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chinadotcom Posts 26% Q-o-Q Revenue Growth to US$45.1 Million and
38% Q-o-Q Increase in Gross Profit to US$26.1 Million
Revenue Driven By Strong Growth In CRM Software And IVR Services Acquisition
Of Ross Systems Expected By End Of August, 2004
Financial Highlights for Q2 2004 vs. Q1 2004:
-- Total revenue including revenue from acquisitions rose 26% to US$45.1M,
compared to US$35.9M in Q1 2004.
-- Gross profit increased 38% to US$26.1M from US$18.9M in Q1 2004.
-- Gross margin was 58%, increasing from 53% in Q1 2004.
-- Operating loss was US$2.4M, compared to operating income of US$2.2M in Q1
2004.
-- Net loss was US$0.6M, compared to net income of US$4.3M in Q1 2004.
-- Non-GAAP net income was US$4.1M, compared to US$6.0M for Q1 2004.
The differences between US GAAP operating loss and net loss, and non-GAAP
operating income and net income were principally due to certain one-time, non-
cash charges including (i) purchase accounting adjustments related to Pivotal
and other acquisitions, including the revenue impact of deferred maintenance
revenue write-downs and stock compensation expenses, and (ii) litigation
settlement expenses.
Recent Highlights:
-- Strong core operating results, excluding purchase accounting adjustments,
contributed from Pivotal, the company's Customer Relationship Management
("CRM") software division.
-- The company continued to make progress in its acquisition of Ross Systems,
Inc. ("Ross"), a NASDAQ-listed Enterprise Resource Planning ("ERP") software
company. The meeting for Ross shareholders to vote on its Board of Directors'
recommendation to approve the merger with chinadotcom corporation will be held
at 10:00 a.m. EDT on Wednesday, August 25, 2004. If the Ross shareholders
approve the transaction, it would be expected to close on August 26, 2004.
HONG KONG, August 5 /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 second quarter of 2004 under US GAAP,
which are supplemented by non-GAAP measures.
For the quarter ended June 30, 2004, the company reported record net revenues
of US$45.1 million including from acquisitions, an increase of 144% from
US$18.5 million reported in the same period in 2003 and an increase of 26% from
US$35.9 million reported in the previous quarter. Software and consulting
services revenues totaled US$34.7 million for the quarter including a full
quarter of contribution from Pivotal, representing a 206% increase over US$11.3
million reported in the same period in 2003 and a 29% increase over US$26.9
million reported in the previous quarter. Mobile services and applications
revenues totaled US$7.6 million for the quarter, a 50% increase from US$5.1
million reported in the same period in 2003 and a 17% increase over US$6.5
million reported in the previous quarter. The increase in mobile services and
applications revenues was driven by a two month contribution from Go2joy and
growth in mobile value-added services such as Interactive Voice Response
("IVR") and Wireless Application Protocol ("WAP"). Total revenues from
advertising and marketing activities were US$2.8 million, representing an
increase of 78% from US$1.6 million reported in the same period in 2003 and a
17% sequential increase from US$2.4 million reported in Q1 2004.
Gross profit in Q2 2004 increased by 190% to US$26.1 million as compared to
US$9.0 million in Q2 2003 and increased by 38% from US$18.9 million in the
previous quarter. Gross margin in Q2 2004 was 58% as compared to 49% in Q2 2003
and 53% in the previous quarter.
Non-GAAP net income for Q2 2004 totaled US$4.1 million, compared to non- GAAP
net income of US$4.1 million for the same period in 2003, and US$6.0 million
for Q1 2004. Non-GAAP diluted earnings per share were 3.8 US cents for the
quarter, compared to 4.2 US cents for the same period of 2003 and 5.6 US cents
for the previous quarter. Non-GAAP net income excludes US$4.7 million of
non-recurring, non-cash charges related principally to (i) purchase accounting
adjustments related to the acquisition of subsidiaries, including the revenue
impact of deferred maintenance revenues write-downs, the amortization of
purchase intangibles and related deferred tax impact, and additional stock
compensation expenses, and (ii) litigation settlement expenses.
Reconciliation of US GAAP results to non-GAAP results*
Quarter Quarter Quarter
Ended Ended Ended
June 30, March 31, June 30,
2003 2004 2004
(unaudited) (unaudited) (unaudited)
Reconciliation of GAAP results to non-GAAP results:
GAAP net income/(loss) 4,078 4,334 (642)
Add back revenue impact of deferred
maintenance revenue write-
down related to the acquisition of a
subsidiary - - 946
Add back amortization of purchased
intangibles related
to the acquisition of subsidiaries 60 1,747 2,277
Add back stock compensation expenses
related to the
Acquisition of a subsidiary - 27 827
Settlement of litigation - - 1,613
Add back deferred tax impact on
purchased intangibles related
to the acquisition of subsidiaries - (123) (954)
Non-GAAP net income 4,138 5,985 4,067
* The information presented in the results highlights herein should be
read in conjunction with the description of non-GAAP Financial
Measures outlined later in this press release and the more detailed
financial statements included at the end of this press release.
On a US GAAP basis, a net loss was recorded in Q2 2004 of US$0.6 million
compared to a net income of US$4.1 million for the same period in 2003, and a
net income of US$4.3 million for Q1 2004. Diluted loss per share was 0.6 US
cents for the quarter, compared to diluted earnings per share of 4.1 US cents
for the same period of 2003 and 4.1 US cents for Q1 2004.
Daniel Widdicombe, Chief Financial Officer, said, "We are pleased to report a
solid quarter that, excluding one-time litigation and acquisition- related
adjustments, met our financial and operational objectives. In the second
quarter the company achieved record revenues, gross profit and gross profit
margins, while continuing its transformation into a larger, more
internationally-diversified entity."
The company's consolidated balance sheet at June 30, 2004 showed net cash and
cash equivalents of US$270 million and 104.7 million common shares outstanding.
Software and Consulting Services
Software and consulting services revenues for Q2 2004 were up 29% to US$34.7M
sequentially. Gross profit was up 54% quarter-on-quarter to US$18.5M with gross
margins for the software and consulting services businesses attaining 53% as
compared to 45% in Q1 2004. There were 63 new customers added to the software
unit in Q2, increasing the company's total customer base to approximately
2,650.
The company's CRM division, Pivotal, achieved 21% sequential growth in license
revenue, 12% sequential growth in overall revenues and added 33 new customers
in the quarter to a total number of 1,744 customers. During the quarter, the
company released Pivotal 5.1 with new usability and accessibility features
including advanced email management, enhanced integration with Microsoft Office
2003, improved mobility, and support for global, multi- language marketing
campaigns. The company also saw market validation in its vertical initiatives,
with strong reviews of its healthcare and financial services products.
Finally, the CRM division continued back office and facilities consolidation
with the company, further planned its Greater China distribution strategy and
engaged in cross selling opportunities with both the company's Australian
outsourcing unit and Ross.
"We are seeing strong momentum in our business, only a few short months after
completing the acquisition of Pivotal by chinadotcom," said Divesh Sisodraker,
President and CEO, Pivotal. "Our core operating profitability, combined with
chinadotcom's strong balance sheet, now enables us to make incremental
investments in our business. These investments will allow us to further
differentiate our CRM products, strengthen our position in our vertical markets
and enhance our ability to better serve our customers around the world."
The company's China enterprise software company added 30 new customers. The
company also added 4 new channel partnerships in China. The company is gaining
traction in China through its initiatives, which include direct sales
activities and expanding its China-based software development facility to
include development for its business intelligence and supply-chain management
("SCM") products. On the sales front, the company closed two important ERP
deals in China for the Ross iRenaissance product, Raybestos and Poly Plastics.
The company has also made steady progress in expanding its Shanghai software
development center.
The company's SCM division reported solid operating results with sequential
license revenue up 13% and operating margins improved to 48% from 41% in Q1
2004. Customers have reacted positively to the company's acquisition of a
majority stake in the SCM division, and the SCM division has retained 90% of
its maintenance customers including major renewals by Starbucks, Canon, Albert
Heijn, and British Airways.
The Australian application development and outsourcing unit continued its major
client contracts and expanded the scope of its services by adding CRM, business
intelligence, independent application testing and voice over IP consultancy
services. In May 2004, it was awarded an international application testing
contract for a key customer. The company has cautious optimism that the unit's
new offerings, combined with a changing Australian business environment, should
result in an improved performance at the unit by the end of the year.
In connection with the company's pending acquisition of Ross, the meeting date
for Ross shareholders to vote on its Board of Directors' recommendation to
approve the merger with chinadotcom corporation has been set at 10:00 a.m. EDT
on Wednesday, August 25, 2004. Shareholders of record as of the close of
business on July 13, 2004 will receive notice and be entitled to vote on the
merger. If Ross shareholders approve the merger, the transaction could close as
early as August 26, 2004. Full details of the proposed transaction and the
meeting were included in the proxy statement mailed on July 21, 2004 to holders
of Ross shares as of July 13, 2004. The company believes that similar to
Pivotal, there will likely be certain one-time, non-cash purchase accounting
adjustments related to the Ross merger including the revenue impact of deferred
maintenance revenue write-downs and stock compensation expense which could
affect the company's second half 2004 results.
Mobile Services and Applications
Mobile services and applications revenue grew 17% to US$7.6 million in Q2 2004
from US$6.5 million in Q1 2004. The company continued to benefit from its
diversified product offerings in mobile value-added services. Revenues from
2.5G (MMS and WAP) products, IVR and other new services grew approximately 519%
from US$0.2 million, or 4% of total mobile value-added services revenues for
the first quarter, to US$1.5 million, or over 20% of total mobile value- added
services revenues for the second quarter. However, total SMS revenues,
including Go2joy's SMS revenues contribution, decreased 3% from US$6.2 million
in Q1 2004 to US$6.0 million in Q2 2004. Due to changes in the regulatory
environment and policies of the mobile operators, the company saw a decline in
its SMS revenues, excluding acquisitions, recording a drop of 11% from US$6.2
million in Q1 2004 to US$5.5 million in Q2 2004.
During the quarter, the company increased the number of provincial WAP sites
from 9 in Q1 2004 to 14 in Q2 2004. In addition, the company has pursued an
important initiative to increase the number of its services embedded on STK
(SIM Tool Kit) cards offered by China Mobile and China Unicom in an effort to
increase usage of the company's services by STK users. At the end of Q2, 13
provincial China Mobile operators and 6 provincial China Unicom operators had
selected the company's services to be embedded into their STK cards.
As an initiative to further enhance its distribution network, the company has
partnered with TV stations such as Phoenix Satellite to provide services
including live and interactive quizzes, polling, and lucky draws via a user's
cellphone. The company has also signed licensing arrangements with leading
domestic and international media companies whereby the company is authorized to
use the content provided by these media companies in its mobile applications
services.
During the second quarter, the company's http://www.china.com/ portal
successfully launched its exclusive online search function utilizing Yahoo!'s
top search engine technology, "3721." The web pages of the portal were revamped
and upgraded to make the pages compatible with the new search engine. In
addition, the World Economic Forum named the http://www.china.com/ portal as
"One of the Most Valuable 500 Brands in China" in June 2004.
The http://www.china.com/ portal has been selected by the organizing committee
of The 10th China National Games as the exclusive online partner for The 10th
China National Games, which will be held in October 2005 in Jiangsu province,
China. As the exclusive online partner for the event, the
http://www.china.com/ portal was granted the right to build and support both
official and commercial websites and develop related online activities for the
entire event. Additionally, the portal has the right to provide mobile
applications services for the event.
Raymond Ch'ien, Executive Chairman said, "I am encouraged by the continuing
operational improvements made by our CRM division, Pivotal, and the strong
uptake of our IVR services in China. Once the Ross merger is concluded,
chinadotcom will have largely completed its transition from building scale
through acquisitions to focus on operational integration, customer-driven
product development and growth in our strategic sectors of enterprise software
and mobile applications. I have confidence in the company's future
performance."
Other Developments
The board of directors has agreed to extend CEO Peter Yip's leave of absence,
for medical reasons. Raymond Ch'ien, Executive Chairman has assumed CEO
responsibilities. In addition, the company has commissioned a search for a
senior manager to provide leadership in global integration processes.
Effective August 15, 2004, SVP of Finance and Administration Keith Oliver will
assume the role of CFO from Daniel Widdicombe, who has resigned from the
company. Mr. Oliver joined the company in January 2004 and has over 20 years of
experience in the financial management field. He was CFO of Dentsu Young &
Rubicam Asia for 4 years and spent 18 years with Philip Morris Asia where he
held various key positions including Regional Vice President, Finance. He was
the CFO at the company's parent prior to listing on NASDAQ, from 1997 to 1998.
Raymond Ch'ien said, "Dan helped steer the company exceptionally well through
several challenging years; executing the plan to right size the company's cost
base and placing the company on a sound fiscal platform. I am pleased he will
remain as an advisor to the company, and wish him well."
In addition, Rudy Chan has resumed the position of CEO of hongkong.com
subsequent to the resignation of former CEO of hongkong.com, John Xiao, who has
relocated to the U.S. The company also announced the appointment of Albert Lam
as COO of hongkong.com. Albert has over 20 years of experience in the
Telecommunications and IT industries in North America and Greater China. He was
previously COO of hongkong.com's subsidiary, Newpalm, until December 2002 and
seven years of his career were in senior management positions at Motorola
within Greater China.
On June 1, 2004, the company reached a settlement with 24/7 Real Media, Inc
("24/7") and their Chief Executive Officer, David Moore for the release of all
claims and the termination of all litigation matters involving the two
companies and their affiliates. 24/7 is a former shareholder of the company
and Mr. Moore was a former director of the company. The settlement resulted in
a net expense of US$1.6 million, which was recorded as a charge in Q2 2004.
Non-GAAP Financial 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, to exclude adjustments related to purchase accounting and
litigation expenses, in analyzing its financial results. 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.
Specifically, the company believes the non-GAAP results provide useful
information to both management and investors by excluding certain adjustments
that did not or are not in the future expected to result in cash payments and
certain adjustments that are related to purchase accounting or litigation
settlement. In particular, the adjusted presentation may be useful for
investors to assess the impact of recent and future acquisitions. Although the
company has historically reported 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.
The company's US GAAP net income for the quarter ended June 30, 2004 included
the following items: (i) a US$946,000 revenue impact of deferred maintenance
revenue write-downs related to the acquisition of a subsidiary; (ii) US$2.3
million additional amortization of purchased intangible assets related to the
acquisition of subsidiaries; (iii) US$827,000 stock compensation expenses
related to the acquisition of a subsidiary; (iv) US$1.6 million in net expenses
related to a litigation settlement; and (v) a US$954,000 credit of deferred tax
on purchased intangibles related to the acquisition of subsidiaries.
For the quarters ended March 31, 2004 and June 30, 2003, respectively, the
company's US GAAP net income included the following items: (i) US$1.7 million
and US$60,000, respectively, of additional amortization of purchased intangible
assets related to the acquisition of subsidiaries; (ii) US$27,000 and zero,
respectively, of stock compensation expense related to the acquisition of a
subsidiary; (iii) US$123,000 and zero, respectively, of credits of deferred tax
on purchased intangibles related to the acquisition of subsidiaries.
Conference Call
chinadotcom will hold a conference call to review its second quarter 2004
results at 9:00 am EDT on Thursday, August 5, 2004 (9:00 pm on August 5, 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 Q2 2004 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=107238
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 4999888.
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 over 1,400 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 release contains forward-looking statements that involve risks and
uncertainties, including those relating to the company's ability to
successfully transition its operations to focus to grow its software and mobile
applications businesses, sustain revenues, make progress in its financial
results, reduce cash usage from existing operations, migrate to higher margin
services and sustain profitability. All statements other than statements of
historical fact, including those with respect to the company's goals, plans,
prospects and strategies are forward-looking statements. The following factors
and uncertainties, among others, could cause actual results to differ
materially from those described in the forward-looking statements: (a) the
ability to realize strategic objectives by taking advantage of market
opportunities in its 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 its operations or new acquisitions in
accordance with its business strategy; (d) the effects of restructurings and
the ability to successfully support its 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 and manage an increasingly broad range of
businesses; (i) reduced importance of certain of its shareholders and existing
operations; (j) the ceasing of funding to certain business units who do not
meet stated objectives and the consequent related ramifications thereof; (k)
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 its software; (l)
increased global competition; (m) the ability to manage regulatory and
litigation risks; (n) the ability to rationalize its operations in a cost
effective manner, particularly as related to certain subsidiaries and
employees; (o) technological changes and developments; (p) general risks of the
software, mobile applications, Internet and marketing sectors; and (q) the
uncertain economic and political climate in Asia, the United States and
throughout the rest of the world and the potential that such climate may
deteriorate further.
This press release includes certain "forward-looking statements" within the
meaning of the United States Private Securities Litigation Reform Act of 1995.
These statements are based on chinadotcom management's current expectations and
are subject to risks and uncertainties and changes in circumstances. All
forward-looking statements included in this press release are based upon
information available to chinadotcom as of the date of the press release, and
it assumes no obligation to update or alter its forward looking statements
whether as a result of new information, future events or otherwise. Further
information on risks or other factors that could affect chinadotcom's results
of operations is detailed in its filings or submissions with the United States
Securities and Exchange Commission, including its Annual Report for the year
ended December 31, 2003 on Form 20-F/A filed on July 8, 2004.
chinadotcom corporation
Consolidated Statement of Operations
(Amounts in thousands of U.S. dollars, except per share data)
Quarter
Quarter Ended Ended
June 30,
March 31, 2004 2004
(unaudited) (unaudited)
Revenues
Software and consulting services 26,887 34,717
Mobile services and applications 6,467 7,580
Advertising and marketing
activities 2,384 2,791
Other income 121 60
35,859 45,148
Cost of revenues
Software and consulting services (14,874) (16,185)
Mobile services and applications (1,053) (1,651)
Advertising and marketing
activities (981) (1,119)
Other income (70) (54)
(16,978) (19,009)
Gross profit 18,881 26,139
Gross Margin % 53% 58%
Selling, general and administrative
expenses (13,690) (21,092)
Research and development expenses (674) (4,549)
Depreciation and amortization
expenses (2,315) (2,866)
(16,679) (28,507)
Operating income/(loss) 2,202 (2,368)
Interest income 2,797 2,404
Interest expense (392) (492)
Gain on disposal of available-for-
sale securities 299 47
Impairment of available-for-sale
securities - (373)
Gain/(loss) on disposal of
subsidiaries and investments 53 (29)
Other non-operating gains - -
Other non-operating losses - -
Share of income in equity investees 6 -
Income/(loss) before income taxes 4,965 (811)
Income taxes benefits/(expenses) (19) 752
Income/(loss) before minority
interests 4,946 (59)
Minority interests in income of
consolidated subsidiaries (665) (583)
Income/(loss) from continuing
operations 4,281 (642)
Discontinued operations
Loss from operations - -
Income from disposal 53 -
Net income/(loss) 4,334 (642)
Basic earnings/(losses) per share 0.0422 (0.0062)
Diluted earnings/(losses) per share 0.0406 (0.0062)
Weighted average number of shares 102,611,756 104,252,061
Diluted number of shares 106,788,279 104,252,061
Reconciliation from GAAP results to
non-GAAP results:
GAAP net income/(loss) 4,334 (642)
Add back revenue impact of deferred
maintenance revenue
write down related to the
acquisition of a subsidiary - 946
Add back amortization of purchased
intangibles related to the
acquisition of subsidiaries 1,747 2,277
Add back stock compensation
expenses related to the
acquisition of a subsidiary 27 827
Settlement of litigation with 24/7
Media Inc. - 1,613
Add back deferred tax impact on
purchased intangibles related to
the acquisition of subsidiaries (123) (954)
Non-GAAP net income 5,985 4,067
chinadotcom corporation
Consolidated Statement of Operations
(Amounts in thousands of U.S. dollars, except per share data)
Quarter
Quarter Ended Ended
June 30,
June 30, 2003 2004
(unaudited) (unaudited)
Revenues
Software and consulting services 11,327 34,717
Mobile services and applications 5,056 7,580
Advertising and marketing
activities 1,565 2,791
Other income 540 60
18,488 45,148
Cost of revenues
Software and consulting services (7,899) (16,185)
Mobile services and applications (692) (1,651)
Advertising and marketing
activities (707) (1,119)
Other income (172) (54)
(9,470) (19,009)
Gross profit 9,018 26,139
Gross Margin % 49% 58%
Selling, general and administrative
expenses (6,610) (21,092)
Research and development expenses - (4,549)
Depreciation and amortization
expenses (1,545) (2,866)
(8,155) (28,507)
Operating income/(loss) 863 (2,368)
Interest income 3,364 2,404
Interest expense (273) (492)
Gain on disposal of available-for-
sale securities 1,343 47
Impairment of available-for-sale
securities - (373)
Gain/(loss) on disposal of
subsidiaries and investments (182) (29)
Other non-operating gains - -
Other non-operating losses (632) -
Share of income in equity investees 11 -
Income/(loss) before income taxes 4,494 (811)
Income taxes benefits/(expenses) (604) 752
Income/(loss) before minority
interests 3,890 (59)
Minority interests in income of
consolidated subsidiaries (136) (583)
Income/(loss) from continuing
operations 3,754 (642)
Discontinued operations
Loss from operations (1,976) -
Income from disposals 2,300 -
Net income/(loss) 4,078 (642)
Basic earnings/(losses) per share 0.0409 (0.0062)
Diluted earnings/(losses) per share 0.0409 (0.0062)
Weighted average number of shares 99,813,334 104,252,061
Diluted number of shares 99,813,334 104,252,061
Reconciliation from GAAP results to
non-GAAP results:
GAAP net income/(loss) 4,078 (642)
Add back revenue impact of deferred
maintenance revenue
write down related to the
acquisition of a subsidiary - 946
Add back amortization of purchased
intangibles related to the
acquisition of subsidiaries 60 2,277
Add back stock compensation
expenses related to the
acquisition of a subsidiary - 827
Settlement of litigation with 24/7
Media Inc. - 1,613
Add back deferred tax impact on
purchased intangibles related to
the acquisition of subsidiaries - (954)
Non-GAAP net income 4,138 4,067
chinadotcom corporation
Consolidated Balance Sheets
(Amounts in thousands of U.S. dollars)
March 31, June 30,
2004 2004
(unaudited) (unaudited)
ASSETS
Current assets:
Cash and cash equivalents 125,510 93,023
Restricted cash 5,931 5,555
Accounts receivable 25,837 28,582
Deposits, prepayments and other
receivables 13,355 12,631
Loan receivables 1,200 1,200
Available-for-sale debt
securities 118,119 156,974
Restricted debt securities 92,656 30,620
Deferred tax assets 240 240
Total current assets 382,848 328,825
Loan receivables 25,000 25,000
Property and equipment, net 8,789 9,384
Goodwill 121,838 127,323
Intangible assets 67,730 64,508
Investment in equity investees 439 330
Investments under cost method 609 256
Available-for-sale debt
securities 9,700 9,700
Restricted debt securities 11,908 11,880
Available-for-sale equity
securities 690 464
Deferred tax assets 305 1,136
Other assets 4,469 4,865
Total assets 634,325 583,671
LIABILITIES AND SHAREHOLDERS'
EQUITY
Current liabilities:
Accounts payable 7,835 13,020
Other payables 3,897 4,121
Purchase consideration payable - -
Accrued liabilities 41,819 36,254
Short-term bank loans 77,180 26,152
Long-term bank loans, current
portion 171 171
Deferred revenue 20,717 20,004
Income tax payable 1,011 873
Total current liabilities 152,630 100,595
Deferred tax liabilities 1,206 1,082
Long term debts, net of current
portion 11,574 11,446
Accrued pension liability 2,005 1,748
Minority interests 46,648 46,829
Shareholders' equity:
Share capital 26 26
Additional paid-in capital 639,108 644,120
Treasury stock (4,067) (4,067)
Accumulated deficits (214,559) (215,201)
Accumulated other comprehensive
income (246) (2,907)
Total shareholders' equity 420,262 421,971
Total liabilities and
shareholders' equity 634,325 583,671
Number of outstanding shares 103,982,109 104,696,654
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 March 31, 2004
GAAP non-GAAP
results Adjustments results
(unaudited) (unaudited)
Revenues
Software and consulting services 26,887 26,887
Mobile services and applications 6,467 6,467
Advertising and marketing
activities 2,384 2,384
Other income 121 121
35,859 - 35,859
Cost of revenues
Software and consulting services (14,874) 641 B (14,233)
Mobile services and applications (1,053) (1,053)
Advertising and marketing
activities (981) (981)
Other income (70) (70)
(16,978) 641 (16,337)
Gross profit 18,881 641 19,522
Gross Margin % 53% 54%
Selling, general and administrative
expenses (13,690) 27 C (13,663)
Research and development expenses (674) (674)
Depreciation and amortization expenses (2,315) 1,106 B (1,209)
(16,679) 1,133 (15,546)
Operating income/(loss) 2,202 1,774 3,976
Interest income 2,797 2,797
Interest expense (392) (392)
Gain on disposal of available-for-sale
securities 299 299
Impairment of available-for-sale
securities - -
Gain/(loss) on disposal of
subsidiaries and investments 53 53
Other non-operating gains - -
Other non-operating losses - -
Share of income in equity investees 6 6
Income/(loss) before income taxes 4,965 1,774 6,739
Income taxes benefits/(expenses) (19) (123) E (142)
Income/(loss) before minority
interests 4,946 1,651 6,597
Minority interests in income of
consolidated subsidiaries (665) (665)
Income/(loss) from continuing
operations 4,281 1,651 5,932
Discontinued operations
Loss from operations - -
Income from disposal 53 53
Net income/(loss) 4,334 1,651 5,985
Basic earnings/(losses) per share 0.0422 0.0583
Diluted earnings/(losses) per share 0.0406 0.0560
Weighted average no. of shares 102,611,756 102,611,756
Diluted no. of shares 106,788,279 106,788,279
non-GAAP adjustments:
A) Add back revenue impact of deferred maintenance revenue write down
related to the acquisition of a subsidiary.
B) Add back amortization of purchased intangibles related to the
acquisition of subsidiaries.
C) Add back stock compensation expenses related to the acquisition of a
subsidiary of $27 for quarter ended March 31, 2004 and $827 for quarter
ended June 30, 2004
D) Settlement of litigation with 24/7 Media Inc. of $1,613 for the
quarter ended June 30, 2004.
E) Add back deferred tax impact 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 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 (21,092) 2,440 C,D (18,652)
Research and development expenses (4,549) (4,549)
Depreciation and amortization
expenses (2,866) 1,660 B (1,206)
(28,507) 4,100 (24,407)
Operating income/(loss) (2,368) 5,663 3,295
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)
Gain/(loss) on disposal of
subsidiaries and investments (29) (29)
Other non-operating gains - -
Other non-operating losses - -
Share of income in equity investees - -
Income/(loss) before income taxes (811) 5,663 4,852
Income taxes benefits/(expenses) 752 (954) E (202)
Income/(loss) before minority
interests (59) 4,709 4,650
Minority interests in income of
consolidated subsidiaries (583) (583)
Income/(loss) from continuing
operations (642) 4,709 4,067
Discontinued operations
Loss from operations - -
Income from disposal - -
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 no. of shares 104,252,061 104,252,061
Diluted no. 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 a subsidiary.
B) Add back amortization of purchased intangibles related to the
acquisition of subsidiaries.
C) Add back stock compensation expenses related to the acquisition of a
subsidiary of $27 for quarter ended March 31, 2004 and $827 for quarter
ended June 30, 2004
D) Settlement of litigation with 24/7 Media Inc. of $1,613 for the
quarter ended June 30, 2004.
E) Add back deferred tax impact 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 June 30, 2003
GAAP non-GAAP
results Adjustments results
(unaudited) (unaudited)
Revenues
Software and consulting services 11,327 11,327
Mobile services and applications 5,056 5,056
Advertising and marketing
activities 1,565 1,565
Other income 540 540
18,488 - 18,488
Cost of revenues
Software and consulting services (7,899) 60 B (7,839)
Mobile services and applications (692) (692)
Advertising and marketing
activities (707) (707)
Other income (172) (172)
(9,470) 60 (9,410)
Gross profit 9,018 60 9,078
Gross Margin % 49% 49%
Selling, general and administrative
expenses (6,610) (6,610)
Research and development expenses - -
Depreciation and amortization expenses (1,545) (1,545)
(8,155) - (8,155)
Operating income/(loss) 863 60 923
Interest income 3,364 3,364
Interest expense (273) (273)
Gain on disposal of available-for-sale
securities 1,343 1,343
Impairment of available-for-sale
securities - -
Gain/(loss) on disposal of
subsidiaries and investments (182) (182)
Other non-operating gains - -
Other non-operating losses (632) (632)
Share of income in equity investees 11 11
Income/(loss) before income taxes 4,494 60 4,554
Income taxes benefits/(expenses) (604) (604)
Income/(loss) before minority
interests 3,890 60 3,950
Minority interests in income of
consolidated subsidiaries (136) (136)
Income/(loss) from continuing
operations 3,754 60 3,814
Discontinued operations
Loss from operations (1,976) (1,976)
Income from disposals 2,300 2,300
Net income/(loss) 4,078 60 4,138
Basic earnings/(losses) per share 0.0409 0.0415
Diluted earnings/(losses) per share 0.0409 0.0415
Weighted average no. of shares 99,813,334 99,813,334
Diluted no. of shares 99,813,334 99,813,334
non-GAAP adjustments:
A) Add back revenue impact of deferred maintenance revenue write down
related to the acquisition of a subsidiary.
B) Add back amortization of purchased intangibles related to the
acquisition of subsidiaries.
C) Add back stock compensation expenses related to the acquisition of
a subsidiary of $827 for quarter ended June 30, 2004
D) Settlement of litigation with 24/7 Media Inc. of $1,613 for the
quarter ended June 30, 2004.
E) Add back deferred tax impact 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 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 (21,092) 2,440 C,D (18,652)
Research and development expenses (4,549) (4,549)
Depreciation and amortization
expenses (2,866) 1,660 B (1,206)
(28,507) 4,100 (24,407)
Operating income/(loss) (2,368) 5,663 3,295
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)
Gain/(loss) on disposal of
subsidiaries and investments (29) (29)
Other non-operating gains - -
Other non-operating losses - -
Share of income in equity investees - -
Income/(loss) before income taxes (811) 5,663 4,852
Income taxes benefits/(expenses) 752 (954) E (202)
Income/(loss) before minority
interests (59) 4,709 4,650
Minority interests in income of
consolidated subsidiaries (583) (583)
Income/(loss) from continuing
operations (642) 4,709 4,067
Discontinued operations
Loss from operations - -
Income from disposals - -
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 no. of shares 104,252,061 104,252,061
Diluted no. 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 a subsidiary.
B) Add back amortization of purchased intangibles related to the
acquisition of subsidiaries.
C) Add back stock compensation expenses related to the acquisition of
a subsidiary of $827 for quarter ended June 30, 2004
D) Settlement of litigation with 24/7 Media Inc. of $1,613 for the
quarter ended June 30, 2004.
E) Add back deferred tax impact on purchased intangibles related to
the acquisition of subsidiaries.
For further information, please contact:
Media Relations
Jane Cheng, Public Relations
Tel: +852-2961-2750
Fax: +852-2571-0410
e-mail:
Investor Relations
Craig Celek, VP, Investor Relations
Tel: +1-(212)-661-2160
Fax: +1-(973)-591-9976
e-mail:
DATASOURCE: chinadotcom corporation
CONTACT: Media Relations - Jane Cheng, Public Relations,
+852-2961-2750, or fax, +852-2571-0410, or , Investor
Relations - Craig Celek, Vice President, Investor Relations, +1-212-661-2160,
or fax, +1-973-591-9976, or , both of chinadotcom
corporation
Web site: http://www.corp.china.com/