CDC Software Corporation (NASDAQ: CDCS), a global provider of
enterprise software solutions and services, today announced
financial results for the fourth quarter and year ended December
31, 2009. For the fourth quarter of 2009, Adjusted EBITDA(a) nearly
doubled to $14.8 million, from $7.8 million in the fourth quarter
of 2008 and non-GAAP earnings per share(a) almost quadrupled to
$0.40 compared to $0.11 in the fourth quarter of 2008. For the year
ended December 31, 2009, CDC Software reported non-GAAP earnings
per share of $1.31 compared to non-GAAP earnings per share of $0.66
for the year ended December 31, 2008.
For the fourth quarter of 2009, Adjusted EBITDA margin was 27
percent compared to 14 percent in the fourth quarter of 2008. For
the full year 2009, Adjusted EBITDA increased 37 percent to $54.3
million compared to $39.6 million in 2008.
For the fourth quarter of 2009, CDC Software posted revenue of
$54.3 million and net income attributable to controlling interest
of $7.0 million. This compares to revenue of $54.3 million, and a
net loss attributable to controlling interest of ($4.9) million for
the fourth quarter of 2008.
Fourth quarter 2009 earnings per share of $0.40 exceeded the
First Call consensus estimate, which was $0.35 per share. In
addition, during the fourth quarter, CDC Software generated license
revenue of $10.5 million, compared to $7.6 million in the third
quarter of 2009 and a 40 percent increase from $7.5 million for the
average of the first three quarters of 2009. First Call consensus
analyst estimates for license revenue in the fourth quarter of 2009
were $7.9 million. Organic license revenue in the fourth quarter,
which does not include revenue from the company’s recent
acquisitions, was $9.7 million, a 29 percent increase from $7.5
million, the average of the first three quarters of 2009.
Operating cash flow for the full year ended December 31, 2009
increased by 56 percent to $53.0 million compared to $33.9 million
for the full year ended December 31, 2008. In the fourth quarter of
2009, CDC Software’s operating cash flow was $6.1 million due
primarily to increased working capital requirements resulting from
organic growth in revenue.
For the year ended December 31, 2009, the company reported
revenue of $203.9 million, and net income attributable to
controlling interest of $23.2 million. This compared to revenue of
$240.8 million and a net loss attributable to controlling interest
of $0.9 million for the year ended December 31, 2008.
“We are pleased with our fourth quarter results, which again
exceeded Wall Street consensus estimates in many of our key
financial metrics including non-GAAP earnings per share and license
revenue,” said Peter Yip, CEO of CDC Software. “Our cash flow from
operations for 2009 of $53.0 million represents a record for CDC
Software.
“Our robust performance in the fourth quarter, especially our
improvements in Adjusted EBITDA margin and license revenue,
primarily resulted from our strategies executed last year, which
focused on disciplined cost controls while still pursuing growth.
The company’s organic license revenue in the fourth quarter is
attributed in significant part to growth from our core vertical
markets, a shortened sales cycle and improved cross selling. Our
disciplined acquisition strategy, along with our other growth
initiatives that include geographic expansion through resellers and
partners, as well as our ongoing programs to drive operational cost
efficiencies, are part of our continuing plans to promote long-term
growth and profitability for CDC Software.”
During the fourth quarter, license revenue, recurring revenue,
services revenue and hardware revenue were, 19 percent, 48 percent,
29 percent and 4 percent, respectively, of total revenue.
Maintenance revenue in the fourth quarter was $25.3 million
compared to $24.9 million in the fourth quarter of 2008. CDC
Software also continued to achieve a high maintenance retention
rate of approximately 90 percent. Professional services revenue in
the fourth quarter of 2009 was $15.8 million, up from $14.9 million
in the third quarter of 2009.
CDC Software’s balance sheet continued to be solid with cash on
hand of $40.3 million at the end of December 31, 2009. DSOs (days
sales outstanding) in the fourth quarter of 2009 improved to 73
days, compared to 79 days for third quarter 2009 and 101 days for
the fourth quarter of 2008. Accounts receivable as of Dec. 31, 2009
was $45.4 million, compared to $53.0 million as of December 31,
2008. Deferred revenue as of December 31, 2009 was $53.2 million,
compared to $54.5 million as of December 31, 2008.
GAAP net income margin improved to 13 percent in the fourth
quarter of 2009, compared to a negative 9 percent in the fourth
quarter of 2008. Gross margin improved to 56 percent during the
fourth quarter of 2009 compared to 50 percent the same quarter of
2008.
SaaS Strategy
In the fourth quarter of 2009, CDC Software acquired two
Software as a Service (SaaS) companies, gomembers, a provider of
SaaS and on-premise enterprise solutions for the Not-For-Profit
(NFP) and Non-Governmental Organizations (NGO) market, and
Truition, an on-demand e-Commerce platform provider for retailers
and brand manufacturers, as part of CDC Software’s previously
announced strategy to expand its offerings in the growing on-demand
software market. For the fourth quarter 2009, CDC Software reported
$616,000 in SaaS revenue, and closed $1 million in SaaS business.
The SaaS revenue includes sales from CDC MarketFirst, as well as
approximately one month of revenue from CDC gomembers and CDC
eCommerce (Truition) since those acquisitions closed late in the
fourth quarter. SaaS revenue is a new line item appearing in the
company’s financial results this quarter and going forward. With an
average maintenance retention rate of 90 percent, CDC Software
strives to develop recurring revenue streams, which includes SaaS
revenue plus maintenance revenue, to reach closer to 70 percent of
total revenue over the next few years.
Acquire, Integrate, Innovate
and Grow
At the core of CDC Software’s financial results has been the
execution of its “acquire, integrate, innovate and grow” strategy.
CDC Software believes this strategy positions the company well for
long-term growth and profitability.
Acquire
CDC Software completed four acquisitions during 2009 including:
WKD Solutions (Categoric), a developer of supply chain event
management software which adds new functionality for CDC’s Supply
Chain solutions; Activplant, a provider of enterprise manufacturing
intelligence solutions for the plant floor that holds significant
cross-selling opportunities for CDC Factory business; gomembers, an
on-demand solution for member-based organizations and Truition, a
leading on-demand eCommerce platform. CDC gomembers and CDC
eCommerce (Truition) are at the center of CDC Software’s SaaS
expansion strategy. CDC Software also acquired PeoplePoint, a
provider of aged care software solutions in January 2010. This
month, CDC Software completed the acquisition of computility, an
association management software solution with integrated web
modules and web collaboration tools that automate processes such as
membership, events services, communications and financials. The
computility acquisition adds web-based functionality and breadth to
the CDC gomembers on-demand platform for the Not-For-Profit (NFP)
market.
CDC Software’s mergers and acquisitions pipeline focuses on
companies that typically match a subscale profile and fit
synergistically, as well as add new functionality within the
company’s product roadmap. For SaaS acquisitions, CDC Software is
focusing on companies that can complement its current SaaS
solutions and expand their vertical markets.
Integrate
The integration portion of CDC Software’s strategy is fueled by
its global scalable business and technology infrastructure that
features 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.
CDC Software’s integration activities are based on three
cornerstones. The first is a common integration strategy which
includes the company’s commitment to providing cohesive solutions,
active involvement in developing integration standards and its
application supporting a service-oriented architecture. The second
is the use of common integration principles including a model based
on Open Applications Group Integration Specification (OAGIS),
point-to-point integration replaced by a service bus architecture,
and a clear distinction between online, event-driven and
batch-oriented architectures. The third cornerstone is the adoption
of common integration technologies including a common on ramp to
CDC Software applications and an internal service bus, a common
service adapter model to hook up to the service bus and web
services to provide interoperability between platforms.
By leveraging this corporate solution architecture, CDC Software
believes it has achieved a successful track record of integrating
software/technology companies that promote innovation and add new
functionality as part of the company’s product roadmap. CDC
Software’s business and technology infrastructure also helps
integrate its acquisitions by driving more cross-sell synergy to
its 6,000 customers globally, eliminating redundant expenses,
streamlining efficiencies and positioning these businesses for
organic growth and profitability.
As an illustration of this strategy, CDC Xalerts supply chain
event management product, has been a popular cross-selling solution
to the company’s CDC Supply Chain installed base, while CDC
Activplant, CDC eCommerce and CDC gomembers have been exceeding
internal expectations and reporting solid performance. Both CDC
eCommerce and gomembers, for example, are preparing for
international expansion with gomembers targeting Canada, U.K. and
Australia while CDC Truition plans to expand in Latin America and
Asia.
Innovate
The key enabler in the “innovate” component of CDC Software’s
corporate strategy is the company’s global technology platform.
This global infrastructure delivers applications and services by
leveraging state-of-the-art product engineering centers in India
and China that utilize the Agile development methodology. Through
this Agile development methodology and domain expertise, CDC
Software believes it has achieved fast speed-to-market delivery and
enhanced quality in its products, as well as building an
exceptional collaborative product development organization.
During the fourth quarter of 2009, CDC Software introduced
several new products and version upgrades for its core ERP, SCM and
CRM applications, and also began marketing its recently acquired
products from Activplant, gomembers and Truition. Major new
releases included: CDC Ross Enterprise Performance Management,
Financial Budgeting and Reporting 6.3.2, CDC Supply Chain Customer
Collaboration 2.2, CDC Pivotal Hand Held Solutions for Windows,
Mobile, MRM 6.0, CDC Contact Management 6.0 and CDC Activplant’s
ActivEssentials 6.0.
CDC Software also is developing other upgrades to enhance its
current SaaS offerings. In addition to upgrades delivered for CDC
gomembers and CDC eCommerce, CDC has piloted CDC Respond on the
Microsoft Azure platform and plans further partnerships with
Microsoft to leverage this newly released Cloud infrastructure. CDC
is also utilizing key parts of its SaaS portfolio to build
reference architectures for both Microsoft.Net and Java for future
SaaS offerings. Furthermore, the company is consolidating its
hosting infrastructure to provide worldwide delivery and support
for its SaaS customers.
Grow
The company has continued its previously announced initiatives
to accelerate organic growth. In the fourth quarter, CDC Software
added new resellers to its channel to expand its pipeline and
target emerging high growth regions. The company is also focusing
its channel growth in Brazil, Russia, India and China.
With its Franchise Partner Program, CDC Software has already
tapped into other high growth regions such as in Latin America,
India and China. Through the Franchise Partner Program, CDC
Software funds investments, through the acquisition of majority
control or minority stakes, in strategic partners located in high
growth geographies. CDC Software plans to add Franchise Partners
next in Brazil and Russia. The company believes that leveraging
resellers in emerging markets such as these can accelerate the
company’s organic revenue growth rate.
In the fourth quarter of 2009, the company initiated an OEM
strategy to resell its solutions directly into third party software
providers. In addition to its OEM agreement with Pilgrim Software
in the fourth quarter, CDC Software has added three new OEM
partnerships in 2009. These partnerships are expected to help CDC
Software expand its footprint in the company’s traditional vertical
markets as well as in new markets. CDC Software believes that by
adding OEM channels, it not only increases sales productivity, but
also improves profit margins.
“We believe we are executing efficiently on our “acquire,
integrate, innovate and grow” strategy which we believe is evident
by the increase we have seen in organic license revenue and our
operating metrics,” said Bruce Cameron, president of CDC Software.
“With our increased cross-selling and the significant expansion in
our global partner/reseller channel, we have also seen an increase
in our first quarter pipeline. Even though we are seeing a slow
economic recovery, we are cautiously optimistic that our pipeline
will show steady growth this year. With our SaaS strategy and
acquisitions of subscale companies with sticky maintenance revenue,
we expect the majority of CDC Software’s revenue to continue to
come from recurring sources.”
Furthermore, during the fourth quarter of 2009, CDC Software
added approximately 100 new customers and signed upgrade and
expansion agreements with approximately 400 enterprise software
customers. New customers accounted for 25 percent of total software
license revenue during the quarter.
Yip concluded, “Last year was challenging for virtually every
business and that is why we are especially proud of our strong
results for the fourth quarter and year. Overall, we remain
cautiously optimistic on our long-term fundamental business
prospects. Our confidence stems not only from our improved pipeline
and marginally improving economy, but also our $49.2 million in
total contracted and unrecognized recurring revenue at the end of
the fourth quarter of 2009.”
Conference Call
The Company's senior management will host a conference call for
financial analysts and investors, Thursday, February 25th, 2010 at
8:30 AM EST.
USA-based Toll Free Number: +1 (888) 603-6873
International: +1 (973) 582-2706
Pass code: # 56068282 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 March 11, 2010. U.S. based Toll Free
Number: +1800-642-1687,
U.S.-based Toll Number: +1 706-645-9291. Conference ID number: #
56068282.
Footnotes:
All dollar amounts are in U.S. dollars
(a) Adjusted Financial Measures
This press release includes Adjusted EBITDA and Adjusted EBITDA
Margin, as well as 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.
Special Note Regarding CDC Software Financial Results
The financial results provided herein apply only to CDC Software
Corporation, a subsidiary of CDC Corporation. These financial
results do not apply to, and are not indicative of, the
consolidated financial results of CDC Corporation, or the financial
results of CDC Games Corporation, China.com, Inc. or any of their
respective subsidiaries. Investors are cautioned not to place
reliance on the financial results set forth herein for purposes of
any investment decision with respect to the shares of CDC
Corporation, and should read the foregoing in conjunction with the
reports and other materials filed with the United States Securities
and Exchange Commission by CDC Corporation and CDC Software
Corporation, from time to time.
About CDC Software
CDC Software (NASDAQ: CDCS), The Customer-Driven Company™, is a
provider of enterprise software applications and a full range of
services designed to help organizations deliver a superior customer
experience, while increasing efficiencies and profitability.
Leveraging a service-oriented architecture (SOA), CDC Software
offers multiple delivery options for their solutions including
on-premise, hosted, cloud-based SaaS or blended-hybrid deployment
offerings. CDC Software’s solutions include enterprise requirements
planning (ERP), manufacturing operations management, enterprise
manufacturing intelligence, supply chain management (demand
management, order management and warehouse and transportation
management), e-Commerce, human capital management, customer
relationship management (CRM), complaint management and aged care
solutions.
CDC Software’s recent acquisitions are part of its “acquire,
integrate, innovate and grow” strategy. Fueling the success of this
strategy is the company’s global scalable business and
technology infrastructure featuring multiple complementary
applications and services, domain expertise in vertical markets,
cost effective product engineering centers in India and China, a
highly collaborative and fast product development process utilizing
Agile methodologies, and a worldwide network of direct sales and
channel operations. This strategy has helped CDC Software deliver
innovative and industry-specific solutions to more than 6,000
customers worldwide within the manufacturing, distribution,
transportation, retail, government, real estate, financial
services, health care, and not-for-profit industries. 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, 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 “acquire, integrate,
innovate and grow” strategy and its effect on our positioning for
long-term growth and profitability, our beliefs regarding our track
record of integrating software and technology companies that
promote innovation and add new functionality as part of our product
roadmap, our beliefs regarding our use of the Agile development
process and its effects on speed to market delivery, product
quality and our collaborative product development organization, our
plans and expectations for future partnerships with Microsoft and
other third parties, our beliefs regarding leveraging resellers and
the effects thereof on the company’s organic growth rate, our
beliefs regarding the addition of OEM channels and the effects
thereof on the company’s sales productivity and profit margins, our
beliefs regarding the effective execution on our corporate
strategies and the effects thereof, our expectations regarding
future revenues and the proportion of which may come from recurring
sources, 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 our strategic position for growth and expansion, 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, 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 Software Unaudited Consolidated Balance Sheets
(Amounts in thousands of U.S. dollars except share and per share
data)
December 31,
December 31,
2008 2009 ASSETS Current assets: Cash
and cash equivalents $ 27,341 $ 40,349 Restricted cash 3,677 113
Accounts receivable (net of
allowance of $4,644 and $4,390 at December 31, 2008 and December
31, 2009, respectively)
53,014 45,360 Marketable securities - 1,084 Prepayments and other
current assets 7,333 7,970 Deferred tax assets 7,089
4,403 Total current assets 98,454 99,279
Property and equipment, net 5,711 5,288 Goodwill 135,987 152,939
Intangible assets 72,907 72,032 Deferred tax assets 32,664 33,640
Receivable from Parent - 34,166 Note receivable due from related
parties 600 680 Investment in cost method investees 740 604 Other
assets 1,218 1,589 Total assets $
348,281 $ 400,217
LIABILITIES AND
SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $
10,429 $ 12,185 Purchase consideration payables 355 2,184 Income
tax payable 2,259 4,101 Short-term bank loans 5,876 4,364
Short-term loan from Parent 19,530 - Accrued liabilities 23,578
23,048 Restructuring accruals, current portion 1,974 2,005 Deferred
revenue 54,507 53,152 Deferred tax liabilities 351
1,182 Total current liabilities 118,859 102,221
Deferred tax liabilities 25,460 22,181 Restructuring
accruals, net of current portion 239 9 Purchase consideration
payables, net of current portion - 810 Other liabilities
8,599 9,628 Total liabilities 153,157 134,849
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 December 31, 2009, respectively;
Nil and 4,679,037 shares outstanding as of December 31, 2008 and
December 31, 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 December 31,
2009, respectively
- 24 Additional paid-in capital - 248,729 Equity investment 203,817
-
Common stock held in treasury; Nil
and 120,963 shares at December 31, 2008 and December 31, 2009,
respectively
- (1,118 ) Retained earnings (accumulated deficit) (5,430 ) 17,792
Accumulated other comprehensive loss (3,580 ) (234 )
Total shareholders' equity 194,807 265,198 Noncontrolling
interest 317 170 Total equity
195,124 265,368 Total liabilities and
shareholders' equity $ 348,281 $ 400,217
CDC
Software Unaudited Combined Statement of Operations
(Amounts in thousands of U.S. dollars except share and per share
data) Three months ended September
30, December 31, 2009 2009 REVENUE:
Licenses (including royalties from related parties of $724 and
$176, respectively) $ 7,618 $ 10,511 Maintenance (including
royalties from related parties of $61 and $49, respectively) 25,414
25,343 Professional services (including royalties from related
parties of $32 and $Nil, respectively) 14,882 15,800 Hardware 697
2,056 SaaS implementation and support - 616
Total revenue 48,611 54,326
COST OF REVENUE:
Licenses 4,318 4,868 Maintenance 3,834 3,609 Professional services
12,613 13,443 Hardware 680 1,525 SaaS implementation and support
- 411 Total cost of revenue
21,445 23,856 Gross profit 27,166
30,470 Gross margin % 56 % 56 %
OPERATING EXPENSES:
Sales and marketing expenses 7,783 8,627 Research and development
expenses 4,001 5,297 General and administrative expenses 9,369
9,425 General and administrative expenses allocated to Parent
(2,304 ) (2,246 ) Exchange gain on deferred tax assets (865 ) (39 )
Amortization expenses 1,094 1,151 Restructuring and other charges
900 1,176 Total operating expenses
19,978 23,391 Operating income
7,188 7,079 Operating margin % 15 % 13 % Other income, net
796 144 Income before income
taxes 7,984 7,223 Income tax expense (1,834 ) (180 )
Net income 6,150 7,043 Net loss (income) attributable to
noncontrolling interest 91 (10 ) Net
income attributable to controlling interest $ 6,241 $ 7,033
Unaudited pro forma information (1):
Net income attributable to controlling interest per class A
ordinary share - basic and diluted $ 0.22 $ 0.24 Net
income attributable to controlling interest per class B ordinary
share - basic and diluted $ 0.22 $ 0.24 Weighted
average shares of class A outstanding - basic and diluted
4,799,740 4,760,880 Weighted average shares of
class B outstanding - basic and diluted 24,200,000
24,200,000 Total weighted average shares - basic and
diluted 28,999,740 28,960,880
(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 Software Unaudited Combined
Statement of Operations (Amounts in thousands of U.S.
dollars except share and per share data)
Three months ended
December 31,
2008 2009 REVENUE: Licenses (including
royalties from related parties of $249 and $176, respectively) $
9,333 $ 10,511 Maintenance (including royalties from related
parties of $56 and $49, respectively) 24,866 25,343 Professional
services 19,030 15,800 Hardware 1,069 2,056 SaaS implementation and
support - 616 Total revenue 54,298
54,326
COST OF REVENUE: Licenses 4,474 4,868
Maintenance 3,897 3,609 Professional services 17,791 13,443
Hardware 1,101 1,525 SaaS implementation and support -
411 Total cost of revenue 27,263
23,856 Gross profit 27,035 30,470 Gross margin
% 50 % 56 %
OPERATING EXPENSES: Sales and marketing
expenses 10,677 8,627 Research and development expenses 6,597 5,297
General and administrative expenses 11,348 9,425 General and
administrative expenses allocated to Parent (3,103 ) (2,246 )
Exchange (gain) loss on deferred tax assets 2,487 (39 )
Amortization expenses 1,737 1,151 Restructuring and other charges
1,351 1,176 Total operating expenses
31,094 23,391 Operating income
(loss) (4,059 ) 7,079 Operating margin % -7 % 13 % Other
income, net 323 144 Income
(loss) before income taxes (3,736 ) 7,223 Income tax expense
(1,204 ) (180 ) Net income (loss) (4,940 ) 7,043 Net
loss (income) attributable to noncontrolling interest 80
(10 ) Net income (loss) attributable to
controlling interest $ (4,860 ) $ 7,033
Unaudited pro forma information (1): Net income attributable
to controlling interest per class A ordinary share - basic and
diluted $ (0.17 ) $ 0.24 Net income attributable to
controlling interest per class B ordinary share - basic and diluted
$ (0.17 ) $ 0.24 Weighted average shares of class A
outstanding - basic and diluted 4,800,000
4,760,880 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
28,960,880 (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 Software Unaudited Combined Statement of
Operations (Amounts in thousands of U.S. dollars except
share and per share data) Twelve months
ended December 31, 2008 2009 REVENUE:
Licenses (including royalties from related parties of $1,091 and
$1,287, respectively) $ 45,340 $ 33,085 Maintenance (including
royalties from related parties of $185 and $250, respectively)
103,606 99,775 Professional services (including royalties from
related parties of $Nil and $32, respectively) 87,971 66,666
Hardware 3,870 3,757 SaaS implementation and support -
616 Total revenue 240,787 203,899
COST OF REVENUE: Licenses 19,946 18,699 Maintenance 15,937
14,663 Professional services 71,949 56,329 Hardware 2,998 3,081
SaaS implementation and support - 411
Total cost of revenue 110,830 93,183
Gross profit 129,957 110,716 Gross margin % 54 % 54 %
OPERATING EXPENSES: Sales and marketing expenses 54,177
32,483 Research and development expenses 25,909 18,005 General and
administrative expenses 44,124 35,725 General and administrative
expenses allocated to Parent (12,379 ) (10,134 ) Exchange (gain)
loss on deferred tax assets 3,271 (2,093 ) Amortization expenses
6,843 4,533 Restructuring and other charges 5,012
3,351 Total operating expenses 126,957
81,870 Operating income 3,000 28,846 Operating
margin % 1 % 14 % Other income, net 857
815 Income before income taxes 3,857 29,661 Income
tax expense (4,877 ) (6,570 ) Net income
(loss) (1,020 ) 23,091 Net loss attributable to noncontrolling
interest 126 131 Net income
attributable to controlling interest $ (894 ) $ 23,222
Unaudited pro forma information (1): Net
income attributable to controlling interest per class A ordinary
share - basic and diluted $ (0.03 ) $ 0.80 Net income
attributable to controlling interest per class B ordinary share -
basic and diluted $ (0.03 ) $ 0.80 Weighted average shares
of class A outstanding - basic and diluted 4,800,000
4,774,913 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 28,974,913 (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 Software Unaudited Combined
Statement of Cash Flow (Amounts in thousands of U.S. dollars
except share and per share data) Three months
ended September 30, December 31, 2009
2009 OPERATING ACTIVITIES: Net income $ 6,150 $ 7,043
Adjustments to reconcile net income to net cash provided by
operating activities: Depreciation expense 766 750 Amortization
expense 4,482 4,736 Provision for bad debt 295 187 Stock
compensation expenses 750 418 Deferred income tax provision (21 )
4,141 Exchange gain on deferred tax assets (865 ) (39 ) Loss on
disposal of property and equipment 1 46 Accrued interest income
from Parent (789 ) (165 ) Interest income on restricted cash 12 47
Changes in operating assets and liabilities: Accounts receivable
9,355 (10,265 ) Deposits, prepayments and other receivables 1,873
293 Other assets (11 ) 149 Accounts payable (610 ) 866 Income tax
payable 1,848 (3,939 ) Accrued liabilities (701 ) 1,970 Deferred
revenue (3,483 ) 517 Other liabilities 149
(700 ) Net cash provided by operating activities 19,201
6,055
INVESTING ACTIVITIES:
Acquisitions, net of cash acquired (1,323 ) (25,533 ) Purchases of
property and equipment (203 ) (120 ) Capitalized software (905 )
(556 ) Investment in cost method investees (franchise partners) -
(70 ) Decrease (increase) in restricted cash (11 )
372 Net cash used in investing activities (2,442 )
(25,907 )
FINANCING ACTIVITIES: Issuance of
class A ordinary shares 43,390 - Payments on loan from Parent, net
(13,752 ) (4,050 ) Short-term borrowings (payments), net (524 )
(1,253 ) Purchases of treasury stock (39 ) (1,079 ) Payments for
capital lease obligations (95 ) (109 ) Net cash
provided by (used) in financing activities 28,980
(6,491 ) Effect of exchange differences on cash
500 (136 ) Net increase (decrease) in
cash and cash equivalents 46,239 (26,479 ) Cash at beginning of
period 20,589 66,828 Cash at end
of period $ 66,828 $ 40,349
CDC Software
Unaudited Combined Statement of Cash Flow (Amounts in
thousands of U.S. dollars except share and per share data)
Three months ended December
31, Twelve months ended December 31, 2008
2009 2008 2009 OPERATING ACTIVITIES:
Net income $ (4,940 ) $ 7,043 $ (1,020 ) $ 23,091 Adjustments to
reconcile net income to net cash provided by operating activities:
Depreciation expense 1,009 750 4,201 3,122 Amortization expense
6,276 4,736 22,609 18,941 Provision for bad debt 1,326 187 3,139
1,056 Stock compensation expenses 735 418 1,548 1,550 Deferred
income tax provision (798 ) 4,141 1,706 4,113 Exchange (gain) loss
on deferred tax assets 2,487 (39 ) 3,271 (2,093 ) Loss (gain) on
disposal of property and equipment (46 ) 46 (44 ) 139 Accrued
interest income from Parent (159 ) (165 ) (639 ) (838 ) Interest
income on restricted cash (155 ) 47 (155 ) - Changes in operating
assets and liabilities: Accounts receivable (2,808 ) (10,265 )
6,173 10,230 Note receivable due from franchise partners (20 ) -
(440 ) - Deposits, prepayments and other receivables (602 ) 293
1,513 (351 ) Other assets 824 149 754 (128 ) Accounts payable 886
866 (699 ) 1,025 Income tax payable 1,872 (3,939 ) 1,838 1,677
Accrued liabilities (673 ) 1,970 (5,138 ) (3,090 ) Deferred revenue
3,583 517 (3,521 ) (4,868 ) Other liabilities (635 )
(700 ) (1,148 ) (572 ) Net cash provided by operating
activities 8,162 6,055 33,948
53,004
INVESTING ACTIVITIES:
Acquisitions, net of cash acquired - (25,533 ) (39 ) (26,856 )
Payment for prior year acquisitions (39 ) - (387 ) - Purchases of
property and equipment 71 (120 ) (2,109 ) (1,010 ) Capitalized
software (757 ) (556 ) (7,269 ) (3,556 ) Investment in cost method
investees (franchise partners) (57 ) (70 ) (210 ) (108 ) Decrease
in restricted cash - 372 -
3,581 Net cash used in investing activities
(782 ) (25,907 ) (10,014 ) (27,949 )
FINANCING ACTIVITIES: Issuance of class A ordinary
shares - - - 43,390 Payments on loan from Parent, net (1,901 )
(4,050 ) (24,191 ) (52,797 ) Short-term borrowings (payments), net
(171 ) (1,253 ) 4,541 (1,656 ) Purchases of treasury stock - (1,079
) - (1,118 ) Payments for capital lease obligations (98 )
(109 ) (98 ) (569 ) Net cash used in financing
activities (2,170 ) (6,491 ) (19,748 )
(12,750 ) Effect of exchange differences on cash (587
) (136 ) (502 ) 703 Net increase
(decrease) in cash and cash equivalents 4,623 (26,479 ) 3,684
13,008 Cash at beginning of period 22,718
66,828 23,657 27,341 Cash
at end of period $ 27,341 $ 40,349 $ 27,341 $
40,349
CDC Software Unaudited 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 September
30, December 31, 2009 2009 (a)
Reconciliation from GAAP results to Adjusted EBITDA from continuing
operations Operating income from continuing operations $ 7,188
$ 7,079 Add back restructuring and other charges 900 1,176 Add back
depreciation expense 766 750 Add back amortization expense 1,094
1,151 Add back amortization expense included in cost of revenue
3,388 3,585 Add back stock compensation expenses 750 418 Add back
exchange gain on deferred taxes (865 ) (39 ) Add back deferred
revenue grind - 632 Adjusted EBITDA $
13,221 $ 14,752 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 September 30 and December 31:
Three months ended September 30, December 31,
2009 2009 Capitalized software credits $ (905
) $ (556 )
Three months ended
September 30, December 31, 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 $
6,241 $ 7,033 Add back amortization expense 1,094 1,151 Add back
amortization expense included in cost of revenue 3,388 3,585
Subtract capitalized software credits (905 ) (556 ) Add back stock
based compensation 750 418 Add back restructuring 900 1,176 Add
back deferred revenue grind - 632 Add back exchange (gain) loss on
deferred tax assets (865 ) (39 ) Add back non cash tax expense 642
63 Tax affect on all reconciling items @ 31% (1,620 )
(1,986 ) Non-GAAP net income $ 9,625 $ 11,477
Non-GAAP net income as % of revenue 20 % 21 % Total weighted
average shares outstanding (basic and dilutive) 28,999,740
28,960,880
Non-GAAP net income per share (basic and
dilutive) $ 0.33 $ 0.40 CDC
Software Unaudited 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 December 31,
Twelve Months Ended December 31, 2008 2009
2008 2009 (a) Reconciliation from GAAP results to
Adjusted EBITDA from continuing operations Operating income
(loss) from continuing operations $ (4,059 ) $ 7,079 $ 3,000 $
28,846 Add back restructuring and other charges 1,351 1,176 5,012
3,351 Add back depreciation expense 1,009 750 4,201 3,122 Add back
amortization expense 1,737 1,151 6,843 4,532 Add back amortization
expense included in cost of revenue 4,539 3,585 15,766 14,409 Add
back stock compensation expenses 735 418 1,548 1,550 Add back
exchange (gain) loss on deferred taxes 2,487 (39 ) 3,271 (2,093 )
Add back deferred revenue grind - 632
- 632 Adjusted EBITDA $ 7,799 $
14,752 $ 39,641 $ 54,349 Adjusted EBITDA
margin % 14 % 27 % 16 % 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 and twelve months
ended December 31:
Three Months Ended December 31,
Twelve Months Ended December 31, 2008 2009
2008 2009 Capitalized software credits $ (757
) $ (556 ) $ (7,269 ) $ (3,556 )
Three Months Ended December 31, Twelve Months Ended
December 31, 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 $
(4,860 ) $ 7,033 $ (894 ) $ 23,222 Add back amortization expense
1,737 1,151 6,843 4,532 Add back amortization expense included in
cost of revenue 4,539 3,585 15,766 14,409 Subtract capitalized
software credits (757 ) (556 ) (7,269 ) (3,556 ) Add back stock
based compensation 735 418 1,548 1,550 Add back restructuring 1,351
1,176 5,012 3,351 Add back deferred revenue grind - 632 - 632 Add
back exchange (gain) loss on deferred tax assets 2,487 (39 ) 3,271
(2,093 ) Add back non cash tax expense 421 63 1,707 2,300 Tax
affect on all reconciling items @ 31% (2,358 ) #
(1,986 ) (6,789 ) (6,486 ) Non-GAAP net income $
3,295 $ 11,477 $ 19,195 $ 37,861
Non-GAAP net income as % of revenue 6 % 21 % 8 % 19 % Total
weighted average shares outstanding (basic and dilutive) 29,000,000
28,960,880 29,000,000 28,974,913
Non-GAAP net income per share
(basic and dilutive) $ 0.11 $ 0.40
$ 0.66 $ 1.31
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