eFuture Announces Unaudited Fourth Quarter and Full Year 2014 Financial Results

4Q14 Total Revenue Up 44% YoY to US$20.9 million

4Q14 Gross Profit Up 48% YoY to US$9.7million

Full Year 2014 Net Income Up to US$1.7million

BEIJING, March 3, 2015 (GLOBE NEWSWIRE) -- eFuture Information Technology Inc. (Nasdaq:EFUT) (the "Company" or "eFuture"), a leading provider of software and mobile social shopping network services to 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, 2014.

Full Year 2014 Financial and Operational Highlights

• Total revenue increased 10% year-over-year to RMB217.4 million (US$35.0 million).
• Gross profit increased 20% year-over-year to RMB95.8 million (US$15.4 million).
• Adjusted EBITDA increased to RMB23.3 million (US$3.8 million), compared to negative RMB0.8 million in 2013.
• Operating income increased to RMB14.5 million (US$2.3 million), compared to an operating loss of RMB7.8 million in 2013.
• Net income increased to RMB10.5 million (US$1.7 million), compared to a net loss of RMB7.5 million in 2013.
• Adjusted net income increased to RMB17.6 million (US$2.8 million), compared to an adjusted net loss of RMB2.3 million in 2013.
• Basic and diluted earnings per share increased to RMB2.41 (US$0.39), as compared to basic and diluted loss per share of RMB1.76 in 2013.
• Adjusted diluted earnings per share increased to RMB4.04 (US$0.65), as compared to adjusted diluted loss per share of RMB0.55 in 2013.
• Backlog as of December 31, 2014 increased 16% year-over-year to RMB145.3 million (US$23.4 million).
• myStore registered user base increased to 1.5 million by the end of December 2014.

Fourth Quarter 2014 Financial Highlights

• Total revenue increased 44 % year-over-year to RMB129.5 million (US$20.9 million).
• Gross profit increased 48% year-over-year to RMB60.2 million (US$9.7 million).
• Adjusted EBITDA increased 272% year-over-year to RMB31.5 million (US$5.1 million), compared to RMB8.5 million in the fourth quarter 2013.
• Operating income increased 296% year-over-year to RMB27.7 million (US$4.5 million), compared to RMB7.0 million in the fourth quarter 2013.
• Net income increased 324 % year-over-year to RMB21.9 million (US$3.5 million), compared to RMB5.2 million in the fourth quarter 2013.
• Adjusted net income increased 309% year-over-year to RMB25.2 million (US$4.1 million), compared to adjusted net income of RMB6.2 million in the fourth quarter 2013.
• Basic and diluted earnings per share increased 318% year-over-year to RMB5.07 (US$0.82), as compared to RMB1.21 in the fourth quarter 2013.
• Adjusted diluted earnings per share increased 303% year-over-year to RMB5.85 (US$0.94), as compared to adjusted diluted earnings per share of RMB1.45 in the fourth quarter 2013.

Mr. Adam Yan, Chairman and Chief Executive Officer of eFuture, commented on the results. "The year 2014 was a remarkable year for eFuture. The software business returned to growth, while myStore also experienced a large-scale public testing, whereby the registered users approximated 2 million as of the end of February 2015.

"As a solid foundation and resource pool for myStore development, we obtained steady growth in logistics, grocery and e-commerce industry in 2014. We will continue to increase our investment in the software business, and expect to expand market share in the top 100 chain retailers and in the tier three and four cities. In 2014, myStore-driven omni-channel (including online, offline, mobile and social media channels) solutions began to enter the market, and are receiving positive feedback.

"The goal of myStore is to connect the customers, the physical stores and its staff. With a cell phone the customers can buy anything and interact with the staff of the physical stores anytime, anywhere. They can go to the store and pick up the goods they've just ordered via mobile devices or just wait for delivery at home. The fast mobile payment channel in the physical stores could also help them to save time while making payment. To achieve this goal, we will continue to expand investment on myStore, connecting more local retail stores to enhance the user experience."

"We have been engaged in a strategic transformation towards mobile internet since 2012. I'm pleased to announce that we are successfully executing our strategy and delivering on our commitments to increase earnings and the value of the Company by exceeding guidance in the fourth quarter of 2014," Ms. Ping Yu, Chief Financial Officer, commented, "We worked to optimize our revenue mix and decreased the proportion of low-margin hardware business in 2014. As a result, gross margin increased from 40% to 44%. Going forward, it is our goal to drive sustained profitable growth to maximize long-term shareholder value. The Board and management team are focused on the execution of our strategy and strategic initiatives to elevate human efficacy and effectively manage general and administrative expenses over the long term."

FULL YEAR 2014 FINANCIAL RESULTS

Revenue

Total revenue for full year of 2014 increased to RMB 217.4 million (US$35.0 million) from RMB197.9 million in 2013.

Revenue Breakdown

Software license revenue for 2014 increased 24% year-over-year to RMB83.9 million (US$13.5 million) from RMB67.9 million in 2013. The increase was primarily due to increased sales in the shopping mall, the e-commerce and the logistics industries.

Hardware revenue for 2014 decreased 79% year-over-year to RMB5.9 million (US$1.0 million) from RMB28.2 million in 2013. The decrease was a result of the Company's strategy to focus on higher margin projects.

Service fee income for 2014 increased 25% year-over-year to RMB127.6 million (US$20.6 million) from RMB101.9 million in 2013. The increase was primarily attributable to completion of a few large projects in the department store and grocery industries as well as a result of increased maintenance service fee income from key customers. The sales of myStore driven omni-channel solutions also made significant contributions to the growth of service fee income.

Cost of Revenue

Cost of revenue for 2014 increased 3% to RMB121.6 million (US$19.6 million) from RMB118.4 million in 2013.

Cost of Revenue Breakdown

Gross Profit and Gross Margin

Gross profit increased 20% year-over-year to RMB95.8 million (US$15.4 million) from RMB79.6 million in 2013, and consolidated gross margin for 2014 improved to 44%, compared with 40% in 2013. The improvement in gross margin was mainly due to lower proportion of hardware sales resulting from the Company's strategy to focus on higher margin projects.

Operating Expenses

Research and development ("R&D") expenses for 2014 increased 7% year-over-year to RMB7.7 million (US$1.2 million), or 4% of total revenue, compared with RMB7.2million, or 4% of total revenue in 2013. The increase was primarily attributable to the investment on software business.

General and administrative expenses ("G&A") for 2014 decreased 20% year-over-year to RMB27.2 million (US$4.4 million), representing 12% of total revenue, compared with RMB33.8 million, or 17% of total revenue in 2013. The decrease was primarily attributable to a lower head count and a reduction of meeting expenses as result of improved management efficiency and effective cost containment.

Selling and distribution ("S&D") expenses for 2014 was RMB46.5 million (US$7.5 million), representing 21% of total revenue, compared with RMB46.4 million, or 23% of total revenue in 2013. S&D expenses remained stable.

Operating Income

Operating income in 2014 was RMB14.5 million (US$2.3 million), compared with an operating loss of RMB7.8 million in 2013. The Improvement was primarily due to the increased gross margin reflecting the Company's strategy of focusing on higher margin projects and decreasing operating expenses, resulting from improved management efficiency and effective cost control.

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

2014 net income was RMB10.5 million (US$1.7 million), compared with a net loss of RMB7.5 million in 2013. Adjusted net income for 2014 was RMB17.6 million (US$2.8 million), compared with an adjusted net loss of RMB2.3 million in 2013.

Basic and diluted earnings per share in 2014 was RMB2.41 (US$0.39), compared to basic and diluted loss per share of RMB1.76 in 2013. Adjusted diluted earnings per share was RM4.04 (US$0.65), compared to an adjusted diluted loss per share of RMB0.55 in 2013.

EBITDA

Adjusted EBITDA for 2014 improved to RMB23.3 million (US$3.8 million), compared to negative RMB0.8 million in 2013.

FOURTH QUARTER 2014 FINANCIAL RESULTS

Revenue

Total revenue for the fourth quarter 2014 increased 44% to RMB129.5 million (US$20.9 million) from RMB89.9 million in the fourth quarter 2013.

Revenue Breakdown

Software license revenue for the fourth quarter 2014 increased 59% year-over-year to RMB55.1 million (US$8.9 million) from RMB34.7 million in the fourth quarter 2013. The increase was primarily attributable to increased sales in the grocery industry and e-commerce industries.

Hardware revenue in the fourth quarter 2014 decreased 59% year-over-year to RMB3.5 million (US$0.6 million) from RMB8.6 million in the fourth quarter 2013. The decrease was a result of the Company's strategy of focusing on higher margin projects.

Service fee income for the fourth quarter 2014 increased 52% year-over-year to RMB70.9 million (US$11.4 million) from RMB46.5 million in the fourth quarter 2013. The increase was primarily due to completion of a few large projects in the department store and grocery industries as well as a result of increased maintenance service fee income from key customers..

Cost of Revenue

Cost of revenue for the fourth quarter 2014 increased 41% to RMB69.3 million (US$11.2 million) from RMB49.3 million in the fourth quarter 2013.

Cost of Revenue Breakdown

Gross Profit and Gross Margin

Gross profit increased 48% year-over-year to RMB60.2 million (US$9.7 million) from RMB40.6 million in the fourth quarter 2013, and consolidated gross margin for the fourth quarter 2014 improved to 46%, compared with 45% in the fourth quarter 2013. The improvement in gross margin was primarily due to lower proportion of hardware sales as a result of the Company's strategy of focusing on higher margin projects.

Operating Expenses 

Research and development ("R&D") expenses for the fourth quarter 2014 increased 22% year-over-year to RMB5.7 million (US$0.9 million), representing 4% of total revenue, compared to RMB4.7 million, or 5% of total revenue in the fourth quarter 2013. The increase was primarily attributable to the investment on software business.

General and administrative expenses ("G&A") for the fourth quarter 2014 decreased 25% year-over-year to RMB10.1 million (US$1.6 million), representing 8% of total revenue, compared with RMB13.4 million, or 15% of total revenue in the fourth quarter 2013. The decrease was primarily attributable to a lower head count and decreased outsourcing service expenses as result of improved management efficiency and more effective cost control.

Selling and distribution ("S&D") expenses for the fourth quarter 2014 increased 8% year-over-year to RMB16.7 million (US$2.7 million), representing 13% of total revenue, compared with RMB15.5 million, or 17% of total revenue in the fourth quarter 2013. The increase was primarily attributable to investments in marketing events for the promotion of myStore.

Operating Income               

Operating income in the fourth quarter 2014 was RMB27.7 million (US$4.5 million), increased by 296% from RMB7.0 million in the fourth quarter 2013.

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

Fourth quarter 2014 net income increased 324% to RMB21.9 million (US$3.5 million), compared net income of RMB5.2 million in the fourth quarter 2013. Adjusted net income for the fourth quarter 2014 increased 309% to RMB25.2 million (US$4.1 million), compared with RMB6.2 million in the fourth quarter 2013.

Basic and diluted earnings per share in the fourth quarter 2014 increased to RMB5.07 (US$0.82), compared to basic and diluted earnings per share of RMB1.21 in the fourth quarter 2013. Adjusted diluted earnings per share was RMB5.85 (US$0.94), compared to RMB1.45 in the fourth quarter 2013.

EBITDA

Adjusted EBITDA for the fourth quarter 2014 increased 272% to RMB31.5 million (US$5.1 million), compared to RMB8.5 million in the fourth quarter 2013.

Balance Sheet and Cash Flow 

As of December 31, 2014, cash and cash equivalents were RMB64.6 million (US$10.4 million), a increase of RMB1.9 million from RMB62.6 million as of December 31, 2013. The increase was mainly attributable to increased cash flows from operating activities resulting from improved operating efficiency and cash flows from short-term loans. 

Total accounts receivable as of December 31, 2014 increased 51% to RMB40.0 million (US$6.4 million) from RMB26.4 million as of December 31, 2013. This resulted from the completion of several projects in the fourth quarter 2014 and it is expected that customers will be making payments over the next few months.

Inventory and work in processes as of December 31, 2014 decreased 17% to RMB16.6 million (US$2.7 million) from RMB19.9 million as of December 31, 2013. The decrease was primarily attributable to completion of several projects in the fourth quarter 2014.

For the full year ended December 31, 2014, net cash provided by operating activities was RMB8.6 million (US$1.4 million). Net cash used in investing activities was RMB17.4 million (US$2.8 million). Net cash provided by financing activities was RMB10.7 (US$1.7 million).

FIRST QUARTER 2015 GUIDANCE

eFuture expects total revenue for the first quarter 2015 to range between RMB21 million (US$3.4 million) to RMB26 million (US$4.2 million), and adjusted EBITDA for the first quarter 2015 is expected to range between negative RMB7.5 million (US$1.2 million) to negative RMB4 million (US$0.6 million).

CURRENCY CONVENIENCE TRANSLATION

For the convenience of readers, certain RMB amounts have been translated into US dollars at the rate of RMB6.2046 to US$1.00, the noon buying rate for US dollars in effect on December 31, 2014 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 mobile social shopping network services to China's rapidly growing retail and consumer goods industries. As a pioneer and proponent of omni-channel and mobile internet solutions in the Asia-pacific, we developed myStore, a mobile shopping social network, to connect consumers and physical stores. 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 3, 2015, 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 –