in the United States of America (“GAAP”). We define these terms as follows:
Adjusted EBITDA: operating income before depreciation and amortization expense, stock based compensation expense, costs associated with the investigation and restatement of our historical financial statements,and other costs, such as the CEO’s replacement awards and restatement bonuses.
Adjusted Net Income: net income before costs relating to non cash stock based compensation, costs associated with the investigation and restatement of our historical financial statements, and other costs, such as the CEO’s replacement awards and restatement bonuses, net of tax.
Free Cash Flow: cash flows provided by operating activities minus capital expenditures. These supplemental measures of the Company’s performance are not required by, or presented in accordance with GAAP. The Company’s management uses these non-GAAP financial measures internally in analyzing its financial results and believes they are useful to investors, as a supplement to the corresponding GAAP measures, in evaluating the Company’s ongoing operational performance and trends and in comparing its financial measures with other companies in the same industry, many of which present similar non-GAAP financial measures to help investors understand the operational performance of their businesses. However, it is important to note that the particular items the Company excludes from, or includes in, its non-GAAP financial measures may differ from the items excluded from, or included in, similar non-GAAP financial measures used by other companies in the same industry. Non-GAAP financial measures should not be considered in isolation from, or a substitute for, financial information prepared in accordance with GAAP. For a quantitative reconciliation of Adjusted EBITDA and Adjusted Net Income to the most directly comparable GAAP financial performance measure see Schedule 4: Reconciliation of GAAP to Non-GAAP Operating Results in this earnings release.
SAFE HARBOR STATEMENT
Statements made in this press release that state Diligent’s or management’s intentions, beliefs, expectations, or predictions for the future are forward-looking statements within the meaning of The Private Securities Litigation Reform Act of 1995, including without limitation Diligent’s revenue outlook for the third quarter and full year 2014. Readers are cautioned that these statements are only predictions and may differ materially from actual future events or results. All forward-looking statements are only as of the date of this press release and Diligent undertakes no obligation to update or revise them. Such forward-looking statements are subject to a number of risks, assumptions and uncertainties that could cause Diligent’s actual results to differ materially from those projected in such forward-looking statements. For example, if we do not successfully develop or introduce new product offerings, or enhancements to our existing Diligent Boardbooks offerings, or keep pace with technological changes that impact the use of our product offerings, or suffer security breaches or service interruptions, we may lose existing customers or fail to attract new customers and our financial performance and revenue growth may suffer. Factors which could cause our actual results to differ materially from those projected in forward-looking statements include, without limitation, economic, competitive, regulatory and technological factors affecting Diligent Board Member Services Inc.’s operations, markets, products, services and other factors set forth in the Company’s Risk Factors included in its Annual Report on Form 10-K/A filed with the SEC on May 20, 2014.