Diligent posts 14pc annual profit fall

Diligent chief executive Brian Stafford.

Diligent Corp, the governance software app developer under a takeover offer, posted a 14 percent decline in annual profit as it ramped up spending on marketing and research and development.

The New York-based, NZX-listed company reported net profit after minorities of US$7.8 million, or 6 cents per share, in calendar 2015, down from US$8.6 million, or 7 cents a year earlier, it said in a statement. Revenue climbed 20 percent to US$99.3 million as the company lifted net client agreements by 30 percent to 3,900. The company also had 80 customers signed up to its D&O add-on product and has made its new Teams service available on a limited basis.

Diligent increased spending on sales and marketing 59 percent to US$22 million in the year while R&D costs climbed 36 percent to US$13.1 million.

Earnings before interest, tax, depreciation and amortisation fell 12 percent to US$15.8 million, missing Forsyth Barr analyst Blair Galpin's estimate for ebitda of US$18.3 million on revenue of US$98.7 million. The ebitda figure includes stock-based compensation, which more than doubled in the year to US$7.8 million. On Diligent's preferred adjusted ebitda measure, earnings were flat at US$24.3 million.

The company is currently facing a takeover offer from US venture capital firm Insight Venture Partners, which is offering US$4.93 a share, a 31 percent premium to Diligent's trading price before the bid emerged.

As a company incorporated in Delaware, the deal requires a simple majority of common shareholders and also needs 60 percent approval by preference shareholders and other regulatory approvals.

Diligent canned a planned analyst briefing on the earnings because of the takeover offer, which it expects to complete in the second quarter of this year.

The shares last traded at $7.08 on the NZX, a discount to the offer price, which at the current exchange rate equates to $7.43 a share.