Diligent Boardbooks IPO

[JayRiggs]

DIL has been really bad for me...... come on go up already!!!! :mad ;:
Any idea when they will release the restated statements?

12th December, less than 2wks to go now.
It's been really bad for me too, hang in there!

[silu]

Been watching for a while but at no stage did I get a buy signal. Hard to see that trend reversing anytime soon.

[ddrone]

Been watching for a while but at no stage did I get a buy signal. Hard to see that trend reversing anytime soon.

Likewise, every buy-point I've established has fallen, glad to be holding out so far.

[kevjws]

12th December, less than 2wks to go now.
It's been really bad for me too, hang in there!

So you reckon this share will go up once the restated statements are announced?

[robbo24]

So you reckon this share will go up once the restated statements are announced?

It depends upon outcome, surely...

[kiora]

From loved to unloved ,the story unfolds, who is going to write the book ?

[kevjws]

Oh god sakes.....its going down again!!!! :scared:

[Theracay]

The great thing about being out of the stock is you won't be pulling your hair out before the restatements.

Instead you can just wait to see how it turns out. There's plenty of time to reenter if its positive.

In my humble opinion, putting a date on the restatement pretty much confirmeduncertainty till then which meant very low chance of a new uptrend developing until that date.
In the meantime there was plenty of other prospects to dip into.

[robbo24]

From loved to unloved ,the story unfolds, who is going to write the book ?

You are, by the looks of it:

http://oi41.tinypic.com/213gh39.jpg

[JayRiggs]

So you reckon this share will go up once the restated statements are announced?

I don't know. Share price is out of our control, so I'm just gonna wait till the restatements or new announcements and see what happens.
I'm not selling at this price.

[robbo24]

WONDER IF RRR is still holding in there.

He's now renting a house and driving a 1985 Mazda 323.

[Wolf]

I guess this illustrates the need for stop losses/ cutting losses. So glad i got out when i did. I still believe in DIL but my gut feeling is that there is something in the closet...
I wonder what Couta is up to.

[winner69]

......... I still believe in DIL but my gut feeling is that there is something in the closet...the signs have been there with this years cash flows (so far) about the same as last year .... and this is a high growth company I am told

[kiora]

Oh bugger ! its already copyrighted !

[Lorne Ranger]

Pretty solid day considering the predictably unspectacular report. I'm guessing most people knew what the report would show, knew that any action so far was from October onwards, and realised the story hasn't changed from this morning.

Bodes well for next week and beyond but it may depend on how long people will wait for anotehr announcment before the next figures are released. Might be a little more scrutiny on sales figures for the next quarterly than before.

Those that dont really buy into the potential might present some good top up opps over the coming week, but I dont see it dropping too far, if at all, as the potential is the story and that seems to be nicely on track, so I suspect a few more buyers (me included) ready to snap up a few more. Maybe Dec 4 will be a mini test of investor confidence.

[psychic]

Pretty solid day considering the predictably unspectacular report. I'm guessing most people knew what the report would show, knew that any action so far was from October onwards, and realised the story hasn't changed from this morning.

Bodes well for next week and beyond but it may depend on how long people will wait for anotehr announcment before the next figures are released. Might be a little more scrutiny on sales figures for the next quarterly than before.

Those that dont really buy into the potential might present some good top up opps over the coming week, but I dont see it dropping too far, if at all, as the potential is the story and that seems to be nicely on track, so I suspect a few more buyers (me included) ready to snap up a few more. Maybe Dec 4 will be a mini test of investor confidence.

Er, false hope for the dil holders LR - think you mean for this post to be on PEB .. :}

[winner69]

I agree - was a pretty strong day for DIL

And the other comments are what DIL followers would love to hear

[Lorne Ranger]

Er, false hope for the dil holders LR - think you mean for this post to be on PEB .. :}

Haha oh my God youre right, I'll report it where it meant. Crack into the weekend wine too early and this is what happens!!

Sorry DIL holders, (of which I am still one), no sarcasm intended.

[Leica]

One hopes that a percentage of the additional staff are sales oriented, and have been able to get a few new orders on the books. However I think it is unrealistic to expect ongoing incremental sales to be as consistently large as they were on a small base, since the incremental base is so much larger. I still believe the business model is a good one. Improved management - they have the cash to get calibre staff - could mature the company. The other hopeful on the horizon is the relocation into NASDAQ territory is a strong indication a listing is on the horizon. Hoping the new CFO can get the house in order. Seems odd that a Big 4 CA firm is taking so long. Reflects poorly on Deloittes. Share price reflects demoralised mood. All hinges on the report while we wait with baited breath but I'm still long.

[winner69]

Seems odd that a Big 4 CA firm is taking so long. Reflects poorly on Deloittes. .

Maybe Deloittes found something in the closet that Wolf mentioned .... that would put them in good light eh

[Harvey Specter]

Maybe Deloittes found something in the closet that Wolf mentioned .... that would put them in good light ehnope. If they have, dil have made a false announcement.

[winner69]

nope. If they have, dil have made a false announcement.

Deloittes in good light I was meaning as Leica was saying Deloittes taking so long wasn't a good look for them

[Wolf]

nope. If they have, dil have made a false announcement.
Not really, they have told us about the reaudit and do not have to tell us anything until the finish it? There could be something in the closet alright. I really just got pissed off at the constant deadline extensions. What i'm thinking is that they wont be done come december by their terrible track record.

[Corporate]

Seems odd that a Big 4 CA firm is taking so long. Reflects poorly on Deloittes.

What makes you think the current auditors is holding up the restatement?

Remember:

1. Management prepared the materially misstated finanical statements that the board approved

2. Management must prepare the restated financial statements for 2010, 2011 and 2012.

3. The past auditor missed the revenue recognition issue which I would imagine makes it hard to 'rely' on any of their previous audit work. Deloitte will probably need to re-audit much of the 2010, 2011 and 2012 financial statements.

[False Profit]

He's now renting a house and driving a 1985 Mazda 323.

I had one of those...the pop up lights. The car not the house ;)

Disc - Holding with gritted teeth and looking to buy more....

[Baddarcy]

What makes you think the current auditors is holding up the restatement?

Remember:

1. Management prepared the materially misstated finanical statements that the board approved

2. Management must prepare the restated financial statements for 2010, 2011 and 2012.

3. The past auditor missed the revenue recognition issue which I would imagine makes it hard to 'rely' on any of their previous audit work. Deloitte will probably need to re-audit much of the 2010, 2011 and 2012 financial statements.

I agree with Corporate, also DIL has told us they are going through each transaction line by line, 3-4 years worth. I think your reading too much into the time it is taking, it is just a big job that takes time. Also if the they had found anything they must tell the market, given they have not, there is almost certainly nothing.

[Baddarcy]

Disc - Holding with gritted teeth and looking to buy more....

Yup me too..

Different topic but ...did you considered changing your name? different spelling and different word with a different meaning i know, but...

[False Profit]

Yup me too..

Different topic but ...did you considered changing your name? different spelling and different word with a different meaning i know, but...

Yeah. How about you change tours to Bad Arsy? Different spelling and different word with a different meaning i know, but...

[Mista_Trix]

Zing !!

Now, now, play nice.

[Baddarcy]

Yeah. How about you change tours to Bad Arsy? Different spelling and different word with a different meaning i know, but...

You appear to have taken my question the wrong way, sorry it was not meant to offend.

[False Profit]

You appear to have taken my question the wrong way, sorry it was not meant to offend.

No no. I'll do the apologising. I work in an environment where banter comes thick and fast. I've grown a lovely thick skin because of it :) but it means I'm less than considerate. Ask all the women I've made cry before now...

Looks like we need to make a DIL cum CNU thread. I thought DIL couldn't get much lower but what do I know. I'm holding off from buying Chorus too since that is reaching for the bottom. When the time is right I may just jump in for both.

[blobbles]

Ahhh, finally I updated my DIL estimates to include tax and cost of funds (completely and ashamedly missed before!).


5126

Based on this, we are way into undervalued territory still. We are now almost the same as a regular investment would make @7% and way above any bank based returns, considering the current price is after tax! My "Magic formulae" assumes a 5% return which is about what you could expect from sensibly managed capital funds at the moment. So lets just forget that they might grow by 25% next year (in the least if the downtrend is assumed) and that they may introduce new products etc and we are sitting on about the right SP right now. :)

In fact it is slightly above, so everyone keep selling :)

[noodles]

Ahhh, finally I updated my DIL estimates to include tax and cost of funds (completely and ashamedly missed before!).


5126

Based on this, we are way into undervalued territory still. We are now almost the same as a regular investment would make @7% and way above any bank based returns, considering the current price is after tax! My "Magic formulae" assumes a 5% return which is about what you could expect from sensibly managed capital funds at the moment. So lets just forget that they might grow by 25% next year (in the least if the downtrend is assumed) and that they may introduce new products etc and we are sitting on about the right SP right now. :)

In fact it is slightly above, so everyone keep selling :)

Blobbles,

Your eps estimates are significantly higher than broker estimates.
Fy13
blobbles .26
brokers .13

Either you or the brokers have got it wrong.

[Citizen Erased]

I feel like such a muppet for adding to my DIL holding at $4.26. At least I haven't bet the house (or car) on it. It's all a learning experience I guess.

[ddrone]

I feel like such a muppet for adding to my DIL holding at $4.26. At least I haven't bet the house (or car) on it. It's all a learning experience I guess.

I think everybody here is watching carefully and hoping get back in for a rise back well past $5, "assuming" that's a reasonable expectation you've got nothing to worry about. As frightening as it may look right now.

[Lorne Ranger]

I must admit Im a little surprised at recent falls below $4. Regardless of the equations to work out paper value etc, why are people cashing out now presumably after waiting so long for the restatement mess to resolve, or after having bought in the last 6months expecting a rise. With the restatement due in less than a fortnight, seems a weird time to leave. I can only assume people are seeing better opportunities elsewhere, getting nervous about the next sales figures after several quarters suggesting slowing growth (but growth nonetheless of course), and/or that the restatement will just be too wet to catch fire. Either way its fair to say it is patience testing. Fortunately patience seems to be the number one attribute suggested by our guru contributors so at least thats in our favor.

[blobbles]

Blobbles,

Your eps estimates are significantly higher than broker estimates.
Fy13
blobbles .26
brokers .13

Either you or the brokers have got it wrong.

Correct. And if I was a betting man, I would say that it was me, given their credentials. :confused::scared:

My figures are annualised for the current time based on growth below:

5128

I am assuming a dropping off of growth as stated but I think next year will be a lot better than this suggests i.e. I expect potentially 6-10% revenue growth per quarter, in reality. After next year I don't predict as it is not open to useful speculation based on current data as anything could change. But as I expect a new product not so far away, I think there might be some serious upside to it. Citizen Erased - give them time to make your money back :)

[couta1]

Hi People,I'm no Guru but have got patience when it comes to this pup mind you sitting on 7.16 average and 40k paper loss you've got to have patience aye, I would be excited CE if mine were at 4.26, think ill be breaking even in around 2 years hopefully must keep positive having held CNU and Still holding Dil

[couta1]

Thanks Moosie, Yes I've been giving your suggestion some serious consideration lately even if it meant selling some Rym to do it but as you say only on positive news,cheers

[Roadrunner]

He's now renting a house and driving a 1985 Mazda 323.

Haha!love the humour and I think we have needed that this year!As posted a while back I sold some DIL(most of them at one point) and bought into PEB,which has helped to make up some of the recent losses.In the last few weeks I have been buying back into DIL and am now 75/25 weighted in favour of DIL on a $4.39 average.I`m confident that the restatement will mark the beginning of the end of this downward slide.If the bottleneck in processing customers, due to shortage of staff, was a major issue in the slowdown of growth (in the rest of the world numbers at least) then that may take a while to kick in I suspect.Also a whopper of a bill from Deloittes is to be expected.I am very positive about the prospects for next year and I hope that the directors of DIL have acknowledged that this fiasco could have been handled a lot better and,in particular,that we are all kept better informed with both good and not so good news.Hopefully early next year a great new product will lift the spirits....By the way the Porsche is still for sale :)

[winner69]

B0red I was so had another look at how similar the DIL price trend is compared to the market darling of old in RAK

Seems that we are on track for a resurgence in the next month ..... the little spike in the highlighted circle - coincidently restatement news ....but it may be short lived before the down trend starts again.

All a bit spooky eh ..... of course there is no similarity between DIL and RAK except being darlings ... once

[robbo24]

B0red I was so had another look at how similar the DIL price trend is compared to the market darling of old in RAK

Seems that we are on track for a resurgence in the next month ..... the little spike in the highlighted circle - coincidently restatement news ....but it may be short lived before the down trend starts again.

All a bit spooky eh ..... of course there is no similarity between DIL and RAK except being darlings ... once

I've been doing some reading about the effect of restatements on shareprice.. Most of the examples and case studies refer to relatively short periods of time between announcement of restatement and restatement.

What was the delay between RAK announcement and restatements?

[winner69]

I've been doing some reading about the effect of restatements on shareprice.. Most of the examples and case studies refer to relatively short periods of time between announcement of restatement and restatement.

What was the delay between RAK announcement and restatements?

Was meaning to say ... id DIL has a spike like RAK did it is coincidently the timing of the DIL restatements (when everybody is saying the price will recover). I don't know what caused the spike in RAKs case.

Funny thing is that both RAK and DIL reached their peaks in May/June ..... just coincidence I suppose

[robbo24]

Was meaning to say ... id DIL has a spike like RAK did it is coincidently the timing of the DIL restatements (when everybody is saying the price will recover). I don't know what caused the spike in RAKs case.

Funny thing is that both RAK and DIL reached their peaks in May/June ..... just coincidence I suppose

The information I read was that once restatements are announced then the SP drops suddenly then continues to drop at much slower but steady rate - as seen with DIL.

Then, as per your prediction there is a surge, followed by slow decline.

However, the case studies and examples that I read seem to be much smaller in scale and in much shorter time frames.

The DIL situation may be such that the dwindling shareprice has already been through the normal motions of a restatement - I just wonder where it will be in a year.

[winner69]

The information I read was that once restatements are announced then the SP drops suddenly then continues to drop at much slower but steady rate - as seen with DIL.

Then, as per your prediction there is a surge, followed by slow decline.

However, the case studies and examples that I read seem to be much smaller in scale and in much shorter time frames.

The DIL situation may be such that the dwindling shareprice has already been through the normal motions of a restatement - I just wonder where it will be in a year.

Interesting stuff robbo .... maybe some academic studies have been done as well.

I feel that the only real people interested in what the restatement brings is the remaining current shareholders. If it bad they will desert the ship, if it is positive they might get excited and buy some more at perceived cheap
prices

For the rest of the market the damage has been done .... reputation/trust and all that sort of stuff ..... and not many will be that interested ..... maybe a DIL has done its dash / had its days of glory .... and as such no great sustained buying

Being a 'pariah of the stockmarket' is not a good place to be

Oh heck, what have I said here .... must dash now before the knives come out.

[robbo24]

There's a fair bit of information published by universities - mostly related to the mid-late 2000s: https://www.google.co.nz/#q=restatement+effect+on+stock+price

I'm not sure that reputation/trust is so damaged. I don't think there was any intentionally deceptive or criminal behaviour. Naivety in relying on their external advisors (not that naivety is an excuse).

I think the real kicker for restatements is the fact that you can't rely on their financial statements for 3 years so how can you legitimately value/appreciate the stock - I think that's the real issue for current and potential investors. Usually a trading hold is implemented until the restatement is made, isn't that right?

I agree that the new customer numbers appeared to dwindle but that is separate and apart from the restatement which should at least bring some consistency back to DIL, at least.

[robbo24]

In general, these results indicate that investors and dealers react negatively to restatements and are more concerned with revenue recognition problems than with other financial reporting errors.

https://umdrive.memphis.edu/ekuvvet1/public/Restatement/AndersonYohn.pdf

[winner69]

OK ...the damage is more how people (past and potential investors) think .....the perception thing ....lingering doubts about the integrity of numbers .....so my bother with DIL and move on and look at other things.

Wasn't inferring any deception or criminality or things.

[Whipmoney]

OK ...the damage is more how people (past and potential investors) think .....the perception thing ....lingering doubts about the integrity of numbers .....so my bother with DIL and move on and look at other things.

Wasn't inferring any deception or criminality or things.

I don't agree that the damage is done. Sure DIL have made a real a$$ of themselves with the options debacle, the restatements, NZX reporting breaches and the like but at the end of the day if the company starts producing some fantastic numbers again then the markets memory will be very short-lived and money will begin flowing back into this stock.

Why would the market ignore a stock just due to a few historical grievances, management slippages and leave it at say $3.70 when its pumping out significant returns. I'm sure any wise fund manager will realise its a bargain and will take a view that the majority of the issues are well behind them and now the company can go on making money.

[blackcap]

I don't agree that the damage is done. Sure DIL have made a real a$$ of themselves with the options debacle, the restatements, NZX reporting breaches and the like but at the end of the day if the company starts producing some fantastic numbers again then the markets memory will be very short-lived and money will begin flowing back into this stock.

.

I guess the market is saying they doubt "if" DIL will produce these fantastic numbers.

[baller18]

man, at the rate its dropping, $3 doesn't seem far away.. sighs...

[robbo24]

I guess the market is saying they doubt "if" DIL will produce these fantastic numbers.


We hypothesize that the announcement of a restatement affects investors’ perceptions of firm value in two ways.

First, the impact of the restatement on the firm’s past financial statements should change investors’ perceptions of current and future profitability and therefore firm value.

Second, the existence of a restatement may create uncertainty regarding the reliability of the firm’s current and future financial statements. This uncertainty is likely to persist after the filing of the restatement with the SEC, causing lower returns for a longer period of time than just the time period surrounding the announcement.


https://umdrive.memphis.edu/ekuvvet1/public/Restatement/AndersonYohn.pdf

[Whipmoney]

I guess the market is saying they doubt "if" DIL will produce these fantastic numbers.

Exactly, in which case I don't think the decline is solely due to the restatements/management oversight. I think its a combination of many factors and that the restatements of the historicals and Q2 and Q3 results will provide the market with greater clarity to guess where DIL is going for Q4.

[bull....]

funny the consolidation was between 4.1 and 4.7 so if you minus the differnce 60c from the breakdown you get 3.50 wow really voodoo stuff

[baller18]

Exactly, in which case I don't think the decline is solely due to the restatements/management oversight. I think its a combination of many factors and that the restatements of the historicals and Q2 and Q3 results will provide the market with greater clarity to guess where DIL is going for Q4.
yeh but either way, how much do you think the restatements will increase the SP by?
It'll will get to $3.50 or even lower... might even get there today...
For people who bought around the $6-$7 mark will need a 100% gain...
$5 mark will need roughly a 50% gain..
The market sentiment is already so negative, unless the report overwhelms the market, will Dil really increase 50% or 100% and back to it's all time highs?
Speculation right now...

[couta1]

Baller think 2 years to get back to $7 dollars odd that's what I'm personally counting on

[robbo24]

For people who bought around the $6-$7 mark will need a 100% gain...

SNK did it, so did XRO, and GEO.

[In under a month]

[baller18]

SNK did it, so did XRO, and GEO.

[In under a month]
DId they establish such negative sentiment on the market? no
Did they need to do such restatements no?
The market potential for xro and dil is not even close...
lol @ geo, um where's the sp now?

[robbo24]

Here's some interesting reading on ways to mitigate restatement issuse: http://www.rsm.nl/fileadmin/default/content/rsm2/attachments/pdf1/avoiding%20reputation%20demage

This seems to suggest that larger stakeholders who hold earn a premium in the long run (see Section 5: Conclusion): https://research.mbs.ac.uk/accounting-finance/Portals/0/docs/2008/Frieder_Shanthikumar_01132008_AfterARestatement.pd f

This paper suggests that investor overreaction is not the reason behind share price decrease but points to a recovery after restatement: http://www.people.hbs.edu/dshanthikumar/Frieder_Shanthikumar_ReturnsAndRiskAfterARestateme ntAnnouncement_July192009.pdf

[Whipmoney]

yeh but either way, how much do you think the restatements will increase the SP by?
It'll will get to $3.50 or even lower... might even get there today...
For people who bought around the $6-$7 mark will need a 100% gain...
$5 mark will need roughly a 50% gain..
The market sentiment is already so negative, unless the report overwhelms the market, will Dil really increase 50% or 100% and back to it's all time highs?
Speculation right now...

Restatements of historicals (FY11,12 & 13) won't add anything to the share price. I guess what the market will want to see is the actual sales results for Q2 and Q3 2014, because as of now we only have details as to the number of licences acquired and their cash position.

[baller18]

Thanks for articles robbo!

[silu]

Wondering who is gonna remove that millstone around DIL's neck.

[robbo24]

Thanks for articles robbo!

A number of months ago Sparky alluded to many other companies that had to restate their financials and that it is not the end of the world. There is a lot written about American examples of restatements.

I think there is a lot to be said about the potential for DIL to recover from the negative sentiment associated with asymmetry of information between company and investors. The reason I say this is because there does not appear to be any overt criminal or fraudulent reason behind the requirement to restate financials - this is the worst kind. After all, to get the ball rolling an institutional investor in DIL sold down and went public with their concerns about uncertainty of information. This is consistent with the idea of jittery market due to uncertain information.

[Mista_Trix]

yeh but either way, how much do you think the restatements will increase the SP by?
It'll will get to $3.50 or even lower... might even get there today...
For people who bought around the $6-$7 mark will need a 100% gain...
$5 mark will need roughly a 50% gain..
The market sentiment is already so negative, unless the report overwhelms the market, will Dil really increase 50% or 100% and back to it's all time highs?
Speculation right now...

However combine this with the fact that there are very few fairly or under-priced companies on the NZX at the moment, so you might get a bit of a run for a while until it reaches a fair price... if its deemed to be oversold.

Uncertainty remains, so for the moment sentiment hasn't changed.

[robbo24]

Keep an eye out for some comments from DIL, and perhaps a preemptive bounce, in the next 2 weeks. From DIL's last "Update on Timing" on 17 October:


NZX had previously advised Diligent that while it would not grant a waiver from the applicable rules requiring Diligent's preliminary half year announcement and half year report to be released in August and September, respectively, it would take no action if Diligent would provide its preliminary half year announcement by 28 October and its half year report by 29 December. At this time, Diligent has determined that it will not be able to provide its preliminary half year announcement by 28 October 2013. Diligent cannot finalise its preliminary half year announcement and half year report for 2013 until the restatement process is complete. It is now expected that this process will take up to an additional 45 days. This means that Diligent's preliminary half year announcement is expected to be provided on or before 12 December 2013. NZX has indicated it does not intend to suspend trading in Diligent's shares because of this additional delay to the provision of Diligent's preliminary half year announcement.

So there's two dates to keep an eye on.

Any views of what to expect in the preliminary HY to be released on or before 12 December?

[goldfish]

Im surprised since the start the management havnt come out with any reassurance whatsoever, there company has had hundreds of millions wiped off the value and not one statement apart from what they have to say to the nzx.
I emailed them twice when this first started and got no reply.
I guess they dont care they are wiping out investors wealth. Wouldnt touch this company as a investor, as a trader its a different story.

[Whipmoney]

Im surprised since the start the management havnt come out with any reassurance whatsoever, there company has had hundreds of millions wiped off the value and not one statement apart from what they have to say to the nzx.
I emailed them twice when this first started and got no reply.
I guess they dont care they are wiping out investors wealth. Wouldnt touch this company as a investor, as a trader its a different story.

Well I think its just a case of management being prudent as if they say something that isn't quite true or doesn't quite pan out then they could potentially incur personal liability for negligence or misrepresentation. Given that management themselves weren't quite sure as to the extent of the accounting mishaps they can only simply comment on what they know, i.e. that the restatements haven't occurred, we'll need more time etc.

[goldfish]

Even that would be better then the deafening silence coming from them now.

[False Profit]

Seeing a small jump in price to 137 cents. Don't knock the messenger but we'll surely see a bit of a sell off tomorrow when the new shares are issued. Considering those individuals who took advantage of the jump after news last week will now have no shares at all. They might as well sell off their allocation too. Just a prediction...

[False Profit]

haha. Yep it sure looks like I picked the wrong time to give up methylated spirits.

Should have posted on the PEB thread...apologies for the heart attacks caused to all out there.

[muss1]

A key issue that I don't think has been addressed in the last couple of pages of posts.. From what I've read, the majority of people don't expect the restatement to have much affect on the SP. It's the next quarters numbers that will have an impact. I think putting a monetary value on the previous 2 quarters results will have an impact. There is so much guesswork around what the current growth rate (and everything else) is that it is proving hard to value. Even to have some clarity around this will surely allow people to make an informed decision. I would assume that this will lead to an increase in SP as the risk of valuing DIL is reduced due to up-to-date information

[robbo24]

A key issue that I don't think has been addressed in the last couple of pages of posts.. From what I've read, the majority of people don't expect the restatement to have much affect on the SP. It's the next quarters numbers that will have an impact. I think putting a monetary value on the previous 2 quarters results will have an impact. There is so much guesswork around what the current growth rate (and everything else) is that it is proving hard to value. Even to have some clarity around this will surely allow people to make an informed decision. I would assume that this will lead to an increase in SP as the risk of valuing DIL is reduced due to up-to-date information

I don't think the majority of people have referred to historic examples of the same thing in coming to their conclusion about the SP.

Remember - there is 100% asymmetry of information right now, nobody knows the state of Diligent's financial position except for Deloitte. How can an informed private or institutional investor risk money on something they cannot analyse? They can't - which, according to the small amount of papers I quoted earlier, is why the SP is bound to dwindle in the interim.

The new customer numbers dwindled a bit for 60 days, yes, but by no means is that game over. Plenty of markets available for expansion and once DIL shakes off the restatement blues then expect some big advances in share price.

[muss1]

I don't think the majority of people have referred to historic examples of the same thing in coming to their conclusion about the SP.

Remember - there is 100% asymmetry of information right now, nobody knows the state of Diligent's financial position except for Deloitte. How can an informed private or institutional investor risk money on something they cannot analyse? They can't - which, according to the small amount of papers I quoted earlier, is why the SP is bound to dwindle in the interim.

The new customer numbers dwindled a bit for 60 days, yes, but by no means is that game over. Plenty of markets available for expansion and once DIL shakes off the restatement blues then expect some big advances in share price.

I agree robbo - I was trying to argue the same point. People don't know enough to make an informed decision/valuation of the company. Once this is cleared up people will no longer have to factor in more risk than usual or worse case scenario. I see this increasing the SP after restatement

[robbo24]

I agree robbo - I was trying to argue the same point. People don't know enough to make an informed decision/valuation of the company. Once this is cleared up people will no longer have to factor in more risk than usual or worse case scenario. I see this increasing the SP after restatement

I agree in part. An increase, yes, but not a huge bounce back.

DIL have work to do no doubt. In terms of customer numbers and credibility.

It will take time but I don't think DIL has been wiped out.

Even the big institutional investor qualified their comments by saying they won't buy back in UNTIL the uncertainty is dealt with.

Haters gonna hate, traders gonna trade, holders gonna hold.

[klid]

The price is climbing a little, what's going on? Temporary?

[Whipmoney]

traders be trading. the market goes up, the market goes down. no confirmation of trend until restatement. thin market prone to sideways action.

Can't knock the hustle.

[ddrone]

28th February 2014. Happy to not be holding.

[bull....]

28th February 2014. Happy to not be holding.

bad man bad

[bull....]

reminds me of worldcom, enron etc with their restatements not implying anything just an observation over restatement issues

[Lorne Ranger]

Sell people, SELL! (too bad no one took a bet with me!)

No we just watched you, scampering off shouting like a maniac, from the cold dark cave we were sheltering in.

Again I think now is a weird time to sell. I'm picking the SP to recover about 10-15% on the restatement, (to about 4.50), just because the certainty will help it look like a real stock again, so I think some short term easy gains afoot Then it all depends on the next sales figures. Balance of annoyance and disappointment on one side, met by genuine possibilities and short memories on the other. Might take the day off for the next sales result and watch it all with pop corn and a beer, will be a spectacle either way I think.

[winner69]

Is PWC daily rate more for Deloittes?

No wonder they had to find new premises

[Wolf]

I again owe much to many seniors on here for telling me to sell.Thank you! haha me too moosie.

Due
to complexities in the restatement process, the Company has determined that
it will not be able to provide its preliminary half year announcement by 12
December 2013 as previously expected. The Company currently expects that it
will provide its preliminary half year announcement, half year report and
preliminary full year report by 28 February 2014.

Knew this would happen and i bet it will happen again in February.

[baller18]

well, now in feb? Serious?

[robbo24]

How utterly embarrassing for Diligent - they looked silly after the first announcement, really silly after the extension and now very, very extremely silly after this one...

At what point do the crosshairs turn on the directors - something to consider...

[Xerof]

Hmmm, extending revenue over the life of instalation from 12 months to NINE YEARS? If this segment of the sales figures is high, then that will make the change to deferred revenue also very large won't it?

Mobius, are you able to elaborate, fill in any gaps?

[Balance]

haha me too moosie.

Due
to complexities in the restatement process, the Company has determined that
it will not be able to provide its preliminary half year announcement by 12
December 2013 as previously expected. The Company currently expects that it
will provide its preliminary half year announcement, half year report and
preliminary full year report by 28 February 2014.

Knew this would happen and i bet it will happen again in February.

Ridiculous!

The accountants, auditors and lawyers will keep this going for as long as they can - bill now must be at least $5m and counting.

20,000 contracts - 5 months so far so say, 4,000 contracts a month to restate.

That's 150 a day?

Hmmm - maybe it does need to take that long!

:(

[baller18]

Can someone tell me if this has a lot to do with management or no?
Someone told me before it was the accountants fault...
N talk about the prefect time to release such statement, when the market's taking a beating!

[Xerof]

Hmmm - maybe it does need to take that long!



can't be that hard - they must all have fairly similar characteristics - get a quant on to it and write an algorithm

[baller18]

well if Croesus is rite again, he could be right about PEB too lol!
Time to top up PEB if that's the case~!

[baller18]

$3 today?! Dang! Glad I was out of this mess!

[winner69]

Hmmm, extending revenue over the life of instalation from 12 months to NINE YEARS? If this segment of the sales figures is high, then that will make the change to deferred revenue also very large won't it?

Mobius, are you able to elaborate, fill in any gaps?

That is some change in conventions

Suppose people did sign 9 year agreements ....that seems wired in itself

But what the heck do I know

Just as well listed in nz ....would have been kicked off any respectable exchange elsewhere in the world

[robbo24]

Alessandro Sodi, Diligent's President & CEO, stated "we are looking forward to providing investors information about the performance of our business and initiatives for future growth. Until the restatement process is complete, our ability to provide business information to our shareholders is limited because of disclosure laws in New Zealand and the United States that prohibit us from providing financial information that might be deemed to be incomplete."

I hope for Sodi's sake that Diligent has some very compelling information about performance of the business and initiatives for further growth - that's for sure!

[Monty]

What a bunch of ar#ses. I am still above my purchase price of $3.40. It would be worth attending the 2014 AGM - and they better come out with some good news then. I hope a few shareholders really pull a strip off the Directors. They really are trying the patience of the long suffering shareholders. Maybe I will seek to buy more at around $3

[robbo24]

Ironically, there is an active duty on directors to carry out their duties with diligence.

[bull....]

never stand in front of a crash

[psychic]

Appalling.
I don't suppose the dirty sods are doing this by stealth to facilitate a cheap US takeover somehow?

[silu]

I do feel sorry for shareholders but then you had 4 months to get out.

[robbo24]

The lowest offer on the board - 60 cents - would give DIL the MCap of their cash pile... A nice 1:1 ratio right there.

[Wolf]

$2.76 jesus!

[MAC]

I'm surprised actually that they managed to convince the NZX not to suspend, or do you get three strikes, ...... one, two, oh yeah this is the third strike. DIL will bounce back eventually and go on, but it may leave the NZX with an interesting legacy precedent for the future ?.

[okay]

Now they just need Ernst and Young and KPMG in office and they can round out the big 4.

[blobbles]

Can't believe they didn't put in a trading halt, I put in an order at $3.50 yesterday for some and quickly tried to cancel it.... boom already sold.Clowns running the show?

[baller18]

I'm not sure about if nothing has changed, can most people say that with 100% sureness?
If not then we are assuming - making an ass - u - me!
Hello $2.76...

[baller18]

Can't believe they didn't put in a trading halt, I put in an order at $3.50 yesterday for some and quickly tried to cancel it.... boom already sold.Clowns running the show?

Yeh how come there was no trading halt? surely, everytime an announcement like this from Dil, sends this stock down more and more...

[winner69]

Don't panic folks

What you are seeing is price ....the value is still there

Even Buffett valuation (attributed to) has value higher than 324

[robbo24]

Don't panic folks

What you are seeing is price ....the value is still there

Even Buffett valuation (attributed to) has value higher than 324

Even winner69 sees value at these levels?

[psychic]

Gonna bounce?

[baller18]

your right on the money winner, quick bounce to $3

[Nigel]

Lots of people still happy to buy in to a massive downtrend. Is it not worth waiting until an uptrend has formed to minimise risk? Or is that me being silly again?

[Xerof]

wow I just picked DIL up at 2.80 and 3.00 was this a trading hic up I will need to go back and check for confirmation

yep, check the one at 2.80 - no trades at 2.80

[robbo24]

two to three days of pain, followed by a gain if youre into picking dirty bottoms ;)

I'm picking a short sharp fall (as seen) and now just a steady decay as we've seen for the last few months...

[winner69]

Well - give you guys your dues ....you did say there would be plenty of action when next announcement made. There certainly was

But to every action there's always an equal and opposite reaction

[Wolf]

I've been trying to get in contact with ASB securities and there is a "unexpected large amount of calls" so i can't get through.. Wonder if it's unhappy Dil people

[fiasco]

The company from the start should have given themselves some breathing space with the restatement, it's evidently not an easy time efficient task. But they should have managed it correctly, poor PM if you ask me. I do still think there is value in the company and come 2014 hopefully they pick themselves up. Obviously a few executives will be on the chopping block.

[baller18]

Hmm.. wonder if its going to do another dead cat bounce...

[robbo24]

Hmm.. wonder if its going to do another dead cat bounce...

It already did - from 276-335

[winner69]

Suppose it was bound to happen on day .... a close pretty much on the much maligned 333 number

Buffett (attributed to) Valuation of 333 mentioned a few times before

Spooky eh ..... but remember price is not the same as value and 335 is just todays price

[robbo24]

I've been looking for similar situations...

It looks like TECD relied upon Ernst & Young for their financial statements and had to restate 3 years of financials as well: http://www.forbes.com/sites/chuckjones/2013/03/21/tech-data-discloses-restatement-to-earnings-including-its-march-4th-numbers/

There was a big drop around the time of the announcement but it seemingly recouped: http://www.nasdaq.com/symbol/tecd/stock-chart?intraday=off&timeframe=1y&splits=off&earnings=off&movingaverage=None&lowerstudy=volume&comparison=off&index=&drilldown=off

They too got extensions: http://tecd.client.shareholder.com/releasedetail.cfm?releaseid=753545

Then they got in trouble, over and over again: http://tecd.client.shareholder.com/releasedetail.cfm?releaseid=790479

Then in more trouble: http://tecd.client.shareholder.com/releasedetail.cfm?releaseid=794601

Then a stay of trading: http://tecd.client.shareholder.com/releasedetail.cfm?releaseid=798451

Ironically, the company's SP does not appear to have been greatly affected other than the sudden drops on the very bad news.

Meanwhile, the company continued to release good news as it occurred. Are we to think that DIL has no good news? Different rules for the NZX? Or is DIL just not very good at damage control?

[robbo24]

The same thing seemingly happened to PNX as well: http://ir.phoenixwm.com/releases.cfm

On 8 Nov 2012 they announced their original restatement issues, look what happened to the SP: http://www.nasdaq.com/symbol/pnx/stock-chart?intraday=off&timeframe=2y&splits=off&earnings=off&movingaverage=None&lowerstudy=volume&comparison=off&index=&drilldown=off

Even on 15 October 2013 (NEARLY A YEAR!) they still had not finished: http://www.nasdaq.com/press-release/the-phoenix-companies-inc-nysepnx-updates-progress-on-restatement-and-filing-of-gaap-financial-statements-20131015-01190

However, with reference to the SP, it recovered completely.

I am mindful that the same could happen for DIL - although the big difference seems to be that DIL says absolutely nothing while these other companies continued to communicate, at least.

[winner69]

Now that is going to result in a massive drop in revenues, as they can only account for 1/9th of the revenue they have previously booked. I was expecting amortisation over about 3 years, not 9!

Try running your valuation calculations with only 1/9th of the estimated revenues each year (the rest is as a liability), and see what number you get. I bet its a lot less than $3.30 and even Snoopy's $2.50 might be optimistic.

They did mention the 9 years relates to instalment revenues .... which only seems to be about 10% of total revunues

Maybe the 9 was a typo

[KiwiGreen]

I look forward to seeing how low this could go, the current price is certainly below any valuation I can come up with that seems realistic (given what we currently know). Will be very interested in the fourth quarter info they provide in January - I am forecasting a 42% growth in new users, 37% increase in client subscriptions, 56% increase in cash and a 68% increase in revenues for the year ending Dec 2013. From my personal DIL DCF I would then need the following revenue growth levels to get a fair value equal to the current $3.30 SP...

2014: 25%
2015: 18.8%
2016: 14.1%
2017: 10.5%
2018: 7.9%

Discount rate: 11%, long term growth in perpetuity: 5%.

I would be very surprised to see growth as low as these numbers, but if they were to release a new product to their extremely loyal and satisfied customers, then that would change the game completely. This is the greatest strength in the company for me. A company that is so solidly networked into the IT decision makers of many of the worlds biggest companies is just too well positioned to introduce new products in future and grow new revenue streams. However because the market for their board portal services is still growing rapidly and due to this accounting debacle I do not expect a new product in the next 6 months (only a guess). In my opinion there may be a some great opportunities for potential buyers between now and February though.

Does anyone have ideas on how much the restatements are likely to be costing them?

[winner69]

No need to panic .... all still going to plan and the downtrend still contained in the linear regression channel.

The price of the bottom channel line for today was 276 -- even though the chart is of closing prices isn't it spooky that the price bounced if the bottom line intraday

just coincidence .... what a load of codswallop winner.

ANd no doubt 276 or 335 is some Fibonacci number as well

[couta1]

Wow missed all the action had to work just as we'll by the look of it, makes no difference to me I'm not selling out for a 45 k loss when it will be back up at $7 within 2 years IMHO, off to the Air Supply concert tonight, I think Dil need to hire this good old band for a bit of resuscitation

[Cricketfan]

What a bad start to investing for me. My first 3 buys were for ANZ, MRP, and DIL (@ $7!!) and after the latter 2 kept going down I was wondering why I didn't just stick to my trusty PIE funds! Since then I have added some better performing stocks (e.g. FPH, XRO, PEB) and my overall portfolio is in the black (just), but it's not too encouraging for a newbie investor like me!

[blobbles]

something very wrong at DIL.
Dread ful stuff and as usual the directors will not be accountable for thier incompetence.

Looks like snapiti is such an authority, he is being quoted by the press:

http://www.stuff.co.nz/business/industries/9476393/Third-delay-for-Diligent-results

[Theracay]

Looks like snapiti is such an authority, he is being quoted by the press:

http://www.stuff.co.nz/business/industries/9476393/Third-delay-for-Diligent-results

They were kind enough to correct the spelling errors. How sweet.

[silu]

Winner - as I always say - don't swim against the trend.

[winner69]

Seconded here. Fear with a side of panic on the side on the menu for tomorrow morning.

Esp when Mum tells Dad that she read in the paper that there is "something very wrong at DIL" and " Dreadful stuff and as usual the directors will not be accountable for their incompetence"

Powerful stuff and Mum will tell Dad time to sell. sell sell - and it all be snapiti's fault

[okay]

if the software is so good how come the company is so hopeless at record keeping.... but then again on opening the up the databases of numerous general ledgers over the last 25 years i was often stupified at the total rubbish i found there.. database fields in short name form, lack of RI in some cases (i kid you not)... badly named fields... no posting engines.. No well defined API's ... consolidated single dimensional database ledgers full of every type of entry under the sun ... in short just a load of rubbish ... and the public ? well they wont know what they are using ....

so many stocks now coming into buying ranges for trades .....

Some of the data they have input into their customer and sales database over the years must be incorrect, incomplete, or not useable for the correction exercise, that's why they are having to revisit the source records (contracts) and make necessary adjustments it seems via a spreadsheet? Wow how high tech lol.

[Xerof]

Esp when Mum tells Dad that she read in the paper that there is "something very wrong at DIL" and " Dreadful stuff and as usual the directors will not be accountable for their incompetence"

Powerful stuff and Mum will tell Dad time to sell. sell sell - and it all be snapiti's fault

Richard Meadows should have countered the negativity with the other statement by Snapiti that he was actually buying shares. Poor form all round

[Corporate]

Not good

- three more months of uncertainty
- more resource required...more cost
- legacy accounting system causing problems
- manual entries in spreadsheets ....
- caveat that more misstatements may be uncovered
- revenue recognition seems to have been very aggressive....installation over 1 year instead of the 9 year estimate relationship.

More downside to come I suspect.

[winner69]

Shouldn't affect the amount they show as being in the bank though .... at least they should have got that right .... shouldn't they

[Corporate]

Shouldn't affect the amount they show as being in the bank though .... at least they should have got that right .... shouldn't they

Correct. However, a large amount of revenue is going to come out and be recorded as revenue in advance (a liability on the balance sheet).

Walking down the income statement, profits will substantially decrease.

[Harvey Specter]

Just remember, the previous auditor signed these policies/accounts off.

When was the last time all the other companies you invested in changed Auditor (and I don't mean "partner rotation")

[winner69]

If they paid the way and put me up in a s****y NY hotel I'd go and help them out and not charge too much for the honour (enough to cover some good times)

Anybody else keen ... I reckon surfersteve would be good, he could rustle up a quick algorithm and maybe an app or two ..... ROGER says he is an accountant who doesn't seem too busy at the moment, think he would be able to add up .......HALEBOP is very good ith numbers and has experience in amortising things I am told ....CORPORATE if nothing else has the right name ..... others

Couldn't take casino as ne would try to sell them something called Intuit (probably better than a spreadsheet anyway) and I suspect Sparks and Mac would be hindrance because they would worry about the value of each of the 20000 tranasaction instead of the price.

DIL couldn't refuse such an offer could they

[JayRiggs]

Arrrrrg!!!! NOT AGAIN.
I'm not averaging down on this anymore! I'm gonna shut my eyes and check the stock price in a yr and hopefully it woulda all blown over by then.

Cmon DIL boys, get your sh*t together!!!!!!!

[winner69]

Correct. However, a large amount of revenue is going to come out and be recorded as revenue in advance (a liability on the balance sheet).

Walking down the income statement, profits will substantially decrease.

......but in the future they will be (forgot the word whipthemoney used) in profits as all that deferred revenuw is released

[Xerof]

Casino should definitely go winner, Intuit's product is called Quicken isn't it? Sounds like a product they could get Deloittes to make use of - sure beats a manual spreadsheet - hurry along

ps where's CJ by the way? Perhaps he's already over there?

[winner69]

Casino should definitely go winner, Intuit's product is called Quicken isn't it? Sounds like a product they could get Deloittes to make use of - sure beats a manual spreadsheet

Bugger I forgot about you mate ....you would be a starter eh

Saw Paper Tiger in the bar .... he has having such fun in there he said not interested .... fancies Karen I thnk

[Casino]

pen and paper guys! pen and paper!

[winner69]

Snoopy maybe ..... nah .... each transaction would be analysed to death and we would have to call a three year extension/delay

[Xerof]

Yeah, I could round up the cash n check the balance, but I'd probably forget what it was, and where it is

oh, well if Snoopdog is on the team, I'll put all the cash with Heartland, unsecured

we could order up a huge quantity of CxBladder test kits, to test whats causing the Directors and shareholders to piss blood?

[Citizen Erased]

The thing that gets me is the appalling lack of communication from DIL to shareholders. It reminds me of GEL. Heads had better roll over this.

[Casino]

Wow missed all the action had to work just as we'll by the look of it, makes no difference to me I'm not selling out for a 45 k loss when it will be back up at $7 within 2 years IMHO, off to the Air Supply concert tonight, I think Dil need to hire this good old band for a bit of resuscitation

What moosie said.

Disc - I haven't researched this stock and have no opinion on what its fair value is.

[couta1]

Yeah/Nah, I really haven't got the energy to sell and try and recoup losses elsewhere at the moment and there's plenty of risk in that also, I'm sitting this one out for now, at least it's not a political football like CNU.

[JayRiggs]

Jay, closing your eyes and going "la la la la la" won't make the pain go away, trust me. You need to reassess why you are in DIL and if it still suits you. I never thought id make all my capital losses back after losing 45% after holding for 5 months; I made it back in TWO WEEKS! It can be done, just requires a lot of hard work and dedication.

in this three months the sp is going to suffer more, we all know that in our heart of hearts. So, if that is a certainty, why not park it elsewhere? You may actually make some (or all!) of it back in that time. if you do, you can buy even more DIL at a lower price when good news is confirmed as well! I suggest PEB to start with (think Medicaid announcement circa 2014)...

disc - not holding DIL or PEB, nor looking to initiate any positions near term :)

Thank you for your advice moosie. I think it was cool how you sold out of DIL then made your losses back quick.
Trading in and out of stocks isn't my style though. Selling now would crystallize a 40% loss and incur hefty brokerage, so I'm OK with sitting on this one for a couple of years like couta.

I still believe in the company to deliver excellent software and make lots of money. Just gotta get through these really really really ridiculous hiccups and we'll be OK.
In the meantime, I'm going to concentrate my efforts on more stable companies like SUM and EBO.

[JayRiggs]

Yeah/Nah, I really haven't got the energy to sell and try and recoup losses elsewhere at the moment and there's plenty of risk in that also, I'm sitting this one out for now, at least it's not a political football like CNU.

With you on this couta. Gonna sit and wait for this one to come back up.

[iceman]

With you on this couta. Gonna sit and wait for this one to come back up.

You guys are not alone. I think there is quite a few of us here that are doing the same thing, despite all the posters questioning our sanity for it and some freely giving regular advice. All appreciated by yours truly.
But everyone has their own circumstances and beliefs and that's what makes this forum of such great value.

I am definitely not happy with the goings-on since August as I'm sure none of the other holders are either. But I see the operational performance of the company and accounting/compliance having become completely separated and all the focus, rightly so, has been on the compliance issues. Hence the extremely negative market sentiment.
I think we all agree they are unacceptable and possibly some heads need to roll because if it. But now is not the time for that.

But the operational performance of the company hasn't really changed all that much, or at least there is no info available to date to suggest any operational problems other than the accounting/compliance issues.
Yes there has been slower growth in recent 2 quarters but an healthy growth nonetheless. Some posters have incorrectly stated that "sales have dropped"which is not the case at all.

The question is whether future sales and operational performance will be positive enough to change the negative market sentiment that exists today.

I believe it will change for the better, given time, that's why I'm still holding. I will continue to do so in the absence of a serious negative change in revenue and revenue growth and like Sparky, I've accepted that this year's profit will go on accountants.

The forthcoming positive change in sentiment will be ably assisted by the great work of winner69's team of volunteers, especially if they can drag PT out of the pub ;)


Don't forget many of us are NOT sitting on a large paper loss as many have been in DIL for a long time and bought lower than where the SP is today. That is not to say I'm not extremely disappointed with where the SP is today.

Discl: My reasonably significant (for me) DIL portfolio is 6% in the red at today's value :mad ;:

[winner69]

Just as well Diligent is only a small company of $50 mill revenues ........just imagine the fiasco / mayhem if it was a half decent sized company

Still astounds me that this is taking so so so long

Maybe they learning along the way ....slow learners

[couta1]

Snapiti not only are you famous but did anyone notice that at the top of the stuff article quoting Snapit there was a Tui logo and those that clicked on get themselves a free Tui see there are benefits to being famous

[Harvey Specter]

Revenue recognition
a) Sales of goods and services
Revenue comprises the fair value of the sales of goods and services, net of goods and services tax, and is recognised as follows:
•
• Installation revenue – when the installation has been completed;
GAAP must be different in NZ. Taken from one well know NZX10 company

[iceman]

Snapiti not only are you famous but did anyone notice that at the top of the stuff article quoting Snapit there was a Tui logo and those that clicked on get themselves a free Tui see there are benefits to being famous

Yeah right ;)

[Casino]

You guys are not alone. I think there is quite a few of us here that are doing the same thing, despite all the posters questioning our sanity for it and some freely giving regular advice. All appreciated by yours truly.
But everyone has their own circumstances and beliefs and that's what makes this forum of such great value.

I am definitely not happy with the goings-on since August as I'm sure none of the other holders are either. But I see the operational performance of the company and accounting/compliance having become completely separated and all the focus, rightly so, has been on the compliance issues. Hence the extremely negative market sentiment.
I think we all agree they are unacceptable and possibly some heads need to roll because if it. But now is not the time for that.

But the operational performance of the company hasn't really changed all that much, or at least there is no info available to date to suggest any operational problems other than the accounting/compliance issues.
Yes there has been slower growth in recent 2 quarters but an healthy growth nonetheless. Some posters have incorrectly stated that "sales have dropped"which is not the case at all.

The question is whether future sales and operational performance will be positive enough to change the negative market sentiment that exists today.

I believe it will change for the better, given time, that's why I'm still holding. I will continue to do so in the absence of a serious negative change in revenue and revenue growth and like Sparky, I've accepted that this year's profit will go on accountants.

The forthcoming positive change in sentiment will be ably assisted by the great work of winner69's team of volunteers, especially if they can drag PT out of the pub ;)


Don't forget many of us are NOT sitting on a large paper loss as many have been in DIL for a long time and bought lower than where the SP is today. That is not to say I'm not extremely disappointed with where the SP is today.

Discl: My reasonably significant (for me) DIL portfolio is 6% in the red at today's value :mad ;:

Of course disappointing but not horrible. My point was just that most portfolios should show solid green arrows for 2013 (Must be one of the ironies of life that the only mobile/cloud/tech company with alright fundamentals gets hammered). 2014/15 are likely to be tougher and it could make sense to search for more defensive values. I just don't see exuberance return in a hurry after such an episode. Then again, it could be all forgotten if they can grow profits with good outlook.

[couta1]

Panic stations, sad so many people follow the herd mentality isn't it.

[bull....]

tech bubble is imploding now all across nzcombined with utilitiy crash where do you invest now?

[Balance]

Capitulation by the traders.

Watch this space.

[Balance]

Just picked up some at $3.00.

Something tells me the traders are panicking and we all know the stockmarket game is about the transfer of wealth from the impatient to the patient, especially when fear takes over the traders.

[winner69]

Well done balance.

[Balance]

Well done balance.

Am told one big seller out there.

Watching out for a crossing at around $3.00 but crossing may get done at higher level now - say, $3.15?

[golden city]

transfer to THL.., will make it back early march.

[Balance]

Am told one big seller out there.

Watching out for a crossing at around $3.00 but crossing may get done at higher level now - say, $3.15?

Crossings happening at $3.11.

Interesting.

[Balance]

Market is not hard to read when you see the fishes scattering as the sharks move in.

Just take a bird's eye view from above.

[Whipmoney]

Hmm wish I got in earlier... Expecting another retracement hearding towards february however.

[Food4Thought]

tech bubble is imploding now all across nzcombined with utilitiy crash where do you invest now?

I like the businesses with a market dominance and increasing market share, steady (albeit small in some cases) profit increases, area specific expertise and have grounded management teams. MHI, PHB, BGR, SUM, WHS, HNZ. Not wishing to speculate to make quick increases with riskier shares at the moment as the uncertainty in the market is looking infectious. Time to be a bit boring.

[winner69]

Where the hell is Brighton when we need him.

He'd know whose doing the buying

Please Brighton-come back and give us the inside gossip

[Lorne Ranger]

Hmm wish I got in earlier... Expecting another retracement hearding towards february however.

I dont disagree with your prediction Whip, but Im at a loss to understand the psychology of it. Why would someone buy in over the next weeks and then sell out just prior to Feb 28? I mean other than hoping for profit obviously, but why retrace closer to the announcement? I didnt understnad why it happened last week either (although in hindsight it was correct but for surely unforeseen reasons). This would seem to say that in the vacuum between now and restatement the price will drift up (why? because its seen as currently oversold?), and then just prior to the restatement the price drops (why? because the restatement will pull down the SP?)

Like I say you are probably right, perhaps this is a trend only understood by experience, but from where I sit it is hard to get my head around it.

[Whipmoney]

I dont disagree with your prediction Whip, but Im at a loss to understand the psychology of it. Why would someone buy in over the next weeks and then sell out just prior to Feb 28? I mean other than hoping for profit obviously, but why retrace closer to the announcement? I didnt understnad why it happened last week either (although in hindsight it was correct but for surely unforeseen reasons). This would seem to say that in the vacuum between now and restatement the price will drift up (why? because its seen as currently oversold?), and then just prior to the restatement the price drops (why? because the restatement will pull down the SP?)

Like I say you are probably right, perhaps this is a trend only understood by experience, but from where I sit it is hard to get my head around it.

Two reasons:

1) Earlier investors either panic, lose interest or confidence in the company, or simply decide its time to cut their losses (or profit take depending on when they brought in). This explains why the stock has been on a general downtrend as the vaccum of information has left investors nervous.

2) The second reason is that traders are buying looking for a rebound which might not eventuate, or might eventuate and result in quick profit taking, leaving the above reason to play its course.

Either way its a clearance sale and you are invited. This is a fundies dream.

DISC: I'm tempted to dip my toes in at these levels however am still cognisant that time is on the side of the buyers as the traders clear out and as holders/sellers continue to grow restless.

[Snow Leopard]

...The forthcoming positive change in sentiment will be ably assisted by the great work of winner69's team of volunteers, especially if they can drag PT out of the pub ;)...

Obviously I have missed something? Somewhere?

Perturbed
Paper Tiger

[iceman]

Obviously I have missed something? Somewhere?

Perturbed
Paper Tiger

You have indeed PT. I refer you to the good humoured posts 5130 & 5134 !

[Joshuatree]

Surely you can think before you speak snapiti, its easy ., simply take a few deep breaths ;before typing ,and hey you stopped ramping; .. just like that:). Be a shame to lose another quality poster; please rethink over the break and have a great xmas with familiars.

[psychic]

That is ridiculous.

[Harvey Specter]

Snapiti - blame the FC, CFO and Auditor for the first mistake, but after that, Directors should have got this sorted out better.

[Snow Leopard]

I have just finished an informative conversation with a very wise man in which he has correctly pointed out to me that the trouble's at DIL can not be attributed to the board members in anyway as DIL is the same as any other company in which directors seek professional services and advice for accountancy and audit matters.
Someone has let the team at DIL down and it is not the directors.
Someone needs to be held accountable...

Given the record of this company in getting quite a few things wrong, each of which they could individually blame on outside advice, you do have to wonder what the common denominator in all this is.

Best Wishes
Paper Tiger

[Snoopy]

Now that is going to result in a massive drop in revenues, as they can only account for 1/9th of the revenue they have previously booked. I was expecting amortisation over about 3 years, not 9!

Try running your valuation calculations with only 1/9th of the estimated revenues each year (the rest is as a liability), and see what number you get. I bet its a lot less than $3.30 and even Snoopy's $2.50 might be optimistic.


I think in fairness I said I would come back and have a look at Diligent when the share price had a '2' in front of it. So this is why I am back on this thread. Snoopy never buys at fair value, only below fair value. So I concede that fair value at Diligent might be a share price beginning with a '3'.

As an outsider and an admirer of technology, there is a lot I like about Diligent. As an investor I have to keep hard nosed on company prospects though. It is good to see some investors here having a go at analyzing cashflows going forwards. But I have three of 'disruptive' questions to pose.

1/ What would it cost to migrate Boardbooks to say the Android platform? I do find it hard to believe that the Apple iPad will retain such a strong grip on the tablet market going forwards. As a worst case, the iPad may not even exist in five years time. Frankly I see the cost of migrating Boardbooks to another platform is something that must be planned for.

2/ How much will all the reauditing eat into Diligent's cash balance? Will they need to come back to shareholders for more capital to get over this temporary hump?

3/ Why do you think the much anticipated 'new product' will be cashflow positive? Granted, taking a longer term view developing a more than one product portfolio is wise. But in my opinion any new product effect will be strongly cashflow negative for at least a couple of years. So how long before this much anticipated new product feeds any profits into Diligent?

Questions posed from the point of view as an interested potential investor.

SNOOPY

[Casino]

I have just finished an informative conversation with a very wise man in which he has correctly pointed out to me that the trouble's at DIL can not be attributed to the board members in anyway as DIL is the same as any other company in which directors seek professional services and advice for accountancy and audit matters.
Someone has let the team at DIL down and it is not the directors.
Someone needs to be held accountable.
Furthermore sometimes I speak without thinking and did not know what is printed on this forum could be quoted elsewhere.
Yes nieve I think they call it but one can easily get wrapped up in the ST community.
My apoligies for any offence taken.
As this will be my last post I wish all posters on ST a good christmas and successful investing.

But I will be watching as I have learnt alot from many posters on this site and I will keep you all honest by putting in my picks for the share comp next year.

We need journalists that provide us with additional insights and not some sensationalist mafia that quotes from internet forums. Says more about them than you.

[Snow Leopard]

You have indeed PT. I refer you to the good humoured posts 5130 & 5134 !

Takk

I notice the announcement contains the following.


Due to limitations in the Company’s legacy accounting systems, extensive manual spreadsheet entries are necessary in order to recalculate revenue and deferred revenue using the new revenue recognition conventions

That is all absolutely appalling.

Best Wishes
Paper Tiger

[blobbles]

I think in fairness I said I would come back and have a look at Diligent when the share price had a '2' in front of it. So this is why I am back on this thread. Snoopy never buys at fair value, only below fair value. So I concede that fair value at Diligent might be a share price beginning with a '3'.

As an outsider and an admirer of technology, there is a lot I like about Diligent. As an investor I have to keep hard nosed on company prospects though. It is good to see some investors here having a go at analyzing cashflows going forwards. But I have three of 'disruptive' questions to pose.

1/ What would it cost to migrate Boardbooks to say the Android platform? I do find it hard to believe that the Apple iPad will retain such a strong grip on the tablet market going forwards. As a worst case, the iPad may not even exist in five years time. Frankly I see the cost of migrating Boardbooks to another platform is something that must be planned for.

2/ How much will all the reauditing eat into Diligent's cash balance? Will they need to come back to shareholders for more capital to get over this temporary hump?

3/ Why do you think the much anticipated 'new product' will be cashflow positive? Granted, taking a longer term view developing a more than one product portfolio is wise. But in my opinion any new product effect will be strongly cashflow negative for at least a couple of years. So how long before this much anticipated new product feeds any profits into Diligent?

Questions posed from the point of view as an interested potential investor.

SNOOPY


Good questions Snoopy:

1. I don't think it would take great time and/or effort. Maybe a couple of developers a year or so for the conversion. Broadbooks, to me as a software developer, doesn't look that complex as a product. From a security standpoint though it would be quite complex, but totally possible on Android with appropriate controls. Banks build Android apps for internet banking, I see no reason why the same level of security would not be used for Broadbooks.
2. They talked about who they were getting in to sort out the problems PWC and a few external consultants. If they ate up $30+ million of cash Diligent has in the bank, I would be pretty shocked. Maybe $2-3 million at most, I would hope, but it may be more intensive than this.
3. It depends on what the new product is, obviously. If it is an adjunct to the current one, for instance one that enables quick manipulation of financial figures in the report for future forecasting purposes, it might be case positive from the get-go, due to them already having happy customers who may want this extra feature. I would have thought it would be something like this - a feature suggestion from a customer as an add on to their current product, which actually can be a whole new product which they would have to market to an entirely new audience.

[Snoopy]

3. It depends on what the new product is, obviously. If it is an adjunct to the current one, for instance one that enables quick manipulation of financial figures in the report for future forecasting purposes, it might be case positive from the get-go, due to them already having happy customers who may want this extra feature. I would have thought it would be something like this - a feature suggestion from a customer as an add on to their current product, which actually can be a whole new product which they would have to market to an entirely new audience.


So the 'new product' might be just an update of the existing product? A compelling reason to update to the latest version of Boardbooks, rather than a whole new income stream?

SNOOPY

[psychic]

Yes, putting aside the shoddy administration and governance, lets get excited about new products again. Last time we got 'sticky notes'.

[psychic]

Bought in again have you Moosie? :)
Just be aware that a bot has been selling most of the day at whatever was offered...

[stoploss]

nice support levels from $3.00 to $3.10, sellers a bit weak. nice set up for a modest rise tomorrow ;)

I'm a bit wary , but bot or no bot I'm in for a punt.( small)

[blobbles]

So the 'new product' might be just an update of the existing product? A compelling reason to update to the latest version of Boardbooks, rather than a whole new income stream?

SNOOPY

I aren't basing that on anything other than "it makes sense to me as a software developer". Releasing complementary products as add-ons (where you have a "basic package" and an "executive package", the difference being additional product(s)) makes sense for two reasons - you can easily up sell to existing clients and you can easily integrate with your current product.

That would be my guess, but again the very existence of a new product is debatable, so we are all going out on limbs thinking about it.

[Mista_Trix]

I aren't basing that on anything other than "it makes sense to me as a software developer". Releasing complementary products as add-ons (where you have a "basic package" and an "executive package", the difference being additional product(s)) makes sense for two reasons - you can easily up sell to existing clients and you can easily integrate with your current product.

That would be my guess, but again the very existence of a new product is debatable, so we are all going out on limbs thinking about it.

Its the same as saying why would microsoft develop new products - PPT when they only had word and excel, Visio addition later etc, when they could be focusing on a new OS. A suit of products on the one platform makes sense, with the entire platform being updated when the need arises.

[Whipmoney]

So the 'new product' might be just an update of the existing product? A compelling reason to update to the latest version of Boardbooks, rather than a whole new income stream?

SNOOPY

Actually despite the others comments I'm expecting the new product to be a whole new product suite aimed at executive directors/senior management (as opposed to simply an add-on to their Board of Directors product suite). This is expected to be rolled out in FY14.

[Lorne Ranger]

F Well, DIL did exactly as expected today; morning panic down to $2.95, followed by a respite up to $3.25 and followed by consolidation between $3.08 and $3.20 with a close at $3.15.

Todays low did not touch yesterdays and the panic did not appear to be full on. If history is right and it always repeats, we should see a test of the of the 10 day MA around $3.50. I would put a sell slightly above this mark for now. Further downside is minimised as RSI is reading higher on lower prices. A bounce should start soon for those looking to sell up :)

What have you done to "go with your gut" Moosie? where is he? Are you the purchaser of a Mossie 900 franchise?

Moosie I can sense what holding this stock in the past has done to your feeling about trading, and Im glad your new system is working out for you. Truly.

I guess the stock gets sooo low that its hardly worth cashing in for some people. Can't see it going much lower, but nor can I see it moving up much either. Whipmoney offers a good theory on that though, but I dont see the motivation either way. Gets to a point where you think, heck, might as well hold then. Not much left to lose. Glad its my smallest holding, but still smarts to see the red figure.

[winner69]

Moose - you been so badly burnt with DIL you don't even want to have a sure fire trade as you outlined

I would have thought that a quick move from 315/320 (or even 300/310) to slightly over 350 would be your thing these days

[Lorne Ranger]

C'mon Moosie!! Little Dilly wants you baaaaaack.... It's sorry about last time, it didnt mean to hurt you so. But this time its different. Little Dilly all beat up and broken, cant do nuffin to a big healthy Moose like you.... C'mon, just one little holding...

Whoa. WTF. Got possessed there for a moment. what did I write? what... oh no hey wai.....

[Loneranger]

It is good to see some humor in time like these. :)

[Lorne Ranger]

It is good to see some humor in time like these. :)

Well its laugh or cry isn't it, and heck its only money.

BTW almost a good choice for your username....;)

[Leica]

Apparently they first off tried to attempt a way of working out the income differential that would do it in the fastest possible time, to deliver the news to investors, but this didn't work and they had to go back to the drawing board to devise another method, hence the laborious manual spreadsheets. The lack of info is due to strict US rules on disclosure so they can't say anything that may have any possible variances, so have to get it entirely, exactly, painfully right. Which I suppose is comforting, if it wasn't taking so #*$&%^% long and if the share price didn't head down the gurgler just when we were hoping for a good news break. It did seem to go down before I heard the announcement by the investor email so either there was some inside sell down, or I got the message late... (markets got it first). I thought surely with all that cash, they could hire a few extra beans to work on the calculations... I reckon the PR lady is going to have a big job building credibility back after this disappointing news. Suppose the volatility is good for traders though I have lost confidence in the team's professionalism. However, the long term prospect of a Nasdaq listing, if they can get inhouse ducks in order, could reward patience. In terms of splitting the income 1/9th, I believe it's the set up cost that needs to be amortised, but the monthly revenue will be the same albeit shifted to the date when they either signed or part way through the month rather than the whole month. So the revenue implication should only shift half a month or so, and the set up cost reimbursement diminished...but I might have that wrong. Not sure about the existence of a set up cost.

[Leica]

I reckon that Snakk material was full of good graphic design, but light on legs. Plenty of other people doing the same thing. Bulk selling spare adspace is not new.

[Loneranger]

Thanks...Lorne Ranger... Well my wife was not much into what I am doing on the market so that how the name came along. I kinda like it. Hopefully people would not mix it up with yours.

[Jaa]

Yes, putting aside the shoddy administration and governance, lets get excited about new products again. Last time we got 'sticky notes'.

Why don't they make a product that allows quick and easy retrospective changes to the way a company recognises its revenue....

[Whipmoney]

It did seem to go down before I heard the announcement by the investor email so either there was some inside sell down, or I got the message late...

I find this happens frequently (particulalry on the ASB platform which showed the last PEB announcement like 10 minutes after the fact) and even suspect that the NZX is a little slow off the mark on getting the announcements up on their website. It could be possible that its hitting the likes of bloomberg etc slightly faster which allows for those with heavy access to move quicker.

[Whipmoney]

Whipmoney offers a good theory on that though, but I dont see the motivation either way. Gets to a point where you think, heck, might as well hold then. Not much left to lose. Glad its my smallest holding, but still smarts to see the red figure.

Lol what was my theory?

All i'm saying is that this stock is going for super cheap and given the fundamentals (which admittedly are a little murky) I still think she's a good bet.

[nextbigthing]

I normally buy and deliver a complete Christmas dinner for one needy family each Christmas.....

Good on you Iceman. Hopefully many others will do the same given the bumper year overall.

[Leftfield]

All i'm saying is that this stock is going for super cheap and given the fundamentals (which admittedly are a little murky) I still think she's a good bet.

I quit DIL some time ago (for a small loss, since made up elsewhere). My learning... 'make the trend your friend.' At the moment (and for some time to come) the trend is against DIL. However when/if good news comes, there will be opportunities to buy into the more positive trend.

[Whipmoney]

I quit DIL some time ago (for a small loss, since made up elsewhere). My learning... 'make the trend your friend.' At the moment (and for some time to come) the trend is against DIL. However when/if good news comes, there will be opportunities to buy into the more positive trend.

I used to think like that until PEB jumped 36% in a matter of seconds (following an announcement) and a further ~51% the following day on a lesser announcement. Prior to those announcements the stock was trending downwards, and you would of had to have been extremely quick to get in on time to capitalise on either of those, and even if you were alert the bids were moving so fast it was near to impossible to get a limit order hit.

What I learned from that was that PEB had great value in a fundamental sense despite its weak technicals, and that you had to be in early for good or bad to capitalise in full.

Sure I believe in opportunity cost, i.e. there's no point tying money up in idle stocks for an unecessary length of time, but when I look at DIL (admittedly a company I have always like yet a stock that I almost loathe) I see an opportunity of a life-time. The company has ~$50m USD of cash on the balance sheet and yet its market cap is only ~$216.845 USD. It has no debt, substantial cash-flows, a substantially growing customer base (admittedly not exponential), and potentially a second product suite on the way which they could easily roll out across their existing customer base and which arguably has a larger target market (executive management).

They are great from an operational stand-point i.e. world class customer support 24/7, an almost unheard of 97% rentention rate in the SaaS business, extremely good security, and only a handful of competitors in a market that hasn't even reached 60% penetration. From Mobius's ealier posts it also seems that they have completely re-developed their code for both scaleability and portability across platforms (e.g. android).

Why's it so cheap?
1. the restatements - these have caused mass confusion but will hopefully come out sometime in the next 3-5 months.
2. declining sales growth - the company is maturing but at this price i still think its a bargain.

[Balance]

Why's it so cheap?
1. the restatements - these have caused mass confusion but will hopefully come out sometime in the next 3-5 months.
2. declining sales growth - the company is maturing but at this price i still think its a bargain.

Declining sales growth is to be expected with any hyper growth company. Market will be looking for increased margins and new product launches to capitalize on the customer base established.

Increased margins are evident but new product has been expected for a while now.

[KiwiGreen]

Thought I'd copy-paste these from the most recent Restatement announcement as reading back through the forum things seem to get twisted from time to time. e.g. someone misstated that revenues (rather than installation fee revenue) would be spread over 9 years. Would be interested if an anyone could find a source that shows the % of installation cost to annual subscription revenue?

" · The Company recognized revenue attributable to particular customer agreements from the beginning of a month rather than from the date of contract signing, and the Company failed to defer revenue recognition until customers are provided access to the Company's hosting environment, as required by U.S. GAAP. The effect of the errors was to accelerate the time when revenues were recognized under the Company’s customer agreements. The Company will correct these errors by deferring revenue recognition until such time as customers are provided access to the Company’s hosting environment and a fully executed customer agreement is received.
· The Company recognized revenue from installation fees under the Company’s customer agreements over the twelve month contract term, rather than the period during which the customer receives the benefit of the installation services. The effect of the Company’s prior policy also was to accelerate the time when revenues (in this case installation fees) were recognized. The Company expects to correct this error by recognizing revenue from installation fees over an estimated nine-year customer life, based on current customer history and renewal rates."

[KiwiGreen]

I have also been searching for info relating to the prospect of a new product release and am finding it hard to find anything that talks to the possibility to any extent. I haven't been to an AGM, has it been brought up there? Can people post links to sources that have hinted at a future second product. It makes logical sense to me for that to happen at some point in the future but I can see no signs of a product being announced in the 'near future' e.g. the next 12 months.

Here is one comment I found in the January Roadshow presentation that hinted at an adaption of the current service/product for a wider audience/market...

"Today, our solutions are primarily used by Boards of Directors. In the future, our solutions could be used by anyone who needs to disseminate confidential information in a secure, timely and user friendly manner."

Thought I'd throw this quote in too as it reminded me how awesome/revolutionary Diligent's service must really be to its users..."currently 100% of our sales are “in-bound”". Don't know how many people on here have tried to sell an IT service to large enterprises but to have achieved the volumes they have at 100% inbound is mind boggling for me.

[stoploss]

Bounce time! id wait to see if she breaks the $3.30 MA line (probably) to sell.

pretty thin on the topside at this stage , thanks moosie

DISC: long

[KiwiGreen]

Last lengthy question. To those who have done a DCF, do you guys get negative Free cash flow for 2012?

I noticed in the January presentation they advertised FCFs of over $5m. But due to the huge net increases in working capital (of over $10m - largely due to all the cash they hold), strictly their FCF should be negative based on FCF = EBIT x (1-tax rate) + Depreciation and Amortisation - Net investment - Net change in working capital

I should also note my fair value based on the growth figures I posted yesterday was way out due to an excel error in my calculation of year 2014 FCF which means the growth figures I posted would give a SP of $3.58 not $3.3. (then factoring for the current exchange rate would produce an NZX share value of $4.37.)

[Whipmoney]

Last lengthy question. To those who have done a DCF, do you guys get negative Free cash flow for 2012?

I noticed in the January presentation they advertised FCFs of over $5m. But due to the huge net increases in working capital (of over $10m - largely due to all the cash they hold), strictly their FCF should be negative based on FCF = EBIT x (1-tax rate) + Depreciation and Amortisation - Net investment - Net change in working capital

I should also note my fair value based on the growth figures I posted yesterday was way out due to an excel error in my calculation of year 2014 FCF which means the growth figures I posted would give a SP of $3.58 not $3.3. (then factoring for the current exchange rate would produce an NZX share value of $4.37.)

I have positive FCFF in FY12 due to the changes in working capital of circa ~$12m.

Based on your formulae below you should actually Add the $12m change in working capital as it a decrease in working capital given that any increases to Accounts receivable, prepaid expenses etc are more than offset by an increase in deferred revenues. Given this value is negative, there is a double negative and you should therefore add the ~$12m change.

: FCF = EBIT x (1-tax rate) + Depreciation and Amortisation - Net investment - Net change in working capital

[forest]

[QUOTE=KiwiGreen;447794]I have also been searching for info relating to the prospect of a new product release and am finding it hard to find anything that talks to the possibility to any extent. I haven't been to an AGM, has it been brought up there?

Hi Kiwigreen, I was at the last AGM. The SP of Dil had rises quite a bit in the prior period. The mood of many share holders was of over jubilance in my opinion.
Questions were asked about new products, they did not want to get into to much detail but (my impression) they tried to lower share holders expectations.
My understanding is that we are more likely to see new features calling it a new product might be stretching it a bit.

And companies like Dil most likely need some new features or add-ons just to stay even with their competition. So I would not add any value for this.

[Snoopy]

And companies like Dil most likely need some new features or add-ons just to stay even with their competition. So I would not add any value for this.


I am curious. Can current users of Diligent decide to save a little cash by using 'last years' version of the Boardbooks program for an extra year?

SNOOPY

[Harvey Specter]

I am curious. Can current users of Diligent decide to save a little cash by using 'last years' version of the Boardbooks program for an extra year?

SNOOPYNo - annual subscription. No pay no use. Benefit of a SaaS model. Over 97% customer retention.

[Snoopy]

I aren't basing that on anything other than "it makes sense to me as a software developer". Releasing complementary products as add-ons (where you have a "basic package" and an "executive package", the difference being additional product(s)) makes sense for two reasons - you can easily up sell to existing clients and you can easily integrate with your current product.

That would be my guess, but again the very existence of a new product is debatable, so we are all going out on limbs thinking about it.


As one of the many 'not a software developer' types about, your theory of 'new' meaning an add on package to what is already there makes sense to me also Bobbles. Of course how much of this truly incremental, or stuff that is just what would normally be expected to keep ahead of the competition is another matter.

If there is enough cash to see Diligent through the medium term, then any add on development like this should benefit Diligent long term. From a long term perspective it might be a waste of time to model this though.

SNOOPY

[Snoopy]

1. I don't think it would take great time and/or effort. Maybe a couple of developers a year or so for the conversion. Boardbooks, to me as a software developer, doesn't look that complex as a product. From a security standpoint though it would be quite complex, but totally possible on Android with appropriate controls. Banks build Android apps for internet banking, I see no reason why the same level of security would not be used for Boardbooks.


Trying to put some 'round figure' numbers on reshaping Boardbooks for an android platform. 2x ace developers for 2x years at $100k per year = $400k. Add on a manager, an underling and a bit of office overhead and you might double that to $800k. Then maybe add $200k to do the rounds of a few trade shows and I get about $1m.

That sounds relatively cheap to do in corporate terms. Why haven't they done it already? What am I missing?

SNOOPY

[Whipmoney]

I am curious. Can current users of Diligent decide to save a little cash by using 'last years' version of the Boardbooks program for an extra year?
SNOOPY

Maybe Mobius can help with this one but from my understanding there is only one version of boardbooks, i.e. the latest.

Users however can pay for upgrades that offer different levels of functionality. They can also pay more for more users.

[Whipmoney]

Trying to put some 'round figure' numbers on reshaping Boardbooks for an android platform. 2x ace developers for 2x years at $100k per year = $400k. Add on a manager, an underling and a bit of office overhead and you might double that to $800k. Then maybe add $200k to do the rounds of a few trade shows and I get about $1m.

That sounds relatively cheap to do in corporate terms. Why haven't they done it already? What am I missing?

SNOOPY

I would imagine they could do it a lot cheaper than that even as they already have a full team of developers on staff. The reason why not is probably due to the security aspect of the Apple platform. I can't see the trade off between IPADs and Androids being an issue for board members. Most of them probably aren't too tech saavy anyhow.

[blobbles]

Trying to put some 'round figure' numbers on reshaping Boardbooks for an android platform. 2x ace developers for 2x years at $100k per year = $400k. Add on a manager, an underling and a bit of office overhead and you might double that to $800k. Then maybe add $200k to do the rounds of a few trade shows and I get about $1m.

That sounds relatively cheap to do in corporate terms. Why haven't they done it already? What am I missing?

SNOOPY

They will likely do it when they are asked by enough customers. Your $1m figure is probably somewhere close, but there would be an ongoing cost overhead as well, likely they would need to keep at least one Android developer on for making product changes.

iPads are still seen as the dominant premium product and will be for some time I would say. They are likely tapping into this idea of "premium" to help their product also look premium. Wow I said the p word too many times!

It is also a lot easier (with a lot less mistakes) to have your product almost fully developed on one platform before you put it on another. As they are still releasing incremental upgrades fairly regularly, they probably have their eye on a stable and almost complete version number before heading to Android.

I don't buy the idea Android is less secure (as others point out), the internet banking software on my phone tells me it's good enough for major banks...

[winner69]

Thought I'd copy-paste these from the most recent Restatement announcement as reading back through the forum things seem to get twisted from time to time. e.g. someone misstated that revenues (rather than installation fee revenue) would be spread over 9 years. Would be interested if an anyone could find a source that shows the % of installation cost to annual subscription revenue?

" · The Company recognized revenue attributable to particular customer agreements from the beginning of a month rather than from the date of contract signing, and the Company failed to defer revenue recognition until customers are provided access to the Company's hosting environment, as required by U.S. GAAP. The effect of the errors was to accelerate the time when revenues were recognized under the Company’s customer agreements. The Company will correct these errors by deferring revenue recognition until such time as customers are provided access to the Company’s hosting environment and a fully executed customer agreement is received.
· The Company recognized revenue from installation fees under the Company’s customer agreements over the twelve month contract term, rather than the period during which the customer receives the benefit of the installation services. The effect of the Company’s prior policy also was to accelerate the time when revenues (in this case installation fees) were recognized. The Company expects to correct this error by recognizing revenue from installation fees over an estimated nine-year customer life, based on current customer history and renewal rates."

in F12 installation was about 10% of revenues .... I posted that the other day

[winner69]

KiwiGreen

Reported FCF March quarter Q113 was $3.12m

In the little stuff they have disclosed since assuming movement in the bank balances is FCF (doesn't seem to be any financing stuff going on) then FCF for Q213 was $2.5m and Q313 was $8.4m

So YTD about $14m ... the same as the year prior

EDIT I see you were talking about the F12 numbers sorry

Reported FCF was $20.1m

Instead of that fandangled formula of your why don't you just use their Cash Flow Statement in the reports. That way you overcome different tax rates for different periods, the timing of tax payments, eliminates share based payments and a few other things

[Hoop]

I quit DIL some time ago (for a small loss, since made up elsewhere). My learning... 'make the trend your friend.' At the moment (and for some time to come) the trend is against DIL. However when/if good news comes, there will be opportunities to buy into the more positive trend.

Wise words.. you're on to it :)...Most of us unfortunately are not in the know so all we have to rely on is published data, reliable? media info and daily stock price trends



I used to think like that until PEB jumped 36% in a matter of seconds (following an announcement) and a further ~51% the following day on a lesser announcement. Prior to those announcements the stock was trending downwards, and you would of had to have been extremely quick to get in on time to capitalise on either of those, and even if you were alert the bids were moving so fast it was near to impossible to get a limit order hit.

What I learned from that was that PEB had great value in a fundamental sense despite its weak technicals, and that you had to be in early for good or bad to capitalise in full................

Contrary to examples in textbooks not all stocks behave according to trends or signals
..some stocks become boring and waver aimlessly for years............. Some like PEB gap up suddenly without technical warnings... trendies obviously wouldn't be in these stocks..but, don't feel sorry for them as they would be making "boring" profit and at a lower risk elsewhere.....

Non-trending stock investment requires "tea lady" investigation to nail a good "exciting" profit at a low risk.

Each to their own..eh?

[MAC]

Crumbs Hoop you almost had me thinking you had become a born again investor there for a second, agree that the trend is your friend when it is going the same direction as the fundamentals else it’s just a time bomb, but that’s what you traders have stop losses for I guess, each to their own, yes.

[JayRiggs]

ACC buying up large @ $3.13 yesterday. nearly 10% holding now...

With the amount of money ACC have, they can average down on this sucker all the way down to 1c.
ACC may not be the smartest fund manager, but I take a bit of comfort they continue to buy rather than sell.

[winner69]

With the amount of money ACC have, they can average down on this sucker all the way down to 1c.
ACC may not be the smartest fund manager, but I take a bit of comfort they continue to buy rather than sell.

good to see them having a punt with our money eh ..... or is it 'investing wisely'

[jonu]

Well, well, well. Don't look down. How's that for a cunning confidence booster. 500k shares wanted @ 3.20. Price shoots up, order disappears. Those with deep pockets and long enough arms can pull the strings all right.

[fiasco]

There was also a seller with 100K, but he also vanished.

[klid]

So..... Whens good to buy? Now you reckon (or yesterday)?

[Harvey Specter]

So..... Whens good to buy? Now you reckon (or yesterday)?A couple of days ago below $2.90 seems like a good entry point.

[robbo24]

A couple of days ago below $2.90 seems like a good entry point.

SWWWWWISSSSSSSSSSSSSSSSSSSHHHHHHHHHHHHHHHHHHHHHHHH HH - time travel, ACTIVATED!

[Balance]

Just received an updated brokers' report - valuation and price target $7.30.

[Mista_Trix]

[QUOTE=Balance;447949]Just received an updated brokers' report - valuation and price target $7.30.[/Say QUOTE]

Say whaaaaaaaaaaaaaaaaaaaaaaaaat?!?!

[robbo24]

Hey Balance, dont believe everything you read, especially since you said SNK wasnt worth more than 5 cents ;)

Do not befoul the DIL thread with your heathen SNK talk!

[Harvey Specter]

Just received an updated brokers' report - valuation and price target $7.30.They could well be right (I am hoping they are) but I cant see how they can update until they have updated financials.

[Balance]

They could well be right (I am hoping they are) but I cant see how they can update until they have updated financials.

I am passing on information - take it for what it is worth.

it is a well researched piece which covers the accounting issues and its likely impact.

It is from one of the major brokers.

I like to look at and read broker reports which are out of sych with market sentiment.

[Balance]

Hey Balance, dont believe everything you read, especially since you said SNK wasnt worth more than 5 cents ;)

Show us a broker's report on Snakk, Moose.

I for one am interested.

Genuinely so.

Not being sarcastic.

[Balance]

Brokers dont cover it (yet). a very good sign if you subscribe to Mr Lynch's way of investing ;)

Agreed save Mr Lynch analyses a whole range of factors himself before he pays someone 10000% more than what they paid themselves for shares!

[KiwiGreen]

Thanks for your replys, forest, whipmoney and winner69.

Winner could you post me your source for installations being 10% of revenues. I would like to play around with this scenario.

Also regarding the reported FCFs of $20.1, I can’t find FCF mentioned at all in their recent reports, so if you have a source for this that would be great too. Personally I find they steer away from using the term ‘free cash flow’ because due to the large increase they have had in working capital which skews the number.

Regarding Whipmoney’s post

“I have positive FCFF in FY12 due to the changes in working capital of circa ~$12m.

Based on your formulae below you should actually Add the $12m change in working capital as it a decrease in working capital given that any increases to Accounts receivable, prepaid expenses etc are more than offset by an increase in deferred revenues. Given this value is negative, there is a double negative and you should therefore add the ~$12m change.

FCF = EBIT x (1-tax rate) + Depreciation and Amortisation - Net investment - Net change in working capital”

The definition of working capital as far as I understand is current assets – current liabilities. And to work out net change in working capital for say 2012 you simply minus the working capital in 2011 from that of 2012.

2012
Total current assets: 37,957,820
Total current liabilities 22,759,948
Working capital = 15,197,872

2011
Total current assets: 15,121,331
Total current liabilities: 10,889,618
Working capital = 4,231,713

When more cash is tied up in working capital than the previous year, the increase in working capital is treated as a cost against free cash flow. An increase in net working capital is considered a negative cash flow and not available for equity. In other words, an increasing requirement for capital for short term operations in the company is not available to equity.

Net change in working capital: 15,197,872 - 4,231,713 = $10,966,159

So in DIL’s case you would minus this positive change in net working capital, which in the definition of FCF (for me) gives a negative FCF number of just over US$3m.

DIL is an interesting case because of the unusually high level of cash they currently hold. Removing net change in working capital is really to say as revenues grow a company will need to hold more working capital – money which cannot therefore be invested elsewhere. In DIL’s case we have seen extraordinary growth in revenue while reducing CoS etc so without having anywhere yet to put their money their current assets are in fact inflated by heaps of cash giving this massive temporary rise in working capital and thus – by the strict definition of FCF – a negative FCF.

Very happy to be proven wrong here, but I’m pretty sure as the definitions for free cash flows and working capital go this should be right. Having a negative FCF due to a huge net increase in working capital is not a bad thing at all of course given the context. As an investor we just hope they can invest this cash for future growth and returns on our DIL investment.

[Whipmoney]

Regarding Whipmoney’s post

“I have positive FCFF in FY12 due to the changes in working capital of circa ~$12m.

Based on your formulae below you should actually Add the $12m change in working capital as it a decrease in working capital given that any increases to Accounts receivable, prepaid expenses etc are more than offset by an increase in deferred revenues. Given this value is negative, there is a double negative and you should therefore add the ~$12m change.

FCF = EBIT x (1-tax rate) + Depreciation and Amortisation - Net investment - Net change in working capital”

The definition of working capital as far as I understand is current assets – current liabilities. And to work out net change in working capital for say 2012 you simply minus the working capital in 2011 from that of 2012.

2012
Total current assets: 37,957,820
Total current liabilities 22,759,948
Working capital = 15,197,872

2011
Total current assets: 15,121,331
Total current liabilities: 10,889,618
Working capital = 4,231,713

When more cash is tied up in working capital than the previous year, the increase in working capital is treated as a cost against free cash flow. An increase in net working capital is considered a negative cash flow and not available for equity. In other words, an increasing requirement for capital for short term operations in the company is not available to equity.

Net change in working capital: 15,197,872 - 4,231,713 = $10,966,159

So in DIL’s case you would minus this positive change in net working capital, which in the definition of FCF (for me) gives a negative FCF number of just over US$3m.

DIL is an interesting case because of the unusually high level of cash they currently hold. Removing net change in working capital is really to say as revenues grow a company will need to hold more working capital – money which cannot therefore be invested elsewhere. In DIL’s case we have seen extraordinary growth in revenue while reducing CoS etc so without having anywhere yet to put their money their current assets are in fact inflated by heaps of cash giving this massive temporary rise in working capital and thus – by the strict definition of FCF – a negative FCF.

Very happy to be proven wrong here, but I’m pretty sure as the definitions for free cash flows and working capital go this should be right. Having a negative FCF due to a huge net increase in working capital is not a bad thing at all of course given the context. As an investor we just hope they can invest this cash for future growth and returns on our DIL investment.

You don't include cash or term deposits in the Current Assets side of working capital.. only spontaneous assets that grow with sales (e.g. accounts receivable). I have also excluded the note receivable from affiliate in FY11 (see note below).

As such working capital for FY11 is:

CA = $3,021,855 (Accounts receivable, prepaid expenses, deferred revenues)
CL = $10,790,386 (Accounts payable, acrrued expenses, income taxes payable and deferred revenue)

FY11 Working Cap = -$7,768,483
FY12 Working Cap = -$17,514,890

Change in working cap = -$9,746,407

Given this is negative you add it (EBITDA-capex) to get FCFF.

If you were to include the note receivable from affiliate then the change in WC is circa -$12m. I would need to look into whether any cash was received in consideration of this before I included it however.

[KiwiGreen]

Awesome, thanks for that explanation Whip. Done some further research on this and although of course working capital = CA - CL you are not supposed to include cash when calculating FCF. This guy summed it up well on Wallstreetoasis.com (obviously it is a common question)...

"If you're asking whether you include cash in the CA to get to change in net working capital, the answer is no. the entire intuition behind CA-CL is to arrive at how cash has changed over the period (increases in CA = use of cash, increase in CL = source of cash)--in that sense, you would use non-cash CA - CL to get to FCF (http://www.wallstreetoasis.com/finance-dictionary/what-is-free-cash-flow-FCF) to do your DCF (http://www.wallstreetoasis.com/finance-dictionary/what-is-a-discounted-cash-flow-DCF)."

Thanks for your time on this Whip, not many FCF/DCF tutorials point out not to include cash in your net working capital calculation. I will review my DCF's with this in mind.

[Mista_Trix]

Makes me feel like I'm gambling in comparison to you guys when you bust out this level of FA.

[Whipmoney]

Awesome, thanks for that explanation Whip. Done some further research on this and although of course working capital = CA - CL you are not supposed to include cash when calculating FCF. This guy summed it up well on Wallstreetoasis.com (obviously it is a common question)...

"If you're asking whether you include cash in the CA to get to change in net working capital, the answer is no. the entire intuition behind CA-CL is to arrive at how cash has changed over the period (increases in CA = use of cash, increase in CL = source of cash)--in that sense, you would use non-cash CA - CL to get to FCF (http://www.wallstreetoasis.com/finance-dictionary/what-is-free-cash-flow-FCF) to do your DCF (http://www.wallstreetoasis.com/finance-dictionary/what-is-a-discounted-cash-flow-DCF)."

Thanks for your time on this Whip, not many FCF/DCF tutorials point out not to include cash in your net working capital calculation. I will review my DCF's with this in mind.

Haha yeah I came across that quote on W/O when I was checking if my theory was right. You should try reading some Aswath Damodaran for a good steer on FCFF/DCF analysis. He's pretty much the world guru on the subject.

Ironically I wasn't sure if I should include deferred revenues in the current liabilities - I could barely find any commentary on how it was to be treated but I guess its a source of cash as much as accounts payable is, and it is also scaleable with sales.

[winner69]

Kiwigreen

Page 5 of 2012 Annual Report

[Xerof]

W69 mate, where are we on your channel at the moment?


TIA

[winner69]

Kiwigreen

From 2012 Annual Report the real Cash Flow

FCF is Cash Flow from Operations +/- Investing Cash Flows

Note the increase in Deferred Revenues is a cash item

Why reinvent the wheel when DIL do it for you

[winner69]

W69 mate, where are we on your channel at the moment?


TIA

I update after the close but 3.63 is regression line point for today

[Xerof]

Thanks winner.

Moosie, without meaning to open old wounds, I took my own advice and my profits in the mid 7's, with only a couple of small short term trades ever since

it is only in a downtrend until it is broken, keep your eyes and mind open ^^, and those antlers trimmed

ps BTW, I tried to free some cash when it dipped below $3 last week, but alas, I was too slow in deciding what to quit. I thought it looked outstanding buying under $3.00, for a punt. Anyway, having sold my S/T punt on NZO for brokerage both ways on 82, (lol) I have some cash ready to go.

[Whipmoney]

Dont forget to increase the deferred revenue figure by approx $3.8m for 2012, plus the other 6/9th of 2010 and 7/9th of 2011 of whatever the installation revenue amounts were then.

Shouldn't effect the FCFF calculation at all as any re-distribution to deferred revenues will invariably be grouped up in the changes to Working Capital.

[robbo24]

In English please, doctors.

[winner69]

In English please, doctors.

They just saying the bank balance is going up by $X .......mere mortals like you don't need to know much more than that

They trying to work out why the bank balance keeps going up ....to you and me easy peasy .....what customers pay you less what you spend eh

Understand now robbo

[robbo24]

They just saying the bank balance is going up by $X .......mere mortals like you don't need to know much more than that

They trying to work out why the bank balance keeps going up ....to you and me easy peasy .....what customers pay you less what you spend eh

Understand now robbo

Me bang rock together with rock

Robbo smash

[winner69]

W69 mate, where are we on your channel at the moment?


TIA

All back on track again .... back to downtrend line that reflects a 0.6% daily fall since beginning of June (yes a decline at a daily rate of 0.6% over 234 days .... some effort eh)

Still a couple of cents to get back to that line

That circles area is interesting ..... its half way from the peak to todays close .... and it hung around that mark for a week or so .... before the underlying down trend commenced

[KiwiGreen]

http://www.sharetrader.co.nz/images/misc/quote_icon.png Originally Posted by KW http://www.sharetrader.co.nz/images/buttons/viewpost-right.png (http://www.sharetrader.co.nz/showthread.php?p=448369#post448369)
Dont forget to increase the deferred revenue figure by approx $3.8m for 2012, plus the other 6/9th of 2010 and 7/9th of 2011 of whatever the installation revenue amounts were then.


Shouldn't effect the FCFF calculation at all as any re-distribution to deferred revenues will invariably be grouped up in the changes to Working Capital.

Hey Whip (and to anyone else interested),

Just trying to get my head around altering DIL's financial statements for the installation revenues. Theoretically on the 2012 balance sheet what item would you balance out the increased Deferred Revenues with? (I know it might not matter as net working capital might remain the same but I am still interested to know how it would look)

FCF would be hit quite hard through net income though would it not? Surely revenues must decrease, so do Cost of Revenues reduce somewhat with them as they are also spread over the 9 year period? Or not? And if they have bigger margins on installations than other revenues, a 10% reduction in installation revenue might only mean a 7% reduction in CoR. I assume operating expenses would remain as is?

I also assume we will need to add 1/9th of both 2010 and 2011 installation revenues and cost of revenues (i.e. gross profit from installations) to 2012 revenues.

Am I on the right track here? - the balance sheet part is really confusing. If you increase deferred revenue what other liability or equity item do you decrease. Surely you cant increase an asset item, can you?

[Whipmoney]

Hey Whip (and to anyone else interested),

Just trying to get my head around altering DIL's financial statements for the installation revenues. Theoretically on the 2012 balance sheet what item would you balance out the increased Deferred Revenues with? (I know it might not matter as net working capital might remain the same but I am still interested to know how it would look)


Just thinking very quickly here.. but if sales are deemed not worthy of being recognised then as part of the restatement they will backed out sales and recorded as deferred revenues.

In effect sales drops, NPAT drops and therefore so does retained earnings. The deferred revenues are matched by cash.

In summary the NET effect is that retained earnings (equity) decreases which is offset by an increase in Deferred Revenues (liabilities). There shouldn't be any material change to the overall asset composition (assuming there were no sales on credit).

In terms of the final FCFF value, there shouldn't be much of a change as while the EBITDA component decreases, so does deferred revenue so a larger amount of changes in Working Cap are added to the smaller EBITDA. In theory these should offset however I haven't worked out what the redistribution of cogs would do to this..?

[Whipmoney]

Back to where we were before the extension. congrats to anyone picking the bottom and selling up here!

Hopefully everyones wise enough not to sell at this point. More gains to come.

[Harvey Specter]

In terms of the final FCFF value, there shouldn't be much of a change There shouldn't be any change as there has been no change in cashflows - they have made that very clear. Therefore if your cashflow model suggests otherwise, then you have either made a mistake or classifying cash flow differently for the purposes of your valuation.

[Whipmoney]

There shouldn't be any change as there has been no change in cashflows - they have made that very clear. Therefore if your cashflow model suggests otherwise, then you have either made a mistake or classifying cash flow differently for the purposes of your valuation.

You don't need to preach to the choir.