Digital River Lowers Guidance

E-commerce outsourcer Digital River Inc. revised its
first quarter guidance downward, from 7 cents a share to 1 to 2 cents a share
on a pro forma basis.

The Minneapolis-based company said that it expects revenue for the first
quarter to be approximately $18 million, lower than the company’s previous
guidance of $19.4 million.

The dip in revenue is “… related to the slower than anticipated growth in
IT spending levels in this economic environment and the impact of lower
seasonal software product sales,” said Joel Ronning, Digital River’s chief
executive officer.

The company said it also anticipates a
$2.3 million charge for a reserve established for pending litigation, as well
as a $200,000 charge in connection with the consolidation of Digital River’s
San Jose operation. Including these charges, the loss per share, prior to the
amortization of acquisition-related expenses, is expected to be 7 to 8 cents.

The company said it expects full year 2002 revenue to total $70 million to
$73 million. This represents a 21 to 26 percent increase from the prior year,
but is lower than its earlier expectations.

Digital River, which provides e-commerce outsourcing solutions to software
publishers and online retailers, has seen its revenues rise steadily, but has
never made any money. For all of 2001, it lost 81 cents a share.

Pro forma earnings per share for 2002, prior to the amortization of
acquisition-related expenses and the previously mentioned charges, are
expected to be in the range of 20 to 22 cents a share, the company said.

“While our sales pipeline is strong for both of our divisions, we continue to
see longer sales cycles and we believe that prospective clients are
postponing their investment commitments until they see a stabilization of the
economy,” Ronning said.

The revised guidance for the full year includes the recently completed
acquisition of CCNow.com, from Innuity Inc., but does not include anything
related to
the acquisition of certain assets from Beyond.com.