Digital River Achieves Nearly 30 Percent Year-Over-Year Revenue Growth in Q1; Company Increases Guidance for Long-Term Operating Margins.Business Editors/High-Tech Writers MINNEAPOLIS--(BUSINESS WIRE)--April 22, 2004 Digital River, Inc. (Nasdaq:DRIV DRIV Drive (street type) ): -- Reports Record Q1 Revenue of $31.9 Million -- Achieves Record Q1 GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). Diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. EPS (Encapsulated PostScript) A PostScript file format used to transfer a graphic image between applications and platforms. EPS files contain PostScript code as well as an optional preview image in TIFF, WMF, PICT or EPSI, the latter being an ASCII-only format. of $0.22 -- Generates Record Q1 Pro Forma As a matter of form or for the sake of form. Used to describe accounting, financial, and other statements or conclusions based upon assumed or anticipated facts. The phrase pro forma Diluted EPS of $0.26 -- Achieves Record Gross Margins of 87.7 Percent Digital River, Inc. (Nasdaq:DRIV), a global leader in e-commerce e-commerce, commerce conducted over the Internet, most often via the World Wide Web. E-commerce can apply to purchases made through the Web or to business-to-business activities such as inventory transfers. outsourcing (1) Contracting with outside consultants, software houses or service bureaus to perform systems analysis, programming and datacenter operations. Contrast with insourcing. See netsourcing, ASP, SSP and facilities management. , today reported revenue of $31.9 million for the quarter ended March 31, 2004. This represents a year-over-year increase of nearly 30 percent from revenue of $24.6 million in the first quarter of last year, and a nearly 18 percent sequential One after the other in some consecutive order such as by name or number. increase from the $27.1 million in net revenue generated in the fourth quarter of 2003. This performance significantly exceeded the Company's previous first quarter 2004 revenue guidance of $27.5 million. GAAP Results: In the first quarter, net income was $7.6 million, or $0.22 per share on a diluted basis. This compared to a net income of $4.0 million, or $0.13 per diluted share, for the same period last year, and $5.6 million, or $0.16 per diluted share in the fourth quarter of 2003. These results also exceeded guidance previously provided by the Company. Proforma Proforma A financial projection based on assumptions. Results: Digital River's net income for the first quarter of 2004, prior to the amortization of acquisition-related expenses, was $9.2 million, or $0.26 per share, on a diluted basis. This compares to net income, on a similar basis, of $5.2 million, or $0.17 per diluted share, in the first quarter of 2003, and net income of $7.1 million, or $0.20 per diluted share, in the prior quarter. "I am very pleased with our performance last quarter," said Joel Joel, book of the Bible Joel, prophetic book of the Bible. It is a collection of the oracles of an otherwise unknown prophet, dated variously from the 9th to the 3d cent. B.C., though a date in c.400 B.C. is likely. Ronning Ronning, Rønning, or Rönning can mean
v. so·lid·i·fied, so·lid·i·fy·ing, so·lid·i·fies v.tr. 1. To make solid, compact, or hard. 2. To make strong or united. v.intr. our position as an industry leader. We believe we are well positioned for the remainder of 2004 and beyond." Digital River's gross margins averaged 87.7 percent, in the first quarter of 2004, a 350 basis point improvement over gross margins during the same period last year. This is also a 249 basis point improvement from the fourth quarter of 2003. Earlier this week, the Company announced that it signed a definitive agreement to acquire privately held element 5 AG. Under the terms of the agreement, Digital River paid $120 million in cash. Digital River also may pay up to an additional $2.5 million in cash based on element 5's operating performance over the first twenty-four months subsequent to the acquisition. As part of the transaction, Digital River established a $45 million secured line of credit. Business Outlook Commenting on Digital River's business outlook, the company's CFO See Chief Financial Officer. , Carter Hicks Hicks , Edward 1780-1849. American painter of primitive works, notably The Peaceable Kingdom, of which nearly 100 versions exist. , said, "As we announced earlier this week, we are raising our financial projections for 2004 primarily due to stronger than anticipated performance in the first quarter." 2004 Guidance Prior Current ------------- --------- ----------- Revenue ($ Millions) $120 $142 Earnings Per Share: ------------------- GAAP $0.77 $0.87 Pro Forma $0.89 $1.10 For the second quarter, Digital River now anticipates revenues of $31.5 million and GAAP net income of $0.16 per share. The Company believes that the acquisition of element 5 will comprise approximately $4 million of the projected second quarter revenue and will be neutral to GAAP EPS. Digital River anticipates pro forma net income will total $0.22 per share. For 2004, Digital River now anticipates revenues of $142 million and GAAP net income of $0.87 per share. The Company believes that the acquisition of element 5 will comprise approximately $17 million of the projected 2004 revenue and approximately $0.04 of the projected GAAP EPS. Digital River anticipates that pro forma net income will total $1.10 per share. Digital River also announced that based on the recent strength of its gross margin levels and the future contributions from the acquisition of element 5, it is raising its guidance for long-term Long-term Three or more years. In the context of accounting, more than 1 year. long-term 1. Of or relating to a gain or loss in the value of a security that has been held over a specific length of time. Compare short-term. operating margins Operating Margin A ratio used to measure a company's pricing strategy and operating efficiency. Calculated by: . The Company believes that gross margins will average 81-86 percent and that operating expenses Operating expenses The amount paid for asset maintenance or the cost of doing business, excluding depreciation. Earnings are distributed after operating expenses are deducted. will average 48 percent. As a result, operating margins will average 33-38 percent, prior to the amortization of acquisition-related expenses. The Company believes that these results can be achieved in a two-year time horizon. This compares to the Company's prior guidance for long-term gross margins of 78-83 percent and operating margins of 30-35 percent. Note: A reconciliation of the pro forma measurement data above is provided as a table following the condensed con·dense v. con·densed, con·dens·ing, con·dens·es v.tr. 1. To reduce the volume or compass of. 2. To make more concise; abridge or shorten. 3. Physics a. financial statements accompanying this announcement. Further information regarding the Company's use of non-GAAP financial data has been included in the Company's Form 8-K Form 8-K The form required by the SEC when a publicly held company incurs any event that might affect its financial situation or the share value of its stock. Form 8-K See 8-K. filed with the Securities and Exchange Commission on April 22, 2004. Digital River will hold a first quarter conference call today at 4:45 p.m. Eastern Daylight Time. To access the call, please dial 877-422-0170, or listen to the webcast at http://phx.corporate-ir.net/phoenix.zhtml?c=94762&p=irol-irhome. Please install any necessary audio software. About Digital River, Inc. Digital River, Inc., a global leader in e-commerce outsourcing, builds and manages online businesses for more than 35,000 companies worldwide. Its e-commerce solution and infrastructure are designed to help companies of all sizes maximize online revenues as well as cut the costs and reduce the risks associated with running an e-commerce operation. The Digital River(R) international e-commerce suite includes site development and hosting, order management, fraud prevention, site merchandising merchandising Element of marketing concerned especially with the sale of goods and services to customers. One aspect of merchandising is advertising, which aims to capture the interest of the segment of the population most likely to buy the product. , reporting and analytics, product fulfillment ful·fill also ful·fil tr.v. ful·filled, ful·fill·ing, ful·fills also ful·fils 1. To bring into actuality; effect: fulfilled their promises. 2. , e-marketing and multi-lingual customer service. Digital River's clients include 3M, ACT!, Autodesk (Autodesk, Inc., San Rafael, CA, www.autodesk.com) A leading provider of computer-aided design (CAD) software, founded in 1982. It introduced AutoCAD in its first year, and three years later, became the first PC CAD company to go public. , H&R Block, Motorola (Motorola, Inc., Schaumburg, IL, www.motorola.com) A leading manufacturer of semiconductor devices, electronics, telecommunications and satellite systems. Founded in Chicago in 1928 by Paul V. , Novell (Novell Inc., Provo, UT, www.novell.com) Novell was founded as Novell Data Systems in 1981 by Jack Davis and George Canova and initially manufactured terminals for IBM mainframes. In 1983, Ray Noorda became CEO and president of a restructured Novell, Inc. , Staples staples U-shaped stainless steel or vitallium units with sharp points used for surgical fixation. epiphyseal staples used to staple epiphysis to metaphysis; have metal bracing at the corners. .com and Symantec (Symantec Corporation, Cupertino, CA, www.symantec.com) A software company founded in 1982 by Dr. Gary Hendrix. It was acquired by Gordon Eubanks in 1984 and released its Q&A file manager the following year. In 1990, it merged with Peter Norton Computing, Inc. . Founded in 1994, Digital River is headquartered in Minneapolis Minneapolis (mĭn'ēăp`əlĭs), city (1990 pop. 368,383), seat of Hennepin co., E Minn., at the head of navigation on the Mississippi River, at St. Anthony Falls; inc. 1856. with offices throughout the United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. and in Europe Europe (y  r`əp), 6th largest continent, c.4,000,000 sq mi (10,360,000 sq km) including adjacent islands (1992 est. pop. 512,000,000). . For more details
about Digital River, visit the corporate Web site at
www.digitalriver.com or call 952-253-1234.
Forward-Looking Statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. In addition to the historical information contained herein, this press release contains forward-looking statements, including statements regarding the Company's anticipated future growth and financial performance as well as statements containing the words, "believes," "anticipates," "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 any future results, performance or achievements 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 electronic commerce market; and other risk factors referenced in the Company's public filings with the Securities and Exchange Commission. 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.
First Quarter Results
(Unaudited, in thousands, except per share amounts)
Condensed Consolidated Balance Sheets
As of
-----------------------
March 31, December 31,
2004 2003
--------- ------------
Assets
------
Current assets
Cash and investments $150,519 $131,922
Other current assets 10,778 10,895
--------- ------------
Total current assets 161,297 142,817
Property and equipment, net 15,148 14,634
Goodwill, intangibles and other assets 31,527 32,207
--------- ------------
Total assets $207,972 $189,658
========= ============
Liabilities and stockholders' equity
------------------------------------
Current liabilities
Accounts payable $49,717 $41,814
Deferred revenue 3,581 3,572
Accrued payroll and other liabilities 13,338 12,420
--------- ------------
Total current liabilities 66,636 57,806
Stockholders' equity 141,336 131,852
--------- ------------
Total liabilities and stockholders' equity $207,972 $189,658
========= ============
Condensed Consolidated Statements of Operations
Three months ended
March 31,
-----------------------
2004 2003
--------- ------------
Revenue $31,855 $24,600
Costs and expenses:
-------------------
Direct cost of services 618 942
Network and infrastructure 3,300 2,946
Sales and marketing 11,468 9,272
Product research and development 2,924 2,388
General and administrative 2,837 2,291
--------- ------------
Earnings before interest, taxes,
depreciation and amortization 10,708 6,761
Depreciation and amortization 1,611 1,588
Amortization of acquisition related costs 1,579 1,221
--------- ------------
Earnings from operations 7,518 3,952
Interest income 97 70
--------- ------------
Net earnings $7,615 $4,022
========= ============
Net earnings per share - basic $0.24 $0.15
========= ============
Net earnings per share - diluted $0.22 $0.13
========= ============
Weighted average shares outstanding - basic 31,620 27,609
Weighted average shares outstanding - diluted 35,059 30,410
Note: Earnings before interest, taxes, depreciation and amortization
("EBITDA") is a non-GAAP financial measure. The presentation of this
measure should be considered in addition to, not as a substitute, or
superior to, operating income, cash flows, or other measures of
financial performance prepared in accordance with GAAP.
Digital River, Inc.
Pro Forma Reconciliations
Unaudited, in thousands, except per share amounts
-------------------------------------------------
Three months Three Months
ended March 31, Ended
----------------- December 31,
2004 2003 2003
-------- -------- ------------
Pro Forma Financial Reconciliations:
------------------------------------
Net earnings per GAAP $7,615 $4,022 $5,606
Add back amortization of acquisition
related costs 1,579 1,221 1,502
-------- -------- ------------
Pro Forma earnings $9,194 $5,243 $7,108
======== ======== ============
Pro Forma net earnings per share -
diluted $0.26 $0.17 $0.20
======== ======== ============
Pro Forma weighted average shares
outstanding - diluted 35,059 30,410 35,343
Prior Current
2004 2004
Guidance Guidance
-------- --------
Pro Forma Guidance EPS
Reconciliations:
----------------------
Expected net earnings per share - GAAP $0.77 $0.87 (1)
Expected add back of amortization of
acquisition related costs $0.12 $0.23 (1)
-------- --------
Expected Pro Forma Guidance Earnings
per Share $0.89 $1.10
======== ========
Footnote 1: The amortization of acquisition related expenses is
currently based on an estimated allocation of the purchase paid for
element 5. The actual amount of amortization of acquisition related
expenses to be incurred may be different pending completion of an
audit covering the purchase price allocation.
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