CDC Corporation (NASDAQ: CHINA),a leading China-based
value-added operator of, and growth investor in, hybrid
(SaaS/On-Premise) enterprise software, IT Services, and New Media
assets, today announced financial results for the quarter ended
December 31, 2010. For the fourth quarter of 2010, operating cash
flow increased 65 percent to $8.9 million, compared to $5.4 million
in the fourth quarter of 2009. In addition, CDC Corporation ended
fiscal year 2010 with Non-GAAP cash and cash equivalents(a) of
approximately $111.8 million.
For the fourth quarter of 2010, CDC Corporation reported
Non-GAAP revenue(a) of $83.9 million and Adjusted EBITDA(a) of $6.5
million, compared to Non-GAAP revenue of $83.6 million and Adjusted
EBITDA of $12.8 million for the fourth quarter of 2009.
For the year ended December 31, 2010, Non-GAAP revenue was
$322.5 million and Adjusted EBITDA was $31.0 million, compared to
Non-GAAP revenue of $320.8 million and Adjusted EBITDA of $41.5
million for the full year in 2009. In the fourth quarter of 2010,
the company recorded non-cash restructuring charges of
approximately $17.5 million related to goodwill impairment,
litigation and other restructuring related expenses. Excluding
certain non-cash, restructuring and other charges of $51.3 million,
as depicted herein, CDC Corp reported $31.0 million of adjusted
EBITDA for the 2010.
“We are very pleased with our strong operating cash flow which
increased 65 percent in the fourth quarter of 2010, compared to the
prior year period,” said Peter Yip, CEO of CDC Corporation. “With
the many forward-thinking strategies we have in place, we believe
we are well positioned for long-term growth and improved
shareholder returns. For instance, CDC Software’s cash flow from
continuing operations rose 99 percent in the fourth quarter of
2010, compared to the fourth quarter of 2009. CDC Software also
reported strong growth in its Cloud segment in the fourth quarter
2010. Also, our focus on profitability and growth at CDC Games has
paid off. CDC Games reported a 40 percent Adjusted EBITDA margin in
the fourth quarter of 2010 compared to a 7 percent Adjusted EBITDA
margin in the fourth quarter of 2009, and an impressive 480 percent
increase in Adjusted EBITDA in the fourth quarter of 2010, compared
to the fourth quarter of 2009. Our strategy on controlling expenses
in such a competitive games market has clearly been effective. CDC
Global Services has also continued to invest significantly in its
offshore development business in China which it believes is a
market that will experience rapid growth in the next few years.
Further validating our value-added investment approach, China.com
has invested in a China-based private equity fund whose audited
results as of December 31, 2010, indicates that it has achieved a
return multiple of approximately 4 times(c). This investment is
accounted for under the cost basis of accounting, therefore, the
return is not reflected fully in our financial statements. As a
result of this superior performance, we are planning more
co-investments with this PE Fund and potential partnerships with
its investees in China.”
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 three months ended December 31, 2009 and 2010:
Q4 2009
Q4 2010
Non-GAAP revenue $55.0 million $57.6 million Adjusted EBITDA $14.1
million $9.0 million Adjusted EBITDA Margin 26% 16%
Operating cash flow in the fourth quarter of 2010 was $13.3
million, and GAAP cash and cash equivalents were $44.7 million as
of December 31, 2010.
Application sales increased 22 percent to $14.6 million in the
fourth quarter of 2010, compared to $12.0 million in the fourth
quarter of 2009. Application sales are comprised of license revenue
plus Secured Total Contract Value (STCV) for Software-as-a-Service
(SaaS) sales secured during the quarter. The strong growth in
application sales was primarily due to significant growth in the
company’s cloud segment, especially within its CDC gomembers
product line, and the inclusion of CDC TradeBeam. Fourth quarter
2010 Total Contracted Backlog (TCB) was $136.5 million, compared to
$104.4 million in the fourth quarter of 2009. TCB is the sum of the
remaining revenue value of SaaS and term license or rental
contracts through the end of their respective terms, the value of
contracted renewals for current SaaS and rental contracts based on
12 months of value, plus maintenance revenues from existing
on-premise contracts over the previous 12 months.
“Overall, we are pleased with our top line growth at CDC
Software that included a 22 percent growth in application sales and
a 99 percent increase in cash flow from operations in the fourth
quarter 2010, over the fourth quarter of 2009,” said Bruce Cameron,
president of CDC Software. “Our CDC TradeBeam and CDC gomembers
cloud products reported strong sales growth during the fourth
quarter of 2010. The fourth quarter of 2010 was also highlighted by
numerous new logo sales and we have been seeing positive results
from the company’s focus on sales in emerging regions, with strong
sales growth in Latin America, China and India.
“We believe the market for our cloud solutions will experience
significant growth over the next few years. Looking ahead, based
upon current financial projections and estimates, we expect record
Non-GAAP revenue and total SaaS secured bookings to be
approximately $6.7 million in the first quarter of 2011; the
highest level since the company started its cloud business in the
fourth quarter of 2009.”
For more information regarding the financial performance of CDC
Software during the fourth quarter of 2010, please see CDC
Software's fourth quarter 2010 earnings press release located at
the company's website: www.cdcsoftware.com.
CDC Global Services
On a standalone basis, CDC Global Services had the following
results for the three months ended December 31, 2009 and 2010:
Q4 2009
Q4 2010
GAAP Revenue: $17.6 million $14.6 million Adjusted EBITDA: $(0.1)
million $(1.4) million Adjusted EBITDA Margin: 0% (9)%
Some highlights in the CDC Global Services business during the
fourth quarter of 2010 include:
- The company completed the construction
of its Nanjing Global Delivery Center (GDC) in December. This GDC
is expected to serve CDC Global Services’ international clients
with offshore software development work.
- Another GDC is being planned in the
city of Nanhai where CDC Global Services has been chosen as the
solution provider to run Nanhai’s Cloud Computing Center.
- CDC Global Services’ Technical Services
Practice of the China Division has been asked to further expand the
SAP consulting team assigned to work on the National Grid
project.
- The company’s North America Division
has successfully restructured and streamlined three of its
consulting operations in the cities of Chicago, Portland and
Philadelphia to report to one management team for improved
operational efficiency.
- The Australia Division has further
expanded its Information Security consulting and audit practice.
Three leading Australian banks have engaged CDC Global Services to
provide PCI Compliance services.
- Appointment of Derik Reynecke as Chief
Financial Officer of CDC Global Services. Reynecke brings extensive
M&A, capital markets, public accounting and financial expertise
to the business.
- Appointment of Tek-Min Gan as Vice
President of Operations, who will be responsible for managing CDC
Global Services’ offshore development center business.
CDC Global Services has been expanding its operations and
leveraging its influence in the China market. Most notably, it
recently signed a memorandum of understanding with the China
Merchant Group Zhangzhou Economic and Technology Development Zone
to invest in the setup of a center in Zhangzhou to develop IT
solutions supporting the food processing industry in China.
As part of this partnership, CDC Global Services and the
Zhangzhou government also plan to host an international IT Food
application seminar in Zhangzhou in the second quarter of 2011.
This seminar will feature thought leadership sessions in IT food
manufacturing solutions, food safety and other industry trends for
multinational companies in China, local businesses, academic and
government officials and international customers seeking to expand
into the China market. This event marks the launch of CDC Global
Services “Silk Road” business consulting services. This service
offering is named after the network of trade routes used by early
century travelers and traders to connect the Asian continent with
Europe and parts of Africa. This collection of “Silk Road” services
is planned to help customers facilitate and streamline access into
China, as well as effectively operate in this fast growing
market.
“We have been making steady progress in expanding the services
provided by the Global Delivery Centers that we have established in
China and India,” said CK Wong, CEO of CDC Global Services. “As
result, our profitability has been temporarily impacted by our
investments in our GDC and increase in management staff for our
offshore development center business. Last year was one of
transition and now we are focused as a China-centric outsourcing
and consulting company with market presence largely in the U.S. and
Australia. We also are focusing on our higher margin business and
we expect to see better traction and improvement in 2011. We
believe we are laying a solid foundation to fully exploit the
significant future revenue opportunities in our GDC offerings. CDC
Global Services also has plans to manage new cloud computing
centers in China and to connect them with the Nanhai, Foshan
Computing Center.”
“We have also been laying the ground work for opening up
opportunities in China for CDC Global Services and other CDC
Corporation businesses,” Wong added. “Several of CDC Corporation’s
businesses have deep connections and core operations within China,
as well as its management team and Board of Directors share many
key relationships within China. As a result, we are executing a
strategy called “Silk Road” to become a partner of choice for
investors and companies seeking to do business or expand operations
there. Finally, we believe the addition of Reynecke and Gan to our
senior management team is very timely, and they will help us
increase revenue opportunities and improve profitability throughout
CDC Global Services’ business.”
New Media (includes CDC Games and China.com)
On a standalone basis, CDC Games had the following results for
the three months ended December 31, 2009 and 2010:
Q4 2009
Q4 2010
GAAP Revenue: $7.0 million $7.3 million Adjusted EBITDA: $0.5
million $2.9 million Adjusted EBITDA Margin: 7% 40%
GAAP revenue for CDC Games during the fourth quarter of 2010
increased to $7.3 million, compared to $7.0 million in the fourth
quarter of 2009. Adjusted EBITDA for the fourth quarter of 2010
increased 480 percent to $2.9 million, compared to Adjusted EBITDA
of $0.5 million in the fourth quarter of 2009, primarily due to the
implementation of cost-cutting measures and streamlining of
operations. Adjusted EBITDA margin was 40 percent in the fourth
quarter of 2010, compared to Adjusted EBITDA margin of 7 percent in
the fourth quarter of 2009.
Recently, CDC Games extended its contract with Mgame to continue
operating Yulgang for two additional years. Yulgang, its flagship
game, has continued to report strong metrics, and reported a 27
percent increase in revenue for the fourth quarter of 2010,
compared to the third quarter of 2010. For 2011, CDC Games expects
to commercially launch the previously announced domestic game
called Mythical Legend, with plans to launch another game this
year, as well.
CDC Games has been experiencing continued delays with The Lord
of the Rings Online (LOTRO), a massively multiplayer online role
playing game (MMORPG) based on the literary works of J.R.R.
Tolkien. LOTRO is developed by North American-based Turbine, Inc.,
a subsidiary of Warner Bros. Home Entertainment Group. CDC Games
continues to work with Turbine/Warner Bros. with respect to the
terms of our agreement with Turbine and to come to terms on making
this free-to-play version ready for success in the market.
“We are pleased with the significant improvement in our
profitability that will allow us to invest in new games,” said
Simon Wong, CEO of CDC Games. “We are excited with the renewal of
our contract with Mgame and expect that Yulgang will continue to
generate strong revenue metrics, especially with a major new update
of the game expected later this year. Since the China games market
is increasingly becoming more competitive, we want to ensure
LOTRO’s launch runs smoothly and is best positioned for success. As
a result, we are continuing to work with Turbine to launch this
game when it is ready.”
On a standalone basis, China.com had the following results for
the three months ended December 31, 2009 and 2010:
Q4 2009 Q4 2010 GAAP
Revenue: $4.1 million $4.4 million Adjusted EBITDA: $0.8 million
$0.4 million
Adjusted EBITDA Margin:
20%
10%
GAAP revenue for the fourth quarter of 2010 was $4.4 million,
compared to $4.1 million in the fourth quarter of 2009. China.com
reported Adjusted EBITDA of approximately $0.4 million in the
fourth quarter of 2010, compared to Adjusted EBITDA of
approximately $0.8 million in the fourth quarter of 2009.
During the fourth quarter of 2010, China.com’s Portal business
continued to expand its automobile and web games channels, and
added some major global brand clients including some of the world’s
largest car manufacturers. China.com’s TTG business also improved
its revenue and profitability, and organized three major events in
the fourth quarter of 2010.
As previously announced, China.com, Inc.’s investment in a
Beijing-based private equity fund from which it has received
approximately $3.0 million in distributions since 2009, has
produced significant returns.
Minority Interest Investments
CDC Corporation’s other investment 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.
Below is a brief snapshot of one of CDC Corporation’s
minority-interest investments:
- Menue (formerly Bbmf) is one of the
largest independent operators of 3G comics in Japan. CDC
Corporation holds a 20 percent equity interest in this company. The
company also recently launched operations in the U.S. For the first
quarter of 2011, Menue reported over 92 million free and paid comic
book downloads, of which 30 percent was paid subscribers, across
the company’s comic services on feature phones and smart phones, a
15 percent increase from 80 million downloads from the first
quarter of 2010. Menue launched its Android comic service in
February and has seen 400 percent month over month growth in free
and paid comic book downloads from February 2011 to March
2011.
Update on Evolution Capital Management
In February 2011, CDC Corporation sought permission to file a
Restated Second Amended Complaint against Evolution Capital
Management and its affiliates. CDC’s new proposed Complaint seeks
to add various Evolution directors as defendants and provides
additional insight into the facts supporting CDC’s claims. The
proposed Complaint also increases the amount of damages CDC is
seeking to at least $795 million, which includes $295 million in
compensatory damages and $500 million in punitive damages.
In March 2011, Evolution and its affiliates withdrew their
pending Motion to Amend their Complaint, which had sought to add
CDC Software International, CDC Software Corporation and CDC
Delaware Corporation as defendants.
CDC plans to file a Motion for Summary Judgment in the Evolution
CDC SPV Ltd v. CDC Corporation litigation on April 21, 2011,
arguing that discovery in the matter has revealed no disputed
issues of material fact and that CDC is therefore entitled to
immediate judgment in its favor.
Share Buyback
During 2010 and 2011, CDC Corporation purchased a total of 1.3
million of its shares at an average price of $4.91 per share.
Concluding Remarks
”In the fourth quarter of 2010, many of our businesses continued
to make significant investments in their operations to position for
growth in rapidly growing markets,” Mr. Yip concluded. “This has
impacted profitability in the short term, but we believe we are
well positioned for future growth and to deliver maximum value to
shareholders. We believe the number of strategic initiatives and
investments we have made in the China market will allow us to
operate as a value-added investor and operator, co-investing with
and operating jointly with trading and long term strategic and
private equity partners inside and outside of China. We believe
that our strategies also will allow us to continue to focus on our
core competency in vertical industries such as food/life science,
manufacturing, financial services, global supply chain, and
interactive games/mobile/new media. Our recent partnership with the
China Merchant Group, and the related upcoming Food Conference, are
just recent examples of how we have been advancing our Silk Road
strategy to position CDC Global Services and our other businesses
for growth.
“We have taken the prudent approach to cleaning up our balance
sheet in accordance to U.S. GAAP rules by recording various
non-cash Non-GAAP write downs and impairments for the year ended
December 31, 2010. Finally, we do not believe CDC’s current market
valuation is reflective of the company’s actual core asset value,
and as such, we plan to recommend to our Board that the company
continues to buy CDC Corporation shares when and if trading windows
are opened.”
Conference Call
The company's senior management will host a conference call for
financial analysts and investors on April 21, 2011 at 8:30AM
EDT.
USA-based Toll Free Number: +1 866 903-3296
International: +1 706 643-6263
Passcode: #:47911441
Call Leader: Monish Bahl
Investors are invited to listen to a live webcast of the
conference call which can be accessed through the investor section
of the CDC Corporation website at www.cdccorporation.net. The call
can also be accessed through www.streetevents.com. To listen to the
call, please go to the website at least 15 minutes prior to the
call and download any necessary audio software.
Instant Replay
For those unable to call in, a digital instant replay will be
available after the call until May 5, 2011. U.S. based Toll Free
Number: +1 800 642 1687, U.S.-based Toll Number: +1 706 645 9291
Passcode or PIN #: 47911441
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.
(a) Adjusted Financial Measures
This press release includes Adjusted EBITDA, Non-GAAP revenue,
Non-GAAP cash and cash equivalents, and Adjusted EBITDA margin,
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.
(b) Revised 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. Amounts
presented herein for 2010 are unaudited and may change in
connection with the audit of the company’s financial statements for
the year ended December 31, 2010.
(c) The management, operation, policy and conduct of the
PE Fund is vested exclusively in its general partners. China.com is
a limited partner in the PE Fund and has accounted for its
investment in the PE Fund at cost less any impairments, because the
range of reasonable fair value estimates is so significant that the
directors of China.com are of the opinion that their fair value
cannot be measured reliably. China.com’s remaining commitment in
the PE Fund is approximately (USD)$2.0 million. The timing of any
capital contributions is generally on an “as needed” basis. The
term of the PE Fund is seven years ending in 2014 unless terminated
earlier pursuant to the partnership agreement.
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 third 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 third 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 beliefs about our position for long-term
growth, our expectations with respect to revenue amounts from CDC
Software’s cloud business for any future period, our beliefs
regarding the offshore development business in China and the growth
potential thereof, our beliefs and expectations for returns on
China.com’s investment in the Beijing-based private equity fund,
our plans with respect to additional co-investments with the PE
Fund and potential partnerships with its investees, our beliefs
regarding potential growth in the cloud market over the next few
years, our expectations with respect to Non-GAAP revenue and total
SaaS secured bookings in the first quarter of 2011, our
expectations regarding the Nanjing Global Delivery Center, our
plans with respect to a Global Delivery Center in Nanhai, our
expectations regarding the Zhangzhou food conference in the second
quarter of 2011, our beliefs regarding our foundation to exploit
future revenue opportunities at CDC Global Services, our plans to
manage new cloud computing centers in China, our beliefs regarding
new members of management at CDC Global Services, our expectations
with respect to the commercial launch of Mythical Legends and LOTRO
at CDC Games, our expectations regarding our continued partnership
with Turbine, Inc., our expectations regarding future metrics for
Yulgang, our expectations regarding our new proposed complaint in
our litigation with Evolution, as well as our plans to file a
motion for summary judgment in that matter, our beliefs regarding
our significant investments in our businesses’ operations and the
impact thereof, our beliefs regarding our strategic investments and
initiatives, and our strategies, and the potential impact and
benefit thereof, our beliefs regarding the creation of shareholder
value, our beliefs regarding the value of our core assets, our
plans with respect to the repurchase of additional shares, beliefs
and expectations about any potential investments or transactions
that we may undertake, our beliefs regarding any future revenue or
business growth, recurring revenues, and other metrics, our
expectations regarding any future or planned game testing or
launches, including LOTRO, our beliefs regarding the value of our
shares and our sum of parts valuation approach, our beliefs about
our plans and strategies and factors that may affect them, our
beliefs regarding any amounts, projections of performance and other
matters relating to any future period, our goals with respect to
levels of recurring revenue, our plans relating to joint ventures
or other partnerships, our expectations regarding future expansion
in China, our Silk Road initiative and the potential benefits to
us, our customers and shareholders, 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 the following: (a) the
ability to realize strategic objectives by taking advantage of
market opportunities in targeted geographic markets; (b) the risk
of significant liability and losses from any litigation matters or
other disputes in which we or any of our subsidiaries may be
involved, including the litigation between Sunshine Mills, Inc. and
Ross Systems and the litigation between Evolution Capital
Management and CDC Corporation; (c) risks related to 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 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; (e) the effects of
restructurings and rationalization of operations in our companies;
(f) the ability to address technological changes and developments
including the development and enhancement of products; (g) the
ability to develop and market successful products and services; (h)
the entry of new competitors and their technological advances; (i)
the need to develop, integrate and deploy enterprise software
applications to meet customer's requirements; (i) the possibility
of development or deployment difficulties or delays; (k) the
dependence on customer satisfaction with the company's games,
software products and services; (l) continued commitment to the
deployment of the products, including enterprise software
solutions; (m) risks involved in developing software solutions and
integrating them with third-party software and services; (n) the
continued ability of the company's products and services to address
client-specific requirements; (o) demand for and market acceptance
of new and existing enterprise software and services and the
positioning of the company's solutions; (p) risks associated with
our convertible debt; (q) the outcome of any litigation in which we
are a party; and (r) the ability of staff to operate the enterprise
software and extract and utilize information from the company's
products and services. If any such risks or uncertainties
materialize or if any of the assumptions proves incorrect, our
results could differ materially from the results expressed or
implied by the forward-looking statements we make. Also, the
results and benefits experienced by customers and users set forth
in this press release may differ from those of other users and
customers. Further information on risks or other factors that could
cause results to differ is detailed in filings or submissions with
the United States Securities and Exchange Commission made by CDC
Corporation in its Annual Report on Form 20-F for the year ended
December 31, 2009, filed with the SEC on June 30, 2010. 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.
CDC Corporation Consolidated Balance Sheets
(Amounts in thousands of U.S. dollars except share and per share
data) Table 1 December 31,
December 31,
2009 (b)
2010 ASSETS Audited Unaudited Current
assets: Cash $ 115,290 $ 99,429 Restricted cash 790 140
Accounts receivable (net of allowance of
$8,839 and $6,302 at December 31, 2009 and 2010, respectively)
58,883 54,044 Investments 2,418 985 Deferred tax assets 5,387 5,679
Prepayments and other current assets 13,276
15,170 Total current assets 196,044 175,447 Property
and equipment, net 13,500 9,808 Goodwill 177,858 191,341 Intangible
assets, net 94,859 78,163 Investments 12,863 11,943 Equity
investments 11,360 10,695 Deferred tax assets 35,983 30,092 Other
assets 4,220 6,968 Total assets $
546,687 $ 514,457
LIABILITIES AND
SHAREHOLDERS’ EQUITY Current liabilities: Accounts payable $
22,513 $ 23,367 Purchase consideration payables 2,457 34 Income tax
payable 2,867 3,440 Accrued liabilities 37,382 43,055 Restructuring
accruals 2,061 1,605 Short-term loans 12,539 15,078 Convertible
notes 52,320 58,195 Deferred revenue 59,975 59,271 Deferred tax
liabilities 1,797 1,427 Total current
liabilities 193,911 205,472 Deferred tax liabilities 23,985
20,677 Long-term debt - 238 Purchase consideration payables 810
1,563 Other liabilities 14,584 14,695
Total liabilities 233,290 242,645 Shareholders’ equity:
Preferred shares, $0.003 par value;
1,666,667 shares authorized, no shares issued
- -
Class A common shares, $0.00075 par value;
266,666,667 shares authorized; 39,492,990 and 39,616,132 shares
issued as of December 31, 2009 and 2010, respectively; 35,253,982
and 35,140,879 shares outstanding as of December 31, 2009 and 2010,
respectively
28 28 Additional paid-in capital 740,981 747,978
Common stock held in treasury; 4,239,008
and 4,475,253 shares at December 31, 2009 and 2010,
respectively
(58,091 ) (59,445 ) Accumulated deficit (427,169 ) (467,769 )
Accumulated other comprehensive income 18,796
22,211 Total shareholders’ equity 274,545 243,003
Noncontrolling interest 38,852 28,809
Total equity 313,397 271,812 Total
liabilities and shareholders’ equity $ 546,687 $ 514,457
CDC Corporation Unaudited Consolidated Statement
of Operations (Amounts in thousands of U.S. dollars except
share and per share data) Table 2 Three months
ended September 30, December 31,
2010 2010 REVENUE: CDC
Software $ 53,007 $ 56,750 CDC Global Services 15,870 14,639 CDC
Games 6,384 7,251 China.com 3,095 4,441
Total revenue 78,356 83,081
COST OF REVENUE: CDC
Software 23,517 25,438 CDC Global Services 13,224 12,422 CDC Games
4,976 4,726 China.com 1,342 1,918 Total
cost of revenue 43,059 44,504
Gross profit 35,297 38,577 Gross margin % 45 % 46 %
OPERATING EXPENSES: Sales and marketing expenses 12,172
14,027 Research and development expenses 6,868 7,257 General and
administrative expenses 18,277 18,377 Exchange gain (1,139 ) (543 )
Amortization expenses 2,195 2,090 Restructuring and other charges
(18 ) 17,515 Total operating expenses
38,355 58,723 Operating loss (3,058 )
(20,146 ) Operating margin % -4 % -24 % Other loss, net
(1,526 ) (2,534 ) Loss before income taxes
(4,584 ) (22,680 ) Income tax expense (1,409 ) (659 )
Net loss (5,993 ) (23,339 ) Net (income) loss attributable
to noncontrolling interest (107 ) 309
Net loss attributable to controlling interest $ (6,100 ) $ (23,030
) Basic and diluted loss per share from operations
attributable to controlling interest (1) $ (0.18 ) $ (0.65 )
Basic and diluted loss per share attributable to controlling
interest (1) $ (0.18 ) $ (0.65 ) Weighted average number of
common shares outstanding - basic 35,162,009 35,207,424
Weighted average number of common shares outstanding - diluted
35,162,009 35,207,424 (1) Refer to "Unaudited Basic and
Diluted Earnings (Loss) Per Share Computation" schedule for
calculation of earnings per share amounts.
CDC Corporation
Unaudited Consolidated Statement of Operations (Amounts
in thousands of U.S. dollars except share and per share data)
Table 3 Three months ended
December 31,
2009 2010 REVENUE:
CDC Software $ 54,326 $ 56,750 CDC Global Services 17,568 14,639
CDC Games 7,011 7,251 China.com 4,068 4,441
Total revenue 82,973 83,081
COST OF REVENUE:
CDC Software 23,857 25,438 CDC Global Services 14,137 12,422 CDC
Games 8,939 4,726 China.com 1,397 1,918
Total cost of revenue 48,330 44,504
Gross profit 34,643 38,577 Gross margin % 42 % 46 %
OPERATING EXPENSES: Sales and marketing expenses 12,221
14,027 Research and development expenses 5,311 7,257 General and
administrative expenses 17,295 18,377 Exchange gain (1,395 ) (543 )
Amortization expenses 2,033 2,090 Restructuring and other charges
2,178 17,515 Total operating expenses
37,643 58,723 Operating loss
(3,000 ) (20,146 ) Operating margin % -4 % -24 % Other
income (loss), net 3,334 (2,534 ) Loss
before income taxes 334 (22,680 ) Income tax expense (4,331
) (659 ) Net loss (3,997 ) (23,339 ) Net income
(loss) attributable to noncontrolling interest (680 )
309 Net loss attributable to controlling interest $
(4,677 ) $ (23,030 ) Basic and diluted loss per share from
continuing operations attributable to controlling interest (1) $
(0.14 ) $ (0.65 ) Basic and diluted loss per share
attributable to controlling interest (1) $ (0.13 ) $ (0.65 )
Weighted average number of common shares outstanding - basic
35,350,423 35,207,424 Weighted average number of common
shares outstanding - diluted 36,106,591 35,207,424 (1) Refer
to "Unaudited Basic and Diluted Earnings (Loss) Per Share
Computation" schedule for calculation of earnings per share
amounts.
CDC Corporation Unaudited Consolidated Statement
of Operations (Amounts in thousands of U.S. dollars except
share and per share data) Table 4 Twelve
months ended
December 31,
2009 2010 REVENUE:
CDC Software $ 203,899 $ 212,876 CDC Global Services 75,149 62,717
CDC Games 28,890 28,714 China.com 12,180
13,532 Total revenue 320,118 317,839
COST OF
REVENUE: CDC Software 93,183 96,535 CDC Global Services 62,294
51,574 CDC Games 24,431 20,520 China.com 5,077
6,307 Total cost of revenue 184,985
174,936 Gross profit 135,133 142,903 Gross margin %
42 % 45 %
OPERATING EXPENSES: Sales and marketing
expenses 46,380 51,763 Research and development expenses 18,019
27,876 General and administrative expenses 66,080 66,938 Exchange
gain (3,427 ) (2,240 ) Amortization expenses 7,927 8,565
Restructuring and other charges 5,510 18,213
Total operating expenses 140,489
171,115 Operating loss (5,356 ) (28,212 ) Operating
margin % -2 % -9 % Other income (loss), net 30,160
(7,027 ) Income (loss) before income taxes
24,804 (35,239 ) Income tax expense (11,438 ) (4,847
) Income (loss) from continuing operations 13,366 (40,086 )
Loss from operations of discontinued subsidiaries, net of tax
- - Net income (loss) 13,366
(40,086 ) Net (income) loss attributable to noncontrolling interest
(1,505 ) (514 ) Net income (loss) attributable
to controlling interest $ 11,861 $ (40,600 ) Basic
and diluted earnings (loss) per share from continuing operations
attributable to controlling interest (1) $ 0.29 $ (1.15 )
Basic and diluted earnings (loss) per share attributable to
controlling interest (1) $ 0.29 $ (1.15 ) Weighted
average number of common shares outstanding - basic 35,402,831
35,227,368 Weighted average number of common shares
outstanding - diluted 36,146,564 35,227,368 . (1) Refer to
"Unaudited Basic and Diluted Earnings (Loss) Per Share Computation"
schedule for calculation of earnings per share amounts.
CDC
Corporation Unaudited Consolidated Statement of Cash
Flows (Amounts in thousands of U.S. dollars)
Table 5 Three months ended September
30, December 31, 2010
2010 OPERATING ACTIVITIES: Net loss $ (5,993 )
$ (23,339 ) Adjustments to reconcile net loss to net cash provided
by operating activities Loss on disposal of property and equipment
133 196 Gain on disposal of available-for-sale securities (373 )
(317 ) Bad debt expense 774 1,405 Amortization expense 6,813 5,917
Depreciation expense 1,695 1,617 Stock compensation expenses 1,464
1,270 Deferred income tax provision (2,455 ) 2,133 Exchange gain
(1,139 ) (543 ) Non-cash restructuring and other charges 58 6,698
Intangibles impairment - 9,881 Cost investments impairment - 936
Amortization of debt issuance costs 87 87 Interest expense 1,535
1,052 Changes in operating assets and liabilities: Accounts
receivable 5,214 1,963 Deposits, prepayments and other receivables
(782 ) 1,403 Other assets 200 (1,674 ) Accounts payable 49 2,746
Accrued liabilities (1,915 ) 282 Deferred revenue (2,404 ) 1,917
Income tax payable 3,395 (1,999 ) Other liabilities 572
(2,686 ) Net cash provided by operating activities
6,928 8,945
INVESTING
ACTIVITIES: Acquisition, net of cash acquired 216 (16 )
Payments for prior year acquisitions (780 ) (320 ) Purchase of
property, plant & equipment (670 ) (304 ) Purchases of
intangible assets (9 ) - Disposal (acquisition) of cost method
investments 372 2,386 Investment in cost method investees (148 )
1,057 Proceeds from disposal of available-for-sale securities
- (1,427 ) Net cash provided by (used in)
investing activities (1,019 ) 1,376
FINANCING ACTIVITIES: Issuance of share capital, net of
offering costs 178 (178 ) Short-term borrowings (repayments) (7,208
) (357 ) Payment for capital lease obligations (92 ) (24 ) Purchase
of CDC Software shares (1,712 ) (2,214 ) Purchases of treasury
stock (843 ) 187 Dividend distribution by China.com (2,553 ) (369 )
Other financing 1,266 (1,395 ) Net cash used
in financing activities (10,964 ) (4,350 )
Effect of exchange differences on cash 2,318
2,539 Net increase (decrease) in cash (2,737 ) 8,511
Cash at beginning of period 93,655 90,918
Cash at end of period $ 90,918 $ 99,429
CDC Corporation Consolidated Statement of Cash Flows
(Amounts in thousands of U.S. dollars)
Table 6 Three months ended December 31,
Twelve months ended December 31, 2009
2010 2009
2010 Unaudited Unaudited Audited Unaudited
OPERATING ACTIVITIES: Net income (loss) $ (3,997 ) $ (23,339
) $ 13,366 $ (40,086 ) Adjustments to reconcile net income to net
cash provided by operating activities Loss on disposal of property
and equipment 65 196 291 346 Loss on disposal of available-for-sale
securities (2,202 ) (317 ) (2,173 ) (1,669 ) Gain on equity
investments 512 - 512 - Gain on purchase of convertible notes
(38,184 ) - (38,184 ) - Bad debt expense 1,274 1,405 2,358 2,557
Amortization expense 7,104 5,917 27,519 26,501 Depreciation expense
1,710 1,617 6,985 6,730 Stock compensation expenses 2,324 1,270
6,539 5,382 Deferred income tax provision 1,776 2,133 8,685 1,971
Exchange gain (1,395 ) (543 ) (3,427 ) (2,240 ) Intangibles
impairment - 9,881 - 9,881 Cost investments impairment 185 936 185
936 Non-cash restructuring and other charges 731 6,698 4,063 7,396
Amortization of debt issuance costs and debt discount on
convertible notes (2,257 ) 87 2,055 232 Fair market value
adjustment on convertible notes 38,687 - 5,012 - Interest income 51
- - - Interest expense 849 1,052 849 5,752 Changes in operating
assets and liabilities: Accounts receivable (9,040 ) 1,963 16,710
6,082 Deposits, prepayments and other receivables 1,650 1,403 408
(210 ) Other assets (533 ) (1,674 ) (1,145 ) (1,260 ) Accounts
payable (414 ) 2,746 (1,831 ) (582 ) Accrued liabilities 2,795 282
(9,996 ) (5,700 ) Deferred revenue 2,485 1,917 (5,960 ) (3,108 )
Income tax payable 1,800 (1,999 ) (1,533 ) 595 Other liabilities
(562 ) (2,686 ) (441 ) (1,903 ) Net
cash provided by operating activities 5,414
8,945 30,847 17,603
INVESTING ACTIVITIES: Acquisitions, net of cash acquired
(25,532 ) (16 ) (26,856 ) (23,121 ) Payments for prior year
acquisitions - (320 ) (944 ) (3,200 ) Purchase of property, plant
& equipment (349 ) (304 ) (3,371 ) (1,405 ) Purchases of
intangible assets 202 - (51 ) (1,222 ) Payment for capitalized
software (556 ) - (3,556 ) - Disposal (acquisition) of cost method
investments - 2,386 (1,226 ) 4,152 Purchase of available-for-sale
securities (803 ) - (803 ) (688 ) Investment in cost method
investees - 1,057 (38 ) (1,011 ) Proceeds from disposal of
available-for-sale securities 7,225 (1,427 ) 33,577 - Change in
restricted cash (160 ) - 3,502
686 Net cash provided by (used in) investing
activities (19,973 ) 1,376 234
(25,809 )
FINANCING ACTIVITIES: Issuance of
share capital, net of offering costs 184 (178 ) 52,728 -
Proceeds from bank loans
1,027
-
1,027 - Short-term borrowings (repayments) (4,601 ) (357 ) (12,469
) 2,322 Purchase of convertible notes (1,050 ) - (101,721 ) - Debt
issuance costs - - - (1,389 ) Payment for capital lease obligations
(109 ) (24 ) (569 ) (523 ) Purchase of CDC Software shares (969 )
(2,214 ) (969 ) (6,839 ) Purchases of treasury stock (623 ) 187
(1,973 ) (1,354 ) Dividend distribution by China.com (5,454 ) (369
) (18,972 ) (2,922 ) Other financing - (1,395
) - (129 ) Net cash used in financing
activities (11,595 ) (4,350 ) (82,918 )
(10,834 ) Effect of exchange differences on cash (119
) 2,539 1,434 3,178
Net increase (decrease) in cash (26,273 ) 8,511 (50,403 )
(15,861 ) Cash at beginning of period 141,563
90,918 165,693 115,290
Cash at end of period $ 115,290 $ 99,429 $ 115,290
$ 99,429
CDC Corporation Unaudited
Reconciliation From GAAP Results to Adjusted EBITDA (Amounts
in thousands of U.S. dollars) Table 7 Three
months ended September 30, December 31,
2010 2010 (a) Reconciliation
from GAAP results to Adjusted EBITDA Operating loss $ (3,058 )
$ (20,146 ) Add back restructuring and other charges (18 ) 17,515
Add back depreciation expense 1,695 1,617 Add back amortization
expense 2,194 2,090 Add back amortization expense included in cost
of revenue 4,619 3,827 Add back stock compensation expenses 1,464
1,270 Subtract exchange gain (1,139 ) (543 ) Add back deferred
revenue grind (1) 1,194 831 Adjusted
EBITDA $ 6,951 $ 6,461 Adjusted EBITDA margin % 9 % 8
%
CDC Software Unaudited Reconciliation From GAAP
Results to Adjusted EBITDA (Amounts in thousands of U.S.
dollars) Three months ended September 30,
December 31, 2010 2010
(a) Reconciliation from GAAP results to Adjusted
EBITDA Operating income (loss) $ 3,852 $ (2,459 ) Add back
restructuring and other charges (376 ) 4,952 Add back depreciation
expense 869 815 Add back amortization expense 1,350 1,408 Add back
amortization expense included in cost of revenue 3,515 3,318 Add
back stock compensation expenses 764 619 Subtract exchange gain
(1,105 ) (444 ) Add back deferred revenue grind (1) 1,194
831 Adjusted EBITDA $ 10,063 $ 9,040
Adjusted EBITDA margin % 19 % 16 %
CDC Global
Services Unaudited Reconciliation From GAAP Results to
Adjusted EBITDA (Amounts in thousands of U.S. dollars)
Three months ended September 30, December
31, 2010 2010 (a)
Reconciliation from GAAP results to Adjusted EBITDA Operating
loss $ (2,598 ) $ (14,732 ) Add back restructuring and other
charges 1,457 12,666 Add back depreciation expense 84 88 Add back
amortization expense 605 446 Add back amortization expense included
in cost of revenue 4 8 Add back stock compensation expenses 135 138
Add back exchange loss 1 1 Adjusted
EBITDA $ (312 ) $ (1,385 ) Adjusted EBITDA margin % -2 % -9 %
CDC Games Corporation Unaudited Reconciliation
From GAAP Results to Adjusted EBITDA (Amounts in thousands
of U.S. dollars) Three months ended September
30, December 31, 2010
2010 (a) Reconciliation from GAAP results to
Adjusted EBITDA Operating income (loss) $ (1,061 ) $ 1,237 Add
back restructuring and other charges 139 311 Add back depreciation
expense 709 674 Add back amortization expense included in cost of
revenue 1,100 501 Add back stock compensation expenses 165
154 Adjusted EBITDA $ 1,052 $ 2,877
Adjusted EBITDA margin % 16 % 40 %
CDC
China.com Unaudited Reconciliation From GAAP Results to
Adjusted EBITDA (Amounts in thousands of U.S. dollars)
Three months ended September 30, December
31, 2010 2010 (a)
Reconciliation from GAAP results to Adjusted EBITDA Operating
income (loss) $ (515 ) $ 234 Add back depreciation expense 33 40
Add back stock compensation expenses 210 169
Adjusted EBITDA $ (272 ) $ 443 Adjusted EBITDA margin
% -9 % 10 %
Corporate Unaudited Reconciliation
From GAAP Results to Adjusted EBITDA (Amounts in thousands
of U.S. dollars) Three months ended September
30, December 31, 2010
2010 (a) Reconciliation from GAAP results to
Adjusted EBITDA from operations Operating loss $ (2,736 ) $
(4,426 ) Add back restructuring and other charges (1,238 ) (414 )
Add back amortization expense 239 236 Add back stock compensation
expenses 190 190 Subtract exchange gain (35 ) (100 )
Adjusted EBITDA $ (3,580 ) $ (4,514 ) (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 Corporation Unaudited Reconciliation From
GAAP Results to Adjusted EBITDA (Amounts in thousands of
U.S. dollars) Table 8
Three months ended
December 31,
Twelve months ended
December 31,
2009 2010
2009 2010 (a) Reconciliation
from GAAP results to Adjusted EBITDA Operating loss $ (3,000 )
$ (20,146 ) $ (5,356 ) $ (28,212 ) Add back restructuring and other
charges 2,178 17,515 5,510 18,213 Add back depreciation expense
1,785 1,617 6,985 6,730 Add back amortization expense 2,033 2,090
7,927 8,565 Add back amortization expense included in cost of
revenue 8,189 3,827 22,710 17,936 Add back stock compensation
expenses 2,414 1,270 6,539 5,382 Subtract exchange gain (1,395 )
(543 ) (3,427 ) (2,240 ) Add back deferred revenue grind (1)
632 831 632 4,672
Adjusted EBITDA (2) $ 12,836 $ 6,461 $ 41,520
$ 31,046 Adjusted EBITDA margin % 15 % 8 % 13 % 10 %
CDC Software Unaudited Reconciliation From GAAP Results
to Adjusted EBITDA (Amounts in thousands of U.S.
dollars) Three months ended
December 31,
Twelve months ended
December 31,
2009 2010
2009 2010 (a) Reconciliation
from GAAP results to Adjusted EBITDA Operating income (loss) $
5,889
$ (2,459 ) $ 27,656
$ 7,891 Add back restructuring and other charges 1,176
4,952 3,351
5,378 Add back depreciation expense 750 815 3,122 3,335 Add back
amortization expense 1,151 1,408 4,533 5,334 Add back amortization
expense included in cost of revenue 3,584 3,318 14,408 14,115 Add
back stock compensation expenses 909 619 2,041 2,379 Subtract
exchange gain (39 ) (444 ) (2,093 ) (2,081 ) Add back deferred
revenue grind (1) 632 831 632
4,672 Adjusted EBITDA (2) $ 14,052 $
9,040 $ 53,650 $ 41,023 Adjusted EBITDA margin
% 26 % 16 % 26 % 19 %
CDC Global Services
Unaudited Reconciliation From GAAP Results to Adjusted
EBITDA (Amounts in thousands of U.S. dollars)
Three months ended
December 31,
Twelve months ended
December 31,
2009 2010
2009 2010 (a) Reconciliation
from GAAP results to Adjusted EBITDA Operating loss $ (2,612 )
$ (14,732 ) $ (9,559 ) $ (20,164 ) Add back restructuring and other
charges 1,523 12,666 6,776 17,911 Add back depreciation expense 99
88 319 328 Add back amortization expense 645 446 2,425 2,337 Add
back amortization expense included in cost of revenue 1 8 18 13 Add
back stock compensation expenses 267 138 857 473 Add back exchange
loss - 1 6 3
Adjusted EBITDA $ (77 ) $ (1,385 ) $ 842 $ 901
Adjusted EBITDA margin % 0 % -9 % 1 % 1 %
CDC Games
Corporation Unaudited Reconciliation From GAAP Results to
Adjusted EBITDA (Amounts in thousands of U.S. dollars)
Three months ended
December 31,
Twelve months ended
December 31,
2009 2010
2009 2010 (a) Reconciliation
from GAAP results to Adjusted EBITDA Operating income (loss) $
(5,320 ) $ 1,237 $ (11,203 ) $ (1,806 ) Add back restructuring and
other charges 20 311 627 138 Add back depreciation expense 793 674
3,124 2,859 Add back amortization expense - - 22 - Add back
amortization expense included in cost of revenue 4,604 501 8,284
3,808 Add back stock compensation expenses 366
154 1,126 657 Adjusted EBITDA $
463 $ 2,877 $ 1,980 $ 5,656 Adjusted
EBITDA margin % 7 % 40 % 7 % 20 %
CDC China.com
Unaudited Reconciliation From GAAP Results to Adjusted
EBITDA (Amounts in thousands of U.S. dollars)
Three months ended
December 31,
Twelve months ended
December 31,
2009 2010
2009 2010 (a) Reconciliation
from GAAP results to Adjusted EBITDA Operating income (loss) $
1,683 $ 234 $ (381 ) $ (1,192 ) Add back depreciation expense 129
40 367 190 Add back stock compensation expenses 353 169 1,125 614
Subtract exchange loss (gain) (1,356 ) -
(1,356 ) - Adjusted EBITDA $ 809 $ 443
$ (245 ) $ (388 ) Adjusted EBITDA margin % 20 % 10 % -2 % -3
%
Corporate Unaudited Reconciliation From GAAP
Results to Adjusted EBITDA (Amounts in thousands of U.S.
dollars) Three months ended
December 31,
Twelve months ended
December 31,
2009 2010
2009 2010 (a) Reconciliation
from GAAP results to Adjusted EBITDA Operating loss $ (2,640 )
$ (4,426 ) $ (11,869 ) $ (12,941 ) Add back restructuring and other
charges (542 ) (414 ) (5,244 ) (5,214 ) Add back depreciation
expense 14 - 53 18 Add back amortization expense 237 236 947 894
Add back stock compensation expenses 519 190 1,390 1,259 Add
(subtract) exchange loss (gain) - (100 )
16 (162 ) Adjusted EBITDA $ (2,412 ) $ (4,514
) $ (14,707 ) $ (16,146 ) (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. (2) 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 2009 and 2010:
Three months ended
December 31,
Twelve months ended
December 31,
2009 2010
2009 2010 Subtract
capitalized software credit $ (556 ) $ - $ (3,556 ) $ -
CDC Corporation Unaudited Reconciliation From GAAP
Results to Non-GAAP Net Income (Amounts in thousands of U.S.
dollars) Table 9 Three
months ended December 31, September 30,
December 31, 2009 2010
2010 (a) Reconciliation from GAAP
net income attributable to controlling interest to Non-GAAP net
income and Non-GAAP net income per share Net loss attributable
to controlling interest $ (4,677 ) $ (6,100 ) $ (23,030 ) Subtract
gain from operations of discontinued subsidiaries, net of tax (409
) - - Add back restructuring and other charges 2,178 (18 ) 17,515
Add back amortization expense 2,033 2,194 2,090 Add back
amortization expense included in cost of revenue 8,184 4,619 3,827
Add back stock based compensation 2,414 1,464 1,270 Subtract
capitalized software credits (556 ) - - Subtract exchange gain
(1,395 ) (1,139 ) (543 ) Add back deferred revenue grind 632 1,194
831 Add back non cash tax expense 3,248 493 231
Tax effect on all reconciling items @
31%
(4,467 ) (2,930 ) (7,915 ) Non-GAAP net income
(loss) $ 7,185 $ (223 ) $ (5,724 ) Non-GAAP net income
(loss) as % of revenue 9 % -2 % -7 % Weighted average number
of common shares outstanding - basic 35,350,423 35,162,009
35,207,424 Weighted average number of common shares outstanding -
diluted 36,106,591 35,162,009 35,207,424
Non-GAAP net
income per share - basic $ 0.20 $
(0.01 ) $ (0.16 ) Non-GAAP
net income per share - diluted $ 0.20 $
(0.01 ) $ (0.16 ) CDC
Corporation Unaudited Revenue Details (Amounts in
thousands of U.S. dollars)
Table 10 Three months ended
December 31, 2009 CDC Software Global Services
CDC Games China.com
Elimination of Intersegment
Revenue
Total Segment revenue from external customers: Licenses $
10,511 $ 106 $ - $ - $ - $ 10,617 Maintenance 25,343 - - - - 25,343
Professional services 15,800 15,971 - - - 31,771 Hardware 2,056
1,491 - - - 3,547 SaaS 616 - - - - 616 New media - -
7,011 4,068 - 11,079 Total
consolidated revenue $ 54,326 $ 17,568 $ 7,011 $ 4,068 $ - $
82,973
Three months ended September 30, 2010
CDC Software Global Services CDC Games
China.com Elimination of Intersegment Revenue
Total Segment revenue from external customers: Licenses $
9,006 $ 43 $ - $ - $ - $ 9,049 Maintenance 25,240 - - - - 25,240
Professional services 14,702 17,251 - - (2,750 ) 29,203 Hardware
567 1,326 - - - 1,893 SaaS 3,492 - - - - 3,492 New media -
- 6,384 3,095 - 9,479
Total consolidated revenue $ 53,007 $ 18,620 $ 6,384 $ 3,095 $
(2,750 ) $ 78,356
Three months ended December 31,
2010
CDC Software Global Services CDC Games
China.com Elimination of Intersegment Revenue
Total Segment revenue from external customers: Licenses $
10,138 $ 8 $ - $ - $ - $ 10,146 Maintenance 26,208 - - - - 26,208
Professional services 15,520 15,893 - - (2,922 ) 28,491 Hardware
1,230 1,660 - - - 2,890 SaaS 3,654 - - - - 3,654 New media -
- 7,251 4,441 - 11,692
Total consolidated revenue $ 56,750 $ 17,561 $ 7,251 $ 4,441 $
(2,922 ) $ 83,081
CDC Corporation Unaudited
Revenue Details (Amounts in thousands of U.S. dollars)
Twelve months ended December 31, 2009 CDC
Software Global Services CDC Games
China.com
Elimination of Intersegment
Revenue
Total Segment revenue from external customers: Licenses $
33,085 $ 1,269 $ - $ - $ - $ 34,354 Maintenance 99,775 - - - -
99,775 Professional services 66,666 69,251 - - - 135,917 Hardware
3,757 4,629 - - - 8,386 SaaS 616 - - - - 616 New media -
- 28,890 12,180 - 41,070
Total consolidated revenue $ 203,899 $ 75,149 $ 28,890 $ 12,180 $ -
$ 320,118
Twelve months ended December 31,
2010 CDC Software Global Services CDC
Games China.com Elimination of Intersegment
Revenue Total Segment revenue from external customers:
Licenses $ 35,884 $ 136 $ - $ - $ - $ 36,020 Maintenance 100,184 -
- - - 100,184 Professional services 62,144 64,897 - - (7,469 )
119,572 Hardware 3,845 5,153 - - - 8,998 SaaS 10,819 - - - - 10,819
New media - - 28,714 13,532 -
42,246 Total consolidated revenue $ 212,876 $ 70,186
$ 28,714 $ 13,532 $ (7,469 ) $ 317,839
CDC Corporation
Unaudited Reconciliation From GAAP Cash to Non-GAAP
Cash (Amounts in thousands of U.S. dollars)
Table 11 December 31, (a) Non-GAAP Cash and Cash
Equivalents Reconciliation 2010 Cash $ 99,429 Add
restricted cash 140 Add available for sale securities - current 985
Investments (1) 11,268 Non-GAAP cash and cash equivalents $
111,822 (1) - Excludes investments of $675 in franchise and
strategic cloud investment partners at December 31, 2010.
CDC
Corporation Unaudited Basic and Diluted Earnings (Loss) Per
Share Computation (Amounts in thousands of U.S. dollars
except share and per share data)
Table 12 Three months ended
December 31,
Twelve months ended
December 31,
2009 2010
2009 2010
Numerator for earnings (loss)
attributable to controlling interest per common share:
Net income (loss) $ (4,407 ) $ (23,030 ) $ 13,366 $ (40,086 )
Net adjustments for (income) loss
attributable to noncontrolling interest and dilutive effect of
subsidiary issued stock (1)
(679 ) 308 (1,505 ) (514 )
Adjusted income (loss) (5,086 ) (22,722 ) 11,861 (40,600 ) Amount
allocated to convertible notes (2) - -
(1,208 ) - Net income (loss) attributable to
controlling
interest
$ (5,086 ) $ (22,722 ) $ 10,653 $ (40,600 )
Numerator for earnings (loss) attributable to controlling
interest per common share: Net income
(loss) attributable to controlling interest $ (4,677 ) $ (22,722 )
$ 10,653 $ (40,600 )
Denominator: Weighted
average number of common shares outstanding - basic 35,350,423
35,207,424 35,402,831 35,227,368
Employee compensation related to common
shares including stock
options
756,168 - 743,733
- Weighted average number of common shares outstanding -
diluted 36,106,591 35,207,424
36,146,564 35,227,368
Per share
amounts:
Earnings (loss) attributable to
controlling interest per common share - basic and dilutive
$ (0.14 ) $ (0.65 ) $ 0.29 $ (1.15 )
Earnings (loss) attributable to
controlling interest per common share - basic and dilutive
$ (0.13 ) $ (0.65 ) $ 0.29 $ (1.15 )
(1) Includes the dilutive effects of
subsidiary-issued stock-based awards, if any.
(2) Income has been allocated to common
stock and convertible notes based on their respective rights to
share in dividends. In accordance with FASB Accounting Standards
Codification 260, "Earnings Per Share" the Company's convertible
notes meet the definition of participating securities and are
included in the basic earnings per share using the two-class stock
method and in diluted earnings per share using the more dilutive of
the if-converted method or two-class stock method.
CDC Corporation Unaudited Reconciliation of GAAP Revenue
to Non-GAAP Revenue (Amounts in thousands of U.S.
dollars) Table 13 Three Months
Ended December 31, 2009 GAAP Revenue Non-GAAP
Adjustment (1) Non-GAAP Revenue Software $ 54,326
$ 632 $ 54,958 Global Services 17,568 - 17,568 CDC Games 7,011 -
7,011 China.com 4,068 - 4,068 Total revenue $
82,973 $ 632 $ 83,605
Three Months Ended September
30, 2010 GAAP Revenue Non-GAAP Adjustment (1)
Non-GAAP Revenue Software $ 53,007 $ 1,194 $ 54,201
Global Services 15,870 - 15,870 CDC Games 6,384 - 6,384 China.com
3,095 - 3,095 Total revenue $ 78,356 $ 1,194 $
79,550
Three Months Ended December 31, 2010
GAAP Revenue Non-GAAP Adjustment (1) Non-GAAP
Revenue Software $ 56,750 $ 831 $ 57,581 Global Services
14,639 - 14,639 CDC Games 7,251 - 7,251 China.com 4,441
- 4,441 Total revenue $ 83,081 $ 831 $ 83,912
(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.
CDC Corporation Unaudited
Reconciliation of GAAP Revenue to Non-GAAP Revenue (Amounts
in thousands of U.S. dollars) Table
14 Twelve Months Ended December 31, 2009 GAAP
Revenue Non-GAAP Adjustment (1) Non-GAAP Revenue
Software $ 203,899 $ 632 $ 204,531 Global Services 75,149 -
75,149 CDC Games 28,890 - 28,890 China.com 12,180 -
12,180 Total revenue $ 320,118 $ 632 $ 320,750
Twelve Months Ended December 30, 2010 GAAP Revenue
Non-GAAP Adjustment (1) Non-GAAP Revenue
Software $ 212,876 $ 4,672 $ 217,548 Global Services 62,717 -
62,717 CDC Games 28,714 - 28,714 China.com 13,532 -
13,532 Total revenue $ 317,839 $ 4,672 $ 322,511
(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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