Digital River Reports First Quarter 2014 Financial Results

  • First quarter revenue of $97.8 million, exceeded guidance
  • First quarter GAAP EPS net loss of $0.19 per share; and non-GAAP EPS of $0.20 per diluted share, both exceeded guidance
  • Raised full year revenue guidance

MINNEAPOLIS — April 30, 2014Digital River, Inc. (NASDAQ: DRIV), a leading global provider of Commerce-as-a-Service solutions, reported financial results for the first quarter of 2014.

First Quarter Ended March 31, 2014

GAAP Results
First quarter revenue totaled $97.8 million, exceeding management’s first quarter revenue guidance of $92.0 to $95.0 million. In 2013, first quarter revenue from continuing operations was $111.0 million.

First quarter 2014 GAAP net loss from continuing operations was $5.7 million or a net loss of $0.19 per share, exceeding management’s first quarter GAAP guidance of a net loss from continuing operations of $0.31 to $0.25 per share. In 2013, first quarter GAAP net loss from continuing operations was $10.7 million or a net loss of $0.33 per share.

Non-GAAP Results
First quarter 2014 non-GAAP net income from continuing operations was $6.2 million or $0.20 per diluted share, which exceeded management’s first quarter non-GAAP guidance of $0.08 to $0.12 per diluted share. In 2013, first quarter non-GAAP diluted net income from continuing operations was $13.3 million or $0.33 per diluted share.

“I am pleased to report we had a strong quarter and are starting to see the benefits of our transformation translate across our business and customer base,” said David Dobson, Digital River’s CEO. “As we continue to expand our relationships with existing customers, our commerce loyalty index is rising and gross volumes across our commerce business are growing. In addition, our payments business continues to deliver solid year-over-year topline growth. We believe these leading indicators are early evidence of the success of our technology investments, focus on our core businesses and improved execution.”

During the first quarter, the company repurchased $169.3 million in aggregate principal amount of its Convertible Senior Notes for $173.3 million in cash, excluding accrued interest. The company also repurchased $14.0 million of its common stock. All transactions of common stock took place in the open market.

Second Quarter and Full Year 2014 Guidance
Management’s forward-looking financial expectations for the second quarter of 2014 are as follows:

  • Revenue, ranging from $84 to $87 million;
  • GAAP EPS, ranging from a net loss of $0.33 to a net loss of $0.28 per share; and
  • Non-GAAP EPS, ranging from a net loss of $0.07 to a net loss of $0.03 per share, using a 21 percent tax rate.

Management’s revised forward-looking financial expectations for the full year 2014 are as follows:

  • Increased revenue, now ranging from $372 to $382 million;
  • GAAP EPS, ranging from a net loss of $0.65 to a net loss of $0.52 per share; and
  • Non-GAAP EPS, ranging from $0.41 to $0.51 per diluted share, using a 21 percent tax rate.

A detailed table providing a reconciliation of the company’s GAAP and non-GAAP earnings guidance estimates can be found accompanying this press release.

Access the Q1 2014 financial tables.

Digital River will host an open-access audio webcast and conference call today at 4:45 p.m. EDT to discuss first quarter 2014 financial results. The live audio webcast can be accessed on the Investor Relations section of its corporate website. Alternatively, to listen to the live broadcast of the call, dial +1 (408) 427-3861 and use conference ID # 22020713. A webcast and audio replay of the presentation will be archived on Digital River’s corporate website.

About Digital River, Inc.
Backed by 20 years of e-commerce experience, Digital River is recognized as a leading global provider of Commerce-as-a-Service solutions. Companies of all sizes rely on Digital River’s multi-tenant, SaaS commerce, payments and marketing services to manage and grow their online businesses. In 2013, Digital River processed more than $30 billion in online transactions, connecting B2B and B2C digital products and cloud service companies as well as branded manufacturers with buyers across multiple devices and channels, and nearly every country in the world.

Digital River is headquartered in Minneapolis with offices across the U.S., Asia, Europe and South America. For more details about Digital River, visit the corporate website, read our Digital River blog, follow the company on Twitter or call +1 952-253-1234.

Non-GAAP Net Income Calculation
Digital River’s non-GAAP net income (loss) from continuing operations is computed by adjusting GAAP pre-tax income from continuing operations as reported on the company’s statement of operations by adding back, when applicable, amortization of acquisition-related intangibles, stock-based compensation expense, intangible impairments, restructuring related costs, litigation settlement related costs, acquisition and integration costs, realized and unrealized investment gains or losses, goodwill impairments, and one-time impacts of debt repurchases, net of a 21 percent tax rate. Non-GAAP diluted earnings per share from continuing operations is calculated using the “if-converted” method with respect to the issuance of the company’s Convertible Senior Notes. In computing non-GAAP diluted earnings per share from continuing operations, if an increase in earnings per share will not result, adjust non-GAAP net income from continuing operations to add back debt interest and issuance cost amortization expenses, net of the tax benefit, and then divide this amount by fully diluted shares outstanding. This amount, representing the fully diluted earnings computation, is selected to represent non-GAAP diluted earnings per share from continuing operations for each period presented. 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 release.

Forward-Looking Statements
This press release contains forward-looking statements, including statements regarding the company’s anticipated future growth and future financial performance, as well as statements containing the words “anticipates,” “believes,” “plans,” “will,” “expects,” or “guidance” 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 operating history and variability of operating results; competition in the commerce and payments markets; challenges associated with international expansion; the variability of foreign exchange rates; any breach or compromise of the company’s security systems; our ability to successfully manage our business while undertaking significant technical initiatives; our ability to execute upon our payments strategy and expand our business in this sector; our ability to achieve favorable tax rates in our international operations; the nature, cost and outcome of pending and future litigation and other legal proceedings; 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 Dec. 31, 2013. 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 reflect management’s expectations as of April 30, 2014. Results may be materially affected by many factors, such as changes in global conditions in the financial services markets and consumer spending, fluctuations in foreign currency rates, the rate of growth of online commerce and online payments, progress with key partners, and other factors. The guidance assumes, among other things, that there are no material changes to stock-based compensation expense and anticipated tax rates. 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 or future guidance 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.