Digital River Reports Second Quarter 2011 Financial Results
Second Quarter Ended June 30, 2011
Second quarter revenue totaled $92.5 million, in line with management’s guidance. This compared to revenue of $81.8 million during the same period in 2010.
Second quarter GAAP net income was $291 thousand, or $0.01 per diluted share, which compared to a GAAP net loss of $2.5 million, or $0.07 per share, in the second quarter of 2010. These results exceeded management’s second quarter guidance of a net loss of $0.01 per share.
Second quarter non-GAAP net income was $6.4 million, or $0.17 per diluted share. This compared to non-GAAP net income of $3.3 million, or $0.09 per diluted share, in the second quarter of 2010. The company’s results exceeded management’s second quarter earnings guidance of $0.15 per diluted share.
Non-GAAP net income is computed by adjusting GAAP pre-tax income as reported on the company’s statement of operations by adding back amortization of acquisition-related intangibles, stock-based compensation expense, unrealized investment gain or loss and restructuring costs, net of a 21 percent tax rate. Non-GAAP diluted earnings per share is calculated using the “if-converted” method with respect to the issuance of the company’s 2004 and 2010 convertible notes, which includes shares reserved upon conversion of 199,828 and 7,022,027, respectively. In computing non-GAAP diluted earnings per share, adjust non-GAAP net income 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 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.
“I am pleased to report we delivered a solid second quarter, significantly improving all earnings measures compared to last year,” said Joel Ronning, Digital River’s CEO. “While we have a cautious outlook for the second half of the year, we remain optimistic about our long-term growth opportunities. We have not seen a time of greater industry transformation or opportunity. We fully intend to leverage this period to our advantage by expanding existing client relationships, pursuing new markets and capitalizing on new product innovation.”
Management’s forward-looking financial expectations for the remainder of the 2011 fiscal year are as follows:
For the third quarter ending Sept. 30, 2011, management currently expects:
- Revenue of $94 million;
- GAAP diluted net income per share of $0.09, using GAAP weighted average diluted shares outstanding of 38.4 million and assuming a 19 percent tax rate; and
- Non-GAAP diluted net income per share of $0.24, using non-GAAP weighted average diluted shares outstanding of 45.6 million and assuming a 21 percent tax rate.
For the fourth quarter ending Dec. 31, 2011, management currently expects:
- Revenue of $108 million;
- GAAP diluted net income per share of $0.26, using GAAP weighted average diluted shares outstanding of 46.1 million and assuming a 19 percent tax rate; and
- Non-GAAP diluted net income per share of $0.39, using non-GAAP weighted average diluted shares outstanding of 46.1 million and assuming a 21 percent tax rate.
For the full year ending Dec. 31, 2011, management currently expects:
- Revenue of $393 million, which compares to previous guidance of $405.5 million;
- GAAP diluted net income of $0.56 per share, using GAAP weighted average diluted shares outstanding of 38.6 million and assuming a 19 percent tax rate. This compares to previous guidance of $0.58 per share and a 21 percent tax rate; and
- Non-GAAP diluted net income of $1.12 per share, using non-GAAP weighted average diluted shares outstanding of 45.6 million and assuming a 21 percent tax rate. This compares to previous guidance of $1.15 per share.
Digital River will hold a conference call today at 4:45 p.m. EDT to discuss second quarter financial results. A live webcast of Digital River’s earnings conference call can be accessed on the Investor Relations section of its corporate website. Alternatively, a live broadcast of the call may be heard by using conference ID #77845628 and dialing (877) 303-3145 inside the United States or Canada, or by calling +1 (408) 427-3861 from international locations. A webcast replay of the call will be archived on Digital River’s corporate website.
About Digital River, Inc.
Digital River, Inc., a leading provider of global e-commerce solutions, builds and manages online businesses for software and game publishers, consumer electronics 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 management, 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 across the U.S., Asia, Europe and South America. For more details about Digital River, visit the corporate website, follow the company on Twitter or call +1 (952) 253-1234.
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 operating history and variability of operating results; competition in the e-commerce market; 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 internal investments; 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; 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, 2010. 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 report on Form 10-K, each as it may be amended from time-to-time.
Access the Q2 2011 Financial Tables.
The forward-looking statements for the remainder of fiscal 2011 reflect management’s expectations as of July 28, 2011. 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 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. 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.