Exhibit 99.1
Digital River Reports Second Quarter Results
MINNEAPOLIS--(BUSINESS WIRE)--July 26, 2007--Digital River, Inc.
(NASDAQ:DRIV), a leading provider of global e-commerce solutions,
today reported its second quarter results.
2007 Revenue - Q2 and Six Months Ended June 30, 2007
Second quarter revenue totaled $78.2 million. This is an increase
of 10 percent from revenue of $71.3 million in the second quarter of
2006. This result is consistent with the preliminary second quarter
revenue guidance the Company provided on June 27, 2007.
In the first half of 2007, the Company reported revenue of $169.9
million. This represents a 14 percent increase from revenue of $149.3
million in the similar period of the prior year.
2007 GAAP Results - Q2 and Six Months Ended June 30, 2007
Second quarter GAAP net income was $14.5 million, or $0.32 per
diluted share. This compared to net income of $13.3 million, or $0.30
per diluted share, in the second quarter of 2006. These results
represent a year-over-year increase of 9 percent in GAAP net income
and 7 percent in GAAP diluted net income per share. This result is
consistent with the preliminary second quarter GAAP diluted net income
per share guidance the Company provided on June 27, 2007.
In the first half of 2007, GAAP net income was $35.2 million, or
$0.78 per diluted share. This compared to net income of $29.7 million,
or $0.70 per diluted share, in the first half of 2006.
2007 Non-GAAP Results - Q2 and Six Months Ended June 30, 2007
Based on the Company's non-GAAP measurements, second quarter
non-GAAP net income was $18.1 million, or $0.39 per diluted share.
This compared to net income on a similar basis of $18.7 million, or
$0.41 per diluted share, in the second quarter of 2006. This result is
consistent with the preliminary second quarter non-GAAP diluted net
income per share guidance the Company provided on June 27, 2007.
Based on the Company's non-GAAP measurements, non-GAAP net income
in the first half of 2007 was $43.1 million, or $0.93 per diluted
share. This compared to net income on a similar basis of $39.4
million, or $0.91 per diluted share, in the first half of 2006.
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 estimated
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 continue to be confident in our core business, solid long-term
fundamentals and the future growth potential of this company," said
Joel Ronning, Digital River's CEO. "During the second half of the
year, we plan to expand relationships with key clients, further
enhance our e-commerce infrastructure to create added scalability for
our business and continue to pursue international markets. Overall, we
believe the company is well positioned to benefit from the strong
trends in e-commerce outsourcing and the ongoing shift from physical
to digital delivery of software."
Q3 2007 Guidance
Forward-looking guidance for the third quarter ending September
30, 2007, is as follows:
-- Revenue of $81.5 million;
-- GAAP diluted net income per share of $0.34, including
stock-based compensation expense of $3.7 million; and
-- Non-GAAP diluted net income per share of $0.41.
Full Year 2007 Guidance
Forward-looking guidance for the full year ending December 31,
2007 is as follows:
-- Revenue of $345 million;
-- GAAP diluted net income per share of $1.59, including
stock-based compensation expense of $14.2 million; and
-- Non-GAAP diluted net income per share of $1.87.
This guidance is consistent with the preliminary full year
guidance that the Company provided on June 27, 2007.
Share Repurchase Program
Digital River also announced that the Company has repurchased
approximately 1.37 million shares of the Company's common stock at a
weighted average price of $45.86 during the month of July 2007. The
Company has approximately $137 million remaining under the $200
million share repurchase authorization the Company announced on June
27, 2007. Additional share repurchases will occur from time-to-time at
the Company's discretion, based on ongoing assessments of the capital
needs of the business, the market price of its common stock and
general market conditions. No time limit has been set for completion
of the repurchase program.
Digital River will hold a second 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/2007q2earnings/.
Alternatively, a live broadcast of the call may be heard by using
conference ID # 9684572 and dialing (888) 802-2278 inside the United
States or Canada, or by calling (913) 312-1264 from international
locations. A webcast replay of the call will be archived on Digital
River's corporate Web site.
About Digital River, Inc.
Digital River, Inc., a leading provider of global e-commerce
solutions, builds and manages online businesses for more than 40,000
software publishers, consumer technology manufacturers, distributors,
online retailers and affiliates. 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;
Tokyo, Japan; and Shanghai, China. 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 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, 2006. 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 third quarter and full
year 2007 reflect Digital River's expectations as of July 26, 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, progress with key partners 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.
Digital River, Inc.
Second Quarter Results
(Unaudited, in thousands)
Subject to reclassification
Condensed Consolidated Balance Sheets As of
June 30, December 31,
-------------------------
2007 2006
------------ ------------
Assets
- --------------------------------------------
Current assets
Cash and cash equivalents $ 409,115 $ 390,243
Short-term investments 271,657 235,699
Accounts receivable, net 45,408 52,392
Deferred income taxes 19,591 19,687
Prepaid expenses and other 7,042 6,025
------------ ------------
Total current assets 752,813 704,046
Property and equipment, net 24,879 24,079
Goodwill 239,772 243,799
Intangible assets, net 17,604 21,106
Deferred income taxes 17,403 1,276
Other assets 12,106 11,957
------------ ------------
Total assets $ 1,064,577 $ 1,006,263
============ ============
Liabilities and stockholders' equity
- --------------------------------------------
Current liabilities
Accounts payable $ 126,991 $ 141,386
Accrued payroll 9,238 12,097
Deferred revenue 7,425 7,040
Accrued acquisition liabilities 1,047 5,654
Other accrued liabilities 43,946 39,982
------------ ------------
Total current liabilities 188,647 206,159
Non-current liabilities
Convertible senior notes 195,000 195,000
Other liabilities 9,504 1,345
------------ ------------
Total non-current liabilities 204,504 196,345
------------ ------------
Total liabilities 393,151 402,504
------------ ------------
Stockholders' equity
Common stock 415 404
Additional paid-in capital 574,820 546,758
Retained earnings 80,081 44,989
Accumulated other comprehensive income 16,110 11,608
------------ ------------
Stockholders' equity 671,426 603,759
------------ ------------
Total liabilities and stockholders' equity $ 1,064,577 $ 1,006,263
============ ============
Digital River, Inc.
Second Quarter Results
(Unaudited, in thousands, except per share amounts)
Subject to reclassification
Condensed Consolidated Statements of Operations
Three months ended Six months ended
June 30, June 30,
------------------- -------------------
2007 2006 2007 2006
--------- --------- --------- ---------
Revenue $ 78,227 $ 71,277 $ 169,858 $ 149,291
Costs and expenses:
Direct cost of services 2,426 1,914 4,989 3,777
Network and infrastructure 7,334 6,298 14,829 13,741
Sales and marketing 32,793 27,628 66,982 54,567
Product research and
development 8,235 7,488 16,887 15,090
General and administrative 9,543 8,247 19,656 16,497
Depreciation and
amortization 3,291 2,475 6,149 4,728
Amortization of acquisition-
related intangibles 1,607 3,038 4,353 5,878
--------- --------- --------- ---------
Total costs and expenses 65,229 57,088 133,845 114,278
--------- --------- --------- ---------
Income from operations 12,998 14,189 36,013 35,013
--------- --------- --------- ---------
Other income, net 8,007 6,392 15,000 9,327
--------- --------- --------- ---------
Income before income tax
expense 21,005 20,581 51,013 44,340
Income tax expense 6,512 7,292 15,814 14,674
--------- --------- --------- ---------
Net income $ 14,493 $ 13,289 $ 35,199 $ 29,666
========= ========= ========= =========
Net income per share - basic $ 0.35 $ 0.34 $ 0.86 $ 0.79
========= ========= ========= =========
Net income per share - diluted $ 0.32 $ 0.30 $ 0.78 $ 0.70
========= ========= ========= =========
Shares used in per share
calculation - basic 41,169 39,452 40,823 37,386
Shares used in per share
calculation - diluted 46,637 45,458 46,488 43,319
Calculation of GAAP Diluted Net Income Per Share
Three months ended Six months ended
June 30, June 30,
------------------- -------------------
2007 2006 2007 2006
--------- --------- --------- ---------
GAAP net income $ 14,493 $ 13,289 $ 35,199 $ 29,666
Add back debt interest
expense and issuance cost
amortization, net of tax
benefit 435 435 870 870
--------- --------- --------- ---------
Adjusted net income for GAAP
EPS calculation $ 14,928 $ 13,724 $ 36,069 $ 30,536
========= ========= ========= =========
Net income per share - diluted $ 0.32 $ 0.30 $ 0.78 $ 0.70
========= ========= ========= =========
Shares used in per share
calculation - diluted 46,637 45,458 46,488 43,319
Digital River, Inc.
Second Quarter Results
(Unaudited, in thousands)
Subject to reclassification
Condensed Consolidated Statements of Cash Flows
Six months ended June 30,
-------------------------
2007 2006
------------ ------------
Operating Activities:
- --------------------------------------------
Net income $ 35,199 $ 29,666
Adjustments to reconcile net income to
net cash provided by operating
activities:
Amortization of acquisition-related
intangibles 4,353 5,878
Change in accounts receivable
allowance, net of acquisitions 570 126
Depreciation and amortization 6,149 4,728
Stock-based compensation expense 7,125 6,932
Excess tax benefits from stock-based
compensation (10,027) (2,705)
Deferred and other income taxes 11,383 12,679
Change in operating assets and
liabilities (net of acquisitions):
Accounts receivable 6,515 (622)
Prepaid and other assets (1,417) (2,538)
Accounts payable (15,997) (14,263)
Deferred revenue 298 553
Income tax payable 2,861 919
Other accrued liabilities 1,068 2,624
------------ ------------
Net cash provided by operating
activities 48,080 43,977
------------ ------------
Investing Activities:
- --------------------------------------------
Purchases of investments (173,092) (103,413)
Sales of investments 137,395 86,913
Cash paid for acquisitions, net of cash
received (8,540) (37,235)
Purchases of equipment and capitalized
software (6,577) (9,162)
------------ ------------
Net cash used in investing
activities (50,814) (62,897)
------------ ------------
Financing Activities:
- --------------------------------------------
Proceeds from sales of common stock - 172,700
Exercise of stock options 7,703 9,616
Sales of common stock under employee
stock purchase plan 1,244 933
Repurchase of restricted stock to
satisfy tax withholding obligation (377) -
Excess tax benefits from stock-based
compensation 10,027 2,705
------------ ------------
Net cash provided by financing
activities 18,597 185,954
------------ ------------
Effect of exchange rate changes on cash 3,009 1,645
------------ ------------
Net increase in cash and cash equivalents 18,872 168,679
Cash and cash equivalents, beginning of
period 390,243 131,770
------------ ------------
Cash and cash equivalents, end of period $ 409,115 $ 300,449
============ ============
------------ ------------
Cash paid for interest on Convertible
Senior Notes $ 1,219 $ 1,219
------------ ------------
Digital River, Inc.
GAAP to non-GAAP Reconciliations
(Unaudited, in thousands, except per share amounts)
Calculation of non-GAAP Diluted Net Income Per Share
Twelve
months
Three months ended ended
--------------------------------------- ---------
March 31, June 30, Sept. 30, Dec. 31, Dec. 31,
2006 2006 2006 2006 2006
--------------------------------------- ---------
GAAP pre-tax income $ 23,759 $ 20,581 $ 20,369 $ 24,773 $ 89,482
Add back:
amortization of
acquisition-
related
intangibles 2,840 3,038 3,313 2,943 12,134
Add back: stock-
based
compensation
expense 3,413 3,519 3,456 3,516 13,904
--------------------------------------- ---------
Non-GAAP pre-tax
income 30,012 27,138 27,138 31,232 115,520
Income tax expense @
31% 9,304 8,413 8,413 9,682 35,812
--------------------------------------- ---------
Non-GAAP net income $ 20,708 $ 18,725 $ 18,725 $ 21,550 $ 79,708
======================================= =========
Non-GAAP net income
per share - diluted $ 0.50 $ 0.41 $ 0.41 $ 0.47 $ 1.79
======================================= =========
Shares used in per
share calculation -
diluted 41,454 45,458 45,666 46,138 44,642
Six
months
Three months ended ended
------------------- ---------
March 31, June 30, June 30,
2007 2007 2007
------------------- ---------
GAAP pre-tax income $ 30,008 $ 21,005 $ 51,013
Add back:
amortization of
acquisition-
related
intangibles 2,746 1,607 4,353
Add back: stock-
based
compensation
expense 3,476 3,649 7,125
------------------- ---------
Non-GAAP pre-tax
income 36,230 26,261 62,491
Income tax expense @
31% 11,231 8,141 19,372
------------------- ---------
Non-GAAP net income $ 24,999 $ 18,120 $ 43,119
=================== =========
Non-GAAP net income
per share - diluted $ 0.54 $ 0.39 $ 0.93
=================== =========
Shares used in per
share calculation -
diluted 46,348 46,637 46,488
Breakdown of stock-based compensation expense
Six
months
Three months ended ended
------------------- ---------
March 31, June 30, June 30,
2007 2007 2007
------------------- ---------
Direct cost of
services $ 195 $ 225 $ 420
Network and
infrastructure 72 61 133
Sales and marketing 1,268 1,350 2,618
Product research
and development 552 466 1,018
General and
administrative 1,389 1,547 2,936
------------------- ---------
Total $ 3,476 $ 3,649 $ 7,125
=================== =========
Non-GAAP Guidance Reconciliation
Q3 - 2007 FY - 2007
Guidance Guidance
--------- ---------
Expected GAAP net
income per share -
diluted $ 0.34 $ 1.59
Add back
amortization of
acquisition-related
costs 0.03 0.15
Add back stock-based
compensation
expense 0.08 0.31
Tax variability (0.03) (0.14)
Deduct impact of
contingent
convertible notes (0.01) (0.04)
--------- ---------
Expected non-GAAP
diluted net income
per share $ 0.41 $ 1.87
========= =========
CONTACT: Digital River, Inc.
Investor Relations Contact:
Tom Donnelly, 952-253-8661
Chief Financial Officer
investorrelations@digitalriver.com
or
Media Relations Contact:
Gerri Dyrek, 952-253-8396
Director, Public Relations
gdyrek@digitalriver.com