chinadotcom Posts 26% Q-o-Q Revenue Growth to US$45.1 Million and
38% Q-o-Q Increase in Gross Profit to US$26.1 Million Revenue
Driven By Strong Growth In CRM Software And IVR Services
Acquisition Of Ross Systems Expected By End Of August, 2004
Financial Highlights for Q2 2004 vs. Q1 2004: -- Total revenue
including revenue from acquisitions rose 26% to US$45.1M, compared
to US$35.9M in Q1 2004. -- Gross profit increased 38% to US$26.1M
from US$18.9M in Q1 2004. -- Gross margin was 58%, increasing from
53% in Q1 2004. -- Operating loss was US$2.4M, compared to
operating income of US$2.2M in Q1 2004. -- Net loss was US$0.6M,
compared to net income of US$4.3M in Q1 2004. -- Non-GAAP net
income was US$4.1M, compared to US$6.0M for Q1 2004. The
differences between US GAAP operating loss and net loss, and
non-GAAP operating income and net income were principally due to
certain one-time, non- cash charges including (i) purchase
accounting adjustments related to Pivotal and other acquisitions,
including the revenue impact of deferred maintenance revenue
write-downs and stock compensation expenses, and (ii) litigation
settlement expenses. Recent Highlights: -- Strong core operating
results, excluding purchase accounting adjustments, contributed
from Pivotal, the company's Customer Relationship Management
("CRM") software division. -- The company continued to make
progress in its acquisition of Ross Systems, Inc. ("Ross"), a
NASDAQ-listed Enterprise Resource Planning ("ERP") software
company. The meeting for Ross shareholders to vote on its Board of
Directors' recommendation to approve the merger with chinadotcom
corporation will be held at 10:00 a.m. EDT on Wednesday, August 25,
2004. If the Ross shareholders approve the transaction, it would be
expected to close on August 26, 2004. HONG KONG, August 5
/Xinhua-PRNewswire-FirstCall/ -- chinadotcom corporation (Nasdaq:
CHINA; http://www.corp.china.com/), a leading integrated enterprise
software and mobile applications company in China and
internationally, today announced its financial results for the
second quarter of 2004 under US GAAP, which are supplemented by
non-GAAP measures. For the quarter ended June 30, 2004, the company
reported record net revenues of US$45.1 million including from
acquisitions, an increase of 144% from US$18.5 million reported in
the same period in 2003 and an increase of 26% from US$35.9 million
reported in the previous quarter. Software and consulting services
revenues totaled US$34.7 million for the quarter including a full
quarter of contribution from Pivotal, representing a 206% increase
over US$11.3 million reported in the same period in 2003 and a 29%
increase over US$26.9 million reported in the previous quarter.
Mobile services and applications revenues totaled US$7.6 million
for the quarter, a 50% increase from US$5.1 million reported in the
same period in 2003 and a 17% increase over US$6.5 million reported
in the previous quarter. The increase in mobile services and
applications revenues was driven by a two month contribution from
Go2joy and growth in mobile value-added services such as
Interactive Voice Response ("IVR") and Wireless Application
Protocol ("WAP"). Total revenues from advertising and marketing
activities were US$2.8 million, representing an increase of 78%
from US$1.6 million reported in the same period in 2003 and a 17%
sequential increase from US$2.4 million reported in Q1 2004. Gross
profit in Q2 2004 increased by 190% to US$26.1 million as compared
to US$9.0 million in Q2 2003 and increased by 38% from US$18.9
million in the previous quarter. Gross margin in Q2 2004 was 58% as
compared to 49% in Q2 2003 and 53% in the previous quarter.
Non-GAAP net income for Q2 2004 totaled US$4.1 million, compared to
non- GAAP net income of US$4.1 million for the same period in 2003,
and US$6.0 million for Q1 2004. Non-GAAP diluted earnings per share
were 3.8 US cents for the quarter, compared to 4.2 US cents for the
same period of 2003 and 5.6 US cents for the previous quarter.
Non-GAAP net income excludes US$4.7 million of non-recurring,
non-cash charges related principally to (i) purchase accounting
adjustments related to the acquisition of subsidiaries, including
the revenue impact of deferred maintenance revenues write-downs,
the amortization of purchase intangibles and related deferred tax
impact, and additional stock compensation expenses, and (ii)
litigation settlement expenses. Reconciliation of US GAAP results
to non-GAAP results* Quarter Quarter Quarter Ended Ended Ended June
30, March 31, June 30, 2003 2004 2004 (unaudited) (unaudited)
(unaudited) Reconciliation of GAAP results to non-GAAP results:
GAAP net income/(loss) 4,078 4,334 (642) Add back revenue impact of
deferred maintenance revenue write- down related to the acquisition
of a subsidiary - - 946 Add back amortization of purchased
intangibles related to the acquisition of subsidiaries 60 1,747
2,277 Add back stock compensation expenses related to the
Acquisition of a subsidiary - 27 827 Settlement of litigation - -
1,613 Add back deferred tax impact on purchased intangibles related
to the acquisition of subsidiaries - (123) (954) Non-GAAP net
income 4,138 5,985 4,067 * The information presented in the results
highlights herein should be read in conjunction with the
description of non-GAAP Financial Measures outlined later in this
press release and the more detailed financial statements included
at the end of this press release. On a US GAAP basis, a net loss
was recorded in Q2 2004 of US$0.6 million compared to a net income
of US$4.1 million for the same period in 2003, and a net income of
US$4.3 million for Q1 2004. Diluted loss per share was 0.6 US cents
for the quarter, compared to diluted earnings per share of 4.1 US
cents for the same period of 2003 and 4.1 US cents for Q1 2004.
Daniel Widdicombe, Chief Financial Officer, said, "We are pleased
to report a solid quarter that, excluding one-time litigation and
acquisition- related adjustments, met our financial and operational
objectives. In the second quarter the company achieved record
revenues, gross profit and gross profit margins, while continuing
its transformation into a larger, more internationally-diversified
entity." The company's consolidated balance sheet at June 30, 2004
showed net cash and cash equivalents of US$270 million and 104.7
million common shares outstanding. Software and Consulting Services
Software and consulting services revenues for Q2 2004 were up 29%
to US$34.7M sequentially. Gross profit was up 54%
quarter-on-quarter to US$18.5M with gross margins for the software
and consulting services businesses attaining 53% as compared to 45%
in Q1 2004. There were 63 new customers added to the software unit
in Q2, increasing the company's total customer base to
approximately 2,650. The company's CRM division, Pivotal, achieved
21% sequential growth in license revenue, 12% sequential growth in
overall revenues and added 33 new customers in the quarter to a
total number of 1,744 customers. During the quarter, the company
released Pivotal 5.1 with new usability and accessibility features
including advanced email management, enhanced integration with
Microsoft Office 2003, improved mobility, and support for global,
multi- language marketing campaigns. The company also saw market
validation in its vertical initiatives, with strong reviews of its
healthcare and financial services products. Finally, the CRM
division continued back office and facilities consolidation with
the company, further planned its Greater China distribution
strategy and engaged in cross selling opportunities with both the
company's Australian outsourcing unit and Ross. "We are seeing
strong momentum in our business, only a few short months after
completing the acquisition of Pivotal by chinadotcom," said Divesh
Sisodraker, President and CEO, Pivotal. "Our core operating
profitability, combined with chinadotcom's strong balance sheet,
now enables us to make incremental investments in our business.
These investments will allow us to further differentiate our CRM
products, strengthen our position in our vertical markets and
enhance our ability to better serve our customers around the
world." The company's China enterprise software company added 30
new customers. The company also added 4 new channel partnerships in
China. The company is gaining traction in China through its
initiatives, which include direct sales activities and expanding
its China-based software development facility to include
development for its business intelligence and supply-chain
management ("SCM") products. On the sales front, the company closed
two important ERP deals in China for the Ross iRenaissance product,
Raybestos and Poly Plastics. The company has also made steady
progress in expanding its Shanghai software development center. The
company's SCM division reported solid operating results with
sequential license revenue up 13% and operating margins improved to
48% from 41% in Q1 2004. Customers have reacted positively to the
company's acquisition of a majority stake in the SCM division, and
the SCM division has retained 90% of its maintenance customers
including major renewals by Starbucks, Canon, Albert Heijn, and
British Airways. The Australian application development and
outsourcing unit continued its major client contracts and expanded
the scope of its services by adding CRM, business intelligence,
independent application testing and voice over IP consultancy
services. In May 2004, it was awarded an international application
testing contract for a key customer. The company has cautious
optimism that the unit's new offerings, combined with a changing
Australian business environment, should result in an improved
performance at the unit by the end of the year. In connection with
the company's pending acquisition of Ross, the meeting date for
Ross shareholders to vote on its Board of Directors' recommendation
to approve the merger with chinadotcom corporation has been set at
10:00 a.m. EDT on Wednesday, August 25, 2004. Shareholders of
record as of the close of business on July 13, 2004 will receive
notice and be entitled to vote on the merger. If Ross shareholders
approve the merger, the transaction could close as early as August
26, 2004. Full details of the proposed transaction and the meeting
were included in the proxy statement mailed on July 21, 2004 to
holders of Ross shares as of July 13, 2004. The company believes
that similar to Pivotal, there will likely be certain one-time,
non-cash purchase accounting adjustments related to the Ross merger
including the revenue impact of deferred maintenance revenue
write-downs and stock compensation expense which could affect the
company's second half 2004 results. Mobile Services and
Applications Mobile services and applications revenue grew 17% to
US$7.6 million in Q2 2004 from US$6.5 million in Q1 2004. The
company continued to benefit from its diversified product offerings
in mobile value-added services. Revenues from 2.5G (MMS and WAP)
products, IVR and other new services grew approximately 519% from
US$0.2 million, or 4% of total mobile value-added services revenues
for the first quarter, to US$1.5 million, or over 20% of total
mobile value- added services revenues for the second quarter.
However, total SMS revenues, including Go2joy's SMS revenues
contribution, decreased 3% from US$6.2 million in Q1 2004 to US$6.0
million in Q2 2004. Due to changes in the regulatory environment
and policies of the mobile operators, the company saw a decline in
its SMS revenues, excluding acquisitions, recording a drop of 11%
from US$6.2 million in Q1 2004 to US$5.5 million in Q2 2004. During
the quarter, the company increased the number of provincial WAP
sites from 9 in Q1 2004 to 14 in Q2 2004. In addition, the company
has pursued an important initiative to increase the number of its
services embedded on STK (SIM Tool Kit) cards offered by China
Mobile and China Unicom in an effort to increase usage of the
company's services by STK users. At the end of Q2, 13 provincial
China Mobile operators and 6 provincial China Unicom operators had
selected the company's services to be embedded into their STK
cards. As an initiative to further enhance its distribution
network, the company has partnered with TV stations such as Phoenix
Satellite to provide services including live and interactive
quizzes, polling, and lucky draws via a user's cellphone. The
company has also signed licensing arrangements with leading
domestic and international media companies whereby the company is
authorized to use the content provided by these media companies in
its mobile applications services. During the second quarter, the
company's http://www.china.com/ portal successfully launched its
exclusive online search function utilizing Yahoo!'s top search
engine technology, "3721." The web pages of the portal were
revamped and upgraded to make the pages compatible with the new
search engine. In addition, the World Economic Forum named the
http://www.china.com/ portal as "One of the Most Valuable 500
Brands in China" in June 2004. The http://www.china.com/ portal has
been selected by the organizing committee of The 10th China
National Games as the exclusive online partner for The 10th China
National Games, which will be held in October 2005 in Jiangsu
province, China. As the exclusive online partner for the event, the
http://www.china.com/ portal was granted the right to build and
support both official and commercial websites and develop related
online activities for the entire event. Additionally, the portal
has the right to provide mobile applications services for the
event. Raymond Ch'ien, Executive Chairman said, "I am encouraged by
the continuing operational improvements made by our CRM division,
Pivotal, and the strong uptake of our IVR services in China. Once
the Ross merger is concluded, chinadotcom will have largely
completed its transition from building scale through acquisitions
to focus on operational integration, customer-driven product
development and growth in our strategic sectors of enterprise
software and mobile applications. I have confidence in the
company's future performance." Other Developments The board of
directors has agreed to extend CEO Peter Yip's leave of absence,
for medical reasons. Raymond Ch'ien, Executive Chairman has assumed
CEO responsibilities. In addition, the company has commissioned a
search for a senior manager to provide leadership in global
integration processes. Effective August 15, 2004, SVP of Finance
and Administration Keith Oliver will assume the role of CFO from
Daniel Widdicombe, who has resigned from the company. Mr. Oliver
joined the company in January 2004 and has over 20 years of
experience in the financial management field. He was CFO of Dentsu
Young & Rubicam Asia for 4 years and spent 18 years with Philip
Morris Asia where he held various key positions including Regional
Vice President, Finance. He was the CFO at the company's parent
prior to listing on NASDAQ, from 1997 to 1998. Raymond Ch'ien said,
"Dan helped steer the company exceptionally well through several
challenging years; executing the plan to right size the company's
cost base and placing the company on a sound fiscal platform. I am
pleased he will remain as an advisor to the company, and wish him
well." In addition, Rudy Chan has resumed the position of CEO of
hongkong.com subsequent to the resignation of former CEO of
hongkong.com, John Xiao, who has relocated to the U.S. The company
also announced the appointment of Albert Lam as COO of
hongkong.com. Albert has over 20 years of experience in the
Telecommunications and IT industries in North America and Greater
China. He was previously COO of hongkong.com's subsidiary, Newpalm,
until December 2002 and seven years of his career were in senior
management positions at Motorola within Greater China. On June 1,
2004, the company reached a settlement with 24/7 Real Media, Inc
("24/7") and their Chief Executive Officer, David Moore for the
release of all claims and the termination of all litigation matters
involving the two companies and their affiliates. 24/7 is a former
shareholder of the company and Mr. Moore was a former director of
the company. The settlement resulted in a net expense of US$1.6
million, which was recorded as a charge in Q2 2004. Non-GAAP
Financial Measures To supplement the financial measures prepared in
accordance with generally accepted accounting principles ("GAAP"),
the company uses non-GAAP financial measures for net income and
other line items, which are adjusted from results based on GAAP, to
exclude adjustments related to purchase accounting and litigation
expenses, in analyzing its financial results. These non-GAAP
measures are provided to enhance the user's overall understanding
of the company's current financial performance and its prospects
for the future. Specifically, the company believes the non-GAAP
results provide useful information to both management and investors
by excluding certain adjustments that did not or are not in the
future expected to result in cash payments and certain adjustments
that are related to purchase accounting or litigation settlement.
In particular, the adjusted presentation may be useful for
investors to assess the impact of recent and future acquisitions.
Although the company has historically reported US GAAP results to
investors, the company believes the inclusion of non-GAAP financial
measures provides further clarity in its financial reporting. These
non-GAAP financial measures may be different from non-GAAP
financial measures used by other companies, and should be
considered in addition to results prepared in accordance with GAAP,
but should not be considered a substitute for or superior to GAAP
measures. The non-GAAP financial measures included in this press
release have been reconciled to the nearest GAAP measures. The
company's US GAAP net income for the quarter ended June 30, 2004
included the following items: (i) a US$946,000 revenue impact of
deferred maintenance revenue write-downs related to the acquisition
of a subsidiary; (ii) US$2.3 million additional amortization of
purchased intangible assets related to the acquisition of
subsidiaries; (iii) US$827,000 stock compensation expenses related
to the acquisition of a subsidiary; (iv) US$1.6 million in net
expenses related to a litigation settlement; and (v) a US$954,000
credit of deferred tax on purchased intangibles related to the
acquisition of subsidiaries. For the quarters ended March 31, 2004
and June 30, 2003, respectively, the company's US GAAP net income
included the following items: (i) US$1.7 million and US$60,000,
respectively, of additional amortization of purchased intangible
assets related to the acquisition of subsidiaries; (ii) US$27,000
and zero, respectively, of stock compensation expense related to
the acquisition of a subsidiary; (iii) US$123,000 and zero,
respectively, of credits of deferred tax on purchased intangibles
related to the acquisition of subsidiaries. Conference Call
chinadotcom will hold a conference call to review its second
quarter 2004 results at 9:00 am EDT on Thursday, August 5, 2004
(9:00 pm on August 5, Hong Kong time). Investors can call: USA and
CANADA Toll Free Number: +1-877-692-2592 US Toll Number:
+1-973-582-2700 UK Toll Free Number: 0800-0689199 AUSTRALIA Toll
Free Number: 1800-003163 CHINA Toll Free Number: 10800-1300432 HONG
KONG Toll Number: 800-903265 The passcode is Q2 2004 China and the
call leader is Raymond Ch'ien. Alternatively the conference call
can be heard via the Internet at:
http://www.talkpoint.com/viewer/starthere.asp?pres=107238 For those
unable to call in or listen to the live broadcast via the web, a
replay will be available after the call at
http://www.corp.china.com/ under INVESTOR RELATIONS or via Instant
Replay by calling US Toll Number: 973-341-3080, US and CANADA Toll
Free Number: 877-519-4471, or UK Toll Free Number: 08001693875. The
passcode for the Instant Replay is 4999888. About chinadotcom
corporation chinadotcom corporation (NASDAQ: CHINA; Website:
http://www.corp.china.com/) is a leading integrated enterprise
software and mobile applications company focused on China and
internationally. The company has over 1,400 employees with
operations in over 14 countries. For more information about
chinadotcom corporation, please visit the website
http://www.corp.china.com/ . Cautionary Note Regarding
Forward-Looking Statements This release contains forward-looking
statements that involve risks and uncertainties, including those
relating to the company's ability to successfully transition its
operations to focus to grow its software and mobile applications
businesses, sustain revenues, make progress in its financial
results, reduce cash usage from existing operations, migrate to
higher margin services and sustain profitability. All statements
other than statements of historical fact, including those with
respect to the company's goals, plans, prospects and strategies are
forward-looking statements. The following factors and
uncertainties, among others, could cause actual results to differ
materially from those described in the forward-looking statements:
(a) the ability to realize strategic objectives by taking advantage
of market opportunities in its geographic markets; (b) the ability
to make changes in business strategy, development plans and product
offerings to respond to the needs of current, new and potential
customers, suppliers and strategic partners; (c) the ability to
integrate its operations or new acquisitions in accordance with its
business strategy; (d) the effects of restructurings and the
ability to successfully support its operations; (e) the potential
negative reaction by customers or shareholders to reduced market
capitalization; (f) the ability to recruit and retain qualified,
experienced employees; (g) the ability to successfully partner with
other companies; (h) the ability to acquire additional companies
and technologies and manage an increasingly broad range of
businesses; (i) reduced importance of certain of its shareholders
and existing operations; (j) the ceasing of funding to certain
business units who do not meet stated objectives and the consequent
related ramifications thereof; (k) risks associated with the
development and licensing of software generally, including
potential delays in software development and technical difficulties
that may be encountered in the development or use of its software;
(l) increased global competition; (m) the ability to manage
regulatory and litigation risks; (n) the ability to rationalize its
operations in a cost effective manner, particularly as related to
certain subsidiaries and employees; (o) technological changes and
developments; (p) general risks of the software, mobile
applications, Internet and marketing sectors; and (q) the uncertain
economic and political climate in Asia, the United States and
throughout the rest of the world and the potential that such
climate may deteriorate further. This press release includes
certain "forward-looking statements" within the meaning of the
United States Private Securities Litigation Reform Act of 1995.
These statements are based on chinadotcom management's current
expectations and are subject to risks and uncertainties and changes
in circumstances. All forward-looking statements included in this
press release are based upon information available to chinadotcom
as of the date of the press release, and it assumes no obligation
to update or alter its forward looking statements whether as a
result of new information, future events or otherwise. Further
information on risks or other factors that could affect
chinadotcom's results of operations is detailed in its filings or
submissions with the United States Securities and Exchange
Commission, including its Annual Report for the year ended December
31, 2003 on Form 20-F/A filed on July 8, 2004. chinadotcom
corporation Consolidated Statement of Operations (Amounts in
thousands of U.S. dollars, except per share data) Quarter Quarter
Ended Ended June 30, March 31, 2004 2004 (unaudited) (unaudited)
Revenues Software and consulting services 26,887 34,717 Mobile
services and applications 6,467 7,580 Advertising and marketing
activities 2,384 2,791 Other income 121 60 35,859 45,148 Cost of
revenues Software and consulting services (14,874) (16,185) Mobile
services and applications (1,053) (1,651) Advertising and marketing
activities (981) (1,119) Other income (70) (54) (16,978) (19,009)
Gross profit 18,881 26,139 Gross Margin % 53% 58% Selling, general
and administrative expenses (13,690) (21,092) Research and
development expenses (674) (4,549) Depreciation and amortization
expenses (2,315) (2,866) (16,679) (28,507) Operating income/(loss)
2,202 (2,368) Interest income 2,797 2,404 Interest expense (392)
(492) Gain on disposal of available-for- sale securities 299 47
Impairment of available-for-sale securities - (373) Gain/(loss) on
disposal of subsidiaries and investments 53 (29) Other
non-operating gains - - Other non-operating losses - - Share of
income in equity investees 6 - Income/(loss) before income taxes
4,965 (811) Income taxes benefits/(expenses) (19) 752 Income/(loss)
before minority interests 4,946 (59) Minority interests in income
of consolidated subsidiaries (665) (583) Income/(loss) from
continuing operations 4,281 (642) Discontinued operations Loss from
operations - - Income from disposal 53 - Net income/(loss) 4,334
(642) Basic earnings/(losses) per share 0.0422 (0.0062) Diluted
earnings/(losses) per share 0.0406 (0.0062) Weighted average number
of shares 102,611,756 104,252,061 Diluted number of shares
106,788,279 104,252,061 Reconciliation from GAAP results to
non-GAAP results: GAAP net income/(loss) 4,334 (642) Add back
revenue impact of deferred maintenance revenue write down related
to the acquisition of a subsidiary - 946 Add back amortization of
purchased intangibles related to the acquisition of subsidiaries
1,747 2,277 Add back stock compensation expenses related to the
acquisition of a subsidiary 27 827 Settlement of litigation with
24/7 Media Inc. - 1,613 Add back deferred tax impact on purchased
intangibles related to the acquisition of subsidiaries (123) (954)
Non-GAAP net income 5,985 4,067 chinadotcom corporation
Consolidated Statement of Operations (Amounts in thousands of U.S.
dollars, except per share data) Quarter Quarter Ended Ended June
30, June 30, 2003 2004 (unaudited) (unaudited) Revenues Software
and consulting services 11,327 34,717 Mobile services and
applications 5,056 7,580 Advertising and marketing activities 1,565
2,791 Other income 540 60 18,488 45,148 Cost of revenues Software
and consulting services (7,899) (16,185) Mobile services and
applications (692) (1,651) Advertising and marketing activities
(707) (1,119) Other income (172) (54) (9,470) (19,009) Gross profit
9,018 26,139 Gross Margin % 49% 58% Selling, general and
administrative expenses (6,610) (21,092) Research and development
expenses - (4,549) Depreciation and amortization expenses (1,545)
(2,866) (8,155) (28,507) Operating income/(loss) 863 (2,368)
Interest income 3,364 2,404 Interest expense (273) (492) Gain on
disposal of available-for- sale securities 1,343 47 Impairment of
available-for-sale securities - (373) Gain/(loss) on disposal of
subsidiaries and investments (182) (29) Other non-operating gains -
- Other non-operating losses (632) - Share of income in equity
investees 11 - Income/(loss) before income taxes 4,494 (811) Income
taxes benefits/(expenses) (604) 752 Income/(loss) before minority
interests 3,890 (59) Minority interests in income of consolidated
subsidiaries (136) (583) Income/(loss) from continuing operations
3,754 (642) Discontinued operations Loss from operations (1,976) -
Income from disposals 2,300 - Net income/(loss) 4,078 (642) Basic
earnings/(losses) per share 0.0409 (0.0062) Diluted
earnings/(losses) per share 0.0409 (0.0062) Weighted average number
of shares 99,813,334 104,252,061 Diluted number of shares
99,813,334 104,252,061 Reconciliation from GAAP results to non-GAAP
results: GAAP net income/(loss) 4,078 (642) Add back revenue impact
of deferred maintenance revenue write down related to the
acquisition of a subsidiary - 946 Add back amortization of
purchased intangibles related to the acquisition of subsidiaries 60
2,277 Add back stock compensation expenses related to the
acquisition of a subsidiary - 827 Settlement of litigation with
24/7 Media Inc. - 1,613 Add back deferred tax impact on purchased
intangibles related to the acquisition of subsidiaries - (954)
Non-GAAP net income 4,138 4,067 chinadotcom corporation
Consolidated Balance Sheets (Amounts in thousands of U.S. dollars)
March 31, June 30, 2004 2004 (unaudited) (unaudited) ASSETS Current
assets: Cash and cash equivalents 125,510 93,023 Restricted cash
5,931 5,555 Accounts receivable 25,837 28,582 Deposits, prepayments
and other receivables 13,355 12,631 Loan receivables 1,200 1,200
Available-for-sale debt securities 118,119 156,974 Restricted debt
securities 92,656 30,620 Deferred tax assets 240 240 Total current
assets 382,848 328,825 Loan receivables 25,000 25,000 Property and
equipment, net 8,789 9,384 Goodwill 121,838 127,323 Intangible
assets 67,730 64,508 Investment in equity investees 439 330
Investments under cost method 609 256 Available-for-sale debt
securities 9,700 9,700 Restricted debt securities 11,908 11,880
Available-for-sale equity securities 690 464 Deferred tax assets
305 1,136 Other assets 4,469 4,865 Total assets 634,325 583,671
LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts
payable 7,835 13,020 Other payables 3,897 4,121 Purchase
consideration payable - - Accrued liabilities 41,819 36,254
Short-term bank loans 77,180 26,152 Long-term bank loans, current
portion 171 171 Deferred revenue 20,717 20,004 Income tax payable
1,011 873 Total current liabilities 152,630 100,595 Deferred tax
liabilities 1,206 1,082 Long term debts, net of current portion
11,574 11,446 Accrued pension liability 2,005 1,748 Minority
interests 46,648 46,829 Shareholders' equity: Share capital 26 26
Additional paid-in capital 639,108 644,120 Treasury stock (4,067)
(4,067) Accumulated deficits (214,559) (215,201) Accumulated other
comprehensive income (246) (2,907) Total shareholders' equity
420,262 421,971 Total liabilities and shareholders' equity 634,325
583,671 Number of outstanding shares 103,982,109 104,696,654
chinadotcom corporation Reconciliation of GAAP to non-GAAP
Consolidated Statement of Operations (Amounts in thousands of U.S.
dollars, except per share data) Quarter Ended March 31, 2004 GAAP
non-GAAP results Adjustments results (unaudited) (unaudited)
Revenues Software and consulting services 26,887 26,887 Mobile
services and applications 6,467 6,467 Advertising and marketing
activities 2,384 2,384 Other income 121 121 35,859 - 35,859 Cost of
revenues Software and consulting services (14,874) 641 B (14,233)
Mobile services and applications (1,053) (1,053) Advertising and
marketing activities (981) (981) Other income (70) (70) (16,978)
641 (16,337) Gross profit 18,881 641 19,522 Gross Margin % 53% 54%
Selling, general and administrative expenses (13,690) 27 C (13,663)
Research and development expenses (674) (674) Depreciation and
amortization expenses (2,315) 1,106 B (1,209) (16,679) 1,133
(15,546) Operating income/(loss) 2,202 1,774 3,976 Interest income
2,797 2,797 Interest expense (392) (392) Gain on disposal of
available-for-sale securities 299 299 Impairment of
available-for-sale securities - - Gain/(loss) on disposal of
subsidiaries and investments 53 53 Other non-operating gains - -
Other non-operating losses - - Share of income in equity investees
6 6 Income/(loss) before income taxes 4,965 1,774 6,739 Income
taxes benefits/(expenses) (19) (123) E (142) Income/(loss) before
minority interests 4,946 1,651 6,597 Minority interests in income
of consolidated subsidiaries (665) (665) Income/(loss) from
continuing operations 4,281 1,651 5,932 Discontinued operations
Loss from operations - - Income from disposal 53 53 Net
income/(loss) 4,334 1,651 5,985 Basic earnings/(losses) per share
0.0422 0.0583 Diluted earnings/(losses) per share 0.0406 0.0560
Weighted average no. of shares 102,611,756 102,611,756 Diluted no.
of shares 106,788,279 106,788,279 non-GAAP adjustments: A) Add back
revenue impact of deferred maintenance revenue write down related
to the acquisition of a subsidiary. B) Add back amortization of
purchased intangibles related to the acquisition of subsidiaries.
C) Add back stock compensation expenses related to the acquisition
of a subsidiary of $27 for quarter ended March 31, 2004 and $827
for quarter ended June 30, 2004 D) Settlement of litigation with
24/7 Media Inc. of $1,613 for the quarter ended June 30, 2004. E)
Add back deferred tax impact on purchased intangibles related to
the acquisition of subsidiaries. chinadotcom corporation
Reconciliation of GAAP to non-GAAP Consolidated Statement of
Operations (Amounts in thousands of U.S. dollars, except per share
data) Quarter Ended June 30, 2004 GAAP non-GAAP results Adjustments
results (unaudited) (unaudited) Revenues Software and consulting
services 34,717 946 A 35,663 Mobile services and applications 7,580
7,580 Advertising and marketing activities 2,791 2,791 Other income
60 60 45,148 946 46,094 Cost of revenues Software and consulting
services (16,185) 617 B (15,568) Mobile services and applications
(1,651) (1,651) Advertising and marketing activities (1,119)
(1,119) Other income (54) (54) (19,009) 617 (18,392) Gross profit
26,139 1,563 27,702 Gross Margin % 58% 165% 60% Selling, general
and administrative expenses (21,092) 2,440 C,D (18,652) Research
and development expenses (4,549) (4,549) Depreciation and
amortization expenses (2,866) 1,660 B (1,206) (28,507) 4,100
(24,407) Operating income/(loss) (2,368) 5,663 3,295 Interest
income 2,404 2,404 Interest expense (492) (492) Gain on disposal of
available-for- sale securities 47 47 Impairment of
available-for-sale securities (373) (373) Gain/(loss) on disposal
of subsidiaries and investments (29) (29) Other non-operating gains
- - Other non-operating losses - - Share of income in equity
investees - - Income/(loss) before income taxes (811) 5,663 4,852
Income taxes benefits/(expenses) 752 (954) E (202) Income/(loss)
before minority interests (59) 4,709 4,650 Minority interests in
income of consolidated subsidiaries (583) (583) Income/(loss) from
continuing operations (642) 4,709 4,067 Discontinued operations
Loss from operations - - Income from disposal - - Net income/(loss)
(642) 4,709 4,067 Basic earnings/(losses) per share (0.0062) 0.0390
Diluted earnings/(losses) per share (0.0062) 0.0380 Weighted
average no. of shares 104,252,061 104,252,061 Diluted no. of shares
104,252,061 107,115,957 non-GAAP adjustments: A) Add back revenue
impact of deferred maintenance revenue write down related to the
acquisition of a subsidiary. B) Add back amortization of purchased
intangibles related to the acquisition of subsidiaries. C) Add back
stock compensation expenses related to the acquisition of a
subsidiary of $27 for quarter ended March 31, 2004 and $827 for
quarter ended June 30, 2004 D) Settlement of litigation with 24/7
Media Inc. of $1,613 for the quarter ended June 30, 2004. E) Add
back deferred tax impact on purchased intangibles related to the
acquisition of subsidiaries. chinadotcom corporation Reconciliation
of GAAP to non-GAAP Consolidated Statement of Operations (Amounts
in thousands of U.S. dollars, except per share data) Quarter Ended
June 30, 2003 GAAP non-GAAP results Adjustments results (unaudited)
(unaudited) Revenues Software and consulting services 11,327 11,327
Mobile services and applications 5,056 5,056 Advertising and
marketing activities 1,565 1,565 Other income 540 540 18,488 -
18,488 Cost of revenues Software and consulting services (7,899) 60
B (7,839) Mobile services and applications (692) (692) Advertising
and marketing activities (707) (707) Other income (172) (172)
(9,470) 60 (9,410) Gross profit 9,018 60 9,078 Gross Margin % 49%
49% Selling, general and administrative expenses (6,610) (6,610)
Research and development expenses - - Depreciation and amortization
expenses (1,545) (1,545) (8,155) - (8,155) Operating income/(loss)
863 60 923 Interest income 3,364 3,364 Interest expense (273) (273)
Gain on disposal of available-for-sale securities 1,343 1,343
Impairment of available-for-sale securities - - Gain/(loss) on
disposal of subsidiaries and investments (182) (182) Other
non-operating gains - - Other non-operating losses (632) (632)
Share of income in equity investees 11 11 Income/(loss) before
income taxes 4,494 60 4,554 Income taxes benefits/(expenses) (604)
(604) Income/(loss) before minority interests 3,890 60 3,950
Minority interests in income of consolidated subsidiaries (136)
(136) Income/(loss) from continuing operations 3,754 60 3,814
Discontinued operations Loss from operations (1,976) (1,976) Income
from disposals 2,300 2,300 Net income/(loss) 4,078 60 4,138 Basic
earnings/(losses) per share 0.0409 0.0415 Diluted earnings/(losses)
per share 0.0409 0.0415 Weighted average no. of shares 99,813,334
99,813,334 Diluted no. of shares 99,813,334 99,813,334 non-GAAP
adjustments: A) Add back revenue impact of deferred maintenance
revenue write down related to the acquisition of a subsidiary. B)
Add back amortization of purchased intangibles related to the
acquisition of subsidiaries. C) Add back stock compensation
expenses related to the acquisition of a subsidiary of $827 for
quarter ended June 30, 2004 D) Settlement of litigation with 24/7
Media Inc. of $1,613 for the quarter ended June 30, 2004. E) Add
back deferred tax impact on purchased intangibles related to the
acquisition of subsidiaries. chinadotcom corporation Reconciliation
of GAAP to non-GAAP Consolidated Statement of Operations (Amounts
in thousands of U.S. dollars, except per share data) Quarter Ended
June 30, 2004 GAAP non-GAAP results Adjustments results (unaudited)
(unaudited) Revenues Software and consulting services 34,717 946 A
35,663 Mobile services and applications 7,580 7,580 Advertising and
marketing activities 2,791 2,791 Other income 60 60 45,148 946
46,094 Cost of revenues Software and consulting services (16,185)
617 B (15,568) Mobile services and applications (1,651) (1,651)
Advertising and marketing activities (1,119) (1,119) Other income
(54) (54) (19,009) 617 (18,392) Gross profit 26,139 1,563 27,702
Gross Margin % 58% 165% 60% Selling, general and administrative
expenses (21,092) 2,440 C,D (18,652) Research and development
expenses (4,549) (4,549) Depreciation and amortization expenses
(2,866) 1,660 B (1,206) (28,507) 4,100 (24,407) Operating
income/(loss) (2,368) 5,663 3,295 Interest income 2,404 2,404
Interest expense (492) (492) Gain on disposal of available-for-
sale securities 47 47 Impairment of available-for-sale securities
(373) (373) Gain/(loss) on disposal of subsidiaries and investments
(29) (29) Other non-operating gains - - Other non-operating losses
- - Share of income in equity investees - - Income/(loss) before
income taxes (811) 5,663 4,852 Income taxes benefits/(expenses) 752
(954) E (202) Income/(loss) before minority interests (59) 4,709
4,650 Minority interests in income of consolidated subsidiaries
(583) (583) Income/(loss) from continuing operations (642) 4,709
4,067 Discontinued operations Loss from operations - - Income from
disposals - - Net income/(loss) (642) 4,709 4,067 Basic
earnings/(losses) per share (0.0062) 0.0390 Diluted
earnings/(losses) per share (0.0062) 0.0380 Weighted average no. of
shares 104,252,061 104,252,061 Diluted no. of shares 104,252,061
107,115,957 non-GAAP adjustments: A) Add back revenue impact of
deferred maintenance revenue write down related to the acquisition
of a subsidiary. B) Add back amortization of purchased intangibles
related to the acquisition of subsidiaries. C) Add back stock
compensation expenses related to the acquisition of a subsidiary of
$827 for quarter ended June 30, 2004 D) Settlement of litigation
with 24/7 Media Inc. of $1,613 for the quarter ended June 30, 2004.
E) Add back deferred tax impact on purchased intangibles related to
the acquisition of subsidiaries. For further information, please
contact: Media Relations Jane Cheng, Public Relations Tel:
+852-2961-2750 Fax: +852-2571-0410 e-mail: Investor Relations Craig
Celek, VP, Investor Relations Tel: +1-(212)-661-2160 Fax:
+1-(973)-591-9976 e-mail: DATASOURCE: chinadotcom corporation
CONTACT: Media Relations - Jane Cheng, Public Relations,
+852-2961-2750, or fax, +852-2571-0410, or , Investor Relations -
Craig Celek, Vice President, Investor Relations, +1-212-661-2160,
or fax, +1-973-591-9976, or , both of chinadotcom corporation Web
site: http://www.corp.china.com/
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