chinadotcom Reports Record Revenues of US$48.3 Million; Revenues Up
123% Year-on-Year and 7% Quarter-on-Quarter ERP Software
Acquisition Completed in Late August; CRM Division Sees Continued
Growth US GAAP * Total revenue including revenue from acquisitions
rose 123% to US$48.3 million from US$21.7 million in Q3 2003. *
Gross profit increased 138% to US$26.4 million from US$11.1 million
in Q3 2003. * Gross margin was 55%, increasing from 51% in Q3 2003.
* Operating loss was US$7.0 million compared to operating income of
US$1.3 million in Q3 2003. * Net loss of US$6.2 million, compared
to net income of US$6.1 million in Q3 2003. Non-GAAP (1) * Non-GAAP
net income excludes certain non-recurring or non-cash expenses
including (i) restructuring charge of almost US$3.1 million, (ii)
purchase-related adjustments of US$3.5 million from the Pivotal and
Ross Systems acquisitions relating to deferred maintenance
revenues, stock compensation expenses and amortization of purchased
intangibles and (iii) legal and professional expenses of US$1.3
million related to the proposed securities offerings. * Non-GAAP
net income totaled US$2.4 million compared to US$4.1 million in Q2
2004. Recent Highlights: * The company completed its acquisition of
Ross Systems, an Atlanta-based Enterprise Resource Planning ("ERP")
software company on August 26, 2004 and paid a total consideration
of US$65.7 million in cash and chinadotcom shares. The company has
consolidated revenues of US$6.0 million for September 2004 from
Ross Systems. * Pivotal, the company's Customer Relationship
Management ('CRM') software unit continued to contribute positive
operating results; total quarterly revenue was US$15.0 million up
15% year-on-year; license revenue was up 26% year-on-year and 32
new customers have been added. * Mobile services and applications
revenues totaled US$6.8 million for the quarter, a 15% increase
from US$5.9 million reported in the same period in 2003 and a 10%
decrease from US$7.6 million reported in the previous quarter. The
decrease in mobile services and applications revenues is
attributable to challenging market conditions in China, increased
regulatory policies and a temporary suspension, commencing from
mid- August, by China Mobile of Go2joy SMS services. In
mid-October, Go2Joy resumed offering its SMS services again after
it fulfilled the connection and other requirements of China Mobile.
(1) All references to Non-GAAP in the results highlights herein
should be read in conjunction with the description of Non-GAAP
Measures later in this press release and the more detailed
financial statements and reconciliation of GAAP to Non-GAAP results
included at the end of this press release. HONG KONG, Nov. 4
/Xinhua-PRNewswire-FirstCall/ -- chinadotcom corporation (Nasdaq:
CHINA; http://www.corp.china.com/ ), a leading integrated
enterprise software and mobile applications company in China and
internationally, today announced its financial results for the
third quarter of 2004 under US GAAP. For the quarter ending
September 30, 2004, the company reported revenues of US$48.3
million including from acquisitions, an increase of 123% from
US$21.7 million reported in the same period in 2003 and an increase
of 7% from US$45.1 million reported in the previous quarter.
Software and consulting services revenue totaled US$38.3 million
for the quarter including a one month contribution of US$6.0
million for September 2004 from Ross Systems, representing a 185%
increase over the US$13.4 million reported in Q3 2003 and a 10%
increase over the US$34.7 million reported in Q2 2004. Mobile
services and applications revenues totaled US$6.8 million for the
quarter, a 15% increase from the US$5.9 million reported in Q3 2003
and a 10% decrease from US$7.6 million reported in Q2 2004. The
decrease in mobile services and applications revenues is
attributable to challenging market conditions in China, increased
regulatory policies and a temporary suspension of services
commencing in mid-August by China Mobile of Go2joy SMS services. In
mid-October, Go2Joy resumed offering its SMS services again after
it fulfilled the connection and other requirements of China Mobile.
Total revenues from advertising and marketing activities were
US$3.0 million, representing an increase of 58% from US$1.9 million
reported in the same period in 2003 and an 8% sequential increase
from US$2.8 million reported in Q2 2004. The increase in
advertising and marketing revenue was due to modest increases in
portal advertising and seasonal revenue increases from the
company's travel trade magazine and events unit. Gross profit in Q3
2004 increased by 138% to US$26.4 million from US$11.1 million in
Q3 2003 and increased by 1% from US$26.1 million from the previous
quarter. Gross margin in Q3 2004 was 55% as compared to 51% in Q3
2003 and 58% in Q2 2004. On a US GAAP basis, a net loss was
recorded in Q3 2004 of US$6.2 million compared to a net income of
US$6.1 million in Q3 2003, and a net loss of US$642,000 for Q2
2004. Basic loss per share was 5.8 US cents for the quarter,
compared to a basic earnings per share of 6.0 US cents for Q3 2003
and a basic loss per share of 0.6 US cents for Q2 2004. As of
September 30, 2004, the company had nearly 110.7 million common
shares outstanding. The increase in shares from Q2 2004 is
principally a result of common shares issued pursuant to the Ross
transaction. Non-GAAP net income for Q3 2004 totaled US$2.4
million, compared to non- GAAP net income of US$6.5 million for Q3
2003, and US$4.1 million for Q2 2004. Non-GAAP earnings per share
were 2.3 US cents for the quarter and 3.9 US cents for Q2 2004.
Selected reconciliation of US GAAP results to Non-GAAP results (1)
(Amounts in thousands of US dollars) Quarter Quarter Ended Ended
June 30, September 30, 2004 2004 (unaudited) (unaudited) GAAP net
loss (642) (6,152) Add back revenue impact of deferred maintenance
revenue write down related to the acquisition of subsidiaries 946
916 Add back amortization of purchased intangibles related to the
acquisition of subsidiaries 2,277 3,451 Add back stock compensation
expenses related to the acquisition of subsidiaries 827 518
Settlement of litigation 1,613 -- Add back legal and professional
expenses on proposed securities offerings -- 1,344 Add back
restructuring charges -- 3,083 Add back deferred tax impact on
purchased intangibles related to the acquisition of subsidiaries
(954) (734) Non-GAAP net income 4,067 2,426 'We have completed two
transformational enterprise software acquisitions in 2004. These
acquisitions have added high margin recurrent revenue streams,
world-class global CRM and ERP product offerings to our suite of
enterprise software products, and seasoned management talent to
chinadotcom's bench strength. Despite expected near term hurdles of
integration and merger- related issues, we are optimistic regarding
the financial performance in the future as a result of our
investments and strategic business planning today,' said Executive
Chairman and Acting CEO Raymond Ch'ien. Ch'ien continued, 'While
revenues from mobile services and applications declined, our
fundamental belief in the market opportunity for chinadotcom's
mobile value added services remains unchanged. Our focus is the
growth of new subscriptions, the development of new products and
services, the expansion of market channels, and the improvement of
customer retention.' Other Developments After the quarter, the
company appointed James LaLonde as President and CEO of CDC
Software, Asia Pacific, its software unit within the chinadotcom
group. LaLonde is principally responsible for growing the company's
sales and presence in the Asia Pacific region. Prior to
chinadotcom, LaLonde was Vice President, Worldwide Sales, for
Brocade Communications Systems, a provider of intelligent switches
and related components for storage area networks (SANs) and was
responsible for driving Brocade's sales revenue and managing
operations globally. Before Brocade, LaLonde was Managing Director,
Asia Pacific Sales and Operations of Network Associates, a network
security and management software company, where he had full P&L
responsibility for Asia Pacific operations. LaLonde began his
career in Asia by spending over 5 years in various senior sales and
marketing positions with Microsoft Corporation in Japan.
chinadotcom plans to leverage upon LaLonde's experience to take
full advantage of the fast growing software market in the Asia
Pacific region, particularly in Japan and China. Non-GAAP Measures
To supplement the financial measures prepared in accordance with
generally accepted accounting principles ("GAAP"), the company uses
non-GAAP financial measures for net income and other line items,
which are adjusted from results based on GAAP. These non-GAAP
measures are provided to enhance the user's overall understanding
of the company's current financial performance and its prospects
for the future. In particular, the adjusted presentation may be
useful for investors to assess the impact of recent acquisitions.
Although the company continues to report US GAAP results to
investors, the company believes the inclusion of non-GAAP financial
measures provides further clarity in its financial reporting. These
non-GAAP financial measures may be different from non-GAAP
financial measures used by other companies, and should be
considered in addition to results prepared in accordance with GAAP,
but should not be considered a substitute for or superior to GAAP
measures. The non-GAAP financial measures included in this press
release have been reconciled to the nearest GAAP measures.
Conference Call chinadotcom will hold a conference call to review
its third quarter 2004 results at 8:00 am EDT on Thursday, November
4, 2004 (9:00 pm on November 4, Hong Kong time). Investors can
call: USA and CANADA Toll Free Number: +1-877-692-2592 US Toll
Number: +1-973-582-2700 UK Toll Free Number: 0800-0689199 AUSTRALIA
Toll Free Number: 1800-003163 CHINA Toll Free Number: 10800-1300432
HONG KONG Toll Number: 800-903265 The passcode is Q3 China and the
call leader is Raymond Ch'ien. Alternatively the conference call
can be heard via the Internet at:
http://www.talkpoint.com/viewer/starthere.asp?Pres=108050 For those
unable to call in or listen to the live broadcast via the web, a
replay will be available after the call at
http://www.corp.china.com/ under INVESTOR RELATIONS or via Instant
Replay by calling US Toll Number: 973-341- 3080, US and CANADA Toll
Free Number: 877-519-4471, or UK Toll Free Number: 08001693875. The
passcode for the Instant Replay is 5283588. About chinadotcom
corporation chinadotcom corporation (Nasdaq: CHINA; Website:
http://www.corp.china.com/ ) is a leading integrated enterprise
software and mobile applications company focused on China and
internationally. The company has approximately 2,000 employees with
operations in over 14 countries. For more information about
chinadotcom corporation, please visit the website
http://www.corp.china.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
statements are based on management's current expectations and are
subject to risks and uncertainties and changes in circumstances.
Factors that could cause actual results to differ materially from
those anticipated in the forward looking statements include: (a)
the ability to realize strategic objectives by taking advantage of
market opportunities in targeted geographic markets; (b) 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; (c) the
ability to integrate operations or new acquisitions in accordance
with the company's business strategy; (d) the effects of
restructurings and rationalization of operations; (e) the potential
negative reaction by customers or shareholders to reduced market
capitalization; (f) the ability to recruit and retain qualified,
experienced employees; (g) the ability to successfully partner with
other companies; (h) the ability to acquire additional companies
and technologies; (i) risks associated with the development and
licensing of software generally, including potential delays in
software development and technical difficulties that may be
encountered in the development or use of software; (j) the ability
to manage regulatory and litigation risks; and (k) to address
technological changes and developments. Further information on
risks or other factors is detailed in filings or submissions with
the United States Securities and Exchange Commission made by
chinadotcom corporation in its Annual Report for the year ended
December 31, 2003 on Form 20-F/A filed on July 8, 2004. 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. chinadotcom corporation
Consolidated Statement of Operations (Amounts in thousands of U.S.
dollars, except per share data) Quarter Ended Quarter Ended June
30, September 30, 2004 2004 (unaudited) (unaudited) Revenues
Software and consulting services 34,717 38,291 Mobile services and
applications 7,580 6,822 Advertising and marketing activities 2,791
3,019 Other income 60 123 45,148 48,255 Cost of revenues Software
and consulting services (16,185) (18,813) Mobile services and
applications (1,651) (1,775) Advertising and marketing activities
(1,119) (1,168) Other income (54) (66) (19,009) (21,822) Gross
profit 26,139 26,433 Gross Margin % 58% 55% Selling, general and
administrative expenses (21,058) (22,696) Research and development
expenses (4,549) (3,934) Depreciation and amortization expenses
(2,866) (3,716) Restructuring expenses -0 (3,083) (28,473) (33,429)
Operating losses (2,334) (6,996) Interest income 2,404 2,579
Interest expense (492) (650) Gain on disposal of available-
for-sale securities 47 -0 Impairment of available-for-sale
securities (373) (416) Loss on disposal of subsidiaries and
investments (29) (270) Losses before income taxes (777) (5,753)
Income taxes benefits 752 685 Losses before minority interests (25)
(5,068) Minority interests in income of consolidated subsidiaries
(583) (791) Losses from continuing operations (608) (5,859)
Discontinued operations Income from operations -0 45 Loss from
disposals (34) (338) Net losses (642) (6,152) Basic losses per
share (0.0062) (0.0581) Diluted losses per share (0.0062) (0.0581)
Weighted average number of shares 104,252,061 105,890,819 Diluted
number of shares 104,252,061 105,890,819 Reconciliation from GAAP
results to non-GAAP results: GAAP net losses (642) (6,152) Add back
revenue impact of deferred maintenance revenue write down related
to the acquisition of subsidiaries 946 916 Add back amortization of
purchased intangibles related to the acquisition of subsidiaries
2,277 3,451 Add back stock compensation expenses related to the
acquisition of subsidiaries 827 518 Settlement of litigation 1,613
-0 Add back legal and professional expenses on proposed securities
offerings -0 1,344 Add back restructuring charges -0 3,083 Add back
deferred tax impact on purchased intangibles related to the
acquisition of subsidiaries (954) (734) Non-GAAP net income 4,067
2,426 Non-GAAP Basic earnings per share 0.0390 0.0229 Non-GAAP
Diluted earnings per share 0.0380 0.0225 Non-GAAP Weighted average
number of shares 104,252,061 105,890,819 Non-GAAP Diluted number of
shares 107,115,957 107,884,619 chinadotcom corporation Consolidated
Statement of Operations (Amounts in thousands of U.S. dollars,
except per share data) Quarter Ended Quarter Ended September 30,
September 30, 2003 2004 (unaudited) (unaudited) Revenues Software
and consulting services 13,428 38,291 Mobile services and
applications 5,942 6,822 Advertising and marketing activities 1,908
3,019 Other income 385 123 21,663 48,255 Cost of revenues Software
and consulting services (8,961) (18,813) Mobile services and
applications (543) (1,775) Advertising and marketing activities
(869) (1,168) Other income (192) (66) (10,565) (21,822) Gross
profit 11,098 26,433 Gross Margin % 51% 55% Selling, general and
administrative expenses (9,134) (22,696) Research and development
expenses -0 (3,934) Depreciation and amortization expenses (665)
(3,716) Restructuring expenses -0 (3,083) (9,799) (33,429)
Operating income/(loss) 1,299 (6,996) Interest income 3,226 2,579
Interest expense (278) (650) Gain on disposal of available-
for-sale securities 879 -0 Impairment of available-for-sale
securities -0 (416) Gain/(loss) on disposal of subsidiaries and
investments 350 (270) Other non-operating gains 998 -0 Share of
income in equity investees 84 -0 Income/(loss) before income taxes
6,558 (5,753) Income taxes benefits 430 685 Income/(loss) before
minority interests 6,988 (5,068) Minority interests in income of
consolidated subsidiaries (1,014) (791) Income/(loss) from
continuing operations 5,974 (5,859) Discontinued operations Income
from operations 384 45 Loss from disposals (268) (338) Net
income/(loss) 6,090 (6,152) Basic earnings/(losses) per share
0.0601 (0.0581) Diluted earnings/(losses) per share 0.0575 (0.0581)
Weighted average number of shares 101,265,249 105,890,819 Diluted
number of shares 105,901,663 105,890,819 chinadotcom corporation
Consolidated Balance Sheets (Amounts in thousands of U.S. dollars)
June 30, September 30, 2004 2004 (unaudited) (unaudited) ASSETS
Current assets: Cash and cash equivalents 93,023 77,914 Restricted
cash 5,555 3,936 Accounts receivable 28,582 40,887 Deposits,
prepayments and other receivables 12,631 11,688 Loan receivables
1,200 2,000 Available-for-sale debt securities 156,974 124,903
Restricted debt securities 30,620 65,144 Deferred tax assets 240
240 Total current assets 328,825 326,712 Loan receivables 25,000
25,000 Property and equipment, net 9,384 11,174 Goodwill 127,323
163,600 Intangible assets 64,508 104,543 Investment in equity
investees 330 330 Investments under cost method 256 1,056
Available-for-sale debt securities 9,700 9,700 Restricted debt
securities 11,880 11,005 Available-for-sale equity securities 464
572 Deferred tax assets 1,136 1,136 Other assets 4,865 5,149 Total
assets 583,671 659,977 LIABILITIES AND SHAREHOLDERS' EQUITY Current
liabilities: Accounts payable 13,020 15,714 Other payables 4,121
5,745 Accrued liabilities 36,254 44,549 Short-term bank loans
26,152 51,786 Long-term bank loans, current portion 171 171
Deferred revenue 20,004 32,774 Income tax payable 873 825 Total
current liabilities 100,595 151,564 Deferred tax liabilities 1,082
224 Long term debts, net of current portion 11,446 11,446 Accrued
pension liability 1,748 1,563 Minority interests 46,829 48,039
Shareholders' equity: Share capital 26 28 Additional paid-in
capital 644,120 673,186 Treasury stock (4,067) (4,067) Accumulated
deficits (215,201) (221,353) Accumulated other comprehensive income
(2,907) (653) Total shareholders' equity 421,971 447,141 Total
liabilities and shareholders' equity 583,671 659,977 Number of
outstanding shares 104,696,654 110,676,274 chinadotcom corporation
Reconciliation of GAAP to non-GAAP Consolidated Statement of
Operations (Amounts in thousands of U.S. dollars, except per share
data) Quarter Ended June 30, 2004 GAAP non-GAAP results Adjustments
results (unaudited) (unaudited) Revenues Software and consulting
services 34,717 946 A 35,663 Mobile services and applications 7,580
7,580 Advertising and marketing activities 2,791 2,791 Other income
60 60 45,148 946 46,094 Cost of revenues Software and consulting
services (16,185) 617 B (15,568) Mobile services and applications
(1,651) (1,651) Advertising and marketing activities (1,119)
(1,119) Other income (54) (54) (19,009) 617 (18,392) Gross profit
26,139 1,563 27,702 Gross Margin % 58% 165% 60% Selling, general
and, administrative expenses (21,058) 2,440 C,D (18,618) Research
and development expenses (4,549) (4,549) Depreciation and
amortization expenses (2,866) 1,660 B (1,206) Restructuring
expenses -0 -0 (28,473) 4,100 (24,373) Operating income/(loss)
(2,334) 5,663 3,329 Interest income 2,404 2,404 Interest expense
(492) (492) Gain on disposal of available-for- sale securities 47
47 Impairment of available-for-sale securities (373) (373) Loss on
disposal of subsidiaries and investments (29) (29) Income/(loss)
before income taxes (777) 5,663 4,886 Income taxes
benefits/(expenses) 752 (954) G (202) Income/(loss) before minority
interests (25) 4,709 4,684 Minority interests in income of
consolidated subsidiaries (583) (583) Income/(loss) from continuing
operations (608) 4,709 4,101 Discontinued operations Income from
operations -0 -0 Loss from disposal (34) (34) Net income/(loss)
(642) 4,709 4,067 Basic earnings/(losses) per share (0.0062) 0.0390
Diluted earnings/(losses) per share (0.0062) 0.0380 Weighted
average number of shares 104,252,061 104,252,061 Diluted number of
shares 104,252,061 107,115,957 non-GAAP adjustments: A) Add back
revenue impact of deferred maintenance revenue write down related
to the acquisition of subsidiaries. B) Add back amortization of
purchased intangibles related to the acquisition of subsidiaries.
C) Add back stock compensation expenses related to the acquisition
of subsidiaries of $827 for quarter ended June 30, 2004 and $518
for quarter ended June 30, 2004 D) Settlement of litigation of
$1,613 for the quarter ended June 30, 2004. E) Add back
restructuring charges. F) Add back legal and professional expenses
on proposed securities offerings of $1,344 for the quarter ended
September 30, 2004. G) Add back deferred tax on purchased
intangibles related to the acquisition of subsidiaries. chinadotcom
corporation Reconciliation of GAAP to non-GAAP Consolidated
Statement of Operations (Amounts in thousands of U.S. dollars,
except per share data) Quarter Ended September 30, 2004 GAAP
non-GAAP results Adjustments results (unaudited) (unaudited)
Revenues Software and consulting services 38,291 916 A 39,207
Mobile services and applications 6,822 6,822 Advertising and
marketing activities 3,019 3,019 Other income 123 123 48,255 916
49,171 Cost of revenues Software and consulting services (18,813)
1,054 B (17,759) Mobile services and applications (1,775) (1,775)
Advertising and marketing activities (1,168) (1,168) Other income
(66) (66) (21,822) 1,054 (20,768) Gross profit 26,433 1,970 28,403
Gross Margin % 55% 215% 58% Selling, general and administrative
expenses (22,696) 1,862 C,F (20,834) Research and development
expenses (3,934) (3,934) Depreciation and amortization expenses
(3,716) 2,397 B (1,319) Restructuring expenses (3,083) 3,083 E -0
(33,429) 7,342 (26,087) Operating income/(loss) (6,996) 9,312 2,316
Interest income 2,579 2,579 Interest expense (650) (650) Gain on
disposal of available- for-sale securities -0 -0 Impairment of
available-for-sale securities (416) (416) Loss on disposal of
subsidiaries and investments (270) (270) Income/(loss) before
income taxes (5,753) 9,312 3,559 Income taxes benefits/(expenses)
685 (734) G (49) Income/(loss) before minority interests (5,068)
8,578 3,510 Minority interests in income of consolidated
subsidiaries (791) (791) Income/(loss) from continuing operations
(5,859) 8,578 2,719 Discontinued operations Income from operations
45 45 Loss from disposal (338) (338) Net income/(loss) (6,152)
8,578 2,426 Basic earnings/(losses) per share (0.0581) 0.0229
Diluted earnings/(losses) per share (0.0581) 0.0225 Weighted
average number of shares 105,890,819 105,890,819 Diluted number of
share 105,890,819 107,884,619 non-GAAP adjustments: A) Add back
revenue impact of deferred maintenance revenue write down related
to the acquisition of subsidiaries. B) Add back amortization of
purchased intangibles related to the acquisition of subsidiaries.
C) Add back stock compensation expenses related to the acquisition
of subsidiaries of $827 for quarter ended June 30, 2004 and $518
for quarter ended June 30, 2004 D) Settlement of litigation of
$1,613 for the quarter ended June 30, 2004. E) Add back
restructuring charges. F) Add back legal and professional expenses
on proposed securities offerings of $1,344 for the quarter ended
September 30, 2004. G) Add back deferred tax on purchased
intangibles related to the acquisition of subsidiaries. For more
information, please contact: Media Relations Jane Cheng, Associate
Director, Public Relations Tel: +852-2961-2750 Fax: +852-2571-0410
Email: Investor Relators Craig Celek, VP Investor Relations Tel:
+1-212-661-2140 Fax: +1-646-827-2421 Email: DATASOURCE: chinadotcom
corporation CONTACT: Jane Cheng, +852-2961-2750 or fax,
+852-2571-0410 or , Craig Celek, +1-212-661-2140 or fax
+1-646-827-2421, or
Copyright