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Exhibit 20.1
Press release of the Registrant
FOR RELEASE AT 3:10 P.M. CST VIA NATIONAL WIRE AND FIRST CALL
INVESTOR CONTACT: MEDIA CONTACT:
Al Galgano Michelle Gjerde
Vice President, Investor Relations Communications Director
(952) 253-8406 (952) 253-8465
[email protected] [email protected]
DIGITAL RIVER REPORTS THIRD QUARTER REVENUE UP 15 PERCENT
FROM PRIOR QUARTER AND 89 PERCENT YEAR-OVER-YEAR GROWTH
ALSO ANNOUNCES COMPANY-WIDE REPORTING ON A NET REVENUE BASIS
MINNEAPOLIS, OCTOBER 19, 2000 -- Digital River, Inc. (Nasdaq: DRIV),
the world's largest Commerce Service Provider (CSP), today reported net revenue
of $7.6 million for the quarter ended September 30, 2000. This represents a
sequential increase of 15 percent from net revenue of $6.6 million in the second
quarter, and a year-over-year increase of 89 percent from net revenue of $4.0
million in the third quarter of 1999.
The company also announced that, based on the consensus reached by the
Emerging Issues Task Force of the Financial Accounting Standards Board regarding
net versus gross revenue recognition which resulted in revised accounting
standards, it would commence reporting all revenues on a net basis with the
quarter ending September 30, 2000. This change will have no impact on the
company's net income, either historically or in the future, as the change simply
reflects a new presentation format. Historical information in the new reporting
format has been provided by the company as an attachment to this press release.
While Digital River no longer manages its business on a gross revenue basis nor
will the company report this metric going forward, it said that gross revenues
in the third quarter were between $34 and $35 million.
The net loss prior to goodwill amortization and acquisition-related
costs was $5.5 million, or $0.25 per share, in the third quarter, a 34 percent
improvement from the second quarter net loss of $8.3 million, or $0.39 per
share, and significantly better than analyst expectations. The net loss for the
quarter, including goodwill amortization and acquisition-related costs was $8.1
million, or $0.37 per share, compared with a net loss of $12.6 million, or $0.60
per share, in the second quarter.
For the nine months ended September 30, 2000, net revenue totaled $21.1
million, a 135 percent increase from $9.0 million in the same period last year.
Through the first nine months of this year, the net loss, prior to the
amortization of goodwill and acquisition-related costs was $ 20.3 million, or
$0.96 per share. The net loss for the period, including the amortization of
goodwill and acquisition-related costs, totaled $32.7 million, or $1.55 per
share, compared with a net loss of $20.7 million, or $1.03 per share in the
first nine months of 1999.
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"I am very pleased with our performance in the third quarter and the
momentum generated by each of our businesses," said Joel Ronning, chief
executive officer. "Digital River was able to deliver solid results in what was
perceived to be a challenging environment for the technology and Internet
sectors. We have demonstrated prudence in managing our business and decreased
our cash utilization this quarter to $6.8 million, resulting in $32.5 million in
cash and investments at September 30th, and we anticipate that our cash
utilization in the fourth quarter will be cut in half."
"We believe we are well capitalized to achieve our profitability
targets," Ronning continued. "We look forward to achieving our first
profitability milestone for the Software Services division in December, as this
will send a clear message to the financial community regarding the strength of
the business model Digital River has built," concluded Mr. Ronning.
EXECUTION OF E-BUSINESS SERVICES STRATEGY
Digital River's E-Business Services division had 15 new client
contracts in the third quarter, resulting in a total of 49 client contracts, at
September 30, 2000. New contracts since the end of the second quarter included
Polaris, Giga Information Group, S3, Xircom and several new divisions of current
clients, such as 3M, Fujitsu and Siemens. The E-Business division generated $1.7
million in revenue for the company in the quarter, a sequential increase of 49
percent, from $1.2 million in the second quarter.
"We're seeing substantial growth opportunities among mid-to-large
manufacturing companies as they take their businesses to the Internet," said
Perry Steiner, president. "Our E-Business clients are generally mature,
profitable companies who sell their products through both direct and indirect
sales channels. These types of companies are turning to Digital River to help
them build and manage a complex sell-side e-commerce system that supports both
channel partners and end customers. As we grow our business just as we have this
past quarter, we're committed to enhancing our commerce system and our service
offerings to support the needs of our clients."
INDUSTRY-LEADING SOFTWARE AND DIGITAL COMMERCE SERVICES
The Software Services division generated $5.9 million in net revenue
for the company in the quarter, versus revenues of $5.4 million in the second
quarter. New clients added since the second quarter included Novell, Network
Ice, Harvard Graphics and Havas. The division also added several
business-to-education clients as well as game publishers. Also in the quarter
Digital River acquired the software services business of NetSales, Inc.
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"The performance of our Software Services division in the third quarter
demonstrates that Digital River has regained its momentum and is the market
leader in this category," said Mr. Steiner. "We expect to continue to take
advantage of the inevitable shift to selling and delivering software via the
Internet. We expect to see high growth in this market from attracting new
top-tier clients and from new opportunities as we help to grow our current
clients," he concluded.
FUTURE EXPECTATIONS
The company also announced its expectations for the fourth quarter.
Sequential revenue growth is expected to be between 25 and 30 percent over the
third quarter. The net loss per share, prior to goodwill amortization and
acquisition related expenses, is expected to be approximately $0.21. The company
also announced that it anticipates that the cash utilization in the fourth
quarter will be approximately half of the third quarter level, at $3.4 million.
Based on the revised presentation format for net revenue, the company also
announced its revised long-term operating targets. It expects long-term gross
margins to be 70-75 percent of net revenue and long-term operating margins to be
25-30 percent of net revenue.
ABOUT DIGITAL RIVER
Digital River (NASDAQ: DRIV) is the world's largest Commerce Service Provider
(CSP), providing over 8,000 companies with complete, outsourced commerce
solutions. The Company's e-commerce services include site development and
hosting, order and transaction management, system integration, product
fulfillment, fraud prevention, e-marketing and customer service. Digital River's
clients include Fujitsu, 3M, Siemens, Hewlett-Packard, Novell, Autodesk,
Adaptec, Block Financial, Staples.com, CompUSA, Fox Interactive and Egghead.com.
For more details about Digital River, visit the corporate web site at
www.digitalriver.com or call 952-253-1234.
Digital River will sponsor a third quarter conference call today, at 3:45 pm
(cdt). Investors are invited to listen to the conference call via Digital
River's Website, WWW.DIGITALRIVER.COM. Please go to the "Investor" page to
access the call and install any necessary audio software.
FORWARD-LOOKING STATEMENTS
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 differ materially 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; 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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Digital River, Inc.
Third Quarter Results
(Unaudited, in thousands, except per share amounts)
Condensed Consolidated Balance Sheets
<TABLE>
<CAPTION>
September 30, 2000 December 31, 1999
---------------------- -------------------------
<S> <C> <C>
Assets
Current assets
Cash and investments $ 32,540 $ 39,507
Other current assets 5,360 3,335
Total current assets 37,900 42,842
Property and equipment, net 13,443 7,279
Long-term investments -- 14,832
Goodwill and other assets 20,988 22,189
Total assets $ 72,331 $ 87,142
Liabilities and stockholders' equity
Current liabilities
Accounts payable $ 12,449 $ 11,020
Deferred revenue 2,210 152
Accrued payroll and other liabilities 4,116 2,893
Total current liabilities 18,775 14,065
Stockholders' equity 53,556 73,077
Total liabilities and stockholders' equity $ 72,331 $ 87,142
</TABLE>
Condensed Consolidated Statements of Operations
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30, September 30,
----------------------------- ------------------------------
2000 1999 2000 1999
-------------- -------------- -------------- ---------------
<S> <C> <C>
Revenue $ 7,607 $ 4,017 $ 21,125 $ 8,985
Costs and expenses:
Direct cost of services 421 264 991 546
Network and infrastructure 1,888 940 5,636 2,723
Sales and marketing 6,247 4,760 19,690 12,601
Product research and development 2,857 2,686 10,949 7,483
General and administrative 1,151 1,041 3,608 2,958
Loss before interest, tax,
depreciation and amortization (4,957) (5,674) (19,749) (17,326)
Depreciation and amortization 896 490 2,239 1,238
Amortization of goodwill and
acquisition related costs 2,603 3,275 12,331 4,577
Loss from operations (8,456) (9,439) (34,319) (23,141)
Interest income 382 751 1,621 2,430
Net loss $ (8,074) $ (8,688) $(32,698) $(20,711)
Net loss per share before amortization
of goodwill and acquisition costs $ (.25) $ (.26) $ (.96) $ (.80)
Net loss per share $ (.37) $ (.42) $ (1.55) $ (1.03)
Weighted average shares outstanding 21,598 20,604 21,164 20,137
</TABLE>
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Digital River, Inc.
Statements of Operations - as reclassified for net revenue recognition
(unaudited, in thousands, except per share amounts)
<TABLE>
<CAPTION>
1999 Qtr. Ended Qtr. Ended Qtr. Ended Qtr. Ended
March 31 June 30 September 30 December 31 Year
---------------------------------------- -------------- ------------- --------------- ---------------- ---------------
<S> <C> <C> <C> <C> <C>
Revenue $ 1,903 $ 3,065 $ 4,017 $ 5,522 $ 14,507
Costs and expenses:
Direct cost of services 126 156 264 255 801
Network and infrastructure 866 917 940 1,711 4,434
Sales and marketing 3,559 4,281 4,760 4,783 17,383
Product research and development 2,341 2,456 2,686 2,768 10,251
General and administrative 901 1,016 1,041 1,043 4,001
Loss before interest, tax,
depreciation and amortization (5,890) (5,761) (5,674) (5,038) (22,363)
Depreciation and amortization 348 400 490 314 1,552
Amortization of goodwill and
acquisition related costs -- 1,302 3,275 2,309 6,886
Loss from operations (6,238) (7,463) (9,439) (7,661) (30,801)
Interest income 894 785 751 718 3,148
Net loss $ (5,344) $ (6,678) $(8,688) $(6,943) $(27,653)
Net loss per share before amortization
of goodwill and acquisition costs $ (.27) $ (.27) $ (.26) $ (.22) $ (1.02)
Net loss per share $ (.27) $ (.33) $ (.42) $ (.33) $ (1.36)
Weighted average shares outstanding 19,632 20,169 20,604 20,889 20,312
</TABLE>
<TABLE>
<CAPTION>
Nine months
2000 Qtr. Ended Qtr. Ended Qtr. Ended Ended
March 31 June 30 September 30 September 30
------------------------------------------ -------------- ------------- --------------- ---------------- ---------------
<S> <C> <C> <C> <C> <C>
Revenue $ 6,883 $ 6,635 $ 7,607 $ 21,125
Costs and expenses:
Direct cost of services 295 275 421 991
Network and infrastructure 1,791 1,957 1,888 5,636
Sales and marketing 6,478 6,965 6,247 19,690
Product research and development 3,663 4,429 2,857 10,949
General and administrative 1,235 1,222 1,151 3,608
Loss before interest, tax,
depreciation and amortization (6,579) (8,213) (4,957) (19,749)
Depreciation and amortization 703 640 896 2,239
Amortization of goodwill and
acquisition related costs 5,394 4,334 2,603 12,331
Loss from operations (12,676) (13,187) (8,456) (34,319)
Interest income 685 554 382 1,621
Net loss $(11,991) $(12,633) $ (8,074) $(32,698)
Net loss per share before amortization
of goodwill and acquisition costs $ (.32) $ (.39) $ (.25) $ (.96)
Net loss per share $ (.58) $ (.60) $ (.37) $ (1.55)
Weighted average shares outstanding 20,775 21,100 21,598 21,164
</TABLE>
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Digital River, Inc.
Statements of Operations - as reclassified for net revenue recognition
(unaudited, in thousands, except per share amounts)
<TABLE>
<CAPTION>
Year ended December 31,
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1996 1997 1998 1999
------------ ------------ ------------ ------------
<S> <C> <C>
Revenue $ 16 $ 420 $ 3,424 $ 14,507
Costs and expenses:
Direct cost of services 2 23 116 801
Network and infrastructure 86 580 1,836 4,434
Sales and marketing 57 1,446 9,310 17,383
Product research and development 131 877 3,140 10,251
General and administrative 402 837 3,111 4,001
Loss before interest, tax,
depreciation and amortization (662) (3,343) (14,089) (22,363)
Depreciation and amortization 35 195 604 1,552
Amortization of goodwill and
acquisition related costs -- -- -- 6,886
Loss from operations (697) (3,538) (14,693) (30,801)
Interest income 8 53 895 3,148
Net loss $(689) $(3,485) $(13,798) $(27,653)
Net loss per share before amortization
of goodwill and acquisition costs $ (.13) $ (.46) $ (1.01) $ (1.02)
Net loss per share $ (.13) $ (.46) $ (1.01) $ (1.36)
Weighted average shares outstanding 5,333 7,514 13,691 20,312
</TABLE>
