DRIV Earnings out yesterday...looked pretty good to me...jbk
biz.yahoo.com
Tuesday July 24, 4:22 pm Eastern Time
Press Release
Digital River Beats Second Quarter Revenue and Per Share Expectations
Revenues and Bottom Line Improve on Both a Year-Over-Year and Sequential Basis
MINNEAPOLIS--(BUSINESS WIRE)--July 24, 2001-- Digital River, Inc. (Nasdaq:DRIV - news), a leading global e-commerce outsource provider, today reported revenues of $13.1 million for the quarter ended June 30, 2001. This represents a year-over-year increase of 97 percent from revenue of $6.6 million in the second quarter of 2000.
The net loss prior to goodwill amortization and acquisition-related costs was $1.2 million, or $0.05 per share, in the second quarter, a 25 percent improvement from the first quarter net loss of $1.6 million, or $0.07 per share, and significantly better than consensus analyst estimates of a loss of $0.10 per share. The $0.05 loss per share for the quarter compares to a $0.39 loss per share in the second quarter of last year. This performance reflects a $0.34 per share, or 87 percent, year-over-year improvement.
The net loss for the quarter, including goodwill amortization and acquisition-related costs, was $5.1 million, or $0.21 per share, compared with a net loss of $6.2 million, or $0.28 per share, in the first quarter. Gross margin for the second quarter reached nearly 76 percent, a 300 basis point improvement from the prior quarter. At June 30, 2001, cash and investments totaled $28.1 million. This was higher than prior Company guidance of $26 million, primarily due to the lower than anticipated net loss and greater than expected balance sheet leverage.
For the six months ended June 30, 2001, net revenue totaled $26.1 million, a 93 percent increase from $13.5 million in the same period last year. Through the first six months of this year, the net loss, prior to the amortization of goodwill and acquisition-related costs was $2.8 million, or $0.12 per share. The net loss, including the amortization of goodwill and acquisition-related costs, totaled $11.3 million, or $0.44 per share, compared with a net loss of $24.6 million, or $1.18 per share in the first six months of 2000.
``Given the seasonal business patterns typical in our second quarter, Digital River delivered great results,'' said Joel Ronning, Digital River's CEO. ``While other companies in our sector have reported weaker than expected earnings, have reset overall expectations or are going of business, we continue to meet and beat our objectives. Moving forward, we plan to build upon this success.''
``The model that we have built at Digital River was designed to take advantage of operational efficiencies and the ability to leverage our infrastructure,'' said Bob Strawman, Digital River's CFO. ``Our solid financial performance this quarter not only results from the growth in top-line revenues, but also from our ability to leverage our fixed infrastructure across our thousands of clients. We believe that we will continue to benefit from these efficiencies going forward and produce results reflective of the robust platform that we have built.''
Based on its strong financial position, solid operational capabilities and world-class business platform, yesterday Digital River announced an acquisition strategy to leverage the consolidation that is occurring in the Internet sector. ``We are finding an opportunity to selectively acquire companies whose revenue base did not grow quickly enough to support the infrastructure that they built,'' said Ronning. ``Because we have invested over $50 million in our infrastructure and have built a superior and scaleable technology platform that currently supports over 8,000 clients, Digital River can efficiently integrate new clients from these service providers. This is a business that requires scale and volume. However, once you break through your fixed expenses, the incremental revenue contributes dramatically to the bottom line. We believe that this acquisition strategy will be highly accretive as we have the capacity to service additional clients and add annuity revenue streams without significant increases in our fixed expense base.''
Industry-Leading Software and Digital Commerce Services
The Software Services Division generated $9.5 million in revenue for the Company in the quarter, versus revenues of $10.5 million in the seasonally stronger first quarter. The $9.5 million of revenue was 73 percent higher than second quarter of last year. Despite the seasonal decline in revenues, the division had earnings before income taxes, depreciation and amortization expenses (EBITDA) of $1.6 million in the second quarter. This performance was similar to first quarter EBITDA levels, due to additional operating efficiencies achieved during the period.
``Digital River has established itself as an e-commerce market leader among software and digital commerce publishers,'' said Jay Kerutis, Digital River's president of its Software and Digital Commerce Services Division. ``This quarter we continued to demonstrate that we can leverage the critical mass in our client base to help drive revenues and address some of the seasonal patterns we experience in our business. Moving forward, we will continue to drive further efficiencies, focus on expanding services to existing clients, contract with new clients and attract top-tier prospects who are looking for new partners as a result of industry consolidation.''
Execution of E-Business Services Strategy
The E-Business Services Division generated $3.6 million in revenue for the Company in the quarter, a sequential increase of nearly 42 percent, from $2.5 million in the first quarter. The division's EBITDA loss was $1.9 million for the quarter, as compared to $2.5 million in the first quarter.
Combining the total number of client contracts, clients with multiple sites and Market Maker installations, the number of E-Business Services Division relationships totaled 92 on June 30, 2001. In addition to closing new business, the E-Business Services Division continues to expand its services to existing clients, with a particular emphasis on e-marketing, and more recently, on creative services.
``Our e-commerce outsourcing model continues to gain market acceptance. It is particularly attractive to companies in this economic environment because it provides a low-risk, low cost-of-entry into e-commerce with high return-on-investment,'' said Ronning. ``Based on our success, we recently announced an E-Rescue Program for companies and government agencies that are working with service providers that are either unable to perform to their clients' satisfaction or are going out of business. The initiative offers these prospects a quick and safe means of upgrading and transitioning their e-commerce platforms as well as establishing programs to grow their online businesses.''
Future Expectations
Based on second quarter results, Digital River anticipates a loss per share, prior to goodwill amortization, of $0.14 per share in 2001, which is better than the $0.22 loss per share guidance provided in the first quarter. Digital River expects to achieve overall Company profitability in the fourth quarter of 2001, when it expects to generate $0.02 of earnings per share, prior to the amortization of goodwill. For 2001, Digital River anticipates revenues to increase approximately 83 percent from the prior year, to $57 million. The Company's cash balances are anticipated to total in excess of $20 million at December 31, 2001.
In the third quarter, the Company expects to generate revenue of $13.6 million, a nearly 80 percent improvement from prior year levels. The E-Business Services Division revenue is projected to be approximately 27-30 percent of total revenue in the third quarter. Digital River anticipates that the third quarter loss per share, prior to goodwill amortization and acquisition-related expenses, will be $0.04. Barring any unique events, the Company expects to end the third quarter with approximately $25 million of cash and investments.
About Digital River
Founded in 1994, Digital River is a leading global e-commerce outsource provider, offering more than 8,000 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, Nabisco, Polaris, Novell, Autodesk, SONICblue and Adaptec. 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 second 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 web cast at drhome.digitalriver.com. Please go to the investor page to access the call and install any necessary audio software.
Forward-Looking Statements
Except for the historical information contained herein, this press release contains forward-looking statements, including 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.
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Digital River, Inc.
Second Quarter Results
(Unaudited, in thousands, except per share amounts)
Condensed Consolidated Balance Sheets
June 30, December 31,
2001 2000
-------- ------------
Assets
Current assets
Cash and investments $28,113 $31,897
Other current assets 7,733 6,026
------- -------
Total current assets 35,846 37,923
Property and equipment, net 14,849 13,570
Goodwill and other assets 19,936 17,910
------- -------
Total assets $70,631 $69,403
Liabilities and stockholders' equity
Current liabilities
Accounts payable $15,935 $14,339
Deferred revenue 1,813 1,833
Accrued payroll and other liabilities 4,933 4,713
------- -------
Total current liabilities 22,681 20,885
Stockholders' equity 47,950 48,518
------- -------
Total liabilities and stockholders' equity $70,631 $69,403
Condensed Consolidated Statements of Operations
Three months ended Six months ended
June 30, June 30,
------------------ -------------------
2001 2000 2001 2000
-------- --------- --------- ---------
Revenue $13,055 $6,635 $26,102 $13,518
Costs and expenses:
Direct cost of services 654 275 1,202 570
Network and infrastructure 2,494 1,957 5,458 3,748
Sales and marketing 6,480 6,965 13,274 13,443
Product research and
development 2,729 4,429 5,197 8,092
General and administrative 1,005 1,222 2,101 2,457
-------- --------- --------- ---------
Loss before interest, tax,
depreciation and
amortization (307) (8,213) (1,130) (14,792)
Depreciation and amortization 1,177 640 2,297 1,343
Amortization of goodwill and
acquisition related costs 3,839 4,334 8,483 9,728
-------- --------- --------- ---------
Loss from operations (5,323) (13,187) (11,910) (25,863)
Interest income 264 554 610 1,239
-------- --------- --------- ---------
Net loss $(5,059) $(12,633) $(11,300) $(24,624)
Net loss per share before
amortization of goodwill and
acquisition costs $(.05) $(.39) $(.12) $(.71)
Net loss per share $(.21) $(.60) $(.44) $(1.18)
Weighted average shares
outstanding 24,383 21,100 23,432 20,937
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Contact:
Digital River, Inc., Minneapolis
Investor Contact:
Al Galgano, 95/253-8406
agalgano@digitalriver.com
or
Media Contact:
Gerri Dyrek, 952/253-8396
gdyrek@digitalriver.com |
