Press Release

Digital River Achieves Q4 Profitability Target
Beats Revenue and Per Share Expectations and Increases Guidance for 2002

Also announces company-wide reporting on a net revenue basis

MINNEAPOLIS, MN, January29, 2002--Digital River, Inc. (NASDAQ: DRIV), a leading global e-commerce outsource provider, today reported revenue of $17.7 million for the quarter ended December 31, 2001. This represents a year-over-year increase of 76 percent from revenue of $10.1 million in the fourth quarter of 2000, and a 27 percent increase from revenue of $14.0 million in the third quarter. Net income prior to goodwill amortization and acquisition related costs was $1.1 million, or $0.04 per share, in the fourth quarter. This marks Digital River's first full quarter of profitability on that basis. The fourth quarter performance was a $0.15 per share improvement from an $0.11 loss per share, prior to goodwill amortization and acquisition related expenses, in the fourth quarter of last year. Gross margin for the fourth quarter exceeded 81 percent, a more than 800 basis point improvement over last year's gross margin. This is also a 218 basis point improvement from the prior quarter.

"In 2001, we consistently exceeded revenue and profitability goals, held operating expense levels flat and improved margins," said Joel Ronning, Digital River's CEO. "Despite a challenging economic environment, Digital River stayed the course. In the fourth quarter, we hit a key financial milestone when we reported our first full quarter of profitability prior to goodwill amortization and acquisition related costs. We firmly believe Digital River is a strong, healthy, growing business. While last year was an extraordinary year for the company, we are looking forward to an even stronger performance in 2002."

Net loss for the quarter, including goodwill amortization and acquisition related costs, was $3.5 million, or $0.14 per share, compared to a net loss of $5.4 million or $0.24 per share in the fourth quarter of 2000. This performance also compares with a net loss of $4.4 million, or $0.18 per share, in the third quarter. At December 31, 2001, cash and investments totaled $31.7 million, a $6.3 million increase from $25.4 million at September 30, 2001.

"In this market, the companies that deliver results are the companies that are going to win," continued Ronning. "All along Digital River has been delivering for our clients, helping them grow their businesses and save money. We've positioned Digital River as a company known not only for its e-commerce and e-marketing expertise, but also its financial strength and staying power."

For the year ended December 31, 2001, revenues totaled $57.8 million, an 85 percent increase from $31.2 million in the same period last year. For the full year, the net loss prior to amortization of goodwill and acquisition related costs was $2.2 million, or $0.09 per share. The net loss, including the amortization of goodwill and acquisition related costs, totaled $19.2 million, or $0.79 per share, compared with a net loss of $38.1 million, or $1.78 per share for the full year of 2000.

Delivering on its acquisition strategy, late in the fourth quarter Digital River acquired the customer assets of FreeMerchant.com from Network Commerce, Inc., a technology infrastructure and services company. This acquisition, which is expected to be mildly accretive in 2002, added more than 3,000 small to mid-sized businesses to Digital River's client base. On January 25, 2002, Digital River also announced its plans to purchase the client assets of Beyond.com, a leading provider of e-commerce technology and services. This acquisition is subject to bankruptcy court approval and certain other conditions.

Segmented Financial Results
Digital River's Software Services Division generated $14.3 million in revenue for the company in the quarter, a more than 85 percent improvement from revenue of $7.7 million in the fourth quarter of 2000. This performance is also a 35 percent increase from revenue of $10.6 million in the third quarter. The division's earnings before interest, taxes, depreciation and amortization (EBITDA) was $4.8 million.         

The E-Business Services Division generated $3.4 million in revenue for the company in the fourth quarter, a 47 percent increase from revenue of $2.3 million in the fourth quarter of 2000. This performance was a 2 percent increase from the third quarter. The division's EBITDA loss was $2.7 million for the quarter, compared to $2.1 million in the third quarter and $2.0 million in the fourth quarter of 2000.         

"To further support our sales and client retention efforts in both divisions, we continued to focus on growing our clients' businesses through our e-marketing and site merchandising activities. These efforts continued to be a major driver of our clients' growth," said Jay Kerutis, Digital River's president of the Software and Digital Commerce Services Division. "As you look at the performance reported by our peers, the fourth quarter continued to be a challenging environment for making inroads into the manufacturing, distribution and retail markets. While growth in our E-Business Services Division didn't keep pace with our expectations, year-over-year performance was strong and there was a slight sequential improvement. We remain optimistic about our prospects moving forward."

Future Expectations
In the first quarter of 2002, Digital River expects to generate revenue of $19.4 million, a more than 49 percent improvement from the first quarter of last year. This will result in earnings per share of $0.07, prior to the amortization of acquisition related costs. The E-Business segment revenue is projected to comprise approximately 22 percent of revenue in the quarter.

In 2002, Digital River continues to expect revenues to total $80-85 million, an increase of 40-50 percent from 2001. In addition, Digital River expects to generate $11 to $12 million of net earnings prior to amortization of acquisition related expenses. The company believes that this performance will result in earnings per share of $0.37 to $0.40, prior to amortization of acquisition related costs. This is an increase from the company's prior earnings per share guidance of $0.35 to $0.38. The company recently announced an agreement to purchase the customer assets of Beyond.com. As this transaction is subject to bankruptcy court approval, our financial guidance does not include any impact from this acquisition.


S-3 Shelf Registration
Digital River expects later today to file a shelf registration statement on Form S-3 with the Securities and Exchange Commission. If declared effective by the SEC, this shelf registration will allow Digital River to issue up to an aggregate of $100 million of various types and combinations of securities, including common stock, preferred stock, debt securities and warrants.

"Our management and board feel this is a prudent decision that will offer us maximum flexibility and decreased execution risk for any future financings or acquisitions involving registered shares," said Bob Strawman, Digital River's chief financial officer.

Digital River will hold a fourth quarter conference call today at 4:45 p.m. eastern time. To access the call, please dial 877-422-0170, or listen to the web cast at http://drhome.digitalriver.com/livehtml/newsite/dr_invest_000.html. Please go to the investor page to access the call and install any necessary audio software.

About Digital River
Founded in 1994, Digital River is a leading global e-commerce outsource provider, offering more than 13,000 companies complete e-commerce systems and services. The company's world-class infrastructure and professional services are proven to grow businesses quickly and profitably while reducing risk. Digital River's commerce services include e-commerce strategy, site development and hosting, order and transaction management, system integration, product fulfillment and returns, e-marketing and customer service. Digital River's clients include Symantec, Fujitsu, 3M, Siemens, Polaris, Major League Baseball, Novell, Autodesk, SONICblue, Adaptec and Staples.com. For more details about Digital River, visit the corporate Web site at www.digitalriver.com or call 952-253-1234.


Digital River will hold a fourth quarter conference call today at 4:45 p.m. Eastern Standard Time. To access the call, please dial 877-422-0170, or listen to the webcast at http://drhome.digitalriver.com/livehtml/newsite/dr_invest_000.html. Please go to the investor page to access the call and install any necessary audio software.