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Digital River (DRIV)

Q3 2012 Earnings Call

November 01, 2012 4:45 pm ET


Ed Merritt - Vice President of Investor Relations

Thomas F. Madison - Lead Director, Chairman of Audit Committee, Chairman of Nominating & Corporate Governance Committee, Member of Finance Committee and Member of Compensation Committee

Joel A. Ronning - Founder, Chairman and Chief Executive Officer

Thomas M. Donnelly - President and Chief Operating Officer

Stephan B. Schulz - Chief Financial Officer, Principal Accounting Officer and Treasurer


Philip Winslow - Crédit Suisse AG, Research Division

Shyam Patil - Raymond James & Associates, Inc., Research Division

Charles Eugene Munster - Piper Jaffray Companies, Research Division

Gregor Schauer - Robert W. Baird & Co. Incorporated, Research Division



Good day, ladies and gentlemen, and welcome to Digital River Third Quarter Earnings Conference Call. [Operator Instructions] As a reminder, this conference call is being recorded.

I would now like to turn the conference over to Mr. Ed Merritt from Digital River. Sir, you may begin.

Ed Merritt

Thanks, and welcome to Digital River's Third Quarter 2012 Earnings Call. I'm Ed Merritt, Digital River's Vice President of Investor Relations. Joining us on the call today from Digital River is Tom Madison, our Lead Director and newly named interim CEO; Joel Ronning, our Founder; Tom Donnelly, our President and Chief Operating Officer; and Stephan Schulz, our Chief Financial Officer.

I'd like to remind you that there may be statements made during the course of this conference call that are not historical facts and are forward-looking in nature. These statements relate to the company's future growth and financial results and may contain the words believe, anticipate, expect, guidance and similar words. These statements involve both known and unknown risks, uncertainties and other factors, which may cause actual results to differ materially from expectations.

For a detailed review of these risks, please refer to the company's filings with the Securities and Exchange Commission. Also, a webcast of our call today will be available on the Investor Relations section of Digital River's corporate website.

With that, I'll turn the call over to Tom Madison.

Thomas F. Madison

Thanks, Ed. And thanks to all of you for joining us today. In addition to our quarter 3 earnings and updated guidance, today we announced a leadership change, and I wanted to join today's call to give you the board's perspective on these events.

We announced that Joel Ronning is stepping down as CEO of Digital River, and that I will serve as interim CEO as we conduct a search for a permanent successor. Joel will continue to serve as Chairman of the Board until year end when he will step down from the Board of Directors. On behalf of the board, I would like to recognize Joel for all that he's done, both for his vision in founding Digital River in 1994 and for his invaluable contributions in building the company into a $400 million global enterprise. Digital River is now an industry leader in online commerce and global payments, thanks to that vision. Joel is a brilliant entrepreneur, who has taken the company a long way over the past 18 years. We deeply appreciate his hard work, dedication and commitment to creating the strong company that Digital River is today.

In light of Joel's departure, the board has began a search to find a permanent CEO. We will consider both internal and external candidates and have retained Spencer Stuart, a leading executive search firm, to assist us. Our goal is to identify a CEO who will build on our strong foundation, an executive with a deep focus on strategy execution and a track record of generating shareholder value.

In the meantime, I will serve as interim CEO working with Digital River's strong management team to ensure continuity until a permanent replacement is named.

I will now turn the call over to Joel, who would like make a few comments. Joel?

Joel A. Ronning

Great. Thanks, Tom, and good afternoon, everyone. I'd just like to spend a few minutes reflecting on my past 18 years at Digital River. In 1994, I started this company with a vision that products would be sold over the internet or at that time was a precursor to the internet, at the earliest stages of online commerce. Today, that vision has resulted in a company with almost $400 million in revenue, offices all over the world and partnerships with some of the leading consumer brands around the globe.

Most importantly, I've had an opportunity to work with some of the best talent, hands down, in Global Commerce. I'm talking about our employees. It's been wonderful to work with this group of individuals, who over the years have established themselves as the go-to experts in solving the toughest issues in e-commerce. I've had the privilege of being part of this company for many years, and I know firsthand that it has just scratched the surface of its potential and has tremendous opportunity to grow for years to come.

Thank you again. And now I will turn the call back to Tom Madison.

Thomas F. Madison

Thanks, Joel. In a minute, I'll turn the call over the Tom Donnelly to provide detailed insight into our results and business strategy and how we see the evolving -- that evolving during the next several quarters. And then Stephan Schulz will discuss our third quarter financial results. But before I do, I'd like to provide the board's perspective on our performance and expectations.

We had a good third quarter and expect to end 2012 with results consistent with earlier guidance. However, as we look to 2013, we are facing some headwinds due to macroeconomic conditions, client attrition, as well as a necessary ramp up in investments to ensure our technology infrastructure keeps up with where we want to and need to be.

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