Digital River Announces First Quarter 2009 Financial Results

MINNEAPOLIS--(Business Wire)--
Digital River, Inc. (NASDAQ: DRIV), a leading provider of global e-commerce
solutions, reports its first quarter financial results.

First Quarter Ended March 31, 2009

GAAP Results

First quarter revenue totaled $102.9 million, compared to $103.6 million during
the same period in 2008. These results exceeded management`s first quarter
revenue guidance of $96 - $100 million.

First quarter GAAP net income was $16.6 million, or $0.45 per diluted share.
This compared to GAAP net income of $18.3 million, or $0.43 per diluted share,
in the first quarter of 2008. These results exceeded management`s first quarter
earnings guidance of $0.37 - $0.42 per diluted share.

Non-GAAP Results

First quarter non-GAAP net income was $20.8 million, or $0.56 per diluted share.
This compared to non-GAAP net income of $22.9 million, or $0.53 per diluted
share, in the first quarter of 2008. These results exceeded management`s first
quarter earnings guidance of $0.48 - $0.53 per diluted share.

Non-GAAP net income is computed by starting with GAAP pre-tax income as reported
on the Company`s statement of income, then adding back amortization of
acquisition-related intangibles and stock-based compensation expense, to
calculate non-GAAP pre-tax income. This amount is then taxed at 27 percent to
arrive at non-GAAP net income. This amount is then divided by fully-diluted GAAP
shares outstanding, which includes shares underlying the Company`s convertible
senior 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 release.

"Our first quarter revenue and earnings exceeded expectations," said Joel
Ronning, Digital River`s CEO. "We are very encouraged by the solid growth in our
pipeline, the high caliber of companies that we are adding to our client list,
and the moderate sequential increase we saw in e-commerce sales activity. We
believe these factors combined with our focus on new product development and
sales execution will create a strong foundation for future growth. We remain
confident in our business strategy and value proposition, and are cautiously
optimistic in our outlook for 2009."

2009 Guidance

Forward-looking guidance for the quarter ending June 30, 2009, is as follows:

Second Quarter

* Revenue of $95 - $97 million;
* GAAP diluted net income per share of $0.27 - $0.30, assuming a 27 percent tax
rate; and
* Non-GAAP diluted net income per share of $0.39 - $0.42, assuming a 27 percent
tax rate.

Digital River will hold a conference call today at 4:45 p.m. EDT to discuss
first quarter financial results. A live webcast of Digital River`s earnings
conference call can be accessed at http://www.digitalriver.com/2009/q1earnings/.
Alternatively, a live broadcast of the call may be heard by using conference ID
# 93106729 and dialing (888) 218-6314 inside the United States or Canada, or by
calling +1 (706) 634-9714 from international locations. A webcast replay of the
call will be archived on Digital River`s corporate Web site.

About Digital River, Inc.

Digital River, Inc., a leading provider of global e-commerce solutions, builds
and manages online businesses for software and game publishers, consumer
electronics manufacturers, distributors, online retailers and affiliates. 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 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. as well as Brazil, China, England, Germany, Ireland, Japan,
Luxembourg and Taiwan. 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 future financial
performance, as well as statements containing the words "anticipates,"
"believes," "plans," "will," 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 operating history and variability of operating results;
competition in the e-commerce market; challenges associated with international
expansion; the variability of foreign exchange rates; our ability to
successfully manage our business while undertaking significant internal
investments; 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, 2008. 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 second quarter 2009 reflect Digital
River`s expectations as of April 29, 2009. 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.
First Quarter Results
(Unaudited, in thousands)
Subject to reclassification

Condensed Consolidated Balance Sheets As of
March 31, December 31,
2009 2008
Assets
Current assets
Cash and cash equivalents $ 347,863 $ 490,335
Short-term investments 7,000 10,000
Accounts receivable, net 61,411 53,216
Deferred income taxes 7,606 7,613
Prepaid expenses and other 19,299 42,522
Total current assets 443,179 603,686
Property and equipment, net 44,417 41,733
Goodwill 264,643 273,788
Intangible assets, net 29,380 32,222
Long-term investments 91,967 93,213
Deferred income taxes 22,686 24,824
Other assets 744 786
Total assets $ 897,016 $ 1,070,252
Liabilities and stockholders' equity
Current liabilities
Convertible senior notes $ - $ 186,195
Accounts payable 202,603 184,361
Accrued payroll 11,979 14,841
Deferred revenue 15,530 13,651
Accrued acquisition liabilities 255 3,278
Other accrued liabilities 36,845 41,336
Total current liabilities 267,212 443,662
Non-current liabilities
Convertible senior notes 8,805 8,805
Other liabilities 15,612 15,712
Total non-current liabilities 24,417 24,517
Total liabilities 291,629 468,179
Stockholders' equity
Common stock 444 432
Treasury stock (216,600 ) (216,163 )
Additional paid-in capital 622,630 623,778
Retained earnings 205,687 189,096
Accumulated other comprehensive (loss)/ income (6,774 ) 4,930
Stockholders' equity 605,387 602,073
Total liabilities and stockholders' equity $ 897,016 $ 1,070,252

Digital River, Inc.
First Quarter Results
(Unaudited, in thousands, except per share amounts)
Subject to reclassification

Condensed Consolidated Statement of Income

Three months ended
March 31,
2009 2008
Revenue $ 102,931 $ 103,634
Costs and expenses:
Direct cost of services 3,942 4,175
Network and infrastructure 10,313 10,188
Sales and marketing 38,447 39,730
Product research and development 12,335 12,670
General and administrative 9,129 10,244
Depreciation and amortization 3,844 3,834
Amortization of acquisition-related intangibles 2,003 2,176
Total costs and expenses 80,013 83,017
Income from operations 22,918 20,617
Interest income 1,189 6,246
Other expense, net (1,348 ) (749 )
Income before income tax expense 22,759 26,114
Income tax expense 6,168 7,831
Net income $ 16,591 $ 18,283

Net income per share - basic $ 0.45 $ 0.47
Net income per share - diluted $ 0.45 $ 0.43
Shares used in per share calculation - basic 36,706 38,528
Shares used in per share calculation - diluted 37,227 43,506

Calculation of GAAP Diluted Net Income Per Share

Three months ended
March 31,
2009 2008
GAAP net income $ 16,591 $ 18,283
Add back debt interest expense and issuance cost amortization, net of tax benefit 21 434
Adjusted net income for GAAP EPS calculation $ 16,612 $ 18,717

Net income per share - diluted $ 0.45 $ 0.43
Shares used in per share calculation - diluted 37,227 43,506

Digital River, Inc.
First Quarter Results
(Unaudited, in thousands)
Subject to reclassification

Condensed Consolidated Statements of Cash Flows
Three months ended March 31,
2009 2008
Operating Activities:
Net income $ 16,591 $ 18,283
Adjustments to reconcile net income to net cash provided by operating activities:
Amortization of acquisition-related intangibles 2,003 2,176
Change in accounts receivable allowance, net of acquisitions 580 411
Depreciation and amortization 3,844 3,834
Stock-based compensation expense 3,711 3,031
Excess tax benefits from stock-based compensation (96 ) (412 )
Deferred and other income taxes 1,555 5,345
Change in operating assets and liabilities (net of acquisitions):
Accounts receivable (10,607 ) 4,374
Prepaid and other assets 17,399 3,732
Accounts payable 23,129 4,798
Deferred revenue 2,191 1,248
Income tax payable 2,020 (7,357 )
Other accrued liabilities (7,729 ) 5,190
Net cash provided by operating activities 54,591 44,653

Investing Activities:
Purchases of investments (2,122 ) (94,714 )
Sales of investments 10,000 122,050
Cash paid for acquisitions, net of cash received (3,017 ) (16,481 )
Purchases of equipment and capitalized software (6,894 ) (4,192 )
Net cash (used in)/provided by investing activities (2,033 ) 6,663

Financing Activities:
Cash paid for convertible senior notes (186,660 ) -
Exercise of stock options 943 1,985
Repurchase of common stock - (137,858 )
Repurchase of restricted stock to satisfy tax withholding obligation (436 ) (355 )
Excess tax benefits from stock-based compensation 96 412
Net cash used in financing activities (186,057 ) (135,816 )
Effect of exchange rate changes on cash (8,973 ) 8,512
Net decrease in cash and cash equivalents (142,472 ) (75,988 )
Cash and cash equivalents, beginning of period 490,335 381,788

Cash and cash equivalents, end of period $ 347,863 $ 305,800

Cash paid for interest on Convertible Senior Notes $ 1,219 $ 1,219

Digital River, Inc.
GAAP to non-GAAP Reconciliations
(Unaudited, in thousands, except per share amounts)

Calculation of non-GAAP Diluted Net Income Per Share

Twelve months
Three months ended ended
March 31, June 30, September 30, December 31, December 31,
2008 2008 2008 2008 2008

GAAP pre-tax income $ 26,114 $ 16,872 $ 20,641 $ 22,644 $ 86,271

Add back: amortization of acquisition-related intangibles 2,176 2,170 2,001 2,044 8,391
Add back: stock-based compensation expense 3,031 3,507 3,623 2,387 12,548
Non-GAAP pre-tax income 31,321 22,549 26,265 27,075 107,210
Income tax expense @ 27% 8,457 6,088 7,092 7,310 28,947
Non-GAAP net income $ 22,864 $ 16,461 $ 19,173 $ 19,765 $ 78,263

Non-GAAP net income per share - diluted $ 0.53 $ 0.40 $ 0.46 $ 0.48 $ 1.86

Shares used in per share calculation - diluted 43,506 41,647 41,620 41,395 42,106

Three months
ended
March 31,
2009
GAAP pre-tax income $ 22,759

Add back: amortization of acquisition-related intangibles 2,003
Add back: stock-based compensation expense 3,711
Non-GAAP pre-tax income 28,473
Income tax expense @ 27% 7,688
Non-GAAP net income $ 20,785

Non-GAAP net income per share - diluted $ 0.56

Shares used in per share calculation - diluted 37,227

Breakdown of stock-based compensation expense
Three months
ended
March 31,
2009
Direct cost of services $ 169
Network and infrastructure 113
Sales and marketing 1,517
Product research and development 456
General and administrative 1,456
Total $ 3,711

Non-GAAP Guidance Reconciliation
Q2 - 2009 Guidance
Low High
Expected GAAP net income per share - diluted $ 0.27 $ 0.30
Add back amortization of acquisition-related costs 0.05 0.05
Add back stock-based compensation expense 0.12 0.12
Tax variability (0.05 ) (0.05 )
Expected non-GAAP diluted net income per share $ 0.39 $ 0.42

Digital River, Inc.
www.digitalriver.com
Investor Relations Contact:
Ed Merritt, 952-540-3362
Vice President, Investor Relations
emerritt@digitalriver.com
or
Media Relations Contact:
Gerri Dyrek, 952-253-1234, ext. 38396
Senior Director, Public Relations
gdyrek@digitalriver.com

Copyright Business Wire 2009