CDC Corporation (NASDAQ: CHINA), a leading global enterprise
software and new media company, today announced its financial
results for the fourth quarter and year-ended December 31, 2007.
Total revenue for full year 2007 was (U.S.)$402.4 million, an
increase of 30 percent from (U.S.)$309.5 million in 2006. Adjusted
net income(a) was (U.S.)$18.7 million for 2007. Non-GAAP cash and
cash equivalents(c) were (U.S.)$255.2 million as of December 31,
2007. �Despite the economic downturn, I believe our company is in a
strong position,� said Peter Yip, CEO, CDC Corporation. �We
finished 2007 with record Q4 revenue of (U.S)$107.7 million while
our software business achieved record milestones for the full year
in all key metrics including license, maintenance and services
revenue, and adjusted net income. Software revenue grew 39 percent
in Q4 2007 compared to Q4 2006, and 45 percent for the full year
2007 compared to the full year 2006. Recurring maintenance revenue
increased 38 percent in 2007 compared to 2006. Due to our vertical
focus, global positioning and acquisition strategy, our software
business delivered strong and consistent growth throughout the
year. In 2008, we intend to continue to execute on our strategies
that have made our software business successful, and we further
expect to increase the leverage of our infrastructure in China and
India both from a research and development perspective, as well as
from a sales and marketing perspective. Given the current economic
downturn, we are also taking proactive steps to improve our profit
margins. In 2008, our focus is on growing recurring software
revenue and sales to our 6,000-plus installed base customer
accounts.� Added Yip, �We are also very happy to see the CDC Games
business getting back on track. CDC Games is now a diversified
global on-line games business that is truly unique in the industry.
We now have eight games commercially deployed, with operations in
the China, Japan and in the United States. We are very pleased to
have resolved our dispute with MGame and are equally pleased with
the recovery in Yulgang revenue. Version 2.0 of Yulgang has
recently been launched and feedback has been encouraging. In the
fourth quarter, CDC Games had a sequential revenue improvement of
20 percent compared to the third quarter and we expect sequential
improvements throughout 2008. We are also taking significant costs
out of our operation as we are consolidating onto one game
publishing platform. We will continue with our diversification
strategy, through our strong pipeline of new games including
Digimon, Life Online and Dragonsky, while maintaining tight cost
controls to promote profitability. In addition to the success of
our games business, revenue for our portal and media business in
China grew by 29 percent in Q4 2007 compared to Q4 2006. �We now
have three successful and growing businesses and we are continuing
to improve the operating performance of each. With our strong
balance sheet that includes a cash position of more than (U.S.)
$250 million at the end of 2007, we believe we are in a very strong
position and we are very excited about our future.� Full Year 2007
Results: Total revenue from CDC Software for 2007 was (U.S.)$349.0
million, an increase of 45 percent from (U.S.)$240.8 million in
2006. Revenue from CDC Games for 2007 was (U.S.)$33.6 million, an
increase of 25 percent from (U.S.)$26.8 million in 2006. The
China.com segment, excluding the discontinued MVAS business,
generated revenue of (U.S.)$11.4 million in 2007, an increase 13
percent from (U.S.)$10.1 million in 2006. Total revenue for full
year 2007 was (U.S.)$402.4 million, an increase of 30 percent from
(U.S.)$309.5 million in 2006. Adjusted net income(a) was
(U.S.)$18.7 million for 2007 and our reported net loss was
(U.S.)$101.8 million. Non-GAAP cash and cash equivalents(c) were
(U.S.)$255.2 million as of December 31, 2007. Fourth Quarter
Results: Total revenue for CDC Corporation in Q4 2007 was
(U.S.)$107.7 million, an increase of 20 percent from (U.S.)$ 89.4
million in Q4 2006. This represents the highest quarterly revenue
in the company�s history. Net loss was (U.S.)$91.2 million for Q4
2007, compared to a loss of (U.S.)$2.2 million in Q4 2006. Included
in the fourth quarter loss were the following non-cash charges:
$72.8 million charge for the write-down of assets in the MVAS
subsidiary, CDC Mobile $8.2 million charge for the write-down of
investments in the CDC Games subsidiary $11.5 million related to
the unrealized loss on collateralized loan obligations and a change
in the fair value of our debt derivative Adjusted net loss for Q4
2007(b) was (U.S.)$3.5 million, primarily due to one-time audit
expenses related to initial SOX compliance and the carve-outs of
CDC Games and CDC Software, and the resolution of the dispute with
Mgame. This compares to an adjusted net income of (U.S.)$6.4
million in Q4 2006. Adjusted diluted loss per share was
(U.S.)$(0.03) for Q4 2007 compared to diluted earnings per share of
(U.S.)$ 0.06 in Q4 2006. Fourth Quarter Subsidiary Results: Total
revenue from CDC Software for Q4 2007 was a record (U.S.)$95.0
million, an increase of 39 percent from (U.S.)$68.3 million in Q4
2006. License revenue was $17.8 million, an increase of 15 percent,
compared to license revenue in Q4 2006. Total revenue from CDC
Games for Q4 2007 was (U.S.)$7.9 million, an increase of 20 percent
from (U.S.)$6.6 million in Q3 2007. The China.com segment,
excluding the discontinued MVAS business, reported revenue of
(U.S.)$4.0 million for Q4 2007, an increase of 29 percent from
(U.S.)$3.1 million in Q4 2006. �Our Q4 results were impacted by
several one-time charges and write-downs,� said Mike Latimore, CFO
of CDC Corporation. �These included non-recurring expenses related
to the MVAS business, investments, and the carve-outs of CDC Games
and CDC Software, as previously noted on our Q3 2007 earnings call.
The result is a much stronger balance sheet and we can focus our
energy and investments more effectively on our three successful,
growing businesses. We are also highly focused on improving our
profit margins going forward. In CDC Games, we have adjusted our
cost structure in Q1 2008 with a headcount reduction of 150 people.
In addition, we continue to standardize globally on a single online
game publishing platform that will provide standard processes,
features, and functions required to operate our games in a more
cost effective manner. To help accomplish our cost savings goals in
CDC Software, we have reduced facilities expenses through
consolidation of neighboring offices and eliminated redundant
positions related to our recent acquisitions. In total, we have
reduced our annualized CDC Software expenses by approximately
(U.S.)$16 million.� Added Latimore, �Due to the current, depressed
status of the capital market, we have missed the IPO window and
have withdrawn our CDC Games IPO. In doing so, we can now provide
additional transparency without the risk of gun-jumping concerns.
As a result, we recently provided Q2 guidance for CDC Games. We are
also working with our financial advisors to evaluate options for
the CDC Software IPO. These options include continuing with the
confidential filing process or postponing the IPO until market
conditions improve. We intend to provide further updates once we
have reached a decision. It is also important to note that our late
delivery of 2007 and Q4 results has been impacted by the
substantial effort required to prepare the necessary IPO materials
and manage the confidential review process. In addition, we
anticipate filing the 2007 20-F earlier than we did last year.�
Subsidiary Revenue and Operating Metrics Summary CDC Software
Financial Highlights for Full Year 2007: Record Revenue of
(U.S.)$349.0 million compared to (U.S.)$240.8 million in 2006,
representing a 45 percent increase. License revenue for the year
was a record (U.S.)$65.3 million, an increase of 41 percent,
compared to (U.S.)$46.3 million in 2006. Services revenue increased
45 percent to (U.S.)$189.8 million from (U.S.)$131.3 million last
year. Maintenance revenue increased 38 percent to (U.S.)$87.3
million compared to (U.S.)$63.3 million in 2006. Deferred revenue,
comprised primarily of higher-margin maintenance revenue increased
51 percent to (U.S.)$62.9 million at the end of 2007 compared to
(U.S.)$41.5 million at the end of 2006. Total organic revenue
increased 11 percent to (U.S.)$235.8 million. For 2007, the
Americas accounted for approximately 59 percent of total revenue.
International regions including EMEA and Asia combined to account
for approximately 41 percent of total revenue. CDC Software
estimates a maintenance revenue retention rate of more than 90
percent during 2007. CDC Software acquired Respond Group Limited in
February 2007, Saratoga Systems in April 2007 and Catalyst
International in September 2007. Highlights for Q4 2007: During the
quarter, CDC Software added a total of 80 new customers for
enterprise software applications and 163 new customers for add-on
and departmental software solutions. Also, during the quarter, the
company signed upgrade and expansion agreements with 354 enterprise
software customers. New customers accounted for 41 percent of total
software license revenue during the quarter and 46 percent of total
software license revenue for the full year 2007. New customers
included Autoroutes Paris Rhin-Rh�ne, BANKPIME, Birds Eye Iglo
Group, Ltd., Blue Ocean Wireless, Canadian Automobile Association,
South Central Ontario, DA Nanomaterials, Elliot Aviation, Fokker
Elmo, Associa�ao Nacional das Farmacias, Franklin Street Bakeries,
Iberochina, Imerys, Kunzler, Local.com, Mead Johnson, Pages Jaunes,
Uniden and Whitfield Foods. Repeat business with existing customers
accounted for 59 percent of total software license revenue for the
quarter and 54 percent of total software license revenue for the
full year 2007. Software sales to existing customers grew by 57
percent in Q4 2007 compared to Q4 2006 and by 60 percent for the
full year 2007 compared to the full year 2006. Customers with
expanded and repeat business during the quarter included AC Legg,
Ahlsell, Albert Heijn, Applied Biosystems, Biom�rieux,
CareerBuilder, Digital Insight, General Aluminum, ICA Norway,
Isaberg Rapid, Lincoln Financials, Moody�s, National Starch,
NorgesGruppen, Pittsburgh Corning, Poliris-Groupe SeLoger.com,
Specialty Food Group, Vectors Innovation Group Taiwan, and Vitasoy.
During the quarter, CDC Software acquired the remaining 49 percent
of its subsidiary, Industri-Matematik International Corporation
from Symphony Technology Group. During the quarter, CDC Software
signed an agreement to form a joint venture with FlexSystem
Limited, one of the leading enterprise software solution providers
in China. The joint venture intends to develop human resources,
payroll and accounting software as a service (SaaS) applications
for initial deployment throughout China. We intend that these
applications will be marketed and sold directly by CDC Software and
offered on a subscription basis with very low up-front costs.
During the quarter, CDC Software also launched new products
including: CDC Factory, the first packaged manufacturing operations
management (MOM) solution, certified by SAP as a NetWeaver
Composite Application. CDC Factory is designed specifically to
address the unique requirements of the food and beverage and
consumer packaged goods industries. Platinum HRM 8.0 a web-based
application, designed to address the unique and challenging human
resource regulatory and reporting requirements for local and global
companies operating in China. The system automates routine daily
tasks such as payroll processing, attendance, and benefits
tracking, providing the HR staff more time and resources to
implement strategies that align the workforce with customer
organization's strategic goals. Platinum HR V8.0 can further reduce
routine cycle�s time and increase employees� satisfaction. A
Software as a Service (SaaS) suite of applications for life
sciences companies. This first-of-its-kind offering, specifically
designed for life sciences, leverages the Ross Enterprise suite of
applications that are currently in use with hundreds of life
sciences manufacturers and research organizations around the world.
CDC Games Total online game revenue during Q4 2007 was (U.S.)$7.9
million, an increase of 20 percent from the Q3 2007. For the full
year 2007, total online game revenue was (U.S.)$33.6 million.
Recent highlights of CDC Games include the following: CDC Games
received multiple prestigious awards for its popular games in China
including Eve Online and Yulgang. CDC Games announced the promotion
of John Huen to chief operating officer of CDC Games. CDC Games
resolved its dispute with MGame. Since this dispute has been
resolved, CDC Games has seen Yulgang revenue increase
substantially. CDC Games recently launched Yulgang Version 2.0.
Based on current feedback, the company believes that this new
version should further bolster results. CDC Games has taken steps
to consolidate all its China-based Games on one game publishing
platform. The company believes that this will result in improved
efficiency and lower operating costs. CDC Games launched the
formation of CDC Games International (CGI). CGI, a subsidiary of
CDC Games, was created to launch new games internationally and to
position CDC Games as a global publisher of online games. CDC Games
announced Jeffrey Longoria had been appointed as president of CDC
Games International. CDC Games International announced the launch
of Minna de Battle, its first online massively multiplayer online
role-playing game (MMORPG) for the Japan market. CDC Games USA
launched 12 Foot Tall, a games portal designed to provide gamers in
North America with fast and easy access to the company's popular
online games, facilitate purchases of virtual merchandise and
enhance collaboration with other players. Concurrent with the USA
portal launch, CDC Games USA launched Lunia, a massively
multiplayer online role-playing game (MMORPG) based on the popular
manga-style comic art form, for commercial availability in North
America. CDC Games increased its investment in BBMF Group Inc, a
leading 3G content provider in Japan, as part of its strategy to
deliver future online mobile games via 3G networks and expand its
geographic reach. BBMF is considered a market leader in 3G content
in Japan with one of the largest mobile comic sites, largest mobile
online game sites and one of the largest libraries of titles
available for mobile access in Japan. China.com Portal Total
revenue for the China.com portal and Media Services during Q4 2007
was (U.S.)$4.0 million, an increase of 29 percent from (U.S.)$3.1
million in the fourth quarter of 2006. For the full year 2007,
total revenue was (U.S.)$11.4 million an increase of 13 percent
from 2006. Gross margin for China.com portal during Q4 2007 was 62
percent. Additional News Executive New Hires and Promotions Timothy
F. Coen has joined the company as senior vice president &
general counsel for CDC Corporation and its subsidiaries. Mr. Coen
will work out of the Atlanta office and will report directly to
Peter Yip. Most recently, Mr. Coen was vice president, general
counsel & secretary for IP Unity Glenayre, Inc. and its
predecessor Glenayre Technologies, Inc., a publicly-held global
company engaged in the worldwide distribution of complex mobile
messaging systems platforms, mobile applications and entertainment
media. Mr. Coen is an experienced lawyer with over twenty five
years of domestic and international corporate and
transaction-oriented experience, during which time he has been an
attorney in major law firms and an executive-level in-house lawyer,
including tenure as of counsel with King & Spalding, LLP, a
partner in the law firm of Powell Goldstein LLP and in house
counsel with Concert Communications and with BellSouth Corporation.
Mr. Coen has represented numerous technology companies in complex
software, technology and professional IT services transactions, as
well as in corporate, securities and compliance matters and other
complex commercial and financial transactions. James McDevitt has
been promoted to COO of CDC Software. Most recently, McDevitt has
been running the CDC Global Services business, successfully growing
and consolidating operations while improving margins. McDevitt
brings more than 25 years of operations and finance experience to
CDC that includes serving as a senior finance and operations
executive for GEAC Computer Corporation and CFO for Clarus
Corporation. He will have complete operating responsibility for CDC
Software, including responsibility for finance, accounting and IT.
�I want to welcome Tim to his new, important role within CDC and
congratulate Jim on his promotion to COO of CDC Software,� added
Yip. �These key changes to the management team will help us in our
key initiatives including compliance, transparency and timely
reporting.� Concluded Yip, �I believe we are in good shape, with a
strong balance sheet, cash in excess of (U.S.) $250 million at the
end of 2007, and three successful, growing businesses in enterprise
software, online games, Internet portals and media. We will
continue to take full advantage of our established China presence
and the exciting opportunities for growth in the strategic
geography. With the current uncertainty in the capital markets, I
believe that our shares are undervalued. The company will
demonstrate our strong confidence in the business, with its plan to
continue our corporate share repurchase program and I intend to
continue purchasing shares in CDC when our trading window opens.�
Conference Call The company�s senior management will host a
conference call for financial analysts and investors, today,
Monday, April 28, 2008 at 5:30 pm EDT. USA-based Toll Free Number:
+1-888-603-6873 U.S. Toll Number: +1 973 582 2706 Passcode:
44429254 Call Leader: Monish Bahl This call is being webcast by
CCBN and can be accessed at CDC Corporation�s corporate web site at
www.cdccorporation.net. The webcast is also being distributed over
CCBN's Investor Distribution Network to both institutional and
individual investors. Individual investors can listen to the call
through CCBN's individual investor center at www.fulldisclosure.com
or by visiting any of the investor sites in CCBN's Individual
Investor Network. Institutional investors can access the call via
CCBN's password-protected event management site, StreetEvents
(www.streetevents.com). Instant Replay For those unable to call in,
a digital instant replay will be available after the call until May
14, 2008. U.S. based Toll Free Number: +1 800 642 1687 U.S.-based
Toll Number: +1 706 645 9291 Passcode or PIN #:44429254 Adjusted
Financial Measures This press release includes adjusted net income,
adjusted earnings per share and non-GAAP net cash and cash
equivalents (�non-GAAP financial measures�). Non-GAAP financial
measures are not in accordance with, or an alternative for, net
income, earnings per share and cash and cash equivalents under
generally accepted accounting principles in the United States
(�GAAP�) and may be different from non-GAAP measures used by other
companies. Non-GAAP financial measures should not be used as a
substitute for, or considered superior to, measures of financial
performance prepared in accordance with GAAP. Investors should be
aware that these non-GAAP measures have inherent limitations,
including their variance from certain of the financial measurement
principals underlying GAAP, should not be considered as a
replacement for net income and earnings per share and cash and cash
equivalents, respectively, and should be read in conjunction with
our consolidated financial statements prepared in accordance with
GAAP. This supplemental non-GAAP information should not be
construed as an inference that the Company�s future results will be
unaffected by similar adjustments to net earnings determined in
accordance with GAAP. The estimates presented in this press release
are preliminary and unaudited. The company is in the process of
completing its 2007 audit and adjustment to the estimates set forth
in this press release may be identified as a result of this
process. The financial statements presented in this press release
are unaudited. About CDC Corporation The CDC family of companies
includes CDC Software focused on enterprise software applications
and services, CDC Games focused on online games, and China.com
focused on portals for the greater China markets. For more
information about CDC Corporation (NASDAQ: CHINA), please visit
www.cdccorporation.net. About CDC Software CDC Software, The
Customer-Driven Company�, is a provider of enterprise software
applications designed to help organizations deliver a superior
customer experience while increasing efficiencies and
profitability. CDC Software�s product suite includes: CDC Factory
(manufacturing operations management), Ross ERP (enterprise
resource planning) and SCM (supply chain management), CDC Supply
Chain (supply chain management, warehouse management and order
management), Pivotal CRM and Saratoga CRM (customer relationship
management), CDC MarketFirst (marketing automation and lead
management), Respond (customer complaint and feedback management),
c360 CRM add-on products, industry solutions and development tools
for the Microsoft Dynamics CRM platform, Platinum HRM (human
resources) and business analytics solutions. These
industry-specific solutions are used by more than 6,000 customers
worldwide within the manufacturing, financial services, health
care, home building, real estate, and wholesale and retail
distribution industries. The company completes its offerings with a
full continuum of services that span the life cycle of technology
and software applications, including implementation, project
consulting, outsourced business services, application management
and offshore development. CDC Software is the enterprise software
unit of CDC Corporation (NASDAQ: CHINA) and is ranked number 12 on
the MBT 2007 Global 100 List of Enterprise and Supply Chain
Management Application vendors. For more information, please visit
www.cdcsoftware.com. About China.com Inc. China.com is a leading
operator of Internet portals, serving a broad range of audiences in
China. In 2006, it was chosen as the first company to host Google's
Video Adsense which serves video ads targeted at China's
English-speaking audience. China.com also was appointed by the
Jilin government as the exclusive web sponsor of the 2007 Asian
Winter Games. China.com was listed on the GEM of the Stock Exchange
of Hong Kong Limited on March 9, 2000. In December 2000, China.com
Inc. was admitted as a constituent stock of the Hang Seng IT and IT
Portfolio Indices. About CDC Games CDC Games is one of the market
leaders of online and mobile games in China with more than 120
million registered users. The company pioneered the "free-to-play,
pay-for-merchandise" online games model in China with Yulgang and
launched the first free-to-play, pay for merchandise FPS (first
person shooter) game in China with Special Force. Launched in July
2007, Special Force has consistently ranked in the Top 10
downloaded games in China and becoming the top revenue producer for
CDC Games. Currently, CDC Games offers six popular MMO online games
in China that include: Special Force, Yulgang, Shaiya, Mir III,
Shine and Eve Online. In March 2007, the company announced the
formation of CDC Games Studio to establish strategic relationships
with selected games development partners to accelerate the
development of new, original online games for China and other
targeted global geographies. CDC Games anticipates being able to
deploy up to $100 million for CDC Games Studio investments through
contributions from CDC affiliated companies, external partners and
its internal resources. Through its CDC Games International (CGI)
subsidiary, the company launched Minna de Battle in Japan in
December 2007, and 16 pounds in Thailand in January 2008. In
February 2008, CDC Games USA launched the www.12FootTall.com portal
to showcase online games in North America, sell virtual merchandise
and promote collaboration among players. Also in February 2008, CGI
launched Lunia, its first game in North America, and is planning
several new games for Southeast Asia, further strengthening its
position as a global publisher of online games. For more
information on CDC Games, visit: www.cdcgames.net Cautionary Note
Regarding Forward-Looking Statements This press release includes
"forward-looking statements" within the meaning of the United
States Private Securities Litigation Reform Act of 1995. These
forward-looking statements include statements regarding our beliefs
regarding our marketing, financial, business and competitive
position, our intent to continue to execute on our strategies and
our expectations with respect to development activities, our
expectations regarding sequential improvements in revenue for CDC
Games, CDC Software and China,com, our intent to continue with a
diversification strategy at CDC Games, the anticipated effects of
our business and financial strategies, our beliefs regarding
continued improvements in operating performance, our beliefs
regarding our focus and intended focus, our ability to continue to
reduce costs and standardize globally at CDC Games and the effects
thereof, our intentions with respect to our initial public offering
for each of CDC Software and CDC Games, including the timing of
each and our intent and ability to continue them, our intent and
ability to provide additional updates with respect to the Games and
Software initial public offerings and other corporate initiatives,
our estimates regarding maintenance revenue retention and other
financial measures, our intentions regarding our joint venture and
other strategic initiatives, our beliefs and expectations regarding
Yulgang 2.0, and other statements that are not historical fact, the
achievement of which involve risks, uncertainties and assumptions.
These statements are based on management�s current expectations and
are subject to risks and uncertainties and changes in
circumstances. There are important factors that could cause actual
results to differ materially from those anticipated in the forward
looking statements, including the following: (a) the ability to
realize strategic objectives by taking advantage of market
opportunities in targeted 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 effects of
restructurings and rationalization of operations in our companies;
(d) the ability to address technological changes and developments
including the development and enhancement of products; (e) the
ability to develop and market successful products and services; (f)
the entry of new competitors and their technological advances; (g)
the need to develop, integrate and deploy enterprise software
applications to meet customer�s requirements; (h) the possibility
of development or deployment difficulties or delays; (i) the
dependence on customer satisfaction with the company�s games,
software products and services; (j) continued commitment to the
deployment of the products, including enterprise software
solutions; (k) risks involved in developing software solutions and
integrating them with third-party software and services; (l) the
continued ability of the company�s products and services to address
client-specific requirements; (m) demand for and market acceptance
of new and existing enterprise software and services and the
positioning of the company�s solutions; and (n) the ability of
staff to operate the enterprise software and extract and utilize
information from the company�s products and services. If any such
risks or uncertainties materialize or if any of the assumptions
proves incorrect, our results could differ materially from the
results expressed or implied by the forward-looking statements we
make. Further information on risks or other factors that could
cause results to differ is detailed in filings or submissions with
the United States Securities and Exchange Commission made by CDC
Corporation in its Annual Report for the year ended December 31,
2006 on Form 20-F filed on July 2, 2007. All forward-looking
statements included in this press release are based upon
information available to management as of the date of the press
release, and you are cautioned not to place undue reliance on any
forward looking statements which speak only as of the date of this
press release. The company assumes no obligation to update or alter
the forward looking statements whether as a result of new
information, future events or otherwise. CDC Corporation
Consolidated Statement of Operations (Amounts in thousands of U.S.
dollars except share and per share data) � � � Year ended Year
ended December 31, 2006 December 31, 2007 (unaudited) (unaudited) �
Revenue: Software $ 174,337 $ 237,314 Global Services 66,484
111,723 CDC Games 26,780 33,609 China.com 10,064 11,409 Mobile
Services and Applications � 31,863 � � 8,342 � � Total revenue
309,528 402,397 � Cost of revenue: Software (73,789 ) (99,832 )
Global Services (45,943 ) (83,129 ) CDC Games (10,631 ) (20,238 )
China.com (4,095 ) (4,283 ) Mobile Services and Applications �
(13,004 ) � (4,757 ) � Total cost of revenue (147,462 ) (212,239 )
� � Gross profit 162,066 190,158 � Operating expenses: Sales and
marketing expenses (59,313 ) (76,408 ) Research and development
expenses (19,981 ) (24,368 ) General and administrative expenses
(68,849 ) (90,752 ) Amortization expenses (8,315 ) (13,022 )
Restructuring and other charges � (1,974 ) � (85,584 ) � Total
operating expenses (158,431 ) (290,134 ) � � Operating income 3,635
(99,976 ) � Other income, net 12,579 (7,839 ) � � � Income before
income taxes 16,214 (107,815 ) Income tax expense � (3,062 ) �
(12,636 ) � Income before minority interests 13,152 (120,451 )
Minority interests in income of consolidated subsidiaries � (2,312
) � 18,695 � � Income (loss) from continuing operations 10,840
(101,756 ) � � � Net income (loss) $ 10,840 � $ (101,756 ) � Basic
and diluted earnings (loss) per share $ 0.10 � $ (0.75 ) � Diluted
earnings (loss) per share $ 0.10 � $ (0.75 ) � Weighted average
number of shares - basic 107,963,060 107,074,957 � Weighted average
number of shares - diluted 109,091,908 125,714,806 CDC Corporation
Consolidated Statement of Operations (Amounts in thousands of U.S.
dollars except share and per share data) � � � � Three Months Ended
Three Months Ended December 31, 2006 December 31, 2007 (Unaudited)
(Unaudited) Revenue: Software $ 47,722 $ 67,306 Global Services
20,587 27,657 CDC Games 10,680 7,930 China.com 3,139 4,046 Mobile
Services and Applications � 7,246 � � 753 � � Total revenue 89,374
107,692 � Cost of revenue: Software (19,450 ) (28,274 ) Global
Services (14,708 ) (21,944 ) CDC Games (4,187 ) (6,723 ) China.com
(1,180 ) (1,508 ) Mobile Services and Applications � (2,535 ) �
(431 ) � Total cost of revenue (42,060 ) (58,880 ) � � Gross profit
47,314 48,812 � Operating expenses: Sales and marketing expenses
(18,476 ) (22,633 ) Research and development expenses (6,717 )
(6,230 ) General and administrative expenses (26,255 ) (28,544 )
Amortization expenses (3,280 ) (3,985 ) Restructuring and other
charges � (1,135 ) � (84,546 ) � Total operating expenses (55,863 )
(145,938 ) � � Operating income (8,549 ) (97,126 ) � � � Other
income (expense), net 1,586 (10,684 ) � � � Income before income
taxes (6,963 ) (107,810 ) Income tax benefit (expense) � 4,123 � �
(1,967 ) � Income (loss) before minority interests (2,840 )
(109,777 ) Minority interests in income of consolidated
subsidiaries � 636 � � 18,551 � � Income (loss) from continuing
operations (2,204 ) (91,226 ) � � � Net income (loss) $ (2,204 ) $
(91,226 ) � Basic and diluted earnings (loss) per share $ (0.02 ) $
(0.67 ) � Diluted earnings (loss) per share $ (0.02 ) $ (0.67 ) �
Weighted average number of shares - basic 105,828,317 106,970,672 �
Weighted average number of shares - diluted 119,239,077 125,467,935
CDC Corporation Consolidated Balance Sheets (Amounts in thousands
of U.S. dollars except share and per share data) � � 2006 2007
(unaudited) (unaudited) ASSETS Current assets: Cash and cash
equivalents $ 223,548 $ 143,971 Restricted cash 1,996 4,066
Accounts receivable (net of allowance of $5,373 and $7,898 in 2006
and 2007, respectively) 64,437 87,231 Note receivable 25,000 -
Prepayments and other current assets 18,525 24,313
Available-for-sale securities 14,401 82,880 Restricted
held-to-maturity securities 30,504 - Deferred tax assets � 3,420 �
� 535 � Total current assets 381,831 342,996 � Property and
equipment, net 9,540 19,646 Goodwill 205,050 195,699 Intangible
assets 104,069 133,782 Investments under cost method 217 13,584
Available-for-sale securities 112,045 24,248 Restricted
available-for-sale securities - - Deferred tax assets 18,648 26,530
Other assets � 8,351 � � 5,466 � � Total assets $ 839,751 � $
761,951 � � LIABILITIES AND SHAREHOLDERS� EQUITY Current
liabilities: Accounts payable $ 24,163 27,092 Purchase
consideration payables 5,626 2,769 Income tax payable 4,202 1,713
Other payables 2,740 - Accrued liabilities 36,787 51,119
Restructuring accruals, current portion 2,411 2,872 Short-term bank
loans 18,991 32,020 Deferred revenue � 46,033 � � 68,237 � Total
current liabilities 140,953 185,822 � Convertible notes 167,645
174,905 Restructuring accruals, net of current portion 3,599 595
Other liabilities � 419 � � 10,989 � Total liabilities 312,616
372,311 � Minority interests 72,512 38,121 � Contingencies and
commitments � Shareholders� equity: Preferred shares, $0.001 par
value; 5,000,000 shares authorized, no shares issued - - Class A
common shares, $0.00025 par value; 800,000,000 shares authorized;
111,364,999 and 114,092,737 shares issued as of December 31, 2005
and 2006, respectively; 109,762,262 and 106,401,376 shares
outstanding as of December 31, 2005 and 2006, respectively � 28 28
Additional paid-in capital 692,143 713,294 Common stock held in
treasury; 1,602,737 and 7,691,361 shares - at December 31, 2005 and
2006, respectively (32,102 ) (55,598 ) Accumulated deficit (217,290
) (327,126 ) Accumulated other comprehensive income � 11,844 � �
20,921 � Total shareholders� equity � 454,623 � � 351,519 � � Total
liabilities and shareholders� equity $ 839,751 � $ 761,951 � a)
Yearly Reconciliation of Net Income to Non-GAAP Net Income (amounts
in thousands of U.S. dollars, except per share data): � � �
Reconciliation from GAAP results to Non-GAAP results YTD 2006 YTD
2007 � Net income (loss) 10,840 $ (101,756 ) Add back revenue
impact of deferred maintenance revenue 16 2,762 Add back
amortization expense 8,315 13,022 Add back amortization expense
included in cost of revenue 6,333 9,296 Add back deferred tax
impact (1,208 ) 7,289 Add back restructuring and other charges
6,274 85,584 Add back amortization of debt issuance costs 273 1,964
Add back loss on derivatives (531 ) 5,996 Add back impairment of
available-for-sale securities - 13,387 Add back stock compensation
expenses 7,466 8,451 Subtract minority interest (1,042 ) (20,028 )
Subtract (gain) loss on disposal of investments � (3,087 ) � (7,240
) Net Income - Non-GAAP $ 33,649 � $ 18,727 � � Adjusted diluted
earnings per share $ 0.30 $ 0.14 Weighted average fully diluted
shares outstanding 109,091,908 125,714,806 b) Quarterly
Reconciliation of Net Income to Non-GAAP Net Income (amounts in
thousands of U.S. dollars, except per share data): � � �
Reconciliation from GAAP results to Non-GAAP results Q4 2006 Q4
2007 � Net income (loss) $ (2,204 ) $ (91,226 ) Add back revenue
impact of deferred maintenance revenue - 1,755 Add back
amortization expense 3,280 3,985 Add back amortization expense
included in cost of revenue 1,705 2,670 Add back deferred tax
impact (6,116 ) (1,429 ) Add back restructuring and other charges
5,435 84,546 Add back amortization of debt issuance costs 273 491
Add back loss on derivatives (531 ) 4,735 Add back impairment of
available-for-sale securities - 6,791 Add back stock compensation
expenses 3,419 2,297 Subtract minority interest (995 ) (17,906 )
Subtract (gain) loss on disposal of investments � 2,085 � � (224 )
Net Income - Non-GAAP $ 6,352 � $ (3,515 ) � Adjusted diluted
earnings per share $ 0.06 $ (0.03 ) Weighted average fully diluted
shares outstanding 119,239,077 125,467,935 c) Non GAAP Cash and
Cash Equivalents � � Q4 2007 Cash and cash equivalents $ 143,971
Add restricted cash 4,066 Add debt and available for sale
securities 107,128 Non GAAP cash and cash equivalents $ 255,165
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