A robust second quarter served as the backdrop to another strategic acquisition by CDC Corp. this week, as the company looked to expand its supply chain offerings and customer base.
In the second quarter, ended June 30, China-based CDC Corp. reported revenue of $103.9 million, a 35% increase over the $77 million recorded in last year's second quarter, and the first time the company has surpassed $100 million in quarterly sales. Software, maintenance, and services yielded $64.4 million, up 50% from $42.8 million in the like period a year earlier. Overall license revenue soared 87%, while organic products saw a 34% year-over-year jump in license revenue. New customers represented 54% of the software revenue in the quarter, according to a statement.
The company also spent much more liberally to reap those rewards, with costs related to software and business services up 53% to $43.7 million, and administrative expenses 47% higher year over year. That contributed to a second-quarter net loss of $3.2 million, compared with net income of $7.9 million in the prior-year second quarter.
History has shown that CDC does not shy away from spending, having made numerous acquisitions on its path to building out vertical-industry expertise in a number of enterprise applications, among them core ERP, customer relationship management, and supply chain functions.
Intent on developing more capabilities in this last area, CDC this week announced that it had signed an agreement to acquire Catalyst International, a .NET-based provider of supply chain software and consulting services. Catalyst reported annual revenue of $35 million, according to a CDC statement, which did not divulge the acquisition price. Catalyst lists Boeing, Abbott Laboratories, Castle Metals, and Brown-Forman among its customers.
Catalyst's offerings, including CatalystCommand, for supply chain execution management; CatalystConnect, for process management; and CatalystCompass, for performance management, extend the capabilities of a manufacturer's supply chain technology by plugging into existing systems. Specific areas of functionality include warehouse management, transportation management, dynamic route planning, slotting, labor management, cross dock planning, and yard management.
CatalystCompass gives users reports, dashboards, and event management capabilities that Forrester analyst Ray Wang said should help CDC create an "event-driven architecture" and also provide "that final level of granularity" into supply chain occurrences. He noted that customers tasked with multi-channel fulfillment would likely benefit from the combined offerings.
"We are also excited about the advanced architecture of CatalystConnect, an event-driven, rules-based workflow platform that will serve as an integration backbone in the future for CDC Software's applications," said Eric Musser, CEO of CDC Software, in a statement. Officials would not comment on the pending acquisition today.
CDC Software plans to incorporate the acquired technology into its IMI Supply Chain line of products.
Catalyst also brings CDC a dedicated team of SAP consultants, who are expected to be folded into the CDC Global Services group.
CDC Corp. maintains a desultory portfolio of business units, including its China.com Internet portal; CDC Games, which offers online games; and CDC Mobile, through which it provides wireless communications services to customers in its home market of China.
The software division remains the crown jewel of the parent corporation, contributing 85% of total revenue, or $88.6 million in the second quarter. It also accounts for CDC's largest footprint in America — U.S. sales make up 60% of the unit's revenue — as a result of the company's string of North American acquisitions, including ERP vendor Ross Systems and CRM purveyors Pivotal Corp. and Saratoga Systems. CDC Corp. recently announced plans to spin out the software division in an initial public offering that is expected to attract as much as $225 million from investors. The IPO, scheduled to take place in the fourth quarter, must first meet with the Securities and Exchange Commission's approval.
"It's about time," Wang said, citing earlier hints of a possible IPO. The move will give CDC Software more cash to use for acquisitions as it maneuvers against other mid-market ERP providers, such as Exact Software, Sage Software, and Epicor Software, he said. CDC Corp. is expected to retain voting rights in the new company.