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BEIJING, eFuture Information Technology Inc. (Nasdaq: EFUT; "eFuture"), a leading provider of front-end supply chain management software and services in China, today announced its unaudited financial results for the first quarter ended March 31, 2008.

Financial Results Highlights for the First Quarter of 2008 -- Total revenue for the first quarter of 2008 was RMB14.0 million (US$2.0 million), an increase of 92.8% from the first quarter of 2007. -- Software revenue for the first quarter of 2008 was RMB7.6 million (US$1.1 million), an increase of 33.5% from the first quarter of 2007. -- Service fee income for the first quarter of 2008 was RMB5.0 million (US$0.7 million), an increase of 241.6% from the first quarter of 2007. -- Gross profit for the first quarter of 2008 was RMB4.7 million (US$0.7 million), an increase of 31.8% from the first quarter of 2007. Excluding amortization of acquired technology, gross profit for the first quarter of 2008 would have been RMB8.6 million (US$1.2 million), an increase of 130.9% from the first quarter of 2007. -- Gross margin for the first quarter of 2008 decreased to 33.6% from 49.2% in the first quarter of 2007. Excluding amortization of acquired technology, gross margin for the first quarter of 2008 would have been 61.2%, compared to 51.1% in the first quarter of 2007. -- Net loss for the first quarter of 2008 was RMB9.2 million (US$1.3 million), an increase of 658.2% over the first quarter of 2007.

"We are pleased to report strong top-line growth in a traditionally weak first fiscal quarter that includes the long Chinese New Year holiday and this year was marked by severe snow storms across large parts of China. With a strong start to 2008, we are optimistic about our prospects and our earnings per share for the full year," said Mr. Adam Yan, eFuture's chairman and chief executive officer. "In addition, a larger base of installed clients contributed to strong organic growth. Service revenue was up 241.6%, the strongest growth of any quarter in ten years, with software revenue growth remaining solid. Moreover, we have strengthened our position and significantly broadened our opportunity in the fast-growing retail market in China with the successful integration of our Guangzhou Royalstone acquisition. Looking forward to the remainder of 2008, we expect that our B2B services, including http://www.bfuture.com.cn and http://www.jindian.com.cn, will begin to contribute to our revenue and drive value for retailers and their suppliers."

First Quarter of 2008 Operational Highlights -- Sales contracts in the first quarter of 2008 increased 102.5% to RMB18.0 million (US$2.6 million) from RMB8.8 in the first quarter of 2007. -- Service sales contracts in first quarter of 2008 increased 662.8% to RMB8.6 million (US$1.2 million) from RMB1.13 million in the first quarter of 2007. -- Total new orders increased 350% to 117 orders from 26 in the first quarter of 2007.

"During the first quarter, we placed particular emphasis on integrating our acquisitions completed in 2007 into a single platform," Mr. Yan continued. "We worked to smoothly incorporate culture, strengthen back-office resource integration and improve processes to streamline internal operations and reduce software deployment costs. This organic growth strategy has translated into a 12% increase in gross margins, excluding amortization of acquired technology."

As part of its effort to streamline its operations to promote organic growth, the company organized its software business according to six vertical strategy business areas: small and medium business, key accounts, department stores and shopping malls, grocery and supermarkets, specialty stores and fast-moving consumer goods.

Financial Results for the First Quarter of 2008

Revenue

eFuture reported total revenue of RMB14.0 million (US$2.0 million) for the first quarter of 2008, a 92.8% increase from RMB7.3 million in the first quarter of 2007.

Software sales in the first quarter of 2008 increased 33.5% to RMB7.6 million (US$1.1 million) from RMB5.7 million in the first quarter of 2007. Software sales contributed 54.0% to total revenue in the first quarter of 2008, compared to 78.0% in the first quarter of 2007.

Hardware sales in the first quarter of 2008 increased 1020% to RMB1.4 million (US$0.2 million) from RMB0.1 million in the first quarter of 2007. Hardware sales contributed 10.1% to total revenue in the first quarter of 2008, compared to 1.7% in the first quarter of 2007.

Service fee income in the first quarter of 2008 increased 241.6% to RMB5.0 million (US$0.7 million) from RMB1.5 million in the first quarter of 2007. Service fee income contributed 36.0% to total revenue in the first quarter of 2008, compared to 20.3% in the first quarter of 2007. The increase was largely due to eFuture's policy to provide free maintenance for its products in the first year of operation, after which the company begins to charge maintenance and support fees.

Gross Margins

Gross profit for the first quarter of 2008 was RMB4.7 million (US$0.7 million), a 31.8% increase from RMB3.6 million in the first quarter of 2007. Excluding amortization of acquired technology, gross profit for the first quarter of 2008 would have been RMB8.6 million (US$1.2 million), an increase of 130.8% from the first quarter of 2007.

Consolidated gross margin for the first quarter of 2008 was 33.6%, compared to 49.2% in the first quarter of 2007 and 43.5% in the fourth quarter of 2007. The decrease in gross margin was largely due to the amortization of acquired technology of RMB3.8 million (US$0.55 million), which represented 27.5% of total revenue in the first quarter of 2008, compared to 1.9% in the first quarter of 2007. Excluding amortization of acquired technology, gross margin for the first quarter of 2008 would have been 61.2%, compared to 51.1% in the first quarter of 2007.

Operating Expenses

Research and development expenses in the first quarter increased 37.2 percent year over year to RMB0.2 million (US$24 thousand). The increase in research and development was mainly due to the acquisition of Royalstone last year, which led to the integration of two research and development teams.

General and administrative expenses in the first quarter increased 169.7 percent year over year to RMB7.9 million (US$1.1 million). The increase in general and administrative expenses was mainly due to RMB2.3 million (US$0.3 million) of bad debt expenses caused by significantly increased accounts receivable. We had US$2 million of accounts receivable in the first quarter, an 84.9% increase from the same period of 2007.General and administrative expenses for the first quarter of 2008 were 56.2 percent of total revenues, compared to 40.1 percent in the first quarter of 2007 and 20.8 percent in the fourth quarter of 2007.

Selling and distribution expenses in the first quarter increased 73.0 percent year over year to RMB3.8 million (US$536 thousand). The increase in selling and distribution expenses was partially due to a significant increase in our sales contracts. Selling and distribution expenses for the first quarter of 2008 were 26.8 percent of total revenues, compared to 29.9 percent in the first quarter of 2007 and 8.2 percent in the fourth quarter of 2007.

Total share-based compensation expenses in the first quarter of 2008 were RMB0.8 million (US$0.1 million).

Operating loss in the first quarter of 2008 was RMB7.1 million (US$1.0 million), a 332.5% increase from RMB1.6 million in the first quarter of 2007. Operating margin was -50.5% in the first quarter of 2008, compared to -22.5% in the first quarter 2007 and 14.1% in the fourth quarter of 2007.

Net Income

Net loss for the first quarter of 2008 was RMB9.2 million (US$1.3 million), compared to net losses of RMB1.2 million in the first quarter of 2007 and net loss RMB24.6 million in the fourth quarter of 2007. Net margins were -65.8% in the first quarter of 2008 compared to -16.74% in the first quarter of 2007 and -50.6% in the fourth quarter of 2007. The increase in net loss and decrease in net margin was due to a number of factors including amortization of acquired technology from the acquisitions completed in 2007 of RMB3.8 million (US$0.6 million), bad debt expenses of RMB2.4 million (US$0.3 million) as a result of a large increase in accounts receivable at the end of the quarter.

Basic and diluted losses per share for the first quarter of 2008 were RMB3.14 (US$0.45) and RMB3.14 (US$0.45), respectively.

EBITDA

EBITDA (non-GAAP) for the first quarter of 2008 was RMB-1.39 million (US$- 0.2 million), a decrease of 101.1% from the first quarter of 2007. First quarter of 2008 adjusted net loss (non-GAAP) was RMB3.2 million (US$0.5 million), an increase of 732% from the first quarter of 2007.

Adjusted non-GAAP diluted losses per share for the first quarter of 2008 was RMB1.09 (US$0.16).

Cash Flow and Capital Expenditures

As of March 31, 2008, the company had RMB59.3 million (US$8.5 million) in cash and cash equivalents and short-term investments. Net cash generated from operating activities and capital expenditures in the first quarter of 2008 were RMB-8.2 million (US$-1.2 million) and RMB2.2 million (US$0.3 million), respectively.

As of March 31, 2008 the company had 627 employees compared to 588 employees as of December 31, 2007.

Business Outlook for 2008

The company has raised its full-year 2008 total revenue guidance to be in the range of approximately US$19 to US$20 million, representing annual growth of 65 to 74% over 2007. This forecast is a current and preliminary view and is subject to change.

Conference Call Information

eFuture's management will hold an earnings conference call at 8:30 p.m. on June 23, 2008 U.S. Eastern Time (8:30 a.m. on June 24, 2008 Beijing/Hong Kong Time).

Dial-in details for the earnings conference call are as follows: U.S. and International: +1-888-710-9688 Mainland China: +86-10-5851-1260 Hong Kong: +852-8306-5032

Please dial in 10 minutes before the call is scheduled to begin and request to be connected to the "eFuture earnings call."

Additionally, an archived webcast of the conference call will be available on the company's website at http://www.e-future.com.cn .

About eFuture Information Technology Inc.

eFuture is a leading provider of front-end supply chain management software and services in China. eFuture provides integrated software and service solutions to manufacturers, distributors, wholesalers, logistics companies and retailers in China's front-end supply chain market, especially in the retail and Fast Moving Consumer Goods industries. eFuture currently serves more than 1,000 clients, including Fortune 500 companies, over 770 retailers and over 200 distributors operating in China. eFuture is also one of IBM's premier business partners in Asia Pacific and is a strategic partner with Oracle, Microsoft, JDA, Motorola and Samsung Network China. The company has over 650 employees and 20 branch offices across China.

For more information about eFuture, please visit http://www.e- future.com.cn/.

Source: tradingmarkets