CDC Corporation Reports Adjusted Net Income of US$10.5 Million for Second Quarter of 2006, an Increase of 95% from Prior Year
Robust Growth in Revenue and Profit Driven by Online Games and Portals, Enterprise Software Licenses and Business Services
HONG KONG, BEIJING, ATLANTA (August 22, 2006) –
CDC Corporation (NASDAQ: CHINA) focused on enterprise software applications, mobile applications, online games and internet portals, today announced its financial results for the second quarter ended June 30, 2006.
HIGHLIGHTS
* Total revenue for Q2 2006 was US$77.0 million, an increase of 19% from US$64.6 million in Q2 2005.
* Total revenue from CDC Software for Q2 2006 was US$57.7 million, an increase of 8% from US$53.7 million in Q2 2005.
* Total revenue from China.com Inc. for Q2 2006 was US$19.2 million, an increase of 77% from US$10.9 million in Q2 2005.
* Adjusted net income* was US$10.5 million for Q2 2006, an increase of 95% from US$5.4 million in Q2 2005.
* GAAP net income was US$7.9 million for Q2 2006, a significant increase over GAAP net income of US$36,000 in Q2 2005.
* Adjusted diluted earnings per share ** was US$0.09 for Q2 2006 compared to US$0.05 for Q2 2005.
* Non-GAAP net cash and cash equivalents*** was US$214.9 million as of June 30, 2006.
“Once again, I am very pleased with the operating results we posted in Q2,” said Peter Yip, CEO of CDC Corporation. “Throughout the family of CDC Companies we built upon, and increased, the momentum established in Q1. As a result of this company-wide increase in momentum, we have exceeded our estimates for the second quarter and recently announced upwardly revised estimates for the remainder of 2006.”
Mr. Yip continued, “Looking ahead to the second half of 2006, we are well prepared for continued success. On August 10, we completed our US$ 20 million 2005 share buyback program and immediately began executing on a new US$20 million program for 2006. We signed up our first partner in the Franchise Partner Program and have several others from strategic geographies in the pipeline. We’ve launched our first applications delivered as Software as a Service (SaaS) in China which will serve as the starting point for additional SaaS applications to be launched globally. With Microsoft we established a strategic partnership to jointly sell and deliver CRM applications in China and around the globe, and in China, we entered into a strategic partnership with Google to further enhance search capabilities, content and services within our portals. Based on this and our other strategic initiatives, we are quite optimistic for the remainder of 2006 and beyond.”
Total revenues of US$77.0 million for Q2 2006 exceeded prior estimates issued on May 25, 2006, that placed total revenues in the range of US$70.6 million to US$71.6 million. Similarly, adjusted net income* of US$10.5 million for Q2 2006 exceeded prior estimates issued on May 25, 2006, that placed adjusted net income in the range of US$5.8 million to US$6.3 million.
On July 17, 2006, the company announced upwardly revised earnings estimates for 2006. Previous guidance provided on April 12, 2006, estimated total revenues in the range of US$283.0 million to US$290.0 million and adjusted net income* in the range of US$30.9 million to US$32.1 million. The revised estimates for 2006 place total revenues in the range of US$300.0 million to US$305.0 million and adjusted net income* in the range of US$31.6 million to US$32.8 million. These revised estimates represent an approximate increase of 22.5% compared to total revenue of US$245.0 million in 2005 and an approximate increase of 100% compared to adjusted net income* of US$15.8 million in 2005.
REVENUE SUMMARY
CDC Corporation
On a consolidated basis, revenues were balanced geographically for CDC Corporation with Asia Pacific contributing 40% or US$30.8 million, the Americas contributing 40% or US$30.6 million and Europe Middle East and Africa contributing 20% or US$ 15.6 million.
CDC Software
Total software revenues in Q1 2006 were US$53.0 million, an increase of 13.7% from US$46.6 million in Q1 2005. Consulting and services revenues were US$28.8 million in Q1 2006, an increase of 21.5% from US$23.7 million in Q1 2005. Software license revenues were US$8.8 million in Q1 2006, up 7.3% from US$8.2 million in Q1 2005. Maintenance revenues were US$15.4 million in Q1 2006, up 5.5% from US$14.6 million in Q1 2005.
China.com
Total revenues for China.com during Q1 2006 were US$11.5 million, an increase of 19.8% from US$9.6 million in Q1 2005. Total MVAS revenue for Q1 2006 was US$8.6 million, representing 74.8% of total revenues for China.com. The remaining 25.2% of China.com’s revenues were attributable to its Internet and media businesses.
OPERATING UNIT SUMMARIES
CDC Software
During the quarter, software, consulting and services revenues were balanced geographically with the Americas contributing 53% of the total, Europe Middle East and Africa contributing 27% and Asia Pacific contributing 20%.
SG&A as a percentage of revenues for the quarter was 32% compared to 37% in Q2 2005. SG&A as a percentage of revenues for the quarter improved due to the company’s continuing focus on consolidation of redundant operations and on overall cost control.
Research and development as a percentage of revenue for the quarter was 7% compared to 10% in Q2 2005. Although total development staffing increased during this period, the financial improvement resulted from the increasing use of development resources in the company’s low-cost development centers in India and China.
Overall maintenance retention rates exceeded 90%, indicating a high degree of customer satisfaction and continued growth in maintenance revenues. This is substantially better than the industry average for maintenance retention which is believed to be approximately 85%.
New customers accounted for 49% of total software license revenue for the quarter, with repeat business to existing customers accounting for 51% of total software license revenue. This ratio of new-business to repeat-business continues to be among the highest in the enterprise software industry. This balanced revenue mix indicates continued healthy expansion of the business and strong demand for industry-specific applications from new customers.
Worldwide, CDC Software signed 61 new-logo customers during the quarter, including major account wins in all key geographies with 19 new customers signed in the rapidly-expanding China market. New customers globally included Bonita Bay Group, Caribbean Broilers, CL Informatique (Soparind Bongrain Group), Schumacher Homes, Silicon Image and Xinhua Finance.. In addition to the new enterprise software customers, 132 new customers licensed the c360 add-on products and industry solutions for the Microsoft Dynamics CRM platform. These applications are sold worldwide, through the network of Microsoft resellers.
Highlighted new customers include Bonita Bay, an award winning developer of planned communities in southwest Florida with seven active, high-end projects including golf courses and marinas. The industry-specific Pivotal Homebuilder solution was selected over a variety of competing CRM systems. A leading outsource manufacturer providing pharmaceutical product development services in the life sciences industries selected the Ross ERP and supply chain solutions to become one of the first companies in their industry to offer secure electronic visibility enabling their clients to have the detailed product data they need on a real time basis. WestFarm Foods, one of the largest dairy product processors in the US, with 11 plants and 1,200 employees, is one of the first new customers to license the OnePlan SaaS planning and scheduling applications that were acquired earlier in the year. The first WestFarm plant went live on the OnePlan applications in only 10 weeks with subsequent plants expected to require only 3-4 weeks each. The second-largest clothing manufacturer in Finland, Nanso Oy, licensed the IMI Warehouse Management applications for their new logistics center being built near Helsinki which is being equipped with the latest technology available.
During the quarter, repeat business with existing customers continued to be strong including add-on sales and upgrades with over 200 companies in all strategic industries, including financial services, discrete and process manufacturing, homebuilding and distribution. Expanding and upgrading customers included Career Builder, Carvel, Castle Clement, Corpbanca, Financo (a subsidiary of Groupe Cr
