Company records year-over-year revenue growth of 66%, maintains full-year revenue and EBITDA guidance
BEIJING, Nov. 7 /Xinhua-PRNewswire/ -- eFuture Information Technology Inc. (Nasdaq: EFUT) ("eFuture" or the "Company"), 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 third quarter ended September 30, 2008.
Financial Highlights for the Third Quarter of 2008
-- Total revenues for the third quarter of 2008 were RMB27.4 million
(US$4.0 million), an increase of 66.4% from the third quarter of 2007.
-- Software sales revenue for the third quarter of 2008 was RMB16.6
million (US$2.4 million), an increase of 77.5% from the third quarter
of 2007.
-- Service fee income for the third quarter of 2008 was RMB8.1 million
(US$1.2 million), an increase of 155.6% from the third quarter of 2007.
-- Gross profit for the third quarter of 2008 was RMB13.1 million (US$1.9
million), an increase of 87.3% from the third quarter of 2007.
Excluding amortization of acquired technology, gross profit for the
third quarter of 2008 would have been RMB16.4 million (US$2.4 million),
an increase of 85.3% from the third quarter of 2007.
-- eFuture completed the conversion of US$4.0 million of convertible notes
related to a US$10 million private placement in 2007, leaving the
Company with outstanding convertible debt in the principal amount of
US$1.0 million and warrants outstanding that will expire on September
9, 2012.
-- As of September 30, 2008, eFuture had deferred contracts with
unrecognized revenues of approximately US$13.8 million
"A number of large contracts completed during the quarter, combined with our acquisition of Guangzhou Royalstone in the third quarter of 2007, drove strong growth of 77.5 percent year over year in our core software license business," said Ms. Ping Yu, eFuture's chief financial officer. "While our five-point improvement in gross margin compared to the year-ago period is evidence of our effective cost control measures, we reported a loss on our bottom-line, which was primarily due to one-time expenses related to the conversion of convertible notes during the quarter. We are pleased that we now have only US$1.0 million of outstanding convertible debt principal, and we expect our high balance of deferred revenue and the sizeable number of software license and service deals closed during the quarter will translate into significant revenue growth in the fourth quarter, which has traditionally been our strongest quarter."
Operational Highlights for the Third Quarter of 2008
-- Sales contracts increased 26.9% to RMB34.3 million (US$5.0 million)
from RMB27.0 million in the third quarter of 2007.
-- Service sales contracts increased 270.3% to RMB11.4 million (US$1.7
million) from RMB3.1 million in the third quarter of 2007.
-- Announced the appointment and hiring of Mr. Deliang Tong as chief
operating officer in charge of business strategy planning and new
business development. Mr. Tong currently serves as president of
Beijing eFuture Royalstone Information Inc., a subsidiary of eFuture.
-- Signed an engagement letter with Grant Thornton LLP ("Grant Thornton").
eFuture's audit committee has approved the engagement, and assuming
shareholder ratification at eFuture's annual shareholder meeting, Grant
Thornton will act as the Company's independent registered public
accounting firm beginning in the third fiscal quarter ended September
30, 2008.
-- Signed a contract to provide its eFuture ONE POS-ERP Sales Counter
Management System to L'Oréal (China) Co. Ltd. at more than 20,000 sales
counters across China.
-- Signed a contract to provide its eFuture ONE CRM Customer Relationship
Management system to Yansha You Yi Shopping City Co., Ltd. The system
will provide customer data analysis capabilities and is designed to
increase customer value and improve sales and market differentiation.
-- Signed and completed a contract to provide its eFuture ONE POS-ERP
Retail Management System to China Sport Industry Group Co., Ltd.'s 2008
Beijing Olympics stores.
-- Signed a contract to provide its mySHOP Retail Business Management
System 3.0 to Tiens Group Co., Ltd.'s six distribution centers, 100
subsidiary stores, 100 direct-sales stores and 1,000 franchised chain
stores.
-- Rolled out the bFuture software-as-a-service ("SaaS") customer
relationship management platform to additional Beijing Wangfujing
Department Store (Group) Co. Ltd. stores.
-- Deployed SaaS B2C stores for five department stores. eFuture's bFuture
SaaS-B2C database currently holds over 70,000 items and receives over
200 orders each day. Over 1,000 suppliers offer merchandise through
these online stores.
"Despite downward pressure on the Chinese economy as a result of severe snow storms, a devastating earthquake and the negative impacts brought about by the global financial crisis, China's retail consumption still grew at 22 percent in the first nine months of 2008," said Mr. Adam Yan, eFuture's chairman and chief executive officer. "Our large and diversified install base, which includes department stores, fast-moving consumer goods companies, grocery stores, logistics companies, specialty retailers and small-to-medium businesses, has enabled us to continue meeting growth targets despite macro uncertainties. I am confident that eFuture will weather this storm effectively and emerge well positioned to win a greater share of business when the global economy returns to a healthier state."
Yan continued, "In our core business of software solutions, our focus in the third quarter remained on the smooth integration of our acquired businesses, packaging our product offering and building a cohesive workforce that is able to deliver world-class solutions that help retailers and suppliers cut costs and improve competitiveness. In business-to-business services, we focused on improving our sales force and building out databases and other modules as we prepare for a nationwide rollout of our China Jindian platform early next year. In our SaaS business, we rolled out our bFuture supply chain management platform to additional Wangfujing Department Store Group stores in Beijing, and the system now enables over 2,000 suppliers to effectively streamline and exchange information and manage work processes. In 2009, we plan to further leverage our dedicated software sales team to bundle SaaS products with our POS-ERP software for retailers and attract more suppliers to join the bFuture online SCM platform."
Financial Results for the Third Quarter of 2008
Revenue
eFuture reported total revenues of RMB27.4 million (US$4.0 million) for the third quarter of 2008, a 66.4% increase from RMB16.4 million in the third quarter of 2007.
Software sales revenue in the third quarter of 2008 increased 77.5% to RMB16.6 million (US$2.4 million) from RMB9.4 million in the third quarter of 2007. Software sales contributed 60.7% to total revenues in the third quarter of 2008, compared to 56.9% in the third quarter of 2007. The year-over-year increase was primarily due to high demand for the Company's software solutions, which is typically strongest in the second half of the year as companies spend the bulk of their IT budgets.
Hardware sales revenue in the third quarter of 2008 decreased 32.3% to RMB2.7 million (US$0.4 million) from RMB3.9 million in the third quarter of 2007. Hardware sales contributed 9.7% to total revenues in the third quarter of 2008, compared to 23.8% in the third quarter of 2007. The Company noted that reselling hardware is not its primary focus, but that from time to time it bundles hardware with its software solutions in response to customer requests.
Service fee income in the third quarter of 2008 increased 155.6% to RMB8.1 million (US$1.2 million) from RMB3.2 million in the third quarter of 2007. Service fee income contributed 29.6% to total revenues in the third quarter of 2008, compared to 19.3% in the third quarter of 2007. The increase was largely due to eFuture's policy to provide complimentary maintenance for its products in the first year of operation, after which it begins to charge maintenance and support fees, as well as the introduction of revenue derived from the Company's B2B services and SaaS products.
Gross Margins
Gross profit for the third quarter of 2008 was RMB13.1 million (US$1.9 million), an 87.3% increase from RMB7.0 million in the third quarter of 2007. Excluding amortization of acquired technology, gross profit (non-GAAP) for the third quarter of 2008 would have been RMB16.4 million (US$2.4 million), an increase of 85.3% from the third quarter of 2007.
Consolidated gross margin for the third quarter of 2008 was 47.9%, compared to 42.5% in the third quarter of 2007 and 57.1% in the second quarter of 2008. The lower gross margin quarter over quarter was primarily due to delayed reimbursement from operating expenses, of which eFuture has a 1-month turnover policy. In the second quarter of 2008, the Company upgraded its financial information system and a portion of operating expenses occurring in the second quarter were delayed until the third quarter of 2008 for reimbursement. Additionally, margins decreased quarter over quarter due to the percentage of total revenue derived from service fee income, which has a higher gross margin than software and hardware sales revenue. Excluding amortization of acquired technology, gross margin (non-GAAP) for the third quarter of 2008 would have been 60.1%, compared to 53.9% in the third quarter of 2007 and 65.0% in the second quarter of 2008.
Operating Expenses
Research and development expenses for the third quarter of 2008 were RMB0.2 million (US$0.03 million), or 0.8% of total revenue, compared to 0.4% of total revenue in the third quarter of 2007 and 0.9% in the second quarter of 2008. The lower proportion of research and development expenses to total revenues in the third quarter of 2007 was primarily a result of the Company's focus on integrating similar versions of software recently acquired at that time rather than spending on research and development.
General and administrative expenses for the third quarter of 2008 were RMB6.8 million (US$1.0 million), or 24.9% of total revenue, compared to 19.8% in the third quarter of 2007 and 33.4% in the second quarter of 2008. The lower proportion of general and administrative expenses to total revenues when compared to the previous quarter was largely due to a decrease in the provision for bad debt expenses, which was a result of the Company's improving accounts receivable collection.
Selling and distribution expenses for the third quarter of 2008 were RMB6.3 million (US$0.9 million), or 23.1% of total revenue, compared to 19.5% in the third quarter 2007 and 17.7% in the second quarter of 2008. The increase was largely driven by the delayed reimbursement, of which eFuture has a 1-month turnover policy. In the second quarter of 2008, the Company upgraded its financial information system and a portion of operating expenses occurred in the second quarter were delayed until the third quarter of 2008 for reimbursement.
Total share-based compensation expenses in the third quarter of 2008 were RMB0.8 million (US$0.1 million).
Operating loss in the third quarter of 2008 was RMB0.3 million (US$0.04 million) compared to operating income of RMB0.5 million in the third quarter of 2007 and operating income of RMB1.2 million in the second quarter of 2008. Operating margin was -1.0% in the third quarter of 2008, compared to 2.8% in the third quarter of 2007 and 5.1% in the second quarter of 2008.
Net Income
Net loss for the third quarter of 2008 was RMB28.9 million (US$4.2 million), compared to a net loss of RMB0.6 million in the third quarter of 2007 and net income of RMB2.8 million in the second quarter of 2008. Basic and diluted losses per share for the third quarter of 2008 were each RMB9.21 (US$1.35). The net loss was primarily attributable to the impact of acquisitions, one-time conversion expenses related to the conversion of a portion of US$10 million in convertible notes completed in third quarter of 2008, and payment of operating expenses incurred in the second quarter of 2008. Amortization of acquired software technology was RMB3.3 million (US$0.5 million); interest expense was RMB8.1 million (US$1.2 million); amortization of discount on notes payable was RMB18.4 million (US$2.7 million) and amortization of loan costs was RMB3.4 million (US$0.5 million). Excluding these expenses, net loss in the third quarter of 2008 would have been RMB2.3 million (US$0.3 million), or RMB0.79 (US$0.12) per basic share. The Company noted that 90% of the US$10.0 million of senior convertible notes have been converted as of September 30, 2008. As of the end of the third quarter of 2008, eFuture had outstanding convertible debt in the principal amount of US$1.0 million and Series A and Placement Agent warrants outstanding to purchase 184,077 and 73,291 ordinary shares, respectively, that will expire September 9, 2012; Series B warrants to purchase 230,097 ordinary shares expired unexercised on September 9, 2008. Adjusted net loss (non-GAAP) for the third quarter of 2008 was RMB5.5 million (US$0.8 million), compared adjusted net income (non-GAAP) of RMB3.0 million in the third quarter of 2007. Adjusted diluted losses per share (non-GAAP) for the third quarter of 2008 were RMB1.76 (US$0.26), compared to an adjusted earnings per share (non-GAAP) of RMB1.09 in the third quarter of 2007.
EBITDA
Adjusted EBITDA (non-GAAP) for the third quarter of 2008 was RMB5.3 million (US$0.8 million), compared to RMB3.3 million in the third quarter of 2007 and RMB4.9 million in the second quarter of 2008.
Cash Flow and Capital Expenditures
As of September 30, 2008, the Company had RMB32.7 million (US$4.8 million) in cash and cash equivalents. Cash provided by operating activities at the end of September 30 of 2008 was RMB-3.6 million (US$-0.5 million). Capital expenditures at the end of September 30 of 2008 were RMB7.4 million (US$1.1 million)".
As of September 30, 2008 the Company had 623 employees, compared to 579 employees as of June 30, 2008.
Business Outlook for 2008
As of September 30, 2008, eFuture had deferred contracts with unrecognized revenue of approximately US$13.8 million. eFuture expects its full-year 2008 total revenue to be in the range of approximately US$19 to US$20 million, representing annual growth of 65％ to 74% over 2007. The Company expects full-year 2008 adjusted EBITDA (non-GAAP) to be in the range of approximately US$5 million to US$6 million, representing annual growth of 72% to 106%. This forecast is a current and preliminary view and is subject to change.
Conference Call Information
eFuture's management will hold an earnings conference call at 7:30 P.M. on November 6, 2008 U.S. Eastern Time (8:30 A.M. on November 7, 2008 Beijing/Hong Kong Time).
Dial-in details for the earnings conference call are as follows:
U.S. and International: +1-888-710-9688
Mainland China: +86-10-5851-1260
Hong Kong: +852-8306-5032
Please dial-in 10 minutes before the call is scheduled to begin, press "*0" to be connected to the operator and request to be connected to the "eFuture earnings call."
Additionally, an 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 .
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 market, especially in the retail and fast moving consumer goods industries. eFuture currently serves more than 1,000 clients, including over 15 Fortune 500 companies, over 950 retailers and over 200 distributors 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 November 6, 2008, and the Company undertakes no duty to update such information or any other forward-looking information, except as required under applicable law.
This announcement contains translations of certain amounts from Chinese Renminbi ("RMB") into U.S. dollars ("US$") at specified rates solely for the convenience of the reader. Unless otherwise noted, all currency translations are made at a rate of RMB6.8183 to US$1.00, the effective noon buying rate on September 30, 2008.
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
E-FUTURE INFORMATION TECHNOLOGY INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
USD:RMB 6.8183
Chinese Yuan (Renminbi) U.S. Dollars
December 31, September 30,September 30,
2007 2008 2008
(Unaudited) (Unaudited) (Unaudited)
ASSETS
Current assets
Cash and cash equivalents 67,227,348 32,654,311 4,789,216
Trade receivables, less allowance
for doubtful accounts of
RMB2,109,910,
RMB4,695,898,and RMB6,854,812
respectively 16,409,333 21,649,789 3,175,247
Refundable value added tax 3,691,035 2,076,806 304,593
Deposits 156,695 209,660 30,750
Advances to employees 3,576,947 3,325,265 487,697
Advances to suppliers 657,724 1,272,190 186,585
Other receivables 3,576,965 2,957,441 433,750
Prepaid expenses 862,653 1,290,072 189,207
Inventory 5,749,951 28,583,119 4,192,118
Total current assets 101,908,651 94,018,652 13,789,163
Non-current assets
Long-term investments 5,460,301 636,438 93,343
Deferred loan costs, net of
RMB6,700,671 of amortization 4,847,633 845,952 124,071
Deferred assets 172,083 170,583 25,018
Property and equipment, net of
accumulated depreciation of
RMB4,690,856,
RMB5,191,489, and RMB5,858,293
respectively 2,065,040 3,816,169 559,695
Intangible assets, net of
accumulated amortization of
RMB8,678,751,
RMB19,799,245 and
RMB31,481,989respectively 47,045,110 55,721,160 8,172,295
Goodwill 46,814,929 62,091,498 9,106,595
Total non-current assets 106,405,096 123,281,801 18,081,017
Total assets 208,313,747 217,300,453 31,870,181
LIABILITIES AND SHAREHOLDERS'
EQUITY
Current liabilities
Trade accounts payable 3,845,873 7,641,533 1,120,739
Other payable 2,124,527 8,314,220 1,219,398
Accrued expenses 3,395,790 5,127,705 752,050
Accrued interest 278,420 129,180 18,946
Taxes payable 7,696,531 3,784,198 555,006
Deferred Revenues -- 3,824,101 560,858
Deferred Tax 5,282,076 4,688,447 687,627
Advances from customers 13,025,978 26,014,183 3,815,347
Royalstone acquisition obligation,
current portion 16,722,213 2,015,456 295,595
Health Filed acquisition obligation 3,300,000 1,027,791 150,740
Proadvancer System acquisition
obligation 21,853,524 3,205,128
Make-whole obligation, current
portion 1,164,116 366,453 53,746
Convertible note payable, current
portion 3,648,824 -- --
Total current liabilities 60,484,349 84,786,790 12,435,180
Long-term liabilities
Royalstone acquisition obligation,
net of current portion 6,093,683 1,424,728 208,956
Make-whole obligation, net of
current portion 9,290,082 9,290,082 1,362,522
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 6,770,666 993,014
Minority shareholder interests (91,499) (5,098,557) (747,775)
Total long-term liabilities 22,062,932 12,386,919 1,817,717
Shareholders' equity
Ordinary shares, $0.0756 U.S.
dollars (￥ 0.6257) par value;
6,613,756 shares
authorized; 2,633,500 shares and
2,633,500 shares outstanding
(2,833,580
shares pro forma), respectively 1,811,589 1,957,580 287,107
Additional paid-in capital 165,678,074 198,574,086 29,123,694
Statutory reserves 3,084,020 3,084,020 452,315
Accumulated deficit (44,807,216) (83,488,941) (12,244,832)
Total shareholders' equity 125,766,467 120,126,745 17,618,284
Total liabilities and shareholders'
equity 208,313,747 217,300,453 31,870,181
E-FUTURE INFORMATION TECHNOLOGY INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED INCOME STATEMENTS
USD:RMB 6.8183
Three Months Ended
September
30,2007 June 30,2008 September 30,2008
RMB RMB RMB US$
(Unaudited) (Unaudited) (Unaudited) 2008
Revenues
Software sales 9,355,671 8,711,537 16,602,397 2,434,976
Hardware sales 3,916,065 2,915,871 2,650,771 388,773
Service fee income 3,170,679 12,533,027 8,103,952 1,188,559
Total Revenues 16,442,415 24,160,436 27,357,120 4,012,308
Cost of revenues
Cost of software 2,443,773 2,039,796 5,312,887 779,210
Cost of hardware 3,648,418 2,549,247 2,025,567 297,078
Cost of service fee
income 877,264 2,983,426 2,698,429 395,763
Amortization of
acquired technology 1,877,460 1,904,687 3,336,837 489,394
Amortization of
software costs 604,976 891,606 891,606 130,767
Total Cost of Revenue 9,451,891 10,368,762 14,265,327 2,092,212
Gross Profit 6,990,524 13,791,673 13,091,793 1,920,096
Expenses
Research and
development 62,440 223,792 231,345 33,930
General and
administrative 3,260,032 8,061,899 6,858,594 1,005,910
Selling and
distribution expenses 3,199,809 4,274,793 6,324,257 927,542
Total Expenses 6,522,281 12,560,484 13,414,196 1,967,381
Profit from operations 468,243 1,231,189 (322,403) (47,285)
Interest income 1,091,635 873,560 353,665 51,870
Interest expense 1,402,739 (504,649) (8,114,896) (1,190,164)
Amortization of
discount on notes
payable (3,112,821) (857,519) (18,385,813) (2,696,539)
Amortization of loan
costs (534,109) (278,575) (3,415,298) (500,902)
Income (loss) on
investments 363,638 47,802 (130,681) (19,166)
Foreign currency
exchange loss (301,585) 711,914 (488,662) (71,669)
Outside business
receives -- 23,400 528 77
Outside business
disburses -- (161,000) (7,827) (1,148)
Income tax expense -- (140,695) -- --
Minority interest -- 1,868,735 1,602,385 235,012
Net loss (622,260) 2,814,162 (28,909,001) (4,239,913)
Earnings per ordinary
share
Basic (0.24) 0.94 (9.21) (1.35)
Diluted (0.24) 0.94 (9.21) (1.35)
E-FUTURE INFORMATION TECHNOLOGY INC. AND SUBSIDIARY
NON-GAAP MEASURES OF PERFORMANCE
USD:RMB 6.8183
Three Months Ended
September June
30,2007 30,2008 September 30,2008
RMB RMB RMB US$
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
NON-GAAP OPERATING
INCOME (LOSS) AND
ADJUSTED EBITDA
Operating income
(loss) (GAAP
Basis) 468,243 1,231,189 (322,403) (47,285)
Adjustments for
non-GAAP measures
of performance:
Add back
amortization of
acquired software
technology 2,229,127 1,904,687 3,336,837 489,394
Add back
amortization of
intangibles 253,309 891,606 891,606 130,767
Add back share-
based compensation
expenses -- 750,685 763,234 111,939
Adjusted non-GAAP
operating income 2,950,678 4,778,168 4,669,274 684,815
Add back
depreciation 337,034 96,577 666,804 97,796
Adjusted EBITDA
(Earnings before
interest, taxes,
depreciation and
amortization) 3,287,712 4,874,745 5,336,078 782,611
NON-GAAP OPERATING
INCOME (LOSS) AND
ADJUSTED EBITDA,
as a percentage of
revenue
Operating income
(loss) (GAAP
BASIS) 3% 5% -1% -1%
Adjustments for
non-GAAP measures
of performance:
Amortization of
acquired software
technology 14% 8% 12% 12%
Amortization of
intangibles 2% 4% 3% 3%
Share-based
compensation
expenses -- 3% 3% 3%
Adjusted non-GAAP
operating income 18% 20% 17% 14%
Depreciation 2% 0.4% 2% 2.4%
Adjusted EBITDA
(Earnings before
interest, taxes,
depreciation and
amortization) 20% 20% 19% 16%
NON-GAAP EARNINGS
PER SHARE
Net Income(Loss) (622,259) 2,814,162 (28,909,001) (4,239,913)
Amortization of
acquired software
technology 2,229,127 1,904,687 3,336,837 489,394
Amortization of
intangibles 253,309 891,606 891,606 130,767
Accretion on
convertible notes 1,138,014 857,519 18,385,813 2,696,539
Share-based
compensation
expenses -- 750,685 763,234 111,939
Adjusted Net income 2,998,190 7,218,660 (5,531,512) (811,274)
Adjusted non-GAAP
diluted earnings
per share 1.09 2.14 (1.76) (0.26)
Shares used to
compute non-GAAP
diluted earnings
per share 2,762,094 2,989,719 3,140,371 3,140,371
E-FUTURE INFORMATION TECHNOLOGY INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
USD:RMB 6.8183
Chinese Yuan (Renminbi) U.S. Dollars
December 31, September 30, September 30,
2007 2008 2008
(Unaudited) (Unaudited) (Unaudited)
Cash flows from operating
activities:
Net income (loss) (27,389,248) (39,213,984) (5,751,285)
Adjustments to reconcile net
income (loss) to net cash
provided by (used in) operating
activities:
Depreciation 500,633 666,804 97,796
Amortization of intangible
assets 11,122,493 11,781,836 1,727,973
Amortization of discount on
notes payable 31,320,836 19,731,836 2,893,952
Amortization of deferred loan
costs 6,610,234 3,936,252 577,307
Interest on notes payable
contributed by shareholders
Compensation expense for options
issued to employees 2,484,974 2,289,700 335,817
Change in assets and
liabilities:
Accounts receivable (11,956,374) (5,240,456) (768,587)
Refundable value added tax (1,220,094) 1,614,230 236,750
Deposits (111,752) (52,965) (7,768)
Advances to employees (2,378,346) 251,682 36,913
Advances to suppliers (214,694) (614,465) (90,120)
Other receivables (3,405,845) 619,524 90,862
Prepaid expenses (327,898) (427,419) (62,687)
Inventories (1,628,815) (22,833,168) (3,348,807)
Trade payables 2,615,091 3,795,660 556,687
Other payables 2,124,527 6,189,693 907,806
Accrued expenses (545,828) 1,731,915 254,010
Accrued interest 278,420 (149,240) (21,888)
Taxes payable 2,513,916 (3,912,333) (573,799)
Deferred Tax 5,282,076 (593,629) (87,064)
Deferred revenue - 3,824,101 560,858
Advances from customers 4,904,935 12,988,205 1,904,904
Net cash provided by operating
activities 20,579,241 3,616,223 (503,370)
Cash flows from investing
activities:
Purchases of property and
equipment (1,521,967) (910,949) (133,604)
Payments for software (15,515,896) (6,512,702) (955,180)
Long-term investments (5,460,301) (1,746,743) (256,185)
Payment to purchase net assets
of Acquirees (47,625,013) (21,853,524) (3,205,128)
Net cash used in investing
activities 70,123,177 31,023,918 (4,550,096)
Cash flows from financing
activities:
Issuance of ordinary shares for
cash, net of offering costs
paid 1,051,776 145,991 21,412
Issue convertible notes 65,095,829 -- --
Repayment of short trem loan -- - --
Payment of make-whole obligation (11,319,381) (797,663) (116,989)
Net cash provided by (used in)
financing activities 54,828,224 651,672 (95,577)
Effect of exchange rate changes
on cash 478,052 718,776 105,419
Net increase in cash 5,762,340 (34,573,037) (5,070,624)
Cash and cash equivalents at
beginning of period 61,465,008 67,227,348 9,859,840
Cash and cash equivalents at end
of period 67,227,348 32,654,311 4,789,216
Supplemental cash flow
information
Interest paid 510,282 8,980,431 1,317,107
For investor and media inquiries please contact:
eFuture Information Technology Inc.
Tel: +86-10-5165-0998 x 8804
Email: ir@e-future.com.cn
Andrew Keller
Ogilvy Financial, Beijing
Tel: +86-10-8520-3112
Email: andrew.keller@ogilvy.com
