eFuture Announces Unaudited Fourth Quarter and Full Year 2013 Financial Results

BEIJING, March 17, 2014 (GLOBE NEWSWIRE) -- eFuture Information Technology Inc. (Nasdaq:EFUT) (the "Company" or "eFuture"), a leading provider of software and services in China's rapidly growing retail and consumer goods industries, today announced its unaudited financial results for the fourth quarter and full year ended December 31, 2013.

Full Year 2013 Financial Highlights

• Total revenue increased 0.4% year-over-year to RMB199.2 million (US$32.9 million).
• Gross profit increased 3% year-over-year to RMB81.0 million (US$13.4 million).
• Adjusted EBITDA decreased 96% to RMB0.6 million (US$0.1 million).
• Operating loss was RMB6.4 million (US$1.1 million), compared to an operating income of RMB1.5 million in 2012.
• Net loss was RMB6.2 million (US$1.0 million), compared to a net loss of RMB4.5 million in 2012.
• Adjusted net loss was RMB1.1 million (US$0.2 million), compared to an adjusted net income of RMB8.2 million in 2012.
• Basic and diluted loss per share was RMB1.47 (US$0.24), as compared to basic and diluted loss per share of RMB1.10 in 2012.
• Adjusted diluted loss per share was RMB0.26 (US$0.04), as compared to adjusted diluted earnings per share of RMB2.00 in 2012.

Fourth Quarter 2013 Financial Highlights

• Total revenue decreased 7% year-over-year to RMB91.2 million (US$15.1 million).
• Gross profit increased 6% year-over-year to RMB42.0 million (US$6.9 million).
• Adjusted EBITDA was RMB9.9 million (US$1.6 million), compared to RMB18.5 million in the fourth quarter 2012.
• Operating income was RMB8.4 million (US$1.4 million), compared to RMB16.1 million in the fourth quarter 2012.
• Net income was RMB6.4 million (US$1.1 million), compared to RMB3.0 million in the fourth quarter 2012.
• Adjusted net income was RMB7.4 million (US$1.2 million), compared to adjusted net income of RMB5.0 million in the fourth quarter 2012.
• Basic and diluted earnings per share were RMB1.50 (US$0.25), as compared to RMB0.74 in the fourth quarter 2012.
• Adjusted diluted earnings per share was RMB1.74 (US$0.29), as compared to adjusted diluted earnings per share of RMB1.20 in the fourth quarter 2012.

Mr. Adam Yan, Chairman and Chief Executive Officer of eFuture, commented on the results. "We are pleased with eFuture's 2013 performance which gave us a more diversified product portfolio, strengthened market leadership and stable revenue stream that allows us to continue the strategic imperative of investing in our future, transforming from a traditional software solutions provider to a shopping social network service, via myStore to transfer offline consumers to mobile consumers (O2M) for the retailers in China retail industry.

"Full year revenue increased modestly. We saw an overall segment growth in service fees, an increased number of clients from various industry segments and geographic locations, and an improved efficiency and profitability from within.

"2013 has been a critical, transformative year for eFuture as we capitalized on the enormous offline to mobile ("O2M") growth opportunities that have resulted from the consumer-led revolutionary change in China's retail industry. We witnessed a strong market response to the rollout of myStore and the results have far exceeded our expectations. As announced earlier this year, leading retailers such as Rainbow & Yonghui have contracted eFuture for our m-commerce and omni-channel solutions, while Yansha Youyi Shopping City, Chengde Kuan Guang Supermarket and others have joined myStore's open platform. Furthermore, the exceptional success of our exhibition that showcased our omni-channel myStore experience store at the 15th China Retail Industry Convention further underpins our success in securing the participation of over 20 retailers.

Mr Yan concluded, "myStore (a shopping social network service connecting consumers) has demonstrated its growing importance as a key business driver for eFuture through our in-house developed m-commerce and omni-channel solutions. In order to accelerate the Company's growth, we have made investments in R&D, sales and marketing personnel and branding initiatives which has affected our short term profitability but remains crucial to our long term prospects. I am excited about our 2014 outlook as we continue to lead the change in the retail industry by helping our clients provide a truly personalized shopping experience for each consumer through myStore."

FULL YEAR 2013 FINANCIAL RESULTS

Revenue

Total revenue for full year of 2013 increased slightly to RMB199.2 million (US$32.9 million) from RMB198.4 million in 2012.

Revenue Breakdown

Software license revenue for 2013 decreased 14% year-over-year to RMB68.2 million (US$11.3 million) from RMB79.5 million in 2012. The decrease was due to the postponement of the new shops opening schedules of our clients as a result of macroeconomic uncertainties.

Hardware revenue for 2013 decreased 1% year-over-year to RMB28.2 million (US$4.7 million) from RMB28.5 million in 2012.

Service fee income for 2013 increased 14% year-over-year to RMB102.9 million (US$17.0 million) from RMB90.4 million in 2012. The increase was mainly contributed by a number of new clients and additional revenue from existing clients to increase the customization and enhancement of their IT systems.

Cost of Revenue

Cost of revenue for 2013 decreased 1% to RMB118.2 million (US$19.5 million) from RMB119.8 million in 2012.

Cost of Revenue Breakdown

Gross Profit and Gross Margin

Gross profit increased 3% year-over-year to RMB81.0 million (US$13.4 million) from RMB78.5 million in 2012, and consolidated gross margin for 2013 was 41%, compared with 40% in 2012.

Operating Expenses 

Research and development ("R&D") expenses for 2013 increased 94% year-over-year to RMB7.2 million (US$1.2 million), or 4% of total revenue, compared with RMB3.7 million, or 2% of total revenue in 2012. The increase was primarily attributable to some capitalized R&D projects which were found to be unable to generate sufficient future cashflow for the company. The capitalized R&D cost was reverted as an expense item in 2013.

General and administrative expenses ("G&A") for 2013 increased 3% year-over-year to RMB33.8 million (US$5.6 million), representing 17% of total revenue, compared with RMB32.8 million, or 17% of total revenue in 2012.

Selling and distribution ("S&D") expenses for 2013 increased 15% year-over-year to RMB46.4 million (US$7.7 million), representing 23% of total revenue, compared with RMB40.4 million, or 20% of total revenue in 2012. The increase was primarily attributable to the increase in staff costs, including statutory welfare benefits and investments in marketing events for the promotion of myStore-led omni channel solutions.

Operating Loss

Operating loss in 2013 was RMB6.4 million (US$1.1 million), compared with an operating income of RMB1.5 million in 2012.

Net Loss/Adjusted Net Loss and Loss Per Share/Adjusted Loss Per Share

2013 net loss was RMB6.2 million (US$1.0 million), compared with a net loss of RMB4.5 million in 2012. Adjusted net loss for 2013 was RMB1.1 million (US$0.2 million), compared with an adjusted net income of RMB8.2 million in 2012.

Basic and diluted loss per share in 2013 was RMB1.47 (US$0.24), compared to basic and diluted loss per share of RMB1.10 in 2012. Adjusted diluted loss per share was RMB0.26 (US$0.04), compared to an adjusted diluted earnings per share of RMB2.00 in 2012.

EBITDA

Adjusted EBITDA for 2013 was RMB0.6 million (US$0.1 million), compared to RMB16.2 million in 2012.

FOURTH QUARTER 2013 FINANCIAL RESULTS

Revenue

Total revenue for the fourth quarter 2013 decreased 7% to RMB91.2 million (US$15.1 million) from RMB98.3 million in the fourth quarter 2012.

Revenue Breakdown

Software license revenue for the fourth quarter 2013 decreased 17% year-over-year to RMB35.0 million (US$5.8 million) from RMB42.3 million in the fourth quarter 2012. The decrease was due to the postponement of our clients' new shops opening schedule as a result of macroeconomic uncertainties.

Hardware revenue in the fourth quarter 2013 decreased 50% year-over-year to RMB8.6 million (US$1.4 million) from RMB17.2 million in the fourth quarter 2012. The decrease was a result of the Company's strategy to focus on higher margin projects.

Service fee income for the fourth quarter 2013 increased 22% year-over-year to RMB47.5 million (US$7.8 million) from RMB38.8 million in the fourth quarter 2012, which was primarily attributable to existing clients' incremental spending on us to help them further enhance and customize their IT systems.

Cost of Revenue

Cost of revenue for the fourth quarter 2013 decreased 16% to RMB49.1 million (US$8.1 million) from RMB58.8 million in the fourth quarter 2012.

Cost of Revenue Breakdown

Gross Profit and Gross Margin

Gross profit increased 6% year-over-year to RMB42.0 million (US$6.9 million) from RMB39.5 million in the fourth quarter 2012, and consolidated gross margin for the fourth quarter 2013 was 46%, compared with 40% in the fourth quarter 2012. The improvement in gross margin was mainly due to a better control on cost, improved efficiency in project delivery and the Company's strategy to focus on higher margin projects.

Operating Expenses

Research and development ("R&D") expenses for the fourth quarter 2013 was RMB4.7 million (US$0.8 million), representing 5% of total revenue, compared to RMB1.3 million, or 1% of total revenue in the fourth quarter 2012. The increase was primarily attributable to some capitalized R&D projects which was found to be unable to generate sufficient future cashflow for the company. The capitalized R&D cost was reverted as an expense item in 2013.

General and administrative expenses ("G&A") for the fourth quarter 2013 increased 40% year-over-year to RMB13.4 million (US$2.2 million), representing 15% of total revenue, compared with RMB9.6 million, or 10% of total revenue in the fourth quarter 2012. The increase was primarily attributable to an increased accrual of additional social welfare benefits for staff.  

Selling and distribution ("S&D") expenses for the fourth quarter 2013 increased 24% year-over-year to RMB15.5 million (US$2.6 million), representing 17% of total revenue, compared with RMB12.5 million, or 13% of total revenue in the fourth quarter 2012. The increase was primarily attributable to the increase of staff costs, including statutory welfare benefits and year-end bonuses as well as increased investment in marketing events for the promotion of myStore-led omni channel solutions.

Operating Income

Operating income in the fourth quarter 2013 was RMB8.4 million (US$1.4 million), decreased by 48% from RMB16.1 million in the fourth quarter 2012.

Net Income /Adjusted Net Income and Earnings Per Share/Adjusted Earnings Per Share

Fourth quarter 2013 net income was RMB6.4 million (US$1.1 million), compared net income of RMB3.0 million in the fourth quarter 2012. Adjusted net income for the fourth quarter 2013 was RMB7.4 million (US$1.2 million), compared with RMB5.0 million in the fourth quarter 2012.

Basic and diluted earnings per share in the fourth quarter 2013 was RMB1.50 (US$0.25), compared to basic and diluted earnings per share of RMB0.74 in the fourth quarter 2012. Adjusted diluted earnings per share was RMB1.74 (US$0.29), compared to RMB1.20 in the fourth quarter 2012.

EBITDA

Adjusted EBITDA for the fourth quarter 2013 was RMB9.9 million (US$1.6 million), compared to RMB18.5 million in the fourth quarter 2012.

Balance Sheet and Cash Flow

As of December 31, 2013, cash and cash equivalents were RMB62.6 million (US$10.3 million), a decrease of RMB16.8 million from RMB79.4 million as of December 31, 2012. The decrease was primarily attributable to the increased staff cost in 2013 and other related travelling expenses.

Total accounts receivable as of December 31, 2013 increased 11% to RMB27.8 million (US$4.6 million) from RMB25.2 million as of December 31, 2012. The increase was a result of a relatively slower collection of cash from customers at the end of the year.

Inventory and work in processes as of December 31, 2013 increased 4% to RMB20.1 million (US$3.3 million) from RMB19.3 million as of December 31, 2012. The increase was primarily attributable to delayed projects which had not reached the point of revenue recognition.

For the full year ended December 31, 2013, net cash used in operating activities was RMB0.6 million (US$0.1 million). Net cash used in investing activities was RMB16.1 million (US$2.7 million).

FIRST QUARTER 2014 GUIDANCE

eFuture expects total revenue for the first quarter 2014 to be in the range of RMB22.5 million (US$3.7 million) to RMB26.5 million (US$4.4 million). Adjusted EBITDA for the first quarter 2014 is expected to be in the range of minus RMB3.2 million (US$0.5 million) to RMB5 million (US$0.8 million).

CONFERENCE CALL INFORMATION

eFuture's management will host a conference call on March 18, 2014 at 8:00 a.m. (Eastern)/ 5:00 a.m. (Pacific)/ 8:00 p.m. (Beijing/Hong Kong) to discuss its quarterly and fiscal year results and recent business activities.

To access the conference call, please dial:

Please dial in at least 10 minutes before the call to ensure timely participation.

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.

Following the earnings conference call, an archive of the call will be available by dialing:

CURRENCY CONVENIENCE TRANSLATION

For the convenience of readers, certain RMB amounts have been translated into US dollars at the rate of RMB6.0537 to US$1.00, the noon buying rate for US dollars in effect on December 31, 2013 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. (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. 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.

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