Digital River 2013 Annual Report Download - page 2

DEAR SHAREHOLDERS,
After my first full year as Digital River’s chief executive officer, I feel more confident than ever
in the opportunities ahead for our company, our customers and you – our shareholders.
This past February, Digital River celebrated 20 years of building, managing and growing
online businesses for customers across the globe. Today Digital River is a leading
global provider of Commerce-as-a-Service solutions. Our 1,300 in-house industry
experts provide commerce, payments and marketing services to help more than 10,000
companies grow their online businesses across more than 200 countries and territories.
In 2013, Digital River processed $30 billion in online transactions on behalf of our
customers. These metrics illustrate the strong foundation built over the last 20 years and
will be the basis upon which we grow going forward.
OUR STRATEGIC TRANSFORMATION
We entered 2013 recognizing there were opportunities to optimize our technology infrastructure, improve customer
loyalty, expand into new markets, and increase our operational efficiency and execution. To address these challenges,
we introduced our strategic transformation plan at our Investor Day on September 19, 2013.
Our transformation plan has three main areas of focus: First, making substantial investments in our technology
platforms and IT infrastructure to increase robustness, drive scalability and accelerate our ability to innovate more
quickly for our customers. Second, improving how we allocate our resources, leverage acquired assets and streamline
our business across a select number of key markets where we can differentiate and deliver sustainable growth. Third,
driving operational excellence to increase our overall competitiveness and position us to deliver higher operating
margins over time. By executing on our strategic plan, I believe we will deepen our relationships with our customers,
delivering an even greater level of value, satisfaction and service, as well as accelerate revenue growth, increase
margins and drive sustained profitability for our business over time.
2013 PROGRESS
We made solid progress in 2013 on our multi-year transformation plan.
• We invested heavily in our technology infrastructure, increasing our technical capacity, scalability and performance.
We also launched a new flagship data center that is based on state-of-the-art virtualization technology and one
of the most sophisticated private clouds in our industry. With this new data center in place, we’ve been able to
increase our order throughput by 10 times, consolidate our data centers from eight to six, and reduce our hardware
footprint, environmental impact and associated operational costs. In addition, we continued to make progress on
modularizing our software code base and executing on key elements of our product roadmap, which will enable us
to innovate at a more rapid pace for our customers.
• We increased our focus on delivering topline growth by divesting non-core assets, expanding our business with
current customers and diversifying across verticals outside of our core commerce software market, specifically in
adjacent digital products and service segments and branded manufacturers. We are privileged to work with world-
leading brands, such as Adobe, Lenovo, Microsoft, PayPal and Ticketmaster; and
• Finally, we made key executive appointments and reduced costs in many segments of our business, generating run
rate savings of $18 million.
2013 FINANCIAL RESULTS
Our 2013 financial results reflect the early progress we made on our strategic plan:
• Total revenue from continuing operations was $389.7 million, an increase of 5 percent compared to 2012. This
reflected improved focus and execution on our large and growing markets, which included the acquisition of LML
Payment Systems and was offset by the continued impact from a few customer departures in 2012.
• Full year non-GAAP diluted net income from continuing operations was $20.0 million or $0.61 per diluted share,
down 52 and 40 percent, respectively, compared to 2012, reflecting our commitment to invest in our technology to
help both existing and new customers accelerate their growth on a global basis.
THE NEW DIGITAL RIVER
As Digital River enters its 20th year, our focus is clear. Our mission is to drive client growth through our global
commerce expertise, and our vision is to set the standard for global commerce technology and services. By executing
on our strategic plan, we intend to deliver on this promise of excellence and significantly increase the value we create
for our employees, our customers and our shareholders. On behalf of the entire Digital River team, I want to thank you
for your ongoing commitment and support. I am energized to continue working on your behalf, and I look forward to
continuing to update you on the progress of the new Digital River.
David C. Dobson - Chief Executive Officer