Digital River Achieves Q4 Profitability Target; Beats Revenue and Per Share Expectations and Increases Guidance for 2002
January 29, 2002 16:10:00 (ET)
MINNEAPOLIS, Jan 29, 2002 (BUSINESS WIRE) -- Digital River, Inc. (DRIV, Trade), 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.
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."
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.
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 drhome.digitalriver.com. Please go to the investor page to access the call and install any necessary audio software.
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.
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.
Fourth quarter and full year results (Unaudited, in thousands, except per share amounts) Condensed Consolidated Balance Sheets Dec. 31, Dec. 31, 2001 2000 -------------------- Assets Current assets Cash and investments $ 31,655 $ 31,897 Other current assets 10,174 6,026 -------------------- Total current assets 41,829 37,923 Property and equipment, net 16,146 13,570 Goodwill and other assets 20,252 17,910 -------------------- Total assets $ 78,227 $ 69,403 ==================== Liabilities and stockholders' equity Current liabilities Notes payable $ 2,500 $ - Accounts payable 19,360 14,339 Deferred revenue 1,106 1,833 Accrued payroll and other liabilities 4,839 4,713 -------------------- Total current liabilities 27,805 20,885 Stockholders' equity 50,422 48,518 -------------------- Total liabilities and stockholders' equity $ 78,227 $ 69,403 ==================== Condensed Consolidated Statements of Operations Three months ended Twelve months ended December 31, December 31, 2001 2000 2001 2000 ---------------------------------------- Revenue $ 17,733 $ 10,056 $ 57,825 $ 31,181 Costs and expenses: Direct cost of services 720 486 2,710 1,477 Network and infrastructure 2,598 2,231 10,200 7,867 Sales and marketing 7,626 6,003 27,489 25,693 Product research and development 3,230 2,114 11,192 13,063 General and administrative 1,483 1,020 4,701 4,628 ---------------------------------------- Earnings (loss) before interest, taxes, depreciation and amortization 2,076 (1,798) 1,533 (21,547) Depreciation and amortization 1,105 939 4,627 3,178 Amortization of goodwill and acquisition related costs 4,611 3,056 17,009 15,387 ---------------------------------------- Loss from operations (3,640) (5,793) (20,103) (40,112) Interest income 98 375 881 1,996 ---------------------------------------- Net loss $ (3,542) $ (5,418) $(19,222) $(38,116) ======================================== Net earnings (loss) per share before amortization of goodwill and acquisition related costs $ 0.04 $ (0.11) $ (0.09) $ (1.06) Net loss per share $ (0.14) $ (0.24) $ (0.79) $ (1.78) Weighted average shares outstanding - basic 25,644 22,162 24,285 21,413 Weighted average shares outstanding - diluted 29,223 22,162 24,285 21,413
CONTACT: Digital River, Inc., Minneapolis Investor Contact: Al Galgano, 952/253-8406 agalgano@digitalriver.com or Media Contact: Gerri Dyrek, 952/253-8396 gdyrek@digitalriver.com URL: businesswire.com Today's News On The Net - Business Wire's full file on the Internet with Hyperlinks to your home page. |
