CDC Corporation Expects to Substantially Increase Adjusted Net Income and Adjusted EBITDA in Second Half of 2008
July 17 2008 - 7:00AM
Business Wire
CDC Corporation (NASDAQ: CHINA), a leading global enterprise
software and new media company, today announced it expects to
achieve a substantial increase in adjusted net income (ANI) and
adjusted EBITDA for the second half of 2008 compared to the first
half of this year. The second half improved outlook is primarily
due to anticipated improvement throughout the company�s operating
metrics, as a result of CDC�s recent cost reduction efforts. The
company now believes it has a scalable business model with higher
predictability of revenues. For example, examining the two major
divisions of the Company: CDC Software, which currently comprises
approximately 85-90 percent of CDC Corporation�s revenues,
anticipates that a large portion of its second half 2008 revenues
will be derived from recurring sources such as: a.) maintenance
revenues from CDC Software�s 6,000 plus global customer base, which
has consistently achieved retention rates of approximately 90
percent and which now makes up a revenue stream with an
approximately $100 million per year run-rate; b.) Software services
revenues that include upgrades, consulting, software
implementations, as well as training services for�both new
and�existing customers and; c.) finally, CDC Global Services, which
is also over $100 million per year in revenues, and offers IT
services to customers. Several of its customers tend to have
longer-term engagements with the company. CDC Games has now
delivered three consecutive quarters of sequential revenue growth.
This division, with the vast majority of its revenues from China,
has a diversified portfolio of awarding-winning and popular�games
that have a reasonably predictable track record of users� spending
patterns. These games are primarily operated in the largest and
fastest growing online games market in the world. As recently
announced, CDC Software has implemented cost reduction initiatives
in the second quarter of 2008 that are expected to yield annual
savings of approximately (U.S.) $15 million, making the total cost
reductions undertaken over the last 12 months approximately (U.S.)
$31 million annually. In addition, over the last six months, CDC
Software has seen improvements in several operating metrics
including utilization rates for software services professionals, as
well as improvements in the company�s sales pipeline. Also, CDC
Games is showing a strong recovery and expects to launch several
new games in the second half of this year. As a result of all these
factors, CDC Corporation is optimistic about the second half of
this year. �After the recent management re-alignment and our filing
to withdraw the planned initial public offerings for both CDC Games
and CDC Software, we are now singularly focused on improving
operational metrics and cash generation from the businesses,� said
Peter Yip, CEO of CDC Corporation. �Overall, CDC now has much lower
corporate overhead and the improved second half guidance is also
attributed to CDC Software�s pipeline. In fact, I will be
personally meeting with several key customers over the next several
months to reinforce CDC Software�s plans to stay ahead by
continuing to serve as a strategic technology partner�for�its
customer base by protecting their IT investments now and into the
future. We plan to accomplish this by providing the solutions that
will empower our customers to maximize productivity in this
challenging environment of rising fuel, transportation and
commodity costs. �As a result of our proactive strategy, we believe
we have built a strong financial foundation that will contribute to
a healthy outlook for the second half of 2008, even if the economy
further declines. With our renewed business focus which even if we
assume a flat license revenue run rate similar to what we achieved
in the first quarter of 2008, we feel confident we will improve
upon our first half of 2008 profitability performance by a
significant percentage during the second half of 2008. With all of
these positive indicators, I feel very comfortable in providing
this general guidance for the second half of 2008. We plan to
provide a formal guidance range for revenues and adjusted EBITDA
for the second half of 2008 when we formally announce Q2 results in
August.� About CDC Corporation The CDC family of companies includes
CDC Software focused on enterprise software applications and
services, CDC Games focused on online games, and China.com focused
on portals for the greater China markets. For more information
about CDC Corporation (NASDAQ: CHINA), please visit
www.cdccorporation.net. About CDC Software CDC Software, The
Customer-Driven Company�, is a provider of enterprise software
applications designed to help organizations deliver a superior
customer experience while increasing efficiencies and
profitability. CDC Software's product suite includes: CDC Factory
(manufacturing operations management), Ross ERP (enterprise
resource planning) and SCM (supply chain management), CDC Supply
Chain (supply chain management, warehouse management and order
management), Pivotal CRM and Saratoga CRM (customer relationship
management), CDC MarketFirst (marketing automation and lead
management), Respond (customer complaint and feedback management),
c360 CRM add-on products, industry solutions and development tools
for the Microsoft Dynamics CRM platform, Platinum HRM (human
resources) and business analytics solutions. These
industry-specific solutions are used by more than 6,000 customers
worldwide within the manufacturing, financial services, health
care, home building, real estate, wholesale and retail distribution
industries. The company completes its offerings with a full
continuum of services that span the life cycle of technology and
software applications, including implementation, project
consulting, outsourced business services, application management
and offshore development. CDC Software is the enterprise software
unit of CDC Corporation (NASDAQ: CHINA) and is ranked number 12 on
the MBT 2007 Global 100 List of Enterprise and Supply Chain
Management Application vendors. For more information, please visit
www.cdcsoftware.com. About China.com Inc. China.com is a leading
operator of Internet portals, serving a broad range of audiences in
China. In 2006, it was chosen as the first company to host Google's
Video Adsense which serves video ads targeted at China's
English-speaking audience. China.com also was appointed by the
Jilin government as the exclusive web sponsor of the 2007 Asian
Winter Games. China.com was listed on the GEM of the Stock Exchange
of Hong Kong Limited on March 9, 2000. In December 2000, China.com
Inc. was admitted as a constituent stock of the Hang Seng IT and IT
Portfolio Indices. About CDC Games CDC Games is one of the market
leaders of online and mobile games in China with more than 140
million registered users. The company pioneered the "free-to-play,
pay-for-merchandise" online games model in China with Yulgang and
launched the first free-to-play, pay for merchandise FPS (first
person shooter) game in China with Special Force. Launched in July
2007, Special Force has consistently ranked in the Top 10
downloaded games in China and becoming the top revenue producer for
CDC Games. Currently, CDC Games offers six popular MMO online games
in China that include: Special Force, Yulgang, Shaiya, Mir III,
Shine and Eve Online. In March 2007, the company announced the
formation of CDC Games Studio to establish strategic relationships
with selected games development partners to accelerate the
development of new, original online games for China and other
targeted global geographies. Through its CDC Games International
(CGI) subsidiary, the company launched a long-term strategy to be a
global publisher of MMO games. As part of this long term strategy,
CDC Games launched the www.12FootTall.com portal to showcase online
games and related content in North America. For more information on
CDC Games, visit: www.cdcgames.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 regarding the achievement of a substantial increase in
adjusted ANI and adjusted EBITDA during the second half of 2008,
our beliefs and expectations relating to the underlying factors
that may cause such increases in financial performance, our
expectations regarding the current and annualized savings yielded
by our cost savings measures and our ability to continue to
recognize and enjoy the benefits thereof, our beliefs regarding our
establishment of a strong financial foundation for our businesses,
our expectations regarding the amount of our increase in
profitability performance, if any, in the second half of 2008 over
the first half of 2008, our beliefs regarding the scalability of
our business model and the predictability of our revenues, our
expectations regarding the launch of new online games, our beliefs
regarding our future profit margins, our beliefs regarding the
sources of our revenue for the second half of 2008, our beliefs
regarding the general terms of engagements for our global services
customers, our beliefs regarding the continuation of improvements
in our operating metrics, our beliefs regarding our pipeline and
strategies with respect thereto, and other statements that are not
historical fact, the achievement of which involve risks,
uncertainties and assumptions. 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. 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 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 effects of restructurings
and rationalization of operations; (d) the ability to address
technological changes and developments including the development
and enhancement of products; (e) the entry of new competitors and
their technological advances; (f) the need to develop, integrate
and deploy enterprise software applications to meet customer's
requirements; (g) the possibility of development or deployment
difficulties or delays; (h) the dependence on customer satisfaction
with the company's software products and services; (i) continued
commitment to the deployment of the enterprise software solutions;
(j) risks involved in developing software solutions and integrating
them with third-party software and services; (k) the continued
ability of the company's enterprise software solutions to address
client-specific requirements; (l) demand for and market acceptance
of new and existing enterprise software and services and the
positioning of the company's solutions; (m) the ability of staff to
operate the enterprise software and extract and utilize information
from the company's enterprise software solutions; (n) the continued
cooperation of our strategic and business partners; (o) risks
relating to economic conditions and other matters beyond our
control; (p) the risk that the preliminary financial results
provided herein could differ from our actual results of operations
and financial condition; and (q) the continued strength of revenues
from our installed base 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
for the year ended December 31, 2007 on Form 20-F filed on June 30,
2008. 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.
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