CDC Software Corporation (NASDAQ: CDCS), a hybrid enterprise
software provider of on-premise and cloud deployments, today
announced financial results for the quarter ended March 31, 2010.
For the first quarter of 2010, Non-GAAP revenue(a) was $51.7
million and Non-GAAP net income(a) was $8.0 million, or $0.28 in
Non-GAAP earnings per share(a), compared to Non-GAAP revenue of
$50.4 million and Non-GAAP net income of $8.3 million, or $0.29 in
Non-GAAP earnings per share in the first quarter of 2009. CDC
Software’s balance sheet continued to be solid with cash on hand of
$44.5 million at March 31, 2010.
First quarter 2010 application sales, which is comprised of
license revenue plus new Total Contract Value (TCV) for
Software-as-a-Service (SaaS) sales secured, increased 14 percent to
$8.2 million during the first quarter of 2010, from $7.2 million in
the first quarter of 2009. Total contracted and unrecognized
recurring revenue at the end of the first quarter 2010 was $52.5
million compared to $49.2 million at end of the fourth quarter of
2009. First quarter 2010 license revenue was $7.9 million, and TCV
for new SaaS contracts secured in the quarter was $0.3 million.
Also the number of enterprise and SaaS deals in the first quarter
of 2010 increased by about 18.7 percent to 299 from 252 in the
first quarter of 2009 (which did not include SaaS).
Total Non-GAAP recurring revenue(a), which CDC Software
defines as Non-GAAP maintenance(a) plus SaaS revenue, increased 14
percent to $27.5 million in the first quarter of 2010 from $24.2
million in the first quarter of 2009. Maintenance retention revenue
continued to be strong at 90 percent for the first quarter of 2010.
First quarter 2010 services revenue was $15.3 million compared to
$18.7 million in the first quarter of 2009.
First quarter 2010 Non-GAAP net income attributable to
controlling interest(a) was $8.0 million, or $0.28 per share,
compared to $8.3 million or $0.29 per share in the first quarter of
2009. Adjusted EBITDA(a) was $10.6 million in the first quarter of
2010 compared to $12.7 million in the same period in 2009. First
quarter 2010 Adjusted EBITDA margin(a) was 20 percent compared to
25 percent in the same period in 2009. Operating cash flow for the
quarter ended March 31, 2010 was $5.5 million compared to $6.7
million for the fourth quarter ended December 31, 2009.
“We saw solid growth in application sales and recurring revenue
despite the first quarter typically being lower than other quarters
due to the seasonality such as customer’s “budget flush” where they
generally have less flexibility in capital spending,” said Bruce
Cameron, president of CDC Software. “We are currently focused on
expanding our business as a pure-play enterprise software company
offering hybrid deployment options that include on-premise and
SaaS. As we have previously stated, our growth strategy is to
develop recurring revenue streams reaching closer to 70 percent of
total revenue over the next few years, after completion of our
planned SaaS acquisitions and our strategic investments in SaaS
companies. In fact, we expect our SaaS revenue to reach close to 20
percent of total revenue by the end of 2011. Already, we have been
seeing solid SaaS sales momentum at this early stage, and in fact,
have already closed more than $800,000 in SaaS business early in
the second quarter.“
Cameron added, “During our expansion, we are integrating our
SaaS acquisitions, making investments in SaaS companies, training
our workforce and enhancing our data centers. We are also
increasing our funding for research and development which was
increased 26 percent in the first quarter compared to fourth
quarter in 2009, as well as expanding the number of our
quota-carrying sales professionals. With these planned strategies,
we feel we offer our customers and prospects a compelling value
proposition as a leading hybrid enterprise applications
provider.”
Effective January 1, 2010, CDC Software discontinued
capitalization of internally developed software due to shorter
development cycles for its products. DSOs (days sales outstanding)
in the first quarter of 2010 was 80 days, compared to 101 days for
the first quarter of 2009. Accounts receivable as of March 31, 2010
was $49.4 million, compared to $53.7 million as of March 31, 2009.
Deferred revenue as of March 31, 2010 was $54.4 million, compared
to $53.4 million as of March 31, 2009. About 43 percent of license
revenue was derived from North America, 34 percent from EMEA, and
23 percent from Asia/Pacific.
Non-GAAP net income margin(a) was 15 percent in the first
quarter of 2010, compared to 17 percent in the first quarter of
2009. Non-GAAP gross margin(a) improved to 61 percent during the
first quarter of 2010, compared to 60 percent the same quarter of
2009.
At the core of CDC Software’s hybrid enterprise software
strategy is the efficient execution of its acquire, integrate,
innovate and grow strategy.
Acquire
CDC Software’s SaaS acquisition strategy is focused on companies
that can complement its current SaaS solutions, extend the
functionality of its on-premise solutions, and expand its
geographic or vertical market footprints. These targets also must
generally meet CDC Software’s disciplined acquisition criteria that
includes immediate earnings accretion and increasing EBITDA margin
over time.
CDC Software has completed three cloud acquisitions since the
latter part of the fourth quarter of 2009 and is on track to
complete more by the end of the year. Earlier this month, CDC
Software announced the signing of a term sheet with potentially its
largest SaaS acquisition to date.
In addition, CDC Software formed its Strategic Cloud Investment
Partner Program (SCIPP) under which it plans to make minority
investments in, and form strategic reselling partnerships with,
companies offering cloud-based or point solutions which complement
its enterprise solutions portfolio. Already, CDC Software has
planned strategic relationships with, and plans to invest in,
Marketbright, a SaaS marketing automation solutions provider, and
eBizNET, a provider of SaaS supply chain execution solutions, where
both companies will be reselling each company’s solutions. With
these strategies in place, CDC Software’s goal is to reach a $50
million cloud revenue run rate on an annualized basis and an
annualized total recurring revenue of $150 million in the first
quarter of 2011.
Integrate
Much of CDC Software’s successful integration of its
acquisitions can be attributed to its global technology and
business infrastructure that offers compelling economies of scale.
For example, the Truition (CDC eCommerce) acquisition in the late
fourth quarter of 2009, already has seen their EBITDA as a
percentage of revenue climb to 27 percent in the first quarter of
2010 compared to 5 percent in the third quarter of 2009 (the last
full quarter prior to acquisition by CDC Software) by its
utilization of CDC Software’s global sales and back office shared
services center. The general and administrative expenses as a
percentage of revenue in the first quarter of 2010 declined to 9
percent compared to 25 percent in the third quarter of 2009. Sales
and marketing expenses as a percentage of revenue in the first
quarter of 2010 decreased to 7 percent compared to 12 percent in
the third quarter 2009.
Many of CDC Software’s acquired SaaS companies’ utilize a web
services framework for integration. To leverage this integration
capability, CDC Software plans to develop the CDC Software
Connector, a middleware tool that will be available on the
cloud that utilizes standards-based messaging and transport
mechanisms, and application-to-application adaptors. CDC Connector
is expected to power CDC Software’s hybrid strategy by enabling it
to seamlessly integrate its on-premise and SaaS solutions.
CDC Connector is expected to provide 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 that
provide interoperability between platforms. For example, CDC
Software has integrated its newly acquired event monitoring
technology, CDC Event Management Framework, that reacts to complex
events in customers’ production environments by utilizing a
powerful, flexible event broker and routing capability.
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 utilizing the highly collaborative Agile development
methodology.
During the first quarter of 2010, CDC Software introduced
several new products and version upgrades for its core enterprise
resource planning (ERP), supply chain management (SCM) and customer
relationship management (CRM) applications, and its recently
acquired products of Activplant, Truition (CDC eCommerce) and
gomembers. Major new releases included: Ross 6.4, CDC Supply Chain
Advanced Order Management version 10, CDC Supply Chain cSuite
version 11, CDC eCommerce, Pivotal 6.0 MMD and CDC eCommerce. Ross
6.4 includes enhancements in intercompany multi-currency, enhanced
user interface and reporting functionality using Microsoft
Reporting Services. CDC Supply Chain Advanced Order Management 10.0
includes enhancements in SOA architecture for XML-based integration
and output management, new smart client user interface, support for
rationing and fair share allocation, mass updates of orders, new
history and purge functions for purchase orders and enhanced
product catalog management. CDC Supply Chain cSuite version 11
includes integration of warehouse and transportation across wave
planning, dynamic load building and route planning and features
integration of real-time event management. Pivotal Money Market
Directories now provides functionality for investment management
customers to import and manage Standard & Poor’s money market
data within the Pivotal CRM 6.0 platform. CDC eCommerce’s new
version release adds functionality in bulk gift registry.
Grow
CDC Software’s total sales pipeline has continued to grow and
CDC Software has seen its second quarter to date sales pipeline
(including SaaS) increase by about 60 percent compared to the same
period in the second quarter in 2009 (which did not include SaaS).
CDC Software’s second quarter 2010 on-premise sales pipeline has
also been seeing double digit organic growth of about 27 percent
compared to the second quarter in 2009. The company’s cross-sell
pipeline has also been growing, and CDC Software has seen strong
demand in selling CDC Factory to its ERP installed base.
As CDC Software continues to expand its hybrid business, SaaS
sales are expected to accelerate at a faster rate than license
sales. SaaS revenue during the first quarter 2010 increased to $1.7
million compared to $0.6 million in the fourth quarter 2009. The
latter part of the fourth quarter in 2009 was the first time CDC
Software reported SaaS revenue.
Another key part of its growth strategy is its Strategic
Alliance Program that includes 1,100 resellers around the world.
Another program, called the Strategic Partner Program, which
started in the third quarter of 2009, focuses on OEM sales. As part
of this program, CDC Software added two new OEM partners in the
first quarter and plans to add new OEM partners every 30 to 60
days. Since the program’s inception, CDC Software’s OEM sale
pipeline has grown from $150,000 in the fourth quarter of 2009 to
$1.5 million in the second quarter of 2010.
In addition, CDC Software’s Franchise Partner Program has been a
key growth program, especially for the company’s expansion in 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
believes that leveraging partners in emerging markets such as these
can accelerate the company’s organic revenue growth rate.
Peter Yip, CEO of CDC Software said, “Overall, we are pleased
with our progress in expanding the company’s hybrid business, which
we feel differentiates us from many other enterprise software
companies. Our valued customers are giving us positive feedback on
our focus in hybrid offerings. That is why we have made significant
investments in our acquisitions and partnerships and expect these
strategies to continue this year. We are also very pleased on our
recently announced securing of $30 million in new financing from
Wells Fargo Capital Finance. While we have solid operating cash
flow, this gives us further flexibility in executing our
acquisition and investment strategies. With our strong cash
position, we also believe we are well positioned to make further
increases in R&D investments and to take advantage of greater
expansion in high growth markets that include China and India.”
Yip concluded, “We have solid business fundamentals, a strong
financial foundation and a proven track record of successfully
integrating top-quality acquisitions. CDC Software has demonstrated
an unwavering commitment to skillfully executing its strategies
knowledgeably, efficiently, timely, and cost effectively and we are
confident that this will foster greater long-term growth and
promote potentially greater levels of shareholder value.”
Conference Call
The Company's senior management will host a conference call for
financial analysts and investors, Wednesday, April 28th, 2010 at
9:00 AM EDT.
USA-based Toll Free Number: +1 (888) 603-6873
International: +1 (973) 582-2706
Pass code: # 68535478 Call Leader: Monish Bahl
This call is being webcast by Thomson Reuters and can be
accessed at the following link:
http://phx.corporate-ir.net/phoenix.zhtml?p=irol-eventDetails&c=215971&eventID=3018326
Individual investors also can listen to the call through at the
following link: www.fulldisclosure.com or by visiting any of the
investor sites in CCBN's Individual Investor Network. Institutional
investors can access the call via Thomsonone's password-protected
event management site, StreetEvents (www.streetevents.com).
Instant Replay
For those unable to call in, a digital instant replay will be
available after the call until May 12, 2010. U.S. based Toll Free
Number: +1800-642-1687,
U.S.-based Toll Number: +1 706-645-9291. Conference ID number: #.
68535478
Footnotes:
a) Adjusted Financial Measures
This press release includes Non-GAAP revenue, Non-GAAP recurring
revenue, Non-GAAP maintenance plus SaaS revenue, Non-GAAP gross
margin, Non-GAAP net income, Non-GAAP net income attributable to
controlling interest, Non-GAAP net income margin, Non-GAAP earnings
per share, Adjusted EBITDA an Adjusted EBITDA margin, which are not
prepared in accordance with generally accepted accounting
principles in the United States (“GAAP”) (collectively, the
"Non-GAAP Financial Measures"). Non-GAAP Financial Measures are not
alternatives for measures such as revenue, SaaS revenue, gross
margin, net income, net income attributable to controlling
interest, net income margin and earnings per share prepared under
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 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) Revised 2009 Information
Results provided herein for 2009 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, 2009.
All dollar amounts are in U.S. dollars
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
hybrid enterprise software provider of on-premise and cloud
deployments. 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 growth strategy, our
planned acquisitions and investments, and our expectations
regarding SaaS revenue, including momentum and expectations for
revenue performance, our expectations regarding increased funding
for research and development and the expansion of the number of
quota-carrying sales professionals, our beliefs regarding our
product offerings and the value thereof, our plans with respect to
revenue run rates and amounts, our beliefs regarding the factors
behind our success with integrations, our plans with respect to CDC
Software Connector, including the potential features and benefits
thereof, our beliefs and expectations regarding our total sales
pipelines, including on-premise, cross-selling and SaaS, our
beliefs regarding strategic partnerships, our beliefs regarding our
credit facility with Wells Fargo Capital Finance and the uses
thereof, our beliefs regarding our potential for long-term growth
and the reasons therefor, 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 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 third parties, 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
any trends we may see, 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,
March 31,
2009 (b ) 2010
ASSETS Current assets: Cash and cash equivalents $ 40,349 $
44,502 Restricted cash 113 112 Accounts receivable (net of
allowance of $5,090 and $4,273 at December 31, 2009 and March 31,
2010, respectively) 44,660 45,117 Marketable securities 1,084 -
Prepayments and other current assets 7,970 11,222 Deferred tax
assets 3,215 3,278
Total current assets
97,391 104,231 Property and equipment, net 5,288 4,935
Goodwill 155,617 158,588 Intangible assets 72,032 68,750 Deferred
tax assets 32,051 32,273 Receivable from Parent 34,166 29,985 Note
receivable due from related parties 680 650 Investment in cost
method investees 604 570 Other assets 1,589
2,174 Total assets $ 399,418 $ 402,156
LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities:
Accounts payable $ 12,185 $ 12,021 Purchase consideration payables
2,184 3,749 Income tax payable 3,853 4,084 Short-term bank loans
4,364 4,901 Accrued liabilities 23,048 22,492 Restructuring
accruals, current portion 2,015 1,819 Deferred revenue 53,152
54,438 Deferred tax liabilities 1,151 1,052
Total current liabilities 101,952 104,556 Deferred
tax liabilities 21,875 21,864 Restructuring accruals, net of
current portion - 9 Purchase consideration payables, net of current
portion 810 2,601 Other liabilities 9,628
9,994 Total liabilities 134,265 139,024 Contingencies
and commitments Shareholders' equity: Class A ordinary
shares, $0.001 par value; 50,000,000 shares authorized; 4,800,000
and 4,800,000 shares issued as of December 31, 2009 and March 31,
2010, respectively; 4,679,037 and 4,562,294 shares outstanding as
of December 31, 2009 and March 31, 2010, respectively
5 5 Class B ordinary shares, $0.001 par value; 27,000,000 shares
authorized; 24,200,000 shares issued as of December 31, 2009 and
March 31, 2010; respectively 24,200,000 and 23,923,457 shares
outstanding as of December 31, 2009 and March 31, 2010,
respectively 24 24 Additional paid-in capital 249,219
249,875 Common stock held in treasury; 120,963 and 514,249 shares
at December 31, 2009 and March 31, 2010, respectively (1,118 )
(5,112 ) Retained earnings 16,843 18,597 Accumulated other
comprehensive income (loss) 10 (515 ) Total
shareholders' equity 264,983 262,874 Noncontrolling interest
170 258 Total equity 265,153
263,132 Total liabilities and shareholders'
equity $ 399,418 $ 402,156
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, March
31, 2009 (b ) 2010
REVENUE: Licenses (including royalties from related parties
of $176 and $466, respectively) $ 10,511 $ 7,923 Maintenance
(including royalties from related parties of $49 and $69,
respectively) 25,343 24,870 Professional services 15,800 15,298
Hardware 2,056 907 SaaS implementation and support 616
1,530 Total revenue 54,326 50,528
COST OF REVENUE: Licenses 4,868 4,749 Maintenance 3,609
4,164 Professional services 13,443 13,743 Hardware 1,525 774 SaaS
implementation and support 411 538
Total cost of revenue 23,856 23,968
Gross profit 30,470 26,560 Gross margin % 56 % 53 %
OPERATING EXPENSES: Sales and marketing expenses 8,627 9,569
Research and development expenses 5,297 6,686 General and
administrative expenses 10,615 8,267 General and administrative
expenses allocated to Parent (2,246 ) (2,342 ) Exchange (gain) loss
on deferred tax assets (39 ) 623 Amortization expenses 1,151 1,280
Restructuring and other charges 1,176 573
Total operating expenses 24,581 24,656
Operating income 5,889 1,904 Operating margin % 11 %
4 % Other income, net 144 730
Income before income taxes 6,033 2,634 Income tax benefit
(expense) 61 (580 ) Net income 6,094
2,054 Net income attributable to noncontrolling interest (10
) (88 ) Net income attributable to controlling
interest $ 6,084 $ 1,966 Net
income attributable to controlling interest per class A ordinary
share - basic and diluted $ 0.21 $ 0.07 Net income
attributable to controlling interest per class B ordinary share -
basic and diluted $ 0.21 $ 0.07 Weighted average
shares of class A outstanding - basic and diluted 4,760,880
4,596,329 Weighted average shares of class B
outstanding - basic and diluted 24,200,000
24,196,927 Total weighted average shares - basic and diluted
28,960,880 28,793,256
CDC
Software Unaudited Combined Statement of Operations
(Amounts in thousands of U.S. dollars except share and per share
data) Three months ended
March 31,
2009 2010 REVENUE:
Licenses (including royalties from related parties of $242 and
$466, respectively) $ 7,130 $ 7,923 Maintenance (including
royalties from related parties of $86 and $69, respectively) 24,198
24,870 Professional services 18,680 15,298 Hardware 345 907 SaaS
implementation and support - 1,530
Total revenue 50,353 50,528
COST OF REVENUE: Licenses
4,578 4,749 Maintenance 3,542 4,164 Professional services 15,818
13,743 Hardware 239 774 SaaS implementation and support -
538 Total cost of revenue 24,177
23,968 Gross profit 26,176 26,560 Gross margin
% 52 % 53 %
OPERATING EXPENSES: Sales and marketing
expenses 7,653 9,569 Research and development expenses 4,531 6,686
General and administrative expenses 9,077 8,267 General and
administrative expenses allocated to Parent (2,861 ) (2,342 )
Exchange loss on deferred tax assets 228 623 Amortization expenses
1,259 1,280 Restructuring and other charges 431
573 Total operating expenses 20,318
24,656 Operating income 5,858 1,904 Operating
margin % 12 % 4 % Other income, net 144
730 Income before income taxes 6,002 2,634 Income tax
expense (2,003 ) (580 ) Net income 3,999 2,054
Net loss (income) attributable to noncontrolling interest 49
(88 ) Net income attributable to controlling
interest $ 4,048 $ 1,966
Unaudited
pro forma information (1): Net income attributable to
controlling interest per class A ordinary share - basic and diluted
$ 0.14 $ 0.07 Net income attributable to controlling
interest per class B ordinary share - basic and diluted $ 0.14
$ 0.07 Weighted average shares of class A outstanding
- basic and diluted 4,596,329 4,596,329
Weighted average shares of class B outstanding - basic and diluted
24,196,927 24,196,927 Total weighted
average shares - basic and diluted 28,793,256
28,793,256 (1) Unaudited pro forma basic and diluted
earnings per share information for 2009 is 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
December 31, March 31,
2009 (b)
2010 OPERATING ACTIVITIES: Net income $
6,094 $ 2,054 Adjustments to reconcile net income to net cash
provided by operating activities: Depreciation expense 750 699
Amortization expense 4,736 5,105 Provision for bad debt 887 (109 )
Stock compensation expenses 909 444 Deferred income tax provision
3,804 - Exchange (gain) loss on deferred tax assets (39 ) 623 Loss
on disposal of property and equipment 46 - Loss (gain) on disposal
of available-for-sale securities - (319 ) Accrued interest income
from Parent (165 ) (358 ) Interest income on restricted cash 47 -
Changes in operating assets and liabilities:
Accounts receivable
(10,265 ) (584 ) Deposits, prepayments and other receivables 1,393
(2,611 ) Other assets 149 (193 ) Accounts payable 865 (107 ) Income
tax payable (4,165 ) 203 Accrued liabilities 1,526 (1,305 )
Deferred revenue 517 1,665 Other liabilities (379 )
265 Net cash provided by operating activities 6,710
5,472
INVESTING ACTIVITIES:
Acquisitions, net of cash acquired (25,533 ) (2,246 ) Purchases of
property and equipment (120 ) (306 ) Capitalized software (556 ) -
Disposal (purchase) of marketable securities (804 ) 1,121
Investment in cost method investees (franchise partners) (70 ) -
Decrease (increase) in restricted cash 372 -
Net cash used in investing activities (26,711 )
(1,431 )
FINANCING ACTIVITIES: Issuance costs
of class A ordinary shares (1 ) - Borrowings from (advances to)
Parent, net (4,049 ) 1,739 Short-term borrowings (payments), net
(1,253 ) 737 Purchases of treasury stock (930 ) (1,343 ) Payments
for capital lease obligations (109 ) (118 ) Net cash
provided by (used) in financing activities (6,342 )
1,015 Effect of exchange differences on cash
(136 ) (903 ) Net increase (decrease) in cash and
cash equivalents (26,479 ) 4,153 Cash at beginning of period
66,828 40,349 Cash at end of period $
40,349 $ 44,502
CDC Software Unaudited
Combined Statement of Cash Flow (Amounts in thousands of
U.S. dollars except share and per share data)
Three months ended March 31, 2009
2010 OPERATING ACTIVITIES: Net
income $ 3,999 $ 2,054 Adjustments to reconcile net income to net
cash provided by operating activities: Depreciation expense 823 699
Amortization expense 5,151 5,105 Provision for bad debt 236 (109 )
Stock compensation expenses 181 444 Exchange loss on deferred tax
assets 228 623 Gain on disposal of marketable securities - (319 )
Accrued interest income from Parent (72 ) (358 ) Interest income on
restricted cash (28 ) - Changes in operating assets and
liabilities: Accounts receivable 2,135 (584 ) Deposits, prepayments
and other receivables (440 ) (2,611 ) Other assets (125 ) (193 )
Accounts payable 400 (107 ) Income tax payable 1,487 203 Accrued
liabilities (1,125 ) (1,305 ) Deferred revenue (573 ) 1,665 Other
liabilities 258 265 Net cash provided
by operating activities 12,535 5,472
INVESTING ACTIVITIES: Acquisitions, net of cash
acquired - (2,246 ) Purchases of property and equipment (398 ) (306
) Capitalized software (892 ) - Disposal (purchase) of marketable
securities - 1,121 Decrease in restricted cash (38 )
- Net cash used in investing activities (1,328 )
(1,431 )
FINANCING ACTIVITIES: Borrowings from
(advances to) Parent, net (20,548 ) 1,739 Short-term borrowings
(payments), net (188 ) 737 Purchases of treasury stock - (1,343 )
Payments for capital lease obligations (85 ) (118 )
Net cash provided by (used) in financing activities (20,821
) 1,015 Effect of exchange differences on cash
(281 ) (903 ) Net increase (decrease) in cash
and cash equivalents (9,895 ) 4,153 Cash at beginning of period
27,341 40,349 Cash at end of
period $ 17,446 $ 44,502
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, March 31, 2009
(b) 2010 (a) Reconciliation from GAAP results to
Adjusted EBITDA from continuing operations Operating income
from continuing operations $ 5,889 $ 1,904 Add back restructuring
and other charges 1,176 573 Add back depreciation expense 750 699
Add back amortization expense 1,151 1,280 Add back amortization
expense included in cost of revenue 3,585 3,825 Add back stock
compensation expenses 910 444 Add back exchange (gain) loss on
deferred taxes (39 ) 623 Add back deferred revenue grind 632
1,203 Adjusted EBITDA $ 14,054 $ 10,551
Adjusted EBITDA margin % 26 % 20 % (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
December 31, 2009 and March 31, 2010:
Three months
ended December 31, March 31, 2009 (b)
2010 Capitalized software credits $ (556 ) $ -
Three months ended December 31,
March 31, 2009 (b ) 2010
(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 $
6,084 $ 1,966 Add back amortization expense 1,151 1,280 Add back
amortization expense included in cost of revenue 3,585 3,825
Subtract capitalized software credits (556 ) - Add back stock based
compensation 910 444 Add back restructuring 1,176 573 Add back
deferred revenue grind 632 1,203 Add back exchange (gain) loss on
deferred tax assets (39 ) 623 Add back non cash tax expense (21 )
348 Tax affect on all reconciling items @ 31% (2,138 )
(2,271 ) Non-GAAP net income $ 10,784 $ 7,991
Non-GAAP net income as % of revenue 20 % 15 % Total weighted
average shares outstanding (basic and dilutive) 28,960,880
28,793,256
Non-GAAP net income per share (basic and
dilutive) $ 0.37 $ 0.28 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 March 31,
2009 2010 (a) Reconciliation
from GAAP results to Adjusted EBITDA from continuing operations
Operating income (loss) from continuing operations $ 5,858 $ 1,904
Add back restructuring and other charges 431 573 Add back
depreciation expense 823 699 Add back amortization expense 1,259
1,280 Add back amortization expense included in cost of revenue
3,892 3,825 Add back stock compensation expenses 181 444 Add back
exchange (gain) loss on deferred taxes 228 623 Add back deferred
revenue grind - 1,203 Adjusted EBITDA $
12,672 $ 10,551 Adjusted EBITDA margin % 25 % 20 %
(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 March 31, 2009 and 2010:
Three
Months Ended March 31, 2009
2010 Capitalized software credits $ (892 ) $ -
Three Months Ended March
31, 2009 2010 (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 $ 4,048 $
1,966 Add back amortization expense 1,259 1,280 Add back
amortization expense included in cost of revenue 3,892 3,825
Subtract capitalized software credits (892 ) - Add back stock based
compensation 181 444 Add back restructuring 431 573 Add back
deferred revenue grind - 1,203 Add back exchange (gain) loss on
deferred tax assets 228 623 Add back non cash tax expense 701 348
Tax affect on all reconciling items @ 31% (1,510 )
(2,271 ) Non-GAAP net income $ 8,338 $ 7,991
Non-GAAP net income as % of revenue 17 % 15 % Total weighted
average shares outstanding (basic and dilutive)
28,793,256
28,793,256
Non-GAAP net income per share (basic and
dilutive) $ 0.29 $ 0.28 CDC
Software
Unaudited Reconciliation From
GAAP Results to Non-GAAP Results
(Amounts in thousands of U.S. dollars) Three
Months Ended March 31, 2009 Three Months Ended December 31,
2009 Three Months Ended March 31, 2010 GAAP
Results
Non-GAAP Adjustments Non-GAAP Results GAAP
Results
Non-GAAP Adjustments Non-GAAP Results GAAP
Results
Non-GAAP Adjustments Non-GAAP Results REVENUE:
Licenses $ 7,130 $ - $ 7,130 $ 10,511 $ - $ 10,511 $ 7,923 $ - $
7,923 Maintenance 24,198 - 24,198 25,343 554 25,897 24,870 932
25,802 Professional services 18,680 - 18,680 15,800 23 15,823
15,298 137 15,435 Hardware 345 - 345 2,056 - 2,056 907 - 907 SaaS
implementation and support - - -
616 55 671
1,530 134 1,664 Total revenue
50,353 - 50,353 54,326 632 54,958 50,528 1,203 51,731
COST OF REVENUE: Licenses 4,578 (3,892 ) 686 4,868 (3,585 )
1,283 4,749 (3,825 ) 924 Maintenance 3,542 - 3,542 3,609 - 3,609
4,164 - 4,164 Professional services 15,818 - 15,818 13,443 - 13,443
13,743 - 13,743 Hardware 239 - 239 1,525 - 1,525 774 - 774 SaaS
implementation and support - - -
411 - 411
538 - 538 Total cost of revenue
24,177 (3,892 ) 20,285
23,856 (3,585 ) 20,271 23,968
(3,825 ) 20,143 Gross profit
26,176 3,892 30,068 30,470 4,217 34,687 26,560 5,028 31,588 Gross
margin % 52 % 60 % 56 % 63 % 53 % 61 %
OPERATING
EXPENSES: Sales and marketing expenses 7,653 - 7,653 8,627 -
8,627 9,569 - 9,569 Research and development expenses 4,531 892
5,423 5,297 556 5,853 6,686 - 6,686 General and administrative
expenses 9,077 (181 ) 8,896 10,615 (910 ) 9,705 8,267 (444 ) 7,823
General and administrative expenses allocated to Parent (2,861 ) -
(2,861 ) (2,246 ) - (2,246 ) (2,342 ) - (2,342 ) Exchange (gain)
loss on deferred tax assets 228 (228 ) - (39 ) 39 - 623 (623 ) -
Amortization expenses 1,259 (1,259 ) - 1,151 (1,151 ) - 1,280
(1,280 ) - Restructuring and other charges 431
(431 ) - 1,176 (1,176 ) -
573 (573 ) - Total
operating expenses 20,318 (1,207 )
19,111 24,581 (2,642 ) 21,939
24,656 (2,920 ) 21,736
Operating income (loss) 5,858 5,099 10,957 5,889 6,859
12,748 1,904 7,948 9,852 Operating margin % 12 % 22 % 11 % 23 % 4 %
19 % Other income, net 144 -
144 144 - 144
730 - 730
Income (loss) before income taxes 6,002 5,099 11,101 6,033 6,859
12,892 2,634 7,948 10,582 Income tax expense (2,003 )
(809 ) (2,812 ) 61 (2,159 )
(2,098 ) (580 ) (1,923 ) (2,503 ) Net
income (loss) 3,999 4,290 8,289 6,094 4,700 10,794 2,054 6,025
8,079 Net loss (income) attributable to noncontrolling interest
49 - 49 (10 )
- (10 ) (88 ) -
(88 ) Net income (loss) attributable to controlling interest
$ 4,048 $ 4,290 $ 8,338 $ 6,084 $ 4,700
$ 10,784 $ 1,966 $ 6,025 $ 7,991
Net income as a % of revenue 8 % 17 % 11 % 20 % 4 % 15 %
Cdc Software Corp. ADS, Each Representing One Class A Ordinary Share (MM) (NASDAQ:CDCS)
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