Digital River Announces Revised First Quarter and Full Year 2002 Expectations
MINNEAPOLIS, March 29, 2002--Digital River, Inc. (NASDAQ: DRIV), a leading global e-commerce outsource provider, today announced it expects revenue for the first quarter ending March 31, 2002, to be approximately $18.0 million, which is lower than the company`s previous guidance of $19.4 million. This represents a 38 percent year-over-year growth and a 2 percent sequential increase from the fourth quarter of last year. The company anticipates that revenue from its E-Business Services Division will comprise 18 to 19 percent of total revenue in the first quarter.
Digital River expects earnings per share in the first quarter to total $0.01 to $0.02, prior to the amortization of acquisition-related expenses and charges related to pending litigation and the consolidation of one of its offices. This is lower than the company`s prior guidance of earnings per share, on the same basis, of $0.07. The company anticipates a $2.3 million charge for a reserve established for pending litigation, as well as a $200,000 charge in connection with the consolidation of Digital River`s San Jose operation. Including these charges, the loss per share, prior to the amortization of acquisition-related expenses, is expected to be $0.07 to $0.08.
"We believe that the expected revenue results for the first quarter are related to the slower than anticipated growth in IT spending levels in this economic environment and the impact of lower seasonal software product sales," said Joel Ronning, Digital River`s chief executive officer. "While our sales pipeline is strong for both of our divisions, we continue to see longer sales cycles and we believe that prospective clients are postponing their investment commitments until they see a stabilization of the economy. We also believe that it is prudent at this point to establish reserves for pending litigation as well as the closing of one of our offices. The closing of the San Jose facility marks the successful completion of the integration of the Market Maker acquisition`s operations. The Market Maker technology has become the centerpiece for our next-generation e-commerce platform to be introduced this summer."
Digital River announced that it expects full year 2002 revenue to total $70 to $73 million. This represents a 21 to 26 percent increase from the prior year, but is lower than prior expectations. The company also anticipates that revenue from its E-Business Services Division will comprise 22 to 23 percent of the full year total. Digital River announced that it expects earnings per share for 2002, prior to the amortization of acquisition-related expenses and the previously mentioned charges, to be in the range of $0.20 to $0.22. Including the impact of the $2.5 million charges described above, Digital River anticipates earnings per share, prior to the amortization of acquisition-related expenses, to be $0.12 to $0.14 for the year.
The revised guidance for the full year includes the recently completed acquisition of CCNow.com, from Innuity, Inc. As a result of this transaction, Digital River has added over 11,000 small-to-medium enterprise sites to the more than 21,000 sites the company already services. This acquisition was completed in late March and is expected to be neutral to first quarter results. The company will discuss this transaction in a later press release.
Also, the company stated that the revised full year guidance does not include any impact from the anticipated acquisition of certain assets from Beyond.com. The company will revise its revenue and earnings guidance upon the closing of that transaction.
"Despite the revised guidance for the first quarter and full year, we continue to be highly confident in the value proposition that we offer to our clients and the platform that we have built. As we enter the second quarter, we believe that we will start to see greater traction from new client growth as well as the impact of our e-marketing efforts for our current clients," concluded Ronning.
The company will be holding a conference call at 11:00 AM CST today to further discuss this announcement. A live broadcast of the conference call may be heard inside the United States or Canada by dialing 877-422-0170, internationally by calling 706-679-5647, or via webcast at: http://drhome.digitalriver.com.
About Digital River
Founded in 1994, Digital River is a leading global e-commerce outsource provider, offering more than 32,000 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, Motorola, 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 be materially different 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; market acceptance of electronic software delivery; the Company`s ability to maintain relationships with software publishers and online retailers; competition in the electronic commerce market; and other risk factors referenced in the Company`s public filings with the Securities and Exchange Commission.
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