Digital River Revenue Up, Losses Down

Digital River

The company reported a loss of $3.5 million, or 13 cents per share, on sales of $18.1 million. For the year-ago period, Digital River reported a loss of $6.2 million, or 28 cents per share, on sales of $13 million.

Charges contributing to the loss included a $2.5 million reserve established for pending litigation, a $200,000 charge for the closing of its San Jose, Calif., office and amortization of acquisition-related costs.

The pending litigation includes a shareholder lawsuit, a patent infringement claim and a contractual dispute. The acquisition-related charge resulted from the purchase of the assets of Beyond.com and CCNow during the quarter.

"These acquisitions demonstrate our intentions to continue to take advantage of the consolidation that is occurring in our industry," said Joel Ronning, CEO of Digital River.

Excluding charges, Digital River earned $520,000, or 2 cents per share. The per-share earnings met the consensus analyst estimate as reported by Thomson Financial/First Call.

The company expects to report $73 million to $75 million in revenue for 2002, with 78 percent of revenue generated from software services. Digital River also expects a decline in revenue in the second quarter to $17 million, vs. first-quarter revenue of $18.1 million. Company CFO Carter Hicks said services sales historically decrease in the second quarter.

Hicks, former senior vice president of operations for Digital River, replaced Bob Strawman as CFO on Wednesday. Strawman left for personal reasons, the company said.

Ronning said he expects that going forward revenue growth will be driven by additions to Digital River's management team, a sales force expansion, and new marketing ad services programs.

Ronning also said Digital River launched two initiatives during the quarter: a mobile offering and a service for migrating customers from in-house e-commerce software to its outsourced solution.

"Many companies have become fatigued by continuous maintenance and systems upgrade costs for in-house e-commerce platforms that create anemic revenue levels and a poor return on investment," Ronning said. "We believe this will be a catalyst for growth as people migrate to e-commerce outsourcing."

Digital River rounded out the quarter with $30.8 million in cash and investments and no debt, Ronning said.