CDC Corporation 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 CDCS
On a standalone basis, CDC Software had the following results for the six months ended June 30, 2010 and 2011:
|
|
Six Months |
Six Months ended June 30, 2011 |
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|
|
||||||||||
|
Non-GAAP revenue |
$105.7 million |
$109.1 million |
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|
Adjusted EBITDA |
$21.4 million |
$10.8 million |
||||||||
|
Adjusted EBITDA Margin(a) |
12% |
3% |
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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 |
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| 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:
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Six Months ended June 30, 2010 |
Six Months ended June 30, 2011 |
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| 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 |
Six Months ended June 30, 2011 |
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| GAAP Revenue: | $6.0 million | $8.0 million | ||||||||
| Adjusted EBITDA: | $(558,000) | $(47,000) | ||||||||
|
Adjusted EBITDA Margin: |
(9)% |
(1)% |
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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 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; (r) 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.
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CDC Corporation |
||||||||
| 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 | $ | 99,360 | $ | 80,646 | ||||
| Restricted cash | 140 | 25 | ||||||
|
Accounts receivable (net of allowance of $6,302 at December 31,
2010 |
53,432 | 57,031 | ||||||
| Investments | 985 | 394 | ||||||
| Deferred tax assets | 10,118 | 10,159 | ||||||
| Prepayments and other current assets | 12,666 | 18,515 | ||||||
| Total current assets | 176,701 | 166,770 | ||||||
| Property and equipment, net | 9,808 | 8,558 | ||||||
| Goodwill | 56,391 | 57,209 | ||||||
| Intangible assets, net | 73,124 | 66,715 | ||||||
| Investments | 11,943 | 11,426 | ||||||
| Equity investments | 12,134 | 12,134 | ||||||
| Deferred tax assets | 47,041 | 47,432 | ||||||
| Other assets | 6,967 | 7,139 | ||||||
| Total assets | $ | 394,109 | $ | 377,383 | ||||
| LIABILITIES AND SHAREHOLDERS' EQUITY | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | 23,405 | $ | 26,516 | ||||
| Purchase consideration payables | 34 | 673 | ||||||
| Income tax payable | 3,739 | 3,510 | ||||||
| Accrued liabilities | 51,076 | 53,585 | ||||||
| Restructuring accruals | 1,610 | 1,093 | ||||||
| Short-term loans | 15,078 | 112 | ||||||
| Convertible notes | 60,574 | 64,865 | ||||||
| Deferred revenue | 59,444 | 63,778 | ||||||
| Deferred tax liabilities | 1,416 | 1,582 | ||||||
| Total current liabilities | 216,376 | 215,714 | ||||||
| Deferred tax liabilities | 19,880 | 19,961 | ||||||
| Long-term debt | 238 | 99 | ||||||
| Purchase consideration payables | 786 | 110 | ||||||
| Other liabilities | 14,993 | 14,298 | ||||||
| Total liabilities | 252,273 | 250,182 | ||||||
| Shareholders' equity: | ||||||||
|
Preferred shares, $0.003 par value; 1,666,667 shares authorized, |
- | - | ||||||
|
Class A common shares, $0.00075 par value; 266,666,667 shares |
28 | 28 | ||||||
| Additional paid-in capital | 747,846 | 754,015 | ||||||
|
Common stock held in treasury; 4,463,587 shares |
(59,445 | ) | (59,445 | ) | ||||
| Accumulated deficit | (579,234 | ) | (602,584 | ) | ||||
| Accumulated other comprehensive income | 21,529 | 26,792 | ||||||
| Total shareholders' equity | 130,724 | 118,806 | ||||||
| Noncontrolling interest | 11,112 | 8,395 | ||||||
| Total equity | 141,836 | 127,201 | ||||||
| Total liabilities and shareholders' equity | $ | 394,109 | $ | 377,383 | ||||
| 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 | ||||||||
| March 31, | June 30, | |||||||
| 2011 | 2011 | |||||||
| REVENUE: | ||||||||
| CDC Software | $ | 52,376 | $ | 56,385 | ||||
| CDC Global Services | 14,780 | 16,347 | ||||||
| CDC Games | 5,962 | 5,064 | ||||||
| China.com | 4,031 | 4,001 | ||||||
| Total revenue | 77,149 | 81,797 | ||||||
| COST OF REVENUE: | ||||||||
| CDC Software | 24,444 | 26,153 | ||||||
| CDC Global Services | 11,626 | 12,498 | ||||||
| CDC Games | 3,881 | 3,736 | ||||||
| China.com | 1,843 | 1,967 | ||||||
| Total cost of revenue | 41,794 | 44,354 | ||||||
| Gross profit | 35,355 | 37,443 | ||||||
| Gross margin % | 46 | % | 46 | % | ||||
| OPERATING EXPENSES: | ||||||||
| Sales and marketing expenses | 15,045 | 16,271 | ||||||
| Research and development expenses | 7,519 | 7,959 | ||||||
| General and administrative expenses | 17,082 | 19,789 | ||||||
| Exchange (gain) loss | 112 | 1,436 | ||||||
| Amortization expenses | 2,117 | 2,168 | ||||||
| Restructuring and other charges | 1,107 | (24 | ) | |||||
| Total operating expenses | 42,982 | 47,599 | ||||||
| Operating loss | (7,627 | ) | (10,156 | ) | ||||
| Operating margin % | -10 | % | -12 | % | ||||
| Other loss, net | (1,724 | ) | (2,772 | ) | ||||
| Loss before income taxes | (9,351 | ) | (12,928 | ) | ||||
| Income tax expense | (1,271 | ) | (358 | ) | ||||
| Net loss | (10,622 | ) | (13,286 | ) | ||||
| Net loss attributable to noncontrolling interest | 291 | 270 | ||||||
| Net loss attributable to controlling interest | $ | (10,331 | ) | $ | (13,016 | ) | ||
| Basic earnings (loss) per share attributable to controlling interest | $ | (0.29 | ) | $ | (0.37 | ) | ||
| Diluted earnings (loss) per share attributable to controlling interest (1) | $ | (0.29 | ) | $ | (0.37 | ) | ||
| Weighted average number of common shares outstanding - basic | 35,141,880 | 35,180,073 | ||||||
| Weighted average number of common shares outstanding - diluted | 35,141,880 | 35,180,073 | ||||||
| (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 | ||||||||
| June 30, | ||||||||
| 2010 | 2011 | |||||||
| REVENUE: | ||||||||
| CDC Software | $ | 52,576 | $ | 56,385 | ||||
| CDC Global Services | 15,764 | 16,347 | ||||||
| CDC Games | 7,111 | 5,064 | ||||||
| China.com | 3,092 | 4,001 | ||||||
| Total revenue | 78,543 | 81,797 | ||||||
| COST OF REVENUE: | ||||||||
| CDC Software | 23,717 | 26,153 | ||||||
| CDC Global Services | 12,932 | 12,498 | ||||||
| CDC Games | 5,233 | 3,736 | ||||||
| China.com | 1,361 | 1,967 | ||||||
| Total cost of revenue | 43,243 | 44,354 | ||||||
| Gross profit | 35,300 | 37,443 | ||||||
| Gross margin % | 45 | % | 46 | % | ||||
| OPERATING EXPENSES: | ||||||||
| Sales and marketing expenses | 13,415 | 16,271 | ||||||
| Research and development expenses | 7,162 | 7,959 | ||||||
| General and administrative expenses | 14,883 | 19,789 | ||||||
| Exchange (gain) loss | (1,182 | ) | 1,436 | |||||
| Amortization expenses | 2,121 | 2,168 | ||||||
| Restructuring and other charges | 505 | (24 | ) | |||||
| Total operating expenses | 36,904 | 47,599 | ||||||
| Operating loss | (1,604 | ) | (10,156 | ) | ||||
| Operating margin % | -2 | % | -12 | % | ||||
| Other income (loss), net | (1,872 | ) | (2,772 | ) | ||||
| Loss before income taxes | (3,476 | ) | (12,928 | ) | ||||
| Income tax benefit (expense) | (3,965 | ) | (358 | ) | ||||
| Net loss | (7,441 | ) | (13,286 | ) | ||||
| Net (income) loss attributable to noncontrolling interest | (493 | ) | 270 | |||||
| Net loss attributable to controlling interest | $ | (7,934 | ) | $ | (13,016 | ) | ||
| Basic earnings (loss) per share attributable to controlling interest | $ | (0.23 | ) | $ | (0.37 | ) | ||
| Diluted earnings (loss) per share attributable to controlling interest (1) | $ | (0.23 | ) | $ | (0.37 | ) | ||
| Weighted average number of common shares outstanding - basic | 35,232,253 | 35,180,073 | ||||||
| Weighted average number of common shares outstanding - diluted | 35,232,253 | 35,180,073 | ||||||
| (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 | ||||||||
| Six months ended | ||||||||
| June 30, | ||||||||
| 2010 | 2011 | |||||||
| REVENUE: | ||||||||
| CDC Software | $ | 103,077 | $ | 108,761 | ||||
| CDC Global Services | 32,206 | 31,127 | ||||||
| CDC Games | 15,079 | 11,026 | ||||||
|
China.com |
5,996 | 8,033 | ||||||
| Total revenue | 156,358 | 158,947 | ||||||
| COST OF REVENUE: | ||||||||
| CDC Software | 47,611 | 50,597 | ||||||
| CDC Global Services | 25,928 | 24,124 | ||||||
| CDC Games | 10,818 | 7,617 | ||||||
| China.com | 3,047 | 3,810 | ||||||
| Total cost of revenue | 87,404 | 86,148 | ||||||
| Gross profit | 68,954 | 72,799 | ||||||
| Gross margin % | 44 | % | 46 | % | ||||
| OPERATING EXPENSES: | ||||||||
| Sales and marketing expenses | 26,395 | 31,316 | ||||||
| Research and development expenses | 13,946 | 15,478 | ||||||
| General and administrative expenses | 29,725 | 36,872 | ||||||
| Exchange gain | (588 | ) | 1,548 | |||||
| Amortization expenses | 4,280 | 4,284 | ||||||
| Restructuring and other charges | 716 | 1,083 | ||||||
| Total operating expenses | 74,474 | 90,581 | ||||||
| Operating loss | (5,520 | ) | (17,782 | ) | ||||
| Operating margin % | -4 | % | -11 | % | ||||
| Other income (loss), net | (2,969 | ) | (4,496 | ) | ||||
| Income (loss) before income taxes | (8,489 | ) | (22,278 | ) | ||||
| Income tax expense | (2,780 | ) | (1,630 | ) | ||||
| Net income (loss) | (11,269 | ) | (23,908 | ) | ||||
| Net (income) loss attributable to noncontrolling interest | (716 | ) | 561 | |||||
| Net income (loss) attributable to controlling interest | $ | (11,985 | ) | $ | (23,347 | ) | ||
| Basic and diluted earnings (loss) per share from continuing operations attributable to controlling interest (1) | $ | (0.34 | ) | $ | (0.66 | ) | ||
| Basic and diluted earnings (loss) per share attributable to controlling interest (1) | $ | (0.34 | ) | $ | (0.66 | ) | ||
| Weighted average number of common shares outstanding - basic | 35,234,849 | 35,161,082 | ||||||
| Weighted average number of common shares outstanding - diluted | 35,234,849 | 35,161,082 | ||||||
| . | ||||||||
| (1) Refer to "Unaudited Basic and Diluted Earnings (Loss) Per Share Computation" schedule for calculation of earnings per share amounts. | ||||||||
| CDC Corporation | ||||||||
| Unaudited Combined Statement 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 | $ | (10,622 | ) | $ | (13,286 | ) | ||
| Adjustments to reconcile net loss to net cash provided by operating activities | ||||||||
| Loss on disposal of property and equipment | - | 7 | ||||||
|
Loss on disposal of available-for-sale securities |
9 | 214 | ||||||
| Bad debt expense | 263 | 407 | ||||||
| Amortization expense | 5,468 | 5,638 | ||||||
| Depreciation expense | 1,503 | 1,445 | ||||||
| Stock compensation expenses | 1,612 | 2,956 | ||||||
| Deferred income tax provision | (273 | ) | (59 | ) | ||||
|
Exchange loss (gain) |
112 | (171 | ) | |||||
| Non-cash restructuring and other charges | 1,107 | (703 | ) | |||||
| Amortization of debt issuance costs | 87 | (256 | ) | |||||
| Interest expense | 1,805 | 2,486 | ||||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | (2,460 | ) | (1,743 | ) | ||||
| Deposits, prepayments and other receivables | (4,063 | ) | (242 | ) | ||||
| Other assets | 202 | 771 | ||||||
| Accounts payable | 5,241 | (2,686 | ) | |||||
| Accrued liabilities | (509 | ) | 1,673 | |||||
| Deferred revenue | 7,410 | (4,496 | ) | |||||
| Income tax payable | 413 | (661 | ) | |||||
| Other liabilities | (449 | ) | (267 | ) | ||||
| Net cash provided by (used in) operating activities | 6,856 | (8,973 | ) | |||||
| INVESTING ACTIVITIES: | ||||||||
| Acquisitions, net of cash acquired | - | - | ||||||
| Payments for prior year acquisitions | (500 | ) | (45 | ) | ||||
| Purchase of property, plant & equipment | (498 | ) | (584 | ) | ||||
| Purchases of intangible assets | (4,000 | ) | - | |||||
| Purchase of available-for-sale securities | - | 554 | ||||||
| Proceeds from disposal of available-for-sale securities | 41 | 188 | ||||||
| Change in restricted cash | - | 115 | ||||||
|
Net cash provided by (used in) investing activities |
(4,957 | ) | 228 | |||||
| FINANCING ACTIVITIES: | ||||||||
| Short-term borrowings (repayments) | (14,996 | ) | (4 | ) | ||||
| Payment for capital lease obligations | (71 | ) | (54 | ) | ||||
| Purchase of CDC Software shares | - | (1,553 | ) | |||||
| Net cash used in financing activities | (15,067 | ) | (1,611 | ) | ||||
| Effect of exchange differences on cash | 2,583 | 2,227 | ||||||
| Net decrease in cash | (10,585 | ) | (8,129 | ) | ||||
| Cash at beginning of period | 99,360 | 88,775 | ||||||
| Cash at end of period | $ | 88,775 | $ | 80,646 | ||||
| CDC Corporation | ||||||||||||||||
| Unaudited Combined Statement 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 loss | $ | (7,441 | ) | $ | (13,286 | ) | $ | (11,269 | ) | $ | (23,908 | ) | ||||
| Adjustments to reconcile net loss to net cash provided by operating activities | ||||||||||||||||
| Loss on disposal of property and equipment | 17 | 7 | 17 | 7 | ||||||||||||
| (Gain) loss on disposal of available-for-sale securities | (101 | ) | 214 | (979 | ) | 223 | ||||||||||
| Bad debt expense | 426 | 407 | 378 | 670 | ||||||||||||
| Amortization expense | 6,679 | 5,638 | 13,771 | 11,106 | ||||||||||||
| Depreciation expense | 1,820 | 1,445 | 3,418 | 2,948 | ||||||||||||
| Stock compensation expenses | 1,535 | 2,956 | 2,648 | 4,568 | ||||||||||||
| Deferred income tax provision | 2,293 | (59 | ) | 2,293 | (332 | ) | ||||||||||
| Exchange gain | (1,182 | ) | (171 | ) | (558 | ) | (59 | ) | ||||||||
| Non-cash restructuring and other charges | - | (703 | ) | - | 404 | |||||||||||
| Amortization of debt issuance costs | (63 | ) | (256 | ) | 58 | (169 | ) | |||||||||
| Interest expense | 1,570 | 2,486 | 3,165 | 4,291 | ||||||||||||
| Changes in operating assets and liabilities: | ||||||||||||||||
| Accounts receivable | (1,251 | ) | (1,743 | ) | (1,095 | ) | (4,203 | ) | ||||||||
| Deposits, prepayments and other receivables | 2,453 | (242 | ) | (731 | ) | (4,305 | ) | |||||||||
| Other assets | 760 | 771 | 286 | 973 | ||||||||||||
| Accounts payable | (1,555 | ) | (2,686 | ) | (3,377 | ) | 2,555 | |||||||||
| Accrued liabilities | (1,345 | ) | 1,673 | (3,426 | ) | 1,164 | ||||||||||
| Deferred revenue | (1,929 | ) | (4,496 | ) | (2,621 | ) | 2,914 | |||||||||
| Income tax payable | 1,192 | (661 | ) | (801 | ) | (248 | ) | |||||||||
| Other liabilities | (99 | ) | (267 | ) | 211 | (716 | ) | |||||||||
| Net cash provided by (used in) operating activities | 3,779 | (8,973 | ) | 1,388 | (2,117 | ) | ||||||||||
| INVESTING ACTIVITIES: | ||||||||||||||||
| Acquisitions, net of cash acquired | (21,075 | ) | - | (23,321 | ) | - | ||||||||||
| Payments for prior year acquisitions | (2,100 | ) | (45 | ) | (2,100 | ) | (545 | ) | ||||||||
| Purchase of property, plant & equipment | (144 | ) | (584 | ) | (431 | ) | (1,082 | ) | ||||||||
| Purchases of intangible assets | (956 | ) | - | (1,213 | ) | (4,000 | ) | |||||||||
| Disposal (acquisition) of cost method investments | (82 | ) | - | 1,394 | - | |||||||||||
| Purchase of available-for-sale securities | (391 | ) | 554 | (688 | ) | 554 | ||||||||||
| Investment in cost method investees | (1,920 | ) | - | (1,920 | ) | - | ||||||||||
| Proceeds from disposal of available-for-sale securities | - | 188 | 1,427 | 229 | ||||||||||||
| Change in restricted cash | 606 | 115 | 686 | 115 | ||||||||||||
|
Net cash provided by (used in) investing activities |
(26,062 | ) | 228 | (26,166 | ) | (4,729 | ) | |||||||||
| FINANCING ACTIVITIES: | ||||||||||||||||
| Short-term borrowings (repayments) | 12,699 | (4 | ) | 9,887 | (15,000 | ) | ||||||||||
| Debt issuance costs | (1,389 | ) | - | (1,389 | ) | - | ||||||||||
| Payment for capital lease obligations | (289 | ) | (54 | ) | (407 | ) | (125 | ) | ||||||||
| Purchase of CDC Software shares | (1,599 | ) | (1,553 | ) | (2,913 | ) | (1,553 | ) | ||||||||
| Purchases of treasury stock | (569 | ) | - | (698 | ) | - | ||||||||||
|
Net cash provided by (used in) financing activities |
8,853 | (1,611 | ) | 4,480 | (16,678 | ) | ||||||||||
| Effect of exchange differences on cash | (982 | ) | 2,227 | (1,337 | ) | 4,810 | ||||||||||
| Net decrease in cash | (14,412 | ) | (8,129 | ) | (21,635 | ) | (18,714 | ) | ||||||||
| Cash at beginning of period | 108,067 | 88,775 | 115,290 | 99,360 | ||||||||||||
| Cash at end of period | $ | 93,655 | $ | 80,646 | $ | 93,655 | $ | 80,646 | ||||||||
| CDC Corporation | ||||||||
| Unaudited Reconciliation From GAAP Results to Adjusted EBITDA | ||||||||
| (Amounts in thousands of U.S. dollars) | ||||||||
| Table 7 | ||||||||
| Three months ended | ||||||||
| March 31, | June 30, | |||||||
| 2011 | 2011 | |||||||
| (a) Reconciliation from GAAP results to Adjusted EBITDA | ||||||||
| Operating loss | $ | (7,627 | ) | $ | (10,156 | ) | ||
| Add back restructuring and other charges | 1,107 | (24 | ) | |||||
| Add back depreciation expense | 1,503 | 1,445 | ||||||
| Add back amortization expense | 2,117 | 2,167 | ||||||
| Add back amortization expense included in cost of revenue | 3,351 | 3,471 | ||||||
| Add back stock compensation expenses | 1,612 | 2,955 | ||||||
| Subtract exchange (gain) loss | 114 | 1,436 | ||||||
| Add back deferred revenue grind (1) | 263 | 82 | ||||||
| Adjusted EBITDA | $ | 2,440 | $ | 1,376 | ||||
| Adjusted EBITDA margin % | 3 | % | 2 | % | ||||
| CDC Software | ||||||||
| Unaudited Reconciliation From GAAP Results to Adjusted EBITDA | ||||||||
| (Amounts in thousands of U.S. dollars) | ||||||||
| Three months ended | ||||||||
| March 31, | June 30, | |||||||
| 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 expenses | 978 | 1,015 | ||||||
| Add back (subtract) exchange gain (loss) | 519 | 1,912 | ||||||
| Add back deferred revenue grind (1) | 263 | 82 | ||||||
| Adjusted EBITDA | $ | 5,578 | $ | 5,183 | ||||
| Adjusted EBITDA margin % | 11 | % | 9 | % | ||||
| CDC Global Services | ||||||||
| Unaudited Reconciliation From GAAP Results to Adjusted EBITDA | ||||||||
| (Amounts in thousands of U.S. dollars) | ||||||||
| Three months ended | ||||||||
| March 31, | June 30, | |||||||
| 2011 | 2011 | |||||||
| (a) Reconciliation from GAAP results to Adjusted EBITDA | ||||||||
|
Operating income (loss) |
$ | (227 | ) | $ | 598 | |||
| Add back restructuring and other charges | 33 | (173 | ) | |||||
| Add back depreciation expense | 77 | 91 | ||||||
| Add back amortization expense | 276 | 297 | ||||||
| Add back amortization expense included in cost of revenue | 1 | 6 | ||||||
| Add back stock compensation expenses | 130 | 321 | ||||||
| Add back (subtract) exchange gain (loss) | (1 | ) | - | |||||
| Adjusted EBITDA | $ | 289 | $ | 1,140 | ||||
| Adjusted EBITDA margin % | 2 | % | 7 | % | ||||
| CDC Games Corporation | ||||||||
| Unaudited Reconciliation From GAAP Results to Adjusted EBITDA | ||||||||
| (Amounts in thousands of U.S. dollars) | ||||||||
| Three months ended | ||||||||
| March 31, | June 30, | |||||||
| 2011 | 2011 | |||||||
| (a) Reconciliation from GAAP results to Adjusted EBITDA | ||||||||
|
Operating income (loss) |
$ | 387 | $ | (1,278 | ) | |||
| Add back restructuring and other charges | (1 | ) | - | |||||
| Add back depreciation expense | 613 | 579 | ||||||
| Add back amortization expense included in cost of revenue | 268 | 607 | ||||||
| Add back stock compensation expenses | 155 | 483 | ||||||
| Adjusted EBITDA | $ | 1,422 | $ | 391 | ||||
| Adjusted EBITDA margin % | 24 | % | 8 | % | ||||
| CDC China.com | ||||||||
| Unaudited Reconciliation From GAAP Results to Adjusted EBITDA | ||||||||
| (Amounts in thousands of U.S. dollars) | ||||||||
| Three months ended | ||||||||
| March 31, | June 30, | |||||||
| 2011 | 2011 | |||||||
| (a) Reconciliation from GAAP results to Adjusted EBITDA | ||||||||
|
Operating loss |
$ | (102 | ) | $ | (508 | ) | ||
| Add back depreciation expense | 47 | 29 | ||||||
| Add back stock compensation expenses | 165 | 323 | ||||||
| Adjusted EBITDA | $ | 110 | $ | (155 | ) | |||
| Adjusted EBITDA margin % | 3 | % | -4 | % | ||||
| Corporate | ||||||||
| Unaudited Reconciliation From GAAP Results to Adjusted EBITDA | ||||||||
| (Amounts in thousands of U.S. dollars) | ||||||||
| Three months ended | ||||||||
| March 31, | June 30, | |||||||
| 2011 | 2011 | |||||||
| (a) Reconciliation from GAAP results to Adjusted EBITDA from operations | ||||||||
| Operating loss | $ | (4,975 | ) | $ | (5,755 | ) | ||
| Add back depreciation expense | 1 | - | ||||||
| Add back amortization expense | 236 | 236 | ||||||
| Add back stock compensation expenses | 185 | 813 | ||||||
| Subtract exchange loss | (406 | ) | (477 | ) | ||||
| Adjusted EBITDA | $ | (4,959 | ) | $ | (5,183 | ) | ||
| (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 | Six months ended | |||||||||||||||
| June 30, | June 30, | |||||||||||||||
| 2010 | 2011 | 2010 | 2011 | |||||||||||||
| (a) Reconciliation from GAAP results to Adjusted EBITDA | ||||||||||||||||
| Operating loss | $ | (1,604 | ) | $ | (10,156 | ) | $ | (5,520 | ) | $ | (17,782 | ) | ||||
| Add back restructuring and other charges | 505 | (24 | ) | 716 | 1,083 | |||||||||||
| Add back depreciation expense | 1,820 | 1,445 | 3,418 | 2,948 | ||||||||||||
| Add back amortization expense | 2,121 | 2,167 | 4,280 | 4,284 | ||||||||||||
| Add back amortization expense included in cost of revenue | 4,558 | 3,471 | 9,491 | 6,822 | ||||||||||||
| Add back stock compensation expenses | 1,534 | 2,955 | 2,648 | 4,568 | ||||||||||||
| Add back exchange gain | (1,182 | ) | 1,436 | (588 | ) | 1,548 | ||||||||||
| Add back deferred revenue grind (1) | 1,444 | 82 | 2,647 | 345 | ||||||||||||
| Adjusted EBITDA (2) | $ | 9,196 | $ | 1,376 | $ | 17,092 | $ | 3,816 | ||||||||
| Adjusted EBITDA margin % | 12 | % | 2 | % | 15 | % | 9 | % | ||||||||
| CDC Software | ||||||||||||||||
| Unaudited Reconciliation From GAAP Results to Adjusted EBITDA | ||||||||||||||||
| (Amounts in thousands of U.S. dollars) | ||||||||||||||||
| Three months ended | Six months ended | |||||||||||||||
| June 30, | June 30, | |||||||||||||||
| 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 (2) | $ | 11,352 | $ | 5,183 | $ | 21,378 | $ | 10,760 | ||||||||
| Adjusted EBITDA margin % | 22 | % | 9 | % | 12 | % | 3 | % | ||||||||
| CDC Global Services | ||||||||||||||||
| Unaudited Reconciliation From GAAP Results to Adjusted EBITDA | ||||||||||||||||
| (Amounts in thousands of U.S. dollars) | ||||||||||||||||
| Three months ended | Six months ended | |||||||||||||||
| June 30, | June 30, | |||||||||||||||
| 2010 | 2011 | 2010 | 2011 | |||||||||||||
| (a) Reconciliation from GAAP results to Adjusted EBITDA | ||||||||||||||||
|
Operating income (loss) |
$ | (1,579 | ) | $ | 598 | $ | (2,834 | ) | $ | 371 | ||||||
| Add back restructuring and other charges | 135 | (173 | ) | 226 | (140 | ) | ||||||||||
| Add back depreciation expense | 70 | 91 | 157 | 168 | ||||||||||||
| Add back amortization expense | 641 | 297 | 1,284 | 572 | ||||||||||||
| Add back amortization expense included in cost of revenue | 1 | 6 | 2 | 7 | ||||||||||||
| Add back stock compensation expenses | 105 | 321 | 200 | 451 | ||||||||||||
| Add back (subtract) exchange gain (loss) | - | - | 1 | (1 | ) | |||||||||||
| Adjusted EBITDA | $ | (627 | ) | $ | 1,140 | $ | (964 | ) | $ | 1,428 | ||||||
| Adjusted EBITDA margin % | -4 | % | 7 | % | -3 | % | 4 | % | ||||||||
| CDC Games Corporation | ||||||||||||||||
| Unaudited Reconciliation From GAAP Results to Adjusted EBITDA | ||||||||||||||||
| (Amounts in thousands of U.S. dollars) | ||||||||||||||||
| Three months ended | Six months ended | |||||||||||||||
| June 30, | June 30, | |||||||||||||||
| 2010 | 2011 | 2010 | 2011 | |||||||||||||
| (a) Reconciliation from GAAP results to Adjusted EBITDA | ||||||||||||||||
|
Operating loss |
$ | (1,638 | ) | $ | (1,278 | ) | $ | (1,982 | ) | $ | (891 | ) | ||||
| Add back restructuring and other charges | 141 | - | (312 | ) | (1 | ) | ||||||||||
| Add back depreciation expense | 734 | 579 | 1,476 | 1,192 | ||||||||||||
| Add back amortization expense included in cost of revenue | 1,100 | 607 | 2,207 | 875 | ||||||||||||
| Add back stock compensation expenses | 181 | 483 | 339 | 638 | ||||||||||||
| Adjusted EBITDA | $ | 518 | $ | 391 | $ | 1,728 | $ | 1,813 | ||||||||
| Adjusted EBITDA margin % | 7 | % | 8 | % | 11 | % | 16 | % | ||||||||
| CDC China.com | ||||||||||||||||
| Unaudited Reconciliation From GAAP Results to Adjusted EBITDA | ||||||||||||||||
| (Amounts in thousands of U.S. dollars) | ||||||||||||||||
| Three months ended | Six months ended | |||||||||||||||
| June 30, | June 30, | |||||||||||||||
| 2010 | 2011 | 2010 | 2011 | |||||||||||||
| (a) Reconciliation from GAAP results to Adjusted EBITDA | ||||||||||||||||
| Operating loss | $ | (496 | ) | $ | (508 | ) | $ | (911 | ) | $ | (611 | ) | ||||
| Add back restructuring and other charges | - | 1 | - | 1 | ||||||||||||
| Add back depreciation expense | 60 | 29 | 117 | 75 | ||||||||||||
| Add back stock compensation expenses | 146 | 323 | 236 | 488 | ||||||||||||
| Adjusted EBITDA | $ | (290 | ) | $ | (155 | ) | $ | (558 | ) | $ | (47 | ) | ||||
| Adjusted EBITDA margin % | -9 | % | -4 | % | -9 | % | -1 | % | ||||||||
| Corporate | ||||||||||||||||
| Unaudited Reconciliation From GAAP Results to Adjusted EBITDA | ||||||||||||||||
| (Amounts in thousands of U.S. dollars) | ||||||||||||||||
| Three months ended | Six months ended | |||||||||||||||
| June 30, | June 30, | |||||||||||||||
| 2010 | 2011 | 2010 | 2011 | |||||||||||||
| (a) Reconciliation from GAAP results to Adjusted EBITDA | ||||||||||||||||
| Operating loss | $ | (2,473 | ) | $ | (5,755 | ) | $ | (5,782 | ) | $ | (10,726 | ) | ||||
| Add back depreciation expense | 4 | - | 17 | 1 | ||||||||||||
| Add back amortization expense | 187 | 236 | 423 | 471 | ||||||||||||
| Add back stock compensation expenses | 551 | 813 | 877 | 998 | ||||||||||||
| Subtract exchange loss | (26 | ) | (477 | ) | (27 | ) | (882 | ) | ||||||||
| Adjusted EBITDA | $ | (1,757 | ) | $ | (5,183 | ) | $ | (4,492 | ) | $ | (10,138 | ) | ||||
| (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 Non-GAAP Net Income (Loss) | ||||||||||||
| (Amounts in thousands of U.S. dollars) | ||||||||||||
| Table 9 | ||||||||||||
| Three months ended | ||||||||||||
| June 30, | March 31, | June 30, | ||||||||||
| 2010 | 2011 | 2011 | ||||||||||
|
(a) Reconciliation from GAAP net (loss) attributable to
controlling interest |
||||||||||||
| Net loss attributable to controlling interest | $ | (7,934 | ) | $ | (10,331 | ) | $ | (13,016 | ) | |||
| Add back restructuring and other charges | 505 | 1,107 | (24 | ) | ||||||||
| Add back amortization expense | 2,121 | 2,117 | 2,121 | |||||||||
| Add back amortization expense included in cost of revenue | 4,558 | 3,351 | 4,558 | |||||||||
| Add back stock based compensation | 1,534 | 1,612 | 2,955 | |||||||||
| Add back (subtract) exchange gain (loss) | (1,182 | ) | 114 | 1,436 | ||||||||
| Add back deferred revenue grind | 1,444 | 263 | 82 | |||||||||
| Add back (subtract) non cash tax expense (benefit) | 2,379 | 763 | 215 | |||||||||
| Tax effect on all reconciling items @ 31% | (324 | ) | 548 | 585 | ||||||||
| Non-GAAP net income (loss) | $ | 3,101 | $ | (456 | ) | $ | (1,088 | ) | ||||
| Non-GAAP net income (loss) as % of revenue | 4 | % | -1 | % | -1 | % | ||||||
| Weighted average number of common shares outstanding - basic | 35,232,253 | 35,141,880 | 35,180,073 | |||||||||
| Weighted average number of common shares outstanding - diluted | 35,232,253 | 35,141,880 | 35,180,073 | |||||||||
| Non-GAAP net income (loss) per share - basic | $ | 0.09 | $ | (0.01 | ) | $ | (0.03 | ) | ||||
| Non-GAAP net income (loss) per share - diluted | $ | 0.09 | $ | (0.01 | ) | $ | (0.03 | ) | ||||
| CDC Corporation | |||
| Unaudited Reconciliation From GAAP Cash to Non-GAAP Cash | |||
| (Amounts in thousands of U.S. dollars) | |||
| Table 10 | |||
| June 30, | |||
|
(a) Non-GAAP Cash and Cash Equivalents Reconciliation |
2011 | ||
| Cash | $ | 80,646 | |
| Add restricted cash | 25 | ||
| Add available for sale securities - current | 394 | ||
| Investments (1) | 11,426 | ||
| Non-GAAP cash and cash equivalents | $ | 92,491 | |
| (1) - Excludes investments of $713 in franchise and strategic cloud investment partners at June 30, 2011. | |||
| CDC Corporation | ||||||||||||||||
| Unaudited Basic and Diluted Loss Per Share Computation | ||||||||||||||||
| (Amounts in thousands of U.S. dollars except share and per share data) | ||||||||||||||||
| Table 11 | ||||||||||||||||
| Three months ended | Six months ended | |||||||||||||||
| June 30, | June 30, | |||||||||||||||
| 2010 | 2011 | 2010 | 2011 | |||||||||||||
| Numerator for earnings (loss)attributable to controlling interest per common share: | ||||||||||||||||
| Net loss | $ | (7,441 | ) | $ | (13,286 | ) | $ | (11,269 | ) | $ | (23,908 | ) | ||||
|
Net adjustments for (income) loss attributable to noncontrolling
interest and |
(493 | ) | 270 | (716 | ) | 561 | ||||||||||
| Adjusted loss | (7,934 | ) | (13,016 | ) | (11,985 | ) | (23,347 | ) | ||||||||
| Amount allocated to convertible notes (2) | - | - | - | - | ||||||||||||
| Net loss attributable to controlling interest | $ | (7,934 | ) | $ | (13,016 | ) | $ | (11,985 | ) | $ | (23,347 | ) | ||||
| Numerator for loss attributable to controlling interest per common share: | ||||||||||||||||
| Net loss attributable to controlling interest | $ | (7,934 | ) | $ | (13,016 | ) | $ | (11,985 | ) | $ | (23,347 | ) | ||||
| Denominator: | ||||||||||||||||
| Weighted average number of common shares outstanding - basic | 35,232,253 | 35,180,073 | 35,234,849 | 35,161,082 | ||||||||||||
|
Employee compensation related to common shares including stock options |
- | - | - | - | ||||||||||||
| Weighted average number of common shares outstanding - diluted | 35,232,253 | 35,180,073 | 35,234,849 | 35,161,082 | ||||||||||||
| Per share amounts: | ||||||||||||||||
| Loss attributable to controlling interest per common share - basic | $ | (0.23 | ) | $ | (0.37 | ) | $ | (0.34 | ) | $ | (0.66 | ) | ||||
| Loss attributable to controlling interest per common share - dilutive | $ | (0.23 | ) | $ | (0.37 | ) | $ | (0.34 | ) | $ | (0.66 | ) | ||||
|
(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 12 | |||||||||
| Three months ended June 30, 2010 | |||||||||
| GAAP Revenue | Non-GAAP Adjustment (1) | Non-GAAP Revenue | |||||||
| Software | $ | 52,576 | $ | 1,443 | $ | 54,019 | |||
| Global Services | 15,764 | - | 15,764 | ||||||
| CDC Games | 7,111 | - | 7,111 | ||||||
| China.com | 3,092 | - | 3,092 | ||||||
| Total revenue | $ | 78,543 | $ | 1,443 | $ | 79,986 | |||
| Three months ended March 31, 2011 | |||||||||
| GAAP Revenue | Non-GAAP Adjustment (1) | Non-GAAP Revenue | |||||||
| Software | $ | 52,376 | $ | 263 | $ | 52,639 | |||
| Global Services | 14,780 | - | 14,780 | ||||||
| CDC Games | 5,962 | - | 5,962 | ||||||
| China.com | 4,031 | - | 4,031 | ||||||
| Total revenue | $ | 77,149 | $ | 263 | $ | 77,412 | |||
| Three months ended June 30, 2011 | |||||||||
| GAAP Revenue | Non-GAAP Adjustment (1) | Non-GAAP Revenue | |||||||
| Software | $ | 56,385 | $ | 82 | $ | 56,467 | |||
| Global Services | 16,347 | - | 16,347 | ||||||
| CDC Games | 5,064 | - | 5,064 | ||||||
| China.com | 4,001 | - | 4,001 | ||||||
| Total revenue | $ | 81,797 | $ | 82 | $ | 81,879 | |||
| Six months ended June 30, 2010 | |||||||||
| GAAP Revenue | Non-GAAP Adjustment (1) | Non-GAAP Revenue | |||||||
| Software | $ | 103,077 | $ | 2,647 | $ | 105,724 | |||
| Global Services | 32,206 | - | 32,206 | ||||||
| CDC Games | 15,079 | - | 15,079 | ||||||
| China.com | 5,996 | - | 5,996 | ||||||
| Total revenue | $ | 156,358 | $ | 2,647 | $ | 159,005 | |||
| Six months ended June 30, 2011 | |||||||||
| GAAP Revenue | Non-GAAP Adjustment (1) | Non-GAAP Revenue | |||||||
| Software | $ | 108,761 | $ | 345 | $ | 109,106 | |||
| Global Services | 31,127 | - | 31,127 | ||||||
| CDC Games | 11,026 | - | 11,026 | ||||||
| China.com | 8,033 | - | 8,033 | ||||||
| Total revenue | $ | 158,947 | $ | 345 | $ | 159,292 | |||
| (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
Investor Relations
Monish
Bahl, 678-259-8510
mbahl@cdcsoftware.com
or
Media
Relations
Lorretta Gasper, 678-259-8631
lgasper@cdcsoftware.com
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