Digital River Reports Revenue Growth

Digital River, Inc. (www.digitalriver.com), a provider in e-commerce outsourcing, today reported record revenue of $54.5 million for the quarter ended March 31, 2005.

This represents a year-over-year increase of 71 percent from revenue of $31.9 million in the first quarter of 2004, and a nearly 14 percent sequential increase from the $48.0 million in revenue generated in the fourth quarter of 2004.

Q1 GAAP Results: In the first quarter, net income was $14.0 million, or $0.35 per share on a diluted basis, including $4.9 million of tax expense. This compared to net income of $7.6 million, or $0.22 per diluted share in the first quarter of 2004, and $12.8 million, or $0.33 per diluted share in the fourth quarter of 2004.

Q1 Pro Forma Results: Digital River's net income for the first quarter of 2005, prior to the amortization of acquisition-related expenses and $3.7 million of non-cash income taxes, was $20.1 million, or $0.54 per diluted share, excluding the effects of EITF 04-08.

This compared to pro forma net income on the same basis of $9.2 million, or $0.26 per diluted share in the first quarter of 2004, and $15.7 million, or $0.43 per diluted share, in the fourth quarter of 2004. These results also exceeded the revised pro forma diluted net income per share guidance of $0.50 previously provided by the Company.

"Digital River started 2005 with a record revenue and earnings performance," said Joel Ronning, Digital River's CEO. "Our ability to consistently execute against our strategic plan continues to translate into revenue and profit growth for our clients, increased income and cash flow for our company, and value for our shareholders."

As of March 31, 2005, Digital River's cash and investments totaled $315.6 million. This is a $165.1 million increase from March 31, 2004, and a $23.5 million increase from December 31, 2004.

"Business integration efforts, ongoing cost control and increased revenue enabled us to reduce operating costs as a percent of revenue, contributing to our record earnings in the first quarter of 2005," said Carter Hicks, Digital River's CFO.

Digital River today also announced the retirement of Carter Hicks, the Company's chief financial officer, effective July 1, 2005. As part of its succession plan, Digital River expects to appoint Thomas Donnelly, the Company's current vice president of finance and treasurer, as its new chief financial officer.

"I will miss Digital River and working with our great team of professionals," Hicks said. "However, it's time for me to move to a new chapter in my life."

"I want to thank Carter for his tremendous contributions and leadership in managing Digital River to profitability," said Ronning.

Digital River, Inc., a global leader in e-commerce outsourcing, builds and manages online businesses for more than 40,000 software publishers, manufacturers, distributors and online retailers.