Digital River Reports Third Quarter 2011 Financial Results
Third Quarter Ended Sept. 30, 2011
Third quarter revenue totaled $95.4 million, slightly ahead of management’s guidance of $94.0 million and over 12 percent above last year’s third quarter revenue of $85.0 million.
Third quarter GAAP net income was $5.5 million, or $0.15 per diluted share, which compared to a GAAP net income of $5.9 million, or $0.15 per diluted share, in the third quarter of 2010. These results exceeded management’s third quarter guidance for net income of $0.09 per diluted share.
Third quarter non-GAAP net income was $8.9 million, or $0.23 per diluted share. This compared to non-GAAP net income of $8.3 million, or $0.22 per diluted share, in the third quarter of 2010. The company’s results were slightly lower than management’s third quarter earnings guidance of $0.24 per diluted share, primarily due to foreign exchange.
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.
“We delivered good results in the third quarter, with revenue increasing over 12 percent from last year, and continue to see solid performance across our enterprise commerce business,” said Joel Ronning, Digital River’s CEO. “While we have tempered our fourth quarter guidance due to the softening in the economy, we remain confident in our global cloud commerce strategy. During the last decade, we’ve developed an international footprint second to none in the industry. Our global reach, combined with a proven payments solution and world class marketing services will continue to drive our revenue going forward.”
On Sept. 7, 2011, the company announced a $100 million share repurchase program. During the third quarter, the company repurchased 2,334,042 shares of common stock at an average price of $21.43 per share.
Management’s forward-looking financial expectations for the fourth quarter ending Dec. 31, 2011:
- Revenue of $103 to $105 million;
- GAAP diluted earnings per share in the range of $0.18 and $0.21, assuming a 17 percent tax rate; and
- Non-GAAP diluted earnings per share in the range of $0.32 and $0.35, assuming a 21 percent tax rate.
For the full year ending Dec. 31, 2011, management currently expects:
- Revenue of $389 to $391 million;
- GAAP diluted earnings per share in the range of $0.52 and $0.55, assuming a 6 percent tax rate; and
- Non-GAAP diluted earnings per share in the range of $1.03 and $1.06, assuming a 21 percent tax rate.
A detailed table providing a reconciliation of the company’s GAAP and non-GAAP guidance estimates can be found accompanying this press release.
Digital River will hold a conference call today at 4:45 p.m. EDT to discuss third 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 #14028165 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.
Access the Q3 2011 Financial Tables.
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.
The forward-looking statements for the remainder of fiscal 2011 reflect management’s expectations as of Oct. 27, 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.