Attached files
| file | filename |
|---|---|
| 8-K - DIGITAL RIVER, INC. 8-K - DIGITAL RIVER INC /DE | a50361713.htm |
Exhibit 99.1
Digital River Reports Second Quarter 2012 Financial Results
Announces new $100 million share repurchase authorization
MINNEAPOLIS--(BUSINESS WIRE)--July 31, 2012--Digital River, Inc. (NASDAQ: DRIV), the revenue growth experts in global cloud commerce, reports its second quarter financial results and announces that its board of directors authorized a new share repurchase program of up to $100 million of its outstanding common shares.
Second Quarter Ended June 30, 2012
GAAP Results
Second
quarter revenue totaled $90.8 million, compared to $92.5 million during
the same period in 2011. This result was below management’s second
quarter revenue guidance of $92 to $94 million.
Second quarter GAAP net income was $200 thousand or $0.01 per diluted share, which compared to GAAP net income of $291 thousand, or $0.01 per diluted share in the second quarter of 2011. These results exceeded management’s second quarter GAAP earnings guidance, which ranged from a loss of $0.02 per share to break-even.
Non-GAAP Results
Second quarter non-GAAP net income was
$6.9 million, or $0.20 per diluted share. This compared to non-GAAP net
income of $6.4 million, or $0.17 per diluted share, in the second
quarter of 2011. These results also exceeded management’s second quarter
non-GAAP earnings guidance of $0.17 to $0.19 per diluted share.
“We beat our earnings plan during the second quarter in spite of a softer top line. This recent softness has caused us to temper our expectations for the remainder of the year, taking into consideration weaker PC sales and uncertainty in the macro economy,” said Joel Ronning, Digital River’s CEO. “While we will continue to monitor these trends into the third quarter, we also will take decisive action to lead in areas where we see long-term growth opportunities, such as software’s shift to SaaS and consumer electronics’ move to direct-to-buyer models. To further demonstrate our confidence in our future prospects, we are pleased to announce a new $100 million share repurchase plan.”
Third Quarter and Full Year 2012 Guidance
Management’s
forward-looking financial expectations for the third quarter are as
follows:
- Revenue, ranging from $88 to $91 million;
- GAAP EPS, ranging from a loss of $0.09 to a loss of $0.02 per share, using a 17 percent tax rate; and
- Non-GAAP EPS, ranging from $0.12 to $0.18 per diluted share, using a 21 percent tax rate.
Management’s revised forward-looking financial expectations for the full year 2012 are as follows:
- Revenue, ranging from $378 to $390 million;
- GAAP EPS, ranging from $0.22 to $0.38 per diluted share, using an approximate 21 percent tax rate; and
- Non-GAAP EPS, ranging from $0.96 to $1.08 per diluted share, using a 21 percent tax rate.
A detailed table providing a reconciliation of the company’s GAAP and non-GAAP earnings guidance estimates can be found accompanying this press release.
Common Share Repurchases
During the second quarter
2012, the company repurchased $20.2 million or 1.4 million shares of
common stock in the open market, completing the repurchase program
announced in September 2011.
In light of the completion of the previous program, Digital River’s board of directors has authorized a new share repurchase program of up to $100 million of its outstanding common shares. Repurchases under this program will be made from time to time at the company’s discretion, based on ongoing assessments of the capital needs of the business. No time limit was set for completion of the repurchase program.
Digital River will hold a conference call today at 4:45 p.m. EDT to discuss second quarter financial results. A live webcast of Digital River’s earnings conference call can be accessed on the Investor Relations section of its corporate website. Alternatively, a live broadcast of the call may be heard by using conference ID #98171403 and dialing +1 (408) 427-3861. A webcast replay of the call will be archived on Digital River’s corporate website.
About Digital River, Inc.
Digital River, Inc., the revenue
growth experts in global cloud commerce, builds and manages online
businesses for software and game publishers, consumer electronics
manufacturers, distributors, online retailers and affiliates. Its
multi-channel 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 a global
commerce operation. The company’s comprehensive platform offers site
development and hosting, order management, global payments, cloud-based
billing, fraud management, 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 across the U.S., Asia, Europe and South America. For more details about Digital River, visit the corporate website, call +1 952-253-1234, or follow the company on Twitter.
Non-GAAP Net Income Calculation
Digital River’s non-GAAP
net income is computed by adjusting GAAP pre-tax income as reported on
the company’s statement of operations by adding back amortization of
acquisition-related intangibles, stock-based compensation expense,
intangible impairments, unrealized investment gain or loss and
restructuring costs, net of a 21 percent tax rate. Non-GAAP diluted
earnings per share is calculated using the “if-converted” method with
respect to the issuance of the company’s 2004 and 2010 convertible
notes, which includes shares reserved upon conversion of 199,828 and
7,022,027, respectively. In computing non-GAAP diluted earnings per
share, adjust non-GAAP net income to add back debt interest and issuance
cost amortization expenses, net of the tax benefit, and then divide this
amount by fully diluted shares outstanding. This amount, representing
the fully diluted earnings computation, is selected to represent
non-GAAP diluted earnings per share for each period presented. 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 release.
Forward-Looking Statements
This press release contains
forward-looking statements, including statements regarding the company’s
anticipated future growth, including future financial performance, as
well as statements containing the words “anticipates,” “believes,”
“plans,” “will,” “expects,” or “guidance” 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 operating history and variability of operating results;
competition in the commerce market; challenges associated with
international expansion; the variability of foreign exchange rates; any
breach or compromise of the company’s security systems; our ability to
successfully manage our business while undertaking significant internal
investments; our ability to execute upon our payments strategy and
expand our business in this sector; our ability to achieve favorable tax
rates in our international operations; 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 for the year ended
Dec. 31, 2011. 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 for the remainder of fiscal 2012 reflect management’s expectations as of July 31, 2012. Results may be materially affected by many factors, such as changes in global conditions in the financial services markets and consumer spending, fluctuations in foreign currency rates, the rate of growth of online commerce and the Internet, progress with key partners and other factors. The guidance assumes, among other things, that there are no changes to stock-based compensation expense and anticipated tax rates. Readers are cautioned not to place undue reliance on forward-looking statements, which reflect management's analysis only as of the date hereof. The company undertakes no obligation to update these forward-looking statements to reflect events or circumstances that may arise after the date hereof.
Digital River is a registered trademark of Digital River, Inc. All other trademarks and registered trademarks are trademarks of their respective owners.
| Digital River, Inc. | ||||||||||
| Second Quarter Results | ||||||||||
| (In thousands, except share data) | ||||||||||
| Subject to reclassification | ||||||||||
| Consolidated Balance Sheets | (Unaudited) | |||||||||
| June 30, | December 31, | |||||||||
| 2012 | 2011 | |||||||||
|
Assets |
||||||||||
| Current assets | ||||||||||
| Cash and cash equivalents | $ | 421,542 | $ | 497,193 | ||||||
| Short-term investments | 222,481 | 223,349 | ||||||||
| Accounts receivable, net of allowance of $4,919 and $4,613 | 71,892 | 64,811 | ||||||||
| Deferred tax assets | 8,447 | 8,532 | ||||||||
| Prepaid expenses and other | 40,789 | 35,719 | ||||||||
| Total current assets | 765,151 | 829,604 | ||||||||
| Property and equipment, net | 47,274 | 51,537 | ||||||||
| Goodwill | 278,355 | 281,858 | ||||||||
| Intangible assets, net of accumulated amortization of $88,625 and $85,542 | 14,644 | 18,324 | ||||||||
| Long-term investments | 84,462 | 99,047 | ||||||||
| Deferred income taxes | 20,964 | 21,433 | ||||||||
| Other assets | 6,577 | 8,973 | ||||||||
| Total assets | $ | 1,217,427 | $ | 1,310,776 | ||||||
|
Liabilities and stockholders' equity |
||||||||||
| Current liabilities | ||||||||||
| Accounts payable | $ | 169,195 | $ | 243,410 | ||||||
| Accrued payroll | 13,137 | 17,523 | ||||||||
| Deferred revenue | 10,712 | 8,633 | ||||||||
| Other accrued liabilities | 41,323 | 42,577 | ||||||||
| Total current liabilities | 234,367 | 312,143 | ||||||||
| Non-current liabilities | ||||||||||
| Convertible senior notes | 353,805 | 353,805 | ||||||||
| Other liabilities | 15,206 | 12,556 | ||||||||
| Total non-current liabilities | 369,011 | 366,361 | ||||||||
| Total liabilities | 603,378 | 678,504 | ||||||||
| Stockholders' equity | ||||||||||
| Preferred Stock, $.01 par value; 5,000,000 shares authorized; no shares issued or outstanding | - | - | ||||||||
| Common Stock, $.01 par value; 120,000,000 shares authorized; 48,928,207 and 47,248,765 shares issued | 489 | 472 | ||||||||
| Treasury stock at cost; 13,309,938 and 11,741,310 shares | (364,718 | ) | (340,946 | ) | ||||||
| Additional paid-in capital | 720,891 | 708,941 | ||||||||
| Retained earnings | 276,706 | 271,769 | ||||||||
| Accumulated other comprehensive income (loss) | (19,319 | ) | (7,964 | ) | ||||||
| Stockholders' equity | 614,049 | 632,272 | ||||||||
| Total liabilities and stockholders' equity | $ | 1,217,427 | $ | 1,310,776 | ||||||
| Digital River, Inc. | ||||||||||||||||
| Second Quarter Results | ||||||||||||||||
| (Unaudited, in thousands, except per share amounts) | ||||||||||||||||
| Subject to reclassification | ||||||||||||||||
| Consolidated Statements of Operations | ||||||||||||||||
| Three months ended | Six months ended | |||||||||||||||
| June 30, | June 30, | |||||||||||||||
| 2012 | 2011 | 2012 | 2011 | |||||||||||||
| Revenue | $ | 90,774 | $ | 92,520 | $ | 193,217 | $ | 190,705 | ||||||||
| Costs and expenses (exclusive of depreciation and amortization expense shown separately below): | ||||||||||||||||
| Direct cost of services | 3,069 | 3,856 | 6,697 | 8,019 | ||||||||||||
| Network and infrastructure | 12,932 | 12,477 | 25,689 | 25,089 | ||||||||||||
| Sales and marketing | 39,818 | 39,492 | 82,844 | 77,198 | ||||||||||||
| Product research and development | 15,416 | 18,106 | 31,419 | 33,726 | ||||||||||||
| General and administrative | 11,856 | 10,867 | 24,522 | 21,623 | ||||||||||||
| Depreciation and amortization | 4,950 | 5,559 | 10,289 | 10,964 | ||||||||||||
| Amortization of acquisition-related intangibles | 1,743 | 2,205 | 3,592 | 4,327 | ||||||||||||
| Total costs and expenses | 89,784 | 92,562 | 185,052 | 180,946 | ||||||||||||
| Income (loss) from operations | 990 | (42 | ) | 8,165 | 9,759 | |||||||||||
| Interest income | 996 | 1,753 | 2,135 | 3,228 | ||||||||||||
| Interest expense | (2,254 | ) | (2,243 | ) | (4,494 | ) | (4,500 | ) | ||||||||
| Other income, net | 1,030 | 672 | 733 | 538 | ||||||||||||
| Income before income taxes | 762 | 140 | 6,539 | 9,025 | ||||||||||||
| Income tax (benefit) expense | 562 | (151 | ) | 1,602 | 1,715 | |||||||||||
| Net income | $ | 200 | $ | 291 | $ | 4,937 | $ | 7,310 | ||||||||
| Net income per share - basic | $ | 0.01 | $ | 0.01 | $ | 0.15 | $ | 0.20 | ||||||||
| Net income per share - diluted | $ | 0.01 | $ | 0.01 | $ | 0.15 | $ | 0.19 | ||||||||
| Shares used in per share calculation - basic | 33,453 | 37,436 | 33,629 | 37,415 | ||||||||||||
| Shares used in per share calculation - diluted | 33,561 | 37,981 | 33,821 | 38,105 | ||||||||||||
| Calculation of GAAP Diluted Net Income Per Share | ||||||||||||||||
| Three months ended | Six months ended | |||||||||||||||
| June 30, | June 30, | |||||||||||||||
| 2012 | 2011 | 2012 | 2011 | |||||||||||||
| GAAP net income | $ | 200 | $ | 291 | $ | 4,937 | $ | 7,310 | ||||||||
| Add back debt interest expense and issuance cost amortization, net of tax benefit | - | - | - | - | ||||||||||||
| Adjusted net income for GAAP EPS calculation | $ | 200 | $ | 291 | $ | 4,937 | $ | 7,310 | ||||||||
| Net income per share - diluted | $ | 0.01 | $ | 0.01 | $ | 0.15 | $ | 0.19 | ||||||||
| Shares used in per share calculation - diluted | 33,561 | 37,981 | 33,821 | 38,105 | ||||||||||||
| Digital River, Inc. | ||||||||||
| Second Quarter Results | ||||||||||
| (Unaudited, in thousands) | ||||||||||
| Subject to reclassification | ||||||||||
| Consolidated Statements of Cash Flows | ||||||||||
| Six months ended | ||||||||||
| June 30, | ||||||||||
| 2012 | 2011 | |||||||||
|
Operating Activities: |
||||||||||
| Net income | $ | 4,937 | $ | 7,310 | ||||||
| Adjustments to reconcile net income to net cash provided by (used in) operating activities: | ||||||||||
| Amortization of acquisition-related intangibles | 3,592 | 4,327 | ||||||||
| Provision for doubtful accounts | 900 | 684 | ||||||||
| Depreciation and amortization | 10,289 | 10,964 | ||||||||
| Debt issuance cost amortization | 987 | 998 | ||||||||
| Stock-based compensation expense | 12,192 | 10,686 | ||||||||
| Excess tax benefits from stock-based compensation | (103 | ) | (1,474 | ) | ||||||
| Deferred and other income taxes | 48 | 1,151 | ||||||||
| Change in operating assets and liabilities (net of acquisitions): | ||||||||||
| Accounts receivable | (8,434 | ) | (3,754 | ) | ||||||
| Prepaid and other assets | (5,598 | ) | (2,236 | ) | ||||||
| Accounts payable | (72,606 | ) | (23,684 | ) | ||||||
| Deferred revenue | 4,917 | (675 | ) | |||||||
| Income tax payable | 2,061 | (1,939 | ) | |||||||
| Other accrued liabilities | (5,029 | ) | (29,241 | ) | ||||||
| Net cash used in operating activities | (51,847 | ) | (26,883 | ) | ||||||
|
Investing Activities: |
||||||||||
| Purchases of investments | (80,602 | ) | (191,634 | ) | ||||||
| Sales of investments | 88,501 | 83,646 | ||||||||
| Purchases of equipment and capitalized software | (6,150 | ) | (9,136 | ) | ||||||
| Net cash provided by (used in) investing activities | 1,749 | (117,124 | ) | |||||||
|
Financing Activities: |
||||||||||
| Debt issuance costs | - | (342 | ) | |||||||
| Exercise of stock options | 1,509 | 315 | ||||||||
| Sales of common stock under employee stock purchase plan | 1,300 | 1,251 | ||||||||
| Repurchase of common stock | (20,242 | ) | - | |||||||
| Repurchase of restricted stock to satisfy tax withholding obligation | (3,530 | ) | (5,756 | ) | ||||||
| Excess tax benefits from stock-based compensation | 103 | 1,474 | ||||||||
| Net cash used in financing activities | (20,860 | ) | (3,058 | ) | ||||||
| Effect of exchange rate changes on cash | (4,693 | ) | 14,433 | |||||||
| Net decrease in cash and cash equivalents | (75,651 | ) | (132,632 | ) | ||||||
| Cash and cash equivalents, beginning of period | 497,193 | 565,086 | ||||||||
| Cash and cash equivalents, end of period | $ | 421,542 | $ | 432,454 | ||||||
| Cash paid for interest on convertible senior notes | $ | 3,505 | $ | 3,505 | ||||||
| Cash paid for income taxes | $ | 1,867 | $ | 2,275 | ||||||
| Digital River, Inc. | |||||||||||||||
| GAAP to non-GAAP Reconciliations | |||||||||||||||
| (Unaudited, in thousands, except per share amounts) | |||||||||||||||
|
UTILIZING 21% EFFECTIVE INCOME TAX RATE |
|||||||||||||||
| Three months ended |
Twelve months |
||||||||||||||
| March 31, | June 30, | September 30, | December 31, | December 31, | |||||||||||
| 2011 | 2011 | 2011 | 2011 | 2011 | |||||||||||
| GAAP pre-tax income | $ | 8,885 | $ | 140 | $ | 3,587 | $ | 2,999 | $ | 15,611 | |||||
| Add back amortization of acquisition-related intangibles | 2,122 | 2,205 | 2,184 | 11,529 | 18,040 | ||||||||||
| Add back stock-based compensation expense | 4,955 | 5,731 | 5,549 | 5,879 | 22,114 | ||||||||||
| Add back unrealized investment gain/loss | - | - | - | 1,995 | 1,995 | ||||||||||
| Subtotal | 15,962 | 8,076 | 11,320 | 22,402 | 57,760 | ||||||||||
| Income tax expense @ 21% | 3,352 | 1,696 | 2,377 | 4,705 | 12,130 | ||||||||||
| Non-GAAP net income | 12,610 | 6,380 | 8,943 | 17,697 | 45,630 | ||||||||||
| Add back debt interest expense and issuance cost amortization, net of tax benefit | 1,420 | 20 | 1,413 | 1,413 | 5,659 | ||||||||||
| Adjusted net income for non-GAAP EPS calculation | $ | 14,030 | $ | 6,400 | $ | 10,356 | $ | 19,110 | $ | 51,289 | |||||
| Non-GAAP net income per share - diluted | $ | 0.31 | $ | 0.17 | $ | 0.23 | $ | 0.45 | $ | 1.15 | |||||
| Shares used in per share calculation - diluted | 45,276 | 38,181 | 44,821 | 42,207 | 44,532 | ||||||||||
| Three months ended |
Six months |
||||||||||||||
| March 31, | June 30, | June 30, | |||||||||||||
| 2012 | 2012 | 2012 | |||||||||||||
| GAAP pre-tax income | $ | 5,777 | $ | 762 | $ | 6,539 | |||||||||
| Add back amortization of acquisition-related intangibles | 1,849 | 1,743 | 3,592 | ||||||||||||
| Add back stock-based compensation expense | 5,961 | 6,231 | 12,192 | ||||||||||||
| Add back restructuring related costs | 395 | 49 | 444 | ||||||||||||
| Subtotal | 13,982 | 8,785 | 22,767 | ||||||||||||
| Income tax expense @ 21% | 2,936 | 1,845 | 4,781 | ||||||||||||
| Non-GAAP net income | 11,046 | 6,940 | 17,986 | ||||||||||||
| Add back debt interest expense and issuance cost amortization, net of tax benefit | 1,409 | 1,412 | 2,821 | ||||||||||||
| Adjusted net income for non-GAAP EPS calculation | $ | 12,455 | $ | 8,352 | $ | 20,807 | |||||||||
| Non-GAAP net income per share - diluted | $ | 0.30 | $ | 0.20 | $ | 0.51 | |||||||||
| Shares used in per share calculation - diluted | 41,032 | 40,783 | 41,043 | ||||||||||||
| Breakdown of stock-based compensation expense | |||||||||||||||
| Three months ended |
Six months |
||||||||||||||
| March 31, | June 30, | June 30, | |||||||||||||
| 2012 | 2012 | 2012 | |||||||||||||
| Direct cost of services | $ | 60 | $ | 58 | $ | 118 | |||||||||
| Network and infrastructure | 364 | 368 | 732 | ||||||||||||
| Sales and marketing | 2,168 | 2,129 | 4,297 | ||||||||||||
| Product research and development | 735 | 953 | 1,688 | ||||||||||||
| General and administrative | 2,634 | 2,723 | 5,357 | ||||||||||||
| Total | $ | 5,961 | $ | 6,231 | $ | 12,192 | |||||||||
| Digital River, Inc. | ||||||||||||||||||||
| Non-GAAP Guidance | ||||||||||||||||||||
| (Unaudited, in millions except per share amounts) | ||||||||||||||||||||
| Revenue Guidance Table | ||||||||||||||||||||
| 2011 Actual | ||||||||||||||||||||
| Three months ended |
Twelve months |
|||||||||||||||||||
| March 31, | June 30, | September 30, | December 31, | December 31, | ||||||||||||||||
| 2011 | 2011 | 2011 | 2011 | 2011 | ||||||||||||||||
| Commerce | $ | 74.6 | $ | 70.1 | $ | 72.5 | $ | 89.6 | $ | 306.8 | ||||||||||
| Support Business | 23.6 | 22.4 | 22.9 | 22.4 | 91.3 | |||||||||||||||
| Total Revenue | $ | 98.2 | $ | 92.5 | $ | 95.4 | $ | 112.0 | $ | 398.1 | ||||||||||
| 2012 Actual | ||||||||||||||||||||
| Three months ended |
Six months |
|||||||||||||||||||
| March 31, | June 30, | June 30, | ||||||||||||||||||
| 2012 | 2012 | 2012 | ||||||||||||||||||
| Commerce | $ | 82.1 | $ | 71.3 | $ | 153.4 | ||||||||||||||
| Support Business | 20.3 | 19.5 | 39.8 | |||||||||||||||||
| Total Revenue | $ | 102.4 | $ | 90.8 | $ | 193.2 | ||||||||||||||
| 2012 Guidance | ||||||||||||||||||||
| Q3 2012 | Full Year 2012 | |||||||||||||||||||
| Low Guidance | High Guidance | Low Guidance | High Guidance | |||||||||||||||||
| Commerce | $ | 68.3 | $ | 70.2 | $ | 299.9 | $ | 309.4 | ||||||||||||
| Support Business | 19.7 | 20.8 | 78.1 | 80.6 | ||||||||||||||||
| Total Expected Revenue | $ | 88.0 | $ | 91.0 | $ | 378.0 | $ | 390.0 | ||||||||||||
| Non-GAAP Guidance Reconciliation | ||||||||||||||||||||
| Q3 2012 | Full Year 2012 | |||||||||||||||||||
| Low Guidance | High Guidance | Low Guidance | High Guidance | |||||||||||||||||
| Expected GAAP net income (loss) per share - diluted | $ | (0.09 | ) | $ | (0.02 | ) | $ | 0.22 | $ | 0.38 | ||||||||||
| Add back amortization of acquisition-related costs, net of tax | 0.04 | 0.04 | 0.16 | 0.16 | ||||||||||||||||
| Add back stock-based compensation expense, net of tax | 0.16 | 0.16 | 0.60 | 0.60 | ||||||||||||||||
| Convertible debt dilution impact, net of tax | - | - | (0.03 | ) | (0.07 | ) | ||||||||||||||
| Other | - | - | 0.01 | 0.01 | ||||||||||||||||
| Tax Variability | 0.01 | - | - | - | ||||||||||||||||
| Expected non-GAAP diluted net income per share | $ | 0.12 | $ | 0.18 | $ | 0.96 | $ | 1.08 | ||||||||||||
CONTACT:
Digital River, Inc.
Investor Relations Contact:
Ed
Merritt
Vice President, Investor Relations
investorrelations@digitalriver.com
952-225-3362
or
Media
Relations Contact:
Gerri Dyrek
Group Vice President, Corporate
Communications
gdyrek@digitalriver.com
952-225-3719