CDC Software Corporation (NASDAQ: CDCS), a global provider of
enterprise software applications and services, today announced
financial results for the quarter ended September 30, 2009. For the
third quarter of 2009, CDC Software reported revenue of (U.S.)$48.6
million, Non-GAAP earnings per share(a) of (U.S.)$0.33, Non-GAAP
net income(a) of (U.S.)$9.6 million, Net income attributable to
controlling interest of (U.S.)$6.2 million and Net income
attributable to controlling interest earnings per share of
(U.S.)$0.22. Third quarter 2009 Non-GAAP earnings per share and Net
income attributable to controlling interest exceeded First Call
consensus estimates, which were (U.S.)$0.30 and (U.S.)$4.6 million,
respectively.
Revenue, Non-GAAP net income and Net income attributable to
controlling interest in the third quarter of 2008 were (U.S.)$60.5
million, (U.S.)$8.8 million and (U.S.)$4.2 million,
respectively.
In addition, CDC Software increased its operating cash flow in
the third quarter to (U.S.)$19.2 million compared to (U.S.)$6.3
million in the same period last year, representing a 205 percent
improvement. For the nine months ended September 30, 2009, the
company reported revenue of (U.S.)$149.6 million, Non-GAAP net
income and Non-GAAP earnings per share of (U.S.)$26.4 million and
(U.S.)$0.91, respectively. Net income attributable to controlling
interest for the first nine months of 2009 was (U.S.)$16.2 million.
This compares to revenue of (U.S.)$186.5 million, Non-GAAP net
income of (U.S.)$15.9 million and Net income attributable to
controlling interest of (U.S.)$4.0 million for the nine months
ended September 30, 2008.
“We are pleased that we exceeded Wall Street consensus estimates
for third quarter GAAP net income and Non-GAAP net income per
share, which are key financial metrics for our company,” said Peter
Yip, CEO of CDC Software. “In addition, our cash flow from
operations of $19.2 million represented an increase of more than
200 percent from the same period last year and is the highest on
record for CDC Software. Our fourth quarter sales pipeline has
continued to increase and has shown steady growth over the last
four quarters. In addition, our cross-sell opportunities in the
fourth quarter have continued to increase as well as the mix of new
logo customer as a percentage of license sales.”
During the third quarter, license revenue, maintenance revenue,
services revenue and hardware revenue were, 16 percent, 52 percent,
31 percent and 1 percent, respectively, of total revenue. License
revenue was (U.S.)$7.6 million. Third quarter license sales from
new logo customers increased to 38 percent compared to 22 percent
of license sales in the second quarter of 2009. Maintenance revenue
in the third quarter increased to (U.S.)$25.4 million compared to
(U.S.)$24.8 million in the second quarter of 2009. CDC Software has
also continued to achieve a maintenance retention rate of
approximately 90 percent. In the third quarter, CDC Software won
back (U.S.)$770,000 through its maintenance win-back program. Since
the beginning of this program in the third quarter of 2008, CDC
Software has won back more than (U.S.)$2.2 million in maintenance
revenue. Professional services revenues in the third quarter of
2009 were (U.S.)$14.9 million, while hardware sales were (U.S.)$0.7
million.
Operating cash flow in the third quarter of 2009 was (U.S.)$19.2
million compared to (U.S.)$6.3 million in the same period last
year. Cash on hand was $66.8 million at the end of the third
quarter. DSOs (days sales outstanding) in the third quarter
improved to an impressive 74 days, compared to 89 days for Q2 2009.
Accounts receivable as of September 30, 2009 was (U.S.)$33.0
million, down from (U.S.)$53.0 million as of December 31, 2008.
Deferred revenue as of September 30, 2009 was (U.S.)$50.6 million,
down from (U.S.)$54.5 million as of December 31, 2008. The combined
utilization rate of North America and EMEA services business for
the third quarter was 68.1 percent, and the services backlog was
(U.S.) $10.9 million.
GAAP net income margin improved to 12.8 percent in the third
quarter of 2009 compared to 7.0 percent in the third quarter of
2008. Gross margin was 56 percent during the third quarter of 2009,
which was flat compared to the same quarter of 2008.
“For the third quarter, CDC Software continued to control and
reduce operating expenses which contributed to the solid GAAP net
income compared to the second quarter of 2009 and prior year,” Yip
added. “We remain cautiously optimistic about our revenue outlook
since third quarter license revenue, which historically is impacted
by seasonality, was essentially the same as in the second quarter
of 2009. In addition, we reported that 38 percent of license sales
came from new logo customers, compared to 22 percent in the second
quarter. During the fourth quarter, we have already closed several
significant deals in the food and beverage and the financial
services industries. We also expect to continue executing on our
strategy of strategic and disciplined acquisitions that are
accretive.”
Organic Growth Initiatives
In an effort to accelerate organic growth, the company has
focused on a three prong approach, which is intended to be additive
to the company’s traditional sales model.
CDC Software added seven new resellers to its channel as part of
its strategy to expand its pipeline and sales dramatically over the
next few years in China, with the goal of positioning this country
as the second largest revenue generator after North America for the
company. Furthermore, the company has seen increased channel sales
activity in India, Australia, Mexico and in China
The company believes that leveraging resellers in emerging
markets can accelerate the company’s organic revenue growth
rate.
Over the last several quarters, CDC Software has also pursued a
focused strategy to maximize cross sales within its installed base
of over 6,000 customers. The company has seen a significant
increase in the pipeline of cross sales opportunities heading into
the fourth quarter, with the pipeline of opportunities increasing
almost 250 percent from the third quarter.
In the third quarter of 2009, the company initiated an OEM
strategy to resell its solutions directly into third party software
providers. The company has already added one OEM partner and
expects to sign another two in the fourth quarter. In the third
quarter, CDC Software signed a reciprocal OEM agreement with
Pilgrim Software to sell each other’s solutions. This OEM
partnership is expected to help CDC Software expand its footprint
in the highly regulated industries of life sciences and consumer
packaged goods (CPG) CDC Software believes that by adding an OEM
channel, it can not only improves sales productivity, but also
improve profit margins, given the nature of OEM sales.
During the third quarter of 2009, CDC Software also introduced
new products and version upgrades for its core ERP, Supply Chain
Management and CRM applications that included:
- Launched a major new
traceability solution in Ross Enterprise called Trace Express
Viewer, which provides manufacturers with easier usability, faster
access and immediate forward and backward trace functionality to
identify suspect materials and assist in the disposition of
finished goods in the event of a product recall
- Ross ERP 6.3 SP5
- CDC Supply Chain Supplier
Collaboration and 3PL Collaboration
- Pivotal eMarketing
- CDC Factory 5.4.2
- CDC Respond 3.7 SP 3
Furthermore, during the third quarter of 2009, CDC Software
added a total of 45 new customers and signed upgrade and expansion
agreements with 233 enterprise software customers. New customers
accounted for 38 percent of total software license revenue during
the quarter and included Alpitour, B&G Foods, Pacific Coast
Producers, BIPO Service Shanghai Ltd., Bongrain Foodservice,
Converteam Power Conversion Co., Ltd., Demag Cranes &
Components Co., Ltd., Emmeti, ESYPCO, GEZE Industries Co., Ltd.,
Igulatorio Medico Quirurgico, Kerry Properties Development
Management Co., Ltd., Molino Harinero San Blas, Pfeiffer Vacuum,
Project Informatica, Rivona, Self, ST Specialty Foods, Swagelok
Fluid System Technologies Ltd and Vegenat.
Repeat business with existing customers accounted for 62 percent
of total software license revenue for the third quarter of 2009.
Customers with expanded and repeat business during the quarter
included ACCOR, Allianz, BASF Shanghai Coatings Co., Ltd., BSH,
Clarins, GFA Brands Inc., Measurement Specialties, MHMRA (Mental
Health, Mental Retardation Authority of Harris County), Natures
Way, Rothschild, Shanghai Roche Pharmaceuticals Ltd., Sudzucker,
The9 Computer Technology Consulting Co., Ltd., Weleda, and
Virbac.
“With the emphasis on our organic growth initiatives, we are
cautiously optimistic about our business prospects,” said Bruce
Cameron, president of CDC Software. “Our cross sell initiatives are
beginning to bear results and we anticipate an uptick in the fourth
quarter. In addition, we have added additional resellers in the
third quarter that emphasize our focus on emerging markets.”
Acquisition Strategy
- Announced a “roll-up strategy”
to capitalize on the growing on-demand software market through the
execution of binding term sheets to acquire two SaaS companies,
including Truition
- Completed the acquisition of WKD
Solutions, a provider of supply chain event management solutions
called X-alert in the third quarter
- Completed the acquisition of
Activplant in the fourth quarter, which the company expects to help
solidify CDC Factory’s position as a leading provider of packaged
MOM solutions
- Reached definitive agreement to
acquire Truition, a leading SaaS eCommerce company
“We are executing on our acquisition strategy, as reflected by
our recent acquisitions of Activplant and WKD Solutions as well as
the pending acquisition of Truition,” said Bruce Cameron, president
of CDC Software. “We anticipate that these will be accretive
acquisitions that fit within our strict valuation criteria. We
believe Activplant will help CDC Software take a leadership role in
the packaged manufacturing operations management (MOM) applications
market. It also expands CDC Factory’s already significant presence
in the food and beverage and CPG markets, as well as help CDC
Supply Chain solutions penetrate further in the Tier 1 automotive
industry.”
WKD Solutions and Activplant were completed during the third and
fourth quarters of 2009, respectively. In addition, CDC Software
recently announced plans to acquire two SaaS companies that
launched its “roll-up” strategy for the growing on-demand market
space. The company believes that the on demand or SaaS space is
showing strong growth. According to Gartner’s May 2009, “Market
Trends: SaaS report for 2008-2013,” Gartner is projecting the
worldwide SaaS market, currently $6 billion in 2008, to show
consistent growth through 2013 when it is expected to total more
than $14 billion for the enterprise application market.
Just last week, CDC Software reached a definitive agreement to
acquire one of these targeted companies, Truition, a leading SaaS
eCommerce platform provider for retailers and brand manufacturers.
Truition opens up the business to-consumer market (B2C) for CDC
Software solutions and also helps to position CDC Software at the
forefront in the enterprise market with its ability to offer an
end-to-end supply chain execution solutions – from raw materials to
the end consumer. The Truition acquisition is expected to close
within the next two weeks.
Cameron added, “We believe Activplant and the planned
acquisition of Truition will position us strongly in the packaged
MOM and SaaS markets, respectively, as well as provide several
potential revenue growth opportunities. As we have stated before,
CDC Software’s acquisition strategy is a key part of the company’s
plan for growth and we believe our strategy is enabled by our
global scalable business and technology platform that features an
infrastructure of multiple complementary applications and services,
domain expertise in vertical markets, cost effective product
engineering centers in India and China and a worldwide network of
direct sales and channel operations. We believe our global platform
is a key reason why we are capable of successfully integrating
acquisitions that should result in a deeper and broader product
portfolio, expanded geographic reach, and increased vertical
expertise.”
Share Repurchase Plan
During the third quarter, CDC Software began a 10b5-1 trading
plan to repurchase American Depositary Shares (ADS) in the open
market, based on various prices. So far, CDC Software has
repurchased 27,619 shares at an average price of approximately
$8.80 per share. The company believes its shares are significantly
undervalued, and intends to continue to repurchase shares in the
open market.
Yip concluded, “Despite the slow global economic recovery, we
believe we are well positioned to continue improving on our
business fundamentals and key operational metrics. In the third
quarter, we did see an increase in new logo customer licenses
compared to the second quarter of 2009 and believe this is a good
indicator for our future revenue outlook. With improving operating
metrics and increasing net cash on hand, we believe we are
well-positioned to execute our organic growth and acquisition
strategies, which includes both on-premise as well as Software as a
Service (SaaS) opportunities. We will remain very disciplined and
strategic buyers for all our acquisitions. Overall, we remain
cautiously optimistic on our fundamental business prospects.”
Conference Call
The Company's senior management will host a conference call for
financial analysts and investors, Monday, Nov. 23rd, 2009, at 8 am
EDT.
USA-based Toll Free Number: +1 (888) 603-6873
International: +1 (973) 582-2706
Pass code: 35254524
Call Leader: Monish Bahl
This call is being webcast by CCBN and can be accessed at CDC
Software's corporate web site at www.cdcsoftware.com.
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 Dec. 7, 2009. U.S. based Toll Free
Number: +1 888 603 6873, U.S.-based Toll Number: +1 973 582 2706.
Conference ID number: 35254524.
(a) Adjusted Financial Measures
This press release includes Adjusted EBITDA and Adjusted EBITDA
Margin, as well as Non-GAAP Net Income and Non-GAAP Earnings per
share which are not prepared in accordance with GAAP ("Non-GAAP
Financial Measures"). Non-GAAP Financial Measures are not
alternatives for measures such as net income, earnings per share
and cash and cash equivalents prepared under generally accepted
accounting principles in the United States ("GAAP"). These Non-GAAP
Financial measures may also 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 Financial Measures
have inherent limitations, including their variance from certain of
the financial measurement principals underlying GAAP, should not be
considered as a replacement for GAAP performance measures, and
should be read in conjunction with our consolidated financial
statements prepared in accordance with GAAP. These supplemental
Non-GAAP Financial Measures 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.
Reconciliations of Non-GAAP Financial Measures to GAAP are provided
herein immediately following the financial statements included in
this press release.
FASB Accounting Standards Codification 810, Consolidation
(ASC 810)
In January 2009, the Company adopted the applicable sections of
ASC 810 that requires reporting entities to present noncontrolling
interests in any of its consolidated entities as equity (as opposed
to a liability or mezzanine equity) and provides guidance on the
accounting for transactions between an entity and noncontrolling
interests. After the adoption of ASC 810, net income (loss) is now
referred to as net income (loss) attributable to controlling
interest on the consolidated statement of operations.
About CDC
Software
CDC Software (NASDAQ: CDCS), The Customer-Driven Company™, is a
provider of enterprise software applications and services designed
to help organizations deliver a superior customer experience, while
increasing efficiencies and profitability. CDC Software provides
customers with maximum flexibility in their solutions through
multiple deployment options which best fit their business needs.
Based on a service-oriented architecture (SOA), CDC Software offers
multiple delivery options for their solutions such as on-premise,
cloud or hybrid, which blends the two deployment offerings. CDC
Software's product suite includes: CDC Factory (manufacturing
operations management), Activplant (enterprise manufacturing
intelligence), CDC Ross ERP (enterprise resource planning), CDC
Supply Chain (supply chain management , warehouse management and
order management),CDC X-alert (real-time supply chain event
management), CDC Power (discrete ERP), CDC Pivotal CRM and Saratoga
CRM (customer relationship management), CDC Respond (customer
complaint and feedback management), c360 CRM add-on products,
industry solutions and development tools for the Microsoft Dynamics
CRM platform, CDC 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, 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, technical support and IT consulting. For more
information, please visit www.cdcsoftware.com.
About CDC Corporation
The CDC family of companies includes CDC Software (NASDAQ: CDCS)
focused on enterprise software applications and services, CDC
Global Services focused on IT consulting services, and outsourced
R&D and application development, CDC Games focused on online
games, and China.com China.com, Inc. (HKGEM:8006) focused on
portals for the greater China markets. For more information about
CDC Corporation (NASDAQ: CHINA), please visit
www.cdccorporation.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 strategic
realignment of our operations and the utility of our platform
strategy, our beliefs regarding and relating to our future
performance, including our sales pipeline, cross-selling
opportunities, the composition of our revenue, the mix of new logo
and existing customers, and the continued growth and improvement
thereof, our beliefs regarding the continued effectiveness of our
maintenance win back program and improvements in DSOs, our beliefs
and expectations regarding fourth quarter sales and the continued
execution of our acquisition strategy, our expectations regarding
our efforts to accelerate organic growth, including the potential
benefits of utilizing OEM partners, resellers, and cross-selling,
for sales and margin improvements, our beliefs regarding the
accretive nature of our past and planned acquisitions, our plans
and expectations relating to the completion of acquisitions and the
potential benefit of any acquisitions for the company and our
customers, our beliefs regarding the opportunity in and growth of,
the SaaS market, our beliefs regarding our share price and value
and our plans with respect to repurchases of our shares, our
beliefs regarding our competitive position, and the reasons for
changes in our financial results and achievements, our beliefs
regarding any preliminary results or indications for the fourth
quarter of 2009, our beliefs regarding our business and financial
decisions and the benefits and effects thereof, our beliefs about
our products, as well as the characteristics and potential benefits
and uses thereof, our beliefs regarding the sufficiency of our cash
to fund our growth initiatives, our beliefs regarding our strategic
position as a platform for growth both acquisitions and
organically, our beliefs regarding our scalable infrastructure, our
beliefs regarding our ability to leverage our global sales and
marketing engine, using our lower cost, high quality offshore
development centers in India and China, and our back office support
systems, and the benefits thereof, our beliefs regarding the
benefits of our infrastructure, our beliefs regarding seasonal
fluctuations in our sales and our expectations regarding future
sales performance, our beliefs regarding our strategic position for
growth and expansion, our expectations and estimates regarding our
financial performance for future periods and 2009, including
revenue, GAAP net income, Non-GAAP Net Income and Adjusted EBITDA,
our beliefs regarding our metrics and leading indicators, our
expectations about improvements in certain financial measures at
CDC Software and the continuation of trends we may have seen or are
seeing, our beliefs regarding the recurring nature of certain
revenue streams and the potential benefits of certain of our
products to users, our expectations regarding our ability to
continue to generate positive cash flows from operations, our
beliefs regarding our current and future strategic, business and
financial position, including the sufficiency of our cash and cash
equivalents, our beliefs regarding customer implementations, our
beliefs regarding the composition of our revenues and the recurring
or non-recurring nature thereof, our beliefs regarding customer
preferences and market trends, 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.
Also, the results and benefits experienced by customers and users
set forth in this press release may differ from those of other
users and customers. Further information on risks or other factors
that could cause results to differ is detailed in our filings or
submissions with the United States Securities and Exchange
Commission, and those of our ultimate parent company, CDC
Corporation. 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.
Historical results are not indicative of future performance.
CDC SoftwareUnaudited
Consolidated Balance Sheets(Amounts in thousands of U.S.
dollars except share and per share data)
September 30, 2008 2009
ASSETS Current assets: Cash and cash equivalents $ 27,341 $
66,828 Restricted cash 3,677 522
Accounts receivable (net of
allowance of $4,644 and $4,458 at December 31, 2008 and September
30, 2009, respectively)
53,014 33,021 Receivable from Parent - 29,995 Prepayments and other
current assets 7,333 8,331 Deferred tax assets 7,089
7,089 Total current assets 98,454 145,786
Property and equipment, net 5,711 4,618 Goodwill 135,987 141,557
Intangible assets 72,907 62,962 Deferred tax assets 32,664 34,492
Note receivable due from related parties 600 618 Investment in cost
method investees 740 798 Other assets 1,218
1,592 Total assets $ 348,281 $ 392,423
LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities:
Accounts payable $ 10,429 $ 10,981 Purchase consideration payables
355 147 Income tax payable 2,259 7,902 Short-term bank loans 5,876
5,092 Short-term loan from Parent 19,530 - Accrued liabilities
23,578 19,441 Restructuring accruals, current portion 1,974 1,917
Deferred revenue 54,507 50,598 Deferred tax liabilities 351
413 Total current liabilities 118,859 96,491
Deferred tax liabilities 25,460 25,628 Restructuring
accruals, net of current portion 239 60 Other liabilities
8,599 8,658 Total liabilities 153,157 130,837
Contingencies and commitments Shareholders' equity:
Class A ordinary shares, $0.001
par value; 50,000,000 shares authorized; Nil and 4,800,000 shares
issued as of December 31, 2008 and September 30, 2009,
respectively; Nil and 4,795,700 shares outstanding as of December
31, 2008 and September 30, 2009, respectively
- 5
Class B ordinary shares, $0.001
par value; 27,000,000 shares authorized; Nil and 24,200,000 shares
issued and outstanding as of December 31, 2008 and September 30,
2009, respectively
- 24 Additional paid in capital - 248,310 Equity investment 203,817
-
Common stock held in treasury; Nil
and 4,300 shares at December 31, 2008 and September 30, 2009,
respectively
- (39 ) Accumulated deficit (5,430 ) 10,759 Accumulated other
comprehensive loss (3,580 ) 2,360 Total
shareholders' equity 194,807 261,419 Noncontrolling interest
317 167 Total equity 195,124
261,586 Total liabilities and shareholders'
equity $ 348,281 $ 392,423
CDC SoftwareUnaudited Combined Statement of
Operations(Amounts in thousands of U.S. dollars except share
and per share data)
Three months ended June 30, September 30,
2009 2009 REVENUE: Licenses (including
royalties from related parties of $145 and $724 respectively) $
7,826 $ 7,618 Maintenance (including royalties from related parties
of $54 and $61 respectively) 24,820 25,414 Professional services
(including royalties from related parties of $Nil and $32,
respectively) 17,304 14,882 Hardware 659 697
Total revenue 50,609 48,611
COST OF REVENUE:
Licenses 4,935 4,318 Maintenance 3,678 3,834 Professional services
14,455 12,613 Hardware 637 680 Total
cost of revenue 23,705 21,445
Gross profit 26,904 27,166 Gross margin % 53 % 56 %
OPERATING EXPENSES: Sales and marketing expenses 8,420 7,783
Research and development expenses 4,176 4,001 General and
administrative expenses 7,854 9,369 General and administrative
expenses allocated to Parent (2,723 ) (2,304 ) Exchange gain on
deferred tax assets (1,417 ) (865 ) Amortization expenses 1,029
1,094 Restructuring and other charges 844 900
Total operating expenses 18,183 19,978
Operating income 8,721 7,188 Operating margin % 17 %
15 % Other income (loss), net (269 ) 796
Income before income taxes 8,452 7,984 Income tax
expense (2,553 ) (1,834 ) Net income 5,899
6,150 Net loss attributable to noncontrolling interest 1
91 Net income attributable to
controlling interest $ 5,900 $ 6,241
Unaudited pro forma information (1): Net income attributable
to controlling interest per class A ordinary share - basic and
diluted $ 0.20 $ 0.22 Net income attributable to
controlling interest per class B ordinary share - basic and diluted
$ 0.20 $ 0.22 Weighted average shares of class A
outstanding - basic and diluted 4,800,000
4,799,740 Weighted average shares of class B outstanding -
basic and diluted 24,200,000 24,200,000
Total weighted average shares - basic and diluted 29,000,000
28,999,740 (1) Unaudited pro forma
basic and diluted earnings per share are presented after giving
effect to the recapitalization and issuance of 29,000,000 shares
upon the effectiveness of the registration statement in August
2009.
CDC SoftwareUnaudited Combined Statement of
Operations(Amounts in thousands of U.S. dollars except share
and per share data) Three months ended
September 30,
2008 2009 REVENUE: Licenses (including
royalties from related parties of $408 and $724, respectively) $
11,874 $ 7,618 Maintenance (including royalties from related
parties of $48 and $61, respectively) 26,372 25,414 Professional
services (including royalties from related parties of $Nil and $32,
respectively) 21,182 14,882 Hardware 1,083 697
Total revenue 60,511 48,611
COST OF REVENUE:
Licenses 5,694 4,318 Maintenance 3,950 3,834 Professional services
16,161 12,613 Hardware 585 680 Total
cost of revenue 26,390 21,445
Gross profit 34,121 27,166 Gross margin % 56 % 56 %
OPERATING EXPENSES: Sales and marketing expenses 12,801
7,783 Research and development expenses 6,347 4,001 General and
administrative expenses 9,332 9,369 General and administrative
expenses allocated to Parent (2,588 ) (2,304 ) Exchange (gain) loss
on deferred tax assets 353 (865 ) Amortization expenses 1,757 1,094
Restructuring and other charges 520 900
Total operating expenses 28,522 19,978
Operating income 5,599 7,188 Operating margin % 9 % 15 %
Other income, net 32 796
Income before income taxes 5,631 7,984 Income tax expense
(1,397 ) (1,834 ) Net income 4,234 6,150 Net loss
attributable to noncontrolling interest 9 91
Net income attributable to controlling interest $
4,243 $ 6,241
Unaudited pro forma
information (1): Net income attributable to controlling
interest per class A ordinary share - basic and diluted $ 0.15
$ 0.22 Net income attributable to controlling
interest per class B ordinary share - basic and diluted $ 0.15
$ 0.22 Weighted average shares of class A outstanding
- basic and diluted 4,800,000 4,799,740
Weighted average shares of class B outstanding - basic and diluted
24,200,000 24,200,000 Total weighted
average shares - basic and diluted 29,000,000
28,999,740 (1) Unaudited pro forma basic and diluted
earnings per share are presented after giving effect to the
recapitalization and issuance of 29,000,000 shares upon the
effectiveness of the registration statement in August 2009.
CDC
SoftwareUnaudited Combined Statement of
Operations(Amounts in thousands of U.S. dollars except share
and per share data)
Nine months
endedSeptember 30,
2008 2009 REVENUE: Licenses (including
royalties from related parties of $842 and $1,111, respectively) $
36,007 $ 22,574 Maintenance (including royalties from related
parties of $129 and $201, respectively) 78,740 74,432 Professional
services (including royalties from related parties of $Nil and $32,
respectively) 68,941 50,866 Hardware 2,801
1,701 Total revenue 186,489 149,573
COST OF
REVENUE: Licenses 15,472 13,831 Maintenance 12,040 11,054
Professional services 54,158 42,886 Hardware 1,897
1,556 Total cost of revenue 83,567
69,327 Gross profit 102,922 80,246 Gross
margin % 55 % 54 %
OPERATING EXPENSES: Sales and
marketing expenses 43,500 23,856 Research and development expenses
19,312 12,708 General and administrative expenses 32,775 26,300
General and administrative expenses allocated to Parent (9,276 )
(7,888 ) Exchange (gain) loss on deferred tax assets 784 (2,054 )
Amortization expenses 5,106 3,382 Restructuring and other charges
3,662 2,175 Total operating expenses
95,863 58,479 Operating income
7,059 21,767 Operating margin % 4 % 15 % Other income, net
534 671 Income before income
taxes 7,593 22,438 Income tax expense (3,673 ) (6,390
) Net income 3,920 16,048 Net loss attributable to
noncontrolling interest 46 141
Net income attributable to controlling interest $ 3,966 $
16,189
Unaudited pro forma information
(1): Net income attributable to controlling interest per class
A ordinary share - basic and diluted $ 0.14 $ 0.56
Net income attributable to controlling interest per class B
ordinary share - basic and diluted $ 0.14 $ 0.56
Weighted average shares of class A outstanding - basic and diluted
4,800,000 4,799,740 Weighted average
shares of class B outstanding - basic and diluted 24,200,000
24,200,000 Total weighted average shares -
basic and diluted 29,000,000 28,999,740
(1) Unaudited pro forma basic and diluted earnings per share
are presented after giving effect to the recapitalization and
issuance of 29,000,000 shares upon the effectiveness of the
registration statement in August 2009.
CDC
SoftwareUnaudited Combined Statement of Cash
Flow(Amounts in thousands of U.S. dollars except share and
per share data)
Three months ended June 30, September 30,
2009 2009 OPERATING ACTIVITIES: Net income $
5,899 $ 6,150 Adjustments to reconcile net income to net cash
provided by operating activities: Depreciation expense 783 766
Amortization expense 4,572 4,482 Provision for bad debt 338 295
Stock compensation expenses 201 750 Deferred income tax provision
(7 ) (21 ) Exchange gain on deferred tax assets (1,417 ) (865 )
Loss on disposal of property and equipment 92 1 Accrued interest
income from Parent 188 (789 ) Interest income received on
restricted cash (31 ) 12 Changes in operating assets and
liabilities: Accounts receivable 9,005 9,355 Deposits, prepayments
and other receivables (2,077 ) 1,873 Other assets (141 ) (11 )
Accounts payable 369 (610 ) Income tax payable 2,281 1,848 Accrued
liabilities (3,234 ) (701 ) Deferred revenue (1,329 ) (3,483 )
Other liabilities (279 ) 149 Net cash provided
by operating activities 15,213 19,201
INVESTING ACTIVITIES: Acquisitions, net of cash
acquired - (1,323 ) Purchases of property and equipment (289 ) (203
) Capitalized software (1,203 ) (905 ) Decrease (increase) in
restricted cash 3,220 (11 ) Net cash provided
(used) in investing activities 1,728 (2,442 )
FINANCING ACTIVITIES: Issurance of class A ordinary
shares - 43,390 Payments on loan from Parent (14,447 ) (13,752 )
Short-term borrowings (payments) 309 (524 ) Purchase of treasure
stock - (39 ) Payments for capital lease obligations (280 )
(95 ) Net cash provided (used) in financing activities
(14,418 ) 28,980 Effect of exchange
differences on cash 620 500 Net
increase in cash and cash equivalents 3,143 46,239 Cash at
beginning of period 17,446 20,589
Cash at end of period $ 20,589 $ 66,828
CDC SoftwareUnaudited Combined Statement of
Cash Flow(Amounts in thousands of U.S. dollars except share
and per share data)
Three months
endedSeptember 30,
Nine months
endedSeptember 30,
2008 2009 2008 2009 OPERATING
ACTIVITIES: Net income $ 4,234 $ 6,150 $ 3,920 $ 16,048
Adjustments to reconcile net income to net cash provided by
operating activities: Depreciation expense 988 766 3,192 2,372
Amortization expense 6,106 4,482 16,333 14,205 Provision for bad
debt 648 295 1,813 869 Stock compensation expenses 24 750 813 1,132
Deferred income tax provision 724 (21 ) 2,504 (28 ) Exchange (gain)
loss on deferred tax assets 353 (865 ) 784 (2,054 ) Loss (gain) on
disposal of property and equipment 19 1 2 93 Accrued interest
income from Parent (160 ) (789 ) (480 ) (673 ) Interest income
received on restricted cash - 12 - (47 ) Changes in operating
assets and liabilities: Accounts receivable 62 9,355 8,981 20,495
Note receivable due from franchise partners (85 ) - (420 ) -
Deposits, prepayments and other receivables 217 1,873 2,115 (644 )
Other assets (569 ) (11 ) (70 ) (277 ) Accounts payable 2,170 (610
) (1,585 ) 159 Income tax payable 387 1,848 (34 ) 5,616 Accrued
liabilities (2,691 ) (701 ) (4,465 ) (5,060 ) Deferred revenue
(5,560 ) (3,483 ) (7,104 ) (5,385 ) Other liabilities (589 )
149 (513 ) 128 Net cash provided
by operating activities 6,278 19,201
25,786 46,949
INVESTING
ACTIVITIES: Acquisitions, net of cash acquired - (1,323 ) (39 )
(1,323 ) Payment for prior year acquisitions (418 ) - (348 ) -
Purchases of property and equipment (618 ) (203 ) (2,180 ) (890 )
Capitalized software (1,228 ) (905 ) (6,512 ) (3,000 ) Investment
in cost method investees (franchise partners) (48 ) - (153 ) (38 )
Decrease (increase) in restricted cash - (11 )
- 3,209 Net cash provided (used) in
investing activities (2,312 ) (2,442 ) (9,232
) (2,042 )
FINANCING ACTIVITIES: Issurance of
class A ordinary shares - 43,390 - 43,390 Borrowings on loan from
Parent 10,334 - 10,334 162 Payments on loan from Parent (17,016 )
(13,752 ) (32,624 ) (48,909 ) Short-term borrowings (326 ) (524 )
4,712 (403 ) Purchase of treasure stock (39 ) (39 ) Payments for
capital lease obligations - (95 ) -
(460 ) Net cash provided (used) in financing
activities (7,008 ) 28,980 (17,578 )
(6,259 ) Effect of exchange differences on cash
(582 ) 500 85 839
Net increase (decrease) in cash and cash equivalents (3,624
) 46,239 (939 ) 39,487 Cash at beginning of period 26,342
20,589 23,657 27,341
Cash at end of period $ 22,718 $ 66,828
$ 22,718 $ 66,828
CDC SoftwareUnaudited
Reconciliation From GAAP Results to Adjusted EBITDA and Non-GAAP
Net Income(Amounts in thousands of U.S. dollars except share
and per share data) Three months ended June
30, September 30, 2009 2009 (a)
Reconciliation from GAAP results to Adjusted EBITDA from continuing
operations Operating income from continuing operations $ 8,721
$ 7,188 Add back restructuring and other charges 844 900 Add back
depreciation expense 783 766 Add back amortization expense 1,029
1,094 Add back amortization expense included in cost of revenue
3,544 3,388 Add back stock compensation expenses 201 750 Add back
exchange gain on deferred taxes (1,418 ) (865 )
Adjusted EBITDA $ 13,704 $ 13,221 Adjusted EBITDA
margin % 27 % 27 % (1) Adjusted EBITDA does not
include the adjustment related to capitalized software costs which
are credited against research and development expenses in our
consolidated statement of operations. Below is a summary of
capitalized software credits for the three months ended June 30 and
September 30:
Three months ended June
30, September 30, 2009 2009
Capitalized software credits $ (1,203 ) $ (905 )
Three months ended June 30, September
30, 2009 2009 (a) Reconciliation from GAAP net
income attributable to controlling interest to non-GAAP net income
and non-GAAP net income per share Net income attributable to
controlling interest $ 5,900 $ 6,241 Add back amortization expense
1,029 1,094 Add back amortization expense included in cost of
revenue 3,544 3,388 Subtract capitalized software credits (1,203 )
(905 ) Add back stock based compensation 201 750 Add back
restructuring 844 900 Add back exchange gain loss on deferred tax
assets (1,418 ) (865 ) Add back non cash tax expense 894 642 Tax
affect on all reconciling items@31% (1,369 ) (1,620 )
Non-GAAP net income $ 8,422 $ 9,625 Non-GAAP net
income as % of revenues 17 % 20 % Total weighted average shares
outstanding (basic and dilutive) 29,000,000 28,999,740
Non-GAAP
net income per share (basic and dilutive) $ 0.29
$ 0.33
CDC SoftwareUnaudited Reconciliation From GAAP Results to
Adjusted EBITDA and Non-GAAP Net Income(Amounts in thousands
of U.S. dollars except share and per share data)
Three Months
EndedSeptember 30,
Nine Months
EndedSeptember 30,
2008 2009 2008 2009 (a)
Reconciliation from GAAP results to Adjusted EBITDA from continuing
operations Operating income from continuing operations $ 5,599
$ 7,188 $ 7,059 $ 21,767 Add back restructuring and other charges
520 900 3,662 2,175 Add back depreciation expense 988 766 3,192
2,372 Add back amortization expense 1,757 1,094 5,106 3,381 Add
back amortization expense included in cost of revenue 4,349 3,388
11,227 10,824 Add back stock compensation expenses 24 750 813 1,132
Add back exchange (gain) loss on deferred taxes 353
(865 ) 784 (2,054 ) Adjusted EBITDA $
13,590 $ 13,221 $ 31,843 $ 39,597
Adjusted EBITDA margin % 22 % 27 % 17 % 26 % (1) Adjusted
EBITDA does not include the adjustment related to capitalized
software costs which are credited against research and development
expenses in our consolidated statement of operations. Below is a
summary of capitalized software credits for the three months and
nine months ended September 30:
Three Months
EndedSeptember 30,
Nine Months
EndedSeptember 30,
2008 2009 2008 2009 Capitalized
software credits $ (1,228 ) $ (905 ) $ (6,512 ) $ (3,000 )
Three Months
EndedSeptember 30,
Nine Months
EndedSeptember 30,
2008 2009 2008 2009 (a)
Reconciliation from GAAP net income attributable to controlling
interest to non-GAAP net income and non-GAAP net income per
share Net income attributable to controlling interest $ 4,243 $
6,241 $ 3,966 $ 16,189 Add back amortization expense 1,757 1,094
5,106 3,381 Add back amortization expense included in cost of
revenue 4,349 3,388 11,227 10,824 Subtract capitalized software
credits (1,228 ) (905 ) (6,512 ) (3,000 ) Add back stock based
compensation 24 750 813 1,132 Add back restructuring 520 900 3,662
2,175 Add back exchange gain loss on deferred tax assets 353 (865 )
784 (2,054 ) Add back non cash tax expense 489 642 1,286 2,237 Tax
affect on all reconciling items@31% (1,681 ) (1,620 )
(4,432 ) (4,499 ) Non-GAAP net income $ 8,826
$ 9,625 $ 15,900 $ 26,385 Non-GAAP net income
as % of revenues 15 % 20 % 9 % 18 % Total weighted average shares
outstanding (basic and dilutive) 29,000,000 28,999,740 29,000,000
28,999,740
Non-GAAP net income per share (basic and
dilutive) $ 0.30 $ 0.33 $
0.55 $ 0.91
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