EFuture Information Technology Inc. : eFuture Announces Unaudited Third Quarter 2013 Financial Results

BEIJING, Nov. 19, 2013 (GLOBE NEWSWIRE) -- November 19, 2013 - 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 third quarter ended September 30, 2013.

Third Quarter 2013 Financial Highlights

• Total revenue increased 8% year-over-year to RMB40.5 million (US$6.6 million).
• Gross profit increased 2% year-over-year to RMB16.4 million (US$2.7 million).
• Adjusted EBITDA was minus RMB0.7 million (US$0.1 million), compared to minus RMB1.0 million in the third quarter 2012.
• Operating loss was RMB2.3 million (US$0.4 million), compared to an operating loss of RMB3.9 million in the third quarter 2012.
• Net loss was RMB1.6 million (US$0.3 million), compared to a net loss of RMB2.1 million in the third quarter 2012.
• Adjusted net loss was RMB0.4 million (US$0.07 million), compared to an adjusted net income of RMB0.3 million in the third quarter 2012.
• Basic and diluted loss per share was RMB0.38(US$0.06), as compared to basic and diluted loss per share of RMB0.52 in the third quarter 2012.
• Adjusted diluted loss per share was RMB0.10(US$0.02), as compared to adjusted diluted earnings per share of RMB0.07 in the third quarter 2012.

Mr. Adam Yan, Chairman and Chief Executive Officer of eFuture, commented on the results. "eFuture's momentum continued through the third quarter, with a 30% growth in service fee income and a 20% increase in newly signed contracts, reaching RMB70.2 million (US$11 million). The continued strength of our operating results is a testament to our well-established key client strategy allowing us to cross-sell our rich portfolio of products and services to existing clients.

"While our key client strategy allows us to leverage our broad array of capabilities to drive greater business value from large clients, due to the complex and highly customized nature of the contracts it has caused a slight delay in the completion time of some services. Nevertheless, the Company has always focused on enhancing cost structure to improve efficiency, and this has mitigated the pressure from delays in revenue recognition. Over the year, G&A expenses have been decreasing from 21.3% to 16.9%, and selling and distribution expenses have also been declining from 30.6% to 27.2%.

"The healthy growth of our robust contract pipeline also enables us to devote more time to further growth initiatives such as omni-channel solutions and myStore, which is a shopping social platform that connects and engages global consumers. Reinforced by our solid backlog, which recorded a total of RMB148 million by the end of the third quarter 2013, we have full confidence in the health of our business and customer demand for our smart products and services. With a slowly improving economic environment, our flexible cost structure and increasing traction from our new business initiatives, we are well positioned to build on our strong performance through the rest of 2013 and into 2014."

THIRD QUARTER 2013 FINANCIAL RESULTS

Revenue

Total revenue for the third quarter 2013 increased 8% to RMB40.5 million (US$6.6 million) from RMB37.5 million in the third quarter 2012.

Revenue Breakdown

Software license revenue for the third quarter 2013 increased 3% year-over-year to RMB13.7 million (US$2.2 million) from RMB13.3 million in the third quarter 2012. The increase was primarily attributable to increased sales in Department Store industry.

Hardware revenue in the third quarter 2013 decreased 49% year-over-year to RMB3.0 million (US$0.5 million) from RMB5.9 million in the third quarter 2012. The decrease was a result of the completion of a few one-off projects in Logistics and Shopping mall industries in the third quarter 2012.

Service fee income for the third quarter 2013 increased 30% year-over-year to RMB23.9 million (US$3.9 million) from RMB18.4 million in the third quarter 2012, which was primarily attributable to increased maintenance service fee income from key customers in Grocery industry.

Cost of Revenue

Cost of revenue for the third quarter 2013 increased 13% to RMB24.1 million (US$3.9 million) from RMB21.4 million in the third quarter 2012. Cost of revenue as a percentage of total revenue in the third quarter 2013 was 59.4%, compared to 69.3% in the previous quarter, and 57.0% a year ago.

Cost of Revenue Breakdown

Gross Profit and Gross Margin

Gross profit increased by 2% year-over-year to RMB16.4 million (US$2.7 million) from RMB16.1 million in the third quarter 2012, and consolidated gross margin for the third quarter 2013 was 40.6%, compared with 43.0% in the third quarter 2012. The decrease in gross margin was mainly due to increased investment in staff cost to accomplish more service fee contracts in compare to the third quarter 2012.

Operating Expenses

Research and development ("R&D") expenses for the third quarter 2013 increased 95% year-over-year to RMB1.2 million (US$0.2 million), or 2.9% of total revenue, compared with RMB0.6 million, or 1.6% of total revenue in the third quarter 2012. The increase in R&D expenses was primarily attributable to the termination of one R&D project which was charged to R&D expenses as a one-off accounting treatment.

General and administrative expenses ("G&A") for the third quarter 2013 decreased 15% year-over-year to RMB6.7 million (US$1.1 million), representing 16.7% of total revenue, compared with RMB8.0 million, or 21.3% of total revenue in the third quarter 2012. The decrease in G&A expenses was primarily attributable to the attorney fee spent on a case with a customer in the third quarter 2012 and a decrease in bad debt provision as a result of an improvement in trade receivable collection.

Selling and distribution ("S&D") expenses for the third quarter 2013 decreased 6% year-over-year to RMB10.8 million (US$1.8 million), representing 26.7% of total revenue, compared with RMB11.5 million, or 30.6% of total revenue in the third quarter 2012. The decrease in S&D expenses was primarily attributable to decreased sales commission, reflecting improved efficiency in generating sales.

Operating Loss

Operating loss in the third quarter 2013 was RMB2.3 million (US$0.4 million), compared to operating loss of RMB3.9 million in the third quarter 2012.

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

Third quarter 2013 net loss was RMB1.6 million (US$0.3 million), compared with a net loss of RMB2.1 million in the third quarter 2012. Adjusted net loss for the third quarter 2013 was RMB0.4 million (US$0.07 million), compared with an adjusted net income of RMB0.3 million in the third quarter 2012.

Basic and diluted loss per share in the third quarter 2013 was RMB0.38(US$0.06), compared to basic and diluted loss per share of RMB0.52 in the third quarter 2012. Adjusted diluted loss per share was RMB0.10(US$0.02), compared to adjusted diluted earnings per share of RMB0.07 in the third quarter 2012.

EBITDA

Adjusted EBITDA for the third quarter 2013 was minus RMB0.7 million (US$0.1 million), compared to minus RMB1.0 in the third quarter 2012.

Balance Sheet and Cash Flow

As of September 30, 2013, cash and cash equivalents were RMB35.1 million (US$5.7 million), a decrease of RMB44.3 million from RMB79.4 million as of December 31, 2012. The decrease was primarily attributable to the payment of annual bonuses for staff and the expenditure spent on customers' projects in the first quarter.

Total accounts receivable as of September 30, 2013 decreased 2% to RMB24.7 million (US$4.0 million) from RMB25.2 million as of December 31, 2012. The decrease was a result of our continuous efforts to strengthen our balance sheet by improving on trade receivables collection.

Inventory and work in process as of September 30, 2013 increased 38% to RMB26.6 million (US$4.4 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 quarter ended September 30, 2013, net cash used in operating activities was RMB0.4 million (US$0.07 million). Net cash used in investing activities was RMB3.9 million (US$0.6 million).

FOURTH QUARTER 2013 GUIDANCE

eFuture expects total revenue for the fourth quarter 2013 to be in the range of RMB77 million(US$12.6 million) to RMB83 million (US$13.6 million). Adjusted EBITDA for the fourth quarter 2013 is expected to be in the range of RMB8 million(US$1.3 million) to RMB12 million (US$2.0 million).

CONFERENCE CALL INFORMATION

eFuture's management will host a conference call on November 20, 2013 at 8:00 a.m. (Eastern)/ 5:00 a.m. (Pacific)/ 9:00 p.m. (Beijing/Hong Kong) to discuss its quarterly results and recent business activities.

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 RMB6.1200 to US$1.00, the noon buying rate for US dollars in effect on September 30, 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.

CONTACT: Investor Contact:
         Troe Wen, Company Secretary
         eFuture Information Technology Inc.
         +86 10 52937699
         ir@e-future.com.cn

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