Digital River Inc. founder Joel Ronning is stepping down as CEO, the e-commerce company reported Thursday as it also reported a third-quarter loss of $734,000, or 2 cents a share, that nonetheless beat Wall Street expectations.
Ronning, 56, will continue as chairman of the 18-year-old Minnetonka firm until the end of the year. Thomas Madison, an independent director since 1996, was named interim CEO, effective Thursday. The company said it would begin a search for a permanent CEO.
"I am at a point where I want to spend more time with my family and pursuing other interests," Ronning said in a statement.
Madison said in a statement: "The company that Joel built from the ground up has become far more than a Minnesota business success story. Digital River is now a $400 million leader in global cloud commerce."
On an adjusted basis, the company beat earnings expectations with a profit of 20 cents a share, compared with 15 cents a share analysts had expected. Revenue fell 3.9 percent to $91.7 million, beating analysts' expectations of $89.3 million.
"It was a good quarter, considering the economy and the fact that PC sales are down," said Daniel Ives, an analyst with FBR Capital Markets in New York. "But the departure of the CEO was a step in the right direction, because the company continues to face challenges."
The market had underscored Digital River's problems. In August, shares dived 20 percent the day after the firm reported a 31 percent drop in second-quarter earnings. At the time, the firm blamed a flat PC market (which hurt Digital River's online software sales) and a decision to accept lower profit margins in order to get more online sales contracts from Microsoft, which accounts for about 30 percent of Digital River's revenue.
But after the latest earnings report, Ives said the company created some of its own problems.
"Digital River has a successful franchise that they built from ground up, but the last few years have not been good for the company or its investors," Ives said. "There had been a series of missteps in execution and strategy. Most investors will think that fresh blood coming into the company at this point is positive."
Earnings were released after the market closed with Digital River shares at $14.73, up 39 cents or 2.7 percent. In after-hours trading, however, the stock dropped 53 cents, or 3.6 percent, ending at $14.20.
Ronning will receive a severance payment of about $4 million, including a cash payment of $867,567 and restricted stock of $3,152,823 that vests immediately, according to the company's filing with the Securities and Exchange Commission. He'll also get any performance shares based on financial results of the company for 2012.
Shareholders had already signaled displeasure with Ronning. Earlier this year, they rejected the company's nonbinding "say-on-pay" proposal and gave Ronning's compensation package one of the lowest approval ratings of the year nationally among publicly held companies. The compensation committee responded by reducing Ronning's potential maximum compensation from $6,500,610 in 2011 to $5,127,100 for 2012.
Steve Alexander 612-673-4553