- Published: 19 March 2013
- Written by Editor
eFuture Announces Fourth Quarter and Full Year 2012 Unaudited Financial Results
eFuture Information Technology Inc. (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, 2012.
Full Year 2012 Financial Highlights
- Total revenue increased 14% year-over-year to RMB198.4 million (US$31.8 million).
- Gross profit increased 40% year-over-year to RMB78.5 million (US$12.6 million).
- Adjusted EBITDA increased 439% to RMB16.2 million (US$2.6 million).
- Operating profit was RMB1.5 million (US$0.2 million), compared to an operating loss of RMB19.5 million in 2011.
- Net loss was RMB5.8 million (US$0.9 million), compared to a net loss of RMB18.8 million in 2011.
- Adjusted net income was RMB6.9 million (US$1.1 million), compared to adjusted net loss of RMB1.5 million in 2011.
- Basic and diluted loss per share was RMB1.41 (US$0.23), as compared to basic and diluted loss per share of RMB4.56 in 2011.
- Adjusted diluted earnings per share was RMB1.69 (US$0.27), as compared to adjusted diluted loss per share of RMB0.37 in 2011.
Fourth Quarter 2012 Financial Highlights
- Total revenue increased 13% year-over-year to RMB98.3 million (US$15.8 million).
- Gross profit increased 41% year-over-year to RMB39.5 million (US$6.3 million).
- Adjusted EBITDA increased 82% to RMB18.5 million (US$3.0 million).
- Operating income increased 877% to RMB16.1 million (US$2.6 million).
- Net income was RMB1.8 million (US$0.3 million), compared to net loss of RMB7.9 million in the fourth quarter 2011.
- Adjusted net income was RMB3.7 million (US$0.6 million), compared to RMB2.0 million in the fourth quarter 2011.
- Basic and diluted earnings per share was RMB0.43 (US$0.07), as compared to basic and diluted loss per share of RMB1.92 in the fourth quarter 2011.
- Adjusted diluted earnings per share was RMB0.89 (US$0.14), as compared to adjusted diluted earnings per share of RMB0.47 in the fourth quarter 2011.
Mr. Adam Yan, Chairman and Chief Executive Officer of eFuture, commented on the results. "I am pleased to report that 2012 was a successful year for eFuture, highlighted by a total revenue growth of 14 percent as a result of our focus to push sales in higher contract value products and services to big brands. This growth was well supported by the continued strong performance of our core business, which grew by 25%, and comprises software licensing, customized IT solutions services and recurring maintenance services. Secondly, I am also delighted to see consistent growth from clients in tier two and three cities, following our diversification strategy from 2009 to localize sales and delivery teams in these areas. Our efforts have realized 67% and 33% year-over-year growth in tier two and three cities, respectively, from 2011 to 2012. We believe nationwide urbanization will continue to act as a solid growth driver for our company.
"Thirdly, the successful execution of our initiatives designed to improve efficiency, through internal restructuring and operational systemization, enabled us to increase our gross margin by 800 basis points in full fiscal year 2012 compared with the previous year. The result of our operational initiatives combined with the benefits from our recent business gains has driven our full year adjusted EBITDA to RMB16.2 million."
Mr. Yan concluded, "Our long term goal remains the same: to sustain our momentum and seize opportunities in the retail and consumer goods market, develop innovative IT products and improve customer satisfaction. Regarding Cloud and mobile solutions, we will continue to evaluate all opportunities we believe would best complement our core businesses, or increase our competitive advantages as a way to maximize value to our shareholders."
Mr. Sean Zheng, Chief Financial Officer, added, "Our improved operational environment has enabled us to finish some Software licensing projects earlier than expected. As a result, some projected 2013 Q1 revenue has been pushed forward to become recognized in the fourth quarter 2012, and our results for this quarter look healthier than anticipated.
"Although we have seen a weaker-than-expected retail and consumer market at the beginning of 2013 which may impact our business over the year, we will attempt to mitigate these effects by applying our sound company principles to fully leverage the advantages acquired through our successful efficiency improvement initiatives. With our business continuing to grow, we are optimistic that we will achieve improved efficiency, better scalability and stronger financial results in 2013 and beyond."
FULL YEAR 2012 FINANCIAL RESULTS
Revenue
Total revenue for the full year of 2012 increased 14% to RMB198.4 million (US$31.8 million) from RMB174.4 million in 2011.
Revenue Breakdown
| FY11 | FY12 | |||
| RMB '000 | RMB '000 | USD '000 | Y-o-Y Change | |
| Software license sales | 52,599 | 79,535 | 12,766 | 51% |
| Hardware sales | 38,838 | 28,461 | 4,568 | (27%) |
| Service fee income | 83,011 | 90,359 | 14,504 | 9% |
| Total | 174,448 | 198,355 | 31,838 | 14% |
Software license revenue for 2012 increased 51% year-over-year to RMB79.5 million (US$12.8 million) from RMB52.6 million in 2011. The increase was primarily attributable to an increase in software licensing product sales from shopping malls and grocery stores.
Hardware revenue for 2012 decreased 27% year-over-year to RMB28.5 million (US$4.6 million) from RMB38.8 million in 2011. The decrease was a result of Company's strategy to focus on higher margin projects.
Service fee income for 2012 increased 9% year-over-year to RMB90.4 million (US$14.5 million) from RMB83.0 million in 2011, which was primarily attributable to an increase in sales of delivery services and the recurring nature of our maintenance services.
Cost of Revenue
Cost of revenue for 2012 increased 1% to RMB119.8 million (US$19.2 million) from RMB118.3 million in 2011.
Cost of Revenue Breakdown
| FY11 | FY12 | |||
| RMB '000 | RMB '000 | USD '000 | Y-o-Y Change | |
| Cost of software license sales | 12,659 | 26,652 | 4,278 | 111% |
| Cost of hardware sales | 32,413 | 23,863 | 3,830 | (26%) |
| Cost of service fee | 57,885 | 62,410 | 10,017 | 8% |
| Amortization of acquired technology | 7,839 | 4,157 | 667 | (47%) |
| Amortization of software costs | 3,320 | 2,767 | 444 | (17%) |
| Impairment loss of intangible assets | 4,135 | -- | -- | (100%) |
| Total | 118,251 | 119,849 | 19,237 | 1% |
Gross Profit and Gross Margin
Gross profit increased 40% year-over-year to RMB78.5 million (US$12.6 million) from RMB56.2 million in 2011, and consolidated gross margin for 2012 was 40%, compared with 32% in 2011. The improvement in gross margin was mainly due to an increase in revenue from most of our business segments, an improved sales portfolio which focuses on more profitable projects and a streamlined cost structure resulting from the Company's continued cost control measures.
Operating Expenses
Research and development ("R&D") expenses for 2012 decreased 20% year-over-year to RMB3.7 million (US$0.6 million), or 2% of total revenue, compared with RMB4.7 million, or 3% of total revenue in 2011. The decrease was primarily attributable to the capitalization of R&D expenditure.
General and administrative expenses ("G&A") for 2012 decreased 29% year-over-year to RMB32.8 million (US$5.3 million), representing 17% of total revenue, compared with RMB46.2 million, or 27% of total revenue in 2011. The decrease was primarily attributable to improved cost control in administrative related expenses and reduced provision for bad debt.
Selling and distribution ("S&D") expenses for 2012 increased 63% year-over-year to RMB40.4 million (US$6.5 million), representing 20% of total revenue, compared with RMB24.8 million, or 14% of total revenue in 2011. The increase was primarily attributable to sales commissions for newly-signed contracts in the fiscal year and an increase of business development expenditure in relation to seed businesses.
Operating Profit/Loss
Operating profit in 2012 was RMB1.5 million (US$0.2 million), compared with an operating loss of RMB19.5 million in 2011.
Net Loss/Adjusted Net Income/Loss and Loss Per Share/Adjusted Earnings/Loss Per Share
As a result of the aforementioned loss, 2012 net loss was RMB5.8 million (US$0.9 million), compared with a net loss of RMB18.8 million in 2011. Adjusted net income for 2012 was RMB6.9 million (US$1.1 million), compared with an adjusted net loss of RMB1.5 million in 2011.
Basic and diluted loss per share in 2012 was RMB1.41 (US$0.23), compared to basic and diluted loss per share of RMB4.56 in 2011. Adjusted diluted earnings per share was RMB1.69 (US$0.27), compared to an adjusted diluted loss per share of RMB0.37 in 2011.
EBITDA
Adjusted EBITDA for 2012 was RMB16.2 million (US$2.6 million), increased by 439% from RMB3.0 million in 2011.
FOURTH QUARTER 2012 FINANCIAL RESULTS
Revenue
Total revenue for the fourth quarter 2012 increased 13% to RMB98.3 million (US$15.8 million) from RMB86.7 million in the fourth quarter 2011.
Revenue Breakdown
| 4Q11 | 4Q12 | |||
| RMB '000 | RMB '000 | USD '000 | Y-o-Y Change | |
| Software license sales | 27,294 | 42,311 | 6,791 | 55% |
| Hardware sales | 25,542 | 17,157 | 2,754 | (33%) |
| Service fee income | 33,898 | 38,829 | 6,233 | 15% |
| Total | 86,734 | 98,297 | 15,778 | 13% |
Software license revenue for the fourth quarter 2012 increased 55% year-over-year to RMB42.3 million (US$6.8 million) from RMB27.3 million in the fourth quarter 2011. The increase was primarily attributable to an increase in sales from our software licensing products.
Hardware revenue in the fourth quarter 2012 decreased 33% year-over-year to RMB17.2 million (US$2.8 million) from RMB25.5 million in the fourth quarter 2011. The decrease was a result of Company's strategy to focus on higher margin projects.
Service fee income for the fourth quarter 2012 increased 15% year-over-year to RMB38.8 million (US$6.2 million) from RMB33.9 million in the fourth quarter 2011, which was primarily attributable to an increase in sales of our customization IT services and the recurring nature of our maintenance services.
Cost of Revenue
Cost of revenue for the fourth quarter 2012 increased 0.04% to RMB58.79 million (US$9.4 million) from RMB58.77 million in the fourth quarter 2011.
Cost of Revenue Breakdown
| 4Q11 | 4Q12 | |||
| RMB '000 | RMB '000 | USD '000 | Y-o-Y Change | |
| Cost of software license sales | 5,875 | 13,464 | 2,161 | 129% |
| Cost of hardware sales | 21,229 | 14,200 | 2,279 | (33%) |
| Cost of service fee | 25,048 | 30,167 | 4,842 | 20% |
| Amortization of acquired technology | 1,742 | 114 | 18 | (93%) |
| Amortization of software costs | 741 | 846 | 136 | 14% |
| Impairment loss of intangible assets | 4,135 | -- | -- | (100%) |
| Total | 58,770 | 58,791 | 9,437 | 0.04% |
Gross Profit and Gross Margin
Gross profit increased 41% year-over-year to RMB39.5million (US$6.3 million) from RMB28.0 million in the fourth quarter 2011, and consolidated gross margin for the fourth quarter 2012 was 40%, compared with 32% in the fourth quarter 2011. The improvement in gross margin was mainly due to an increase in sales from most of our business segments.
Operating Expenses
Research and development ("R&D") expenses for the fourth quarter 2012 increased 12% year-over-year to RMB1.3 million (US$0.2 million), or 1% of total revenue, compared with RMB1.2 million, or 1% of total revenue in the fourth quarter 2011. The increase in R&D expense was primarily attributable to a year-end bonus accrual.
General and administrative expenses ("G&A") for the fourth quarter 2012 decreased 45% year-over-year to RMB9.6 million (US$1.5 million), representing 10% of total revenue, compared with RMB17.3 million, or 20% of total revenue in the fourth quarter 2011. The decrease was primarily attributable to our continued discipline in controlling administrative expenses as part of the Company's focus on profitability.
Selling and distribution ("S&D") expenses for the fourth quarter 2012 increased 59% year-over-year to RMB12.5 million (US$2.0 million), representing 13% of total revenue, compared with RMB7.9 million, or 9% of total revenue in the fourth quarter 2011. The increase was primarily attributable to sales commissions for the newly-signed contracts.
Operating Income
Operating income in the fourth quarter 2012 was RMB16.1 million (US$2.6 million), increased by 877% from RMB1.6 million in the fourth quarter 2011.
Net Income /Adjusted Net Income and Earnings Per Share/Adjusted Earnings Per Share
Fourth quarter 2012 net income was RMB1.8 million (US$0.3 million), compared with a net loss of RMB7.9 million in the fourth quarter 2011. Adjusted net income for the fourth quarter 2012 was RMB3.7 million (US$0.6 million), compared with RMB2.0 million in the fourth quarter 2011.
Basic and diluted earnings per share in the fourth quarter 2012 was RMB0.43 (US$0.07), compared to basic and diluted loss per share of RMB1.92 in the fourth quarter 2011. Adjusted diluted earnings per share was RMB0.89 (US$0.14), compared to RMB0.47 in the fourth quarter 2011.
EBITDA
Adjusted EBITDA for the fourth quarter 2012 was RMB18.5 million (US$3.0 million), increased by 82% from RMB10.2 million in the fourth quarter 2011.
Balance Sheet and Cash Flow
As of December 31, 2012, cash and cash equivalents amounted to RMB79.4 million (US$12.7 million), an increase of RMB22.2 million from RMB57.2 million as of December 31, 2011. The increase was primarily attributable to an increase in cash collection from our core business operation.
Total accounts receivable as of December 31, 2012 increased 27% to RMB25.2 million (US$4.0 million) from RMB19.9 million as of December 31, 2011. The increase was primarily attributable to an increase in overall sales.
Inventory and work in process as of December 31, 2012 decreased 31% to RMB19.3 million (US$3.1 million) from RMB28.0 million as of December 31, 2011. The decrease was primarily attributable to the reduced work-in-process projects as a result of better project management.
For the full year ended December 31, 2012, net cash provided by operating activities was RMB37.9 million (US$6.1 million). Net cash used in investing activities was RMB15.7 million (US$2.5 million).
Share Repurchase Program
On December 22, 2011, the Company announced a share repurchase program to repurchase up to US$2 million worth of its ordinary shares over the next 12 months. During the fourth quarter of 2012, eFuture repurchased approximately 12 thousands shares with an average price of US$3.5 per share. Today, the Board of Directors of the Company announced to suspend the Company's share repurchase program for the foreseeable future. The Company expects it will be able to generate enhanced shareholder value by investing the cash for future business development and the growth of its business.
FIRST QUARTER 2013 GUIDANCE
eFuture expects total revenue for the first quarter 2013 to be in the range of RMB22 million (US$3.5 million) to RMB25 million (US$4 million). Adjusted EBITDA for the first quarter 2013 is expected to be in the range of minus RMB5 million (US$0.8 million) to RMB6 million (US$1 million).
CONFERENCE CALL INFORMATION
eFuture's management will host a conference call on March 19, 2013 at 5:00 am (US Pacific) / 8:00 am (US Eastern) / 8:00 pm (Beijing) to discuss the Company's 2012 fourth quarter and full year results and recent business activities. The conference call may be accessed by dialing:
| To access the conference call, please dial: | |
| Toll Free: | |
| U.S. | 1-866-519-4004 |
| Hong Kong | 800-930-346 |
| Toll: | |
| International | 65-6723-9381 |
| China | 400-620-8038 / 800-819-0121 |
| Hong Kong | 852-2475-0994 |
| U.S. | 1-718-354-1231 |
| 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: | |
| Toll Free: | |
| U.S. | 1-855-452-5696 |
| China | 400-120-0932 / 800-870-0205 |
| Hong Kong | 800-963-117 |
| International Toll: | 61-2-8199-0299 |
| Replay Passcode: | 1886-9877 |
| Available Time: | 11:00 a.m. March 19, 2013 ET -- 08:00 a.m. March 27, 2013 ET |
The Company will also broadcast a live audio webcast of the conference call. The webcast will be available at http://ir.e-future.com.cn.
CURRENCY CONVENIENCE TRANSLATION
For the convenience of readers, certain RMB amounts have been translated into US dollars at the rate of RMB6.2301 to US$1.00, the noon buying rate for US dollars in effect on December 31, 2012 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 U.S. Securities and Exchange Commission: (i) adjusted EBITDA excluding amortization of acquired software technology, amortization of intangibles, impairment of intangible assets, share-based compensation expenses and depreciation; (ii) adjusted net income excluding amortization of acquired software technology, amortization of intangibles, impairment of intangible assets, share-based compensation expenses and accretion on convertible notes; and (iii) 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. (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. 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, 2013 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 revenue and certain cost or expense items; eFuture's ability to attract clients 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 will be 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 March 18, 2013, and the Company undertakes no duty to update such information or any other forward-looking information, except as required under applicable law.
-- FINANCIAL TABLES TO FOLLOW
| EFUTURE INFORMATION TECHNOLOGY INC. AND SUBSIDIARIES | Exchange rate | 6.2301 | ||||
| CONDENSED CONSOLIDATED INCOME STATEMENTS | ||||||
| Year ended | Three months ended | |||||
| Chinese Yuan (Renminbi) | U.S. Dollars | Chinese Yuan (Renminbi) | U.S. Dollars | |||
| December 31, | December 31, | December 31, | December 31, | December 31, | December 31, | |
| 2011 | 2012 | 2012 | 2011 | 2012 | 2012 | |
| (Audited) | (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | |
| Revenues | ||||||
| Software revenue | 52,599,132 | 79,535,451 | 12,766,320 | 27,293,638 | 42,311,087 | 6,791,398 |
| Hardware revenue | 38,838,235 | 28,460,810 | 4,568,275 | 25,541,584 | 17,156,646 | 2,753,831 |
| Service fee revenue | 83,011,113 | 90,358,608 | 14,503,556 | 33,898,471 | 38,829,098 | 6,232,500 |
| Total Revenues | 174,448,480 | 198,354,869 | 31,838,152 | 86,733,693 | 98,296,831 | 15,777,729 |
| Cost of revenues | ||||||
| Cost of software revenue | (12,658,868) | (26,651,708) | (4,277,894) | (5,874,419) | (13,463,689) | (2,161,071) |
| Cost of hardware revenue | (32,412,956) | (23,862,880) | (3,830,256) | (21,229,193) | (14,200,204) | (2,279,290) |
| Cost of service fee revenue | (57,885,408) | (62,409,787) | (10,017,462) | (25,047,645) | (30,167,197) | (4,842,169) |
| Amortization of acquired technology | (7,838,965) | (4,157,333) | (667,298) | (1,742,287) | (114,480) | (18,375) |
| Amortization of software costs | (3,319,857) | (2,767,041) | (444,141) | (741,329) | (845,902) | (135,777) |
| Impairment loss of intangible assets | (4,135,194) | -- | -- | (4,135,194) | -- | -- |
| Total Cost of Revenues | (118,251,248) | (119,848,749) | (19,237,051) | (58,770,067) | (58,791,472) | (9,436,682) |
| Gross Profit | 56,197,232 | 78,506,120 | 12,601,101 | 27,963,626 | 39,505,359 | 6,341,047 |
| Operating Expenses | ||||||
| Research and development expenses | (4,666,122) | (3,737,959) | (599,984) | (1,163,364) | (1,305,367) | (209,526) |
| General and administrative expenses | (46,231,355) | (32,799,689) | (5,264,713) | (17,273,196) | (9,562,760) | (1,534,928) |
| Selling and distribution expenses | (24,845,248) | (40,448,601) | (6,492,448) | (7,880,351) | (12,545,370) | (2,013,671) |
| Total Operating Expenses | (75,742,725) | (76,986,249) | (12,357,145) | (26,316,911) | (23,413,497) | (3,758,125) |
| Profit/(Loss) from operations | (19,545,493) | 1,519,871 | 243,956 | 1,646,715 | 16,091,862 | 2,582,922 |
| Other income (expenses) | ||||||
| Interest income | 534,203 | 497,457 | 79,847 | 380,498 | 143,108 | 22,970 |
| Interest expenses | (550,338) | -- | -- | (63,798) | -- | -- |
| Interest expenses - amortization of discount on convertible notes payable | (6,431,872) | -- | -- | (6,086,046) | -- | -- |
| Interest expenses - amortization of deferred loan costs | (474,399) | -- | -- | (202,734) | -- | -- |
| Loss on investments | (240,000) | -- | -- | (240,000) | -- | -- |
| Gains on derivative liabilities | 347,565 | 3,168 | 508 | (1,311) | -- | -- |
| Other income/(expenses) | 873,697 | (3,537,252) | (567,767) | 318,999 | (4,339,707) | (696,571) |
| Foreign currency exchange loss | (36,864) | (5,328) | (855) | (69,363) | (21,234) | (3,408) |
| Profit/(Loss) from continuing operations before income tax | (25,523,501) | (1,522,084) | (244,311) | (4,317,040) | 11,874,028 | 1,905,913 |
| Less: Income tax expense/(benefit) | (571,857) | 4,270,945 | 685,534 | 3,597,525 | 10,123,572 | 1,624,945 |
| Loss from continuing operations | (24,951,644) | (5,793,029) | (929,845) | (7,914,565) | 1,750,457 | 280,968 |
| Less: Net loss attributable to the non-controlling interest | (511,423) | -- | -- | -- | -- | -- |
| Net loss from continuing operations attributable to eFuture Information Technology Inc. | (24,440,221) | (5,793,029) | (929,845) | (7,914,565) | 1,750,457 | 280,968 |
| Discontinued operations | ||||||
| Gain from discontinued operations (including gain on disposal of Y6,701,170 and nil, respectively) | 5,609,352 | -- | -- | -- | -- | -- |
| Less: Income tax expenses | -- | -- | -- | -- | -- | -- |
| Gain from discontinued operations | 5,609,352 | -- | -- | -- | -- | -- |
| Net loss | (18,830,869) | (5,793,029) | (929,845) | (7,914,565) | 1,750,457 | 280,968 |
| Earnings/(Loss) per share | ||||||
| Basic | (4.56) | (1.41) | (0.23) | (1.92) | 0.43 | 0.07 |
| - Continuing operations | (5.92) | (1.41) | (0.23) | (1.92) | 0.43 | 0.07 |
| - Discontinued operations | 1.36 | -- | -- | -- | -- | -- |
| Diluted | (4.56) | (1.41) | (0.23) | (1.92) | 0.43 | 0.07 |
| - Continuing operations | (5.92) | (1.41) | (0.23) | (1.92) | 0.43 | 0.07 |
| - Discontinued operations | 1.36 | -- | -- | -- | -- | -- |
| Basic Weighted-average Shares Outstanding | 4,130,221 | 4,098,772 | 4,098,772 | 4,130,221 | 4,066,472 | 4,066,472 |
| Fully-Diluted Weighted-average Shares Outstanding | 4,130,221 | 4,098,919 | 4,098,919 | 4,130,221 | 4,151,935 | 4,151,935 |
| EFUTURE INFORMATION TECHNOLOGY INC. AND SUBSIDIARIES | Exchange rate | 6.2301 | |
| CONDENSED CONSOLIDATED BALANCE SHEETS | |||
| Chinese Yuan (Renminbi) | U.S. Dollars | ||
| December 31, | December 31, | December 31, | |
| 2011 | 2012 | 2012 | |
| (Audited) | (Unaudited) | (Unaudited) | |
| ASSETS | |||
| Current assets | |||
| Cash and cash equivalents | 57,157,078 | 79,373,365 | 12,740,304 |
| Trade receivables, net of allowance for doubtful accounts of Y3,559,207 and Y2,811,934($451,347), respectively | 19,904,642 | 25,182,508 | 4,042,071 |
| Refundable value added tax | 6,950,923 | 5,000,709 | 802,669 |
| Advances to employees | 1,749,427 | 1,365,995 | 219,257 |
| Advances to suppliers | 331,040 | -- | -- |
| Other receivables due from previously consolidated entities | 1,067,000 | 405,000 | 65,007 |
| Other receivables | 2,021,053 | 2,174,556 | 349,040 |
| Prepaid expenses | 1,465,219 | 1,134,602 | 182,116 |
| Inventory and work in process, net of inventory provision of Y4,507,846 and Y2,467,133($396,002), respectively | 28,001,490 | 19,299,732 | 3,097,821 |
| Total current assets | 118,647,872 | 133,936,467 | 21,498,285 |
| Non-current assets | |||
| Long-term investments, net of impairment of Y240,000 and Y240,000($38,523), respectively | -- | -- | -- |
| Property and equipment, net of accumulated depreciation of Y5,748,528 and Y7,472,485($1,199,417), respectively | 3,930,974 | 4,357,965 | 699,502 |
| Intangible assets, net of accumulated amortization of Y65,846,644 and Y72,771,017($11,680,554), respectively | 17,190,976 | 22,216,204 | 3,565,946 |
| Goodwill | 80,625,667 | 80,625,667 | 12,941,312 |
| Deferred tax assets | -- | 8,125,595 | 1,304,248 |
| Total non-current assets | 101,747,617 | 115,325,431 | 18,511,008 |
| Total assets | 220,395,489 | 249,261,898 | 40,009,293 |
| LIABILITIES AND EQUITY | |||
| Current liabilities | |||
| Trade payables | 12,500,602 | 17,548,846 | 2,816,784 |
| Other payables | 12,525,300 | 16,920,421 | 2,715,915 |
| Accrued expenses | 14,464,113 | 26,706,174 | 4,286,636 |
| Taxes payable | 4,205,734 | 16,128,906 | 2,588,868 |
| Advances from customers | 49,653,714 | 47,519,612 | 7,627,424 |
| Deferred tax liabilities, current portion | 623,600 | 42,900 | 6,886 |
| Total current liabilities | 93,973,063 | 124,866,859 | 20,042,513 |
| Long-term liabilities | |||
| Derivative liabilities | 3,168 | -- | -- |
| Deferred tax liabilities | 413,130 | -- | -- |
| Total long-term liabilities | 416,298 | -- | -- |
| Equity | |||
| Ordinary shares, $0.0756 U.S. dollars par value; 6,613,756 shares authorized; 3,977,221 shares and 3,912,176 shares issued and outstanding, respectively | 2,353,068 | 2,321,998 | 372,706 |
| Additional paid-in capital | 225,411,222 | 229,624,232 | 36,857,231 |
| Statutory reserves | 3,305,527 | 5,914,384 | 949,324 |
| Accumulated deficits | (105,063,689) | (113,465,575) | (18,212,481) |
| Total equity | 126,006,128 | 124,395,039 | 19,966,780 |
| Total liabilities and equity | 220,395,489 | 249,261,898 | 40,009,293 |
| EFUTURE INFORMATION TECHNOLOGY INC. AND SUBSIDIARIES | Exchange rate | 6.2301 | ||||
| CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||||
| Year ended | Three months ended | |||||
| Chinese Yuan (Renminbi) | U.S. Dollars | Chinese Yuan (Renminbi) | U.S. Dollars | |||
| December 31, | December 31, | December 31, | December 31, | December 31, | December 31, | |
| 2011 | 2012 | 2012 | 2011 | 2012 | 2012 | |
| (Audited) | (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | |
| Cash flows from operating activities: | ||||||
| Net loss | (18,830,869) | (5,793,029) | (929,845) | (7,914,565) | 1,750,457 | 280,968 |
| Adjustments to reconcile net loss to net cash flows used in operating activities: | ||||||
| Depreciation of property and equipment | 1,996,264 | 1,956,728 | 314,076 | 585,756 | 464,283 | 74,523 |
| Amortization of intangible assets | 11,206,919 | 6,924,374 | 1,111,439 | 2,483,616 | 960,382 | 154,152 |
| Impairment of intangible assets | 4,135,194 | -- | -- | 4,135,194 | -- | -- |
| Amortization of discount on convertible notes payable | 6,431,872 | -- | -- | 6,086,046 | -- | -- |
| Amortization of deferred loan costs | 474,399 | -- | -- | 202,734 | -- | -- |
| Gain on extinguishment of debt | (382,889) | -- | -- | -- | -- | -- |
| Loss/(Gain) on derivative liabilities | (347,565) | (3,168) | (508) | 1,311 | -- | -- |
| Investment loss/(income) | (6,461,170) | -- | -- | 240,000 | -- | -- |
| Loss on disposal of property and equipment | 88,148 | 6,959 | 1,117 | 15,304 | 6,959 | 1,117 |
| Allowance for doubtful accounts | 2,832,646 | 2,290,370 | 367,630 | 194,130 | (10,489) | (1,684) |
| Provision (Reversal) for loss in inventory and work in process | 4,184,469 | (2,040,713) | (327,557) | 3,142,526 | (3,451,567) | (554,015) |
| Compensation expenses | 5,308,608 | 5,784,391 | 928,459 | 1,300,228 | 985,823 | 158,236 |
| Deferred income taxes | (2,691,481) | (9,119,425) | (1,463,769) | 1,477,900 | (3,266,797) | (524,357) |
| Foreign exchange loss/(gain) | (141,638) | 5,329 | 855 | 94,006 | 20,734 | 3,328 |
| Non-controlling interest | (511,423) | -- | -- | -- | -- | -- |
| Changes in assets and liabilities: | ||||||
| Trade receivables | (9,051,744) | (7,568,236) | (1,214,786) | (3,042,937) | (2,572,738) | (412,953) |
| Refundable value added tax | (4,295,257) | 1,950,214 | 313,031 | (2,873,746) | (3,098,040) | (497,270) |
| Advances to employees | 720,142 | 383,432 | 61,545 | 655,711 | 315,968 | 50,716 |
| Advances to suppliers | 1,703,355 | 57,340 | 9,204 | (305,939) | -- | -- |
| Other receivables | 3,163,605 | 508,497 | 81,619 | 2,340,440 | 4,498,953 | 722,132 |
| Prepaid expenses | (794,600) | 330,617 | 53,068 | (109,554) | 677,082 | 108,679 |
| Inventory and work in process | (16,554,487) | 10,742,471 | 1,724,285 | 16,922,419 | 19,298,060 | 3,097,552 |
| Trade payables | 6,036,907 | 5,048,244 | 810,299 | (3,048,966) | 4,118,122 | 661,004 |
| Other payables | 1,533,607 | 4,395,121 | 705,466 | 3,802,466 | 6,072,546 | 974,711 |
| Accrued expenses | (1,392,446) | 12,242,061 | 1,964,986 | 4,009,387 | 18,104,864 | 2,906,031 |
| Taxes payable | (2,345,297) | 11,923,172 | 1,913,801 | 4,989,493 | 14,969,214 | 2,402,725 |
| Advances from customers | 7,465,494 | (2,134,102) | (342,547) | (19,034,805) | (17,938,083) | (2,879,261) |
| Net cash provided by (used in) operating activities | (6,519,237) | 37,890,647 | 6,081,868 | 16,348,155 | 41,905,733 | 6,726,334 |
| Cash flows from investing activities: | ||||||
| Purchases of property and equipment | (1,425,678) | (2,117,218) | (339,837) | (111,232) | (131,409) | (21,093) |
| Payments for intangible assets | (8,220,522) | (11,949,601) | (1,918,044) | (3,659,490) | (1,198,416) | (192,359) |
| Cash paid for ordinary shares repurchase | -- | (1,602,451) | (257,211) | -- | (247,774) | (39,770) |
| Cash received from disposal of property and equipment | 3,000 | 240 | 39 | -- | 240 | 39 |
| Disposal of investments | 5,895,999 | -- | -- | -- | -- | -- |
| Net cash used in investing activities | (3,747,201) | (15,669,031) | (2,515,053) | (3,770,722) | (1,577,359) | (253,183) |
| Cash flows from financing activities: | ||||||
| Cash paid for the redemption of convertible notes | (6,329,300) | -- | -- | (6,329,300) | -- | -- |
| Net cash provided by financing activities | (6,329,300) | -- | -- | (6,329,300) | -- | -- |
| Effect of exchange rate changes on cash and cash equivalents | (14,362) | (5,329) | (855) | (119,811) | (20,734) | (3,329) |
| Net increase (decrease) in cash and cash equivalents | (16,610,100) | 22,216,287 | 3,565,960 | 6,128,322 | 40,307,640 | 6,469,822 |
| Change in cash and cash equivalents included in the current assets of discontinued operations | ||||||
| Cash and cash equivalents at beginning of period | 73,767,178 | 57,157,078 | 9,174,344 | 51,028,756 | 39,065,725 | 6,270,482 |
| Cash and cash equivalents at end of period | 57,157,078 | 79,373,365 | 12,740,304 | 57,157,078 | 79,373,365 | 12,740,304 |
| Supplemental cash flow information | ||||||
| Interest paid | 482,048 | -- | -- | 158,873 | -- | -- |
| Income tax paid | 3,758,088 | 1,571,915 | 252,310 | 3,758,088 | 1,571,915 | 252,310 |
| EFUTURE INFORMATION TECHNOLOGY INC. AND SUBSIDIARIES | Exchange rate | 6.2301 | ||||
| NON-GAAP MEASURES OF PERFORMANCE | ||||||
| Year ended | Three months ended | |||||
| Chinese Yuan (Renminbi) | U.S. Dollars | Chinese Yuan (Renminbi) | U.S. Dollars | |||
| December 31, | December 31, | December 31, | December 31, | December 31, | December 31, | |
| 2011 | 2012 | 2012 | 2011 | 2012 | 2012 | |
| (Audited) | (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | |
| NON-GAAP OPERATING INCOME (LOSS) AND ADJUSTED EBITDA | ||||||
| Operating income/(loss) (GAAP Basis) | (19,545,493) | 1,519,871 | 243,956 | 1,646,715 | 16,091,862 | 2,582,922 |
| Adjustments for non-GAAP measures of performance: | ||||||
| Add back amortization of acquired software technology | 7,838,965 | 4,157,333 | 667,298 | 1,742,287 | 114,480 | 18,375 |
| Add back amortization of intangibles | 3,319,857 | 2,767,041 | 444,141 | 741,329 | 845,902 | 135,777 |
| Add back impairment of intangible assets | 4,135,194 | -- | -- | 4,135,194 | -- | -- |
| Add back share-based compensation expenses | 5,308,608 | 5,784,391 | 928,459 | 1,300,159 | 985,823 | 158,235 |
| Adjusted non-GAAP operating income | 1,057,131 | 14,228,636 | 2,283,854 | 9,565,684 | 18,038,067 | 2,895,309 |
| Add back depreciation | 1,947,925 | 1,956,728 | 314,076 | 585,757 | 464,283 | 74,523 |
| Adjusted EBITDA (Earnings before interest, taxes, depreciation and amortization) | 3,005,056 | 16,185,364 | 2,597,930 | 10,151,441 | 18,502,350 | 2,969,832 |
| NON-GAAP OPERATING INCOME (LOSS) AND ADJUSTED EBITDA, as a percentage of revenue | ||||||
| Operating income/(loss) (GAAP BASIS) | -11% | 1% | 1% | 2% | 16% | 16% |
| Adjustments for non-GAAP measures of performance: | ||||||
| Amortization of acquired software technology | 4% | 2% | 2% | 2% | 0% | 0% |
| Amortization of intangibles | 2% | 1% | 1% | 1% | 1% | 1% |
| Share-based compensation expenses | 3% | 3% | 3% | 1% | 1% | 1% |
| Adjusted non-GAAP operating income/(loss) | -2% | 7% | 7% | 6% | 18% | 18% |
| Depreciation | 1% | 1% | 1% | 1% | 0% | 0% |
| Adjusted EBITDA (Earnings before interest, taxes, depreciation and amortization) | -1% | 8% | 8% | 7% | 19% | 19% |
| NON-GAAP EARNINGS PER SHARE | ||||||
| Net loss from continuing operations | (24,440,221) | (5,793,029) | (929,845) | (7,914,565) | 1,750,457 | 280,968 |
| Amortization of acquired software technology | 7,838,965 | 4,157,333 | 667,298 | 1,742,287 | 114,480 | 18,375 |
| Amortization of intangibles | 3,319,857 | 2,767,041 | 444,141 | 741,329 | 845,902 | 135,777 |
| Share-based compensation expenses | 5,308,608 | 5,784,391 | 928,459 | 1,300,159 | 985,823 | 158,235 |
| Accretion on convertible notes | 6,431,872 | -- | -- | 6,086,046 | -- | -- |
| Adjusted Net Income/(Loss) | (1,540,919) | 6,915,736 | 1,110,053 | 1,955,256 | 3,696,662 | 593,355 |
| Adjusted non-GAAP diluted earnings/(loss) per share | (0.37) | 1.69 | 0.27 | 0.47 | 0.89 | 0.14 |
| Shares used to compute non-GAAP diluted earnings per share | 4,130,221 | 4,098,919 | 4,098,919 | 4,130,221 | 4,151,935 | 4,151,935 |
Investor Contact:
Troe Wen, Company Secretary
eFuture Information Technology Inc.
+86 10 5293 7699
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