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Digital River Announces Repurchases Of Convertible Debt

Digital River, Inc. (NASDAQ: DRIV), a leading global provider of Commerce-as-a-Service solutions, today announced that the company, in a privately-negotiated transaction, repurchased $150 million in aggregate principal amount of its 2.0% Convertible Senior Notes due 2030 for $153.75 million in cash, excluding accrued interest. Following the closing of this repurchase, approximately $145.75 million in aggregate principal amount of Notes remain outstanding.

The company expects to record a one-time pre-tax charge in the first quarter of fiscal 2014 of approximately $5.2 million related to settlement of the Notes and acceleration of the recognition of deferred financing costs associated with the repurchased Notes. Excluding the one-time charge, pre-tax savings related to interest and amortization of deferred financing costs on the repurchased Notes will be approximately $0.3 million and $2.9 million for first quarter 2014 and full year 2014, respectively.

“Given the upcoming put date of our Notes and the yield available on short-term investments, we were delighted to take advantage of the opportunity to increase shareholder value through our capital allocation strategy,” said Stefan Schulz, Digital River’s chief financial officer.

As a result of the transaction, management has updated the EPS guidance that was previously provided on Feb. 5, 2014, to the following:

GAAP EPS guidance:

  • First quarter 2014 GAAP EPS, ranging from a net loss of $0.31 to a net loss of $0.25 per share; and
  • Full year 2014 GAAP EPS, ranging from a net loss of $0.59 to a net loss of $0.45 per share.

Non-GAAP EPS guidance, which excludes the impact of the one-time charge:

  • First quarter 2014 non-GAAP EPS, ranging from $0.08 to $0.12 per diluted share, using a 21 percent tax rate; and
  • Full year 2014 non-GAAP EPS, ranging from $0.41 to $0.51 per diluted share, using a 21 percent tax rate.

About Digital River, Inc.Backed by 20 years of e-commerce experience, Digital River is recognized as a leading global provider of Commerce-as-a-Service solutions. Companies of all sizes rely on Digital River’s multi-tenant, SaaS commerce, payments and marketing services to manage and grow their online businesses. In 2013, Digital River processed more than $30 billion in online transactions, connecting B2B and B2C digital products and cloud service companies as well as branded manufacturers with buyers across multiple devices and channels, and nearly every country in the world.

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, follow the company on Twitter or call +1 952-253-1234.

Non-GAAP Net Income Calculation Digital River’s non-GAAP net income (loss) from continuing operations is computed by adjusting GAAP pre-tax income from continuing operations as reported on the company’s statement of operations by adding back, when applicable, amortization of acquisition-related intangibles, stock-based compensation expense, intangible impairments, restructuring related costs, litigation settlement related costs, acquisition and integration costs, realized and unrealized investment gains or losses, goodwill impairments, and one-time impacts of debt repurchases, net of a 21 percent tax rate. Non-GAAP diluted earnings per share from continuing operations is calculated using the “if-converted” method with respect to the issuance of the company’s Convertible Senior Notes. In computing non-GAAP diluted earnings per share from continuing operations, if an increase in earnings per share will not result, adjust non-GAAP net income from continuing operations 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 from continuing operations for each period presented.

Forward-Looking Statements This press release contains forward-looking statements, including statements regarding the company’s anticipated future growth and 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 and payments markets; 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 technical initiatives; 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, 2013. 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 reflect management’s expectations as of March 5, 2014. 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 online payments, progress with key partners, and other factors. The guidance assumes, among other things, that there are no material 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 or future guidance 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.

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