CDC Software Reports Third Quarter 2011 Results

Shanghai, Atlanta, December 13, 2011 — CDC Software Corporation (OTC:CDCS), a global enterprise software provider of on-premise and cloud deployments, today announced financial results for the quarter ended September 30, 2011. For the third quarter of 2011, Non-GAAP revenue(a) was $53.4 million and Non-GAAP net income(a) was $4.6 million, or $0.17 per share, compared to Non-GAAP revenue of $54.2 million and Non-GAAP net income of $6.9 million, or $0.24 per share in the third quarter of 2010.

In the third quarter of 2011, Adjusted EBITDA(a) was $6.7 million, compared to $4.9 million in the second quarter of 2011 and $9.9 million in the same period in Q3 2010. In the third quarter of 2011, compared to the same quarter last year, CDC Software continued to invest in sales and marketing and research and development (R&D) for both its on-premise and cloud segments. GAAP gross profit was $31.2 million and gross margin was 58 percent in the third quarter of 2011, compared to $29.3 million in gross profit and gross margin of 55 percent in the third quarter of 2010. DSO (days sales outstanding) in the third quarter of 2011 was 63 days, compared to 69 days for the third quarter of 2010.

Total Non-GAAP recurring revenue(a), which CDC Software defines as Non-GAAP maintenance(a) plus SaaS revenue was $30.2 million in the third quarter of 2011, compared to $30.4 million in the third quarter of 2010. Non-GAAP services revenue was $13.7 million for the third quarter 2011, compared to $14.2 million for the third quarter of 2010. During the third quarter of 2011, approximately 36 percent of license revenue was derived from North America, 49 percent from EMEA, and 15 percent from Asia/Pacific.

Application sales, which is comprised of license revenue plus Secured Total Contract Value (STCV) for Software-as-a-Service (SaaS) sales secured, was $13.2 million during the third quarter of 2011 and $14.0 million in the third quarter of 2010. Application sales for the third quarter of 2011 included license revenue of $8.3 million and STCV, or bookings, for Software-as-a-Service (SaaS) sales of $4.9 million, compared to license revenue of $9.0 million and STCV of $5.0 million in the third quarter of 2010. STCV is the contract dollar amount for the duration of the contracts for all SaaS contracts secured, including new logo contracts, upsell, rental, as well as all renewals received by the end of the quarter.

Third quarter 2011 Total Contract Backlog (TCB) increased to a record $149.5 million, compared to $148.0 million in the second quarter of 2011. TCB is defined as the sum of the remaining revenue value of SaaS and term license or rental contracts through the end of their respective term, the value of contracted renewals for current SaaS and rental contracts based on 12 months of value, plus maintenance revenues from existing contracts over the previous 12 months.

For the third quarter of 2011, CDC Software’s Cloud business segment reported Non-GAAP revenue of $6.7 million, compared to Non-GAAP revenue of $7.1 million in the third quarter of 2010. The Cloud segment reported negative Adjusted EBITDA of $8,000 in the third quarter of 2011, compared to Adjusted EBITDA of $1.3 million in the third quarter of 2010, due to increased investment in sales and marketing and research and development activities.

Overall, earnings for CDC Software in the third quarter of 2011 have continued to be impacted by increased investments in sales and marketing, R&D as well as increased expenses for certain legal and governance matters related primarily to the litigation and settlement of Ross Systems’ Sunshine Mills lawsuit and the investigation undertaken by the special committee of the board of directors.

“We are pleased with our results for Q3 2011, including record TCB and increases in Adjusted EBITDA in Q3 2011, compared to the previous quarter, as well as improvement in our gross profit in Q3 compared to the same period last year,” said CK Wong, interim CEO of CDC Software. “While total revenue was generally flat year over year, we achieved record TCB which we believe illustrates the growth mode of our Cloud business. Compared to last year, our profitability in Q3 2011 was impacted primarily by continued increases in spending for sales and marketing, product engineering and legal expenses.”

Wong added, “Notable sales wins this quarter included a seven digit license sale to a leading U.K. financial services firm and a half a million license deal to a major financial services firm in India. We also secured two separate deals, valued each at more than $600,000, for TradeBeam and CDC eCommerce.”

Company Highlights:

During the third quarter of 2011, CDC Software introduced several new products and version upgrades for its core on-premise ERP, customer relationship management and business process management applications. New cloud products delivered in the third quarter of 2011 included iSupply 7.6, a new version release of its collaborative supply chain management solution, and a new version of CDC eCommerce.

Major on-premise sales wins in the third quarter of 2011 included a seven digit CDC Respond deal to a large financial services installed-base customer in the U.K and a half a million dollar Pivotal deal to a major financial services firm in India. Other major deals for Q3 2011 included a CDC Factory sale to a major installed-base food processor, a new logo deal to a major private label food manufacturer and a new logo CDC Supply Chain sale to a Nordic retailer. During the third quarter of 2011, key SaaS deals were from the company’s TradeBeam and CDC eCommerce product lines, as well as its Nordic hosting business.

Share Buyback:

Between August 2009 and Sept. 30, 2011, CDC Software, management, Peter Yip and family members and certain affiliates of the company, have purchased an aggregate of approximately 1.7 million shares at an average price of $7.56 per share. The company’s 10b5-1 repurchase plan is no longer in effect and company repurchases of its shares have ceased as of October 2011.

Concluding Remarks:

“CDC Software is an independent public company that has a fiscally-sound foundation with virtually no debt,” Wong noted. “However, confusion continues to exist in the market between CDC Corporation and CDC Software, and this important distinction is often overlooked. While CDC Corporation’s bankruptcy filing does not significantly affect the day-to-day operations and assets of CDC Software, we anticipate that CDC Corporation’s Chapter 11 filing will have a significant adverse impact on CDC Software’s revenues in the fourth quarter of 2011. We have taken, and are continuing to take, affirmative, proactive steps to help address this situation, but we believe that this effect will continue, to some extent, until CDC Corporation emerges from the Chapter 11 process.”

Mr. Wong added, ”It is also worth emphasizing that contrary to some of the inaccurate and confusing messages communicated by competitors to our current customers and prospects, CDC Software has not filed for bankruptcy and our positive operating results is testament to the financial health and viability of our organization.

“Despite the several, significant challenges we have faced, we believe we achieved a solid performance during Q3 2011,” Wong said. “Although we continue to face additional issues, as disclosed in our recent public filings, we continue to remain committed to delivering world-class solutions to our customers by continuing to invest in our products and providing outstanding customer service.”

Revised 2010 Information:

Results provided herein for 2010 have been revised from those previously reported in the company’s press releases due to certain year-end adjustments required to be made in connection with the preparation of the company’s financial statements for the year ended December 31, 2010. The revisions recorded by the company for 2010 included a $123.5 million goodwill impairment charge, $112.8 million of which related to its on-premise business and $10.8 million of which related to its Cloud business. The company also recorded a $1.3 million impairment charge for identifiable intangible assets in its on-premise segment and $7.5 million of tax related purchase accounting adjustments relating to the company’s TradeBeam acquisition. Furthermore, in accordance with U.S. GAAP, management accrued a loss contingency of $10.0 million related to the litigation between the company’s subsidiary, Ross Systems, Inc, and Sunshine Mills, Inc. as of December 31, 2010. This matter was subsequently settled in September 2011 for a payment of $9.0 million in cash to Sunshine Mills, Inc. and $500,000 into escrow. Additional adjustments relate to changes in estimates which impacted the reserves for litigation settlements, purchase consideration payables, and valuation of deferred tax assets and deferred tax liabilities.

Footnotes:

a) Adjusted Financial Measures

This press release includes Non-GAAP revenue, Non-GAAP net income, Adjusted EBITDA and Non-GAAP recurring revenue, which are not prepared in accordance with generally accepted accounting principles in the United States (“GAAP”) (collectively, the "Non-GAAP Financial Measures"). Non-GAAP Financial Measures are not alternatives for measures such as net income, earnings per share, and others, prepared under GAAP. These Non-GAAP Financial Measures may also be different from non-GAAP measures used by other companies. Non-GAAP Financial Measures should not be used as a substitute for, or considered superior to, measures of financial performance prepared in accordance with GAAP.

Investors should be aware that these Non-GAAP Financial Measures have inherent limitations, including their variance from certain of the financial measurement principals underlying GAAP, should not be considered as a replacement for GAAP performance measures, and should be read in conjunction with our consolidated financial statements prepared in accordance with GAAP. These supplemental Non-GAAP Financial Measures should not be construed as an inference that the Company's future results will be unaffected by similar adjustments determined in accordance with GAAP. Reconciliations of Non-GAAP Financial Measures to GAAP are provided herein immediately following the financial statements included in this press release.

All dollar amounts are in U.S. dollars

Special Note Regarding CDC Software Financial Results

The financial results provided herein apply only to CDC Software Corporation, a subsidiary of CDC Corporation. These financial results do not apply to, and are not indicative of, the consolidated financial results of CDC Corporation, or the financial results of CDC Games Corporation, China.com, Inc. or any of their respective subsidiaries. Investors are cautioned not to place reliance on the financial results set forth herein for purposes of any investment decision with respect to the shares of CDC Corporation, and should read the foregoing in conjunction with the reports and other materials filed with the United States Securities and Exchange Commission by CDC Corporation and CDC Software Corporation, from time to time.


About CDC Software

CDC Software, (OTC:CDCS) The Customer-Driven Company™, is a global enterprise software provider of on-premise and cloud deployments. Leveraging a service-oriented architecture (SOA), CDC Software offers multiple delivery options for their solutions including on-premise, hosted, cloud-based SaaS or blended-hybrid deployment offerings. CDC Software’s solutions include enterprise requirements planning (ERP), manufacturing operations management, enterprise manufacturing intelligence, supply chain management (demand management, order management and warehouse and transportation management), global trade management, eCommerce, human capital management, government and not-for-profit, customer relationship management (CRM), complaint management, business intelligence/analytics and aged care solutions.

CDC Software’s acquisitions are part of its “integrate, innovate and grow” strategy. Fueling the success of this strategy is the company’s global scalable business and technology infrastructure featuring multiple complementary applications and services, domain expertise in vertical markets, cost effective product engineering centers in India and China, a highly collaborative and fast product development process utilizing Agile methodologies, and a worldwide network of direct sales and channel operations. This strategy has helped CDC Software deliver innovative and industry-specific solutions to more than 10,000 customers worldwide within the manufacturing, distribution, transportation, retail, government, real estate, financial services, health care, and not-for-profit industries. For more information, please visit www.cdcsoftware.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 forward-looking statements include statements regarding our expectations regarding the factors that will impact revenue and earnings in current and subsequent periods, our beliefs and expectations regarding TCB and potential growth in our Cloud business, our beliefs regarding the impact of CDC Corporation’s Chapter 11 filing on CDC Software’s business, revenue, prospects and results of operations, as well as the steps CDC Software has taken with respect thereto and the continuation and duration thereof, our beliefs about customer perceptions, our beliefs about any continued investment in sales and marketing and research and development for our Cloud and on premise businesses and the impact thereof on our earnings now and in future periods, including the continuation of such impact and the potential benefits of these investments, our beliefs regarding any trends we may see, and other statements that are not historical fact, the achievement of which involve risks, uncertainties and assumptions. 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 risk of ongoing, increased expenses and liability related to litigation matters we may now face or in the future become a party to, as well as potential negative market perception related to the foregoing and the potential impact thereof on our business, operations and financial condition; (b) risks related to the impact of CDC Corporation’s Chapter 11 filing on CDC Software’s business, prospects and results of operations, and the continuation and duration thereof; (c) risks related to the trading halt and subsequent suspension of trading of our shares and the potential de-listing from NASDAQ; (d) risks related to the recent resignation of Deloitte as our independent auditors and our ability to retain a replacement independent auditor; (e) risks related to decreased liquidity and access to capital as a result of the recent closure of our credit facility with Wells Fargo Capital Finance, and increased difficulty in obtaining credit; (f) risks related to the variability of, and basis for, any assessments and estimates made by management herein, including any impairment or other charges or accruals that we may make from time to time, which are subject to change; (e) the ability to realize strategic objectives by taking advantage of market opportunities in targeted geographic markets; (g) risks related to our Cloud business; (h) 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; (i) the effects of restructurings and rationalization of operations in our companies; (j) the ability to address technological changes and developments including the development and enhancement of products; (k) the ability to develop and market successful products and services; (l) the entry of new competitors and their technological advances; (m) the need to develop, integrate and deploy enterprise software applications to meet customer's requirements; (n) the possibility of development or deployment difficulties or delays; (o) the dependence on customer satisfaction with the company's software products and services; (p) continued commitment to the deployment of our enterprise software products, including on-premise and cloud deployments; (q) risks involved in developing software solutions and integrating them with other software and services; (r) the continued ability of the company's products and services to address client-specific requirements; (s) demand for and market acceptance of new and existing software and services, and the positioning of the company's solutions; and (t) the ability of our customers’ staff to operate the enterprise software and extract and utilize information from the company's products and services. If any such risks or uncertainties materialize or if any of the assumptions or estimates proves incorrect, our results could differ materially from the results expressed or implied by the forward-looking statements we make. Further information on risks or other factors that could cause results to differ is detailed in our filings or submissions with the United States Securities and Exchange Commission, including our Annual Report on form 20-F for the year ended December 31, 2009, filed with the SEC on June 1, 2010, and those of our ultimate parent company, CDC Corporation. 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. Historical results are not indicative of future performance.

For More Information

Media Relations

Lorretta Gasper
CDC Software
(678) 259-8631
lgasper@cdcsoftware.com

Investor Relations

Monish Bahl
CDC Corporation
(678) 259-8510
monishbahl@cdcsoftware.com

CDC Software: The Customer-Driven Company™