eFuture Announces First Quarter 2013 Unaudited Financial Results

BEIJING, May 20, 2013 (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 first quarter ended March 31, 2013.

First Quarter 2013 Financial Highlights

• Total revenue decreased 3% year-over-year to RMB22.5 million (US$3.6 million).
• Gross profit decreased 3% year-over-year to RMB8.7 million (US$1.4 million).
• Adjusted EBITDA was minus RMB5.3 million (US$0.8 million), compared to an adjusted EBITDA of minus RMB1.3 million in the first quarter 2012.
• Operating loss was RMB7.3 million (US$1.2 million), compared to an operating loss of RMB5.3 million in the first quarter 2012.
• Net loss was RMB6.0 million (US$1.0 million), compared to a net loss of RMB4.9 million in the first quarter 2012.
• Adjusted net loss was RMB4.5 million (US$0.7 million), compared to an adjusted net loss of RMB1.4 million in the first quarter 2012.
• Basic and diluted loss per share was RMB1.42 (US$0.23), as compared to basic and diluted loss per share of RMB1.19 in the first quarter 2012.
• Adjusted diluted loss per share was RMB1.06 (US$0.17), as compared to adjusted diluted loss per share of RMB0.34 in the first quarter 2012.

Mr. Adam Yan, Chairman and Chief Executive Officer of eFuture, commented on the results. "As we entered into 2013, we continued to execute on our strategy of increasing wallet share and deepening business penetration. Overall, the results have been very encouraging with total backlog valued at RMB148.3 million (US$23.8 million) as of the end of March, representing an increase of 25% year over year. The total value of new contracts also increased by 25% year over year.

On our Software solutions, we continued the expansion of our client base among medium to large local and multinational corporate enterprises through the provision of IT software solutions and consulting services to enhance the efficiency of front end supply chains for our customers. Earlier in the quarter, we signed some leading nationwide and regional players such as aigo Entrepreneurs Alliance ("aigo") and New Hua Du Supercenter Co., Ltd ("New Hua Du"). aigo is a leading consumer electronics company in China, and New Hua Du is one of the largest supermarket operators with 123 stores in Fujian Province.

In addition, our tier 2 and 3 city expansion strategy continued to reap rewarding results with leading regional department store operators, and our progress with clients such as Guofang Group only help to further solidify our market position in these high growth regions. With growing demand for our full suite of solutions designed to optimize business efficiency, our pipeline is much stronger and healthier as compared to last year, and provides a solid foundation for growth in year 2013."

Mr. Sean Zheng, Chief Financial Officer, added, "The first quarter of 2013 fell well in line with our guidance and expectations. The year over year decline in revenue reflected the delay in revenue recognition for our backlog, as well as some Q1 revenue was partially recognized last quarter when some projects finished earlier than expected. At the beginning of the year, we also made investments in people and enhanced our employees' benefits to retain talent, which resulted in higher SG&A expenses over the quarter. We expect these investments to provide eFuture with significant long-term benefits and hence strengthen our foundation to achieve a sustainable long term business growth for shareholders."

FIRST QUARTER 2013 FINANCIAL RESULTS

Revenue

Total revenue for the first quarter 2013 decreased 3% to RMB22.5 million (US$3.6 million) from RMB23.3 million in the first quarter 2012.

Revenue Breakdown

Software license revenue for the first quarter 2013 decreased 21% year-over-year to RMB6.6 million (US$1.1 million) from RMB8.4 million in the first quarter 2012. The decrease was primarily attributable to decreased revenue recognized in the logistics and grocery industries and partial revenues that were recognized in Q4 last year due to some projects finishing earlier than expected.

Hardware revenue in the first quarter 2013 increased 88% year-over-year to RMB4.2 million (US$0.7 million) from RMB2.2 million in the first quarter 2012. The increase was a result of the completion of some large contracts from grocery industry in the first quarter 2013.

Service fee income for the first quarter 2013 decreased 7% year-over-year to RMB11.7 million (US$1.9 million) from RMB12.6 million in the first quarter 2012, which was primarily attributable to decreased revenue recognized in customization services in the grocery industry, which was partially offset by an increase in sales of maintenance and consulting services.

Cost of Revenue

Cost of revenue for the first quarter 2013 decreased 4% to RMB13.8 million (US$2.2 million) from RMB14.3 million in the first quarter 2012.

Cost of Revenue Breakdown

Gross Profit and Gross Margin

Gross profit decreased 3%year-over-year to RMB8.7 million (US$1.4 million) from RMB8.9 million in the first quarter 2012, and consolidated gross margin for the first quarter 2013 was 39%, compared with 38% in the first quarter 2012. The improvement in gross margin was mainly due to the decreased amortization cost of self-developed software and acquired software, which comprises part of the cost of revenue, as some of the software had been fully-amortized after the first quarter 2012.

Operating Expenses

Research and development ("R&D") expenses for the first quarter 2013 increased 59% year-over-year to RMB0.8 million (US$0.1 million), or 4% of total revenue, compared with RMB0.5 million, or 2% of total revenue in the first quarter 2012. The increase in R&D expense was primarily attributable to a RMB 0.4 million (US$51,038) expenditure spent on enhancing Sales Force Automation (SFAv1.2), a cloud product.

General and administrative expenses ("G&A") for the first quarter 2013 decreased 8% year-over-year to RMB6.0 million (US$1.0 million), representing 27% of total revenue, compared with RMB6.5 million, or 28% of total revenue in the first quarter 2012. The decrease was primarily attributable to decreased option expenses as the employee incentive plan granted in December 2009 ended its investment period at the end of 2012.

Selling and distribution ("S&D") expenses for the first quarter 2013 increased 28% year-over-year to RMB9.2 million (US$1.5 million), representing 41% of total revenue, compared with RMB7.1 million, or 31% of total revenue in the first quarter 2012. The increase was primarily attributable to an increased investment in people by adopting an enhanced employee benefit scheme, started at the beginning of 2013, to retain talent and increase business development activities to promote sales in cloud services and myStore.

Operating Loss

Operating loss in the first quarter 2013 was RMB7.3 million (US$1.2 million), compared to operating loss of RMB5.3 million in the first quarter 2012.

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

First quarter 2013 net loss was RMB6.0 million (US$1.0 million), compared with a net loss of RMB4.9 million in the first quarter 2012. Adjusted net loss for the first quarter 2013 was RMB4.5 million (US$0.7 million), compared with an adjusted net loss of RMB1.4 million in the first quarter 2012.

Basic and diluted loss per share in the first quarter 2013 was RMB1.42 (US$0.23), compared to basic and diluted loss per share of RMB1.19 in the first quarter 2012. Adjusted diluted loss per share was RMB1.06 (US$0.17), compared to RMB0.34 in the first quarter 2012.

EBITDA

Adjusted EBITDA for the first quarter 2013 was minus RMB5.3 million (US$0.8 million), compared to minus RMB1.3 million in the first quarter 2012.

Balance Sheet and Cash Flow

As of March 31, 2013, cash and cash equivalents were RMB43.6 million (US$7.0 million), a decrease of RMB35.8 million from RMB79.4 million as of December 31, 2012. The decrease was primarily attributable to the payment of annual bonuses and the expenditure on customer projects.

Total accounts receivable as of March 31, 2013 decreased 5.5% to RMB23.8 million (US$3.8 million) from RMB25.2 million as of December 31, 2012. The decrease was primarily attributable to the collection of trade receivables due from the projects completed in prior quarters.

Inventory and work in process as of March 31, 2013 increased 49.2% to RMB28.8 million (US$4.6 million) from RMB19.3 million as of December 31, 2012. The increase was primarily attributable to an increase in the number of on-going projects which had not reached the point of revenue recognition.

For the quarter ended March 31, 2013, net cash used in operating activities was RMB31.8 million (US$5.1 million). Net cash used in investing activities was RMB3.9 million (US$0.6 million).

SECOND QUARTER 2013 GUIDANCE

eFuture expects total revenue for the second quarter 2013 to be in the range of RMB43 million (US$6.9 million) to RMB48 million (US$7.7 million). Adjusted EBITDA for the second quarter 2013 is expected to be in the range of minus RMB4.0 million (US$0.6 million) to breakeven.

CONFERENCE CALL INFORMATION

eFuture's management will host a conference call on May 21, 2013 at 5:00 am (US Pacific) / 8:00 am (US Eastern) / 8:00 pm (Beijing) to discuss the Company's 2013 first quarter results and recent business activities. The conference call may be accessed by dialing:

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 RMB6.2108 to US$1.00, the noon buying rate for US dollars in effect on March 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.