CDC Software Corporation (NASDAQ: CDCS), a hybrid enterprise
software provider of on-premise and cloud deployments, today
announced financial results for the quarter ended March 31, 2011.
For the first quarter of 2011, Non-GAAP revenue(a) was $52.6
million and Non-GAAP net income(a) was $3.1 million, or $0.11 in
Non-GAAP earnings per share(a), compared to Non-GAAP revenue of
$51.7 million and Non-GAAP net income of $8.0 million, or $0.28 in
Non-GAAP earnings per share in the first quarter of 2010.
In the first quarter of 2011, CDC Software continued to invest
strongly in sales and marketing and research and development
(R&D) for both its on-premise and cloud segments, and reported
record revenue and SaaS bookings in its Cloud business. For the
first quarter of 2011, CDC Software’s Cloud business reported
Non-GAAP revenue of $6.8 million, an increase of 51 percent from
$4.5 million in the first quarter of 2010. The Cloud segment
reported negative Adjusted EBITDA(a) of $206,000 in the first
quarter of 2011, compared to Adjusted EBITDA of $1.2 million in the
first quarter of 2010. Earnings in the first quarter of 2011 have
continued to be impacted by increased investments in sales and
marketing and R&D. As previously discussed, CDC Software
believes earnings in 2011 will be lower than 2010 given the
company’s increased investments in its cloud-based assets.
Operating cash flow for the quarter ended March 31, 2011
increased 62 percent to $8.9 million, compared to $5.5 million for
the quarter ended March 31, 2010. DSOs (days sales outstanding) in
the first quarter of 2011 was 73 days, compared to 80 days for the
first quarter of 2010. CDC Software had cash on hand of $34.9
million as of March 31, 2011 and minimal debt.
First quarter 2011 application sales, which is comprised of
license revenue plus Secured Total Contract Value (STCV) for
Software-as-a-Service (SaaS) sales secured, increased more than 52
percent to $12.5 million during the first quarter of 2011, from
$8.2 million in the first quarter of 2010. Application sales for
the first quarter of 2011 included license revenue of $6.4 million
and STCV, or bookings, for Software-as-a-Service (SaaS) sales of
$6.1 million, compared to license revenue of $7.9 million and STCV
of $260,000 in the first quarter of 2010. STCV is the contract
dollar amount for the duration of the contracts for all SaaS
contracts secured, including new logo contracts, upsell, rental, as
well as all renewals received by the end of the quarter.
First quarter 2011 Total Contract Backlog (TCB) increased
approximately 6 percent to $144.7 million, compared to $136.6
million in the fourth quarter of 2010. Cloud TCB in the first
quarter of 2011 was at its highest levels since the company started
its Cloud business 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
contracts over the previous 12 months. Also, the number of
enterprise and SaaS deals in the first quarter of 2011 increased by
approximately 16 percent to 340, from 294 in the first quarter of
2010.
Total Non-GAAP recurring revenue(a), which CDC Software
defines as Non-GAAP maintenance(a) plus SaaS revenue, increased
approximately 8 percent to $30.2 million in the first quarter of
2011, from $28.0 million in the first quarter of 2010. Maintenance
retention rates continued to be strong at more than 90 percent for
the first quarter of 2011. First quarter 2011 services revenue was
$14.9 million, compared to $14.8 million in the first quarter of
2010. During the first quarter of 2011, approximately 57 percent of
license revenue was derived from North America, 28 percent from
EMEA, and 15 percent from Asia/Pacific.
Adjusted EBITDA was $5.6 million in the first quarter of 2011,
compared to $10.6 million in the same period in 2010. First quarter
2011 Adjusted EBITDA margin(a) was 11 percent, compared to 20
percent in the same period in 2010. In addition to the significant
investments in our Cloud business, especially in sales and
marketing and R&D, Adjusted EBITDA in the first quarter of 2011
also was impacted, in part, by expenses related to the integration
of acquired businesses acquisitions and legal expenses.
“During the first quarter of 2011, we saw solid growth in our
Cloud business despite the first quarter typically being lower than
other quarters,” said Bruce Cameron, president of CDC Software.
“While our profitability was impacted primarily by the upfront
costs associated with our Cloud investments, which we expect to
continue in the foreseeable future, we are positioning ourselves
for higher organic growth in that business. Our increased marketing
investments also included a totally re-designed website and several
scheduled user conferences, trade shows and marketing programs. We
believe that we are starting to see returns on these investments.
Our recurring revenue as a percentage of total revenue in the first
quarter of 2011 was at 57 percent, compared to 48 percent in the
first quarter of 2009, and we believe that will continue to grow.
As we have previously stated, our strategy is to develop recurring
revenue streams reaching closer to 70 percent of total revenue over
the next few years, after completion of our planned SaaS
acquisitions and our strategic investments in SaaS companies.
Cameron added, “During the first quarter of 2011, our revenue
from partnership and strategic alliances represented a strong 23
percent of total license revenue. Additionally, CDC Software
continued to grow its business in emerging markets like India,
where it won its largest license deal of the first quarter. In
fact, we have been stepping-up our sales and marketing activities
in markets such as Germany, Brazil, Australia, China, India, Poland
and Russia, which we believe hold solid sales potential for our
solutions. The company has also been seeing a solid trend of new
business, which was up to 34 percent of license revenue in the
first quarter of 2011, its highest levels in three years. Our total
pipeline so far in 2011 is up to $81.5 million, compared to $79.7
million in the first quarter of 2010, with our cloud pipeline
increasing approximately 20 percent to $19.9 million, compared to
$17.7 million in the same period in 2010.”
Cloud Highlights:
CDC Software’s Cloud business provides global SaaS applications
with functionality in ERP, member management, e-Commerce, supply
chain and global trade management. Specifically, the Cloud business
includes the CDC gomembers, CDC eCommerce and CDC TradeBeam product
lines. During the first quarter of 2011, the Cloud business
reported total Non-GAAP revenue of $6.8 million, of which $4.7
million was SaaS revenue, an increase of 114 percent compared to
SaaS revenue of $2.2 million in the first quarter of 2010.
New cloud products delivered in the first quarter of 2011
included Ross in the Cloud, the cloud version of the company’s
popular ERP suite of applications, and new version releases of
TradeBeam, CDC eCommerce and CDC gomembers.
During the first quarter of 2011, six of the top 10 SaaS deals
were from the company’s TradeBeam product line, and included a six
figure deal with a major air express transportation carrier. In
addition to the transportation and third party logistics markets,
other top 10 deals for the first quarter of 2011 were from the
aerospace/automotive, non-profit/associations, retail/wholesale,
manufacturing and telecom/broadcasting markets.
“We believe these strong metrics indicate impressive progress
and traction within our Cloud business so far in 2011,” Cameron
said. “We continue to believe the cloud market will experience
significant growth over the next five years. For these reasons, we
have been increasing our investment in this fast growth business
which requires a different operational focus, expertise and
management approach than our on-premise business.”
On-Premise Highlights:
During the first quarter of 2011, CDC Software introduced
several new products and version upgrades for its core on-premise
ERP, supply chain management and complaint management applications.
Other new products included Pivotal Sales Force Automation, a new
sales module for the Pivotal 6.0 CRM platform and Ross version
6.4.3 which includes new functionality in export documentation,
reporting, enhancements in sales order processing and new
translations in Chinese. Major sales wins in the first quarter of
2011 included a new Pivotal CRM deal to a large financial services
company in India; an installed-base CDC Factory deal to a leading
natural products customer; a new Ross ERP deal to a life sciences
company and an installed-base CDC Respond deal to a major
U.K.-based financial services company.
Earlier this month, CDC Software held two U.S. user conferences
for its two main product lines. At both user conferences, the full
line of CDC Software solutions were showcased in numerous sessions
where cross-selling opportunities were highlighted. User
conferences for other product businesses, as well as international
customers, are planned throughout the remainder of the year.
CDC Software hosted CDC Galaxy, its CRM user conference, where
more than 200 attendees converged to hear about the Pivotal CRM
roadmap and its cloud strategy. According to Pivotal customer Tom
Dobbe, vice president of Farm Credit Services of America, “The very
best thing about this conference was the natural environment it
creates for users to network – with CDC Pivotal, your partners,
your prospects, and all of us customers.”
Also this month, nearly 200 Ross ERP customers and partners
attended Ross SIG, a conference sponsored by the user community of
Ross Systems. At this venue, CDC Software presented its Statement
of Direction for Ross ERP that includes the planned launch of Ross
ERP 7.0, its next generation of ERP solutions. One metals
manufacturer and long-time Ross customer commented about the Ross
user conference, ”I left San Antonio with an overwhelming 'team'
feeling. It was great to mingle with everyone in Ross and to hear
how CDC and Ross are working with the users.”
Strategic Alliance Program:
Another key part of CDC Software’s growth strategy for both its
on-premise and Cloud businesses is its Strategic Alliance Program.
For the first quarter of 2011, strategic alliance partnership
revenue grew 65 percent, compared to the first quarter of 2010.
During 2010, CDC Software added a new original equipment
manufacturer (OEM) partner, Compusoft Development, a developer of
ERP reporting solutions. In December 2010, CDC Software signed an
OEM partnership agreement with MIR3, a developer of real-time
Intelligent Notification software, which is expected to help CDC
Software products expand into the IT service management and crisis
management markets. In the first quarter of 2011, seven new deals
have closed under this partnership.
Through its Alliance Program, CDC Software has also continued to
focus on emerging economies such as India, China, Brazil, Russia
and Eastern Europe, since the company believes those regions
present significant growth opportunities for both its cloud and
on-premise products in the future.
Share Buyback:
Between August 2009 and March 31, 2011, CDC Software,
management, the CEO and family members and certain affiliates of
the company, have purchased an aggregate of approximately 1.5
million shares at an average price of $8.10 per share. The Company
has continued to repurchase its shares in the open market through a
10b5-1 trading plan.
Concluding Remarks:
“We are very pleased with the strong growth of our Cloud
business in the first quarter of 2011 and our 62 percent increase
in operating cash flow,” said Peter Yip, CEO of CDC Software.
”While our profitability is impacted by the investments we are
making in our Cloud business, we believe this will position us for
strong growth in the future. Already, we have reported record
Non-GAAP revenue in the company’s Cloud business and the highest
level of total SaaS secured bookings in the first quarter of 2011
since we started our Cloud business in the fourth quarter of 2009.
With this momentum, we have been continuing to progress with our
previously announced goal to make recurring revenue an increasingly
significant part of the company’s total revenue. Notably, we are
also exploring various alternatives to maximize shareholder benefit
from our Cloud business. I am also pleased with the planned
corporate governance improvements, as well as our plan to reduce
inter-company debt.”
Conference Call
The Company's senior management will host a conference call for
financial analysts and investors, Thursday, May 19, 2011 at 8:30 AM
EDT.
USA and Canada Toll Free Number:
(866)
903-3296
Int’l/Local Dial-In #:
(706)
643-6263
Pass code: # 66612776 Call Leader: Monish Bahl
This call is being webcast by Thomson Reuters and can be
accessed at the following link:
http://phx.corporate-ir.net/phoenix.zhtml?p=irol-eventDetails&c=215971&eventID=3018326
Individual investors also can listen to the call through at the
following link: www.fulldisclosure.com or by visiting any of the
investor sites in CCBN's Individual Investor Network. Institutional
investors can access the call via Thomsonone's password-protected
event management site, StreetEvents (www.streetevents.com).
Instant Replay
For those unable to call in, a digital instant replay will be
available after the call until May 26, 2011. U.S. based Toll Free
Number: +1 800-642-1687, U.S.-based
Toll Number: +1 706-645-9291. Conference ID number: #66612776
Footnotes:
a) Adjusted Financial Measures
This press release includes Non-GAAP revenue, Non-GAAP net
income, Non-GAAP earnings per share, Adjusted EBITDA,
Non-GAAP recurring revenue and Adjusted EBITDA margin, which
are not prepared in accordance with generally accepted accounting
principles in the United States (“GAAP”) (collectively, the
"Non-GAAP Financial Measures"). Non-GAAP Financial Measures are not
alternatives for measures such as net income, earnings per share,
and others, prepared under GAAP. These Non-GAAP Financial Measures
may also be different from non-GAAP measures used by other
companies. Non-GAAP Financial Measures should not be used as a
substitute for, or considered superior to, measures of financial
performance prepared in accordance with GAAP.
Investors should be aware that these Non-GAAP Financial Measures
have inherent limitations, including their variance from certain of
the financial measurement principals underlying GAAP, should not be
considered as a replacement for GAAP performance measures, and
should be read in conjunction with our consolidated financial
statements prepared in accordance with GAAP. These supplemental
Non-GAAP Financial Measures should not be construed as an inference
that the Company's future results will be unaffected by similar
adjustments determined in accordance with GAAP. Reconciliations of
Non-GAAP Financial Measures to GAAP are provided herein immediately
following the financial statements included in this press
release.
(b) Revised 2010 Information
Results provided herein for 2010 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, 2010.
All dollar amounts are in U.S. dollars
Special Note Regarding CDC Software Financial Results
The financial results provided herein apply only to CDC Software
Corporation, a subsidiary of CDC Corporation. These financial
results do not apply to, and are not indicative of, the
consolidated financial results of CDC Corporation, or the financial
results of CDC Games Corporation, China.com, Inc. or any of their
respective subsidiaries. Investors are cautioned not to place
reliance on the financial results set forth herein for purposes of
any investment decision with respect to the shares of CDC
Corporation, and should read the foregoing in conjunction with the
reports and other materials filed with the United States Securities
and Exchange Commission by CDC Corporation and CDC Software
Corporation, from time to time.
About CDC Software
CDC Software (NASDAQ: CDCS), The Customer-Driven Company™, is a
hybrid enterprise software provider of on-premise and cloud
deployments. Leveraging a service-oriented architecture (SOA), CDC
Software offers multiple delivery options for their solutions
including on-premise, hosted, cloud-based SaaS or blended-hybrid
deployment offerings. CDC Software’s solutions include enterprise
requirements planning (ERP), manufacturing operations management,
enterprise manufacturing intelligence, supply chain management
(demand management, order management and warehouse and
transportation management), global trade management, eCommerce,
human capital management, government and not-for-profit, customer
relationship management (CRM), complaint management, business
intelligence/analytics and aged care solutions.
CDC Software’s recent acquisitions are part of its “integrate,
innovate and grow” strategy. Fueling the success of this strategy
is the company’s global scalable business and technology
infrastructure featuring multiple complementary applications and
services, domain expertise in vertical markets, cost effective
product engineering centers in India and China, a highly
collaborative and fast product development process utilizing Agile
methodologies, and a worldwide network of direct sales and channel
operations. This strategy has helped CDC Software deliver
innovative and industry-specific solutions to more than 10,000
customers worldwide within the manufacturing, distribution,
transportation, retail, government, real estate, financial
services, health care, and not-for-profit industries. For more
information, please visit www.cdcsoftware.com.
Cautionary Note Regarding Forward-Looking Statements
This press release includes "forward-looking statements" within
the meaning of the United States Private Securities Litigation
Reform Act of 1995. These forward-looking statements include
statements regarding our beliefs about our continued investment in
sales and marketing and research and development for our Cloud and
on premise businesses and the impact thereof on our earnings now
and in future periods, including the continuation of such impact
and the potential benefits of these investments, our beliefs
regarding returns on our marketing investments, our beliefs
regarding recurring revenue as a percentage of total revenue and
the continued increase of that percentage, our expectations
regarding any future SaaS acquisitions or strategic investments in
SaaS companies, our beliefs regarding the sales potential in
markets such as Germany Brazil, Australia, China, India, Poland and
Russia and our continued focus thereon, our beliefs regarding our
sales metrics in our Cloud business, continued growth in the
overall cloud market and the rate thereof, our plans with respect
to user conferences for 2011, our beliefs and statements that may
be contained in our statement of direction for Ross ERP, our
expectations regarding our growth strategy, our planned
acquisitions and investments, and our expectations regarding SaaS
revenue, including momentum and expectations for revenue
performance, our beliefs regarding strategic partnerships, our
beliefs regarding the effective execution on our corporate
strategies and the effects thereof, our expectations regarding
future revenues and the proportion of which may come from recurring
sources, our beliefs regarding any trends we may see, and other
statements that are not historical fact, the achievement of which
involve risks, uncertainties and assumptions. These statements are
based on management's current expectations and are subject to risks
and uncertainties and changes in circumstances. There are important
factors that could cause actual results to differ materially from
those anticipated in the forward looking statements, including the
following: (a) the ability to realize strategic objectives by
taking advantage of market opportunities in targeted geographic
markets; (b) the risk of significant liability and losses from any
litigation matters or other disputes in which we may be involved,
including the litigation between Sunshine Mills, Inc. and Ross
Systems; (c) risks related to the potential impact of any
litigation matters, including the Sunshine Mills matter, on our
business, operations and financial condition; (d) risks related to
our the variability of and basis for, any assessments and estimates
made by management herein; (e) risks related to our Cloud business;
(f) the ability to make changes in business strategy, development
plans and product offerings to respond to the needs of current, new
and potential customers, suppliers and strategic partners,
including our expansion as a hybrid enterprise software provider of
on-premise and cloud deployments; (g) the effects of restructurings
and rationalization of operations in our companies; (h) the ability
to address technological changes and developments including the
development and enhancement of products; (i) the ability to develop
and market successful products and services, including our
expansion as a hybrid enterprise software provider; (j) the entry
of new competitors and their technological advances; (g) the need
to develop, integrate and deploy enterprise software applications
to meet customer's requirements; (k) the possibility of development
or deployment difficulties or delays; (l) the dependence on
customer satisfaction with the company's software products and
services; (m) continued commitment to the deployment of our
enterprise software products, including on-premise and cloud
deployments; (n) risks involved in developing software solutions
and integrating them with fourth-party software and services; (o)
the continued ability of the company's products and services to
address client-specific requirements; (p) demand for and market
acceptance of new and existing software and services, and the
positioning of the company's solutions; (q) the ability of our
customers’ staff to operate the enterprise software and extract and
utilize information from the company's products and services. If
any such risks or uncertainties materialize or if any of the
assumptions proves incorrect, our results could differ materially
from the results expressed or implied by the forward-looking
statements we make. Further information on risks or other factors
that could cause results to differ is detailed in our filings or
submissions with the United States Securities and Exchange
Commission, including our Annual Report on form 20-F for the year
ended December 31, 2009, filed with the SEC on June 1, 2010, and
those of our ultimate parent company, CDC Corporation. All
forward-looking statements included in this press release are based
upon information available to management as of the date of the
press release, and you are cautioned not to place undue reliance on
any forward looking statements which speak only as of the date of
this press release. The company assumes no obligation to update or
alter the forward looking statements whether as a result of new
information, future events or otherwise. Historical results are not
indicative of future performance.
CDC Software Unaudited Consolidated Balance
Sheets (Amounts in thousands of U.S. dollars except share
and per share data) Table 1 December 31,
March 31, 2010 2011 ASSETS
Current assets: Cash and cash equivalents $ 44,748 $ 34,882
Restricted cash 93 94
Accounts receivable (net of allowance of
$4,263 at December 31, 2010 and $3,467 at March 31, 2011)
41,555 43,658 Prepayments and other current assets 10,698 14,424
Deferred tax assets 7,109 7,112 Total
current assets 104,203 100,170 Property and equipment, net
4,823 4,382 Goodwill 176,679 179,714 Intangible assets 60,990
56,874 Deferred tax assets 25,089 25,124 Receivable from Parent
31,865 36,233 Note receivable due from related parties 1,885 2,012
Investment in cost method investees 675 709 Other assets
3,494 2,848 Total assets $ 409,703 $
408,066
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities: Accounts payable $ 13,357 $ 13,798 Purchase
consideration payables 34 744 Income tax payable 6,513 5,331
Short-term bank loans 15,055 - Accrued liabilities 27,477 30,438
Restructuring accruals, current portion 1,547 1,025 Deferred
revenue 52,600 60,395 Deferred tax liabilities 361
428 Total current liabilities 116,944 112,159
Long-term debt 242 220 Deferred tax liabilities 18,505 18,619
Purchase consideration payables, net of current portion 1,563 893
Other liabilities 8,900 8,605 Total
liabilities 146,154 140,496 Contingencies and commitments
Shareholders' equity:
Class A ordinary shares, $0.001 par value;
50,000,000 shares authorized; 5,210,638 shares issued as of
December 31, 2010 and March 31, 2011; 3,934,186 and 3,808,395
shares outstanding as of December 31, 2010 and March 31, 2011,
respectively
5 5
Class B ordinary shares, $0.001 par value;
27,000,000 shares authorized; 24,200,000 shares issued as of
December 31, 2010 and March 31, 2011; 23,789,362 shares outstanding
as of December 31, 2010 and March 31, 2011
24 24 Additional paid-in capital 252,462 253,440
Common stock held in treasury; 1,276,452
shares as of December 31, 2010 and 1,402,243 as of March 31,
2011
(10,423 ) (11,267 ) Retained earnings 21,866 19,684 Accumulated
other comprehensive income (loss) (778 ) 5,305
Total shareholders' equity 263,156 267,191 Noncontrolling
interest 393 379 Total equity
263,549 267,570 Total liabilities and
shareholders' equity $ 409,703 $ 408,066
CDC Software Unaudited Combined Statement
of Operations (Amounts in thousands of U.S. dollars except
share and per share data) Table 2 Three months
ended December 31, March 31, 2010
2011 REVENUE: Licenses (including royalties from
related parties of $216 and $534, respectively) $ 10,138 $ 6,399
Maintenance (including royalties from related parties of $96 and
$160, respectively) 26,304 25,521 Professional services (including
royalties from related parties of Nil and $20, respectively) 14,946
14,772 Hardware 1,230 1,161 SaaS 3,988 4,523
Total revenue 56,606 52,376
COST OF REVENUE:
Licenses 4,268 3,501 Maintenance 5,044 5,120 Professional services
(including cost from related parties of $2,893 and Nil,
respectively) 13,733 13,356 Hardware 978 878 SaaS 1,387
1,582 Total cost of revenue 25,410
24,437 Gross profit 31,196 27,939 Gross
margin %
55
%
53
%
OPERATING EXPENSES: Sales and marketing expenses
12,081 12,561 Research and development expenses 7,484 7,517 General
and administrative expenses 10,911 9,563 Operating expenses
allocated to Parent (2,808 ) (2,184 ) Exchange (gain) loss (442 )
520 Amortization expenses 1,411 1,606 Restructuring and other
charges 5,946 1,074 Total operating
expenses 34,583 30,657 Operating
loss (3,387 ) (2,718 ) Operating margin % -6 % -5 % Other
income, net (including interest income from Parent of $304 and
$251, respectively) 95 102 Loss
before income taxes (3,292 ) (2,616 ) Income tax benefit 752
386 Net loss (2,540 ) (2,230 ) Net
(income) loss attributable to noncontrolling interest (5 )
14 Net loss attributable to controlling
interest $ (2,545 ) $ (2,216 ) Net loss
attributable to controlling interest per class A ordinary share -
basic and diluted $ (0.09 ) $ (0.08 ) Net loss attributable to
controlling interest per class B ordinary share - basic and diluted
$ (0.09 ) $ (0.08 ) Weighted average shares of class A outstanding
- basic and diluted 4,533,139 3,808,395
Weighted average shares of class B outstanding - basic and diluted
23,789,362 23,789,362 Total weighted
average shares - basic and diluted 28,322,501
27,597,757
CDC Software
Unaudited Combined Statement of Operations (Amounts in
thousands of U.S. dollars except share and per share data)
Table 3 Three months ended March 31,
2010 2011 REVENUE: Licenses (including
royalties from related parties of $495 and $534, respectively) $
7,923 $ 6,399 Maintenance (including royalties from related parties
of $95 and $160, respectively) 24,870 25,521 Professional services
(including royalties from related parties of $3 and $20,
respectively) 14,723 14,772 Hardware 907 1,161 SaaS 2,103
4,523 Total revenue 50,526 52,376
COST OF REVENUE: Licenses 4,766 3,501 Maintenance 4,114
5,120 Professional services 13,488 13,356 Hardware 774 878 SaaS
736 1,582 Total cost of revenue
23,878 24,437 Gross profit 26,648
27,939 Gross margin % 53 % 53 %
OPERATING EXPENSES:
Sales and marketing expenses 9,987 12,561 Research and development
expenses 6,784 7,517 General and administrative expenses 7,832
9,563 Operating expenses allocated to Parent (2,342 ) (2,184 )
Exchange loss 623 520 Amortization expenses 1,280 1,606
Restructuring and other charges 573 1,074
Total operating expenses 24,737 30,657
Operating income (loss) 1,911 (2,718 ) Operating
margin % 4 % -5 % Other income, net (including interest
income from Parent of $358 and $251, respectively) 730
102 Income (loss) before income taxes
2,641 (2,616 ) Income tax (expense) benefit (580 )
386 Net income (loss) 2,061 (2,230 ) Net (income)
loss attributable to noncontrolling interest (88 ) 14
Net income (loss) attributable to controlling
interest $ 1,973 $ (2,216 )
Unaudited pro
forma information: Net income (loss) attributable to
controlling interest per class A ordinary share - basic and diluted
$ 0.07 $ (0.08 ) Net income (loss) attributable to
controlling interest per class B ordinary share - basic and diluted
$ 0.07 $ (0.08 ) Weighted average shares of class A
outstanding - basic and diluted 4,596,329
3,808,395 Weighted average shares of class B outstanding -
basic and diluted 24,196,927 23,789,362
Total weighted average shares - basic and diluted 28,793,256
27,597,757
CDC
Software Unaudited Combined Statement of Cash Flow
(Amounts in thousands of U.S. dollars except share and per share
data) Table 4 Three months ended
December 31, March 31, 2010 2011
OPERATING ACTIVITIES: Net loss $ (2,540 ) $ (2,230 )
Adjustments to reconcile net loss to net cash provided by operating
activities: Depreciation expense 815 766 Amortization expense 4,726
4,688 Provision for bad debt 413 261 Stock compensation expenses
619 978 Deferred income tax provision (1,864 ) (38 ) Exchange
(gain) loss (443 ) 520 Loss on disposal of property and equipment 1
- Gain on disposal of available-for-sale securities (219 ) (22 )
Impairment of cost investments 936 - Amortization of debt issuance
costs 232 87 Accrued interest income from Parent (322 ) (251 )
Accrued interest income (42 ) (30 ) Changes in operating assets and
liabilities: Accounts receivable 1,088 (2,281 ) Deposits,
prepayments and other receivables 1,154 (3,726 ) Other assets (862
) 340 Accounts payable 2,957 642 Income tax payable 755 (1,182 )
Accrued liabilities 5,366 2,975 Deferred revenue 1,087 7,795 Other
liabilities (1,260 ) (413 ) Net cash provided by
operating activities 12,597 8,879
INVESTING ACTIVITIES: Acquisitions, net of cash
acquired (38 ) - Payment for prior year acquisitions (500 ) (500 )
Purchases of property and equipment (350 ) (325 ) Disposal of
marketable securities 907 - Investment in cost method investees 57
- Decrease (increase) in restricted cash 1 (1
) Net cash provided by (used in) investing activities 77
(826 )
FINANCING ACTIVITIES: Borrowings
from (advances to) Parent, net (903 ) (4,023 ) Short-term
borrowings (payments), net (625 ) (15,000 ) Debt issuance costs
(1,389 ) - Purchases of treasury stock (1,261 ) (844 ) Payments for
capital lease obligations (121 ) (71 ) Net cash used
in financing activities (4,299 ) (19,938 )
Effect of exchange differences on cash (80 ) 2,019
Net increase (decrease) in cash and cash equivalents
8,295 (9,866 ) Cash at beginning of period 36,453
44,748 Cash at end of period $ 44,748 $
34,882
CDC Software 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, 2010
2011 OPERATING ACTIVITIES: Net income (loss) $ 2,061
$ (2,230 ) Adjustments to reconcile net income (loss) to net cash
provided by operating activities: Depreciation expense 699 766
Amortization expense 5,105 4,688 Provision for bad debt (109 ) 261
Stock compensation expenses 444 978 Deferred income tax provision -
(38 ) Exchange gain 623 520 Gain on disposal of marketable
securities (319 ) (22 ) Amortization of debt issuance costs - 87
Accrued interest income from Parent (358 ) (251 ) Accrued interest
income - (30 ) Changes in operating assets and liabilities:
Accounts receivable (584 ) (2,281 ) Deposits, prepayments and other
receivables (2,611 ) (3,726 ) Other assets (193 ) 340 Accounts
payable (107 ) 642 Income tax payable 203 (1,182 ) Accrued
liabilities (1,305 ) 2,975 Deferred revenue 1,665 7,795 Other
liabilities 265 (413 ) Net cash provided by
operating activities 5,479 8,879
INVESTING ACTIVITIES: Acquisitions, net of cash acquired
(2,246 ) - Payment for prior year acquisitions - (500 ) Purchases
of property and equipment (306 ) (325 ) Disposal of marketable
securities 1,121 - Increase in restricted cash -
(1 ) Net cash used in investing activities (1,431 )
(826 )
FINANCING ACTIVITIES: Borrowings from
(advances to) Parent, net 1,739 (4,023 ) Short-term borrowings
(payments), net 737 (15,000 ) Purchases of treasury stock (1,343 )
(844 ) Payments for capital lease obligations (118 )
(71 ) Net cash provided by (used in) financing activities
1,015 (19,938 ) Effect of exchange differences
on cash (903 ) 2,019 Net increase
(decrease) in cash and cash equivalents 4,160 (9,866 ) Cash at
beginning of period 40,349 44,748
Cash at end of period $ 44,509 $ 34,882
CDC Software Unaudited Reconciliation From
GAAP Results to Adjusted EBITDA (Amounts in thousands of
U.S. dollars except share and per share data) Table
6 Three months ended December 31, March
31, Consolidated 2010 2011 (a)
Reconciliation from GAAP results to Adjusted EBITDA Operating
loss $ (3,387 ) $ (2,718 ) Add back restructuring and other charges
5,946 1,074 Add back depreciation expense 815 766 Add back
amortization expense 1,411 1,606 Add back amortization expense
included in cost of revenue 3,318 3,082 Add back stock compensation
expense 619 978 Add back exchange gain (442 ) 520 Add back deferred
revenue grind (1) 831 263 Adjusted
EBITDA $ 9,111 $ 5,571 Adjusted EBITDA margin % 16 %
11 %
Three months ended December 31,
March 31, On Premise 2010 2011 (a)
Reconciliation from GAAP results to Adjusted EBITDA Operating
income $ 6,411 $ 3,065 Add back restructuring and other charges
4,734 1,014 Add back depreciation expense 251 214 Add back
amortization expense 1,245 1,253 Add back amortization expense
included in cost of revenue 3,084 2,823 Add back stock compensation
expense 619 978 Add back exchange gain (442 ) 520 Add back deferred
revenue grind (1) 105 39 Adjusted
EBITDA $ 16,007 $ 9,906 Adjusted EBITDA margin % 31 %
22 %
Three months ended December 31, March
31, Cloud 2010 2011 (a) Reconciliation
from GAAP results to Adjusted EBITDA Operating loss $ (1,542 )
$ (1,388 ) Add back restructuring and other charges (128 ) 38 Add
back depreciation expense 330 308 Add back amortization expense 165
353 Add back amortization expense included in cost of revenue 234
259 Add back deferred revenue grind (1) 726
224 Adjusted EBITDA $ (215 ) $ (206 ) Adjusted EBITDA margin
% -4 % -3 %
Three months ended December
31, March 31, Corporate 2010 2011
(a) Reconciliation from GAAP results to Adjusted EBITDA
Operating loss $ (8,256 ) $ (4,395 ) Add back restructuring and
other charges 1,340 22 Add back depreciation expense 235
244 Adjusted EBITDA $ (6,681 ) $ (4,129 )
Adjusted EBITDA margin % -12 % -8 % (1) Deferred revenue
grind represents the fair value adjustment required to reduce the
historical deferred revenue liabilities from acquisitions to the
fair value of the Company’s legal performance obligations plus a
normal profit margin based on fulfillment effort.
CDC Software Unaudited Reconciliation From GAAP
Results to Adjusted EBITDA (Amounts in thousands of U.S.
dollars except share and per share data) Table 7
Three months ended March 31, Consolidated
2010 2011 (a) Reconciliation from GAAP results to
Adjusted EBITDA Operating income (loss) $ 1,911 $ (2,718 ) Add
back restructuring and other charges 573 1,074 Add back
depreciation expense 699 766 Add back amortization expense 1,280
1,606 Add back amortization expense included in cost of revenue
3,825 3,082 Add back stock compensation expenses 444 978 Add back
exchange gain 623 520 Add back deferred revenue grind (1)
1,204 263 Adjusted EBITDA $ 10,559 $
5,571 Adjusted EBITDA margin % 20 % 11 %
Three
months ended March 31, On Premise 2010
2011 (a) Reconciliation from GAAP results to Adjusted
EBITDA Operating income $ 4,884 $ 3,065 Add back restructuring
and other charges 564 1,014 Add back depreciation expense 442 214
Add back amortization expense 1,170 1,253 Add back amortization
expense included in cost of revenue 3,634 2,823 Add back stock
compensation expenses 444 978 Add back exchange gain 623 520 Add
back deferred revenue grind (1) 350 39
Adjusted EBITDA $ 12,111 $ 9,906 Adjusted EBITDA
margin % 26 % 22 %
Three months ended March
31, Cloud 2010 2011 (a) Reconciliation
from GAAP results to Adjusted EBITDA Operating income (loss) $
20 $ (1,388 ) Add back restructuring and other charges (10 ) 38 Add
back depreciation expense 63 308 Add back amortization expense 110
353 Add back amortization expense included in cost of revenue 191
259 Add back deferred revenue grind (1) 854
224 Adjusted EBITDA $ 1,228 $ (206 ) Adjusted EBITDA
margin % 27 % -3 %
Three months ended March
31, Corporate 2010 2011 (a)
Reconciliation from GAAP results to Adjusted EBITDA Operating
loss $ (2,993 ) $ (4,395 ) Add back restructuring and other charges
19 22 Add back depreciation expense 194 244
Adjusted EBITDA $ (2,780 ) $ (4,129 ) Adjusted EBITDA margin
%
-5
%
-8
% (1) Deferred revenue grind represents the fair
value adjustment required to reduce the historical deferred revenue
liabilities from acquisitions to the fair value of the Company’s
legal performance obligations plus a normal profit margin based on
fulfillment effort.
CDC Software
Unaudited Reconciliation From GAAP Results to Non-GAAP Net
Income (Amounts in thousands of U.S. dollars except share
and per share data) Table 8 Three months
ended March 31, 2010 2011 (a)
Reconciliation from GAAP net income (loss) attributable to
controlling interest to Non-GAAP net income and Non-GAAP net income
per share Net income (loss) attributable to controlling
interest $ 1,973 $ (2,216 ) Add back restructuring and other
charges 573 1,074 Add back amortization expense 1,280 1,606 Add
back amortization expense included in cost of revenue 3,825 3,082
Add back stock based compensation 444 978 Add back exchange gain
623 520 Add back deferred revenue grind (1) 1,204 263 Add back non
cash tax expense 348 (232 ) Tax affect on all reconciling items
(2,226 ) (1,956 ) Non-GAAP net income $ 8,044
$ 3,119 Non-GAAP net income as a % of revenue 16 % 6 % Total
weighted average shares outstanding (basic and dilutive) 28,793,256
27,597,757
Non-GAAP net income per share (basic and
dilutive) $ 0.28 $ 0.11
Three months ended December 31, March
31, 2010 2011
(a) Reconciliation from GAAP net loss
attributable to controlling interest to Non-GAAP net income and
Non-GAAP net income per share
Net loss attributable to controlling interest $ (2,545 ) $ (2,216 )
Add back restructuring and other charges 5,946 1,074 Add back
amortization expense 1,411 1,606 Add back amortization expense
included in cost of revenue 3,318 3,082 Add back stock based
compensation 619 978 Add back exchange gain (442 ) 520 Add back
deferred revenue grind (1) 831 263 Add back non cash tax expense
(451 ) (232 ) Tax affect on all reconciling items (3,038 )
(1,956 ) Non-GAAP net income $ 5,649 $ 3,119
Non-GAAP net income as % of revenue 10 % 6 % Total weighted average
shares outstanding (basic and dilutive) 28,322,501 27,597,757
Non-GAAP net income per share (basic and dilutive) $
0.20 $ 0.11 (1) Deferred revenue grind
represents the fair value adjustment required to reduce the
historical deferred revenue liabilities from acquisitions to the
fair value of the Company’s legal performance obligations plus a
normal profit margin based on fulfillment effort.
CDC Software Unaudited Reconciliation From
GAAP Revenue to Non-GAAP Revenue (Amounts in thousands of
U.S. dollars) Table 9 Three months ended
GAAP Results March 31, 2010 December 31, 2010
March 31, 2011 On Premise Licenses $ 7,664 $ 9,916 $
6,201 Maintenance 24,650 25,805 24,690 Professional services 13,682
14,268 13,706 Hardware 907 1,230 1,161 Total
On Premise 46,903 51,219 45,758
Cloud
Licenses $ 259 $ 222 $ 198 Maintenance 220 499 831 Professional
services 1,041 678 1,066 SaaS 2,103 3,988
4,523 Total Cloud 3,623 5,387 6,618 Total
revenue $ 50,526 $ 56,606 $ 52,376
Three months
ended Non-GAAP Adjustment (1) March 31, 2010
December 31, 2010 March 31, 2011 On Premise
Licenses $ - $ - $ - Maintenance 350 90 31 Professional services
- 15 8 Total On Premise 350 105
39
Cloud Licenses $ 43 $ - $ - Maintenance 583 306 -
Professional services 94 86 75 SaaS 134 334
149 Total Cloud 854 726 224 Total revenue $
1,204 $ 831 $ 263
Three months ended
Non-GAAP Results March 31, 2010 December 31,
2010 March 31, 2011 On Premise Licenses $ 7,664 $
9,916 $ 6,201 Maintenance 25,000 25,895 24,721 Professional
services 13,682 14,283 13,714 Hardware 907 1,230
1,161 Total On Premise 47,253 51,324
45,797
Cloud Licenses $ 302 $ 222 $ 198 Maintenance 803 805
831 Professional services 1,135 764 1,141 SaaS 2,237
4,322 4,672 Total Cloud 4,477 6,113
6,842 Total revenue $ 51,730 $ 57,437 $ 52,639 (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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