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eFuture Announces Unaudited Fourth Quarter and Full Year 2015 Financial Results

BEIJING, March 04, 2016 (GLOBE NEWSWIRE) -- eFuture Holding Inc. (Nasdaq:EFUT) (the “Company” or “eFuture”), a leading software and solution provider and a mobile business enabler 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, 2015.

Full Year 2015 Financial and Operational Highlights

  • Total revenue increased 1% year-over-year to RMB221.6 million (US$34.2 million).
  • Gross profit decreased 1% year-over-year to RMB92.1 million (US$14.2 million).
  • Adjusted EBITDA increased 2% year-over-year to RMB20.0 million (US$3.1 million).
  • Operating income decreased 27% year-over-year to RMB7.8 million (US$1.2 million).
  • Net income decreased 55% year-over-year to RMB3.3 million (US$0.5 million)
  • Adjusted net income decreased 5% year-over-year to RMB13.7 million (US$2.1 million), as compared to adjusted net income of RMB14.5 million in 2014.
  • Basic earnings per share decreased 61% year-over-year to RMB0.69 (US$0.11), as compared to basic earnings per share of RMB1.77 in 2014.
  • Diluted earnings per share decreased 60% year-over-year to RMB0.69 (US$0.11), as compared to diluted earnings per share of RMB1.71 in 2014.
  • Adjusted diluted earnings per share decreased 16% year-over-year to RMB2.80 (US$0.43), as compared to adjusted diluted earnings per share of RMB3.35 in 2014.
  • Backlog as of December 31, 2015 decreased 5% year-over-year to RMB138.7million (US$24.1 million).

Fourth Quarter 2015 Financial Highlights

  • Total revenue decreased 2% year-over-year to RMB129.0 million (US$19.9 million).
  • Gross profit decreased 6% year-over-year to RMB54.3 million (US$8.4 million).
  • Adjusted EBITDA decreased 2% year-over-year to RMB27.1 million (US$4.2million), compared to RMB27.6 million in the fourth quarter 2014.
  • Operating income decreased 5% year-over-year to RMB22.6 million (US$3.5 million), compared to RMB23.8 million in the fourth quarter 2014.
  • Net income decreased 1% year-over-year to RMB18.5 million (US$2.9 million), compared to RMB18.7 million in the fourth quarter 2014.
  • Adjusted net income remained level at 22.1 million (US$3.4 million), compared to adjusted net income of RMB22.1 million in the fourth quarter 2014.
  • Basic and diluted earnings per share decreased 17% year-over-year to RMB3.60 (US$0.56), as compared to RMB4.35 in the fourth quarter 2014.
  • Adjusted diluted earnings per share decreased 19% year-over-year to RMB4.17 (US$0.66), as compared to adjusted diluted earnings per share of RMB5.12 in the fourth quarter 2014.

"In 2015, we focused on the company's management structure realignment to better serve our core business--software and services. We also selected, reviewed and adjusted our innovative businesses for incubation. We fine-tuned the company's business strategy rationally--build an open and cooperative software and cloud service platform that forms the omni-channel sales loop by connecting retailers, merchandises and consumers and provides an O2O ("Online together with Offline") matchmaker service to help internet platforms cooperate with physical retailers in different real-world scenarios." Mr. David Ren, Chief Executive Officer of eFuture, commented.

“As Shiji (Hong Kong) Limited acquired more than 50% of our ordinary shares in November 2015 and is a wholly owned subsidiary of Beijing Shiji Information Technology Co. Ltd. (Shenzhen Stock Exchange:002153), the Company plans to work closely with Shiji in developing a strategy relating to our omni-channel platform which provides Chinese retailers and consumers with big data value-added services, that benefits both companies. ” Mr. Ren added.

“We are pleased that we have successfully delivered on our promise to maintain sustained profitable results for the fiscal year 2015. The rapid increase of service revenue mix demonstrates the potential for becoming the fundamental strength of our core business. Our omni-channel solution business continues to gain momentum through the support of those innovative retailers who seek to provide their customers with a seamless shopping experience. We will focus on R&D investment and product optimization, as well as labor efficiency improvement.” Ms. Ping Yu, Chief Financial Officer of eFuture, said.

FULL YEAR 2015 FINANCIAL RESULTS

Revenue

Total revenue for full year of 2015 increased to RMB 221.6 million (US$34.2 million) from RMB219.5 million in 2014.

Revenue Breakdown

 FY14FY15
RMB ‘000RMB ‘000USD ‘000Y-o-Y Change
Software revenue83,69373,39311,330 -12%
Hardware revenue5,9498,1291,255 37%
Service fee revenue129,812140,04321,619 8%
Total219,454221,56534,204 1%

Software revenue for 2015 decreased 12% year-over-year to RMB73.4 million (US$11.3 million) from RMB83.7 million in 2014. The decrease was primarily due to the continued reduction of new physical retail stores under the current macro economy condition.

Hardware revenue for 2015 increased 37% year-over-year to RMB8.1 million (US$1.3 million) from RMB5.9 million in 2014. The increase was due to the completion of two one-off projects in the shopping mall and logistics industry in 2015.

Service fee revenue for 2015 increased 8% year-over-year to RMB140.0 million (US$21.6 million) from RMB129.8 million in 2014. The increase was primarily attributable to completion of a large customizable service project for a key customer in the grocery industry.

Cost of Revenue

Cost of revenue for 2015 increased 3% to RMB129.5 million (US$20.0 million) from RMB126.1 million in 2014. The primary reason was the increased amortization of software costs associated with innovative projects development from previous years.

Cost of Revenue Breakdown

FY14FY15
RMB ‘000RMB ‘000USD ‘000Y-o-Y Change
Cost of software revenue19,60019,1752,960 -2%
Cost of hardware revenue6,0336,8271,054 13%
Cost of service fee revenue96,71295,02914,670 -2%
Amortization of software costs3,7668,4231,300 124%
Total126,111129,45319,984 3%

Gross Profit and Gross Margin

Gross profit decreased 1% year-over-year to RMB92.1 million (US$14.2 million) from RMB93.3 million in 2014, and consolidated gross margin for 2015 was 42%, compared with 43% in 2014.

Operating Expenses

Research and development (“R&D”) expenses for 2015 increased 8% year-over-year to RMB8.7 million (US$1.3 million), or 4% of total revenue, compared with RMB8.0 million, or 4% of total revenue in 2014. The increase was primarily attributable to expenditures on innovative projects.

General and administrative expenses (“G&A”) for 2015 increased 37% year-over-year to RMB37.5 million (US$5.8 million), representing 17% of total revenue, compared with RMB27.4 million, or 12% of total revenue in 2014. The increase was primarily attributable to the increase in staff costs and an increased bad debt provision resulting from a trade receivable that had not been collected on schedule, as well as higher rental costs and expenses resulting from moving into two new offices in Beijing.

Selling and distribution (“S&D”) expenses for 2015 was RMB38.2 million (US$5.9 million), representing 17% of total revenue, compared with RMB47.3 million, or 22% of total revenue in 2014. The decrease was primarily attributable to enhanced human resource integration and improved management efficiency.

Operating Income

Operating income in 2015 was RMB7.8 million (US$1.2 million), compared with an operating income RMB10.6 million in 2014. The decrease of 27% was primarily due to the increased amortization of software costs associated with innovative projects development from previous years.

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

2015 net income decreased 55% to RMB3.3 million (US$0.5 million), compared with net income RMB7.4 million in 2014. Adjusted net income decreased 5% to RMB13.7 million (US$2.1 million) for 2015, compared with an adjusted net income RMB14.5 million in 2014.

Basic earnings per share in 2015 decreased 61% to RMB0.69 (US$0.11), compared to basic earnings per share of RMB1.77 in 2014. Diluted earnings per share decreased 60% to RMB0.69(US$0.11), compared to diluted earnings per share of RMB1.71 in 2014. Adjusted diluted earnings per share was RMB2.80 (US$0.43), compared to an adjusted diluted earnings per share RMB3.35 in 2014.

EBITDA

Adjusted EBITDA for 2015 was RMB20.0 million (US$3.1 million), compared to RMB19.5 million in 2014, an increase of 2%.

FOURTH QUARTER 2015 FINANCIAL RESULTS

Revenue

Total revenue for the fourth quarter 2015 decreased 2% to RMB129.0 million (US$19.9 million) from RMB131.5 million in the fourth quarter 2014.

Revenue Breakdown

 4Q144Q15
RMB ‘000RMB ‘000USD ‘000Y-o-Y Change
Software revenue54,92941,6496,429 -24%
Hardware revenue3,5081,898293 -46%
Service fee revenue73,11285,46313,194 17%
Total131,549129,01019,916 -2%

Software revenue for the fourth quarter 2015 decreased 24% year-over-year to RMB41.6 million (US$6.4 million) from RMB54.9 million in the fourth quarter 2014. The decrease of 24% was primarily attributable to the continued reduction of new physical retail stores under the current macro economy condition.

Hardware revenue in the fourth quarter 2015 decreased 46% year-over-year to RMB1.9 million (US$0.3 million) from RMB3.5 million in the fourth quarter 2014. The decrease was the completion of two one-off projects in the department store and shopping mall industries in the fourth quarter in 2014.

Service fee revenue for the fourth quarter 2015 increased 17% year-over-year to RMB85.5 million (US$13.2 million) from RMB73.1 million in the fourth quarter 2014. The increase was primarily due to completion of a large customizable service project from a key customer in grocery industry.

Cost of Revenue

Cost of revenue for the fourth quarter 2015 increased 1% to RMB74.8 million (US$11.5 million) from RMB73.8 million in the fourth quarter 2014.

Cost of Revenue Breakdown

4Q144Q15
RMB ‘000RMB ‘000USD ‘000Y-o-Y Change
Cost of software revenue12,13112,0301,857 -1%
Cost of hardware revenue3,7281,501232 -60%
Cost of service fee revenue57,01258,3419,006 2%
Amortization of software costs9552,878444 201%
Total73,82674,75011,539 1%

Gross Profit and Gross Margin

Gross profit decreased 6% year-over-year to RMB54.3 million (US$8.4 million) from RMB57.7 million in the fourth quarter 2014, and consolidated gross margin for the fourth quarter 2015 was 42%, compared with 44% in the fourth quarter 2014. The decrease in gross margin was primarily due to the increased amortization of software costs associated with innovative projects development from previous years.

Operating Expenses

Research and development (“R&D”) expenses for the fourth quarter 2015 decreased 33% year-over-year to RMB4.0 million (US$0.6 million), representing 3% of total revenue, compared to RMB6.0 million, or 5% of total revenue in the fourth quarter 2014. The decrease was primarily attributable to a decreased option expense and related expenditure as employee incentive plan granted in December 2014, as well as the expenditure of some software projects in the fourth quarter 2014.

General and administrative expenses (“G&A”) for the fourth quarter 2015 increased 40% year-over-year to RMB14.4 million (US$2.2 million), representing 11% of total revenue, compared with RMB10.3 million, or 8% of total revenue in the fourth quarter 2014. The increase was primarily attributable to an increased bad debt provision resulting from a trade receivable that had not been collected on schedule, the increase in staff costs, as well as higher rental costs and expenses resulting from moving into two new offices in Beijing in the fourth quarter 2015.

Selling and distribution (“S&D”) expenses for the fourth quarter 2015 decreased 25% year-over-year to RMB13.3 million (US$2.1 million), representing 10% of total revenue, compared with RMB17.6 million, or 13% of total revenue in the fourth quarter 2014. The decrease was primarily attributable to improved management efficiency on investments in marketing events in the fourth quarter 2015.

Operating Income

Operating income in the fourth quarter 2015 was RMB22.6 million (US$3.5 million), decreased by 5% from RMB23.8 million in the fourth quarter 2014.

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

Fourth quarter 2015 net income decreased 1% to RMB18.5 million (US$2.9 million), compared with net income of RMB18.7 million in the fourth quarter 2014. Adjusted net income for the fourth quarter 2015 remained level at RMB22.1 million (US$3.4 million), compared to RMB22.1 million in the fourth quarter 2014.

Basic and diluted earnings per share in the fourth quarter 2015 decreased to RMB3.60 (US$0.56), or 17%, compared to basic and diluted earnings per share of RMB4.35 in the fourth quarter 2014. Adjusted diluted earnings per share was RMB4.17 (US$0.66), compared to RMB5.12 in the fourth quarter 2014, a decrease of 19%.

EBITDA

Adjusted EBITDA for the fourth quarter 2015 decreased 2% to RMB27.1 million (US$4.2 million), compared to RMB27.6 million in the fourth quarter 2014.

Balance Sheet and Cash Flow

As of December 31, 2015, cash and cash equivalents were RMB106.7 million (US$16.5 million), an increase of RMB42.1 million from RMB64.6 million as of December 31, 2014. The increase was mainly attributable to increased cash flows from the exercise of options by employees and cash flows from issuance of ordinary shares through the private placement transaction in 2015.

Total accounts receivable as of December 31, 2015 increased 35% to RMB55.2 million (US$8.5 million) from RMB40.9 million as of December 31, 2014. This resulted from the completion of several projects in the fourth quarter 2015, and it is expected that customers will make payments over the next few months.

Inventory and work in processes as of December 31, 2015 increased 13% to RMB16.5 million (US$2.5 million) from RMB14.6 million as of December 31, 2014. The increase was primarily attributable to a number of on-going large projects which had not reached the point of revenue recognition.

For the full year ended December 31, 2015, net cash provided by operating activities was RMB24.7 million (US$3.8 million). Net cash used in investing activities was RMB6.7 million (US$1.0 million). Net cash provided by financing activities was RMB23.4 (US$3.6 million).

FIRST QUARTER 2016 GUIDANCE

eFuture expects total revenue for the first quarter 2016 to range between RMB19 million (US$2.9 million) to RMB24million (US$3.7million), and adjusted EBITDA for the first quarter 2016 is expected to range between negative RMB9 million (US$1.4million) to negative RMB5 million (US$ 0.8 million).

TAX INSPECTION

The Beijing tax authority has not made a decision regarding the issue of underpayment of taxes as disclosed in the 2015 third quarter earnings release.

CURRENCY CONVENIENCE TRANSLATION

For the convenience of readers, certain RMB amounts have been translated into US dollars at the rate of RMB6.4778 to US$1.00, the noon buying rate for US dollars in effect on December 31, 2015 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 HOLDING INC.

eFuture Holding Inc. (NASDAQ:EFUT) is a leading software and solution provider and a mobile business enabler to China's rapidly growing retail and consumer goods industries. eFuture's clients include over 1,000 active retailers with more than 50,000 physical stores across China, of which approximately 45% were ranked among the top 100 chain retailers during 2014. 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 4, 2016, 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 –

EFUTURE HOLDING INC. AND SUBSIDIARIES Exchange rate 6.4778
CONDENSED CONSOLIDATED BALANCE SHEETS
Chinese Yuan (Renminbi) U.S. Dollars
December 31,December 31,December 31,
2014 2015 2015
(Audited)(Unaudited)(Unaudited)
ASSETS
Current assets
Cash and cash equivalents 64,558,916 106,654,067 16,464,551
Trade receivables,net of allowance for doubtful accounts of ¥4,502,766 and ¥9,967,342($1,538,692), respectively 40,889,759 55,237,392 8,527,184
Refundable value added tax 6,765,916 2,179,123 336,399
Advances to employees 1,117,272 697,006 107,599
Other receivables 2,474,076 2,072,858 319,994
Prepaid expenses 1,554,052 1,275,727 196,938
Inventory and work in process,net of inventory provision of ¥4,356,091 and ¥4,026,525($621,588), respectively 14,560,195 16,512,881 2,549,150
Deferred tax assets, current portion 7,046,782 7,637,587 1,179,040
Total current assets 138,966,968 192,266,641 29,680,855
Non-current assets
Long-term investments,net of impairment of ¥240,000 and ¥240,000($37,050), respectively - - -
Property and equipment, net of accumulated depreciation of ¥9,515,986 and ¥10,513,072($1,622,939), respectively 3,279,483 3,473,877 536,274
Intangible assets, net of accumulated amortization of ¥80,190,029 and ¥88,612,659($13,679,437), respectively 40,294,260 36,521,835 5,638,000
Goodwill 80,625,667 80,625,667 12,446,458
Deferred tax assets 919,637 998,139 154,086
Total non-current assets 125,119,047 121,619,518 18,774,818
Total assets 264,086,015 313,886,159 48,455,673
LIABILITIES AND EQUITY
Current liabilities
Short-term loans 10,692,003 7,307,997 1,128,160
Trade payables 12,509,613 16,518,543 2,550,024
Other payables 17,978,021 36,988,223 5,709,998
Accrued expenses 24,685,555 24,860,304 3,837,770
Taxes payable 16,128,358 21,791,642 3,364,050
Advances from customers 51,661,078 43,935,067 6,782,406
Total current liabilities 133,654,628 151,401,776 23,372,408
Equity
Ordinary shares $0.0756 U.S. dollars par value; 6,613,756 shares, authorized;3,989,626 shares and 5,218,615 shares issued and outstanding, respectively 2,357,978 2,934,894 453,070
Additional paid-in capital 234,405,541 262,553,351 40,531,253
Statutory reserves 8,574,634 8,574,634 1,323,695
Accumulated deficits (114,906,766) (111,578,496) (17,224,752)
Total equity 130,431,387 162,484,383 25,083,266
Total liabilities and equity 264,086,015 313,886,159 48,455,674

EFUTURE HOLDING INC. AND SUBSIDIARIES Exchange rate 6.4778
CONDENSED CONSOLIDATED INCOME STATEMENTS
Year ended Three months ended
Chinese Yuan (Renminbi) U.S. Dollars Chinese Yuan (Renminbi) U.S. Dollars
December 31,December 31,December 31, December 31,December 31,December 31,
2014 2015 2015 Y-o-Y Change 2014 2015 2015 Y-o-Y Change
(Audited)(Unaudited)(Unaudited)% (Unaudited)(Unaudited)(Unaudited)%
Revenues
Software revenue 83,693,264 73,392,666 11,329,875 -12% 54,929,148 41,648,880 6,429,479 -24%
Hardware revenue 5,948,379 8,129,266 1,254,942 37% 3,507,942 1,897,697 292,954 -46%
Service fee revenue 129,812,064 140,042,841 21,618,889 8% 73,111,448 85,463,047 13,193,221 17%
Total revenues 219,453,707 221,564,773 34,203,706 1% 131,548,538 129,009,624 19,915,654 -2%
Cost of revenues
Cost of software revenue 19,599,743 19,174,966 2,960,105 -2% 12,130,816 12,030,260 1,857,152 -1%
Cost of hardware revenue 6,032,868 6,827,063 1,053,917 13% 3,728,198 1,501,176 231,742 -60%
Cost of service fee revenue 96,712,746 95,028,741 14,669,910 -2% 57,012,162 58,341,132 9,006,319 2%
Amortization of software costs 3,765,833 8,422,630 1,300,230 124% 954,637 2,877,842 444,262 201%
Total cost of revenues 126,111,190 129,453,400 19,984,162 3% 73,825,813 74,750,410 11,539,475 1%
Gross profit 93,342,517 92,111,373 14,219,544 -1% 57,722,725 54,259,214 8,376,179 -6%
Operating expenses
Research and development expenses 8,017,819 8,684,459 1,340,649 8% 5,987,184 4,003,153 617,980 -33%
General and administrative expenses 27,369,028 37,458,620 5,782,614 37% 10,294,982 14,387,456 2,221,040 40%
Selling and distribution expenses 47,339,529 38,185,022 5,894,752 -19% 17,617,431 13,283,146 2,050,564 -25%
Total operating expenses 82,726,376 84,328,101 13,018,016 2% 33,899,597 31,673,755 4,889,585 -7%
Income from operations 10,616,141 7,783,272 1,201,528 23,823,128 22,585,459 3,486,594
Other income (expenses)
Interest income 564,750 296,389 45,755 83,490 59,338 9,160
Interest expenses (164,171) (822,860) (127,028) (139,146) (114,102) (17,614)
Other income 587,836 503,677 77,754 23,355 201,523 31,110
Foreign currency exchange gain (loss) 7,649 746,505 115,241 (11,366) 615,762 95,057
Income before income tax 11,612,205 8,506,983 1,313,252 23,779,461 23,347,980 3,604,307
Less: Income tax expense 4,225,049 5,178,713 799,456 5,052,970 4,808,589 742,318
Net Income 7,387,156 3,328,270 513,796 18,726,491 18,539,391 2,861,989
Income per share
Basic 1.77 0.69 0.11 4.35 3.60 0.56
Diluted 1.71 0.69 0.11 4.35 3.60 0.56
Basic weighted average shares outstanding 4,173,014 4,842,727 4,842,727 4,309,234 5,156,553 5,156,553
Fully diluted weighted average shares outstanding 4,308,516 4,888,023 4,888,023 4,309,234 5,303,463 5,303,463

EFUTURE HOLDING INC. AND SUBSIDIARIES Exchange rate 6.4778
NON-GAAP MEASURES OF PERFORMANCE
Year endedThree months ended
Chinese Yuan (Renminbi) U.S. Dollars Chinese Yuan (Renminbi) U.S. Dollars
December 31,December 31,December 31, December 31,December 31,December 31,
2014 2015 2015 2014 2015 2015
(Audited)(Unaudited)(Unaudited) (Unaudited)(Unaudited)(Unaudited)
NON-GAAP OPERATING INCOME AND ADJUSTED EBITDA
Operating Income(GAAP basis) 10,616,141 7,783,272 1,201,528 23,823,128 22,585,459 3,486,594
Adjustments for non-GAAP measures of performance:
Add back amortization of intangibles 3,765,833 8,422,630 1,300,230 954,637 2,877,842 444,262
Add back share-based compensation expenses 3,298,602 1,951,097 301,197 2,397,094 683,603 105,530
Adjusted non-GAAP operating income 17,680,576 18,156,999 2,802,955 27,174,859 26,146,904 4,036,386
Add back depreciation 1,804,164 1,812,863 279,858 421,035 951,665 146,912
Adjusted EBITDA (Earnings before interest, taxes, depreciation and amortization) 19,484,740 19,969,862 3,082,813 27,595,894 27,098,569 4,183,298
NON-GAAP OPERATING INCOME AND ADJUSTED EBITDA, as a percentage of revenue
Operating income (GAAP BASIS) 5% 4% 4% 18% 18% 18%
Adjustments for non-GAAP measures of performance:
Amortization of intangibles 2% 4% 4% 1% 2% 2%
Share-based compensation expenses 2% 1% 1% 2% 1% 1%
Adjusted non-GAAP operating income 8% 8% 8% 21% 20% 20%
Depreciation 1% 1% 1% 0% 1% 1%
Adjusted EBITDA (Earnings before interest, taxes, depreciation and amortization) 9% 9% 9% 21% 21% 21%
NON-GAAP EARNINGS PER SHARE
Net income 7,387,156 3,328,270 513,796 18,726,491 18,539,391 2,861,989
Amortization of intangibles 3,765,833 8,422,630 1,300,230 954,637 2,877,842 444,262
Share-based compensation expenses 3,298,602 1,951,097 301,197 2,397,094 683,603 105,530
Adjusted net income 14,451,591 13,701,997 2,115,223 22,078,222 22,100,836 3,411,781
Adjusted non-GAAP diluted earning per share 3.35 2.80 0.43 5.12 4.17 0.66
Shares used to compute non-GAAP diluted income per share 4,308,516 4,888,023 4,888,023 4,309,234 5,303,463 5,156,553

EFUTURE HOLDING INC. AND SUBSIDIARIES Exchange rate 6.4778
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Year endedThree months ended
Chinese Yuan (Renminbi) U.S. Dollars Chinese Yuan (Renminbi) U.S. Dollars
December 31,December 31,December 31, December 31,December 31,December 31,
2014 2015 2015 2014 2015 2015
(Audited)(Unaudited)(Unaudited) (Unaudited)(Unaudited)(Unaudited)
Cash flows from operating activities:
Net income 7,387,156 3,328,270 513,796 18,726,491 18,539,391 2,861,989
Adjustments to reconcile net income to net cash flows used in operating activities:
Depreciation of property and equipment 1,804,164 1,812,863 279,858 421,035 465,172 71,810
Amortization of intangible assets 3,765,833 8,422,630 1,300,230 954,637 2,877,842 444,262
Loss on disposal of property and equipment 26,165 13,180 2,035 2,230 5,056 781
Allowance for doubtful accounts 1,962,403 6,107,799 942,882 727,892 3,071,991 474,234
Provision for loss in inventory and work in process 8,302,435 (329,566) (50,876) 4,980,051 2,063,723 318,584
Compensation expenses 3,298,602 1,951,097 301,197 2,397,094 314,021 48,476
Deferred income taxes 509,041 (669,307) (103,323) 1,336,962 (639,431) (98,711)
Foreign exchange loss (7,649) (746,505) (115,241) (13,925) (615,762) (95,057)
Other noncash expense - - (891,945) (3,042,653) (469,705)
Changes in assets and liabilities:
Trade receivables (16,765,678) (21,110,432) (3,258,889) (15,883,442) (23,475,419) (3,623,980)
Refundable value added tax (4,718,654) 4,586,793 708,079 (2,134,888) 999,680 154,324
Advances to employees 331,470 420,266 64,878 421,059 299,369 46,215
Advances to suppliers - - - 30,667 - -
Other receivables (29,794) 1,056,218 163,052 (140,799) 447,205 69,037
Prepaid expenses (316,705) 278,325 42,966 97,526 303,144 46,797
Inventory and work in process (2,962,248) (1,623,120) (250,568) 21,428,131 25,665,002 3,961,994
Trade payables 510,352 4,008,930 618,872 4,598,371 4,683,038 722,936
Other payables (403,860) 19,010,202 2,934,669 (863,024) 23,391,690 3,611,055
Accrued expenses 2,448,355 174,749 26,977 16,837,389 17,010,405 2,625,954
Taxes payable 683,881 5,720,055 883,024 10,857,594 12,822,610 1,979,470
Advances from customers (2,409,613) (7,726,011) (1,192,692) (43,464,582) (34,490,702) (5,324,447)
Net cash provided by operating activities 3,415,656 24,686,436 3,810,926 20,424,524 50,695,372 7,826,018
Cash flows from investing activities:
Purchases of property and equipment (1,789,314) (2,131,596) (329,062) (244,654) (31,699) (4,893)
Payments for intangible assets (10,458,286) (4,650,204) (717,869) 955,818 2,788,555 430,479
Cash received from disposal of property and equipment 14,751 54,388 8,396 11,451 54,594 8,428
Net cash provided by(used in) investing activities (12,232,849) (6,727,412) (1,038,534) 722,615 2,811,450 434,014
Cash flows from financing activities:
Proceeds from short-term loans 10,692,003 (3,384,006) (522,401) 7,692,003 (2,692,003) (415,574)
Proceeds from exercise of options by employees 55,805 7,023,416 1,084,229 - 6,844,536 1,056,614
Issurance of ordinary shares - 19,750,212 3,048,907 - - -
Net cash provided by financing activities 10,747,808 23,389,622 3,610,735 7,692,003 4,152,533 641,040
Effect of exchange rate changes on cash and cash equivalents 7,649 746,505 115,241 13,925 615,762 95,057
Net increase in cash and cash equivalents 1,938,264 42,095,151 6,498,368 28,853,067 58,275,117 8,996,128
Cash and cash equivalents at beginning of period 62,620,652 64,558,916 9,966,179 35,705,849 48,378,950 7,468,423
Cash and cash equivalents at end of period 64,558,916 106,654,067 16,464,551 64,558,916 106,654,067 16,464,551
Supplemental cash flow information
Interest paid 164,171 810,609 125,136 139,146 120,601 18,618
Income tax paid 3,736,424 3,042,230 469,639 - - -


INVESTOR CONTACT: Troe Wen, Company Secretary eFuture Holding Inc. +86 10 50916128 ir@e-future.com.cn

Source:eFuture Holding Inc.