Thursday July 27, 4:10 pm Eastern Time
Company Press Release
Digital River Reports Second Quarter Results
MINNEAPOLIS--(BUSINESS WIRE)--July 27, 2000--Digital River, Inc. (Nasdaq:DRIV - news),
the world's largest Commerce Service Provider (CSP), today reported sales of $31.0 million for the second quarter
ended June 30, 2000 and a net loss prior to goodwill amortization and acquisition-related costs, of $0.39 per share. These results were in line with the earnings pre-announcement made by the company on June 15th, when the company announced sales expectations of $30-$31.5 million for the quarter and an EPS loss in line with analyst consensus estimates.
The sales results for the second quarter represent a 96-percent increase from sales of $15.8 million in the second quarter of 1999, and a 5-percent sequential decline from sales of $32.8 million in the first quarter of this year.
The company's second quarter net loss, excluding goodwill amortization and acquisition-related costs was $8.3 million, or $0.39 per share. The net loss for the quarter, including goodwill amortization and acquisition-related costs was $12.6 million, or $0.60 per share, compared with a net loss of $6.7 million, or $0.33 per share, in the second quarter of 1999.
For the six months ended June 30, 2000, sales were $63.8 million, a 132-percent increase, from $27.5 million in the same period last year. In the first half of this year, the net loss, prior to the amortization of goodwill and acquisition-related costs was $14.9 million, or $0.71 per share. The net loss for the period, including the amortization of goodwill and acquisition-related costs, totaled $24.6 million, or $1.18 per share, compared with a net loss of $12.0 million, or $0.60 per share in the first six months of 1999.
``Though the software business is seasonally slower through the summer, we are encouraged by opportunities we foresee for the Software Services division in the second half of the year,'' said Joel Ronning, chief executive officer. ``Software and digital content delivery on the Internet is a huge and growing business and we firmly believe Digital River will continue be the leader in this inevitable tidal shift. Also, as thousands of traditional manufacturing companies, retailers, and distributors move their businesses to the Internet, we're extremely excited about the gigantic growth potential for our E-Business Services Division.''
``In addition to acquiring new clients, we further expanded our global initiatives and enhanced our products and services such as purchase order processing, product returns management, channel management, volume licensing, customer service, and e-marketing. With these new commerce services, we are particularly optimistic as we approach our clients' seasonally high selling period,'' he continued. ``With in excess of $39 million of cash and investments, at the end of the quarter, we believe we are well positioned to achieve our profitability objectives without a need to raise additional capital,'' concluded Mr. Ronning.
Execution of E-Business Services Strategy
Digital River's E-Business Services division ended the second quarter with 43 client contracts, an increase of 14 contracts during the period and double the level of new client contracts in the first quarter. New clients announced included Siemens, Alta Vista and Rapala Normark. The E-Business division generated $1.2 million in revenue for the company in the quarter, approximately 50-percent higher than the prior quarter. Gross margin for the division averaged 82.9-percent in the second quarter, generating nearly 15-percent of the company's gross margin for the period.
``During the quarter we added 20 sales professionals in the E-Business division, bringing the total for that group to 35
associates, and 6 additional client services professionals, bringing the total for that group to 19 associates,'' said Perry Steiner, president. ``That investment is already starting to have an impact on our business as we doubled the number of new client contracts from the first quarter and further expanded our sales pipeline,'' concluded Mr. Steiner.
Industry-Leading Software and Digital Commerce Services
The Software Services division generated $29.9 million in revenue for the company in the quarter, representing a nearly 90-percent increase from revenues in the second quarter of 1999. The division's gross margin for the quarter averaged 18.4-percent. The division's total number of clients reached 7,500 during the quarter.
``While we were disappointed with the greater than expected seasonal impact on sales for the Software Services division this quarter,'' said Mr. Steiner, ``we remain bullish on the future growth potential for this business and we believe the division remains on track to achieve its goal of profitability, before depreciation and amortization by December of this year. During the quarter, we added 480 new publishers, expanded our volume licensing program and continued to grow our clients' global e-commerce operations,'' he concluded.
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