Digital River Reports Third Quarter Financial Results
Q3 revenue up 42 percent year-over-year
MINNEAPOLIS - Oct. 26, 2006 --Digital River, Inc. (NASDAQ: DRIV), a global leader in e-commerce outsourcing, today reported its third quarter 2006 financial results.
Q3 Revenue
Third quarter revenue totaled $75.3 million, an increase of 42 percent from revenue of $53.2 million in the third quarter of 2005.
Q3 GAAP Results
Third quarter GAAP net income was $14.8 million, or $0.33 per diluted share, including $3.5 million of stock-based compensation expense. This compared to net income of $12.4 million, or $0.31 per diluted share, including no stock-based compensation expense in the third quarter of 2005. These results represent a year-over-year increase of 20 percent in GAAP net income and 6 percent in GAAP diluted net income per share.
Q3 Non-GAAP Results
Based on the Company’s non-GAAP measurements, third quarter non-GAAP net income was $18.7 million, or $0.41 per diluted share, compared to net income, on a similar basis, of $13.2 million, or $0.31 per diluted share in the third quarter of 2005. This represents a year-over-year increase of 42 percent in non-GAAP net income and 32 percent in non-GAAP diluted net income per share.
Non-GAAP net income is computed by starting with GAAP pre-tax income as reported on the Company’s statement of operations, adding back amortization of acquisition-related intangibles, and beginning in 2006, stock-based compensation expense, to calculate non-GAAP pre-tax income. This figure is then taxed at 31 percent, the Company’s anticipated long-term effective tax rate, to arrive at non-GAAP net income. This amount is then divided by fully-diluted GAAP shares outstanding, which includes the impact of the Company’s contingent convertible notes, to derive non-GAAP diluted net income per share. To provide further clarity, a detailed reconciliation on the comparability of the GAAP and non-GAAP data has been provided in table form following the financial statements accompanying this announcement.
“Our ability to execute on our business objectives contributed to our solid third quarter financial performance and strong cash flows,” said Joel Ronning, Digital River’s CEO. “The announcements this week of our expanded relationships with Symantec and Microsoft serve as further testimony to our ability to grow our business and deliver a compelling value proposition for our clients. We believe we are well positioned to capitalize on growth opportunities before us in 2007.”
Nine Months Ended September 30, 2006, Revenue
For the nine month period ended September 30, 2006, the Company reported revenue of $224.6 million. This represents a 41 percent increase from revenue of $158.9 million in the similar period of the prior year.
Nine Months Ended September 30, 2006, GAAP Results
For the nine month period ended September 30, 2006, GAAP net income was $44.5 million, or $1.04 per diluted share, including $10.4 million of stock-based compensation expense. This compared to net income of $36.6 million, or $0.92 per diluted share, including no stock-based compensation expense for the same period in 2005.
Nine Months Ended September 30, 2006, Non-GAAP Results
Through September 30, 2006, based on the Company’s non-GAAP measurements, non-GAAP net income was $58.2 million, or $1.32 per diluted share, compared to net income on a similar basis of $40.1 million, or $0.96 per diluted share for the same period in 2005.
Q4 2006 Guidance
Forward-looking guidance for the fourth quarter ending December 31, 2006, is as follows:
- Revenue of $82.4 million;
- GAAP diluted net income per share of $0.35, including stock-based compensation expense of $3.6 million and a quarterly GAAP tax rate of 33 percent; and
- Non-GAAP diluted net income per share of $0.46.
Full Year 2006 Guidance
Forward-looking guidance for the full year ending December 31, 2006, is as follows:
- Revenue of $307 million;
- GAAP diluted net income per share of $1.39, including stock-based compensation expense of $14.0 million; and
- Non-GAAP diluted net income per share of $1.78.
Full Year 2007 Guidance
Forward-looking guidance for the full year ending December 31, 2007, is as follows:
- Revenue of $380 million;
- GAAP diluted net income per share of $1.74, including stock-based compensation expense of $15.3 million and an annual effective tax rate of 32 percent; and
- Non-GAAP diluted net income per share of $2.14.
Digital River will hold a third quarter conference call today at 4:45 p.m. Eastern Daylight Time. A live webcast of the conference call can be accessed from http://www.digitalriver.com/2006q3earnings/. Alternatively, a live broadcast of the call may be heard by using conference ID # 7953094 and dialing 800-922-0755 inside the United States or Canada, or by calling 973-935-2406 from international locations. A webcast replay of the call will be archived on the Company’s corporate Web site.
Q3 2006 Financial Tables
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. cities as well as Cologne, Germany; London, England; Shannon, Ireland; Luxembourg, Luxembourg; Taipei, Taiwan; and Tokyo, Japan. 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 global business infrastructure, and future financial performance as well as statements containing the words “anticipates,” “believes,” “plans,” “will” 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 for the year ended December 31, 2005. The financial information contained in this release should be read in conjunction with the consolidated financial statements and notes thereto included in Digital River’s most recent reports on Form 10-K and Form 10-Q, each as it may be amended from time-to-time.
The forward-looking statements regarding fourth quarter 2006 and full year 2006 and 2007 reflect Digital River’s expectations as of October 26, 2006. Results may be materially affected by many factors, such as changes in global economic conditions and consumer spending, fluctuations in foreign currency rates, the rate of growth of online commerce and the Internet and other factors. The guidance assumes, among other things, that there are no changes to stock-based compensation expense and anticipated tax rates, and that no additional intangible assets are recorded. Readers are cautioned not to place undue reliance on forward-looking statements, which reflect management's analysis only as of the date hereof. The Company undertakes no obligation to update these forward-looking statements to reflect events or circumstances that may arise after the date hereof.
Digital River is a registered trademark of Digital River, Inc. All other trademarks and registered trademarks are trademarks of their respective owners.
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