UBS MSCI CHINA A SF UCIT... (BIT:CHINA)
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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