MINNEAPOLIS--Feb. 1, 2006--Digital River, Inc. (NASDAQ:DRIV):
-- Q4 revenue up 28 percent; full year 2005 revenue up 43 percent
-- Q4 GAAP diluted EPS up 33 percent; full year 2005 GAAP diluted
EPS up 42 percent
-- Q4 non-GAAP diluted EPS up 40 percent; full year 2005 non-GAAP
diluted EPS up 66 percent
-- Full year net cash flow from operations up 47 percent
Digital River, Inc. (NASDAQ:DRIV), a global leader in e-commerce outsourcing, today reported its fourth quarter and full year 2005 financial results:
Revenue: Q4 and Full Year 2005
-- Fourth quarter revenue totaled $61.6 million, an increase of
28 percent from revenue of $48.0 million in the fourth quarter
of 2004, and above the Company`s guidance of $57.1 million,
provided on October 26, 2005.
-- For the full year ended December 31, 2005, revenue totaled
$220.4 million, an increase of 43 percent from revenue of
$154.1 million in 2004.
GAAP Results: Q4 and Full Year 2005
-- Fourth quarter GAAP net income was $17.7 million, or $0.44 per
diluted share at an effective tax rate of 12 percent. This
compared to net income of $12.8 million, or $0.33 per diluted
share at an effective tax rate of 8 percent, in the fourth
quarter of 2004. This represents a year-over-year increase of
38 percent in GAAP net income and 33 percent in GAAP diluted
net income per share. Fourth quarter 2005 results reflect the
impact of reversing the valuation allowance on certain
deferred tax assets resulting in a one-time benefit of $4.4
million or $0.11 per diluted share. Without this one-time
benefit, GAAP diluted net income per share would have been
$0.33, at an effective tax rate of 34 percent, above the
Company`s guidance of $0.29 provided on October 26, 2005.
-- For the full year ended December 31, 2005, GAAP net income was
$54.3 million, or $1.36 per diluted share at an effective tax
rate of 24 percent. This compared to net income of $35.3
million, or $0.96 per diluted share at an effective tax rate
of 3 percent, in 2004. This represents a year-over-year
increase of 54 percent in GAAP net income and 42 percent in
GAAP diluted net income per share. These results exceeded the
Company`s GAAP diluted net income per share guidance of $1.21
provided on October 26, 2005.
Non-GAAP Results: Q4 and Full Year 2005
In the third quarter of 2005, Digital River announced it was replacing its historical "pro forma" measurements for reporting net income and diluted net income per share with new "non-GAAP" measurements. The Company believes providing both GAAP and non-GAAP measures will provide investors better comparability between its historical and projected future financial performance.
Based on the new non-GAAP measurements:
-- Fourth quarter non-GAAP net income was $14.8 million, or $0.35
per diluted share, compared to net income, on a similar basis,
of $10.5 million, or $0.25 per diluted share in the fourth
quarter of 2004. This represents a year-over-year increase of
41 percent in non-GAAP net income and 40 percent in non-GAAP
diluted net income per share. The results exceeded the
Company`s non-GAAP diluted net income per share guidance of
$0.31 provided on October 26, 2005.
-- For the full year 2005, non-GAAP net income was $53.1 million,
or $1.28 per diluted share, compared to net income, on a
similar basis, of $29.5 million, or $0.77 per diluted share in
the full year of 2004. This represents a year-over-year
increase of 80 percent in non-GAAP net income and 66 percent
in non-GAAP diluted net income per share.
Non-GAAP net income is computed by starting with GAAP pre-tax income as reported on the Company`s statement of operations, adding back amortization of acquisition-related costs, and beginning in 2006, stock-based compensation expense, to calculate non-GAAP pre-tax income. This figure is then taxed at 34 percent, the Company`s anticipated effective rate, to arrive at non-GAAP net income. This amount is then divided by fully-diluted GAAP shares outstanding, which includes the impact of the Company`s contingent convertible notes, to derive non-GAAP diluted net income per share.
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 announcement. Further information regarding the Company`s use of non-GAAP financial data has been included in the Company`s Form 8-K filed with the SEC on February 1, 2006.
"We ended 2005 with record financial results, exceeding revenue and earnings expectations," said Joel Ronning, Digital River`s CEO. "Last year was a year of expansion at Digital River. We expanded our geographic footprint, strategic marketing programs and oneNetwork marketplace. We also moved into new vertical segments, including the high tech and consumer electronics markets and the enterprise license management space. As we look out into 2006, we believe we have set a solid stage for our future growth and plan to accelerate our investments in each of these areas to take advantage of the growth opportunities before us."
Q1 2006 Guidance
Forward-looking guidance for the first quarter ending March 31, 2006, is as follows:
-- Revenue of $70.0 million;
-- GAAP diluted net income per share of $0.31, including
stock-based compensation expense of $3.4 million; and
-- Non-GAAP diluted net income per share of $0.40.
Full Year 2006 Guidance
Forward-looking guidance for the full year ending December 31, 2006, is as follows:
-- Revenue of $280 million;
-- GAAP diluted net income per share of $1.16, including
stock-based compensation expense of $14.2 million; and
-- Non-GAAP diluted net income per share of $1.53.
Digital River will hold a fourth quarter conference call today at 4:45 p.m. Eastern Standard Time. A live webcast of the conference call can be accessed from http://www.digitalriver.com/2005q4earnings/. Alternatively, a live broadcast of the call may be heard by using conference ID # 6893855 and dialing 888-896-0863 inside the United States or Canada, or by calling 973-582-2741 from international locations. A webcast replay of the call will be archived on the Company`s corporate Web site.
About Digital River, Inc.
Digital River, Inc., a global leader in e-commerce outsourcing, builds and manages online businesses for more than 40,000 software publishers, manufacturers, distributors and online retailers. 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 prevention, 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 in major U.S. cities as well as Cologne, Germany; London, England; Taipei, Taiwan; and Tokyo, Japan. For more details about Digital River, visit the corporate Web site at www.digitalriver.com or call 952-253-1234.
Forward-Looking Statements
This press release contains forward-looking statements, including statements regarding the Company`s anticipated future growth, including the expansion of its global business infrastructure, and future financial performance as well as statements containing the words "anticipates" 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 limited operating history and variability of operating results; competition in the e-commerce market; challenges associated with international expansion, 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 filed on March 16, 2005, for the year ended December 31, 2004. 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 reports on Form 10-K and Form 10-Q, each as it may be amended from time to time.
The forward-looking statements regarding first quarter 2006 and full year 2006 reflect Digital River`s expectations as of February 1, 2006. Results may be materially affected by many factors, such as changes in global economic conditions and consumer spending, fluctuations in foreign currency rates, the rate of growth of online commerce and the Internet and other factors. The guidance assumes, among other things, that there are no changes to stock-based compensation expense and that no additional intangible assets are recorded.
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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