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Summary
conference date: August 22, 2006
for quarter ending: June 31, 2006 (2nd quarter)
Overview: Best quarter in a while, as China.com division shows growth spurt. Increased 2007 guidance.
Basic data:
Total revenues were $77 million, up 19% sequentially from $64.4 million and 19% from $64.6 in the June 2005 quarter.
Enterprise software revenues were $57.7 million, up 9% sequentially and up 8% from June 2005.
China.com division revenues were $19.2 million, up 67% sequentially and 77% from June 2005. $7.7 million was from games. They now own 100% of 17games, which is where some of the revenue bump came from, rather than from organic growth.
GAAP net income was $7.9 million; non-GAAP was $10.5 million. That is up from essentially 0 (zero) in June 2005.
Cash ended at $214.9 million, down slightly from stock buyback program.
Guidance:
Guidance is now at $300 to 305 million in revenue and $31.6 to 32.8 million in adjusted net income for 2006. No 3rd quarter guidance due to MVS situation.
Conference Highlights:
$18 million free cash flow from operations.
New regulations may cut into MVS revenues short term, but believes will help in long run.
Believes enterprise software division can grow by specializing for vertical industries. But that's what all their competitors are saying as well. Working on SAAS (software as a service) solutions for customers, but competitors are doing the same.
Now 19 enterprise software customers in China, which is a good forward indicator since the China market is not as saturated as Europe and North America.
Hopes to list CDC games as a separate entity traded on a European exchange. Possible CDC Software spin-off as well. Still looking for acquisitions. Talking to potential China ERP company.
Looking for lines of credit or debt issuances to fund further R&D, to leave cash available for acquisitions.
Q&A:
Financial services space? Salesforce.com is competing at low end, but not when vertical expertise is needed. Claims getting viral-type growth as happy customers within a company make for further wins within the same company. Hiring best & brightest who have been set free during recent consolidations of larger ERP companies.
Microsoft relationship going very well. Will be targeting vertical markets in 2007.
Google deal in China does generate revenue for china.com; they get paid for clicks.
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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 2006 William P. Meyers