Digital River, Inc.

[Pages:6]Digital River, Inc. First Quarter Results (Unaudited, in thousands, except share data) Subject to reclassification

Consolidated Balance Sheets

Assets Current assets Cash and cash equivalents Short-term investments Accounts receivable, net of allowance of $3,417 and $3,206 Deferred tax assets Prepaid expenses and other Total current assets Property and equipment, net Goodwill Intangible assets, net Long-term investments Deferred income taxes Other assets Total assets

Liabilities and stockholders' equity Current liabilities Accounts payable Accrued payroll Deferred revenue Other current liabilities Total current liabilities Non-current liabilities Convertible senior notes Other liabilities Total non-current liabilities Total liabilities 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; 50,603,707 and 50,074,977 shares issued Treasury stock at cost; 17,950,133 and 16,910,883 shares Additional paid-in capital Retained earnings Accumulated other comprehensive income (loss) Stockholders' equity Total liabilities and stockholders' equity

March 31, 2014

$ 309,717 82,156 66,746 1,518 23,199

483,336 51,480

137,766 26,441 57,580 1,169 1,212

$ 758,984

$ 167,857 12,714 4,945 44,968

230,484

135,225 21,532

156,757 387,241

-

506

(442,400)

765,543

45,670

2,424

371,743

$

758,984

December 31, 2013

$

483,868

115,652

70,865

1,479

27,878

699,742

53,770

139,318

29,217

56,023

1,037

2,067

$

981,174

$

187,635

20,058

6,904

55,899

270,496

295,795 21,452

317,247 587,743

-

501

(424,416)

761,560

51,254

4,532

393,431

$

981,174

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

Consolidated Statements of Operations

Revenue Costs and expenses (exclusive of depreciation and amortization expense shown separately below): Direct cost of services Network and infrastructure Sales and marketing Product research and development General and administrative Goodwill impairment Depreciation and amortization Amortization of acquisition-related intangibles Total costs and expenses

Income (loss) from operations Interest income Interest expense Other income (expense), net Loss on extinguishment of debt

Income (loss) from continuing operations before income taxes Income tax expense (benefit)

Income (loss) from continuing operations Income (loss) from discontinued operations, net of tax Net Income (loss)

Income (loss) per share - basic Income (loss) from continuing operations Income (loss) from discontinued operations Net income (loss) per share - basic

Income (loss) per share - diluted Income (loss) from continuing operations Income (loss) from discontinued operations Net income (loss) per share - diluted Shares used in per share calculation - basic Shares used in per share calculation - diluted

Three months ended

March 31,

2014

2013

$ 97,807

$ 111,021

18,152 14,079 24,302 18,273 12,319

6,358 2,171 95,654 2,153

619 (1,607)

(323) (5,605) (4,763)

954 (5,717)

133 $ (5,584)

22,006 15,075 29,456 17,248 18,347 21,249

5,000 1,928 130,309 (19,288)

596 (1,979) 10,905

(9,766)

921 (10,687)

(678) $ (11,365)

$ (0.19) $

0.01

$

(0.18) $

(0.33) (0.02) (0.35)

$ (0.19) $

(0.33)

0.01

(0.02)

$

(0.18) $

(0.35)

30,734

32,877

30,734

32,877

Calculation of GAAP Diluted Net Income (Loss) Per Share

Three months ended

March 31,

2014

2013

GAAP net income (loss)

$ (5,584) $ (11,365)

Add back debt interest expense and issuance cost amortization, net of tax

benefit

-

-

Adjusted net income (loss) for GAAP EPS calculation

$ (5,584) $ (11,365)

Net income (loss) per share - diluted Shares used in per share calculation - diluted

$

(0.18) $

30,734

(0.35) 32,877

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

Consolidated Statements of Cash Flows

Operating Activities: Net income (loss) Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Loss (gain) on disposal of discontinued operations Amortization of acquisition-related intangibles Provision for doubtful accounts Depreciation and amortization Impairment of goodwill Debt issuance cost amortization Amortization of investment premiums Loss (gain) on disposal of equipment Gain on sale of investment Loss on extinguishment of debt Stock-based compensation expense Deferred and other income taxes Change in operating assets and liabilities (net of acquisitions): Accounts receivable Prepaid and other assets Accounts payable Deferred revenue Income tax payable Other current liabilities Net cash provided by (used in) operating activities

March months ended

March 31,

2014

2013

$ (5,584)

$ (11,365)

(212) 2,171

179 6,358

346 473 (472)

5,605 3,988 (228)

4,151 2,245 (19,060) (2,174)

850 (9,060) (10,424)

1,928

327 5,030 21,249

430 697

73 (11,067)

5,575 (633)

(13,774) 2,172 (1,197) (1,646) 716 (8,764)

(10,249)

Investing Activities: Purchases of investments Sales of investments Cash received (paid) for cost method investments Cash paid for acquisitions, net of cash received Proceeds from sale of equipment Purchases of equipment and capitalized software Net cash provided by (used in) investing activities

(11,102) 44,060

(658) -

472 (4,135) 28,637

(20,285) 37,783 33,177 (55,847)

(6,983) (12,155)

Financing Activities: Repurchase of senior convertible notes Exercise of stock options Repurchase of common stock Repurchase of restricted stock to satisfy tax withholding obligation Net cash provided by (used in) financing activities

Effect of exchange rate changes on cash Net increase (decrease) in cash and cash equivalents Cash and cash equivalents, beginning of period Cash and cash equivalents, end of period

(173,253) -

(14,024) (3,960)

(191,237) (1,127)

(174,151) 483,868 $ 309,717

(1,335) 1,273 (11,181) (3,961) (15,204) (4,501) (42,109) 542,851 $ 500,742

Cash paid for interest on convertible senior notes Cash paid for income taxes

$ 1,157

$

55

$ 1,657

$

974

Digital River, Inc. GAAP to non-GAAP Reconciliations (Unaudited, in thousands, except per share amounts) UTILIZING 21% EFFECTIVE INCOME TAX RATE

GAAP pre-tax income (loss) from continuing operations Add back amortization of acquisition-related intangibles Add back stock-based compensation expense Add back restructuring related costs Add back litigation settlement related costs Add back acquisition and integration costs Add back realized investment loss (gain) Add back goodwill impairment Subtotal

Income tax expense (benefit) @ 21% Non-GAAP income (loss) from continuing operations

March 31, 2013

$ (9,766) 1,928 5,575 2,808 4,532

(11,067) 21,249 15,259

3,204 12,055

Three months ended

June 30,

September 30,

2013

2013

$

(887) $ (8,241)

2,283

2,149

6,379

4,341

424

395

312

-

269

94

(6,459)

-

-

-

2,321

(1,262)

487

(264)

1,834

(998)

December 31,

2013

$

(543)

2,183

4,273

2,164

45

806

-

-

8,928

1,875

7,053

Twelve months ended

December 31, 2013

$ (19,437) 8,543

20,568 5,791 357 5,701

(17,526) 21,249 25,246

5,302 19,944

Add back debt interest expense and issuance cost amortization,

net of tax benefit

1,233

Adjusted income (loss) from continuing operations for non-

GAAP EPS calculation

$ 13,288 $

1,834 $

(998) $

1,214 8,267

Non-GAAP income (loss) from continuing operations per share -

diluted

$

0.33 $

0.06 $

(0.03) $

0.22

Shares used in per share calculation - diluted

39,767

32,739

31,487

37,709

GAAP pre-tax income (loss) from continuing operations Add back amortization of acquisition-related intangibles Add back stock-based compensation expense Add back restructuring related costs Add back litigation settlement related costs Add back loss on extinguishment of debt Subtotal

Income tax expense (benefit) @ 21% Non-GAAP income (loss) from continuing operations

Three months ended

March 31, 2014

$ (4,763) 2,171 3,988 221 599 5,605 7,821 1,642 6,179

79 $ 20,023

$

0.61

32,744

Add back debt interest expense and issuance cost amortization, net of tax benefit

Adjusted income (loss) from continuing operations for non-

GAAP EPS calculation

$

6,179

Non-GAAP income (loss) from continuing operations per share -

diluted

$

Shares used in per share calculation - diluted

0.20 31,418

Digital River, Inc. Non-GAAP Reconciliations (Unaudited, in thousands)

Breakdown of stock-based compensation expense

Three months

ended

March 31,

2014

Direct cost of services

$

44

Network and infrastructure

382

Sales and marketing

1,002

Product research and development

912

General and administrative

1,648

Total

$

3,988

Breakdown of restructuring related costs

Direct cost of services Network and infrastructure Sales and marketing Product research and development General and administrative Total

Three months

ended

March 31,

2014

$

-

21

95

8

97

$

221

Breakdown of litigation settlement related costs Three months

ended

March 31,

2014

Direct cost of services

$

-

Network and infrastructure

-

Sales and marketing

-

Product research and development

-

General and administrative

599

Total

$

599

Digital River, Inc. Non-GAAP Guidance (Unaudited, in millions except per share amounts)

Revenue Guidance Table

Commerce Payments Total Revenue

March 31,

2013

$

96.7

14.3

$

111.0

2013 Actual

Three months ended

June 30,

September 30,

2013

2013

$

74.3 $

72.5

15.9

14.8

$

90.2 $

87.3

December 31,

2013

$

84.7

16.5

$

101.2

Twelve months

ended

December 31,

2013

$

328.2

61.5

$

389.7

Commerce Payments Total Revenue

2014 Actual

Three months

ended

March 31,

2014

$

81.2

16.6

$

97.8

Expected Revenue

2014 Guidance

Q2 2014

FY 2014

Low Guidance High Guidance Low Guidance High Guidance

$

84.0 $

87.0 $

372.0 $

382.0

Non-GAAP Guidance Reconciliation

Expected GAAP net income (loss) per share from continuing operations diluted

Add back amortization of acquisition-related intangibles, net of tax Add back stock-based compensation expense, net of tax Add back restructuring related costs, net of tax Add back loss on extinguishment of debt, net of tax Add back litigation settlement related costs, net of tax Tax variability Expected non-GAAP diluted net income (loss) per share

Q2 2014 Low Guidance High Guidance

$

(0.33) $

(0.28)

0.06

0.06

0.13

0.13

-

-

-

-

-

-

0.07

0.06

$

(0.07) $

(0.03)

FY 2014 Low Guidance High Guidance

$

(0.65) $

(0.52)

0.22

0.22

0.48

0.48

0.01

0.01

0.14

0.14

0.02

0.02

0.19

0.16

$

0.41 $

0.51

Projected Shares Used in Per Share Calculation

Shares used in per share calculation - GAAP diluted Shares used in per share calculation - non-GAAP diluted

Q2 2014 Low Guidance High Guidance

30,359 30,359

30,359 30,359

FY 2014 Low Guidance High Guidance

30,599 31,220

30,599 31,220

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