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CDC Corporation Reports Results for Six Months Ended June 30, 2011(ENP Newswire Via Acquire Media NewsEdge) ENP Newswire - 05 September 2011 Release date- 02092011 - HONG KONG, ATLANTA -CDC Corporation (NASDAQ: CHINA), a leading China-based value-added operator of, and growth investor in, hybrid (Cloud/On-Premise) enterprise software, IT Services, and New Media assets, today announced financial results for the six months ended June 30, 2011. For the first six months of 2011, Non-GAAP revenue(a) was $159.3 million and Adjusted EBITDA(a) was $3.8 million, compared to Non-GAAP revenue of $159.0 million and Adjusted EBITDA of $17.1 million in the first six months of 2010. The decrease in Adjusted EBITDA largely reflects planned increases in research and development and sales and marketing, as well as litigation expenses at CDC Software and CDC Corporation. 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. As of June 30, 2011, CDC Corporation reported Non-GAAP cash and cash equivalents(a) of approximately $91.8 million. Below is a summary of the financial results of CDC Corporation's core portfolio of assets. CDC Software (NASDAQ:CDCS) On a standalone basis, CDC Software had the following results for the six months ended June 30, 2010 and 2011: Six Months ended June 30, 2010 Six Months ended June 30, 2011 Non-GAAP revenue $105.7 million $109.1 million Adjusted EBITDA $21.4 million $10.8 million Adjusted EBITDA Margin(a) 12% 3% Application sales, which is comprised of license revenue plus Secured Total Contract Value (STCV) for Software-as-a-Service (SaaS) sales secured, was $28.7 million during the first six months of 2011, compared to $21.7 million in the six months ended June 30, 2010. STCV, or bookings, for Software-as-a-Service (SaaS) sales was $13.6 million, compared STCV of $5.0 million in the six months ended June 30, 2010. The results for the first six months of 2011 included record bookings in the second quarter of 2011, since the company started its cloud business in the fourth quarter of 2009. 'We are pleased with our six months results, including the growth in our cloud business, as well as our pipeline,' said Bruce Cameron, president of CDC Software. 'Notable sales wins in this period, for example, included a seven digit renewal and add-on SaaS deal of CDC TradeBeam for a leading clothing retailer, 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. We also continued to grow our business in emerging markets like India, where we reported our largest license deal in the first quarter.' For more information regarding the financial performance of CDC Software during the first half 2011 of 2010, please see CDC Software's first and second quarter 2011 earnings press releases located at CDC Software's website: www.cdcsoftware.com. CDC Global Services On a standalone basis, CDC Global Services had the following results for the six months ended June 30, 2010 and 2011: Six Months ended June 30, 2010 Six Months ended June 30, 2011 GAAP revenue $32.2 million $31.1 million Adjusted EBITDA $(964,000) $1.4 million Adjusted EBITDA Margin (3)% 4% CDC Global Services' utilization rate was approximately 90 percent in the second quarter of 2011, and 88 percent in the first quarter of 2011. Some highlights in the CDC Global Services business during the first half of 2011 included: A leading medical device manufacturer extended its current SAP EWM Consulting Services contract for an additional 12 months. CDC Global Services is currently supporting the rollout of Extended Warehouse Management (EWM) to more than 10 sites globally. A leading provider of automation equipment and peripherals for the North American and Latin American markets has engaged CDC Global Services to provide SAP Console consulting and implementation services for their North American distribution hub located near Chicago. CDC Global Services China was awarded a service contract to design and implement an Enterprise Application Integration framework for the Zhangzhou Development Zone of the China Merchants Group. This framework is expected to improve the interoperability of different application systems already installed, as well as those being planned in the Zhangzhou. CDC Software's Event Management Framework is a core component of the designed solution. CDC Global Services China was awarded a three-year service contract for the hosting and support of a CRM system used by a leading cosmetic manufacturer in their China retail outlets. CDC Global Services has agreed to provide technical support through call-centers, application system hosting in the cloud computing center and on-site maintenance services in the various cities where this manufacturer has retail outlets. 'We are pleased with the improvement in our Adjusted EBITDA at CDC Global Services as a result of our focus on higher margin business and better traction in our services businesses,' said CK Wong, CEO of CDC Global Services. 'We have been progressing well in our China businesses, and have been securing some key engagements with major companies in our SAP consulting business.' New Media (includes CDC Games and China.com) On a standalone basis, CDC Games had the following results for the six months ended June 30, 2010 and 2011: Six Months ended June 30, 2010 Six Months ended June 30, 2011 GAAP revenue $15.1 million $11.0 million Adjusted EBITDA $1.7 million $1.8 million Adjusted EBITDA Margin 11% 16% GAAP revenue for CDC Games during the first six months of 2011 was $11.0 million, compared to $15.1 million in the first six months of 2010. The decrease in revenue for the first six months of this year was largely attributed to a reduction in the number of games offered and less promotional and marketing spending on existing games, compared to the same period last year. Adjusted EBITDA for the first six months of 2011 improved to $1.8 million, compared to Adjusted EBITDA of $1.7 million in the first six months of 2010. Adjusted EBITDA margin was 16 percent in the first six months of 2011, compared to Adjusted EBITDA margin of 11 percent in the first six months of 2010. At the end of the first quarter of 2011, CDC Games introduced an expansion pack, 'Tyrannis' for EVE Online in China. On June 30, 2011, CDC Games launched Yulgang 6.0, known as 'Blood War,' a major new version release of its popular massively multiplayer online role-playing game (MMORPG). Since the launch of Yulgang 6.0, CDC Games has reported an increase in peak concurrent users (PCU) of more than 10 percent. In September 2006, CDC Games licensed the exclusive rights to distribute, in China, Lord of the Rings Online: Shadows of Angmar (LOTRO), a MMORPG based upon the Lord of the Rings trilogy. For the past several years, CDC Games has experienced significant delays in the continued development and launch of this game. Since initially licensing this game, CDC Games has invested approximately $10.0 million in licensing, development and other costs related to it, including a $4.0 million initial non-refundable license fee. CDC Games has received notification from the game's developer that the failure to launch LOTRO constituted an event of default under our agreements with them. The developer has also asserted that our license agreement for LOTRO has been terminated. CDC Games is currently in settlement discussions regarding the license for LOTRO, but does not currently believe that settlement discussions will permit it to retain future licensing rights for LOTRO. 'We are pleased with the improvement in our profitability and the solid metrics of Yulgang 6.0,' said Simon Wong, CEO of CDC Games. 'After six years of operating Yulgang, we are very pleased to see this popular game maintaining a strong base of loyal users. While we are disappointed that we do not expect to be launching LOTRO, we believe this is the best financial decision for us in terms of focus on our time and resources.' On a standalone basis, China.com had the following results for the six months ended June 30, 2010 and 2011: Six Months ended June 30, 2010 Six Months ended June 30, 2011 GAAP revenue $6.0 million $8.0 million Adjusted EBITDA $(558,000) $(47,000) Adjusted EBITDA Margin (9)% (1)% During the first half of 2011, China.com's automobile and web games channels continued to expand. Its social network, for example, launched the following new games during the first quarter: 'Wind of War,' 'City Battle' and 'Beautiful City.' In the second quarter, the automobile channel participated in the 2011 Shanghai International Auto Show. In April 2011, China.com's webgame channel organized the 2011 National Webgames Summit in the City of Jiaxing, Zhejiang Province, the fourth time hosting this event. This Summit received wide attention in the webgame community in China, with more than 300 webgame developers and operators participating with more than 100 media representatives reporting on the event. Management News: As previously announced, the company's chief executive officer, Peter Yip is on administrative leave and John Clough, chairman of CDC Corporation, is serving as interim CEO for the company. Concluding Remarks: 'Our operating business units have been performing reasonably well,' said John Clough, interim CEO of CDC Corporation. 'CDC Software has continued to report solid results in its business while CDC Games, CDC Global Services and China.com have been making strong progress in improving profitability. We are weighing our options regarding the various litigation matters in which we and our subsidiaries are involved, and are considering financing options, potentially selling non-core assets, as well as other strategic alternatives.' Share Buyback: Since January 2009, CDC Corporation has purchased an aggregate of 918,637 of its shares at an average price of $3.85 per share. Revised 2010 Information: Results provided herein for 2010 have been revised from those previously reported in CDC Corporation'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 CDC Corporation included a $133.4 million goodwill impairment charge, $113.1 million of which related to CDC Software's on-premise business, $10.8 million of which related to CDC Software's Cloud business and $9.5 million of which is related to CDC Global Services. The company also recorded a $1.3 million impairment charge for identifiable intangible assets in CDC Software's on-premise business, $7.5 million of tax related purchase accounting adjustments relating to CDC Software's TradeBeam acquisition, and a $4.0 million write-off in CDC Games for pre-paid license fees relating to The Lord of the Rings Online. 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. Footnotes: All dollar amounts are in U.S. dollars CDC Corporation has recently changed the composition of its Adjusted EBITDA measurement, as provided herein, to be consistent with the presentation of Adjusted EBITDA for its subsidiary, CDC Software Corporation. CDC Corporation believes this revised presentation is a useful measure of operating performance. In June 2010, CDC Corporation received approval from its shareholders to effect a reverse split of its common shares. CDC Corporation's board of directors thereafter approved a one-for-three reverse split of the company's outstanding, issued and authorized shares of common stock, which became effective on August 23, 2010. All numbers set forth herein reflect the effect of such one-for-three reverse stock split. (a) Adjusted Financial Measures This press release includes Adjusted EBITDA, Non-GAAP revenue, Adjusted EBITDA margin and Non-GAAP cash and cash equivalents, which are not prepared in accordance with generally accepted accounting principles in the United States of America ('GAAP') (collectively, the 'Non-GAAP Financial Measures'). We believe that these Non-GAAP Financial Measures are helpful in understanding our past financial performance and our future results. Non-GAAP Financial Measures are not alternatives for measures such as revenue, cash and cash equivalents and other measures 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 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. About CDC Corporation CDC Corporation is a China-based value-added operator of, and growth investor in, hybrid (on premise and SaaS) enterprise software, IT, and new media businesses. The company pursues two value-added investment strategies. The first strategy includes actively managing majority interests in its core portfolio of hybrid enterprise software, IT services and New Media businesses, adding value by driving operational excellence, top-line growth and overall profitability. The second strategy includes identifying and executing on opportunities to co-invest with leading venture capital and private equity funds through minority interests in fast growth companies in emerging markets related to CDC Corporation's core assets. This second strategy, which complements the first, helps to mitigate risk and enhance deal flow for the company. CDC Corporation expects to deliver superior returns and additional value for its shareholders through these strategies, as well as through its plans to declare and pay regular dividends in the form of registered shares of its publicly listed subsidiaries and other assets. 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 expectations about the continued and future impact on earnings from ongoing litigation expenses as well as costs associated with the investigation being undertaken by the special committee of the board of directors, our plans and efforts to continue to grow our CDC Software business in emerging markets, our beliefs regarding settlement negotiations with the developer of LOTRO and the potential impact thereof, our plans and expectations regarding litigation matters, financing options, the potential sale of non-core assets and other strategic alternatives, our beliefs regarding our strategic investments and initiatives, and our strategies, and the potential impact and benefit thereof, our beliefs regarding the utility of the Non-GAAP and pro forma financial information provided herein, 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 risks relating to: (a) our failure to timely file our Annual Report on Form 20-F for the year ended December 31, 2010; (b) significant liability and losses from any litigation matters or other disputes in which we or any of our subsidiaries may now, or in the future, be involved, including the litigation between Sunshine Mills, Inc. and Ross Systems and the litigation between Evolution Capital Management and CDC Corporation, including the effect and impact of the summary judgment rendered against us in the New York Supreme Court in the Evolution matter; (c) the potential impact of any litigation matters, including the Sunshine Mills or Evolution matters, on our business, operations and financial condition and those of our subsidiaries; (d) the ongoing investigation being conducted by the special committee of our board of directors; (e) our liquidity and our continued ability to access capital; (f) CDC Software's credit facility with Wells Fargo Capital Finance, and the availability thereof in any future period; (g) the availability of insurance coverage for any litigation matters that we, or any of our subsidiaries, may be involved; (h) our internal controls over financial reporting; (i) our use of judgments, estimates and assumptions, including risks related to significant charges to earnings that we may experience, such as the impairment of goodwill or intangible assets; (j) disruptions in the financial and credit markets, which may adversely affect our business; (k) our limited operating history; (l) acquisitions we have made, including our ability to integrate these businesses and our ability to grow our business organically; (m) the various, and potentially disparate, products and services our subsidiaries may offer; (n) fluctuating expenses and the potential impact thereof on our financial results; (o) regulatory compliance, including export compliance and other matters; (p) our international operations, including compliance with local laws, rules and regulations, currency exchange fluctuations, disruptions in foreign markets and economic downturns; (q) the continuation of our installed base customers continuing to license additional products, renew support agreements, and purchase additional services; any forecasts we may provide; (s) our ability to grow direct and indirect sales channels; (t) research and development and our ability to successfully develop, market and sell new products; (u) competition that any of our subsidiaries may face; (v) CDC Software's Cloud business; (w) interruptions or delays in service from our third-party data center hosting facilities and the hosting, collection and retention of personal information; (x) our 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; (y) the effects of restructurings and rationalization of operations in our companies; (z) the ability to address technological changes and developments including the development and enhancement of products; (aa) the ability to develop and market successful products and services; (bb) the entry of new competitors and their technological advances; (cc) the need to develop, integrate and deploy enterprise software applications to meet customer's requirements; (dd) the possibility of development or deployment difficulties or delays; (ee) the dependence on customer satisfaction with the company's games, software products and services; (ff) continued commitment to the deployment of the products, including enterprise software solutions; (gg) risks involved in developing software solutions and integrating them with third-party software and services; (hh) the continued ability of the company's products and services to address client-specific requirements; (ii) demand for and market acceptance of new and existing enterprise software and services and the positioning of the company's solutions; (jj) the ability of staff to operate the enterprise software and extract and utilize information from the company's products and services; (kk) our dependence on a limited number of games at our CDC Games business, our dispute with Turbine, Inc. and our ability to maintain our relationships with licensor and other third parties; (ll) operations in China; and (mm) our intellectual property, personnel, technology and networks. If any such risks or uncertainties materialize or if any of the assumptions proves incorrect, our results could differ materially from the results expressed or implied by the forward-looking statements we make. Also, the results and benefits experienced by customers and users set forth in this press release may differ from those of other users and customers. Further information on risks or other factors that could cause results to differ is detailed in filings or submissions with the United States Securities and Exchange Commission made by CDC Corporation in its Annual Report on Form 20-F for the year ended December 31, 2009, filed with the SEC on June 30, 2010. You should also see the filings or submissions with the United States Securities and Exchange Commission made by CDC Software Corporation in its Annual Report on Form 20-F for the year ended December 31, 2009, filed with the SEC on June 1, 2010. We also encourage you to see other public press releases and filings or submissions we, or CDC Software, may make, from time to time. 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. For these and other reasons, investors are cautioned not to place undue reliance upon any forward-looking statement in this press release. For More Information Media Relations Lorretta Gasper CDC Software (678) 259-8631 [email protected] Investor Relations Monish Bahl CDC Corporation (678) 259-8510 [email protected] [Editorial queries for this story should be sent to [email protected]] ((Comments on this story may be sent to [email protected])) (c) 2011 Electronic News Publishing - |