CDC Software Corporation (NASDAQ: CDCS), a global enterprise
software provider of on-premise and cloud deployments, today
announced financial results for the quarter ended June 30, 2011.
For the second quarter of 2011, Non-GAAP revenue(a) was $56.5
million and Non-GAAP net income(a) was $2.2 million, or $0.08 per
share, compared to Non-GAAP revenue of $54.0 million and Non-GAAP
net income of $8.0 million, or $0.28 per share in the second
quarter of 2010.
In the second quarter of 2011, Adjusted EBITDA(a) was $5.2
million, compared to $11.4 million in the same period in 2010. In
the second quarter of 2011, CDC Software continued to invest in
sales and marketing and research and development (R&D) for both
its on-premise and cloud segments. In addition, increased
litigation expenses impacted earnings in the quarter. GAAP gross
profit was $30.2 million and gross margin was 54 percent in the
second quarter of 2011, compared to $27.9 million in gross profit
and gross margin of 53 percent in the first quarter of 2011. DSO
(days sales outstanding) in the second quarter of 2011 was 69 days,
compared to 80 days for the second quarter of 2010.
Total Non-GAAP recurring revenue(a), which CDC Software
defines as Non-GAAP maintenance(a) plus SaaS revenue, increased to
$30.7 million in the second quarter of 2011, from $27.8 million in
the second quarter of 2010. Second quarter 2011 services revenue
was $15.4 million, compared to $16.1 million in the second quarter
of 2010. During the second quarter of 2011, approximately 33
percent of license revenue was derived from North America, 48
percent from EMEA, and 19 percent from Asia/Pacific.
Application sales, which is comprised of license revenue plus
Secured Total Contract Value (STCV) for Software-as-a-Service
(SaaS) sales secured, was $16.2 million during the second quarter
of 2011, compared to $13.5 million in the second quarter of 2010.
Application sales for the second quarter of 2011 included license
revenue of $8.7 million and record STCV, or bookings, for
Software-as-a-Service (SaaS) sales of $7.5 million, compared to
license revenue of $8.8 million and STCV of $4.7 million in the
second quarter of 2010. Second quarter 2011 STCV marks record
bookings since the company started its cloud business in the fourth
quarter of 2009. STCV is the contract dollar amount for the
duration of the contracts for all SaaS contracts secured, including
new logo contracts, upsell, rental, as well as all renewals
received by the end of the quarter.
Second quarter 2011 Total Contract Backlog (TCB) increased to
$148.0 million, compared to $144.7 million, in the first quarter of
2011. TCB is defined as the sum of the remaining revenue value of
SaaS and term license or rental contracts through the end of their
respective term, the value of contracted renewals for current SaaS
and rental contracts based on 12 months of value, plus maintenance
revenues from existing contracts over the previous 12 months.
For the second quarter of 2011, CDC Software’s Cloud business
segment reported Non-GAAP revenue of $6.7 million, an increase of
approximately 18 percent from $5.7 million in the second quarter of
2010. The Cloud segment reported negative Adjusted EBITDA of
$348,000 in the second quarter of 2011, compared to Adjusted EBITDA
of $379,000 in the second quarter of 2010, due to increased
investment activities.
Overall, earnings for CDC Software in the second quarter of 2011
have continued to be impacted by increased investments in sales and
marketing, R&D as well as increased litigation expenses. The
company expects that earnings will continue to be impacted going
forward by expenses related to ongoing litigation as well as costs
associated with the investigation being undertaken by the special
committee of the board of directors.
“We are pleased with our Q2 2011 results, including an
improvement in revenue on a sequential quarterly basis as well as
the growth in our pipeline,” said Bruce Cameron, president of CDC
Software. “While our cloud business has been seeing good progress
from a revenue growth perspective, we are evaluating the synergies
of each of our completed cloud acquisitions with respect to the
company’s cross-sell strategy, as well as how each of these
businesses impacts the company’s overall profitability both in the
short and longer term. Indeed, our profitability in Q2 2011 was
impacted primarily by continued increases in spending for sales and
marketing, product engineering and litigation, however, we believe
that we have also continued to position ourselves for higher
organic growth in our business. With higher spending in sales and
marketing, we have already seen increases in our sales
pipeline.”
Cameron added, “Notable sales wins included a seven digit
renewal and add-on SaaS deal of CDC TradeBeam for a leading
clothing retailer, and key new logo customers for CDC Factory that
included a leading cosmetic and beauty company, as well as a
chemical manufacturer, both new markets for this business.”
Company Highlights:
During the second quarter of 2011, CDC Software introduced
several new products and version upgrades for its core on-premise
ERP, supply chain management and complaint management applications.
New products included Pivotal Customer Service and Support, a new
service and support module developed on the innovative Pivotal 6
platform, and a major technology upgrade of its Enterprise
Performance Management (EPM) solution. Also, CDC gomembers’
on-premise not-for-profit enterprise solution introduced its Social
Community and Mobile Membership application, a new social media
application that can be accessed via a user’s mobile devices. CDC
Respond, a complaint and feedback management suite of solutions
launched a new module, Proactive Case Management (PCM), which helps
organizations comply with recent legal and regulatory changes in
the U.K.
New cloud products delivered in the second quarter of 2011
included TradeBeam GTM 2.5, a new version release of its global
trade management solution featuring improved reporting and
classification for screening purposes, and a new version upgrade of
CDC eCommerce was offered that included extensive search
capabilities for online shopping which further expanded the breadth
of its multichannel offerings.
Major on-premise sales wins in the second quarter of 2011
included a seven digit CDC Respond deal to a large installed-base
customer in the U.K. Another major deal for Q2 2011 included a CDC
Factory sale to a new customer, a leading global cosmetics and
beauty company. During the second quarter of 2011, three of the top
five SaaS deals were from the company’s TradeBeam product line, and
included a seven figure deal with a major clothing retailer.
Another key part of CDC Software’s growth strategy for both its
on-premise and Cloud businesses is its indirect channels. For
example, the company’s Strategic Alliance Program, which started in
the fourth quarter of 2009, reported record OEM sales, comprised of
on-premise revenue plus the STCV of SaaS contracts, in the second
quarter 2011 of $901,000, an increase of more than 460 percent
compared to the second quarter of 2010. The company signed a new
reciprocal OEM partnership with Global Range, a provider of
service-oriented architecture (SOA) solutions that includes CDC
Software’s Event Management Framework, a real-time alerting and
proactive event detection and resolution workflow solution, and
Global Range’s integration adaptors.
Share Buyback:
Between August 2009 and June 30, 2011, CDC Software, management,
Peter Yip and family members and certain affiliates of the company,
have purchased an aggregate of approximately 1.6 million shares at
an average price of $7.75 per share. The Company has continued to
repurchase its shares in the open market through a 10b5-1 trading
plan.
Management News:
As previously announced, the company’s chief executive officer,
Peter Yip is on administrative leave and John Clough, chairman of
CDC Software, is serving as interim CEO for the company.
Concluding Remarks:
“We are pleased with our solid top line results and the
progression of our cloud business in the second quarter of 2011,”
said John Clough, interim CEO of CDC Software. ”While our
profitability has been impacted by a variety of factors mentioned
earlier, we plan to continue evaluating our investment programs
relative to our expansion plans, including further investment in
the cloud, as well as growth in regions like Brazil, Russia, India,
and China. While there are currently negative drivers in the global
economy which are beyond our control, we plan to focus on cash
preservation and growth as we execute on our corporate
strategy.”
Revised 2010 Information:
Results provided herein for 2010 have been revised from those
previously reported in the company’s press releases due to certain
year-end adjustments required to be made in connection with the
audit of its financial statements for the year ended December 31,
2010.
The revisions recorded by the company included a $123.9 million
goodwill impairment charge, $113.1 million of which related to its
on-premise business and $10.8 million of which related to its Cloud
business. The company also recorded a $1.3 million impairment
charge for identifiable intangible assets in its on-premise segment
and $7.5 million of tax related purchase accounting adjustments
relating to the company’s TradeBeam acquisition. Furthermore, in
accordance with U.S. GAAP, management has accrued an expected loss
contingency of $10.0 million related to the ongoing litigation
between the company’s subsidiary, Ross Systems, Inc, and Sunshine
Mills, Inc. as of December 31, 2010, which is subject to
further revision. Additional adjustments relate to changes in
estimates which impacted the reserves for litigation settlements,
purchase consideration payables, and valuation of deferred tax
assets and deferred tax liabilities.
Conference Call
The Company's senior management will host a conference call for
financial analysts and investors, Thursday, August 25, 2011 at 8:30
AM EDT.
USA and Canada Toll Free Number: (866)
903-3296Int’l/Local Dial-In #: (706)
643-6263
Pass code: # 91612723 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 Sept. 01, 2011. U.S. based Toll Free
Number: +1800-642-1687, U.S.-based
Toll Number: +1 706-645-9291. Conference ID number: ## 91612723
Footnotes:
a) Adjusted Financial Measures
This press release includes Non-GAAP revenue, Non-GAAP net
income, Adjusted EBITDA, Non-GAAP recurring revenue and
Non-GAAP maintenance, 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 net income, earnings per share, and others, 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.
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
global 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), global trade management, eCommerce,
human capital management, government and not-for-profit, customer
relationship management (CRM), complaint management, business
intelligence/analytics and aged care solutions.
CDC Software’s acquisitions are part of its “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 10,000
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.
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 expectations regarding the factors that
will impact earnings in subsequent periods, our expectations with
respect to our progress in revenue growth, including the
continuation thereof, our expectations regarding our evaluation of
any cross-selling synergies with our Cloud companies, our beliefs
about our position for higher organic growth, our beliefs and
expectations regarding our sales pipeline, our expectations and
plans relating to any future repurchases of our shares, our plans
to continue evaluating our investment programs relative to our
expansion plans, our plans relating to our focus on cash
preservation and growth as we execute our corporate strategy, our
beliefs about any continued investment in sales and marketing and
research and development for our Cloud and on premise businesses
and the impact thereof on our earnings now and in future periods,
including the continuation of such impact and the potential
benefits of these investments, our beliefs regarding returns on our
marketing investments, our beliefs regarding recurring revenue as a
percentage of total revenue and the continued increase of that
percentage, our expectations regarding SaaS revenue, including
momentum and expectations for revenue performance, our beliefs
regarding strategic partnerships, our beliefs regarding our
corporate strategies and the effects thereof, 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 risk
of significant liability and losses from any litigation matters or
other disputes in which we may be involved, including the
litigation between Sunshine Mills, Inc. and Ross Systems; (b) the
risk of ongoing, increased expenses and liability related to the
Sunshine Mills litigation, other litigations matters we may now or
in the future become a party to, and the investigation being
undertaken by the special committee of the board of directors, as
well as potential negative market perception related to the
foregoing; (c) risks related to the potential impact of any
litigation matters, including the Sunshine Mills matter and others,
on our business, operations and financial condition; (d) risks
related to the variability of, and basis for, any assessments and
estimates made by management herein, including any impairment or
other charges or accruals that we may make from time to time, which
are subject to change; (e) the ability to realize strategic
objectives by taking advantage of market opportunities in targeted
geographic markets; (f) risks related to our Cloud business; (g)
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, including
our expansion as a hybrid enterprise software provider of
on-premise and cloud deployments; (h) the effects of restructurings
and rationalization of operations in our companies; (i) the ability
to address technological changes and developments including the
development and enhancement of products; (j) the ability to develop
and market successful products and services, including our
expansion as a hybrid enterprise software provider; (k) the entry
of new competitors and their technological advances; (l) the need
to develop, integrate and deploy enterprise software applications
to meet customer's requirements; (m) the possibility of development
or deployment difficulties or delays; (n) the dependence on
customer satisfaction with the company's software products and
services; (o) continued commitment to the deployment of our
enterprise software products, including on-premise and cloud
deployments; (p) risks involved in developing software solutions
and integrating them with other software and services; (q) the
continued ability of the company's products and services to address
client-specific requirements; (r) demand for and market acceptance
of new and existing software and services, and the positioning of
the company's solutions; and (s) the ability of our customers’
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 or
estimates proves incorrect, our results could differ materially
from the results expressed or implied by the forward-looking
statements we make. Further information on risks or other factors
that could cause results to differ is detailed in our filings or
submissions with the United States Securities and Exchange
Commission, including our Annual Report on form 20-F for the year
ended December 31, 2009, filed with the SEC on June 1, 2010, 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) Table 1 December
31, June 30, 2010 2011
ASSETS
Current assets: Cash and cash equivalents $ 44,679 $ 31,637
Restricted cash 93 12
Accounts receivable (net of allowance of
$4,458 at December 31, 2010 and $3,757 at June 30, 2011)
40,928 43,959 Prepayments and other current assets 9,203 14,195
Deferred tax assets 12,126 12,133 Total
current assets 107,029 101,936 Property and equipment, net
4,823 4,540 Goodwill 43,729 44,545 Intangible assets 58,951 50,345
Deferred tax assets 40,845 41,237 Receivable from Parent 30,014
37,485 Note receivable due from related parties 1,885 2,043
Investment in cost method investees 675 713 Other assets
3,222 2,667 Total assets $ 291,173 $
285,511
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities: Accounts payable 13,395 14,870 Purchase
consideration payables 34 673 Income tax payable 4,677 4,050
Short-term bank loans 15,055 90 Accrued liabilities 34,612 39,706
Restructuring accruals, current portion 1,547 1,030 Deferred
revenue 52,614 57,662 Deferred tax liabilities 349
447 Total current liabilities 122,283 118,528
Long-term debt 242 99 Deferred tax liabilities 17,708 17,788
Purchase consideration payables, net of current portion 786 110
Other liabilities 9,204 8,496 Total
liabilities 150,223 145,021 Contingencies and commitments
Shareholders' equity:
Class A ordinary shares, $0.001 par value;
50,000,000 shares authorized; 5,210,638 shares issued as of
December 31, 2010 and June 30, 2011; 3,934,186 and 3,621,762 shares
outstanding as of December 31, 2010 and June 30, 2011,
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, 2010 and June 30, 2011; 23,789,362 shares outstanding
as of December 31, 2010 and June 30, 2011, respectively
24 24 Additional paid-in capital 252,278 254,469
Common stock held in treasury; 1,276,452
shares as of December 31, 2010 and 1,588,876 as of June 30,
2011
(10,423 ) (12,176 ) Retained earnings (101,267 ) (107,665 )
Accumulated other comprehensive income (loss) (75 )
5,222 Total shareholders' equity 140,542 139,879
Noncontrolling interest 408 611 Total
equity 140,950 140,490 Total
liabilities and shareholders' equity $ 291,173 $ 285,511
CDC Software Unaudited Consolidated
Statements of Operations (Amounts in thousands of U.S.
dollars except share and per share data) Table 2
Three months ended March 31, June
30, 2011 2011 REVENUE: Licenses (including
royalties from related parties of $531 and $484, respectively) $
6,399 $ 8,669 Maintenance (including royalties from related parties
of $180 and $191, respectively) 25,521 25,929 Professional services
(including royalties from related parties of $179 and $211,
respectively) 14,772 15,430 Hardware 1,161 1,646 SaaS 4,523
4,711 Total revenue 52,376 56,385
COST OF REVENUE: Licenses 3,501 3,560 Maintenance 5,121
5,533 Professional services 13,372 14,076 Hardware 878 1,422 SaaS
1,573 1,561 Total cost of revenue
24,445 26,152 Gross profit
27,931 30,233 Gross margin % 53 % 54 %
OPERATING
EXPENSES: Sales and marketing expenses 12,783 13,125 Research
and development expenses 7,519 7,959 General and administrative
expenses 9,324 10,524 Operating expenses allocated to Parent (2,184
) (1,857 ) Exchange loss 519 1,912 Amortization expenses 1,606
1,635 Restructuring and other charges 1,074
148 Total operating expenses 30,641
33,446 Operating loss (2,710 ) (3,213 ) Operating
margin % -5 % -6 % Other income, net (including interest
income from Parent of $251 and $250, respectively) 104
343 Loss before income taxes (2,606 )
(2,870 ) Income tax benefit (expense) 385 (904
) Net loss (2,221 ) (3,774 ) Net (income) loss attributable
to noncontrolling interest 14 (215 )
Net loss attributable to controlling interest $ (2,207 ) $ (3,989 )
Net loss attributable to controlling interest
per class A ordinary share - basic and diluted $ (0.08 ) $ (0.15 )
Net loss attributable to controlling interest per class B ordinary
share - basic and diluted $ (0.08 ) $ (0.15 ) Weighted average
shares of class A outstanding - basic and diluted 3,808,395
3,695,071 Weighted average shares of class B
outstanding - basic and diluted 23,789,362
23,789,362 Total weighted average shares - basic and diluted
27,597,757 27,484,433
CDC
Software Unaudited Consolidated Statements of Operations
(Amounts in thousands of U.S. dollars except share and per share
data) Table 3 Three months ended
June 30, 2010 2011 REVENUE:
Licenses (including royalties from related parties of $501 and
$484, respectively) $ 8,817 $ 8,669 Maintenance (including
royalties from related parties of $70 and $191, respectively)
23,862 25,929 Professional services (including royalties from
related parties of $8 and $211, respectively) 16,078 15,430
Hardware 1,142 1,646 SaaS 2,677 4,711
Total revenue 52,576 56,385
COST OF REVENUE: Licenses
5,048 3,560 Maintenance 4,150 5,533 Professional services
(including cost from related parties of $484 and nil, respectively)
12,063 14,076 Hardware 853 1,422 SaaS 1,603
1,561 Total cost of revenue 23,717
26,152 Gross profit 28,859 30,233 Gross margin % 55 %
54 %
OPERATING EXPENSES: Sales and marketing expenses
10,083 13,125 Research and development expenses 7,164 7,959 General
and administrative expenses 8,611 10,524 Operating expenses
allocated to Parent (1,947 ) (1,857 ) Exchange (gain) loss (1,156 )
1,912 Amortization expenses 1,293 1,635 Restructuring and other
charges 229 148 Total operating
expenses 24,277 33,446 Operating
income (loss) 4,582 (3,213 ) Operating margin % 9 % -6 %
Other income (loss), net (including interest income from Parent of
$274 and $250, respectively) (14 ) 343
Income (loss) before income taxes 4,568 (2,870 ) Income tax expense
(1,452 ) (904 ) Net income (loss) 3,116 (3,774
) Net income attributable to noncontrolling interest (141 )
(215 ) Net income (loss) attributable to controlling
interest $ 2,975 $ (3,989 )
Unaudited pro
forma information: Net income (loss) attributable to
controlling interest per class A ordinary share - basic and diluted
$ 0.10 $ (0.15 ) Net income (loss) attributable to
controlling interest per class B ordinary share - basic and diluted
$ 0.10 $ (0.15 ) Weighted average shares of class A
outstanding - basic and diluted 4,509,011
3,695,071 Weighted average shares of class B outstanding -
basic and diluted 23,923,457 23,789,362
Total weighted average shares - basic and diluted 28,432,468
27,484,433
CDC Software
Unaudited Consolidated Statements of Operations (Amounts
in thousands of U.S. dollars except share and per share data)
Table 4 Six months ended June
30, 2010 2011 REVENUE:
Licenses (including royalties from related parties of $996 and
$1,016, respectively) $ 16,740 $ 15,068 Maintenance (including
royalties from related parties of $165 and $371, respectively)
48,731 51,450 Professional services (including royalties from
related parties of $11 and $391, respectively) 31,350 30,202
Hardware 2,049 2,807 SaaS 4,207 9,234
Total revenue 103,077 108,761
COST OF REVENUE:
Licenses 9,803 7,060 Maintenance 8,355 10,654 Professional services
(including cost from related parties of $484 and nil, respectively)
25,557 27,449 Hardware 1,627 2,300 SaaS 2,269
3,134 Total cost of revenue 47,611
50,597 Gross profit 55,466 58,164 Gross margin % 54 %
53 %
OPERATING EXPENSES: Sales and marketing expenses
20,070 25,908 Research and development expenses 13,946 15,478
General and administrative expenses 16,937 19,849 Operating
expenses allocated to Parent (4,289 ) (4,041 ) Exchange (gain) loss
(562 ) 2,431 Amortization expenses 2,573 3,241 Restructuring and
other charges 802 1,223 Total operating
expenses 49,477 64,089 Operating
income (loss) 5,989 (5,925 ) Operating margin % 6 % -5 %
Other income, net (including interest income from Parent of $632
and $501 respectively) 717 447
Income (loss) before income taxes 6,706 (5,478 ) Income tax expense
(2,032 ) (518 ) Net income (loss) 4,674 (5,996
) Net income attributable to noncontrolling interest (229 )
(202 ) Net income (loss) attributable to controlling
interest $ 4,445 $ (6,198 )
Unaudited pro
forma information: Net income (loss) attributable to
controlling interest per class A ordinary share - basic and diluted
$ 0.16 $ (0.22 ) Net income (loss) attributable to
controlling interest per class B ordinary share - basic and diluted
$ 0.16 $ (0.22 ) Weighted average shares of class A
outstanding - basic and diluted 4,509,011
3,759,742 Weighted average shares of class B outstanding -
basic and diluted 23,923,457 23,789,362
Total weighted average shares - basic and diluted 28,432,468
27,549,104
CDC Software
Unaudited Consolidated Statements of Cash Flow (Amounts
in thousands of U.S. dollars except share and per share data)
Table 5 Three months ended
March 31, June 30, 2011 2011
OPERATING ACTIVITIES: Net loss $ (2,221 ) $ (3,774 )
Adjustments to reconcile net loss to net cash provided by operating
activities: Depreciation expense 766 746 Amortization expense 4,688
4,493 Provision for bad debts 261 290 Stock compensation expenses
978 1,015 Deferred income tax provision (38 ) (302 ) Exchange
(gain) loss 520 (520 ) Loss on disposal of property and equipment -
8 Loss (gain) on disposal of available-for-sale securities (22 ) 44
Amortization of debt issuance costs 87 82 Accrued interest income
from Parent (251 ) (438 ) Accrued interest income (30 ) (30 )
Changes in operating assets and liabilities: Accounts receivable
(2,281 ) (1,234 ) Deposits, prepayments and other receivables
(3,726 ) 195 Other assets 340 846 Accounts payable 642 550 Income
tax payable (1,182 ) 555 Accrued liabilities 2,975 1,449 Deferred
revenue 7,795 (3,959 ) Other liabilities (413 ) (351
) Net cash provided by (used in) operating activities 8,888
(335 )
INVESTING ACTIVITIES: Payment
for prior year acquisitions (500 ) (45 ) Purchases of property and
equipment (325 ) (457 ) Decrease (increase) in restricted cash
(1 ) 82 Net cash used in investing activities
(826 ) (420 )
FINANCING ACTIVITIES:
Advances to Parent, net (4,023 ) (2,759 ) Payments on short-term
borrowings (15,000 ) - Purchases of treasury stock (844 ) (909 )
Payments for capital lease obligations (71 ) (54 )
Net cash used in financing activities (19,938 )
(3,722 ) Effect of exchange differences on cash 2,008
1,303 Net decrease in cash and cash
equivalents (9,868 ) (3,174 ) Cash at beginning of period
44,679 34,811 Cash at end of period $
34,811 $ 31,637
CDC Software
Unaudited Consolidated Statements of Cash Flow (Amounts
in thousands of U.S. dollars except share and per share data)
Table 6 Three months ended
Six months ended June 30, June 30,
2010 2011 2010 2011
OPERATING ACTIVITIES: Net income (loss) $ 3,116 $ (3,774 ) $
4,674 $ (5,996 ) Adjustments to reconcile net income (loss) to net
cash provided by operating activities: Depreciation expense 952 746
1,651 1,512 Amortization expense 4,753 4,493 9,858 9,181 Provision
for bad debt 301 290 192 551 Stock compensation expenses 552 1,015
996 1,993 Deferred income tax provision - (302 ) - (340 ) Exchange
(gain) loss (1,155 ) (520 ) (532 ) - Loss on disposal of property
and equipment - 8 - 8 Loss (gain) on disposal of available-for-sale
securities - 44 (319 ) 22 Amortization of debt issuance costs - 82
- 169 Accrued interest income from Parent - (438 ) - (689 ) Accrued
interest income (42 ) (30 ) (42 ) (60 ) Changes in operating assets
and liabilities: Accounts receivable (1,042 ) (1,234 ) (1,626 )
(3,515 ) Deposits, prepayments and other receivables 623 195 (1,988
) (3,530 ) Other assets (724 ) 846 (917 ) 1,186 Accounts payable
(3,339 ) 550 (3,446 ) 1,192 Income tax payable 1,077 555 1,280 (627
) Accrued liabilities (2,435 ) 1,449 (3,740 ) 4,424 Deferred
revenue (2,062 ) (3,959 ) (397 ) 3,836 Other liabilities
(625 ) (351 ) (360 ) (764 ) Net cash provided
by (used in) operating activities (327 ) (335 )
4,649 8,553
INVESTING
ACTIVITIES: Acquisitions, net of cash acquired (21,075 ) -
(23,321 ) - Payment for prior year acquisitions (2,100 ) (45 )
(2,100 ) (545 ) Purchases of property and equipment 85 (457 ) (221
) (782 ) Dispose (Purchase) of marketable securities (390 ) - 731 -
Investment in cost method investees (1,920 ) - (1,920 ) - Decrease
in restricted cash 18 82 18
81 Net cash used in investing activities
(25,382 ) (420 ) (26,813 ) (1,246 )
FINANCING ACTIVITIES: Proceeds from issuance of class
A ordinary shares - - - - Borrowings from (advances to) Parent, net
(17 ) (2,759 ) 1,722 (6,782 ) Short-term borrowings (payments), net
13,535 - 14,272 (15,000 ) Purchases of treasury stock (1,506 ) (909
) (2,849 ) (1,753 ) Payments for capital lease obligations
(270 ) (54 ) (388 ) (125 ) Net cash provided
by (used in) financing activities 11,742
(3,722 ) 12,757 (23,660 ) Effect of
exchange differences on cash (1,044 ) 1,303
(1,451 ) 3,311 Net decrease in cash and
cash equivalents (15,011 ) (3,174 ) (10,858 ) (13,042 ) Cash at
beginning of period 44,502 34,811
40,349 44,679 Cash at end of
period $ 29,491 $ 31,637 $ 29,491 $ 31,637
CDC Software Unaudited Reconciliation From
GAAP Results to Adjusted EBITDA (Amounts in thousands of
U.S. dollars except share and per share data) Table
7 Three months ended March 31,
June 30, Consolidated 2011 2011 (a)
Reconciliation from GAAP results to Adjusted EBITDA Operating
loss $ (2,710 ) $ (3,213 ) Add back restructuring and other charges
1,074 148 Add back depreciation expense 766 746 Add back
amortization expense 1,606 1,635 Add back amortization expense
included in cost of revenue 3,082 2,858 Add back stock compensation
expense 978 1,015 Add back exchange gain 519 1,912 Add back
deferred revenue grind (1) 263 82
Adjusted EBITDA $ 5,578 $ 5,183 Adjusted EBITDA
margin % 11 % 9 %
Three months ended March
31, June 30, On Premise 2011 2011
(a) Reconciliation from GAAP results to Adjusted EBITDA
Operating income $ 3,835 $ 1,703 Add back restructuring and other
charges 1,036 1,091 Add back depreciation expense 449 415 Add back
amortization expense 1,254 1,477 Add back amortization expense
included in cost of revenue 2,823 2,602 Add back exchange gain 519
1,912 Add back deferred revenue grind (1) 39 8
Adjusted EBITDA $ 9,955 $ 9,208 Adjusted
EBITDA margin % 22 % 18 %
Three months ended March
31, June 30, Cloud 2011 2011 (a)
Reconciliation from GAAP results to Adjusted EBITDA Operating
loss $ (1,438 ) $ (224 ) Add back restructuring and other charges
38 (943 ) Add back depreciation expense 317 331 Add back
amortization expense 353 158 Add back amortization expense included
in cost of revenue 258 256 Add back deferred revenue grind (1)
224 74 Adjusted EBITDA $ (248 ) $ (348
) Adjusted EBITDA margin % -4 % -5 %
Three months
ended March 31, June 30, Corporate
2011 2011 (a) Reconciliation from GAAP results to
Adjusted EBITDA Operating loss $ (5,107 ) $ (4,692 ) Add back
stock compensation expense 978 1,015
Adjusted EBITDA $ (4,129 ) $ (3,677 ) Adjusted EBITDA margin % 0 %
0 % (1) Deferred revenue grind represents the fair value
adjustment required to reduce the historical deferred revenue
liabilities from acquisitions to the fair value of the Company’s
legal performance obligations plus a normal profit margin based on
fulfillment effort.
CDC Software Unaudited
Reconciliation From GAAP Results to Adjusted EBITDA (Amounts
in thousands of U.S. dollars except share and per share data)
Table 8 Three months ended
Six months ended June 30, June 30,
Consolidated 2010 2011 2010
2011 (a) Reconciliation from GAAP results to
Adjusted EBITDA Operating income (loss) $ 4,582 $ (3,213 ) $
5,989 $ (5,925 ) Add back restructuring and other charges 229 148
802 1,223 Add back depreciation expense 952 746 1,651 1,512 Add
back amortization expense 1,293 1,635 2,573 3,241 Add back
amortization expense included in cost of revenue 3,457 2,858 7,282
5,940 Add back stock compensation expenses 551 1,015 996 1,993 Add
back exchange gain (1,156 ) 1,912 (562 ) 2,431 Add back deferred
revenue grind (1) 1,444 82 2,647
345 Adjusted EBITDA $ 11,352 $ 5,183
$ 21,378 $ 10,760 Adjusted EBITDA margin % 21
% 9 % 20 % 10 %
Three months ended Six months
ended June 30, June 30, On Premise
2010 2011 2010 2011 (a)
Reconciliation from GAAP results to Adjusted EBITDA Operating
income $ 9,244 $ 1,703 $ 13,914 $ 5,497 Add back restructuring and
other charges 229 1,091 811 2,127 Add back depreciation expense 585
415 1,218 865 Add back amortization expense 1,174 1,477 2,344 2,730
Add back amortization expense included in cost of revenue 3,203
2,602 6,837 5,425 Add back exchange gain (1,157 ) 1,912 (561 )
2,432 Add back deferred revenue grind (1) 284
8 633 47 Adjusted EBITDA $
13,562 $ 9,208 $ 25,196 $ 19,123
Adjusted EBITDA margin % 28 % 18 % 26 % 20 %
Three months
ended Six months ended June 30, June 30,
Cloud 2010 2011 2010 2011 (a)
Reconciliation from GAAP results to Adjusted EBITDA Operating
loss $ (1,522 ) $ (224 ) $ (2,003 ) $ (1,623 ) Add back
restructuring and other charges - (943 ) (10 ) (905 ) Add back
depreciation expense 367 331 433 647 Add back amortization expense
120 158 229 511 Add back amortization expense included in cost of
revenue 254 256 445 515 Add back deferred revenue grind (1)
1,160 74 2,014 298
Adjusted EBITDA $ 379 $ (348 ) $ 1,108 $ (557 )
Adjusted EBITDA margin % 7 % -5 % 11 % -4 %
Three months
ended Six months ended June 30, June 30,
Corporate 2010 2011 2010 2011
(a) Reconciliation from GAAP results to Adjusted EBITDA
Operating loss $ (3,140 ) $ (4,692 ) $ (5,922 ) $ (9,799 ) Add back
stock compensation expenses 551 1,015
996 1,993 Adjusted EBITDA $ (2,589 ) $
(3,677 ) $ (4,926 ) $ (7,806 ) Adjusted EBITDA margin % 0 % 0 % 0 %
0 % (1) Deferred revenue grind represents the fair value
adjustment required to reduce the historical deferred revenue
liabilities from acquisitions to the fair value of the Company’s
legal performance obligations plus a normal profit margin based on
fulfillment effort.
CDC Software Unaudited
Reconciliation From GAAP Results to Non-GAAP Net Income
(Amounts in thousands of U.S. dollars except share and per share
data) Table 9 Three months
ended June 30, 2010 2011 (a)
Reconciliation from GAAP net income (loss) attributable to
controlling interest to Non-GAAP net income and Non-GAAP net income
per share Net income (loss) attributable to controlling
interest $ 2,975 $ (3,989 ) Add back restructuring and other
charges 229 148 Add back amortization expense 1,293 1,635 Add back
amortization expense included in cost of revenue 3,457 2,858 Add
back stock based compensation 551 1,015 Add back exchange loss
(gain) (1,156 ) 1,912 Add back deferred revenue grind (1) 1,444 82
Add back non cash tax expense 871 542 Tax effect on all reconciling
items (1,629 ) (1,989 ) Non-GAAP net income $ 8,035
$ 2,214 Non-GAAP net income as a % of revenue 15 % 4
% Total weighted average shares outstanding (basic and dilutive)
28,432,468 27,484,433
Non-GAAP net income per share (basic and
dilutive) $ 0.28 $ 0.08
Three months ended March 31, June 30,
2011 2011 (a) Reconciliation from GAAP net loss
attributable to controlling interest to Non-GAAP net income and
Non-GAAP net income per share Net loss attributable to
controlling interest $ (2,207 ) $ (3,989 ) Add back restructuring
and other charges 1,074 148 Add back amortization expense 1,606
1,635 Add back amortization expense included in cost of revenue
3,082 2,858 Add back stock based compensation 978 1,015 Add back
exchange gain 519 1,912 Add back deferred revenue grind (1) 263 82
Add back non cash tax expense (benefit) (231 ) 542 Tax effect on
all reconciling items (1,956 ) (1,989 ) Non-GAAP net
income $ 3,128 $ 2,214 Non-GAAP net income as % of
revenue 6 % 4 % Total weighted average shares outstanding (basic
and dilutive) 27,597,757 27,484,433
Non-GAAP net income per
share (basic and dilutive) $ 0.11 $
0.08 (1) Deferred revenue grind represents the fair
value adjustment required to reduce the historical deferred revenue
liabilities from acquisitions to the fair value of the Company’s
legal performance obligations plus a normal profit margin based on
fulfillment effort.
CDC Software Unaudited
Reconciliation From GAAP Revenue to Non-GAAP Revenue
(Amounts in thousands of U.S. dollars) Table
10 Three months ended GAAP Results June
30, 2010 March 31, 2011 June 30,
2011 On Premise Licenses $ 8,608 $ 6,201 $ 8,601
Maintenance 23,546 24,690 25,125 Professional services 14,763
13,706 14,347 Hardware 1,142 1,161 1,646 Total
On Premise 48,059 45,758 49,719
Cloud
Licenses $ 209 $ 198 $ 68 Maintenance 316 831 804 Professional
services 1,315 1,066 1,083 SaaS 2,677 4,523
4,711 Total Cloud 4,517 6,618 6,666 Total
revenue $ 52,576 $ 52,376 $ 56,385
Three months
ended (a) Non-GAAP Adjustment (1) June 30, 2010
March 31, 2011 June 30, 2011 On Premise
Licenses $ - $ - $ - Maintenance 284 32 6 Professional services
- 6 2 Total On Premise 284 38
8
Cloud Licenses $ - $ - $ - Maintenance 509 36 16
Professional services 179 39 9 SaaS 472 149 49
Total Cloud 1,160 224 74 Total revenue $ 1,444
$ 262 $ 82
Three months ended (a) Non-GAAP
Results June 30, 2010 March 31, 2011 June 30,
2011 On Premise Licenses $ 8,608 $ 6,201 $ 8,601
Maintenance 23,830 24,722 25,131 Professional services 14,763
13,712 14,349 Hardware 1,142 1,161 1,646 Total
On Premise 48,343 45,796 49,727
Cloud
Licenses $ 209 $ 198 $ 68 Maintenance 825 867 820 Professional
services 1,494 1,105 1,092 SaaS 3,149 4,672
4,760 Total Cloud 5,677 6,842 6,740 Total
revenue $ 54,020 $ 52,638 $ 56,467 (1) Non-GAAP
adjustment represents deferred revenue grind adjustment required to
reduce the historical deferred revenue liabilities from
acquisitions to the fair value of the Company’s legal performance
obligations plus a normal profit margin based on fulfillment
effort.
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