Digital River Reports Fourth Quarter and Full Year Financial Results
Q4 revenue up 35 percent and full year revenue up 40 percent
MINNEAPOLIS - Feb. 8, 2007 - Digital River, Inc. (NASDAQ: DRIV), a global leader in e-commerce outsourcing, today reported its fourth quarter and full year 2006 financial results.
Revenue: Q4 and Full Year 2006
- Fourth quarter revenue totaled $83.0 million, an increase of 35 percent from revenue of $61.6 million in the fourth quarter of 2005.
- For the full year ended December 31, 2006, revenue totaled $307.6 million, an increase of 40 percent from revenue of $220.4 million in 2005.
GAAP Results: Q4 and Full Year 2006
- Fourth quarter GAAP net income was $16.4 million, or $0.36 per diluted share, including $3.5 million of stock-based compensation expense. This compared to restated net income of $18.1 million, or $0.45 per diluted share, including minimal stock-based compensation expense in the fourth quarter of 2005. Fourth quarter 2005 results included a one-time tax benefit of $6.7 million or $0.16 per diluted share due to reversing the valuation allowance on certain deferred tax assets. In addition, the restatement related to stock option grants added approximately $400,000 of tax benefit to fourth quarter 2005 results.
- For the full year ended December 31, 2006, GAAP net income was $60.8 million, or $1.40 per diluted share, including $13.9 million of stock-based compensation expense. This compared to restated net income of $56.5 million or $1.41 per diluted share in 2005. Our restatement related to stock option grants added a $2.2 million benefit to previously reported 2005 financial results. This is the result of approximately $2.5 million in cumulative tax benefit for the periods from 1998 through 2005 offset by stock-based compensation expense in 2005 of approximately $300,000.
Non-GAAP Results: Q4 and Full Year 2006
- Based on the Company’s non-GAAP measurements, fourth quarter non-GAAP net income was $21.6 million, or $0.47 per diluted share, compared to restated net income, on a similar basis, of $15.4 million, or $0.37 per diluted share in the fourth quarter of 2005. This represents a year-over-year increase of 40 percent in non-GAAP net income and 27 percent in non-GAAP diluted net income per share.
- For the full year ended December 31, 2006, non-GAAP net income was $79.7 million, or $1.79 per diluted share, compared to restated net income, on a similar basis, of $55.5 million, or $1.34 per diluted share in the full year of 2005. This represents a year-over-year increase of 44 percent in non-GAAP net income and 34 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 stock-based compensation expense, to calculate non-GAAP pre-tax income. This figure is then taxed at 31 percent, the Company’s current 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.
“We are pleased with our fourth quarter and full year results,” said Joel Ronning, Digital River’s CEO. “Key client wins, expansion in global markets and growth in strategic marketing services were major contributors to our success last year. Looking forward, we intend to deliver more value to our clients and prospects while further strengthening our market leadership position. In 2007, we plan to intensify our focus on operational execution as well as introduce more revenue-generating e-marketing programs.”
Q1 2007 Guidance
Forward-looking guidance for the first quarter ending March 31, 2007, is as follows:
- Revenue of $88 million;
- GAAP diluted net income per share of $0.44, including stock-based compensation expense of $3.5 million and a quarterly GAAP tax rate of 31 percent; and
- Non-GAAP diluted net income per share of $0.53.
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 $1.86, including stock-based compensation expense of $14.1 million and an annual GAAP tax rate of 31 percent; and
- Non-GAAP diluted net income per share of $2.14.
Digital River will hold a fourth quarter conference call today at 4:45 p.m. Eastern Standard Time. A live webcast of the conference call can be accessed from http://www.digitalriver.com/2006q4earnings/. Alternatively, a live broadcast of the call may be heard by using conference ID # 8340808 and dialing 877-493-9121 inside the United States or Canada, or by calling 973-582-2750 from international locations. A webcast replay of the call will be archived on the Company’s corporate Web site.
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; potential consequences surrounding findings of our internal investigation, investigation by a committee of our independent directors and informal SEC inquiry into our stock option granting practices; any potential civil litigation relating to our stock option granting practices; 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 first quarter 2007 and full year 2007 reflect Digital River’s expectations as of February 8, 2007. 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 company and product names are trademarks, registrations or copyrights of their respective owners.
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