Total revenues increased 21% year-over-year, exceeding guidance
BEIJING, May 20 /PRNewswire-Asia/ -- eFuture Information Technology Inc. (Nasdaq: EFUT, the "Company" or "eFuture"), a leading provider of software and services in China's rapidly growing retail and consumer goods industries, today announced its unaudited financial results for the first quarter ended March 31, 2010.
First Quarter 2010 Financial Highlights:
-- Total revenues increased 20.9% year-over-year to RMB16.7 million
(US$2.5 million).
-- Revenue from software license sales increased 15.7% year-over-year
to RMB5.7 million (US$838,617).
-- Revenue from hardware sales increased 56.2% year-over-year to
RMB2.2 million (US$319,203).
-- Service fee income increased 17.7% year-over-year to RMB8.8 million
(US$1.3 million).
-- Gross profit increased 19.4% year-over-year to RMB5.4 million
(US$778,730). Gross margin decreased slightly to 32.2% from 32.6% in
the first quarter 2009.
-- Operating loss was RMB13.5 million (US$2.0 million) from RMB9.3 million
in the first quarter 2009.
-- Net loss was RMB10.9 million (US$1.6 million), compared with a net loss
of RMB7.5 million in the first quarter 2009.
-- Diluted net loss per share was RMB3.14 (US$0.44), as compared to a net
loss per share of RMB2.22 in the first quarter 2009.
-- Adjusted net loss (non-GAAP) was RMB5.1 million (US$752,765), compared
to an adjusted net loss of RMB2.8 million in the first quarter 2009.
-- Non-GAAP adjusted diluted losses per share was RMB1.46 (US$0.21),
compared to RMB0.82 in the first quarter 2009.
Ms. Ping Yu, Chief Financial Officer of eFuture, said, "We are delighted to have returned to growth, with our top line expanding 21% during our seasonally slowest quarter, allowing us to exceed the top end of our guidance range by 11.3%. Rapidly expanding demand for our logistics solutions, as well as our grocery and department store solutions, drove growth during the quarter. We maintained our focus on optimising our revenue mix, with service fee income accounting for over half of total revenue. We believe that innovation is key to our future growth as it allows us to further broaden our service offering, in particular maintenance, consulting and eService, and this in turn helps mitigate the impact of seasonality. Our solid top-line performance puts us on track to achieve our financial objective of profitable growth over the long term."
Mr. Dehong Yang, President, added, "During the first quarter, we saw increased expenditure from customers investing in software and services to open new stores and warehouses. Our strong momentum was driven by solid execution in both our large accounts and our fast-growing tier2 and tier3 markets in China. We restructured our sales organization from a product driven model to a customer driven model by building major account teams and three regional sales teams focused on North, South and East China. To achieve margin expansion, we aim to deliver solid top-line growth, coupled with disciplined expense management and rationalisation of our cost structure."
Mr. Adam Yan, Chairman and Chief Executive Officer, said, "As our customers continue to invest for profitable growth, eFuture is well-positioned to benefit due to our leading brand in China and our one-stop, end-to-end integrated portfolio of products and services that improve the liquidity and efficiency of the front-end supply chain from factory to consumer.
"Following a healthy start to 2010, we look forward to delivering consistent revenue growth by capitalizing on the ongoing market rebound. Strengthening our software core business while simultaneously increasing recurring maintenance service and eService revenues remains our strategy to drive growth going forward," Mr. Yan concluded.
First Quarter 2010 Financial Results
Revenue
Revenue for the first quarter 2010 increased 20.9% to RMB16.7 million (US$2.5 million) from RMB13.8 million in the first quarter 2009.
Software license revenues increased by 15.7% year-over-year to RMB5.7 million (US$838,617), primarily attributable to a continued rebound in our Grocery, Hypermarket & Supermarket and Department Store & Shopping Mall Strategic Business Units (SBUs) due to improved economic conditions.
Hardware revenues increased by 56.2% year-over-year to RMB2.2 million (US$319,203). eFuture undertook a number of initiatives to revamp its organization during first quarter 2010 in order to bolster its earnings power and implement structural reforms aimed at new growth. The establishment of a Software Service and Integration SBU in the first quarter 2010 resulted in more clearly defined business unit responsibilities, making the Company better positioned to supply customers with hardware. Although not an area of focus for eFuture, the Company needs to provide hardware as part of its total solution, as a complement to its other offerings.
Service fee income increased by 17.7% year-over-year to RMB8.8 million (US$1.3 million), and accounted for 52.7% of total revenue in the first quarter, as compared to 54.1% in the same period last year. The year-over-year rise in service fee income was largely attributable to the booking of revenue in the first quarter relating to the delivery of contracts signed during the second half of 2009 amid the market upturn.
Revenue Breakdown
2009Q1 2010Q1
RMB '000 RMB '000 USD '000 Y-o-Y %
Change
Software license sales 4,949 5,724 839 15.7%
Hardware sales 1,395 2,179 319 56.2%
Service fee income 7,480 8,804 1,290 17.7%
Total 13,824 16,707 2,448 20.9%
Cost of Revenue
The cost of revenue for the first quarter of 2010 increased 21.6% to RMB11.3 million (US$1.7 million) from RMB9.3 million in first quarter 2009, in line with the rise in total revenue.
Cost of Revenue Breakdown
2009Q1 2010Q1
RMB '000 RMB '000 USD '000 Y-o-Y %
Change
Cost of software license
sales 1,092 1,738 255 59.2%
Cost of hardware sales 1,370 1,875 275 36.8%
Cost of service fee 2,952 3,483 510 18.0%
Amortization of acquired
technology 2,997 2,998 439 0.0%
Amortization of software
costs 904 1,229 180 36.0%
Total 9,315 11,323 1,659 21.6%
Gross Profit
First quarter 2010 gross profit increased 19.4% year-over-year to RMB5.4 million (US$788,730), from RMB4.5 million in the first quarter of 2009.
Consolidated gross margin for the first quarter of 2010 was 32.2%, compared with 32.6% in the first quarter of 2009, primarily due to higher salaries for technical employees.
Operating Expenses
Research and development expenses for the first quarter 2010 increased 639.4% year-over-year to RMB691,804 (US$101,351), or 4.1% of total revenues, compared with RMB93,566, or 0.7% of total revenues in the first quarter 2009. The significant year-over-year increase resulted from booking expenses at an earlier stage of development than was the case in the previous year.
General and administrative expenses for the first quarter 2010 increased 32.4% year-over-year to RMB10.4 million (US$1.5 million), or 62.4% of total revenue, compared with RMB7.9 million, or 57.0% of total revenue in the first quarter 2009. General and administrative expenses as a percentage of revenue increased year-over-year due to the continued implementation of a share option scheme to offer enhanced incentives to senior and middle management, as well as to higher rental expenses incurred due to operational expansion.
Selling and distribution expenses for the first quarter 2010 increased 38.8% year-over-year to RMB7.7 million (US$1.1 million), or 46.3% of total revenue, compared with RMB5.6 million, or 40.3% of total revenue in the first quarter 2009. The increase in selling and distribution costs was primarily due to continued investment in building the Company's regional sales teams in line with its goal of strengthening penetration in tier-2 and tier-3 cities.
Operating Loss
Operating loss in the first quarter 2010 was RMB13.5 million (US$2.0 million), compared with an operating loss of RMB9.0 million in the first quarter 2009.
Net Loss and EBITDA
As a result of the foregoing, first quarter 2010 net loss was RMB10.9 million (US$1.6 million) compared with a net loss of RMB7.5 million in the first quarter 2009.
Basic and diluted losses per share in the first quarter 2010 were RMB3.14 (US$0.44), compared to basic and diluted losses per share of RMB2.22 in the first quarter.
Adjusted net loss (non-GAAP) for the first quarter was RMB5.1 million (US$752,765), compared to an adjusted net loss of RMB2.8 million in the first quarter 2009.
First quarter 2010 non-GAAP adjusted diluted losses per share were RMB1.46 (US$0.21), compared to losses per share of RMB0.82 in the first quarter 2009.
EBITDA (non-GAAP) for the first quarter 2010 was minus RMB7.3 million (minus US$1.1 million), compared to minus RMB4.2 million in the first quarter 2009.
Balance Sheet and Cash Flow
As of March 31, 2010, net cash from operating activities was minus RMB9.2 million (minus US$1.3 million), while net cash used in investing activities was RMB10.5 million (US$1.5 million), relating largely to the final cash payment for Proadvancer, the logistics solutions and service provider that the Company acquired in 2008.
As of March 31, 2010, cash and cash equivalents were RMB39.8 million (US$5.8 million), which was a 6.5% decrease compared with RMB42.5 million at the end of March 2009.
Total accounts receivable as of March 31, 2010 decreased 51.1% to RMB10.4 million (US$1.5 million) from RMB21.3 million as of March 31, 2009. This improvement was mainly attributable to enhanced management of accounts receivable collections.
Inventories as of March 31, 2010 increased to RMB10.2 million (US$1.5 million), compared with RMB6.9 million as of March 31, 2009, as some of eFuture's contracts were still classified as work in process. They will become costs when they reach the point of revenue recognition.
Second Quarter 2010 Guidance
eFuture expects total revenues for the second quarter of 2010 to be in the range of approximately US$3.5 million to US$3.9 million. Adjusted EBITDA (non-GAAP) for the second quarter of 2010 is expected to range between a loss of US$0.8 million and a loss of US$1.3 million.
Conference Call Information
eFuture's management will host a conference call on Thursday, May 20, 2010 at 5:00 am (US Pacific) / 8:00 am (US Eastern) / 8:00 pm (Beijing) to discuss its first quarter 2010 financial results and recent business activity. The conference call may be accessed by calling:
United States Toll Free +1 866 519 4004
United States Toll +1 718 354 1231
United Kingdom Toll Free 0808 234 6646
Hong Kong Toll Free 800 930 346
China Local Dial-in 8008 190 121
China (Mobile Callers) 4006 208 038
International Dial-in +65 6723 9381
Passcode 74427409 or "eFuture"
Please dial in 10 minutes before the call is scheduled to begin.
A replay of the conference call may be accessed by phone at the following numbers until Thursday, May 27, 2010:
United States Toll Free +1 866 214 5335
United States Toll Dial-in +1 718 354 1232
United Kingdom Dial-in 0800 731 7846
Hong Kong Dial-in 800 901 596
China North Dial-in 108 00714 0386
China South Dial-in 108 00140 0386
International Dial-in +61 2 8235 5000
Passcode 74427409 or "eFuture"
Additionally, a live and archived webcast of the conference call will be available on the investor relations section of eFuture's website at http://www.e-future.com.cn/ENG/newshow.asp?id=513 .
Currency Convenience Translation
For the convenience of readers, certain RMB amounts have been translated into US dollars at the rate of RMB6.8258 to US$1.00, the noon buying rate for US dollars in effect on March 31, 2010 for cable transfers of RMB per U.S. dollar as certified for customs purposes by the Federal Reserve Bank of New York.
Use of Non-GAAP Financial Measures
To supplement eFuture's unaudited consolidated financial results presented in accordance with U.S. GAAP, eFuture uses the following non-GAAP measures defined as non-GAAP financial measures by the SEC: adjusted EBITDA excluding amortization of acquired software technology, amortization of intangibles, share-based compensation expenses, depreciation, adjusted net income excluding amortization of acquired software technology, amortization of intangibles, share-based compensation expenses and accretion on convertible notes, adjusted basic and diluted earnings per share excluding amortization of acquired software technology, amortization of intangibles, share-based compensation expenses and accretion on convertible notes.
The presentation of these non-GAAP financial measures is not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with U.S. GAAP.
eFuture believes that these non-GAAP financial measures provide meaningful supplemental information regarding its performance and liquidity by excluding expenses that may not be indicative of its operating performance from a cash perspective or be indicative of its operating performance. eFuture believes that both management and investors benefit from referring to these non-GAAP financial measures in assessing the Company's performance and when planning and forecasting future periods. These non-GAAP financial measures also facilitate management's internal comparisons to eFuture's historical performance and liquidity. eFuture computes its non-GAAP financial measures using the same consistent method from quarter to quarter. The Company believes these non-GAAP financial measures are useful to investors in allowing for greater transparency with respect to supplemental information used by management in its financial and operational decision-making. The accompanying paragraphs have more details on the reconciliations between GAAP financial measures that are most directly comparable to non-GAAP financial measures.
eFuture's management also believes that EBITDA, defined as earnings before interest, income tax expense, depreciation and amortization is a useful financial metric to assess its operating and financial performance before the impact of investing and financing transactions and income taxes. In addition, eFuture's management believes that EBITDA is widely used by other companies in the software industry and may be used by investors as a measure of its financial performance. Given the significant investments that eFuture has made in property, equipment, depreciation and amortization expense comprises a meaningful portion of the Company's cost structure. eFuture's management believes that EBITDA will provide investors with a useful tool for comparability between periods because it eliminates depreciation and amortization expense attributable to capital expenditures. The presentation of EBITDA should not be construed as an indication that the Company's future results will be unaffected by other charges and gains eFuture considers to be outside the ordinary course of its business.
The use of EBITDA and adjusted EBITDA has certain limitations. Depreciation and amortization expense for various long-term assets, income tax expense, interest expense and interest income have been and will be incurred and are not reflected in the presentation of EBITDA. Further, share-based compensation expenses have been and will be incurred and are not reflected in the presentation of adjusted EBITDA. Each of these items should also be considered in the overall evaluation of eFuture's financial results. The term EBITDA or adjusted EBITDA is not defined under U.S. GAAP, and EBITDA or adjusted EBITDA is not a measure of net income, operating income, operating performance or liquidity presented in accordance with U.S. GAAP. When assessing eFuture's operating and financial performance, you should not consider this data in isolation or as a substitute for its net income, operating income or any other operating performance measure that is calculated in accordance with U.S. GAAP. In addition, the Company's EBITDA and adjusted EBITDA may not be comparable to EBITDA or similarly titled measures utilized by other companies since such other companies may not calculate EBITDA in the same manner as eFuture does.
Statement Regarding Unaudited Financial Information
The unaudited financial information set forth above is subject to adjustments that may be identified when audit work is performed on the Company's year-end financial statements, which could result in significant differences from this unaudited financial information.
About eFuture Information Technology Inc.
eFuture Information Technology Inc. (NASDAQ: EFUT) is a leading provider of software and services in China's rapidly growing retail and consumer goods industries. eFuture provides integrated software and services to manufacturers, distributors, wholesalers, logistics companies and retailers in China's front-end supply chain (from factory to consumer) market, especially in the retail and fast moving consumer goods industries. eFuture currently serves over 15 Fortune 500 companies, over 1,000 retailers and over 5,000 suppliers operating in China. eFuture is one of IBM's premier business partners in Asia Pacific and is a strategic partner with Oracle, Microsoft, JDA, Motorola and Samsung Network China. eFuture has more than 670 employees and 20 branch offices across China. For more information about eFuture, please visit http://www.e-future.com.cn .
Safe Harbor
This announcement contains forward-looking statements. These statements are made under the "safe harbor" provisions of the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements can be identified by terminology such as "will," "expects," "anticipates," "future," "intends," "plans," "believes," "estimates" and similar statements. Among other things, 2009 financial outlook and quotations from management in this announcement, as well as strategic and operational plans, contain forward-looking statements. eFuture may also make written or oral forward-looking statements in periodic reports to the Securities and Exchange Commission (the "SEC"), in its annual report to shareholders, in press releases and other written materials and in oral statements made by its officers, directors or employees to second parties. Statements that are not historical facts, including statements about the Company's beliefs and expectations, are forward-looking statements. Forward-looking statements involve inherent risks and uncertainties. A number of factors could cause actual results to differ materially from those contained in any forward-looking statement, including but not limited to the following: eFuture's anticipated growth strategies; eFuture's future business development, results of operations and financial condition; expected changes in the Company's revenues and certain cost or expense items; eFuture's ability to attract customers and leverage its brand; trends and competition in the software industry; the Company's ability to control expenses and maintain profit margins; the Company's ability to hire, train and retain qualified managerial and other employees; the Company's ability to develop new software and pilot new business models at desirable locations in a timely and cost-effective manner; the performance of third parties under contracts with the Company; the expected growth of the Chinese economy software market in retail and consumer goods industries; and Chinese governmental policies relating to private managers and operators of software and applicable tax rates.
Further information regarding these and other risks is included in eFuture's annual report on Form 20-F and other documents filed with the SEC. All information provided in this press release and in the attachments is as of May 19, 2010, and the Company undertakes no duty to update such information or any other forward-looking information, except as required under applicable law.
For further information, please contact:
Investor Contact:
Troe Wen, Company Secretary
eFuture Information Technology Inc.
Tel: +86-10-5293-7699
Email: ir@e-future.com.cn
Investor Relations (US):
Mahmoud Siddig
Taylor Rafferty
Tel: +1-212-889-4350
Email: eFuture@Taylor-Rafferty.com
Investor Relations (HK):
Ruby Yim
Taylor Rafferty
Tel: +852-3196-3712
Email: eFuture@Taylor-Rafferty.com
Media Contact:
Jason Marshall
Taylor Rafferty
Tel: +1-212-889-4350
Email: eFuture@Taylor-Rafferty.com
E-FUTURE INFORMATION TECHNOLOGY INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
Chinese Yuan (Renminbi) U.S. Dollars
March 31, March 31,
2009 2010 2010
(Unaudited) (Unaudited) (Unaudited)
ASSETS
Current assets
Cash and cash equivalents 42,524,982 39,774,247 5,827,045
Trade receivables, less allowance
for doubtful accounts of
RMB4,210,428 and
RMB7,720,707($1,131,107),
respectively 21,333,448 10,436,827 1,529,027
Refundable value added tax 1,578,129 1,666,247 244,110
Deposits -- -- --
Advances to employees 4,778,897 3,646,256 534,187
Advances to suppliers 1,395,298 301,797 44,214
Other receivables 3,673,343 2,578,937 377,822
Prepaid expenses 455,515 657,060 96,261
Inventory and work in process 6,869,625 10,152,161 1,487,322
Total current assets 82,609,237 69,213,532 10,139,988
Non-current assets
Long-term investments 654,192 654,192 95,841
Long term deferred expense 285,000 52,500 7,691
Deferred loan costs 1,097,696 746,955 109,431
Property and equipment, net of
accumulated depreciation of
RMB3,216,585 and
RMB4,616,565($676,340),
respectively 3,509,836 4,748,398 695,654
Intangible assets, net of
accumulated amortization of
RMB38,191,777 and
RMB55,199,621($8,086,909),
respectively 48,988,255 39,033,359 5,718,503
Goodwill 91,284,735 91,284,735 13,373,485
Total non-current assets 145,819,714 136,520,139 20,000,605
Total assets 228,428,951 205,733,671 30,140,594
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Trade accounts payable 2,290,929 6,040,508 884,952
Other payable 12,784,897 12,934,138 1,894,890
Accrued expenses 4,708,929 9,678,841 1,417,979
Accrued interest (27,332) 102,216 14,975
Taxes payable 5,782,023 4,961,387 726,858
Advances from customers 26,400,130 31,019,830 4,544,497
Royalstone acquisition
obligation,net of current portion 6,426,752 -- --
Health field acquisition obligation 553,908 -- --
Proadvancer System acquisition
obligation 30,004,186 5,664,608 829,882
BFuture acquisition obligation 392,877 392,877 57,558
Deferred tax, current portion 1,164,898 1,300,899 190,586
Total current liabilities 90,482,197 72,095,304 10,562,177
E-FUTURE INFORMATION TECHNOLOGY INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
Chinese Yuan (Renminbi) U.S. Dollars
March 31, March 31,
2009 2010 2010
(Unaudited) (Unaudited) (Unaudited)
Long-term liabilities
Royalstone acquisition obligation -- -- --
3%-10% RMB6,825,800 ($1,000,000)
convertible note payable, net of
RMB6,780,327 ($993,338) of
unamortized discount 31,073 45,473 6,662
Derivative liabilities 3,828,952 2,527,594 370,300
Minority shareholder interests -- (923,973) (135,365)
Deferred tax 5,458,232 2,899,151 424,734
Total long-term liabilities 9,318,257 4,548,245 666,331
Shareholders' equity
Ordinary shares, $0.0756 U.S.
dollars par value; 6,613,756
shares authorized; 3,362,241
shares and 3,598,413 shares
outstanding, respectively 2,039,196 2,161,187 316,620
Additional paid-in capital 173,819,877 202,277,787 29,634,297
Statutory reserves 3,084,020 3,084,020 451,818
Accumulated deficit (50,314,596) (78,432,872) (11,490,649)
Total shareholders' equity 128,628,497 129,090,122 18,912,086
Total liabilities and shareholders'
equity 228,428,951 205,733,671 30,140,594
E-FUTURE INFORMATION TECHNOLOGY INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED INCOME STATEMENTS
Three Months Ended
December March
31,2009 31,2009 March 31,2010
RMB RMB RMB US$
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
Revenues
Software sales 24,817,764 4,949,335 5,724,231 838,617
Hardware sales 19,323,064 1,395,170 2,178,815 319,203
Service fee income 16,964,910 7,479,788 8,803,985 1,289,810
Total Revenues 61,105,738 13,824,293 16,707,031 2,447,630
Cost of revenues
Cost of software 4,589,125 1,092,129 1,738,249 254,659
Cost of hardware 15,275,100 1,370,114 1,874,735 274,654
Cost of service fee
income 9,079,225 2,952,121 3,483,021 510,273
Amortization of acquired
technology 2,904,831 2,996,500 2,997,849 439,194
Amortization of software
costs 1,442,273 904,352 1,229,472 180,121
Total Cost of Revenue 33,290,554 9,315,216 11,323,326 1,658,901
Gross Profit 27,815,184 4,509,077 5,383,705 788,730
Operating Expenses
Research and development 1,900,975 93,566 691,804 101,351
General and
administrative 16,933,587 7,876,101 10,429,897 1,528,011
Selling and distribution
expenses 11,324,099 5,575,080 7,737,125 1,133,512
Total Operating Expenses 30,158,661 13,544,747 18,858,826 2,762,874
Profit/(loss) from
operations (2,343,477) (9,035,670) (13,475,121) (1,974,144)
Interest income (71,115) 180,273 111,188 16,289
Interest expense 42,903 (145,097) (132,716) (19,443)
Interest expenses -
amortization of discount
on notes payable (5,506) (6,648) (9,929) (1,455)
Interest expenses -
amortization of deferred
loan costs (89,457) (86,062) (90,605) (13,274)
Income/(loss) on
investments -- -- -- --
Gain on derivatives 1,831,621 1,290,861 1,297,153 190,037
Loss on extinguishment of
convertible notes -- -- -- --
Foreign currency exchange
gain (120,383) (55,769) (294,998) (43,218)
Profit/(loss) before tax (755,414) (7,858,112) (12,595,028) (1,845,209)
Income tax
expense/(benefit) (808,005) 388,299 1,256,541 184,087
Minority interest in
profit/(loss) of
consolidated subsidiary 492,429 -- 414,794 60,769
Net Income/(loss) (1,070,990) (7,469,813) (10,923,693) (1,600,353)
Other comprehensive
income/(loss)
Foreign currency
translation adjustment -- -- -- --
Comprehensive
Income/(loss) (1,070,990) (7,469,813) (10,923,693) (1,600,353)
Earnings per ordinary
share
Basic (0.32) (2.22) (3.14) (0.44)
Diluted (0.32) (2.22) (3.14) (0.44)
E-FUTURE INFORMATION TECHNOLOGY INC. AND SUBSIDIARY
NON-GAAP MEASURES OF PERFORMANCE
December March
31, 2009 31, 2009 March 31, 2010
RMB RMB RMB US$
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
NON-GAAP OPERATING INCOME
(LOSS) AND ADJUSTED
EBITDA
Operating income/(loss)
(GAAP Basis) (2,343,477) (9,035,670) (13,475,121) (1,974,145)
Adjustments for non-GAAP
measures of performance:
Add back amortization of
acquired software
technology 2,904,831 2,996,500 2,997,849 439,194
Add back amortization of
intangibles 1,442,273 904,352 1,229,472 180,121
Add back share-based
compensation expenses 3,881,775 765,226 1,548,219 226,819
Adjusted non-GAAP
operating income/(loss) 5,885,402 (4,369,592) (7,699,581) (1,128,011)
Add back depreciation 381,834 145,241 363,103 53,196
Adjusted EBITDA (Earnings
before interest, taxes,
depreciation and
amortization) 6,267,236 (4,224,351) (7,336,478) (1,074,816)
NON-GAAP OPERATING INCOME
(LOSS) AND ADJUSTED
EBITDA, as a percentage
of revenue
Operating income/(loss)
(GAAP BASIS) -4% -65% -81% -81%
Adjustments for non-GAAP
measures of performance:
Amortization of acquired
software technology 5% 22% 18% 18%
Amortization of
intangibles 2% 7% 7% 7%
Share-based compensation
expenses 6% 6% 9% 9%
Adjusted non-GAAP
operating income/(loss) 10% -32% -46% -46%
Depreciation 0.6% 1.1% 2.2% 2.2%
Adjusted EBITDA (Earnings
before interest, taxes,
depreciation and
amortization) 10% -31% -44% -44%
NON-GAAP EARNINGS PER
SHARE
Net Income/(Loss) (1,070,990) (7,469,813) (10,923,693) (1,600,354)
Amortization of acquired
software technology 2,904,831 2,996,500 2,997,849 439,194
Amortization of
intangibles 1,442,273 904,352 1,229,472 180,121
Accretion on convertible
notes 5,506 6,648 9,929 1,455
Share-based compensation
expenses 3,881,775 765,226 1,548,219 226,819
Adjusted Net
income/(loss) 7,163,395 (2,797,087) (5,138,224) (752,765)
Adjusted non-GAAP diluted
earnings per share 2.06 (0.82) (1.46) (0.21)
Shares used to compute
non-GAAP diluted
earnings per share 3,480,225 3,394,099 3,519,506
E-FUTURE INFORMATION TECHNOLOGY INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Chinese Yuan (Renminbi) U.S. Dollars
December 31, March 31, March 31,
2009 2010 2010
(Unaudited) (Unaudited) (Unaudited)
Cash flows from operating
activities:
Net income/(loss) (24,086,788) (10,923,693) (1,600,354)
Adjustments to reconcile net income
(loss) to net cash provided by
(used in) operating activities:
Depreciation 1,102,709 363,103 53,196
Amortization of intangible assets 16,112,838 4,227,321 619,315
Impairment of intangible assets -- -- --
Amortization of discount on notes
payable 13,316 9,929 1,455
Amortization of deferred loan costs 350,996 90,605 13,274
Gain on derivatives (1,290,656) (1,297,153) (190,037)
Loss on extinguishment of
convertible notes -- -- --
Investment (income)/loss -- -- --
Loss on disposition of property and
equipment 14,456 14,019 2,054
Provision for doubtful debt 1,392,611 867,540 127,097
Provision for loss in inventory and
work in process 1,103,382 -- --
Compensation expense for options
issued to employees 6,176,054 1,548,219 226,819
Deferred taxes (1,554,838) (1,256,541) (184,087)
Foreign exchange loss -- -- --
Minority interest (713,593) (414,794) (60,769)
Change in assets and liabilities: -- --
Accounts receivable 3,883,719 4,725,019 692,229
Refundable value added tax 155,403 934,052 136,841
Deposits -- -- --
Advances to employees 1,500,531 (2,010,871) (294,599)
Advances to suppliers (198,692) (4,193) (614)
Other receivables 1,920,407 64,948 9,515
Prepaid expenses (754,238) 779,894 114,257
Inventories (3,745,144) (4,287,442) (628,123)
Trade payables 3,393,734 (3,036,641) (444,877)
Other payables 2,346,510 (1,736,411) (254,389)
Accrued expenses 3,116,989 (310,506) (45,490)
Accrued interest (27,304) 129,520 18,975
Taxes payable (1,757,166) (2,285,320) (334,806)
Advances from customers 1,741,712 4,624,944 677,568
Net cash provided by operating
activities 10,196,948 (9,184,452) (1,345,550)
Cash flows from investing
activities:
Purchases of property and equipment (2,185,887) (24,061) (3,525)
Payments for intangible assets (9,826,100) (427,456) (62,624)
Long-term investments -- -- --
Acquisition of business -- (10,000,000) (1,465,030)
Loan to Guarantor -- -- --
Amounts due from a related party -- -- --
Net cash used in investing
activities (12,011,987) (10,451,517) (1,531,178)
E-FUTURE INFORMATION TECHNOLOGY INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Chinese Yuan (Renminbi) U.S. Dollars
December 31, March 31, March 31,
2009 2010 2010
(Unaudited) (Unaudited) (Unaudited)
Cash flows from financing activities:
Issuance of ordinary shares for cash,
net of offering costs paid -- -- --
Proceeds from exercise of warrants -- -- --
Issuance of convertible notes -- -- -
Payment of make-whole obligation -- -- --
Repayment of short-term loans -- -- --
Net cash provided by (used in)
financing activities -- -- --
Effect of exchange rate changes on
cash 142,181 295,340 43,268
Net increase (decrease) in cash (1,672,858) (19,340,629) (2,833,460)
Cash and cash equivalents at
beginning of period 60,787,734 59,114,876 8,660,505
Cash and cash equivalents at end of
period 59,114,876 39,774,247 5,827,045
Supplemental cash flow information
Interest paid 450,826 119,474 17,503
