MINNEAPOLIS, Feb 02, 2012 (BUSINESS WIRE) -- Digital River, Inc. DRIV +9.08% , the revenue growth experts in global cloud commerce, reports its fourth quarter and full year 2011 financial results.
Fourth Quarter and Full Year Ended Dec. 31, 2011, Financial Results GAAP Results Fourth quarter 2011 revenue totaled $112.0 million, exceeding management's guidance of $103 to $105 million. In the fourth quarter of 2010, revenue was $97.7 million.
For the full year 2011, revenue was $398.1 million, exceeding management's guidance of $389 to $391 million. In 2010, revenue was $363.2 million.
Fourth quarter GAAP net income was $4.3 million, or $0.12 per diluted share, which compared to GAAP net income of $5.4 million, or $0.14 per diluted share, in the fourth quarter of 2010. These results were below management's fourth quarter guidance for net income of $0.18 to $0.21 per diluted share driven by $9.4 million of one-time non-cash impairments recorded in the quarter. These impairments primarily related to the reduction in the book carrying values of intangibles, including certain customer relationship, trade name and non-compete agreements.
For the full year 2011, GAAP net income was $17.2 million, or $0.46 per diluted share, and compared to GAAP net income of $15.7 million, or $0.41 per diluted share, during the same period in 2010. These results were below management's full year 2011 guidance of $0.52 to $0.55 per diluted share, due to the aforementioned impairment charge.
Non-GAAP Results Fourth quarter 2011 non-GAAP net income was $17.7 million, or $0.45 per diluted share. This compared to non-GAAP net income of $12.7 million, or $0.32 per diluted share, in the fourth quarter of 2010. These results exceeded management's fourth quarter earnings guidance of $0.32 to $0.35 per diluted share.
For the full year 2011, non-GAAP net income was $45.6 million, or $1.15 per diluted share, and compared to non-GAAP net income of $36.7 million, or $0.95 per diluted share, during the same period in 2010. These results exceeded management's full year 2011 guidance of $1.03 to $1.06 per diluted share.
"I am pleased to report that we ended 2011 on a high note, delivering the highest quarterly revenue in the history of the company and beating our fourth quarter non-GAAP earnings guidance," said Joel Ronning, Digital River's CEO. "This year, innovation and product development will be major themes inside Digital River. We have several solutions we intend to deliver in 2012, including an expanded cloud-based subscriptions offering. Our company and clients' goals are clearly aligned -- we are both focused on growing online revenue."
On Sept. 7, 2011, management announced a $100 million share repurchase program. During the fourth quarter, the company repurchased $29.7 million of common stock, or 1.9 million shares at an average price of $15.41 per share. For the year, the company repurchased $79.8 million of common stock, or 4.3 million shares at an average price of $18.70 per share.
First Quarter 2012 Guidance
-- Revenue in the range of $99 to $101 million;
-- GAAP diluted earnings per share in the range of $0.09 to $0.13;
-- Non-GAAP diluted earnings per share in the range of $0.27 to $0.30; and
-- A tax rate of 21 percent for both GAAP and non-GAAP earnings.
Full Year 2012 Guidance
-- Revenue in the range of $402 to $409 million;
-- GAAP diluted earnings per share in the range of $0.54 to $0.64;
-- Non-GAAP diluted earnings per share in the range of $1.20 to $1.28; and
-- A tax rate of 21 percent for both GAAP and non-GAAP earnings.
A detailed table providing a reconciliation of the company's GAAP and non-GAAP earnings guidance estimates can be found accompanying this press release.
Digital River will hold a conference call today at 4:45 p.m. EST to discuss fourth quarter and full year 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 #38649790 and dialing (877) 303-3145 inside the United States or Canada, or by calling +1 (408) 427-3861 from international locations. 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, 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, 2010. 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 Feb. 2, 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.
Fourth Quarter Results
(Unaudited, in thousands)
Subject to reclassification
Consolidated Balance Sheets
December 31, December 31,
-------------------- --------------------
2011 2010
-------------------- --------------------
Assets
--------------------------------------------------------------------
Current assets
Cash and cash equivalents $ 497,193 $ 565,086
Short-term investments 223,349 163,029
Accounts receivable, net of allowance of $4,613 and $4,902 64,811 50,922
Deferred tax assets 8,532 10,628
Prepaid expenses and other 35,719 30,375
--------- ---------
Total current assets 829,604 820,040
Property and equipment, net 51,537 49,599
Goodwill 281,858 283,940
Intangible assets, net of accumulated amortization of $85,542 and 18,324 37,911
$80,106
Long-term investments 99,047 110,736
Deferred income taxes 21,433 17,721
Other assets 8,973 13,820
--------- ---------
Total assets $ 1,310,776 $ 1,333,767
==== ========= ==== =========
Liabilities and stockholders' equity
--------------------------------------------------------------------
Current liabilities
Accounts payable $ 243,410 $ 188,915
Accrued payroll 17,523 21,117
Deferred revenue 8,633 10,446
Accrued acquisition liabilities - 1,615
Other accrued liabilities 42,577 58,083
--------- ---------
Total current liabilities 312,143 280,176
Non-current liabilities
Convertible senior notes 353,805 353,805
Other liabilities 12,556 16,038
--------- ---------
Total non-current liabilities 366,361 369,843
--------- ---------
Total liabilities 678,504 650,019
--------- ---------
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; 472 463
47,248,165 and 46,323,799 shares issued
Treasury stock at cost; 11,741,310 and 7,297,174 shares (340,946) (255,196)
Additional paid-in capital 708,941 683,307
Retained earnings 271,769 254,602
Accumulated other comprehensive income (loss) (7,964) 572
--------- ---- ---------
Stockholders' equity 632,272 683,748
--------- ---------
Total liabilities and stockholders' equity $ 1,310,776 $ 1,333,767
==== ========= ==== =========
Digital River, Inc.
Fourth Quarter Results
(Unaudited, in thousands, except per share amounts)
Subject to reclassification
Consolidated Statements of Operations
Three months ended Twelve months ended
December 31, December 31,
----------------------------- ------------------------------
2011 2010 2011 2010
-------------- ------------- -------------- --------------
Revenue $ 112,024 $ 97,681 $ 398,140 $ 363,226
Costs and expenses (exclusive of depreciation and
amortization expense shown separately below):
Direct cost of services 3,809 4,248 15,491 17,789
Network and infrastructure 12,327 12,213 49,433 46,909
Sales and marketing 44,831 39,274 162,564 150,041
Product research and development 16,355 14,916 66,862 60,844
General and administrative 11,729 10,832 43,093 43,392
Depreciation and amortization 5,550 5,751 22,207 23,413
Amortization of acquisition-related intangibles 11,529 2,564 18,040 7,845
------- ------ ------- -------
Total costs and expenses 106,130 89,798 377,690 350,233
------- ------ ------- -------
Income from operations 5,894 7,883 20,450 12,993
------- ------ ------- -------
Interest income 1,307 1,003 6,100 3,035
Interest expense (2,254) (1,535) (9,018) (1,688)
Other income (expense), net (1,948) 40 (1,921) (1,067)
------- -- ------ ------- -- ------- --
Income before income taxes 2,999 7,391 15,611 13,273
Income tax expense (benefit) (1,340) 2,004 (1,556) (2,462)
------- -- ------ ------- -- ------- --
Net income $ 4,339 $ 5,387 $ 17,167 $ 15,735
== ======= == ====== == ======= == =======
Net income per share - basic $ 0.12 $ 0.14 $ 0.47 $ 0.42
== ======= == ====== == ======= == =======
Net income per share - diluted $ 0.12 $ 0.14 $ 0.46 $ 0.41
== ======= == ====== == ======= == =======
Shares used in per share calculation - basic 34,757 37,194 36,778 37,518
Shares used in per share calculation - diluted 35,185 38,430 37,510 38,339
Calculation of GAAP Diluted Net Income Per Share
Three months ended Twelve months ended
December 31, December 31,
----------------------------- ------------------------------
2011 2010 2011 2010
-------------- ------------- -------------- --------------
GAAP net income $ 4,339 $ 5,387 $ 17,167 $ 15,735
Add back debt interest expense and issuance
cost amortization, net of tax benefit 19 15 78 79
------- ------ ------- -------
Adjusted net income for GAAP EPS calculation $ 4,358 $ 5,402 $ 17,245 $ 15,814
== ======= == ====== == ======= == =======
Net income per share - diluted $ 0.12 $ 0.14 $ 0.46 $ 0.41
== ======= == ====== == ======= == =======
Shares used in per share calculation - diluted 35,185 38,430 37,510 38,339
Digital River, Inc.
Fourth Quarter Results
(Unaudited, in thousands)
Subject to reclassification
Consolidated Statements of Cash Flows
Twelve months ended December 31,
----------------------------------------
2011 2010
------------------- -------------------
Operating Activities:
-------------------------------------------------------------------------
Net income $ 17,167 $ 15,735
Adjustments to reconcile net income to net cash provided by (used
in) operating activities:
Amortization of acquisition-related intangibles 8,689 7,845
Provision for doubtful accounts 1,317 2,666
Depreciation and amortization 22,207 23,413
Impairment of intangibles 9,351 -
Debt issuance cost amortization 1,986 318
Stock-based compensation expense 22,114 20,773
Excess tax benefits from stock-based compensation (1,985) (2,474)
Deferred and other income taxes (2,649) (2,841)
Impairment of equity investment 2,198 2,188
Change in operating assets and liabilities (net of acquisitions):
Accounts receivable (15,292) 180
Prepaid and other assets 2,635 (6,540)
Accounts payable 57,162 (11,554)
Deferred revenue (1,782) (2,749)
Income tax payable (4,061) (1,491)
Other accrued liabilities (24,289) 12,331
-------- ---- --------
Net cash provided by operating activities 94,768 57,800
-------- --------
Investing Activities:
-------------------------------------------------------------------------
Purchases of investments (254,536) (198,673)
Sales of investments 213,302 53,299
Cash paid for cost method investments (9,490) -
Funding of restricted cash - (2,156)
Cash paid for acquisitions, net of cash received - (14,585)
Purchases of equipment and capitalized software (23,860) (18,579)
-------- ---- -------- ----
Net cash used in investing activities (74,584) (180,694)
-------- ---- -------- ----
Financing Activities:
-------------------------------------------------------------------------
Cash received (paid) for convertible senior notes - 345,000
Debt issuance costs (342) (9,529)
Exercise of stock options 364 5,004
Sales of common stock under employee stock purchase plan 2,466 2,374
Repurchase of common stock (79,758) (34,999)
Repurchase of restricted stock to satisfy tax withholding obligation (5,992) (3,317)
Excess tax benefits from stock-based compensation 1,985 2,474
-------- --------
Net cash provided by (used in) financing activities (81,277) 307,007
-------- ---- --------
Effect of exchange rate changes on cash (6,800) (11,731)
-------- ---- -------- ----
Net increase (decrease) in cash and cash equivalents (67,893) 172,382
Cash and cash equivalents, beginning of period 565,086 392,704
Cash and cash equivalents, end of period $ 497,193 $ 565,086
==== ======== ==== ========
Cash paid for interest on convertible senior notes $ 7,010 $ 110
==== ======== ==== ========
Cash paid for income taxes $ 5,085 $ 5,883
==== ======== ==== ========
Digital River, Inc.
GAAP to non-GAAP Reconciliations
(Unaudited, in thousands, except per share amounts)
UTILIZING 21% EFFECTIVE INCOME TAX RATE
-------------------------------------------------------------------------------------------------------------------------------
Twelve months
Three months ended ended
-------------------------------------------------------------- --------------
March 31, June 30, September 30, December 31, December 31,
2010 2010 2010 2010 2010
------------ ------------- ----------------- -------------- --------------
GAAP pre-tax income (loss) $ 9,676 $ (4,887) $ 1,093 $ 7,391 $ 13,273
Add back amortization of acquisition-related intangibles 1,481 1,612 2,188 2,564 7,845
Add back stock-based compensation expense 4,476 5,522 5,280 5,495 20,773
Add back unrealized investment gain/loss - - 1,562 626 2,188
Add back restructuring related costs - 1,870 443 - 2,313
------ ------ ------ ------ ------
Non-GAAP pre-tax income 15,633 4,117 10,566 16,076 46,392
Income tax expense @ 21% 3,283 865 2,218 3,376 9,742
------ ------ ------ ------ ------
Non-GAAP net income 12,350 3,252 8,348 12,700 36,650
====== ====== ====== ====== ======
Add back debt interest expense and issuance cost amortization, net 21 21 21 937 1,000
of tax benefit
------ ------ ------ ------ ------
Adjusted net income for non-GAAP EPS calculation $ 12,371 $ 3,273 $ 8,369 $ 13,637 $ 37,650
==== ====== == ====== ==== ====== ====== ====== ====== ======
Non-GAAP net income per share - diluted $ 0.32 $ 0.09 $ 0.22 $ 0.32 $ 0.95
==== ====== == ====== ==== ====== ====== ====== ====== ======
Shares used in per share calculation - diluted 38,220 38,351 38,504 43,085 39,512
Twelve months
Three months ended ended
-------------------------------------------------------------- --------------
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 1,420 20 1,413 1,413 5,659
of tax benefit
------ ------ ------ ------ ------
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
Breakdown of stock-based compensation expense
Twelve months
Three months ended ended
-------------------------------------------------------------- --------------
March 31, June 30, September 30, December 31, December 31,
2011 2011 2011 2011 2011
------------ ------------- ----------------- -------------- --------------
Direct cost of services $ 115 $ 118 $ (16) $ 52 $ 269
Network and infrastructure 247 345 345 373 1,310
Sales and marketing 1,760 2,116 2,265 1,974 8,115
Product research and development 710 781 698 910 3,099
General and administrative 2,123 2,371 2,257 2,570 9,321
------ ------ ------ ------ ------
Total $ 4,955 $ 5,731 $ 5,549 $ 5,879 $ 22,114
==== ====== == ====== ==== ====== ====== ====== ====== ======
Digital River, Inc.
Guidance
(Unaudited, in millions except per share amounts)
Revenue Guidance Table
2011 Actual
--------------------------------------------------------------------------------------
Twelve Months
Three months ended Ended
---------------------------------------------------------------------- --------------
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 Guidance
----------------------------------------------------------------------
Q1 2012 Full Year 2012
---------------------------------- ----------------------------------
Low Guidance High Guidance Low Guidance High Guidance
---------------- ---------------- ---------------- ----------------
Commerce $ 79.5 $ 80.3 $ 325.5 $ 329.1
Support Business 19.5 20.7 76.5 79.9
----- ----- ----- -----
Total Expected Revenue $ 99.0 $ 101.0 $ 402.0 $ 409.0
==== ===== ==== ===== ==== ===== ==== =====
Non-GAAP Guidance Reconciliation
Q1 2012 Full Year 2012
---------------------------------- ----------------------------------
Low Guidance High Guidance Low Guidance High Guidance
---------------- ---------------- ---------------- ----------------
Expected GAAP net income per share - diluted $ 0.09 $ 0.13 $ 0.54 $ 0.64
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 0.14 0.14 0.58 0.58
Convertible debt dilution impact, net of tax (0.01) (0.02) (0.09) (0.11)
Other 0.01 0.01 0.01 0.01
----- ----- ----- -----
Expected non-GAAP diluted net income per share $ 0.27 $ 0.30 $ 1.20 $ 1.28
==== ===== ==== ===== ==== ===== ==== =====
Projected Shares Used in Per Share Calculation
Q1 2012 Full Year 2012
---------------------------------- ----------------------------------
Low Guidance High Guidance Low Guidance High Guidance
---------------- ---------------- ---------------- ----------------
Shares used in per share calculation - GAAP diluted 33.8 34.0 34.2 34.2
Shares used in per share calculation - non-GAAP diluted 41.1 41.1 41.2 41.2
SOURCE: Digital River, Inc.
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