CDC Corporation Reports Q2 2008 Results that Exceed Analyst Expectations with Adjusted Net Income of $0.04 per share Compared to Consensus of $0.01 per share
Company Ends Q2 2008 with Non-GAAP Cash and Cash Equivalents of $233 Million
BEIJING, ATLANTA (August 07, 2008) –
CDC Corporation (NASDAQ: CHINA), a leading global enterpr ise software and new media company, today announced its financial results for the second quarter of 2008. Total revenue from continuing operations for the period ended June 30, 2008 was (U.S.)$111.0 million, higher than the company’s previously announced range of (U.S.)$107.3 to (U.S.)$108.5 million and an increase of 10 percent from (U.S.)$100.7 million in the second quarter of 2007. Adjusted net income from continuing operations (3) totaled ( U.S. )$4.5 million compared to a loss of ( U.S.)$0.75 million for the first quarter of 2008 and adjusted EBITDA (2) totaled ( U.S.)$6.1 million in Q2 2008.
Adjusted net income per share was ( U.S.)$0.04, exceeding the consensus Wall Street of ( U.S.)$0.01 per share. Non-GAAP cash and cash equivalents (1) totaled ( U.S.)$233.4 million as of June 30, 2008.
The company generated positive operating cash flow in both Q1 2008 and Q2 2008. Operating cash flow was ( U.S.)$5.3 million and ( U.S.)$5.6 million for Q1 2008 and Q2 2008, respectively. Combined, for the first half of 2008, the company generated positive cash flow of ( U.S.)$10.9 million.
“We are very proud that we have exceeded analyst expectations for the second quarter in a row and that we have generated significant positive cash flow for the first half of 2008, especially in light of this difficult operating environment,” said Peter Yip, CEO, CDC Corporation. “We are delighted that all three of our business units, CDC Software, CDC Games and China.com, have delivered double digit sequential growth in Q2 2008. A significant portion of CDC Corporation’s total revenue is now derived from recurring sources and over the next several quarters we expect to demonstrate improving profitability.
“The quarter’s strong results were led by excellent results at CDC Software, with solid performance from our higher growth solutions, including CDC Supply Chain, CDC Factory and CDC Respond. These solutions have demonstrated that they can perform well in a challenging economic environment. We believe our target markets increasingly see the value of our solutions and we anticipate a continuation of these positive trends. In light of rising transportation, fuel and commodity costs, CDC Factory and CDC Supply Chain are strategically positioned to provide both new and existing customers with the critical operating tools they need to help better manage their internal costs. In addition, CDC Respond is delivering a high return on investment to many of its users by enabling them to help better retain their customers through complaint and feedback management.
“We also are continuing to carefully manage our cost structure. Toward the end of the second quarter, we eliminated approximately (U.S.) $15 million in additional annual overhead costs by reducing facilities and related administration expenses, eliminating redundant and non-essential positions, accelerating integration of past acquisitions and reducing other general and administrative costs, bringing the total costs eliminated to approximately (U.S.)$31 million annually over the last 12 months,” added Yip. “We plan to continue to improve our profit margins throughout the year by managing costs while still maintaining a healthy research and development budget within CDC Software.
“In the second quarter, we also saw robust growth in our China-based businesses, with CDC Games’ China operations and China.com both delivering a double-digit increase in revenue from Q1 2008 to Q2 2008. Looking forward, CDC Games has an exciting roll-out schedule of new game launches planned for the second half of the year, including Digimon, which was recently ranked number one on the Baidu search engine user survey chart.
“I have also been very pleased with our current management team, which has been responsible for shortening quarterly reporting schedules, accelerating the integration of past acquisitions, including standardizing our entities on a common IT system, reorganizing our Global Business Services Group and identifying and implementing our recent cost-cutting moves,” continued Yip. “Overall, we believe that we have taken the steps necessary to manage our cost base in anticipation of an on-going difficult operating environment and intend to improve operating metrics and profitability going forward.”
Second Quarter Highlights:
* Total revenue for CDC Software for Q2 2008 was an all-time record for the CDC Software division, with revenue of ( U.S.)$ 96.1 million, an increase of 9 percent from ( U.S.)$88.4 million in Q2 2007. Organic growth at CDC Software was up approximately 3 percent compared to the same quarter last year. Recurring maintenance revenue was ( U.S.)$26.8 million, up 29 percent compared to Q2 2007. License revenue was ( U.S.)$ 14.8 million, an increase of 21 percent from Q1 2008, or ( U.S.)$12.3 million.
* Total revenue for CDC Games for Q2 2008 was ( U.S.)$10.8 million. We record revenue net of local sales tax, which were $0.6 million in Q2 of 2008. Including sales tax, gross revenue would have been ( U.S. )$11.4 million. This compares to net revenue of ( U.S.) $8.7 million, net of $0.5 million of sales tax, or gross revenue of ( U.S.)$9.1 million in Q1 2008. This represents a sequential increase of 24 percent for Q2 2008.
* Total revenue for China.com was ( U.S.)$4.1 million for Q2 2008, an increase of 39 percent over ( U.S.)$3.0 million in Q2 2007.
* Total revenue for CDC Corporation was (U.S.)$111.0 million compared to ( U.S.)$100.7 million in Q2 2007. Net loss from continuing operations in Q2 2008 for CDC Corporation was ( U.S.)$10.1 million, compared to a loss of ( U.S.)$2.7 million in Q2 2007.
* Adjusted net income from continuing operations (1) was ( U.S.)$4.5 million for Q2 2008 compared to a loss of ( U.S.)$0.75 million in the previous quarter. Adjusted EBITDA from continuing operations (2) was ( U.S.)6.1 million for Q2 2008 compared to a loss of ( U.S.)$0.9 million in the previous quarter.
* Operating cash flow was ( U.S.)$5.6 million in Q2 2008. In the first quarter of 2008, operating cash flow was ( U.S.)$5.3 million.
Subsidiary Revenue and Operating Metrics Summary
Highlights for Q2 2008:
CDC Software
Total revenue for CDC Software for Q2 2008 was ( U.S.)$96.1 million, an increase of 9 percent from ( U.S.)$88.4 million in Q2 2007. The total revenue amount for CDC Software for Q2 2008 was comprised of software license revenue of ( U.S.)$14.8 million, maintenance revenue of ( U.S.)$26.8 million, software consulting and services revenue of ( U.S.)$25.4 million, global services revenue of ( U.S.)$27.0 million, and hardware revenue of ( U.S.)$2.2 million.
Gross margin for CDC Software, excluding Global Services, during Q2 2008 and Q2 2007 was 57 percent and 59 percent, respectively. Gross margin for Global Services was 26 percent in Q2 2008 compared to 24 percent in Q2 2007.
Q2 2008 revenue for CDC Software was geographically distributed with the Americas contributing 59 percent of the total, and the rest of world contributing 41 percent. Days sales outstanding (DSOs) in the quarter were 77 days compared to 79 days for the Q1 2008.
During Q2 2008, CDC Software added a total of 225 new customers and signed upgrade and expansion agreements with 572 enterprise software customers.
New customers accounted for 39 percent of total software license revenue during the quarter and included: a global leading specialty coffee roaster and retailer, Red Gold, Toyota France, Poclain Hydraulics, Elizabeth Arden, Staples, BASF Coatings, Hager, Coral Chemical, Hanna Candles, Cerro Wire and Cable, Certified Diabetic Services, Bristol-Myers, and SRAM. Repeat business with existing customers accounted for 61 percent of total software license revenue for the quarter. Customers with expanded and repeat business during the quarter included: Jefferies Group, ABN-Amro Bank, Nike, The Nielsen Co., Estee Lauder, Celanese, Molex Changdu, Web-EX, Sonoco Products Company, R&D Systems, AlloSource, Schneider Electric, Smith & Nephew, ACCOR, MERIAL, ELIOR, AFII ( Agence Fran
