Digital River Founder, Longtime CEO Joel Ronning Steps Down
Joel Ronning, a serial entrepreneur who has led Digital River, Inc., since founding the Minnetonka-based e-commerce company in 1994, abruptly stepped down Thursday from his role as CEO.
Ronning will continue to serve as chairman through the end of the year, at which point he will retire from the company's board.
“Digital River is in a strong position today, and I’m confident it has excellent prospects for the future,” Ronning said in a statement. “After considerable reflection, I am at a point where I want to spend more time with my family and pursuing other interests.”
Thomas Madison, lead independent director of the company’s board, has been named interim CEO, and the board has launched a search for a permanent leader. The company said that it has hired global executive search firm Spencer Stuart to assist with the process, and it will consider both internal and external candidates.
Madison has served as president and CEO of Minneapolis-based investment company MLMPartners since 1993. He previously served as vice chairman and CEO of Minnesota Mutual Life Insurance Company, president of U.S. West Communications Markets, and president and CEO of Northwestern Bell Telephone Company. He has served on Digital River’s board since 1996.
The announcement of Ronning’s resignation came just minutes before the release of the company’s third-quarter earnings report. Digital River's revenue totaled $91.7 million for the quarter that ended September 30, down 3.8 percent from $95.4 million during the same period in 2011 but exceeding the expectations of analysts polled by Thomson Reuters, who anticipated $89.3 million in sales.
The company reported a net loss of $734,000, or 2 cents per share, compared with net income of $5.5 million, or 15 cents per share, during the third quarter of 2011.
On an adjusted basis, excluding certain restructuring, acquisition, and other costs, net income totaled $6.6 million, or 20 cents per share, compared with adjusted earnings of $8.9 million, or 23 cents per share, for the same period in 2011. Adjusted earnings beat analysts’ expectations of 15 cents per share.
Madison said in a statement that the company is “pleased with both the revenue and earnings results,” adding that “we have a lot of work ahead of us and face some challenges, but are confident we have the right strategy and team in place to execute to our plan and deliver attractive and sustainable shareholder value over time.”
During a Thursday conference call with investors, Madison said that the board is looking for 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.”
Looking ahead to 2013, the company is “facing some headwinds due to macro-economic conditions, client attrition, as well as a necessary ramp up in investments to ensure our technology infrastructure keeps up with where we want and need to be,” Madison added.
The company’s announcement was made after markets closed Thursday. Digital River's stock price was down more than 10 percent at $13.20 during Friday morning trading.
Ronning was among the longest-tenured CEOs at Minnesota’s largest public companies. Before founding Digital River, he was chairman and CEO of Tech Squared, Inc., a marketer of software and hardware products. He also founded and served as chief executive of Tech Squared subsidiary MacUSA, Inc.
Ronning will receive a cash payment of $867,576 and the accelerated vesting of certain stock awards, according to a filing with the U.S. Securities and Exchange Commission. The cash and stock awards are together valued at about $4 million, according to a report by the Star Tribune. He may also receive performance shares based on the company’s 2012 financial results.
A call to the company seeking additional information regarding Ronning’s departure and his future plans was not immediately returned.
Daniel Ives, an analyst with FBR Capital Markets in New York, told the Star Tribune that Ronning’s departure “was a step in the right direction, because the company continues to face challenges.”
Ives told the Minneapolis newspaper that the past few years “have not been good for the company or its investors” due to “a series of missteps in execution and strategy,” and most investors will believe that “fresh blood coming into the company at this point is positive.”
Digital River is among Minnesota’s 50 largest public companies based on revenue, which totaled $398.1 million in 2011. The company currently employs roughly 1,400, and it offers cloud-based e-commerce solutions. In late September, the company announced plans to acquire Canadian company LML Payment Systems in a deal valued at $102.8 billion.