Exhibit 99.1
Digital River Beats Q2 Revenue and Earnings Expectations; Raises 2005 Guidance
MINNEAPOLIS--(BUSINESS WIRE)--July 27, 2005--Digital River, Inc.
(NASDAQ:DRIV):
-- 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
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.
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 trademarks and registered trademarks are trademarks of their
respective owners.
Digital River, Inc.
Second Quarter Results
(Unaudited, in thousands)
Condensed Consolidated Balance Sheets
As of
--------------------------------
June 30, 2005 December 31, 2004
-------------- -----------------
Assets
- ------
Current assets
Cash and cash equivalents $142,221 $127,734
Short-term investments 179,824 164,402
Accounts receivable, net 21,903 21,520
Other current assets 3,109 3,317
-------------- -----------------
Total current assets 347,057 316,973
Property and equipment, net 19,314 17,367
Goodwill 156,279 148,086
Intangible assets, net 15,194 17,297
Other assets 9,566 10,113
-------------- -----------------
Total assets $547,410 $509,836
============== =================
Liabilities and stockholders' equity
- ------------------------------------
Current liabilities
Accounts payable $84,879 $88,052
Accrued payroll 4,254 5,332
Deferred revenue 4,419 3,901
Accrued acquisitions expenses 6,588 6,720
Other accrued liabilities 16,987 14,221
-------------- -----------------
Total current liabilities 117,127 118,226
Non-current liabilities
Convertible senior notes 195,000 195,000
Deferred tax liability 3,245 3,841
-------------- -----------------
Total non-current liabilities 198,245 198,841
-------------- -----------------
Total liabilities 315,372 317,067
-------------- -----------------
Stockholders' equity
Common stock 342 337
Additional paid-in capital 261,103 243,926
Accumulated deficit (29,079) (51,164)
Accumulated other comprehensive
loss (328) (330)
-------------- -----------------
Stockholders' equity 232,038 192,769
-------------- -----------------
Total liabilities and stockholders'
equity $547,410 $509,836
============== =================
Digital River, Inc.
Second Quarter Results
(Unaudited, in thousands, except per share amounts)
Condensed Consolidated Statements of Operations
Three months ended Six months ended
June 30, June 30,
------------------- ------------------
2005 2004 2005 2004
--------- --------- --------- --------
Revenue $51,143 $34,877 $105,672 $66,732
Costs and expenses:
Direct cost of services 1,187 1,449 2,488 2,067
Network and infrastructure 4,738 3,506 9,216 6,806
Sales and marketing 15,740 11,407 32,116 22,875
Product research and
development 5,127 3,645 9,585 6,569
General and administrative 5,301 3,856 10,917 6,693
Depreciation and amortization 2,375 1,859 4,497 3,470
Amortization of acquisition-
related costs 2,110 2,267 4,506 3,846
--------- --------- --------- --------
Total costs and expenses 36,578 27,989 73,325 52,326
--------- --------- --------- --------
Income from operations 14,565 6,888 32,347 14,406
--------- --------- --------- --------
Other income/(expense), net 891 (132) 2,046 (35)
--------- --------- --------- --------
Income before income tax
expense 15,456 6,756 34,393 14,371
Income tax expense (5,230) - (10,130) -
--------- --------- --------- --------
Net income $10,226 $6,756 $24,263 $14,371
========= ========= ========= ========
Net income per share - basic $0.30 $0.21 $0.71 $0.45
========= ========= ========= ========
Net income per share - diluted $0.26 $0.19 $0.61 $0.40
========= ========= ========= ========
Weighted average shares
outstanding - basic 34,176 32,064 34,097 31,842
Weighted average shares
outstanding - diluted 41,154 37,440 41,347 36,244
Digital River, Inc.
Second Quarter Results
(Unaudited, in thousands)
Condensed Consolidated Statements of Cash Flows
Six months ended
June 30,
-------------------
2005 2004
--------- ---------
Operating Activities:
- ---------------------
Net income $24,263 $14,371
Adjustments to reconcile net income to net cash
provided by operating activities:
Amortization of acquisition-related costs 4,506 3,846
Change in accounts receivable allowance (390) 175
Depreciation and amortization 4,497 3,453
Tax benefit of stock based compensation 6,269 -
Deferred and other income taxes 3,870 -
Change in operating assets and liabilities:
Accounts receivable 1,392 (1,026)
Prepaid and other assets (475) 587
Accounts payable (6,705) 4,934
Deferred revenue 633 41
Accrued payroll and other accrued
liabilities 595 (1,423)
--------- ---------
Net cash provided by operating activities 38,455 24,958
--------- ---------
Investing Activities:
- ---------------------
Purchases of investments (69,089) (44,207)
Sales of investments 53,227 44,982
Cash paid for acquisitions, net of cash received (7,825) (124,714)
Purchases of property, equipment and capitalized
software (6,021) (4,409)
--------- ---------
Net cash used in investing activities (29,708) (128,348)
--------- ---------
Financing Activities:
- ---------------------
Principal amount on line of credit - 45,000
Repayment of principal on line of credit - (45,000)
Proceeds from convertible senior notes - 169,201
Exercise of stock options 10,453 8,007
Sales of common stock under employee stock
purchase plan 1,488 427
Repurchase of common stock (3,205) -
--------- ---------
Net cash provided by financing activities 8,736 177,635
--------- ---------
Effect of exchange rate changes on cash (2,996) 57
--------- ---------
Net increase in cash and cash equivalents 14,487 74,302
Cash and cash equivalents, beginning of period 127,734 101,878
--------- ---------
Cash and cash equivalents, end of period $142,221 $176,180
========= =========
Digital River, Inc.
Reconciliations
(Unaudited, in thousands, except per share amounts)
Calculation of GAAP Diluted Net Income Per Share
- ------------------------------------------------
Three months Six months
ended June 30, ended June 30,
---------------- -----------------
2005 2004 2005 2004
-------- ------- -------- --------
GAAP net income $10,226 $6,756 $24,263 $14,371
Add back debt interest expense and
issuance cost amortization, net of
tax benefit 457 236 969 236
-------- ------- -------- --------
Adjusted net income for GAAP EPS
calculation $10,683 $6,992 $25,232 $14,607
======== ======= ======== ========
Net income per share - diluted $0.26 $0.19 $0.61 $0.40
======== ======= ======== ========
Weighted average shares outstanding
- diluted 41,154 37,440 41,347 36,244
GAAP to Pro Forma Financial Reconciliations
- -------------------------------------------
Three months Six months
ended June 30, ended June 30,
---------------- -----------------
2005 2004 2005 2004
-------- ------- -------- --------
Pro Forma Financial Reconciliation:
- -----------------------------------
GAAP net income $10,226 $6,756 $24,263 $14,371
Add back amortization of
acquisition-related costs 2,110 2,267 4,506 3,846
Add back non-cash income taxes 5,230 - 8,930 -
Remove litigation reserve credit (158) - (158) -
-------- ------- -------- --------
Pro forma net income $17,408 $9,023 $37,541 $18,217
======== ======= ======== ========
Pro forma net income per share -
diluted $0.47 $0.25 $1.02 $0.51
======== ======= ======== ========
Pro forma weighted average shares
outstanding - diluted 36,729 35,981 36,922 35,515
Q3 Full Year
2005 2005
Guidance Guidance
-------- ---------
Pro Forma Guidance Reconciliation:
- ----------------------------------
Expected GAAP net income per share -
diluted $0.27 $1.17
Expected impact of amortization of
acquisition-related costs 0.05 0.23
Expected impact of non-cash income
taxes 0.14 0.52
Expected impact of contingent
convertible notes 0.02 0.08
Expected impact of litigation
reserve credit - -
-------- ---------
Expected pro forma net income per
share - diluted $0.48 $2.00
======== =========
CONTACT: Digital River, Inc., Minneapolis
Investor Contact:
Tom Donnelly, 952-253-8406
investorrelations@digitalriver.com
or
Media Contact:
Gerri Dyrek, 952-253-8396
publicrelations@digitalriver.com