Revenue Growth Exceeds Guidance;
Revenue Grows 47.8% and 64.7% for the Fourth Quarter and Full Year 2008, Respectively;
Significant Improvement in Profitability-Fourth Quarter Net Income Grows 136.9% to RMB9.1 Million
BEIJING, April 28 /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 fourth quarter and full year ended December 31, 2008.
Fourth Quarter of 2008 Financial Highlights:
-- Total revenues increased 47.8% year-over-year to RMB71.7 million
(US$10.5 million).
-- Revenue from software license sales increased 70.2% year-over-year
to RMB31.8 million (US$4.7 million).
-- Revenue from hardware sales increased 100.5% year-over-year to
RMB19.7 million (US$2.9 million).
-- Service fee income increased 1.0% to RMB20.2 million (US$3.0
million).
-- Gross profit increased 59.1% year-over-year to RMB33.6 million (US$4.9
million). Gross margin was 46.8%, compared to 43.5% in the fourth
quarter of 2007.
-- Operating income increased 86.1% year-over-year to RMB12.7 million
(US$1.9 million).
-- Net income increased 136.9% year-over-year to RMB9.1 million (US$1.3
million).
-- Diluted net income per share was RMB2.7 (US$0.4), as compared to net
loss per share of RMB8.18 the fourth quarter of 2007.
-- Operating cashflow was RMB31.7 million (US$4.7 million).
-- Adjusted net income (non-GAAP) increased 17.1% year-over-year to
RMB20.6 million (US$3.0 million).
-- Non-GAAP adjusted diluted earnings per share were RMB6.08 (US$0.89).
Full Year 2008 Financial Highlights:
-- Total revenues increased 64.7% year-over-year to RMB138.5 million
(US$20.3 million).
-- Revenue from software license sales increased 56.5% year-over-year
to RMB64.7 million (US$9.5 million).
-- Revenue from hardware sales increased 64.6% year-over-year to
RMB26.7 million (US$3.9 million).
-- Service fee income increased 77.8% to RMB47.1 million (US$6.9
million).
-- Gross profit increased 73.9% year-over-year to RMB66.2 million (US$9.7
million). Gross margin was 47.8%, compared to 45.3% in 2007.
-- Operating profit was RMB2.7 million (US$0.4 million), as compared to
an operating profit of RMB6.9 million (US$1.0 million) in 2007.
-- Net loss increased 9.6% year-over-year to RMB30.1 million (US$4.4
million).
-- Diluted loss per share was RMB9.76 (US$1.43).
-- Operating cash flow as of December 31 2008 increased 71.2% year-over-
year to RMB31.7 million (US$4.6 million).
-- Cash and cash equivalents as of December 31, 2008 was RMB60.7 million
(US$8.9 million).
-- Adjusted net income (non-GAAP) was RMB15.3 million (US$2.2 million), a
decrease of 13.2% from 2007.
-- Non-GAAP adjusted diluted earnings per share were RMB4.9 (US$0.72).
"We are very pleased to report a great quarter with strong revenue growth, solid margin expansion and steady progress across a wide range of strategic and tactical initiatives in 2008," said Mr. Adam Yan, Chairman and Chief Executive Officer of eFuture. "While our full year reported bottom-line results were negatively impacted by expenses related to a US$4 million convertible note, our underlying operations performed very well in the face of significant macroeconomic headwinds. This reflects our continued execution, focused growth strategy consisting of both organic and acquisitive initiatives, affordable and flexible suite of solutions, a large and diversified install base, and the continued resilience of China's retail and consumer goods industry. I am pleased to report that we have made substantial progress and important developments on several key fronts.
"As part of our organic growth strategy, the initiative to organize our operations into seven strategic business units has already yielded positive results, helping to streamline our operations and allowing us to leverage our capabilities to better serve clients and accelerate growth. The result has been revenue increases across all business segments, a commendable achievement, and as a testament to our ability to deepen relationships with existing customers, software licensing revenues from current clients increased by 117%.
"Furthermore, we solidified our core enterprise software business and forged into new frontiers of eService, including our B2B service and SaaS (Software-as-a-Service) service for supply chain management and B2C eShopping. Our SaaS strategy remains a key near- to long-term growth driver, and this service began to make a positive contribution in 2008, representing 8.5% of our total full year revenues.
"On the M&A front, our acquisition of Proadvancer has provided us with market leadership and significant share gains in China's logistics market, allowing us to form a total front-end supply chain management solution. Additionally, we increased our stake in Wangku from 20% to 51%. Together, these deals comprised 18.4% of our revenue in 2008. Going forward, we will continue to seek further growth opportunities through mergers and acquisitions to diversify our product and service offerings.
"Looking ahead, we intend to continue to focus on executing our growth strategy by investing in technology and business model innovations, expanding our client base within tier-2 and tier-3 cities in China, and actively pursuing domestic and international clients. Alongside each of these initiatives, we will strive to maximize our operational efficiency and enhance earnings growth to increase long-term shareholder returns."
Full Year 2008 Operational Highlights:
By solidifying eFuture's core enterprise software business, growing value-added service revenues, and strengthening eFuture's eService offerings and capabilities, the Company established a diverse platform designed to enable it to expand its market share and to generate consistent revenue flows.
Core Business (Software License, Hardware, and Service Fee excluding eServices)
In 2008, eFuture re-aligned its software business into seven vertical strategic business units ("SBU") in order to better service the various market segments and to enhance customer satisfactions. The new SBUs are as follows:
-- Department Store and Shopping Mall
-- Grocery and Supermarket
-- Specialty Retail
-- Fast-Moving Consumer Goods
-- Logistics
-- Small-to-Medium Business
-- Key Accounts
In 2008, software licensing revenue from existing customers contributed 61.9% of the total software revenues and 28.9% of total revenues, an increase of 17% and 7% over the 44.6% and 21.9% in 2007, respectively.
eService Business
eFuture's eService strategy remains a key near- to long-term growth driver and began to make positive contributions in 2008, representing 8.5% of total revenues for the year.
In March 2008, eFuture and IBM entered into a strategic partnership to launch a Software-as-a-Service platform ( http://www.bfuture.com.cn ) for the retail distribution industry in China. Thus far, this initiative has brought 2,000 of Wangfujing Group's suppliers onto the platform, allowing them to exchange business information, arrange payments online and access purchase orders, returns, payment status, inventory levels and analysis of sales data.
IBM China Research Lab and eFuture began their collaboration in 2005 with the goal of combining IBM's integrated infrastructure and platforms with eFuture's expertise and best practices in supply chain management software. This partnership is geared towards strategically targeting retailers and their suppliers to greatly improve their productivity, shorten the credit cycle, reduce risks and facilitate the growth of both demand and supply sides of the businesses. It can help retailers reduce their investment in IT systems, which in turn will help China's distribution sector combat the current financial crisis. Further collaboration with IBM has also positioned eFuture as the partner of choice for leading global technology companies.
Major Wins
In 2008, eFuture signed a total of 837 contracts valued at RMB138 million with leading global and domestic companies operating in China's retail and consumer goods industry. The top ten customers contributed a total contract value of RMB32.3 million, representing about 23.5% of the total contract value.
Research & Development
In 2008, the Company expanded its product portfolio by launching eFuture ONE Congou SOA and eFuture ONE CRM. These solutions further enhanced eFuture's open technology platform, characterized by leading technological innovation, first to market next generation SOA architecture, industry-leading functionality and seamless integration with eFuture's existing products.
eFuture and IBM China Research Lab also jointly developed eFuture ONE SCM SaaS Platform based on IBM's Blue Cloud computing architecture.
Mergers & Acquisitions
eFuture's acquisition of Proadvancer resulted in significant share gains in China's logistics market, enabling the Company to form a total front-end supply chain management solution and further solidifying eFuture's market leadership. Additionally, eFuture increased its stake in Wangku from 20% to 51%, in order to further expand its eService business initiatives. Together, these deals contributed 18.4% of eFuture's revenue in 2008.
In addition to the completion of these acquisitions, eFuture grew organically in 2008. As of December 31, 2008, the Company has a total of 601 employees, compared to 588 employees as of December 31, 2007.
Convertible Notes
The Company converted US$5 million notes in 2007 and US$4 million notes in 2008, representing a total conversion of 90%. The expenses related to converting the remaining 10% will be US$0.9 million.
Fourth Quarter and Full Year 2008 Financial Results
Revenue
Revenue for the fourth quarter of 2008 increased 47.8% to RMB71.7 million (US$10.5 million) from RMB48.5 million in the fourth quarter of 2007.
Total fiscal year 2008 revenue increased 64.7% to RMB138.5 million (US$20.3 million) from RMB84.1 million in 2007. Service fee income increased to 34.0% of total revenue as compared to 31.5% in 2007, further enhancing the Company's recurring revenue stream and improving the overall revenue mix.
These increases are primarily attributable to the significant growth across all product lines including software license sales driven by the re-alignment of the software business into seven vertical strategic business units and improved operating efficiency.
Revenue Breakdown
2007 2008
Q4 FY Q4 FY
RMB RMB RMB USD Y-o-Y RMB USD Y-o-Y
'000 '000 '000 '000 Change '000 '000 change
Software license
sales 18,703 41,360 31,830 4,665 70.2% 64,709 9,485 56.5%
Hardware sales 9,817 16,198 19,685 2,885 100.50% 26,661 3,907 64.6%
Service fee
income 19,990 26,512 20,181 2,958 1.0% 47,131 6,908 77.8%
Total 48,510 84,070 71,696 10,508 47.8% 138,501 20,301 64.7%
Cost of Revenues
The cost of revenue for the fourth quarter of 2008 increased 39.1% to RMB38.1 million (US$5.6 million) from RMB27.4 million in the fourth quarter of 2007.
The cost of revenue for fiscal year 2008 increased 57.2% to RMB72.3 million (US$10.6 million) from RMB46.0 million in 2007.
Cost of Revenues Breakdown
2007 2008
Q4 FY Q4 FY
RMB RMB RMB USD Y-o-Y RMB USD Y-o-Y
'000 '000 '000 '000 Change '000 '000 change
Cost of software
license sales 8,364 15,413 8,819 1,293 5.4% 18,017 2,641 16.9%
Cost of hardware
sales 7,181 12,587 17,486 2,563 143.5% 23,266 3,410 84.8%
Cost of service
see 4,950 6,857 8,476 1,242 71.2% 15,866 2,326 131.4%
Amortization of
acquired
technology 6,002 8,231 2,410 353 -59.8% 11,512 1,687 39.9%
Amortization of
software costs 904 2,889 929 136 2.8% 3,609 529 24.9%
Total 27,402 45,978 37,191 5,587 35.7% 72,270 10,593 57.2%
The increase in cost of revenue was primarily attributable to a proportionate increase in sales volume and, to a lesser extent, cost in hardware sales along with an increase in service income fees. The increases in service income fees were affected by several factors:
1. Increased senior technical personnel on major accounts to explore
service expansion opportunities and further enhanced monetization.
eFuture devoted its senior technical personnel to its major accounts
according to the customers' 3 years programming needs which will
deliver more value to these customers' future operation. However,
these high-end configurations and higher salaries of these senior
personnel added extra expenses to eFuture's projects.
2. Increased marketing efforts on major accounts to further explore
customer's potential needs in their IT operating plans.
Gross Profit
Fourth quarter of 2008 gross profit increased 59.1% to RMB33.6 million (US$4.9 million) from RMB21.1 million in the fourth quarter of 2007.
Consolidated gross margin for the fourth quarter of 2008 was 46.8% compared to 43.9% in the fourth quarter of 2007 and 47.9% in the third quarter of 2008. These increases were primarily attributable to increases in revenues and decreases in amortization of acquired intangibles.
2008 gross profit demonstrated substantial growth, increasing 73.9% to RMB66.2 million (US$9.7 million) for the fiscal year 2008 from RMB38.1 million in 2007.
Consolidated gross margin for 2008 further expanded to 47.8%, up from 45.3% in 2007.
Operating Expenses
Research and development expenses for the fourth quarter of 2008 were RMB5.0 million (US$0.7 million), or 7.0% of total revenues, compared to 0.4% of total revenues in the fourth quarter of 2007 and 0.8% in the third quarter of 2008.
Research and development expenses in 2008 were RMB5.7 million (US$0.8 million), or 4.1% of total revenues, compared to 0.5% in 2007.
Both the year-over-year and sequential increases in research and development expenses are mainly due to our larger expenditures in software integration and upgrading. Management believes that these efforts to integrate multiple versions of similar software into full-featured single software versions will reduce eFuture's R&D costs in the long term and reduce the future software implementation costs.
General and administrative expenses for the fourth quarter of 2008 were RMB11.0 million (US$1.6 million), or 15.4% of total revenues, compared to 20.1% in the fourth quarter of 2007 and 25.1% in the third quarter of 2008.
General and administrative expenses in 2008 were RMB37.8 million (US$5.5 million), or 27.30% of total revenues, compared to 19.4% in 2007.
The year-over-year increase was mainly due to a RMB1.5 million increase in salaries and a RMB3.0 million increase in the maintenance costs of 8 new branches in 2008. In addition, the expenses associated with the compliance of auditing and Sarbanes-Oxley Act compliance contributed RMB1.6 million to the general and administration expenses.
Selling and distribution expenses for the fourth quarter of 2008 were RMB4.8 million (US$0.7 million), or 6.7% of total revenues, compared to 8.2% in the fourth quarter 2007 and 23.1% in the third quarter of 2008.
Selling expenses in 2008 were RMB20.1 million (US$2.9 million), or 14.5% of total revenues, as compared to 14.0% in 2007. The year-over year increase was mainly due to a proportionate increase in sales volume in 2008.
Total share-based compensation expenses in 2008 were RMB2.7 million (US$0.4 million).
Operating Income/Loss
Operating profit in the fourth quarter of 2008 increased 86.1% to RMB12.7 million (US$1.9 million) from RMB6.8 million in the fourth quarter of 2007.
Operating margin was 17.7% in the fourth quarter of 2008, compared to 15.1% in the fourth quarter 2007. 2008 operating profit was RMB2.75 million (US$0.4 million), as compared to an operating profit of RMB6.9 million in 2007. The decreased operating profit primarily resulted from the increased R&D expenses and increased G&A expenses.
Net Income/Loss and EBITDA
As a result of the foregoing, fourth quarter of 2008 net income was RMB9.1 million (US$1.3 million) compared to net loss of RMB25.6 million in the fourth quarter of 2007. Net margins were 12.6% in the fourth quarter 2008. Net loss for the year ended December 31, 2008 was RMB30.1 million (US$4.4 million), compared to RMB27.5 million in 2007. These losses were largely due to the RMB20.5 million expense related to the conversion of the convertible notes.
Basic and diluted losses per share in the fourth quarter of 2008 were RMB2.7 (US$0.4) and RMB2.67 (US$0.39), respectively. 2008 basic and diluted losses per share were RMB9.76 (US$1.43) and RMB9.76 (US$1.43), respectively.
Adjusted net income (non-GAAP) for the fourth quarter was RMB20.6 million (US$3.0 million), an increase of 17.1% from the fourth quarter of 2007. Adjusted net income (non-GAAP) for 2008 was RMB15.3 million (US$2.2 million), a decrease of 13.2% from 2007.
Fourth quarter 2008 adjusted non-GAAP diluted earnings per share was RMB6.08 (US$0.89). 2008 adjusted non-GAAP diluted earnings per share was RMB4.9 (US$0.72).
EBITDA (non-GAAP) for the fourth quarter of 2008 was RMB16.8 million (US$2.5 million), a decrease of 20.9% from the fourth quarter of 2007. 2008 EBITDA (non-GAAP) was RMB21.5 million (US$3.1 million), an increase of 1.2% from 2007.
Balance Sheet and Cash Flow
In 2008, net cash generated from operating activities was RMB31.7 million (US$4.6 million), while net cash used in capital expenditures was RMB30.0 million (US$4.3 million).
As of December 31, 2008, cash and cash equivalents decreased 9.7% year-over-year to RMB60.7 million from RMB67.2 million in 2007, mainly due to the expenses related to the conversion of US$4 million convertible notes, as well as payment for the acquisitions of Royalstone and Proadvancer in 2008.
Total accounts receivable as of December 31, 2008 increased 10.8% to RMB18.2 million (US$2.7 million) from RMB16.4 million as of December 31, 2007, mainly attributable to increases in total revenue.
Inventories as of December 31, 2008 increased 73.4% to RMB10.0 million (US$1.5 million) from RMB5.7 million as of December 31, 2007. This increase was mainly attributable to the working in progress projects of RMB45 million that have not reached the revenue recognition point.
2009 Business Outlook
Industry and Market Outlook
Management expects macroeconomic factors, such as retail sales of consumer goods and IT spending, to increase at a healthy rate for 2009. For the first quarter of 2009, total retail sales of consumer goods reached RMB2,940 billion (US$430.9 billion), an increase of 15% over the prior year. eFuture expects that it remains in a strong position to compete in the supply chain management sector.
Top line Growth Drivers
-- As of December 31, 2008, the Company's unrecognized revenue base was
US$6.5 million, including US$3.6 million of software license income and
US$2.7 million of service fee income for 2009.
-- Increasing demand for value-added service such as maintenance and
outsourcing, and the upward trend in license revenue from existing
customers.
-- Solid demand from department stores, supermarkets, and key customer
accounts under challenging economic conditions.
-- Deepening penetration and expanding market share via eFuture's plan to
further develop its B2B services and software-as-a-service businesses
(including Supply Chain Management and B2Cstore eShopping) by
leveraging the Company's relationships with over 1,000 retailers, their
base of over 13,000 stores and over 900,000 suppliers as well as nearly
80 million end consumers.
Channel Expansion Initiatives
Currently, 50% of eFuture's revenue is derived from China's three mega-cities-Beijing, Shanghai and Guangzhou-while 80% of total revenue is derived from eight Tier 1 cities (including the mega cities) in China. However, the continued expansion of many retailers, including current eFuture customers, into China's Tier 2 and Tier 3 cities presents a significant opportunity to gain additional market shares in these growing markets. As such, one of the Company's key initiatives in 2009 is to enhance penetration into Tier 2 and Tier 3 cities, by investing approximately RMB7.5 million in order to increase the coverage of its sales and distribution network from 10 up to 15 provinces in China.
2009 Guidance
In 2009, eFuture plans to focus upon continued execution on its growth strategy, which consists of a combined organic and acquisitive approach. eFuture will continue to solidify its core enterprise software business and forge into new frontiers of eService and investing.
eFuture expects its 2009 total revenues to be in the range of approximately US$27 million to US$28 million, representing annual growth of 33% to 38% over 2008. Adjusted EBITDA (non-GAAP) is expected to be in the range of approximately US$4.9 million to US$5.9 million. This forecast is a current and preliminary view and is subject to change.
Conference Call Information
eFuture's management will host a conference call on Monday, April 27, 2009 at 5:30 pm (Pacific) / 8:30 pm (Eastern) / Tuesday, April 28, 8:30 am (China) to discuss its fourth quarter and full year 2008 financial results and recent business activity. The conference call may be accessed by calling:
United States toll free +1-866-519-4004
China, toll free 800-819-0121
China, toll 400-620-8038
United Kingdom toll free 0808-234-6646
Hong Kong toll free 800-933-053
Passcode 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 Monday, May 4, 2009:
United States toll free +1-866-214-5335
China North 10-800-714-0386
China South 10-800-140-0386
United Kingdom toll free 0800-731-7846
Hong Kong toll free 800-901-596
Passcode #92982918
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 RMB6.8225 to US$1.00, the noon buying rate for US dollars in effect on December 31, 2008 for cable transfers of RMB per US 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 600 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, 2008 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 April 27, 2009, and the Company undertakes no duty to update such information or any other forward-looking information, except as required under applicable law.
For more information, please contact:
Investor Contact:
Troe Wen, Company Secretary
eFuture Information Technology Inc.
Tel: +86-10-5165-0998 x8804
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
-- FINANCIAL TABLES TO FOLLOW --
E-FUTURE INFORMATION TECHNOLOGY INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
Chinese Yuan (Renminbi) U.S. Dollars
December 31, December 31,
2007 2008 2008
(Audited) (Unaudited) (Unaudited)
ASSETS
Current assets
Cash and cash
equivalents 67,227,348 60,723,734 8,900,511
Trade receivables, less
allowance for doubtful
accounts of RMB2,109,910,
RMB4,695,898,and
RMB7,539,546 respectively 16,409,333 18,185,221 2,665,478
Refundable value added
tax 3,691,035 2,859,018 419,057
Deposits 156,695 -- --
Advances to employees 3,576,947 2,978,844 436,621
Advances to suppliers 657,724 847,831 124,270
Other receivables 3,576,965 852,191 124,909
Prepaid expenses 862,653 1,177,396 172,575
Inventory 5,749,951 10,406,711 1,525,352
Total current assets 101,908,651 98,030,946 14,368,772
Non-current assets
Long-term investments 5,460,301 654,192 95,887
Deferred loan costs,
net of RMB6,700,671 of
amortization 4,847,633 642,744 94,209
Deferred assets 172,083 2,809,201 411,755
Property and equipment,
net of accumulated
depreciation of
RMB4,690,856,
RMB5,191,489, and
RMB5,858,293
respectively 2,065,040 3,202,286 469,371
Intangible assets, net
of accumulated
amortization of
RMB8,678,751,
RMB19,799,245 and
RMB31,481,989
respectively 47,045,110 59,261,346 8,686,163
Goodwill 46,814,929 63,506,496 9,308,391
Total non-current
assets 106,405,096 130,076,265 19,065,777
Total assets 208,313,747 228,107,211 33,434,549
LIABILITIES AND
SHAREHOLDERS' EQUITY
Current liabilities
Trade accounts payable 3,845,873 8,393,534 1,230,272
Other payable 2,124,527 3,574,142 523,876
Accrued expenses 3,395,790 6,946,751 1,018,212
Accrued interest 278,420 -- --
Taxes payable 7,696,531 8,124,009 1,190,767
Deferred Revenues 8,073,981 1,183,434
Deferred Tax 5,282,076 4,691,336 687,627
Advances from customers 13,025,978 16,502,902 2,418,894
Royalstone acquisition
obligation, current
portion 16,722,213 6,405,610 938,895
Health Filed
acquisition obligation 3,300,000 592,948 86,911
Proadvancer System
acquisition obligation -- 14,533,644 2,130,252
Make-whole obligation,
current portion 1,164,116 426,734 62,548
payable, current
portion 3,648,825 899,826 131,891
Total current
liabilities 60,484,349 79,165,416 11,603,579
Long-term liabilities
Royalstone acquisition
obligation, net of
current portion 6,093,683 -- --
Make-whole obligation,
net of current portion 9,290,082 718,000 105,240
12% RMB75,108,000
($10,000,000)
convertible note
payable, net of
RMB53,379,624 -- -- --
unamortized discount
based on an imputed
interest rate of
28.9%, net of -- -- --
current portion 6,770,666 64,998 9,527
Minority shareholder
interests (91,499) 4,318,148 632,927
Total long-term
liabilities 22,062,932 5,101,146 747,694
Shareholders' equity
Ordinary shares,
$0.0756 U.S. dollars
(RMB 0.6257) par
value; 6,613,756
authorized; 2,633,500
shares and 2,633,500
shares outstanding
(2,833,580 shares pro
forma), respectively 1,811,589 2,038,631 298,810
Additional paid-in
capital 165,678,074 222,849,091 32,663,846
Statutory reserves 3,084,020 3,084,020 452,037
Accumulated foreign
currency translation
adjustment -- (8,231,428) (1,206,512)
Accumulated deficit (44,807,216) (75,899,664) (11,124,905)
Total shareholders'
equity 125,766,467 143,840,650 21,083,276
Total liabilities and
shareholders' equity 208,313,747 228,107,211 33,434,549
E-FUTURE INFORMATION TECHNOLOGY INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED INCOME STATEMENTS
Chinese Yuan (Renminbi) U.S. Dollars
2007 2008 2008
(Audited) (Unaudited) (Unaudited)
Revenues
Software sales 41,360,165 64,709,268 9,484,686
Hardware sales 16,198,402 26,661,095 3,907,819
Service fee income 26,511,794 47,131,117 6,908,189
Total Revenues 84,070,361 138,501,480 20,300,693
Cost of revenues
Cost of software 15,412,948 18,017,073 2,640,832
Cost of hardware 12,587,418 23,265,895 3,410,171
Cost of service fee
income 6,857,161 15,866,431 2,325,604
Amortization of
acquired technology 8,231,375 11,511,558 1,687,293
Amortization of
software costs 2,889,118 3,609,186 529,012
Total Cost of Revenue 45,978,020 72,270,144 10,592,912
Gross Profit 38,092,341 66,231,337 9,707,781
Expenses
Research and
development 436,923 5,666,901 830,619
General and
administrative 18,957,385 37,844,196 5,546,969
Selling and
distribution
expenses 11,755,517 20,059,398 2,940,183
Total Expenses 31,149,825 63,570,495 9,317,771
Profit from
operations 6,942,516 2,660,842 390,010
Interest income 3,533,326 1,418,040 207,848
Interest expense (841,277) (542,813) (79,562)
Amortization of
discount on notes
payable (31,320,836) (27,201,387) (3,987,012)
Amortization of loan
costs (6,610,234) (3,637,607) (533,178)
Income (loss) on
investments 985,085 (623,266) (91,355)
Foreign currency
exchange loss (201,847) 18,393 2,696
Outside business
receives -- 51,751 7,585
Outside business
disburses -- (1,024,572) (150,176)
Impairment of
intangible assets -- (2,014,634) (295,293)
Income tax expense -- (340,184) (49,862)
Minority interest 32,520 1,102,973 161,667
Net loss (27,480,747) (30,132,466) (4,416,631)
Earnings per ordinary
share
Basic (10.23) (9.76) (1.43)
Diluted (10.23) (9.76) (1.43)
E-FUTURE INFORMATION TECHNOLOGY INC. AND SUBSIDIARY
NON-GAAP MEASURES OF PERFORMANCE
December
31,2007 December 31,2008
RMB RMB US$
(Unaudited) (Unaudited) (Unaudited)
NON-GAAP OPERATING INCOME (LOSS)
AND ADJUSTED EBITDA
Operating income (loss) (GAAP
Basis) 6,942,516 2,660,842 390,010
Adjustments for non-GAAP
measures of performance:
Add back amortization of
acquired software technology 8,231,375 11,511,558 1,687,293
Add back amortization of
intangibles 2,891,118 3,609,186 529,012
Add back share-based
compensation expenses 2,663,105 3,109,903 455,830
Adjusted non-GAAP operating
income 20,728,114 20,891,490 3,062,145
Add back depreciation 500,633 586,880 86,021
Adjusted EBITDA (Earnings
before interest, taxes,
depreciation and
amortization) 21,228,747 21,478,370 3,148,167
NON-GAAP OPERATING INCOME
(LOSS) AND ADJUSTED EBITDA,
as a percentage of revenue
Operating income (loss) (GAAP
BASIS) 8% 2% 2%
Adjustments for non-GAAP
measures of performance:
Amortization of acquired
software technology 10% 8% 8%
Amortization of intangibles 3% 3% 3%
Share-based compensation
expenses 3% 2% 2%
Adjusted non-GAAP operating
income 25% 15% 15%
Depreciation 0.6% 0.4% 0.4%
Adjusted EBITDA (Earnings
before interest, taxes,
depreciation and
amortization) 25% 16% 16%
NON-GAAP EARNINGS PER SHARE
Net Income(Loss) (27,480,747) (30,132,466) (4,416,631)
Amortization of acquired
software technology 8,231,375 11,511,558 1,687,293
Amortization of intangibles 2,891,118 3,609,186 529,012
Accretion on convertible notes 31,320,836 27,201,387 3,987,012
Share-based compensation
expenses 2,663,105 3,109,903 455,830
Adjusted Net income 17,625,687 15,299,569 2,242,516
Adjusted non-GAAP diluted
earnings per share 5.88 4.90 0.72
Shares used to compute non-
GAAP diluted earnings per
share 2,997,921 3,124,464 3,124,464
E-FUTURE INFORMATION TECHNOLOGY INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED INCOME STATEMENTS
Three Months Ended
December September
31,2007 30,2008 December 31,2008
RMB RMB RMB US$
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
Revenues
Software sales 18,702,618 16,602,397 31,830,223 4,665,478
Hardware sales 9,816,610 2,650,771 19,685,341 2,885,356
Service fee
income 19,990,060 8,103,952 20,180,605 2,957,949
Total
Revenues 48,509,288 27,357,120 71,696,169 10,508,783
Cost of revenues
Cost of software 8,363,521 5,312,887 8,819,265 1,292,673
Cost of hardware 7,181,113 2,025,567 17,486,295 2,563,033
Cost of service
fee income 4,950,478 2,698,429 8,475,719 1,242,319
Amortization
of acquired
technology 6,002,248 3,336,837 2,409,791 353,212
Amortization of
software costs 904,236 891,606 929,118 136,184
Total Cost
of Revenue 27,401,596 14,265,327 38,120,187 5,587,422
Gross Profit 21,107,692 13,091,793 33,575,982 4,921,360
Expenses
Research and
development 194,159 231,345 5,044,572 739,402
General and
administrative 10,097,655 6,858,594 11,020,454 1,615,310
Selling and
distribution
expenses 3,986,341 6,324,257 4,804,225 704,174
Total Expenses 14,278,155 13,414,196 20,869,250 3,058,886
Profit from
operations 6,829,536 (322,403) 12,706,732 1,862,474
Interest income 764,491 353,665 70,936 10,397
Interest expense 444,949 (8,114,896) 8,437,618 1,236,734
Amortization of
discount on
notes payable (28,208,015) (18,385,813) (7,469,551) (1,094,841)
Amortization of
loan costs (5,373,092) (3,415,298) 298,644 43,773
Income (loss)
on investments 844,938 (130,681) 17,754 2,602
Foreign currency
exchange loss 99,738 (488,662) 566,316 83,007
Outside business
receives -- 528 27,824 4,078
Outside business
disburses -- (7,827) (855,746) (125,430)
Impairment of
intangible assets -- -- (2,014,634) (295,293)
Income tax
expense -- -- (199,490) (29,240)
Minority interest 32,520 1,602,385 (2,522,638) (369,753)
Net Income
(loss) (24,564,935) (28,909,001) 9,063,764 1,328,511
Earnings per
ordinary share
Basic (9.14) (9.21) 2.70 0.40
Diluted (9.14) (9.21) 2.67 0.39
E-FUTURE INFORMATION TECHNOLOGY INC. AND SUBSIDIARY
NON-GAAP MEASURES OF PERFORMANCE
December 31, September 30, December 31,
2007 2008 2008
RMB RMB RMB US$
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
NON-GAAP OPERATING INCOME
(LOSS) AND ADJUSTED EBITDA
Operating income (loss)
(GAAP Basis) 6,942,516 (322,403) 12,706,732 1,862,474
Adjustments for non-GAAP
measures of performance:
Add back
amortization of
acquired software
technology 8,231,375 3,336,837 2,409,791 353,212
Add back
amortization of
intangibles 2,891,118 891,606 929,118 136,184
Add back share-
based compensation
expenses 2,663,105 763,234 765,657 112,225
Adjusted non-GAAP
operating income 20,728,114 4,669,274 16,811,298 2,464,095
Add back
depreciation 500,633 666,804 (14,765) (2,164)
Adjusted EBITDA
(Earnings before
interest, taxes,
depreciation and
amortization) 21,228,747 5,336,078 16,796,532 2,461,932
NON-GAAP OPERATING
INCOME (LOSS) AND
ADJUSTED EBITDA,
as a percentage
of revenue
Operating income (loss)
(GAAP BASIS) 8% -1% 18% 18%
Adjustments for non-GAAP
measures of performance:
Amortization of
acquired software
technology 10% 12% 3% 3%
Amortization of
intangibles 3% 3% 1% 1%
Share-based
compensation
expenses 3% 3% 1% 1%
Adjusted non-GAAP
operating income 25% 17% 23% 23%
Depreciation 0.6% 2% -0.02% -0.02%
Adjusted EBITDA
(Earnings before
interest, taxes,
depreciation and
amortization) 25% 20% 23% 23%
NON-GAAP EARNINGS PER
SHARE
Net Income(Loss) (27,480,747) (28,909,001) 9,063,764 1,328,511
Amortization of
acquired software
technology 8,231,375 3,336,837 2,409,791 353,212
Amortization of
intangibles 2,891,118 891,606 929,118 136,184
Accretion on
convertible notes 31,320,836 18,385,813 7,469,551 1,094,841
Share-based
compensation
expenses 2,663,105 763,234 765,657 112,225
Adjusted Net income 17,625,687 (5,531,512) 20,637,882 3,024,973
Adjusted non-GAAP
diluted earnings
per share 5.88 (1.76) 6.08 0.89
Shares used to compute
non-GAAP diluted
earnings per share 2,997,921 3,140,371 3,394,099 3,394,099
E-FUTURE INFORMATION TECHNOLOGY INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Chinese Yuan (Renminbi) U.S. Dollars
December 31, December 31, December 31,
2007 2008 2008
(Audited) (Unaudited) (Unaudited)
Cash flows from
operating
activities:
Net income (loss) (27,480,747) (30,132,466) (4,416,631)
Adjustments to
reconcile net income
(loss) to net cash
provided by (used
in) operating
activities:
Depreciation 500,633 839,266 123,014
Amortization of
intangible assets 11,120,493 15,135,140 2,218,415
Amortization of
discount on notes
payable 31,320,836 27,201,387 3,987,012
Amortization of
deferred loan costs 6,610,234 3,637,607 533,178
Investment income (985,085) -- --
Interest on notes
payable contributed
by shareholders -- -- --
Compensation expense
for options issued
to employees? 2,663,105 3,110,891 455,975
Foreign Exchange Loss 93,622 -- --
Minority interest (32,520) (1,102,973) (161,667)
Change in assets and
liabilities:
Accounts receivable (10,352,076) (1,881,912) (275,839)
Refundable value
added tax (1,220,094) 981,435 143,853
Deposits (111,752) -- --
Advances to employees (2,378,346) 1,131,108 165,791
Advances to suppliers (214,694) 246,730 36,164
Other receivables 537,784 (2,792,879) (409,363)
Prepaid expenses (291,548) (125,414) (18,382)
Inventories 265,645 (4,656,761) (682,559)
Trade payables 1,827,696 4,162,135 610,060
Other payables (1,013,731) 3,070,343 450,032
Accrued expenses 340,012 4,751,875 696,500
Accrued interest 278,420 -- --
Taxes payable 2,437,452 (560,508) (82,156)
Deferred Tax -- -- --
Deferred revenue - 3,650,622 535,086
Decrease in accrued
make-whole
obligations 4,575,302 -- --
Advances from
customers -- 1,511,210 221,504
Other non-cash
expenditures -- 3,477,926 509,773
Net cash provided by
operating activities 18,490,641 31,654,762 4,639,760
Cash flows from
investing
activities:
Purchases of property
and equipment (527,743) (1,384,465) (202,926)
Payments for software (7,151,309) (5,034,421) (737,914)
Long-term investments (4,475,216) (1,105,450) (162,030)
Payment to purchase
net assets of
Acquirees (53,188,175) (22,135,101) (3,244,427)
Loan to Guarantor -- -- --
Amounts due from a
related party (3,000,000) -- --
Net cash used in
investing activities (68,342,443) (29,659,437) (4,347,298)
Cash flows from
financing
activities:
Issuance of ordinary
shares for cash, net
of offering costs
paid 1,060,992 3,614,764 529,830
Issue convertible
notes 69,079,430 -- --
Repayment of short
term loan -- -- --
Payment of make-whole
obligation (11,988,170) (9,296,824) (1,362,671)
Net cash provided by
(used in) financing
activities 58,152,252 (5,682,060) (832,841)
Effect of exchange
rate changes on cash (2,537,839) (2,816,878) (412,881)
Net increase in cash 5,762,611 (6,503,614) (953,260)
Cash and cash
equivalents at
beginning of period 61,464,737 67,227,348 9,853,770
Cash and cash
equivalents at end
of period 67,227,348 60,723,734 8,900,511
Supplemental cash
flow information
Interest paid 510,282 542,813 79,562
