CDC Corporation (NASDAQ: CHINA), a leading global enterprise
software, IT services and new media company, today announced
financial results for the quarter ended September 30, 2009. For the
third quarter of 2009, CDC Corporation reported revenue of
(U.S.)$76.6 million and net income attributable to controlling
interest of (U.S.)$5.6 million, or (U.S.) $0.05 per share. This
compares to revenue of (U.S.)$104.1 million and a net loss
attributable to controlling interest of $10.0 million, or a loss
per share of (U.S.) $0.09 for the third quarter of 2008.
Third quarter operating cash flow was $12.1 million, compared to
$11.2 million in the second quarter of 2009, and a 52 percent
increase from (U.S.)$8.0 million in the third quarter of 2008. This
marks eight consecutive quarters of cash generated from
operations.
Third quarter adjusted EBITDA (a) from continuing operations (b)
or Adjusted EBITDA* was (U.S.)$9.0 million compared to Adjusted
EBITDA of (U.S ) $13.7 million in the third quarter of 2008.
For the nine months ended September 30, 2009, CDC Corporation
reported Adjusted EBITDA of (U.S.)$28.7 million compared to
(U.S.)$26.2 million for the same period in 2008. Net income
attributable to controlling interest for the nine months ended
September 30, 2009, was (U.S.)$16.5 million, or (U.S.)$0.14 per
share, compared to a net loss attributable to controlling interest
of (U.S.)$33.1 million, or a loss per share of (U.S.)$0.31 for the
same period in 2008.
As of September 30, 2009, Non-GAAP Cash and Cash Equivalents(a)
of (U.S.)$162.0 million.
“We are pleased with our overall performance, especially in
achieving eight consecutive quarters of positive operating cash
flow,” said Peter Yip, CEO of CDC Corporation. “CDC Software
performed well with a significant increase in operating cash flow
to $19.2 million compared to $6.3 million in the prior year period.
Results were influenced by historically soft sales in the third
quarter for our enterprise software unit, the significant focus
expended for the upcoming launch of The Lord of the Rings Online in
our Games business and the completion of high yielding margin
engagements for CDC Global Services. However, we are optimistic on
the outlook for the fourth quarter and beyond, since we have
started to execute on key strategic alternatives that are expected
to fuel our growth in the coming quarters for each of our key
businesses.”
CDC Corporation Consolidated
- Net income attributable to
controlling interest for third quarter 2009 was (U.S.)$5.6 million
or (U.S.) $0.5 per share compared to a net loss attributable to
controlling interest of (U.S.)$10.0 million, or a loss per share of
(U.S.) $0.09 in the third quarter of 2008.
- Operating cash flow was $12.1
million, a 52 percent increase from (U.S.)$8.0 million in the third
quarter of 2008.
- Total revenue for CDC
Corporation in the third quarter of 2009 was (U.S.)$76.6 million, a
decrease of 6 percent from (U.S.)$81.6 million in the second
quarter of 2009.
- Adjusted EBITDA in the third
quarter of 2009 was (U.S.)$ 9.0 million, a decrease of 28 percent
from (U.S.)$12.5 million in the second quarter of 2009.
- Third quarter revenue was
attributed to the following regions: North America, 48 percent,
EMEA, 26 and Asia/Pacific, 26 percent.
Subsidiary Revenue and Operating Metrics Summary
CDC Software
On a standalone basis, for the third quarter of 2009, CDC
Software posted a significant increase in operating cash flow of
(U.S.)$19.2 million compared to (U.S.)$6.3 million in the same
period last year. CDC Software reported net income attributable to
controlling interest of (U.S.)$6.2 million and Non-GAAP earnings
per share of (U.S.)$0.33. These amounts exceeded Wall Street
consensus estimates, which according to First Call, were (U.S.)$4.6
million for net income attributable to controlling interest and
(U.S.)$0.30 for Non-GAAP earnings per share.
CDC Software had the following results for the three months
ended September 30, 2008 and 2009:
Q3 2008 Q3 2009
Revenue: (U.S.)$60.5 million (U.S.)$48.6 million Non-GAAP Net
Income: (U.S.)$8.8 million (U.S.)$9.6 million Non-GAAP earnings per
share: (U.S.)$0.30 (U.S.)$0.33 Operating Cash Flow (U.S)$6.3
million (U.S.)$19.2 million
Total revenue for CDC Software for the third quarter of 2009 was
(U.S.)$48.6 million. However, license sales from new logo customers
increased 38 percent compared to 22 percent of license customers in
the second quarter of 2009.
CDC Software is now trading as a separately listed public
company on the NASDAQ Global Market under the symbol CDCS. For a
more information regarding the financial performance of CDC
Software during the third quarter and first nine months of 2009,
please see CDC Software's third quarter 2009 press release located
at the company's website: www.cdcsoftware.com.
“We are very pleased on accomplishing $19.2 million in operating
cash flow, up more than 200 percent year over year,” said Bruce
Cameron, president of CDC Software. “While our third quarter
reflected challenges in the seasonality of our business due to
summer holidays in certain regions which delayed purchasing
decisions, we were very pleased that we exceeded the Wall Street
consensus estimates for third quarter GAAP net income and Non-GAAP
earnings per share. Our maintenance retention rate continues to be
one of the highest in the industry and we have generated strong
maintenance gross margins, as well as seeing increasing success in
our maintenance win back program. Our fourth quarter sales pipeline
and our cross-sell opportunities have continued to show steady
growth. We also have aggressively restarted our acquisition
strategy and have made announcements in recent months on the
completion of certain acquisition opportunities and the execution
of binding agreements to acquire others. These recent acquisition
transactions address key areas in our technology road map, open up
cross-sell opportunities, expand our market share in new, existing
and underpenetrated markets, as well as move us strongly into the
software as a service (SaaS) space. In addition, we launched an
aggressive growth strategy in China that included the addition of
seven resellers in China that we believe may help us increase sales
dramatically in that region over the next few years.”
CDC Global Services
On a standalone basis, CDC Global Services had the following
results for the three months ended June 30, 2009 and the three
months ended September 30, 2009:
Q2 2009 Q3 2009
Revenue: (U.S.)$18.5 million (U.S.)$19.2 million Adjusted EBITDA:
(U.S.)$0 (U.S.)$0.3 million Adjusted EBITDA Margin: 0 2%
Total revenue for CDC Global Services for the third quarter of
2009 was (U.S.) $19.2 million, an improvement from second quarter
of 2009. Third quarter Adjusted EBITDA for CDC Global Services also
improved when the company generated $300,000 in Adjusted
EBITDA.
Approximately 63 percent of CDC Global Services’ revenue was
derived from the U.S. market while 37 percent was from
international sources. Staff utilization for the quarter was 90
percent, an increase from 89 percent in Q2 2009 which the company
believes are higher than industry averages. CDC Global Services'
profit margins were negatively impacted in part by the completion
of high yielding margin engagements and the expenses associated
with ramping up its BPO operations in India.
The company is pursuing strategic alternatives to fuel its
expansion, and position CDC Global Services for long-term growth.
Recently, CDC Global Services agreed to acquire a majority interest
in Sowell, known also as the platform of Jiangsu Microsoft
Technology Center in Nanjing, which provides research and
development services to Microsoft. In the event the acquisition is
completed, Sowell is expected to serve as a platform for rolling up
other Microsoft Technology Centers and help expand CDC Global
Services’ services throughout China. These steps are expected to
help position CDC Global Services to become one of the market
leaders in IT/R&D outsourcing for customers around the world.
In addition, CDC Global Services expanded its capabilities in
India, and plans to continue to add more seats to its BPO and IT
outsourcing operations there.
Some other highlights in the CDC Global Services business
include major new engagements for the implementation of warehouse
management systems for a major specialty gas processor; the
implementation of a small parcel shipping solution for a third
party logistics provider; and the integration of a small parcel
solution for a leading Life Sciences provider at a major European
distribution center, followed by a global roll out.
"We are very pleased on our recent moves aimed at expanding our
outsourcing operations especially in the IT/R&D outsourcing
area in China, which we believe offers significant growth
potential,” said Mr. C.K. Wong, Ph.D, chairman of CDC Global
Services. “We have been seeing growing demand for outsourcing,
especially in IT and R&D, by enterprises that are looking to
enhance their business operations on flexibility, cost savings and
core competencies. We believe CDC Global Services’ recent plans to
acquire the Jiangsu Microsoft Technology Center could serve as the
launch pad for expanding our IT/R&D outsourcing capabilities in
China. Notably, based on recent cost reduction strategies
implemented during the last two quarters and increasing labor
utilization rates, we expect to see continued EBITDA improvement in
this business in Q4.”
CDC Games
On a standalone basis, CDC Games had the following results for
the three months ended June 30, 2009 and the three months ended
September 30, 2009.
Q2 2009 Q3 2009
Revenue: (U.S.)$9.5 million (U.S.)$6.2 million Adjusted EBITDA:
(U.S.)$3.3 million (U.S.)-$0.9 million Adjusted EBITDA Margin: 35%
-14%
Total revenue from continuing operations (b) for CDC Games
during the third quarter of 2009 declined to (U.S.)$6.2 million,
compared to (U.S.) $9.5 million in Q2 2009 (U.S.). The decrease was
mainly attributable to resources focused on upcoming launches of
The Lord of the Rings Online (LOTRO) and Richman Universe (RU
Online), the company’s first major domestic online game based on
the widely popular Monopoly game.
CDC Games recently completed a successful Closed Beta Test of
The Lord of the Rings Online (LOTRO), which attracted more than 2.0
million users with an average playing time of 3.9 hours per
session. Throughout the testing period, LOTRO was frequently ranked
in the Top 10 list of highly anticipated and most downloaded games
in various popular games portals, and since its Open Beta Test
launch last week on November 20, 2009, it has been ranked in the
top 5 for most anticipated games on China's top search engine.
LOTRO entered Open Beta Test last week on November 20, 2009 and is
planning its commercial launch within the next two weeks. After the
first day of LOTRO’s OBT, average playing time averaged five hours
per session.
The company is looking to maximize its strategic alternatives in
the first half of 2010, based on the launch of LOTRO, and
leveraging its existing games portfolio, as well as its strong
pipeline of upcoming local games. Other local games CDC Games is
planning to launch next year include a 3D massively multiplayer
online role playing game (MMORPG) based on a popular fiction novel
and a 2.5D massively multiplayer online game (MMOG) based on
Chinese history.
"Third quarter revenue declined as a result of dedicating our
focus and resources to the launch of LOTRO and on RU Online planned
in the fourth quarter,” said Mr. Sun Jingqing, COO of CDC Games.
“We have also experienced delays from receiving any major content
update from Mgame, the developer of Yulgang, which we believe has
impacted our metrics for that game. However, with the successful
OBT of LOTRO to date and its eventual commercial launch, we believe
that we are well positioned to improve our revenue for the fourth
quarter of 2009. We are also pleased with the exciting new local
games we have in the pipeline for next year. We believe that with
these factors along with strategic alternatives that we plan to
pursue, we have positioned the business for rapid organic growth in
2010 and beyond.”
China.com
Total revenue for China.com from continuing operations (b) was
(U.S.)$2.7 million in each of the third quarter of 2008 and
2009.
In the third quarter, China.com portal Automobile Channel
reported the Auto Show Events in Changchun and Chengdu as well as
the Motor Show in Frankfurt. In September, China.com’s Game Channel
covered the Tokyo Game Show. China.com was the leading media
reporting these major events in China, all of which had generated a
great deal of interest in the gaming community.
In September, the Automobile Channel organized “Design in China”
competition in search for innovative design for automotive and
tire. The sponsors of these two events included China Great Wall
Auto, Pan Asia Technical Automotive Center and China Automotive
Engineers Society. China.com will continue to host these events and
will roll them out to major design colleges and universities to tap
talented designers in the country. Other clients include Shanghai
Volkswagen, Worry-free work network, Sofang.com, IBM China, Nokia
china, Guangzhou Honda, Haier Group, FAW Mazda Motor, Kumho Asiana,
Lotto Travel Network, Toyota China, Canon China, Dongfeng and Yueda
Kia Motors.
China.com Inc’s subsidiary, TTG has initiated new strategies to
find new revenue sources. In the third quarter, the team initiated
two new projects namely “TTG 35th Anniversary Special Edition” and
“New TTG Revamp Issues” that successfully brought in new sourcesof
revenue. Other Q3 achievements include the appointment of TTG as
“Media Partner” by Xin Lu Advertising – the official advertising
agency of China National Tourism Administration – to publish the
International Section of the official directory of China
International Travel Mart (CITM) 2009 and the CITM 2009 official
daily.
China.com is actively pursuing strategic alternatives which it
believes may help transform its business and unlock shareholder
value.
Concluding Remarks
Yip concluded, "Overall, we are pleased with our prospects for
growth in our main businesses despite challenging market
conditions. We have now completed some key strategic initiatives
for CDC Software that we believe will position it for dynamic
growth in the future. Now, we are more aggressively pursuing and
evaluating a number of strategic alternatives for our other
business units. We believe our recent acquisition plans for CDC
Software and CDC Global Services will help expand their businesses
and help position them in leadership roles in their respective
markets. We also feel confident in the prospects of LOTRO after its
successes in just a few days of OBT. We anticipate that LOTRO will
be a significant driver of organic growth quarter over quarter for
CDC Games, that is expected to be supplemented by our local games
planned for next year.
"Also, we are continuing our strategy to improve cost
management, streamline operations, reduce debt and pursue a variety
of strategic growth opportunities that we intend will not only
strengthen our balance sheet, but also ultimately help to unlock
shareholder value. We remain cautiously optimistic with our
long-term prospects since we are making significant acquisitions,
executing new growth strategies and launching exciting games.”
Convertible Note Update
As of September 30, 2009, CDC Delaware Corp., a wholly-owned
subsidiary of CDC Corporation was the holder of (U.S.)$124.8
million in principal amount, or 74.7 percent of the total aggregate
outstanding amount of the company’s 3.75 percent Senior
Exchangeable Convertible Notes due 2011, or Notes. Approximately
25.3 percent, or (U.S.)$42.2 million in face value, of the
outstanding notes are held by non-affiliates of the company.
CDC Corporation has recently received notification from the
non-affiliated Note holders that such holders have purported to
exercise the holder redemption option under the Notes.
On November 11, 2009, CDC Delaware Corporation and the
company amended the Notes and the related Note Purchase Agreement
to provide that certain subsidiaries of the company, or any of
their respective subsidiaries, can consummate a “Qualified IPO”,
and to reduce the amount of proceeds necessary to achieve a
Qualified IPO from (U.S.)$100.0 million to
(U.S.)$40.0 million.
As a result of these amendments, the company disputes the
validity of the holder redemption notices, and believes that,
although the outcome of any negotiations or disputes with any
holders is uncertain, the holder redemption provision is both no
longer exercisable by such holders, and is no longer of any force
or effect.
CDC Corporation expects to continue discussing potential
resolutions to this dispute with the Note holders, and has recently
reached a preliminary agreement with one noteholder with respect to
its Notes.
Also, on October 30, 2009, CDC Corporation announced that it
initiated a lawsuit against a holder of its Notes, alleging breach
of non-disclosure agreement, breach of the purchase agreement
relating to the Notes, breach of the covenant of good faith and
fair dealing, breach of fiduciary duty, wrongful disclosure and
misuse of trade secrets, tortious interference with business
relations, and civil conspiracy. The complaint also seeks recovery
of compensatory damages, punitive damages, interest, attorneys’
fees, litigation expenses and injunctive relief.
Conference Call
The company's senior management will host a conference call for
financial analysts and investors on Monday, November 23, 2009, at
9:00 am EDT.
USA-based Toll Free Number: +1-(888) 603-6873
International: +1 973 582 2706
Pass code: 35253031
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 Dec07, 2009. U.S. based Toll Free
Number: +1 800 642 1687, U.S.-based Toll Number: +1 706 645 9291
Conference ID #: 35253031
* CDC Corporation has recently changed the composition of its
Adjusted EBITDA measurement, as provided herein, to be consistent
with the presentation of Adjusted EBITDA for its subsidiary, CDC
Software Corporation. CDC Corporation believes this revised
presentation is a useful measurement of operating performance. A
reconciliation of this revised Adjusted EBITDA measurement to our
historical Adjusted EBITDA measurement is provided below.
(a) Adjusted Financial Measures
This press release includes Adjusted EBITDA from continuing
operations, Non-GAAP Net Income, Non-GAAP earnings per share and
Non-GAAP Cash and Cash Equivalents, which are not prepared in
accordance with GAAP (collectively, the "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.
(b) Adjustment for Discontinued Businesses
During the second and fourth quarter of 2008, the mobile value
added business of China.com and operations of CDC Games
International, respectively, were discontinued. The operations of
CDC Games International, a subsidiary of CDC Games Corporation,
included operations in the U.S., Japan and Korea. All historical
results related to these two businesses have been included in
discontinued operations.
(c) 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.
(d) 2008 Revised Quarterly Information
Results provided herein for certain quarters of 2008 may be
different than those previously reported in our press releases due
to certain year-end adjustments required to be made in connection
with the audit of our financial statements for the year ended
December 31, 2008.
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.
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.
Leveraging a service-oriented architecture (SOA), CDC Software
offers multiple delivery options for their solutions such as
on-premise, cloud-based or hybrid (blending of the two options)
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 Global Services
CDC Global Services, a business unit of CDC Corporation,
provides IT consulting services, including platform-specific
services for Microsoft and SAP, as well as project management, IT
staffing, managed help desk solutions and a full range of
outsourced service offerings. CDC Global Services provides hardware
for data collection and RFID, through partnerships with some of the
industry's most reputable vendors. CDC Global Services customers
benefit from streamlined vendor management and the ability to
control project costs, while being able to access the right IT
resources through a singular point of contact. For more information
on CDC Global Services, visit: www.cdcglobalservices.com.
About CDC Games
CDC Games is a market leader in online and mobile games in China
with more than 160 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. Currently, CDC Games offers six popular MMO online games in
China. For more information on CDC Games, visit:
www.cdcgames.net
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
second 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 (HKGEM:8006) 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.
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 and expectations regarding our
future growth and performance at CDC Corporation and at each of our
subsidiaries, our beliefs regarding maintenance retention rates,
sales pipelines, cross-selling opportunities and other plans, our
beliefs regarding our strategies and the potential benefits
thereof, our beliefs regarding market positioning and market
potential, our beliefs regarding staff utilization rates and
margins at our Global Services business, our beliefs regarding
plans for future expansion and growth in each of our businesses,
our beliefs regarding any past, pending and future acquisitions we
may make, our beliefs and expectations regarding our potential for
growth, our beliefs regarding trends we may see and any
continuation of them, including those indicating increased demand
for IT/R&D outsourcing, Our beliefs regarind the potential
success of LOTRO and our pipeline of planned games, our beliefs
regarding strategic alternatives and the effectiveness thereof, our
beliefs regarding present and future steps to unlock shareholder
value, our beliefs regarding our amendments to CDC Corporation’s
3.75% Senior Exchangeable Convertible Notes, or Notes, and the
effects thereof, our beliefs regarding the invalidity of the holder
redemption put notices, our beliefs regarding any potential future
success in our negotiations with our noteholders, our beliefs
regarding plans to unlock shareholder value at our subsidiaries,
our beliefs regarding the effects of our proactive strategies for
right-sizing, improving operational efficiencies and leverage
off-shore resources, our beliefs regarding the stability of our
sales to our installed base customers, our beliefs regarding our
competitive positioning in the event of a recovery in the global
economy, our beliefs regarding the utility of the pro forma
financial information provided herein, our beliefs regarding
factors that negatively affected performance at CDC Global Services
during the second quarter of 2009, our expectations regarding
planned launches for games at CDC Games and the timing thereof, our
beliefs regarding market perceptions of our current and planned
games and trends related thereto, our beliefs regarding the timing
of our anticipated launch of LOTRO, our beliefs regarding our
platform strategy and competitive position, our expectations and
estimates regarding our financial performance for future periods
and 2009, including revenue, GAAP net income and Adjusted EBITDA,
our beliefs about Yulgang, our beliefs about the continuation of,
and any possible results of, our discussions with holders of our
convertible notes and communications relating thereto, as well as
the completion of any transactions relating thereto, our beliefs
about the nature of revenues, our beliefs regarding China.com's
business and the factors influencing it, our beliefs about our cash
position, our efforts with respect to continued cost-savings and
our beliefs regarding our marketing, financial, business and
competitive position 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) risks
associated with our convertible debt, including the potential
outcome of disagreements with our noteholders, the risks associated
with our recent amendment of the Notes and the validity of the
holder redemption put provisions of the Note and notices we have
received, and the risks regarding potential amounts we may be
required to pay under the Notes, including amounts which could be
in excess of the face value of these Notes; (c) 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; (d) the effects of
restructurings and rationalization of operations in our companies;
(e) the ability to address technological changes and developments
including the development and enhancement of products; (f) the
ability to develop and market successful products and services; (g)
the entry of new competitors and their technological advances; (h)
the need to develop, integrate and deploy enterprise software
applications to meet customer's requirements; (i) the possibility
of development or deployment difficulties or delays; (j) the
dependence on customer satisfaction with the company's games,
software products and services; (k) continued commitment to the
deployment of the products, including enterprise software
solutions; (l) risks involved in developing software solutions and
integrating them with third-party software and services; (m) the
continued ability of the company's products and services to address
client-specific requirements; (n) demand for and market acceptance
of new and existing enterprise software and services and the
positioning of the company's solutions; and (o) 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 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, 2008 on Form 20-F filed on June 30, 2009.
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 Corporation Unaudited Consolidated Balance Sheets
(Amounts in thousands of U.S. dollars except share and per share
data) December 31, September
30, 2008 2009
ASSETS Current assets: Cash $ 165,693 $ 141,563 Restricted
cash 4,275 671 Accounts receivable (net of allowance of $8,304 and
$8,295 at December 31, 2008 and September 30, 2009, respectively)
72,834 48,431 Available-for-sale securities 33,454 6,738 Deferred
tax assets 7,880 8,093 Prepayments and other current assets
11,944 13,839 Total current assets 296,080
219,335 Property and equipment, net 15,392 13,536 Goodwill
155,083 163,533 Intangible assets, net 107,287 91,710
Available-for-sale securities 11,771 12,997 Investments under cost
method 996 1,120 Equity investments 10,261 10,261 Deferred tax
assets 41,859 43,687 Other assets 5,166 4,586
Total assets $ 643,895 $ 560,765
LIABILITIES AND SHAREHOLDERS’ EQUITY Current liabilities:
Accounts payable $ 23,297 $ 22,567 Purchase consideration payables
628 419 Income tax payable 4,194 8,052 Accrued liabilities 43,270
34,652 Restructuring accruals, current portion 2,026 2,008
Short-term loans 8,265 15,680 Convertible notes 160,961 41,544
Derivatives of convertible notes 41,189 14,117 Deferred revenue
61,977 55,363 Deferred tax liabilities 438 472
Total current liabilities 346,245 194,874 Deferred
tax liabilities 27,624 27,792 Restructuring accruals, net of
current portion 239 8 Other liabilities 12,848
13,136 Total liabilities 386,956 235,810
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; 118,103,289 and 118,478,051 shares
issued as of December 31, 2008 and September 30, 2009,
respectively; 106,999,640 and 106,014,502 shares outstanding as of
December 31, 2008 and September 30, 2009, respectively 28 28
Additional paid-in capital 722,890 738,065 Common stock held in
treasury; 11,103,649 and 12,463,549 shares at December 31, 2008 and
September 30, 2009, respectively (56,118 ) (57,468 ) Accumulated
deficit (439,030 ) (422,492 ) Accumulated other comprehensive
income 12,726 20,689 Total parent
shareholders’ equity 240,496 278,822 Noncontrolling interest
16,443 46,133 Total equity
256,939 324,955 Total liabilities and
shareholders’ equity $ 643,895 $ 560,765
CDC
Corporation Unaudited Consolidated 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: Software $ 50,609
$ 48,611 Global Services 18,528 19,223 CDC Games 9,457 6,163
China.com 3,060 2,652 Total revenue
81,654 76,649
COST OF REVENUE: Software 23,705 21,445
Global Services 15,934 16,020 CDC Games 5,388 4,799 China.com
1,301 1,170
Total cost of revenue
46,328 43,434 Gross profit
35,326 33,215 Gross margin % 43 % 43 %
OPERATING
EXPENSES: Sales and marketing expenses 11,150 11,705 Research
and development expenses 4,176 4,001 General and administrative
expenses 14,751 17,147 Exchange (gain) loss on deferred tax assets
(1,412 ) (848 ) Amortization expenses 1,974 1,953 Restructuring and
other charges 1,430 1,242 Total
operating expenses 32,069 35,200
Operating income (loss) from continuing operations 3,257 (1,985 )
Operating margin % 4 % -3 % Other income, net 1,405
10,506 Income before income taxes 4,662
8,521 Income tax expense (1,253 ) (1,907 )
Income from continuing operations 3,409 6,614 Loss from operations
of discontinued subsidiaries, net of tax (67 ) (139 )
Net income 3,342 6,475 Net income attributable to
noncontrolling interest (93 ) (892 ) Net
income attributable to controlling interest $ 3,249 $ 5,583
Basic and diluted earnings (loss) per share from
continuing operations attributable to controlling interest (1) $
0.03 $ 0.05 Basic and diluted earnings (loss)
per share attributable to controlling interest (1) $ 0.03 $
0.05 Weighted average number of common shares
outstanding - basic 106,203,480 106,000,395 Weighted average
number of common shares outstanding - diluted 106,254,659
108,153,645 (1) Refer to "Unaudited Basic and Diluted
Earnings (Loss) Per Share Calculation" schedule for calculation of
earnings per share amounts.
CDC Corporation Unaudited
Consolidated Statement of Operations (Amounts in thousands
of U.S. dollars except share and per share data)
Three months ended
September 30,
2008 (d)
2009 REVENUE: Software $ 60,511 $
48,611 Global Services 28,791 19,223 CDC Games 12,118 6,163
China.com 2,650 2,652
Total revenue
104,070 76,649
COST OF REVENUE: Software 26,390
21,445 Global Services 21,727 16,020 CDC Games 7,296 4,799
China.com 1,394 1,170 Total cost of
revenue 56,807 43,434 Gross
profit 47,263 33,215 Gross margin % 45 % 43 %
OPERATING
EXPENSES: Sales and marketing expenses 17,560 11,705 Research
and development expenses 6,347 4,001 General and administrative
expenses 19,493 17,147 Exchange (gain) loss on deferred tax assets
353 (848 ) Amortization expenses 2,859 1,953 Restructuring and
other charges 626 1,242 Total operating
expenses 47,238 35,200 Operating
income (loss) from continuing operations 25 (1,985 ) Operating
margin % 0 % -3 % Other income (loss), net (4,859 )
10,506 Income (loss) before income taxes
(4,834 ) 8,521 Income tax expense (2,290 ) (1,907 )
Income (loss) from continuing operations (7,124 ) 6,614 Loss
from operations of discontinued subsidiaries, net of tax
(2,901 ) (139 ) Net income (loss) (10,025 ) 6,475 Net
income attributable to noncontrolling interest 48
(892 ) Net income (loss) attributable to controlling
interest $ (9,977 ) $ 5,583 Basic and diluted
earnings (loss) per share from continuing operations attributable
to controlling interest (1) $ (0.07 ) $ 0.05 Basic
and diluted earnings (loss) per share attributable to controlling
interest (1) $ (0.09 ) $ 0.05 Weighted average number
of common shares outstanding - basic 107,242,906 106,000,395
Weighted average number of common shares outstanding - diluted
107,242,906 108,153,645 (1) Refer to "Unaudited Basic and
Diluted Earnings (Loss) Per Share Calculation" schedule for
calculation of earnings per share amounts.
CDC Corporation
Unaudited Consolidated Statement of Operations (Amounts
in thousands of U.S. dollars except share and per share data)
Nine months ended
September 30,
2008 (d)
2009 REVENUE: Software $ 186,489 $
149,573 Global Services 85,213 57,581 CDC Games 31,341 21,879
China.com 8,985 8,112 Total revenue
312,028 237,145
COST OF REVENUE: Software 83,567
69,327 Global Services 64,582 48,156 CDC Games 18,695 15,492
China.com 4,465 3,680
Total cost of revenue
171,309 136,655 Gross profit
140,719 100,490 Gross margin % 45 % 42 %
OPERATING
EXPENSES: Sales and marketing expenses 57,937 34,159 Research
and development expenses 19,312 12,708 General and administrative
expenses 63,923 48,785 Exchange (gain) loss on deferred tax assets
784 (2,032 ) Amortization expenses 9,252 5,894 Restructuring and
other charges 3,872 3,332 Total
operating expenses 155,080 102,846
Operating loss from continuing operations (14,361 ) (2,356 )
Operating margin % -5 % -1 % Other income (loss), net
(6,618 ) 27,235 Income (loss) before income
taxes (20,979 ) 24,879 Income tax expense (3,212 )
(7,107 ) Income (loss) from continuing operations (24,191 )
17,772 Loss from operations of discontinued subsidiaries, net of
tax (8,199 ) (409 ) Net income (loss) (32,390
) 17,363 Net income attributable to noncontrolling interest
(702 ) (825 ) Net income (loss) attributable to
controlling interest $ (33,092 ) $ 16,538 Basic and
diluted earnings (loss) per share from continuing operations
attributable to controlling interest (1) $ (0.23 ) $ 0.14
Basic and diluted earnings (loss) per share attributable to
controlling interest (1) $ (0.31 ) $ 0.14 Weighted
average number of common shares outstanding - basic 107,102,523
106,247,005 Weighted average number of common shares
outstanding - diluted 107,102,523 106,794,770
(1) Refer to "Unaudited Basic and Diluted Earnings (Loss) Per Share
Calculation" schedule for calculation of earnings per share
amounts.
CDC Corporation Unaudited Consolidated Statement
of Cash Flows (Amounts in thousands of U.S. dollars)
Three months ended June 30,
September 30, 2009 2009
OPERATING ACTIVITIES: Net income $ 3,342 $ 6,475
Adjustments to reconcile net income to net cash provided by
operating activities Loss on disposal/write-off of PPE net of Cash
92 147 Gain on disposal of available-for-sale securities (171 )
(416 ) Gain on purchase of convertible notes (438 ) (2,205 ) Bad
debt expense 447 345 Amortization of intangible assets 6,747 6,500
Depreciation expense 1,726 1,725 Stock compensation expenses 810
2,382 Deferred income tax provision 1,141 1,752 Exchange gain on
deferred tax assets (1,412 ) (848 ) Amortization of debt issuance
costs and debt discount on convertible notes 266 1,115 Fair market
value adjustment of derivative instruments (1,814 ) (9,302 )
Interest income received on restricted cash (19 ) (1 ) Changes in
operating assets and liabilities: Accounts receivable 10,986 10,165
Deposits, prepayments and other receivables (1,601 ) 752 Other
assets (396 ) 58 Accounts payable (3,176 ) (692 ) Accrued
liabilities (1,412 ) (1,437 ) Deferred revenue (1,461 ) (4,512 )
Income tax payable (2,777 ) 445 Other liabilities 288
(328 ) Net cash provided by operating activities
11,168 12,120
INVESTING
ACTIVITIES: Acquisition, net of cash acquired - (1,324 )
Payments for prior year acquisitions - (944 ) Purchase of property,
plant & equipment (391 ) (2,008 ) Purchases of intangible
assets - (253 ) Payment for capitalized software (1,203 ) (905 )
Acquisition of cost method investments - (398 ) Proceeds from
disposal of available-for-sale securities 233 11,025 Decrease in
restricted cash 3,647 8 Net cash
provided by investing activities 2,286 5,201
FINANCING ACTIVITIES: Issuance of share
capital, net of offering costs 136 52,032 Proceeds from short-term
loans 303 (81 ) Repayment of short-term loans (2,819 ) (2,617 )
Repayment of convertible notes (3,562 ) (34,569 ) Payment for
capital lease obligations (365 ) (95 ) Purchases of treasury stock
(147 ) (241 ) Dividend distribution by China.com 10
(2,863 ) Net cash (used) provided in financing activities
(6,444 ) 11,566 Effect of exchange
differences on cash 1,075 805
Net increase in cash and cash equivalents 8,085 29,692 Cash at
beginning of period 103,786 111,871
Cash at end of period $ 111,871 $ 141,563
CDC Corporation Unaudited Consolidated Statement of Cash
Flows (Amounts in thousands of U.S. dollars)
Three months ended September 30,
Nine months ended September 30, 2008
2009 2008
2009 OPERATING ACTIVITIES: Net income (loss) $
(10,025 ) $ 6,475 $ (32,390 ) $ 17,363 Adjustments to reconcile net
income (loss) to net cash provided by operating activities Loss on
disposal/write-off of PPE net of Cash 95 147 228 226 Loss (gain) on
disposal of available-for-sale securities - (416 ) (127 ) 29 Gain
on disposal of subsidiaries, net of taxes (960 ) - (960 ) - Loss
(gain) on disposal of cost investments (140 ) - (97 ) - Gain on
purchase of convertible notes - (2,205 ) - (6,603 ) Bad debt
expense 1,122 345 2,485 1,084 Amortization of intangible assets
8,840 6,500 24,476 20,415 Depreciation expense 1,953 1,725 6,527
5,275 Impairment of available for sale securities 537 - (17 ) -
Loss from deemed disposal (89 ) - (2 ) - Stock compensation
expenses 1,928 2,382 5,458 4,215 Deferred income tax provision
(2,335 ) 1,752 (3,231 ) 6,909 Exchange loss (gain) on deferred tax
assets 353 (848 ) 784 (2,032 ) Amortization of debt issuance costs
and debt discount on convertible notes 317 1,115 948 4,312 Fair
market value adjustment of derivative instruments 3,533 (9,302 )
9,407 (27,072 ) Interest income received on restricted cash - (1 )
- (51 ) Changes in operating assets and liabilities: Accounts
receivable (1,334 ) 10,165 5,412 25,750 Deposits, prepayments and
other receivables 1,777 752 8,210 (1,242 ) Other assets (102 ) 58
(193 ) (612 ) Accounts payable 3,392 (692 ) (2,950 ) (1,417 )
Accrued liabilities (2,078 ) (1,437 ) (5,226 ) (9,459 ) Deferred
revenue (6,654 ) (4,512 ) (6,722 ) (8,445 ) Income tax payable
2,344 445 2,532 (3,333 ) Other liabilities 5,496
(328 ) 4,272 121 Net cash
provided by operating activities 7,970 12,120
18,824 25,433
INVESTING ACTIVITIES: Acquisition, net of cash acquired (870
) (1,324 ) (909 ) (1,324 ) Payments for prior year acquisitions
(2,885 ) (944 ) (3,534 ) (944 ) Purchase of property, plant &
equipment (1,525 ) (2,008 ) (3,937 ) (3,022 ) Purchases of
intangible assets (1,743 ) (253 ) (4,574 ) (253 ) Payment for
capitalized software (1,228 ) (905 ) (6,513 ) (3,000 ) Acquisition
of investments (1,596 ) (398 ) (1,596 ) (1,226 ) Investment in cost
method investees (franchise partners) (286 ) - (623 ) (38 )
Proceeds from disposal of available-for-sale securities 461 11,025
59,682 26,352 Proceeds from disposal of subsidiaries, net of tax -
- 364 - Decrease (increase) in restricted cash (10 )
8 4,840 3,662 Net cash (used)
provided by investing activities (9,682 ) 5,201
43,200 20,207
FINANCING ACTIVITIES: Issuance of share capital, net of
offering costs 277 52,032 892 52,544 Proceeds from short-term loans
1,207 (81 ) 8,555 448 Repayment of short-term loans (2,291 ) (2,617
) (32,876 ) (8,316 ) Repayment of convertible notes - (34,569 ) -
(100,671 ) Payment for capital lease obligations - (95 ) - (460 )
Purchase of China.com shares by CDC Corporation (192 ) - (192 ) -
Purchases of treasury stock (1,291 ) (241 ) (4,165 ) (1,350 )
Dividend distribution by China.com (16,450 ) (2,863 )
(16,450 ) (13,518 ) Net cash (used) provided in
financing activities (18,740 ) 11,566
(44,236 ) (71,323 ) Effect of exchange differences on
cash (1,815 ) 805 1,116
1,553 Net increase (decrease) in cash and cash
equivalents (22,267 ) 29,692 18,904 (24,130 ) Cash at beginning of
period 183,389 111,871 142,218
165,693 Cash at end of period $ 161,122
$ 141,563 $ 161,122 $ 141,563
CDC
Corporation Unaudited Reconciliation From GAAP Results to
Adjusted EBITDA (Amounts in thousands of U.S. dollars)
Three months ended June 30,
September 30, 2009 2009
(a) Reconciliation from GAAP results to Adjusted EBITDA
from continuing operations Operating income (loss) from
continuing operations $ 3,257 $ (1,985 ) Add back restructuring and
other charges 1,430 1,242 Add back depreciation expense 1,701 1,715
Add back amortization expense 1,974 1,953 Add back amortization
expense included in cost of revenue 4,773 4,547 Add back stock
compensation expenses 754 2,367 Add back exchange (gain) loss on
deferred taxes (1,412 ) (848 ) Adjusted EBITDA from
continuing operations (1) $ 12,477 $ 8,991 Adjusted
EBITDA margin % 15 % 12 %
CDC Software Unaudited
Reconciliation From GAAP Results to Adjusted EBITDA (Amounts
in thousands of U.S. dollars) 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) loss on deferred taxes
(1,418 ) (865 ) Adjusted EBITDA from continuing
operations (1) $ 13,704 $ 13,221 Adjusted EBITDA
margin % 27 % 27 %
CDC Global Services Unaudited
Reconciliation From GAAP Results to Adjusted EBITDA (Amounts
in thousands of U.S. dollars) Three months ended
June 30, September 30, 2009
2009 (a) Reconciliation from GAAP results
to Adjusted EBITDA from continuing operations Operating loss
from continuing operations $ (2,579 ) $ (2,165 ) Add back
restructuring and other charges 1,694 1,460 Add back depreciation
expense 64 84 Add back amortization expense 687 624 Add back
amortization expense included in cost of revenue 6 1 Add back stock
compensation expenses 85 286 Add back exchange loss on deferred
taxes 6 1 Adjusted EBITDA from
continuing operations $ (37 ) $ 291 Adjusted EBITDA margin %
0 % 2 %
CDC Games Corporation Unaudited
Reconciliation From GAAP Results to Adjusted EBITDA (Amounts
in thousands of U.S. dollars) Three months ended
June 30, September 30, 2009
2009 (a) Reconciliation from GAAP results
to Adjusted EBITDA from continuing operations Operating income
(loss) from continuing operations $ 786 $ (3,593 ) Add back
restructuring and other charges 400 231 Add back depreciation
expense 765 792 Add back amortization expense 23 - Add back
amortization expense included in cost of revenue 1,223 1,158 Add
back stock compensation expenses 133 519 Add back exchange (gain)
loss on deferred taxes - - Adjusted
EBITDA from continuing operations $ 3,330 $ (893 ) Adjusted
EBITDA margin % 35 % -14 %
CDC China.com Unaudited
Reconciliation From GAAP Results to Adjusted EBITDA (Amounts
in thousands of U.S. dollars) Three months ended
June 30, September 30, 2009
2009 (a) Reconciliation from GAAP results
to Adjusted EBITDA from continuing operations Operating loss
from continuing operations $ (415 ) $ (759 ) Add back restructuring
and other charges - - Add back depreciation expense 76 60 Add back
amortization expense - - Add back amortization expense included in
cost of revenue - - Add back stock compensation expenses 175 340
Add back exchange (gain) loss on deferred taxes -
- Adjusted EBITDA from continuing operations $ (164 )
$ (359 ) Adjusted EBITDA margin % -5 % -14 %
Corporate Unaudited Reconciliation From GAAP Results to
Adjusted EBITDA (Amounts in thousands of U.S. dollars)
Three months ended June 30, September
30, 2009 2009 (a)
Reconciliation from GAAP results to Adjusted EBITDA from continuing
operations Operating loss from continuing operations $ (3,256 )
$ (2,656 ) Add back restructuring and other charges (1,508 ) (1,349
) Add back depreciation expense 13 13 Add back amortization expense
235 235 Add back amortization expense included in cost of revenue -
- Add back stock compensation expenses 160 472 Add back exchange
(gain) loss on deferred taxes - 16
Adjusted EBITDA from continuing operations $ (4,356 ) $ (3,269 )
(1) Adjusted EBITDA does not include the adjustment
related to capitalized software costs which are credited against
research and development expenses in CDC Software statement of
operations. Below is a summary of capitalized software credits for
the three months ended:
Three months ended June
30, September 30, 2009
2009 Capitalized software credits $ (1,203 ) $
(905 )
CDC Corporation Unaudited Reconciliation From GAAP
Results to Adjusted EBITDA (Amounts in thousands of U.S.
dollars) Three months
ended
September 30,
Nine months ended
September 30,
2008 2009
2008 2009 (a) Reconciliation
from GAAP results to Adjusted EBITDA from continuing operations
Operating income (loss) from continuing operations $ 25 $ (1,985 )
$ (14,361 ) $ (2,356 ) Add back restructuring and other charges 626
1,242 3,872 3,332 Add back depreciation expense 1,845 1,715 6,223
5,200 Add back amortization expense 2,871 1,953 9,252 5,894 Add
back amortization expense included in cost of revenue 6,034 4,547
15,072 14,521 Add back stock compensation expenses 1,936 2,367
5,357 4,125 Add back exchange (gain) loss on deferred taxes
353 (848 ) 784 (2,032 ) Adjusted
EBITDA from continuing operations (1) $ 13,690 $ 8,991
$ 26,199 $ 28,684 Adjusted EBITDA margin % 13
% 12 % 8 % 12 %
CDC Software Unaudited
Reconciliation From GAAP Results to Adjusted EBITDA (Amounts
in thousands of U.S. dollars) Three months ended
September 30,
Nine months ended
September 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 from continuing
operations (1) $ 13,590 $ 13,221 $ 31,843 $
39,597 Adjusted EBITDA margin % 22 % 27 % 17 % 26 %
CDC Global Services Unaudited Reconciliation From GAAP
Results to Adjusted EBITDA (Amounts in thousands of U.S.
dollars) Three months ended
September 30,
Nine months ended
September 30,
2008 2009
2008 2009 (a) Reconciliation
from GAAP results to Adjusted EBITDA from continuing operations
Operating loss from continuing operations $ (3,571 ) $ (2,165 ) $
(6,786 ) $ (6,947 ) Add back restructuring and other charges 2,086
1,460 6,441 5,253 Add back depreciation expense 137 84 422 220 Add
back amortization expense 855 624 2,870 1,780 Add back amortization
expense included in cost of revenue - 1 - 12 Add back stock
compensation expenses 74 286 256 590 Add back exchange loss on
deferred taxes - 1 -
6 Adjusted EBITDA from continuing operations $ (419 )
$ 291 $ 3,203 $ 914 Adjusted EBITDA margin %
-1 % 2 % 4 % 2 %
CDC Games Corporation Unaudited
Reconciliation From GAAP Results to Adjusted EBITDA (Amounts
in thousands of U.S. dollars) Three months ended
September 30,
Nine months ended
September 30,
2008 2009
2008 2009 (a) Reconciliation
from GAAP results to Adjusted EBITDA from continuing operations
Operating income (loss) from continuing operations $ 479 $ (3,593 )
$ 511 $ (5,883 ) Add back restructuring and other charges 156 231
351 607 Add back depreciation expense 682 792 2,223 2,331 Add back
amortization expense 4 - 541 23 Add back amortization expense
included in cost of revenue 1,685 1,158 3,845 3,685 Add back stock
compensation expenses 27 519 27 760 Add back exchange (gain) loss
on deferred taxes - - -
- Adjusted EBITDA from continuing operations $ 3,033
$ (893 ) $ 7,498 $ 1,523 Adjusted EBITDA
margin % 25 % -14 % 24 % 7 %
CDC China.com
Unaudited Reconciliation From GAAP Results to Adjusted
EBITDA (Amounts in thousands of U.S. dollars)
Three months ended
September 30,
Nine months ended
September 30,
2008 2009
2008 2009 (a) Reconciliation
from GAAP results to Adjusted EBITDA from continuing operations
Operating loss from continuing operations $ (685 ) $ (759 ) $
(3,147 ) $ (2,064 ) Add back restructuring and other charges - - -
- Add back depreciation expense 217 60 362 238 Add back
amortization expense - - - - Add back amortization expense included
in cost of revenue - - - - Add back stock compensation expenses 261
340 957 772 Add back exchange (gain) loss on deferred taxes
- - - - Adjusted
EBITDA from continuing operations $ (207 ) $ (359 ) $ (1,828 ) $
(1,054 ) Adjusted EBITDA margin % -8 % -14 % -20 % -13 %
Corporate Unaudited Reconciliation From GAAP Results to
Adjusted EBITDA (Amounts in thousands of U.S. dollars)
Three months ended
September 30,
Nine months ended
September 30,
2008 2009
2008 2009 (a) Reconciliation
from GAAP results to Adjusted EBITDA from continuing operations
Operating loss from continuing operations $ (1,797 ) $ (2,656 ) $
(11,998 ) $ (9,229 ) Add back restructuring and other charges
(2,136 ) (1,349 ) (6,582 ) (4,703 ) Add back depreciation expense
(179 ) 13 24 39 Add back amortization expense 255 235 735 710 Add
back amortization expense included in cost of revenue - - - - Add
back stock compensation expenses 1,550 472 3,304 871 Add back
exchange loss on deferred taxes - 16
- 16 Adjusted EBITDA from continuing
operations $ (2,307 ) $ (3,269 ) $ (14,517 ) $ (12,296 )
(1) Adjusted EBITDA does not include the adjustment related
to capitalized software costs which are credited against research
and development expenses in CDC Software statement of operations.
Below is a summary of capitalized software credits for the three
and nine months ended:
Three months ended
September 30,
Nine months ended
September 30,
2008 2009
2008 2009 Subtract
capitalized software credit $ (1,228 ) $ (905 ) $ (6,512 ) $ (3,000
)
CDC Corporation Unaudited Reconciliation From GAAP Cash
to Non GAAP Cash (Amounts in thousands of U.S. dollars)
September 30, (a) Non GAAP Cash and Cash
Equivalents Reconciliation 2009 Cash $ 141,563
Add restricted cash 671 Add available for sale securities - current
6,738 Add available for sale securities - long-term 12,997
Non GAAP cash and cash equivalents $ 161,969
CDC Corporation
Unaudited Revenue Details (Amounts in thousands of U.S.
dollars) Three months ended June
30, September 30, 2009
2009 Segment revenue from external customers: Software:
Licenses $ 7,826 $ 7,618 Maintenance 24,820 25,414 Professional
services 17,304 14,882 Hardware 659 697 Total
Software 50,609 48,611 Global Services: Licenses 253 124
Consulting services 17,246 18,138 Hardware 1,029
961
Total Global Services
18,528 19,223 CDC Games 9,457 6,163 China.com 3,060
2,652 Total consolidated revenue $ 81,654 $
76,649
Three months ended
September 30,
2008 (d ) 2009 Segment revenue
from external customers: Software: Licenses $ 11,874 $ 7,618
Maintenance 26,372 25,414 Professional services 21,182 14,882
Hardware 1,083 697
Total Software
60,511 48,611 Global Services: Licenses 1,149 124 Consulting
services 26,480 18,138 Hardware 1,162 961
Total Global Services 28,791 19,223 CDC Games 12,118 6,163
China.com 2,650 2,652 Total consolidated
revenue $ 104,070 $ 76,649
Nine months
ended
September 30,
2008 (d ) 2009 Segment revenue
from external customers: Software: Licenses $ 36,007 $ 22,574
Maintenance 78,740 74,432 Professional services 68,941 50,866
Hardware 2,801 1,701 Total Software 186,489
149,573 Global Services: Licenses 3,682 1,163 Consulting
services 78,422 53,280 Hardware 3,109 3,138
Total Global Services 85,213 57,581 CDC Games 31,341 21,879
China.com 8,985 8,112 Total consolidated
revenue $ 312,028 $ 237,145
CDC Corporation
Unaudited Basic and Diluted Earnings (Loss) Per Share
Computation (Amounts in thousands of U.S. dollars except
share and per share data) Three months
ended
September 30,
Nine months ended
September 30,
2008 2009
2008 2009 Numerator: Net
(loss) income from continuing operations $ (7,124 ) $ 6,614 $
(24,192 ) $ 17,772
Net adjustments for loss (income)
attributable to noncontrolling interest and dilutive effect of
subsidiary issued stock (1)
48 (892 ) (815 ) (825 ) Adjusted
(loss) income from continuing operations (7,076 ) 5,722 (25,007 )
16,947 Amount allocated to convertible notes (2) -
(281 ) - (1,574 )
Net (loss) income from continuing
operations attributable to controlling interest
$ (7,076 ) $ 5,441 $ (25,007 ) $ 15,373
Net (loss) income from continuing
operations attributable to controlling interest
$ (7,076 ) $ 5,441 $ (25,007 ) $ 15,373
(Loss) income from operations of
discontinued subsidiaries, net of tax
(2,901 ) (139 ) (8,199 ) (409 )
(Loss) income from operations of
discontinued subsidiaries allocated to convertible notes (2)
- 7 - 38
Net (loss) income attributable to
controlling interest
$ (9,977 ) $ 5,309 $ (33,206 ) $ 15,002
Denominator: Weighted average number of common shares
outstanding - basic 107,242,906 106,000,395 107,102,523 106,247,005
Employee compensation related to
common shares including stock options
- 2,153,250 -
547,765
Weighted average number of common
shares outstanding - diluted
107,242,906 108,153,645
107,102,523 106,794,770
Per share
amounts:
Earnings (loss) from continuing
operations attributable to controlling interest per common share -
basic
$ (0.07 ) $ 0.05 $ (0.23 ) $ 0.14
Earnings (loss) from continuing
operations attributable to controlling interest per common share -
dilutive
$ (0.07 ) $ 0.05 $ (0.23 ) $ 0.14
Earnings (loss) attributable to
controlling interest per common share - basic
$ (0.09 ) $ 0.05 $ (0.31 ) $ 0.14
Earnings (loss) attributable to
controlling interest per common share -
dilutive
$ (0.09 ) $ 0.05 $ (0.31 ) $ 0.14 (1 )
Includes the dilutive effects of subsidiary-issued stock-based
awards, if any, and adjustments for discontinued operations. (2 )
Income has been allocated to common stock and convertible notes
based on their respective rights to share in dividends. In
accordance with FASB Accounting Standards Codification 260,
"Earnings Per Share" the Company's convertible notes meet the
definition of participating securities and are included in the
basic earnings per share using the two-class stock method and in
diluted earnings per share using the more dilutive of the
if-converted method or two-class stock method.
Cdc Corp. (MM) (NASDAQ:CHINA)
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