Digital River Beats Q2 Revenue and Earnings Expectations; Raises 2005 Guidance
• Q2 Revenue - $51.1 million, up 47 percent year-over-year
• Q2 GAAP Diluted EPS - $0.26, up 37 percent year-over-year
• Q2 Pro Forma Diluted EPS - $0.47, up 88 percent year-over-year
MINNEAPOLIS, July 27, 2005--Digital River, Inc. (NASDAQ: DRIV), a global leader in e-commerce outsourcing, today reported revenue of $51.1 million for the quarter ended June 30, 2005. This represents a year-over-year increase of 47 percent from revenue of $34.9 million in the second quarter of 2004. This performance exceeded the Company’s second quarter revenue guidance of $49.0 million, provided on April 27, 2005.
Q2 GAAP Results: In the second quarter, net income was $10.2 million, or $0.26 per share on a diluted basis, including $5.2 million of income tax expense. These results represent an increase of 37 percent compared to net income of $6.8 million, or $0.19 per diluted share with no income tax expense in the second quarter of 2004. This performance exceeded the GAAP diluted net income per share guidance of $0.19, provided by the Company on April 27, 2005.
Q2 Pro Forma Results: Digital River’s net income for the second quarter of 2005, prior to the amortization of acquisition-related expenses and $5.2 million of non-cash income taxes, was $17.4 million, or $0.47 per diluted share, excluding the impact of the Company’s contingent convertible notes. These results represent an 88 percent increase compared to net income, prior to the amortization of acquisition-related expenses, of $9.0 million, or $0.25 per diluted share, in the second quarter of 2004. This performance exceeded the pro forma diluted net income per share guidance of $0.41, provided by the Company on April 27, 2005.
For the six month period ended June 30, 2005, the Company reported revenue of $105.7 million. This represents a 58 percent increase from revenue of $66.7 million in the similar period of the prior year.
Six Months Ended June 30, 2005, GAAP Results: In the first half of 2005, net income was $24.3 million, or $0.61 per share on a diluted basis, including $10.1 million of income tax expense. These results compared to net income of $14.4 million, or $0.40 per diluted share with no income tax expense, for the same period of 2004.
Six Months Ended June 30, 2005, Pro Forma Results: In the first half of 2005, Digital River’s net income, prior to the amortization of acquisition-related expenses and $8.9 million of non-cash income taxes, was $37.5 million, or $1.02 per diluted share, excluding the impact of the Company’s contingent convertible notes. These results compared to net income, prior to the amortization of acquisition-related expenses, of $18.2 million, or $0.51 per diluted share, for the same period of 2004.
“In the second quarter, we exceeded our revenue and earnings expectations,” said Joel Ronning, Digital River’s CEO. “We continue to execute well on several growth fronts. We are capitalizing on sales prospects in our online network and in international markets. Our strategic marketing services continue to generate incremental revenue streams for our clients and our company. With the positive momentum coming out of the first half of the year and Internet market forces playing in our favor, we are raising our guidance for 2005. We remain confident in our ability to continue to deliver strong results to our clients and shareholders.”
On April 19, 2005, Digital River announced that its Board of Directors authorized a share repurchase program of up to $50 million of its outstanding common shares. During the second quarter, Digital River purchased a total of 136,000 shares at a weighted average price per share of $23.57. Future repurchases will be from time-to-time at the Company’s discretion, subject to the insider trading rules and the Company’s policy with respect to appropriate trading windows.
“Digital River has established a strong track record for delivering solid financial results,” said Tom Donnelly, Digital River’s CFO. “As Digital River’s new CFO, I am looking forward to expanding our global business infrastructure to support the company’s rapid growth and driving our overall financial performance.”
Q3 2005 Guidance
Forward-looking guidance for the third quarter ending September 30, 2005, is as follows:
- Revenue is expected to be $52.5 million;
- GAAP diluted net income per share is expected to be $0.27; and
- Pro forma diluted net income per share is expected to be $0.48.
Full Year 2005 Guidance
Forward-looking guidance for the full-year ending December 31, 2005, is as follows:
- Revenue is expected to be $216.0 million; up from the Company’s previous guidance of $209.0 million;
- GAAP diluted net income per share is expected to be $1.17; up from the Company’s previous guidance of $1.02; and
- Pro forma diluted net income per share is expected to be $2.00; up from the Company’s previous guidance of $1.81.
The estimated effective income tax rates and expense assumed in Digital River’s 2005 full-year guidance may significantly vary based on actual operating results and tax elections available to the Company.
Digital River’s pro forma net income and per share results exclude the effects, if any, of the amortization of acquisition-related expenses, non-cash income taxes and the impact on GAAP results of the Company’s contingent convertible notes. A detailed reconciliation to provide clarity on the comparability of the GAAP and pro forma data has been provided in table form following the financial statements accompanying this announcement. In addition, the calculation of GAAP diluted net income per share also is provided in the table. Further information regarding the Company’s use of pro forma financial data has been included in the Company’s Form 8-K filed with the SEC on July 27, 2005.
Digital River will hold a second quarter conference call today at 4:45 p.m. Eastern Daylight Time. To access the call, please dial 888-896-0863 inside the United States or Canada, or 973-582-2741 from international locations. In addition, the call can be heard via webcast at http://DR2005q2earnings.digitalriver.com. Please install any necessary audio software. A webcast replay of the call will be archived on the Company’s corporate Web site.
Click here to view Digital River's Q2 2005 Condensed Consolidated Balance Sheets.
Click here to view Digital River's Q2 2005 Condensed Consolidated Statements of Operations.
Click here to view Digital River's Q2 2005 Condensed Consolidated Statements of Cash Flows.
Click here to view Digital River's Q2 2005 Reconciliations.
About Digital River, Inc.
Digital River, Inc., a global leader in e-commerce outsourcing, builds and manages online businesses for more than 40,000 software publishers, manufacturers, distributors and online retailers. Its multi-channel e-commerce solution, which supports both direct and indirect sales, is designed to help companies of all sizes maximize online revenues as well as reduce the costs and risks of running an e-commerce operation. The company’s comprehensive platform offers site development and hosting, order management, fraud prevention, export controls, tax management, physical and digital product fulfillment, multi-lingual customer service, advanced reporting and strategic marketing services.
Founded in 1994, Digital River is headquartered in Minneapolis with offices in major U.S. and European cities. For more details about Digital River, visit the corporate Web site at www.digitalriver.com or call 952-253-1234.
Forward-Looking Statements
This press release contains forward-looking statements, including statements regarding the Company’s anticipated future growth, including the expansion of its international operations and global business infrastructure, and future financial performance as well as statements containing the words “anticipates” or “expects,” and similar words. Such forward-looking statements involve known and unknown risks, uncertainties and other factors, which may cause the actual results, performance or achievements of the Company, or industry results, to differ materially from those expressed or implied by such forward-looking statements. Such factors include, among others: the Company’s limited operating history and variability of operating results; competition in the e-commerce market; challenges associated with international expansion, and other risk factors referenced in the Company’s public filings with the Securities and Exchange Commission, including the Annual Report on Form 10-K filed on March 16, 2005, for the year ended December 31, 2004.
Digital River is a registered trademark of Digital River, Inc. All other company and product names are trademarks, registrations or copyrights of their respective owners.
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