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conference date: February 9, 2007
for quarter ending: December 31, 2006 (4th quarter)
Note: figures discussed are preliminary results. Final results for Q4 will not be available until early March.
Overview: Revenues increasing at nice pace.
Basic data:
Revenues were $87.2 to $88.2 million, up approximately 12% sequentially and 41% over Q4 2005.
Non-GAAP net income for all 2006 was $34.3 to $35.0 million, up 119% from 2005 levels.
Guidance:
2007 full year revenues between $401 and $411 million. Adjusted (non-GAAP) net income of $55 to $60 million. Believes growth will be organic plus some small acquisition completions.
Conference Highlights:
Some softness in MVAS (mobile value added services) in China, but believes in its long-term potential. In the future a write-down of some of CDC Mobile's MVAS investments is possible.
CDC now has two divisions, (1) Enterprise Software and Business Services and (2) China New Media [China.com; Mobile; Games].
For CDC Games reiterated prior news about Yulgang and pipeline.
Mobile division continues soft due to regulatory changes in China. Reiterated acquisition and partnership news.
CDC Software had license revenues of $13.8 to $14.2 million in Q4, a 37% increase year-over-year.
Q&A:
CDC mobile write-down? Annual testing date was December 31, have not determined yet if it there will be an impairment. Q4 revenue was up slightly over Q3. Making operational changes to enhance position. TimeCard online mobile game being brought out. Getting user-content ready for 3G changeover, which will accelerate in 2008.
Detail on operating margins by group? Not audited yet, will release in March.
License software growth causes? Biggest changes are people are contacting them, rather than them having to call out. That is due to becoming better known in vertical markets. Also improved vertical products. Some markets are still left unserved, which provide additional opportunities. Many more deals now in China.
2007 software outlook? Primary product has 15% growth. Total organic growth is 11 to 12%, but trying to beat that. ERP and CRM products in verticals have great demand. Going to do more in manufacturing process manufacturing.
Mobile regulations in China going forward? Hope have seen worst of regulatory changes. China ministry did a 2006 year-end inspection had some impact. In the long run they think the changes are for the good.
New Pivotal software release allows for integration with mobile services for salesmen.
Are still looking for a software acquisition in China.
Margin expansion sectors? As we get more scale in software space our margins do expand. Same for games.
Gaming launch dates? 3 game in pipeline right now. Special Force is in beta 1, with beta 2 to launch this month. Open beta by end of quarter. Stone Age 2 and Lord of the Rings will launch in second half of 2007. Still looking to license more games.
Are new customers switching from competitor, or totally new? Seeing people switch, mainly from competitors have been consolidated. But in mid-market still many customers have never put in CRM or ERM or are moving from home-grown platforms. Selling more into installed base as well.
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Disclaimer: Our analyst summaries may include both our condensations of statements made by company representatives and our own analysis. They are not covered by any warranty. We cannot guarantee anything said by company representatives is true. Before making or terminating an investment you should always verify any factual basis of your decision.
Copyright 2007 William P. Meyers