Digital River 2002 Annual Report Download - page 3

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To Our Shareholders
2002 was a watershed year for Digital River
During the year, Digital River delivered a solid financial performance, clearly demonstrating
the strength of our business model.We posted strong gains in the second half of 2002 and
record-breaking revenues for the year.We achieved record-level EBITDA profitability and
the highest level of productivity in our corporate history as measured by revenue per
employee. However, our most important accomplishment was driving the company to
GAAP profitability in the third and fourth quarters, positioning Digital River in an exclusive
group of leading Internet companies.
Financial results
For the year ended December 31, 2002, Digital River reported revenues of $77.8 million, nearly 35 percent higher than
the $57.8 million we posted in 2001.The 2002 GAAP net loss was $0.5 million, or $0.02 per share, compared with a net
loss of $19.2 million, or $0.79 per share in 2001. Most notably, however, in the third quarter of 2002 we reported GAAP
profitable results, which grew to $3.3 million in the fourth quarter.
Our year-over-year financial performance is supported by key metrics:
• We increased revenue per employee by nearly 25 percent, due to efficiency gains delivered across the entire organization;
• Our gross margins in the fourth quarter averaged 83.7 percent, an approximate 240 basis point improvement over the
prior year, driven primarily by increased operational efficiencies in customer service;
• Our EBITDA margins improved to nearly 14 percent from less than 3 percent in 2001; and
• Cash and investments at year-end totaled $40.8 million, a $9.1 million increase from year-end 2001.
We believe these performance metrics demonstrate that Digital River is a healthy, well-managed business guided by
a group of highly skilled associates and a seasoned executive leadership team.
1
Joel A. Ronning
Chief Executive Officer