CDC Corporation (NASDAQ: CHINA), a leading global enterprise
software and new media company, today announced its financial
results for the first quarter of 2008. Total revenue from
continuing operations(a) for the period ended March 31, 2008 was
(U.S.)$98.3 million, an increase of 12 percent from (U.S.)$88.0
million in the first quarter of 2007. Non-GAAP cash and cash
equivalents(1) totaled (U.S.)$229.2 million as of March 31, 2008.
The company generated positive GAAP operating cash flow of
(U.S.)$5.3 million in the first quarter of 2008. �We�ve started
2008 with our best-ever first quarter revenue, beating consensus
analyst estimates for both revenue and adjusted net income, despite
the slow economy that is impacting the global software industry,�
said Peter Yip, CEO of CDC Corporation. �Total revenue for CDC
Software grew 15 percent and recurring maintenance revenue grew 52
percent in Q1 2008, compared to Q1 2007. We also just completed our
annual North American user conference with record attendance and
very enthusiastic feedback. Additionally, our software license
pipeline today reflects low double-digit growth compared to our
pipeline at the same point in Q1 2008. During the quarter, we also
saw our second quarter of sequential growth for CDC Games revenue
and this trend has continued into Q2. Overall, we are in a strong
position and seeing positive indicators in our software and games
businesses, which are growing and each capable of generating a
significant portion of their revenues from recurring sources,
despite the very challenging market conditions. We believe that our
relatively stable revenue mix, along with our strong cash position,
provides the foundation needed to continue growing in a slow
economy and help us accelerate our business as economic conditions
improve.� Added Yip, �We are also continuing to work very hard on
improving our profit margins. In CDC Games, we reduced our cost
structure in Q1 2008 through a headcount reduction of 150 people.
We are also taking steps to standardize onto 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 for CDC
Software, we have reduced facilities expenses through consolidation
of neighboring offices and eliminated redundant positions related
to our recent acquisitions over the last 12 months. We estimate
that these cost reductions will reduce our annualized CDC Software
expenses by approximately (U.S.)$16.3 million. Based on these and
other cost reduction initiatives currently under evaluation, we
look to see improvements in key operating metrics such as adjusted
net income and margins on recurring revenues.� First Quarter
Results: Total revenue for CDC Software for Q1 2008 was a first
quarter record, at (U.S.)$87.3 million, an increase of 15 percent
from (U.S.)$76.2 million in Q1 2007. Recurring maintenance revenue
was $25.8 million, up 52% compared to Q1 2007. Total revenue for
CDC Games for Q1 2008 was (U.S.)$8.7 million, an increase of 10
percent from (U.S.)$7.9 million in Q4 2007. Total revenue for
China.com, which includes our internet and media portal businesses,
was (U.S.)$2.2 million for Q1 2008, an increase of 9 percent over
(U.S.)$2.1 million in Q1 2007. Total revenue for CDC Corporation
was (U.S.)$98.3 million compared to (U.S.)$88.0 million in Q1 2007.
Net loss from continuing operations in Q1 2008 for CDC Corporation
was (U.S.)$11.6 million, compared to a gain of (U.S.)$1.4 million
in Q1 2007. Adjusted net income from continuing operations(2) was
(U.S.)$80,000 for Q1 2008 compared to a loss in the previous
quarter. GAAP operating cash flow was (U.S.)$5.3 million in Q1
2008. Subsidiary Revenue and Operating Metrics Summary CDC Software
Highlights for Q1 2008: Total revenue for CDC Software in Q1 2008
was (U.S.)$87.3 million, an increase of 15 percent from (U.S.)$76.2
million in Q1 2007. This was comprised of: software license revenue
of (U.S.)$12.3 million, maintenance revenue of (U.S.)$25.8 million,
software consulting and services revenue of (U.S.)$23.0 million,
global services revenue of (U.S.)$24.7 million, and hardware
revenue of (U.S.)$1.5 million. Total revenue for CDC Software in Q1
2008, excluding Global Services, was (U.S.)$59.8 million, an
increase of 17 percent from (U.S.)$51.3 million in Q1 2007. Revenue
for CDC Global Services in Q1 2008 was (U.S.)$27.5 million in Q1
2008, an increase of 11 percent from (U.S.)$24.9 million in Q1
2007. Gross margin for CDC Software, excluding Global Services
during Q1 2008 was 54 percent compared to 58 percent in Q1 2007.
Gross margin for Global Services was 22 percent in Q1 2008 compared
to 26 percent in Q1 2007. Q1 2008 revenues for CDC Software were
geographically distributed with the Americas contributing 60
percent of the total, and the rest of world contributing 40
percent. During Q1 2008, CDC Software added a total of 185 new
customers including 57 for enterprise software applications and 128
for add-on and departmental software solutions. Also, during the
quarter, the company signed upgrade and expansion agreements with
297 enterprise software customers. New customers accounted for 34
percent of total software license revenue during the quarter. New
customers included Bank of East Asia, Contractor�s Steel, Flour
China, Global Sources, Industrias Carnicas Vicente Lopez, Lloyd,
Inc., Lunds Energi, Natividad Abogados, Oxford Aviation Academy,
PurFoods, TCIMS, Ungerer, Woolf Enterprises. Repeat business with
existing customers accounted for 66 percent of total software
license revenue for the quarter. Software sales to existing
customers grew by 33 percent in Q1 2008 compared to Q1 2007.
Customers with expanded and repeat business during the quarter
included Ahlsell, AXA Insurance, Barclays Bank, Bay Valley Foods,
CareerBuilder, Carvel Corporation, Covidien, Georgia Gulf, Johnson
Controls, Juice Harvest, Konika Minolta, Legrand, Medline, Nation
Pizza, Sandvik, See�s Candies, Unilever, WebEx, and Wise Foods.
During the last 12 months, CDC Software implemented cost reduction
initiatives that are estimated to yield approximately (U.S.)$16.3
million in annualized savings. These initiatives are intended to
align operating costs with revenue forecasts and help protect
against the negative effects of the slowing global economy. During
the quarter, CDC Software also launched new products and upgrades
including: Pivotal 6.0, is an upgrade which provides a new user
interface for Pivotal CRM and enhanced integration with Microsoft
Outlook and Visual Studio. Several educational events were hosted
allowing customers and partners to learn about the new capabilities
of Pivotal 6.0, and how to use the migration tools used to convert
their current implementations. To date, over 100 customers and
partners have downloaded this upgrade. Pivotal CRM On Demand for
Institutional Asset Management - Designed with a new Software as a
Service (SaaS) architecture, Pivotal CRM On Demand can be hosted by
CDC Software and accessed on-demand, via a web browser by
customers. The solution can also be deployed on-premise and hosted
internally by customers, or used in a blended mode, both on-demand
hosted externally and on-premise, hosted internally, at the same
time. Building on CDC Software�s experience in providing
industry-specific solutions for financial services, the company�s
first industry-specific application for the Pivotal CRM On Demand
platform helps address the unique customer relationship
requirements of Institutional Asset Management (IAM) firms. Pivotal
Capital IQ Adapter, is a packaged solution that allows Financial
Services institutions to leverage Standard & Poor's Capital IQ
data directly within their Pivotal CRM systems. Ross EPM upgrade,
is an upgrade that provides the addition of pricing and promotional
analytics. With this upgrade, Ross EPM customers can now analyze
gift promotions, book-only promotions, substitution discounts and
multi-level sales order discount calculations, in order to help
improve their level of customer service. As part of providing
expanded negotiated pricing and discounting terms and conditions of
sales, Ross EPM Sales enhancements now provide new dashboards,
metrics, and KPI�s, based on added analysis dimensions, as part of
offering added insight into the impact of promotional costs on
Sales and Profit Margin over time. CDC Factory Scheduling upgrade -
This release provides significant new scheduling features,
usability and performance enhancements to help improve production
scheduling and real-time integration between shop floor execution
and production schedules. The Enhanced Labor Scheduling feature now
offers the ability to define, model and assign labor types to
specific production tasks, to further enable the optimization of
human capital within the factory. EPM Warehouse for CDC Supply
Chain - EPM Warehouse is a plug-in business intelligence
application for CDC Supply Chain's solutions for Extended Warehouse
Management. Visual and intuitive dashboards give users access to a
set of preconfigured reports and gauges with verified key
performance indicators (KPI) for receiving, picking, shipping and
resource utilization. Users can also create their own personalized
reports and graphs. CDC Supply Chain WMS upgrade � This upgrade
includes new and enhanced functionality in picking and post-picking
processes, transit flows, bar code scanning and voice interaction,
along with improved 3PL functionality. The release was a result of
internal research and development efforts as well as several
development cooperation�s with customers including Albert Heijn,
NMD, Schenker, NorgesGruppen and Menarini. The CDC Connect North
American user conference, which included for the first time
customers from all CDC Software product lines, was held in Denver
Colorado, on May 12 through 15, 2008. There were approximately 650
attendees, which represented all of the company�s major vertical
industries including financial services, manufacturing,
distribution, food and beverage, consumer products, life sciences,
specialty chemicals, metals and natural products. During the
conference, customers and partners, as well as industry and equity
analysts, learned about new releases and significant upgrades of
the company�s products that included: Pivotal CRM, Saratoga CRM,
Ross Enterprise, CDC Factory, as well as our new software as a
service CRM solution, Pivotal CRM On Demand. CDC Connect featured
over 120 educational sessions, 24 hands-on product test drive
sessions, 26 Sponsors and Partners, and 51 exhibits and
demonstrations. New and enhanced products featured at the event are
expected to help drive additional business, including expanded
deployments and additional service contracts. Also, during Q1 2008,
CDC completed its acquisition of a 51 percent stake in Integrated
Solutions Limited (ISL), a Hong Kong-based vendor of ERP systems
designed for small and medium-sized discrete manufacturers in
China. ISL joins CDC Software�s successful Franchise Partner
Program that includes Franchise Partners located in India,
Argentina, Spain and Mexico. ISL provides ERP solutions designed to
address the needs of small and medium-sized discrete manufacturers
in the electronics, toy, watch and furniture industries in China.
With company headquarters in Hong Kong, ISL has been successfully
selling and deploying these solutions throughout southern China.
CDC Software plans to help ISL expand beyond its current focus to
other parts of China, the Middle East, Southeast Asia, India and
other countries. In addition, the company has already seen some
success with cross-selling solutions through both sales channels.
CDC will continue to make additional investments in China through
the expansion of its Franchise Partner Program as well as through
acquisitions. CDC Games Total revenue for CDC Games during Q1 2008
was (U.S.)$8.7 million, an increase of 10 percent from the Q4 2007.
This was the second consecutive quarter of strong
sequential-quarter growth for CDC Games. The company believes that
it has a relatively stable, recurring and repeatable revenue base.
In addition, the benefits of the company�s diversification strategy
are also becoming clear. CDC Games� revenue is now derived from its
portfolio of 8 MMO games across multiple geographies with no single
game contributing more than 35 percent of total revenue in Q1 2008
and three games each contributing at least 20 percent or more to
total revenue. Recent highlights for CDC Games include: CDC Games,
working closely with Mgame, recently launched Yulgang Version 2.0.
Metrics associated with the launch have, so far, exceeded the
company�s expectations. CDC Games has taken steps to consolidate
its China-based games on one single common game publishing
platform. The company believes that this will help to improve
operational efficiency and further enable cross promotion of CDC�s
entire game portfolio to its more than 140 million registered
players in China. CDC Games is in the process of standardizing all
of its games on one universal game card. The company believes that
this will help increase its brand awareness, improve its cash flow
and negotiate better financial terms with its distribution channel,
as well as increase the liquidity of its cards. CDC Games began
cross marketing its games. Through collecting user data and
incentive programs, the company believes it can effectively market
other games to its installed user base. During Q1 2008, CDC Games
reduced headcount by approximately 150 people to help streamline
operations and improve key operating metrics for the company. In Q1
2008, CDC Games USA launched its Online Games portal 12FootTall and
as of May 12, it has attracted more than 300,000 registered users.
The company believes this platform can be an exciting launch pad
for casual games and other content, such as the mini flash games
and exclusive comics currently available today. CDC Games USA has
established an entry in the emerging MMO games market with its
first USA title, Lunia although revenue is not yet material. The
Company also believes it has made progress in diversifying the
pipeline and style of new games planned for the second half of
2008. The pipeline, which includes Dragonsky, Life Online, Digimon
and Come on Baby, caters to a more casual and expanded target
audience. In addition, the company believes it has developed a more
cost effective process for effectively launching games, including
cross promotion, leveraging a combined base of existing players. In
response to the announcement made by the State Council of the
People's Republic of China, CDC Games will honor a three-day
national mourning for the earthquake victims in China from May 19
to May 21, 2008. The Company has suspended game services beginning
on May 19, 2008 to express its sympathy for the victims and will
resume game services on May 22, 2008. China.com Portal Total
revenue for the China.com portal and media services businesses
during Q1 2008 was (U.S.)$2.2 million, an increase of 9 percent
from (U.S.)$2.1 million in the first quarter of 2007. Gross margin
for the China.com portal business during Q1 2008 was 50 percent.
The Company believes that China.com benefits from strong brand
recognition in China, the growth of online advertising, and
strategic partnerships with Internet industry leaders. The business
unit is particularly focused on its industry-leading automobile and
defense content channels. The portal has increased advertising
focus in these areas and successfully partnered with notable auto
clients such as Volkswagen and Mercedes-Benz. �We are cautiously
optimistic about the remainder of 2008,� added Yip. �Our cost
structure is now better-aligned with our revenues and we are
examining options for further improvements. Our cash balance
remains very strong and, as noted, we believe we have a stable
stream of recurring revenues. Based on these indicators, including
our sales leads and expanded pipeline coming out of Q1 2008 for CDC
Software, as well as revenue run rates across all our businesses,
we will look to show continued growth as well as improved operating
metrics in 2008.� Conference Call The company�s senior management
will host a conference call for financial analysts and investors,
today, Wednesday, May 21, 2008 at 5:30 pm EDT. USA-based Toll Free
Number: +1-888-603-6873 International: +1 973 582 2706 Passcode:
46125595 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
June 4, 2008. U.S. based Toll Free Number: +1 800 642 1687
U.S.-based Toll Number: +1 706 645 9291 Passcode or PIN #:46125595
### (a)Adjustment for Discontinued Businesses During the first
quarter of 2008, the Mobile Services and Applications business unit
was discontinued. All first quarter 2008 and corresponding
historical amounts for the Mobile Services and Applications
business unit have been classified as discontinued operations, and
are not included herein. 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 140
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. Through its CDC Games International
(CGI) subsidiary, the company launched a long-term strategy to be a
global publisher of MMO games. As part of this long term strategy,
CDC Games launched the www.12FootTall.com portal to showcase online
games and related content in North America. 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
about the continued financial and business performance and
position, our beliefs regarding our sales pipelines, our beliefs
regarding the reliability of our business indicators and our
revenue mix as well as the stability, strength thereof and of our
cash position, the use of the foregoing to help us continue
growing, our efforts regarding our financial and business focus,
including our efforts with respect to cost-savings, our ability to
streamline operations, our ability to reduce costs and beliefs
about the effects thereof, our beliefs and expectations regarding
our existing and new customers, our expectations and intentions
relating to cost-savings associated with our initiatives, our
beliefs regarding the efficacy and abilities, functions, and
features of our products and upgrades, our expectations regarding
the effects of our products that were featured at CDC Connect, our
plans and expectations with respect to ISL and its and our future
performance, our beliefs regarding our potential future investments
in China, our beliefs regarding our revenue base and the stability,
repeatability and repeatable nature thereof, our beliefs regarding
the benefits of our diversification strategy, our expectations
regarding Yulgang 2.0, our beliefs regarding our operational
efficiency and cross-promotion activities and plans, our beliefs
regarding each of our games contribution to revenues, our beliefs
regarding cross-selling and marketing success and opportunities,
our beliefs regarding brand awareness, improved cash flow,
negotiating leverage and the liquidity of our pre-paid cards, our
beliefs regarding the progress in our diversification strategy for
our existing and planned games pipeline, the cost-effective nature
of our processes for launching new games, our beliefs regarding our
ability to leverage our combined base of game players, our beliefs
regarding China.com�s brand recognition in China, the growth of
online advertising in China, and strategic partnerships in China,
and the effects and benefits thereof, our beliefs regarding our
ability to produce continued growth in subsequent quarters, 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 Unaudited
Consolidated Statement of Operations (Amounts in thousands of U.S.
dollars except per share data) � � � � Three Months Ended Three
Months Ended March 31, 2007 March 31, 2008 Revenue: Software $
51,276 $ 59,797 Global Services 24,897 27,548 CDC Games 9,728 8,706
China.com � 2,056 � � 2,245 � � Total revenue 87,957 98,296 � Cost
of revenue: Software (21,327 ) (27,475 ) Global Services (18,365 )
(21,599 ) CDC Games (3,953 ) (5,655 ) China.com � (763 ) � (1,126 )
� Total cost of revenue (44,408 ) (55,855 ) � � Gross profit 43,549
42,441 Gross margin % 50 % 43 % Operating expenses: Sales and
marketing expenses (14,819 ) (19,674 ) Research and development
expenses (4,814 ) (6,434 ) General and administrative expenses
(17,303 ) (22,480 ) Amortization expenses (2,527 ) (3,264 )
Restructuring and other charges � (1,586 ) � (513 ) � Total
operating expenses (41,049 ) (52,365 ) � � Operating income 2,500
(9,924 ) Operating income % 3 % -10 % � Other income, net 1,191
(912 ) � � � Income before income taxes 3,691 (10,836 ) Income tax
expense � (1,395 ) � (451 ) � Income before minority interests
2,296 (11,287 ) Minority interests in income of consolidated
subsidiaries � (935 ) � (345 ) � Income (loss) from continuing
operations 1,361 (11,632 ) Income (loss) from continuing operations
% 2 % -12 % � Discontinued operations: Loss from operations of
discontinued subsidiaries (1,297 ) (252 ) Loss on
disposal/dissolution of discontinued subsidiaries, net � - � � �
Net income (loss) $ 64 � $ (11,884 ) � Basic and diluted earnings
(loss) per share from continuing operations $ 0.01 � $ (0.11 ) �
Basic and diluted earnings (loss) per share $ (0.00 ) $ (0.11 ) � �
Weighted average number of shares - basic 107,461 106,975 �
Weighted average number of shares - diluted 127,379 123,484 � CDC
Corporation Unaudited Consolidated Balance Sheets (Amounts in
thousands of U.S. dollars except share and per share data) � �
December 31, March 31, � 2007 � � 2008 � ASSETS Current assets:
Cash and cash equivalents $ 145,346 $ 156,748 Restricted cash 4,066
4,171 Accounts receivable (net of allowance of $8,248 and $7,098 at
December 31, 2007 and March 31, 2008, respectively) 87,668 82,381
Prepayments and other current assets 26,345 29,308
Available-for-sale securities 77,646 37,179 Deferred tax assets �
1,499 � � 1,642 � Total current assets 342,570 311,429 � Property
and equipment, net 19,659 18,282 Goodwill 207,213 209,407
Intangible assets 132,060 130,716 Investments 12,464 12,655
Available-for-sale securities 28,526 31,145 Deferred tax assets
21,082 21,184 Other assets � 6,814 � � 7,945 � � Total assets $
770,388 � $ 742,763 � � LIABILITIES AND SHAREHOLDERS� EQUITY
Current liabilities: Accounts payable $ 28,571 $ 25,937 Purchase
consideration payables 4,192 2,771 Income tax payable 1,711 946
Accrued liabilities 49,744 50,854 Restructuring accruals, current
portion 2,872 2,265 Short-term bank loans 32,020 10,276 Deferred
revenue � 67,989 � � 73,243 � Total current liabilities 187,099
166,292 � Convertible notes 174,905 177,539 Restructuring accruals,
net of current portion 595 638 Other liabilities � 10,989 � �
11,757 � Total liabilities 373,588 356,226 � Minority interests
37,710 37,640 � 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 714,474 716,301 Common stock held in treasury; 1,602,737
and 7,691,361 shares at December 31, 2005 and 2006, respectively
(55,798 ) (55,792 ) Accumulated deficit (323,480 ) (335,366 )
Accumulated other comprehensive income � 23,866 � � 23,726 � Total
shareholders� equity � 359,090 � � 348,897 � � Total liabilities
and shareholders� equity $ 770,388 � $ 742,763 � � � � � � � CDC
Corporation Unaudited Consolidated Statement of Cash Flows (Amounts
in thousands of U.S. dollars) � � Three Months Ended March 31, �
2008 � OPERATING ACTIVITIES: Net (loss) income $ (11,884 )
Adjustments to reconcile net (loss) income to net cash provided by
operating activities: Minority interests in income of consolidated
subsidiaries 345 Bad debt expense 42 Amortization expense 3,264
Amortization expense included in cost of revenue 3,021 Depreciation
2,084 Stock compensation expenses 1,643 Deferred provision for
income taxes 66 Discount amortization on convertible notes 490 Fair
market value adjustment of derivative instruments 2,319 Other 79
Changes in operating assets and liabilities: Accounts receivable
7,151 Prepayments and other current assets (2,704 ) Other assets
(1,181 ) Accounts payable (3,030 ) Accrued liabilities (300 )
Deferred revenue 3,878 Income tax payable (805 ) Other liabilities
� 803 � � Net cash provided by operating activities � 5,281 � �
INVESTING ACTIVITIES: Acquisitions, net of cash acquired (3,623 )
Purchases of property and equipment (290 ) Capitalized software
(2,899 ) Proceeds from disposal of available-for-sale securities
33,319 Other � 85 � � Net cash provided (used) in investing
activities � 26,592 � � FINANCING ACTIVITIES: Repayment of bank
loans (21,783 ) Other � 119 � � Net cash provided by (used in)
financing activities � (21,664 ) � Effect of exchange differences
on cash � 1,193 � � Net increase (decrease) in cash and cash
equivalents 11,402 Cash and cash equivalents at beginning of year �
145,346 � � Cash and cash equivalents at end of year $ 156,748 � �
� (1) Non-GAAP Cash Reconciliation � Q1 2008 Cash and cash
equivalents $ 156,748 Add restricted cash 4,171 Add
available-for-sale securities - current 37,179 Add
available-for-sale securities - long-term 31,145 Non GAAP cash and
cash equivalents $ 229,243 (2) CDC Corporation Unaudited
Reconciliation From GAAP Results to Non-GAAP Results (Amounts in
thousands of U.S. dollars except per share data) � � � Three Months
Ended Three Months Ended March 31, 2007 March 31, 2008
Reconciliation from GAAP results to Non-GAAP results Income (loss)
from continuing operations $ 1,361 $ (11,632 ) Add back revenue
impact of deferred maintenance revenue - 605 Add back amortization
expense 2,527 3,264 Add back amortization expense included in cost
of revenue 1,933 3,021 Add back deferred tax impact 699 (66 ) Add
back restructuring and other charges 1,586 513 Add back
amortization of debt issuance costs 491 490 Add back loss on
derivatives - 2,319 Add back impairment of available-for-sale
securities - 51 Add back stock compensation expenses 2,279 1,643
Subtract minority interest (186 ) (116 ) Subtract (gain) loss on
disposal of investments � - � � (12 ) Income (loss) from continuing
operations - Non-GAAP $ 10,690 � $ 80 � � Adjusted diluted earnings
per share from continuing operations $ 0.08 � $ 0.00 � � Weighted
average fully diluted shares outstanding 127,379 123,484
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