eFuture Announces Fourth Quarter and Fiscal Year 2009 Unaudited Financial Results
(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
Fourth Quarter 2009 Financial Highlights:
-- Total revenues decreased 17.8% year-over-year to RMB61.1 million
(US$9.0 million).
-- Revenue from software license sales decreased 25.6% year-over-year
to RMB24.8 million (US$3.6 million).
-- Revenue from hardware sales decreased 1.8% year-over-year to
RMB19.3 million (US$2.8 million).
-- Service fee income decreased 20.4% year-over-year to RMB17.0 million
(US$2.5 million).
-- Gross profit increased 6.3% year-over-year to RMB27.8 million
(US$4.1 million). Gross margin increased to 45.5% from 35.2% in the
fourth quarter of 2008.
-- Operating loss improved to RMB2.3 million (US$343,321) from
RMB3.7 million in the fourth quarter 2008.
-- Net loss was RMB1.1 million (US$156,902), compared with a net loss of
RMB5.8 million in the fourth quarter 2008.
-- Diluted net loss per share was RMB0.32 (US$0.05), as compared to a net
loss per share of RMB1.81 in the fourth quarter 2008.
-- Adjusted net income (non-GAAP) was RMB7.2 million (US$1.0 million),
compared to an adjusted net income of RMB168,705 in the fourth quarter
2008.
-- Non-GAAP adjusted diluted earnings per share was RMB2.06 (US$0.30),
compared to RMB0.05 in the fourth quarter 2008.
Full Year 2009 Financial Highlights:
-- Total revenues decreased 12.5% year-over-year to RMB122.3 million
(US$18.0 million).
-- Revenue from software license sales decreased 18.2% year-over-year
to RMB54.2 million (US$8.0 million).
-- Revenue from hardware sales decreased 19.3% year-over-year to
RMB22.0 million (US$3.2 million).
-- Service fee income decreased 0.7% year-over-year to RMB47.0 million
(US$6.8 million).
-- Gross profit decreased 10.3% year-over-year to RMB51.8 million
(US$7.6 million). Gross margin increased to 42.3% from 41.3% in 2008.
-- Operating loss increased to RMB27.0 million (US$4.0 million) from
RMB10.0 million in 2008.
-- Net loss was RMB24.1 million (US$3.5 million), compared with a net loss
of RMB4.5 million in 2008.
-- Diluted net loss per share was RMB7.16 (US$1.05), as compared to a net
loss per share of RMB1.39 in 2008.
-- Operating cash flow was RMB10.2 million (US$1.5 million), compared to
RMB31.0 million in 2008.
-- Adjusted net loss (non-GAAP) was RMB1.6 million (US$239,365), compared
to an adjusted net profit of RMB15.6 million 2008.
-- Non-GAAP adjusted diluted loss per share was RMB0.47 (US$0.07),
compared to non-GAAP diluted earnings per share of RMB4.99.
Mr.
pleased to report that we saw a further rebound in two of our strategic
business units (SBUs), Department Store & Shopping Mall and Logistics, with
increased revenue from both existing and new customers in the fourth quarter
of 2009. This underpinned the continued recovery of our business and allowed
us to deliver full-year revenue within our guidance range. Despite the
challenging market environment and uncertainty that characterized 2009, we
never lost our focus on innovation, which we believe is the cornerstone of our
growth going forward. In 2009, we significantly strengthened our market
position through investment in new releases of core software solutions and
sales-related activities to further strengthen penetration into tier-2 and
tier-3 cities. Additionally, we continued to broaden our service offering in
order to generate new revenue streams and mitigate the impact of seasonality.
In terms of revenue mix, we continued to shift towards a higher margin
structure, with service fee income increasing to 38.1% of total revenue in
2009 from 33.6% in 2008.
Mr. Yan concluded, “Looking forward, we believe we are well positioned to
deliver consistent top-line growth as our customers and end markets continue
to recover. As of
approximately
2010. In addition, we secured a number of new customers during 2009, the
majority of which have completed pilot projects and are preparing for
nationwide rollout of our systems and services in 2010. For 2010, we will put
in place a plan to improve our cost structure with a focus on further margin
expansion. Building on the ongoing market rebound in 2010, we will drive
growth by continuing to strengthen our software core business while expanding
beyond the core to develop recurring maintenance service and e-service
revenues.”
Operational Highlights:
Management and Operational Enhancements
Since the start of 2010, eFuture’s management team has been enhanced with
the following appointments:
-- Mr. Dehong Yang, President. Mr Yang was appointed to the newly created
position of President, effective 1 January 2010. Mr. Yang has
experience in senior roles within leading international IT companies
such as Wincor Nixdorf and IBM.
-- Mr. Jack Qiu, Vice President and General Manager of the Retail and
Distribution Research Lab at Beijing eFuture, has been promoted to
Chief Innovation Officer and Senior Vice President of eFuture
Information Technology, Inc. Mr. Qiu replaces Mr. Hongjun Zhou. Mr. Qiu
served since 2007 as Vice President and General Manager of Retail and
Distribution Research Lab, Beijing eFuture. From 1998 to 2007, he
served as Executive Vice President of Guangzhou Royalstone System
Integration Co. Ltd.
-- Mr. Johnson Li, Vice President of Beijing eFuture, has been promoted to
Senior Vice President, eFuture Information Technology, Inc.,
responsible for the management of sales and distribution at the
Company's wholly-owned subsidiary, eFuture (Beijing) Royalstone
Information Technology, Inc, and at two effectively controlled variable
interest entities ("VIEs"), Beijing Wangku Hutong Information
Technology Co., Ltd. ("Wangku") and Beijing Fuji Biaoshang Information
Technology Co., Ltd. ("Biaoshang" or "bFuture"). Mr. Li, age 44, has
served as Vice President at Beijing eFuture since 1997. Since 2008, he
has also served as the General Manager of the Key Account SBU. From
2006 to 2007, Mr. Li served as the Secretary of the Board of eFuture.
-- eFuture's Chief Marketing Officer, Mr. James Mu, resigned due to
personal reasons, effective January 2010. Pending the appointment of a
replacement, eFuture's President, Mr. Yang, is leveraging his marketing
experience with companies such as IBM to drive marketing initiatives.
Fourth Quarter and Full Year 2009 Financial Results
Revenue
Revenue for the fourth quarter 2009 decreased 17.8% to
(
during the quarter was primarily driven by eFuture’s Department Store &
Shopping Mall, Logistics, and Grocery, Hypermarket & Supermarket units.
Total fiscal year 2009 revenue decreased 12.5% to RMB122.3 million
(US$18.0 million) from RMB139.9 million in 2008, due to weakness in the
Department Store & Shopping Mall, Logistics, and Grocery, Hypermarket &
Supermarket SBUs during the first three quarters of the year as a result of
the economic slowdown.
Revenue Breakdown
2008 2009
Q4 FY Q4
RMB RMB RMB USD Y-o-Y
'000 '000 '000 '000 Change
Software
license sales 33,337 66,216 24,818 3,636 (25.6)%
Hardware sales 19,680 26,656 19,323 2,831 (1.8)%
Service fee
income 21,315 46,992 16,965 2,485 (20.4)%
Total 74,331 139,864 61,106 8,952 (17.8)%
2009
FY
RMB USD Y-o-Y
'000 '000 change
Software
license sales 54,188 7,939 (18.2)%
Hardware sales 21,518 3,152 (19.3)%
Service fee
income 46,643 6,833 (0.7)%
Total 122,349 17,924 (12.5)%
Cost of Revenues
The cost of revenue for the fourth quarter of 2009 decreased 30.9% to
The decrease was primarily attributable to the decrease in sales volume and
lower labor costs relating to software implementation and delivery.
The cost of revenue for the full year 2009 decreased 14.1% to
million
attributable to the decrease in sales volume, the decline in cost of revenue
was also due to improved cost of software in 2009.
Cost of Revenues Breakdown
2008 2009
Q4 FY Q4
RMB RMB RMB USD Y-o-Y
'000 '000 '000 '000 Change
Cost of
software
license sales 13,731 22,929 4,589 672 (66.6)%
Cost of
hardware sales 16,209 21,989 15,275 2,238 (5.8)%
Cost of
service fee
income 13,073 20,248 9,079 1,330 (30.5)%
Amortization
of acquired
technology 4,206 13,308 2,905 426 (30.9)%
Amortization
of software
costs 953 3,633 1,442 211 51.4 %
Total 48,172 82,106 33,291 4,877 (113.8)%
2009
FY
RMB USD Y-o-Y
'000 '000 change
Cost of
software
license sales 13,587 1,991 (40.7)%
Cost of
hardware sales 17,295 2,534 (21.3)%
Cost of
service fee
income 23,419 3,431 15.7 %
Amortization
of acquired
technology 11,983 1,756 (10.0)%
Amortization
of software
costs 4,280 627 17.8 %
Total 70,564 10,339 (14.1%)
Gross Profit
Fourth quarter 2009 gross profit increased 6.3% year-over-year to
million
Full year 2009 gross profit decreased 10.3% year-over-year to
(
Consolidated gross margin for the fourth quarter of 2009 was 45.5%
compared with 35.2% in the fourth quarter of 2008. Consolidated gross margin
for the full year 2009 was 42.3% compared with 41.3% in 2008, primarily due to
the slight improvement in software and hardware gross margins.
Operating Expenses
Research and development expenses for the fourth quarter 2009 decreased
67.7% year-over-year to
compared with
2008. Research and development expenses for the full year 2009 decreased 61.4%
year-over-year to
compared with
was due to product launches following the successful completion of product
development and pilot phases.
General and administrative expenses for the fourth quarter 2009 decreased
3.5% year-over-year to
revenues, compared with
fourth quarter 2008. General and administrative expenses as a percentage of
revenues decreased year-over-year as a result of provision for employees’
social security having been made on a quarterly basis during 2009, in contrast
to a yearly basis in the fourth quarter 2008 relating to the full year 2008.
Additionally, the impairment of assets in the fourth quarter 2008 contrasted
with no impairment in 2009.
General and administrative expenses for the full year 2009 increased 3.8%
year-over-year to
compared with
year-over-year increase in general and administrative expenses as a percentage
of revenues was primarily due to the 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 fourth quarter 2009 increased
76.0% year-over-year to
revenues, compared with
quarter 2008. Selling and distribution expenses for the full year 2009
increased 64.8% year-over-year to
of total revenue, compared with
2008. The increase in selling and distribution costs for the fourth quarter
and full year 2009 was primarily due to higher salaries and continued
investment in sales and marketing activities, such as client meetings and
associated travel costs, and the redeployment of the sales force in order to
continue penetration of tier-2 and tier-3 cities.
Operating Loss
Operating loss in the fourth quarter 2009 improved to
quarter 2008. The improvement was mainly attributable to the slight increase
in software sales gross margin.
Operating loss in the full year 2009 was
compared with an operating loss of
mainly attributable to the combination of a decrease in sales volume during
the market slowdown and an increase in selling and distribution expenses to
capitalise on improving market conditions towards the end of 2009.
Net Profit/Loss and EBITDA
As a result of the foregoing, fourth quarter 2009 net loss was
million
quarter 2008 and
loss was
million
Basic and diluted losses per share in the fourth quarter 2009 improved to
in the fourth quarter 2008 and
diluted losses per share in the full year 2009 were
compared to basic and diluted losses per share of
Adjusted net income (non-GAAP) for the fourth quarter improved to
million
the fourth quarter 2008. Adjusted net loss (non-GAAP) for the full year 2009
was
million
Fourth quarter 2009 non-GAAP adjusted diluted earnings per share improved
to
year 2009 adjusted non-GAAP diluted loss per share was
compared to non-GAAP diluted earnings per share of
EBITDA (non-GAAP) for the fourth quarter 2009 improved to
(non-GAAP) for the full year 2009 was minus
compared to
Balance Sheet and Cash Flow
As of
was
As of
(
the end of 2008.
Total accounts receivable as of
This improvement was mainly attributable to enhanced management of accounts
receivable collections.
Inventories as of
million
eFuture’s contracts were still classified as work-in-process. They will become
costs when they reach the point of revenue recognition.
First Quarter 2010 Guidance
To better reflect the dynamics of eFuture’s business, the Company has
decided to provide quarterly guidance instead of annual guidance. eFuture
expects total revenues for the first quarter of 2010 to be in the range of
approximately
the first quarter of 2010 is expected to range between a loss of
million
Conference Call Information
eFuture’s management will host a conference call on
at
its 2009 fourth quarter and full year 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 800-819-0121
China (Mobile Callers) 400-620-8038
International Dial-in +65-6723-9381
Passcode 68422376 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
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 10-800-714-0386
China South Dial-in 10-800-140-0386
International Dial-in +61-2-8235-5000
Passcode 68422376
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
US dollars in effect on
dollar as certified for customs purposes by the Federal Reserve Bank of
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
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
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
- FINANCIAL TABLES TO FOLLOW-
E-FUTURE INFORMATION TECHNOLOGY INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
U.S.
Chinese Yuan (Renminbi) Dollars
December 31, December 31, December 31,
2008 2009 2009
(Unaudited) (Unaudited) (Unaudited)
ASSETS
Current assets
Cash and cash equivalents 60,787,734 59,114,876 8,660,378
Trade receivables, less
allowance for doubtful
accounts of RMB4,743,679
and RMB6,916,151($1,013,222),
respectively 19,468,029 16,029,386 2,348,318
Refundable value added tax 2,755,702 2,600,299 380,946
Deposits -- -- --
Advances to employees 3,205,953 1,612,691 236,261
Advances to suppliers 198,752 297,604 43,599
Other receivables 2,229,535 2,437,431 357,086
Prepaid expenses 735,083 1,425,704 208,867
Inventory and work in
process 2,879,250 5,761,384 844,047
Total current assets 92,260,038 89,279,374 13,079,502
Non-current assets
Long-term investments 654,192 654,192 95,840
Long term deferred expense -- 63,750 9,339
Deferred loan costs 1,182,588 836,337 122,524
Property and equipment,
net of accumulated
depreciation of
RMB3,020,838 and
RMB4,162,217($609,768),
respectively 3,605,458 5,208,594 763,064
Intangible assets, net of
accumulated amortization
of RMB34,704,373 and
RMB50,972,300($7,467,484),
respectively 49,875,082 42,833,223 6,275,103
Goodwill 91,284,735 91,284,735 13,373,289
Total non-current assets 146,602,055 140,880,831 20,639,159
Total assets 238,862,093 230,160,205 33,718,661
LIABILITIES AND
SHAREHOLDERS' EQUITY
Current liabilities
Trade accounts payable 5,646,259 9,080,949 1,330,366
Other payable 11,097,702 14,670,879 2,149,296
Accrued expenses 6,873,703 9,989,371 1,463,451
Accrued interest -- -- --
Taxes payable 7,933,734 6,989,700 1,023,997
Advances from customers 22,839,530 26,394,886 3,866,873
Royalstone acquisition
obligation, net of current
portion 6,416,970 6,420,168 940,560
Health field acquisition
obligation 594,000 -- --
Proadvancer System
acquisition obligation 29,958,518 29,973,448 4,391,135
BFuture acquisition
obligation 392,877 392,877 57,557
Deferred tax, current
portion 1,553,197 1,389,121 203,507
Total current liabilities 93,306,490 105,301,397 15,426,742
Long-term liabilities
Royalstone acquisition
obligation -- -- --
3%-10% RMB6,825,900
($1,000,000) convertible
note payable, net of
RMB6,789,061
($994,603) of unamortized
discount 26,068 36,839 5,397
Derivative liabilities 5,111,417 3,824,552 560,300
Minority shareholder
interests 204,414 (509,179) (74,595)
Deferred tax 5,458,232 4,067,470 595,888
Total long-term
liabilities 10,800,131 7,419,682 1,086,990
Shareholders' equity
Ordinary shares, $0.0756
U.S. dollars par value;
6,613,756 shares
authorized; 3,362,241
shares and 3,368,424
shares outstanding,
respectively 2,039,196 2,042,384 299,211
Additional paid-in capital 173,054,651 179,821,900 26,344,057
Statutory reserves 3,084,020 3,084,020 451,812
Accumulated deficit (43,422,395) (67,509,179) (9,890,151)
Total shareholders' equity 134,755,472 117,439,126 17,204,929
Total liabilities and
shareholders' equity 238,862,093 230,160,205 33,718,661
E-FUTURE INFORMATION TECHNOLOGY INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED INCOME STATEMENTS
Three Months Ended
December September
31, 2008 31, 2009 December 31, 2009
RMB RMB RMB US$
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
Revenues
Software sales 33,336,724 13,809,558 24,817,765 3,635,823
Hardware sales 19,680,213 799,850 19,323,064 2,830,845
Service fee income 21,314,538 10,603,170 16,964,910 2,485,373
Total Revenues 74,331,475 25,212,578 61,105,739 8,952,041
Cost of revenues
Cost of software 13,730,797 4,379,759 4,589,125 672,311
Cost of hardware 16,209,487 649,717 15,275,100 2,237,815
Cost of service fee
income 13,072,938 6,449,959 9,079,225 1,330,114
Amortization of
acquired technology 4,206,263 3,063,315 2,904,831 425,560
Amortization of
software costs 952,676 1,027,965 1,442,273 211,294
Total Cost of Revenue 48,172,160 15,570,716 33,290,555 4,877,094
Gross Profit 26,159,314 9,641,862 27,815,184 4,074,947
Operating Expenses
Research and
development 5,890,351 427,195 1,900,974 278,494
General and
administrative 17,552,899 7,173,665 16,933,586 2,480,785
Selling and
distribution expenses 6,434,386 7,914,027 11,324,100 1,658,990
Total Operating
Expenses 29,877,636 15,514,887 30,158,661 4,418,269
Profit/(loss) from
operations (3,718,322) (5,873,024) (2,343,477) (343,321)
Interest income 84,193 153,454 (71,114) (10,417)
Interest expense (401,547) (176,753) 42,902 6,285
Interest expenses-
amortization of
discount on notes
payable (2,697) (958) (5,506) (807)
Interest expenses-
amortization of
deferred loan costs (83,815) (88,301) (89,457) (13,106)
Income/(loss) on
investments (2,911,634) -- -- --
Gain on derivatives 16,564,984 (158,449) 1,831,621 268,334
Loss on extinguishment
of convertible notes (5) -- -- --
Foreign currency
exchange gain (10,844,217) 31,006 (120,388) (17,637)
Profit/(loss) before
tax (1,313,059) (6,113,025) (755,418) (110,669)
Income tax
expense/(benefit) (670,049) 1,574,525 (808,005) (118,374)
Minority interest in
profit/(loss) of
consolidated
subsidiary (3,830,025) 375,795 492,429 72,141.00
Net Income/(loss) (5,813,134) (4,162,706) (1,070,995) (156,902)
Other comprehensive
income/(loss)
Foreign currency
translation adjustment -- -- -- --
Comprehensive
Income/(loss) (5,813,134) (4,162,706) (1,070,995) (156,902)
Earnings per
share
Basic (1.81) (1.24) (0.32) (0.05)
Diluted (1.81) (1.24) (0.32) (0.05)
E-FUTURE INFORMATION TECHNOLOGY INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED INCOME STATEMENTS
U.S.
Chinese Yuan (Renminbi) Dollars
2008 2009 2009
(Unaudited) (Unaudited) (Unaudited)
Revenues
Software sales 66,215,769 54,187,769 7,938,553
Hardware sales 26,655,967 21,518,084 3,152,417
Service fee income 46,991,766 46,642,594 6,833,179
Total Revenues 139,863,502 122,348,447 17,924,149
Cost of revenues
Cost of software 22,928,605 13,587,296 1,990,550
Cost of hardware 21,989,087 17,294,931 2,533,722
Cost of service fee income
20,247,922 23,418,659 3,430,853
Amortization of acquired
technology 13,308,030 11,983,299 1,755,563
Amortization of software
costs 3,632,744 4,280,232 627,058
Total Cost of Revenue 82,106,388 70,564,417 10,337,745
Gross Profit 57,757,114 51,784,030 7,586,403
Operating Expenses
Research and development 6,512,776 2,513,915 368,291
General and administrative 40,488,964 42,015,797 6,155,349
Selling and distribution
expenses 20,792,618 34,256,793 5,018,648
Total Operating Expenses 67,794,358 78,786,505 11,542,288
Profit/(loss) from
operations (10,037,244) (27,002,475) (3,955,885)
Interest income 1,424,029 425,103 62,278
Interest expense (1,246,780) (453,861) (66,491)
Interest expenses-
amortization of discount on
notes payable (33,212) (13,316) (1,951)
Interest expenses-
amortization of deferred
loan costs (978,204) (350,996) (51,421)
Income/(loss) on investments (3,552,902) -- --
Gain on derivatives 33,122,465 1,290,327 189,034
Loss on extinguishment of
convertible notes (22,529,233) -- --
Foreign currency exchange
gain 368,127 (133,091) (19,498)
Profit/(loss) before tax (3,462,954) (26,238,308) (3,843,934)
Income tax expense/(benefit) (810,744) 1,437,926 210,658
Minority interest in
profit/(loss) of
consolidated subsidiary (204,414) 713,593 104,542.00
Net Income/(loss) (4,478,112) (24,086,788) (3,528,734)
Other comprehensive
income/(loss)
Foreign currency
translation adjustment -- -- --
Comprehensive Income/(loss) (4,478,112) (24,086,788) (3,528,734)
Earnings per ordinary share
Basic (1.39) (7.16) (1.05)
Diluted (1.39) (7.16) (1.05)
E-FUTURE INFORMATION TECHNOLOGY INC. AND SUBSIDIARY
NON-GAAP MEASURES OF PERFORMANCE
Three Months Ended
December
31, 2008 December 31, 2009
RMB RMB US$
(Unaudited) (Unaudited) (Unaudited)
NON-GAAP OPERATING INCOME
(LOSS) AND ADJUSTED EBITDA
Operating income (loss)
(GAAP Basis) (3,718,322) (2,343,477) (343,321)
Adjustments for non-GAAP
measures of performance:
Add back amortization of
acquired software technology 4,206,263 2,904,831 425,560
Add back amortization of
intangibles 952,676 1,442,273 211,294
Add back share-based
compensation expenses 820,203 3,881,775 568,683
Adjusted non-GAAP operating
income 2,260,820 5,885,403 862,216
Add back depreciation 224,379 381,834 55,939
Adjusted EBITDA (Earnings
before interest, taxes,
depreciation and
amortization) 2,485,199 6,267,237 918,155
NON-GAAP OPERATING INCOME
(LOSS) AND ADJUSTED EBITDA,
as a percentage of revenue
Operating income (loss)
(GAAP BASIS) -5 % -4 % -4 %
Adjustments for non-GAAP
measures of performance:
Amortization of acquired
software technology 6 % 5 % 5 %
Amortization of intangibles 1 % 2 % 2 %
Share-based compensation
expenses 1 % 6 % 6 %
Adjusted non-GAAP operating
income 3 % 10 % 10 %
Depreciation 0.3 % 0.6 % 0.6 %
Adjusted EBITDA (Earnings
before interest, taxes,
depreciation and
amortization) 3 % 10 % 10 %
NON-GAAP EARNINGS PER SHARE
Net Income(Loss) (5,813,134) (1,070,995) (156,902)
Amortization of acquired
software technology 4,206,263 2,904,831 425,560
Amortization of intangibles 952,676 1,442,273 211,294
Accretion on convertible
notes 2,697 5,506 807
Share-based compensation
expenses 820,203 3,881,775 568,683
Adjusted Net income 168,705 7,163,391 1,049,442
Adjusted non-GAAP diluted
earnings per share 0.05 2.06 0.30
Shares used to compute non-
GAAP diluted earnings per
share 3,394,099.19 3,480,225 3,480,225
E-FUTURE INFORMATION TECHNOLOGY INC. AND SUBSIDIARY
NON-GAAP MEASURES OF PERFORMANCE
Year Ended
December
31,2008 December 31,2009
RMB RMB US$
(Unaudited) (Unaudited) (Unaudited)
NON-GAAP OPERATING INCOME
(LOSS) AND ADJUSTED EBITDA
Operating income (loss) (GAAP
Basis) (10,037,244) (27,002,475) (3,955,885)
Adjustments for non-GAAP
measures of performance:
Add back amortization of
acquired software technology 13,308,030 11,983,299 1,755,563
Add back amortization of
intangibles 3,632,744 4,280,232 627,058
Add back share-based
compensation expenses 3,109,903 6,176,054 904,797
Adjusted non-GAAP operating
income 10,013,433 (4,562,889) (668,467)
Add back depreciation 891,183 1,102,709 161,548
Adjusted EBITDA (Earnings
before interest, taxes,
depreciation and
amortization) 10,904,616 (3,460,180) (506,919)
NON-GAAP OPERATING INCOME
(LOSS) AND ADJUSTED EBITDA,
as a percentage of revenue
Operating income (loss) (GAAP
BASIS) -7 % -22 % -22 %
Adjustments for non-GAAP
measures of performance:
Amortization of acquired
software technology 10 % 10 % 10 %
Amortization of intangibles 3 % 3 % 3 %
Share-based compensation
expenses 2 % 5 % 5 %
Adjusted non-GAAP operating
income 7 % -4 % -4 %
Depreciation 0.6 % 0.9 % 0.9 %
Adjusted EBITDA (Earnings
before interest, taxes,
depreciation and
amortization) 8 % -3 % -3 %
NON-GAAP EARNINGS PER SHARE
Net Income(Loss) (4,478,112) (24,086,788) (3,528,734)
Amortization of acquired
software technology 13,308,030 11,983,299 1,755,563
Amortization of intangibles 3,632,744 4,280,232 627,058
Accretion on convertible
notes 33,212 13,316 1,951
Share-based compensation
expenses 3,109,903 6,176,054 904,797
Adjusted Net income 15,605,777 (1,633,887) (239,365)
Adjusted non-GAAP diluted
earnings per share 4.99 (0.47) (0.07)
Shares used to compute non-
GAAP diluted earnings per
share 3,124,463 3,478,013 3,478,013
E-FUTURE INFORMATION TECHNOLOGY INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
U.S.
Chinese Yuan (Renminbi) Dollars
December
December 31, December 31, 31,
2008 2009 2009
(Unaudited) (Unaudited) (Unaudited)
Cash flows from operating
activities:
Net income (loss) (4,478,112) (24,086,788) (3,528,734)
Adjustments to reconcile net
income (loss) to net cash
provided by (used in)
operating activities:
Depreciation 891,183 1,102,709 161,548
Amortization of intangible
assets 16,940,774 16,112,838 2,360,544
Impairment of intangible
assets 2,143,290 -- --
Amortization of discount on
notes payable 33,212 13,316 1,951
Amortization of deferred
loan costs 978,204 350,996 51,421
Gain on derivatives (33,122,465) (1,290,656) (189,082)
Loss on extinguishment of
convertible notes 22,529,233 -- --
Investment (income)/loss 3,552,902 -- --
Loss on disposition of
property and equipment 385,995 14,456 2,118.00
Provision for doubtful debt 2,340,706 1,392,612 204,019
Provision for loss in
inventory and work in
process 1,449,542 1,103,381.85 161,646.00
Compensation expense for
options issued to employees 3,109,903 6,176,054 904,797
Deferred taxes 481,774 (1,554,838) (227,785)
Foreign exchange loss (2,222,996) -- --
Minority interest 204,414 (713,593) (104,542)
Change in assets and
liabilities:
Accounts receivable (2,526,441) 3,883,719 568,968
Refundable value added tax 935,333 155,403 22,767
Deposits 156,695 -- --
Advances to employees 370,994 1,500,531 219,829
Advances to suppliers 991,888 (198,692) (29,109)
Other receivables 136,565 1,920,407 281,341
Prepaid expenses 305,014 (754,238) (110,497)
Inventories 1,421,159 (3,745,144) (548,667)
Trade payables 1,230,861 3,393,734 497,185
Other payables 7,269,063 2,346,510 343,766
Accrued expenses 2,360,449 3,116,989 456,642
Accrued interest (278,420) (27,304) (4,000)
Taxes payable (1,084,826) (1,757,166) (257,426)
Advances from customers 4,542,952 1,741,712 255,162
Net cash provided by
operating activities 31,048,845 10,196,948 1,493,861
Cash flows from investing
activities:
Purchases of property and
equipment (1,618,331) (2,185,887) (320,234)
Payments for intangible
assets (2,930,247) (9,826,100) (1,439,532)
Long-term investments -- -- --
Acquisition of business (28,278,247) -- --
Loan to Guarantor -- -- --
Amounts due from a related
party -- -- --
Net cash used in investing
activities (32,826,825) (12,011,987) (1,759,766)
Cash flows from financing
activities:
Issuance of ordinary shares
for cash, net of
offering costs paid -- -- --
Proceeds from exercise of
warrants 3,657,908 -- --
Issuance of convertible
notes -- -- --
Payment of make-whole
obligation (8,054,079) -- --
Repayment of short-term
loans -- -- --
Net cash provided by (used
in) financing activities (4,396,171) -- --
Effect of exchange rate
changes on cash (265,463) 142,180.54 20,830
Net increase (decrease) in
cash (6,439,614) (1,672,858) (245,075)
Cash and cash equivalents at
beginning of period 67,227,348 60,787,734 8,905,453
Cash and cash equivalents at
end of period 60,787,734 59,114,876 8,660,378
Supplemental cash flow
information
Interest paid 1,525,200 450,826.20 66,046.00
SOURCE eFuture Information Technology Inc.