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Pansoft Announces Fiscal 2011 Full-Year Financial Results(Marketwire Via Acquire Media NewsEdge) JINAN, CHINA -- (MARKET WIRE) -- 12/30/11 -- Pansoft Company Limited (NASDAQ: PSOF) ("Pansoft" or the "Company"), a leading ERP software service provider for the oil and gas industry in China, today announced unaudited financial results for the fiscal 2011 business year ended June 30, 2011. Highlights for Fiscal 2011: Revenues were $19.2 million, an increase of 59.0% versus the prior fiscal year Gross profit was $6.4 million, an increase of 10.0% versus the prior fiscal year Operating profit was $1.4 million, compared to $3.6 million in the prior fiscal year Net income attributable to Pansoft shareholders was $1.4 million, compared to $3.2 million in the prior fiscal year Net income per diluted share attributable to Pansoft shareholders was $0.25, compared to $0.59 in the prior fiscal year Comprehensiveincome attributable to Pansoft common shareholders was $2.2 million, compared to $3.3 million in the prior fiscal year Completed the acquisition of Hefei Langji Technology Co., Ltd., a leading HR solution provider to China's coal-mining industry, and its wholly-owned sales and marketing arm Shanghai Zhongrui for a total of approximately $1.7 million on October 19, 2011 "We are mostly satisfied with our business results for fiscal 2011. We basically achieved our revenue growth target of 60%. The ITLamp acquisition offers us direct access to the Tarim oilfield and enhances Pansoft's presence and sales there. Our stake in HongAo offers us access to its solid base of thermal-power clients and the turnkey solutions it provides. The delay in reaching breakeven at Pansoft-Japan offset an otherwise solid year, and our strategy remains on track. Moreover, the acquisition of Langji technology increases our exposure to China's coal-mining industry," said Hugh Wang, Pansoft's Chairman of the Board. "Still, net income was lower than expected, primarily due to larger-than-expected losses at Pansoft-Japan and a slower pace of revenue recognition at HongAo, which has a large proportion of revenues from completed projects subject to inspection and acceptance from clients. Non-cash charges, which primarily resulted from the accounting treatment of recent acquisitions, also significantly hurt our GAAP bottom-line results. Looking ahead, we are confident about improving our profitability, as our new ventures start to make a positive contribution to Pansoft's profitability." Financial Results Highlights for the Fiscal-2011 Business Year Revenues for the fiscal year ended June 30, 2011 were $19.2 million, compared to $12.1 million in the prior fiscal year, an increase of 59.0%, of which, approximately 72.2% was contributed by Pansoft-China and 27.8% by newly acquired businesses. Cost of sales was $12.8 million, an increase of 104.4% from $6.3 million in the prior fiscal year. Cost of sales increased faster than revenues, largely due to: 1) higher headcount and therefore, higher compensation expense; 2) start-up losses at Pansoft-Japan, the outsourcing joint venture for testing mobile-phone software; and 3) a higher proportion of lower-margin hardware purchases for clients at the HongAo subsidiary. Gross profit was $6.4 million, an increase of 10.0% from $5.8 million from the prior fiscal year. Gross margin was 33.3%, as compared to 48.1% in the prior fiscal year. The decline in the gross margin was mainly due to the abovementioned reasons. Operating expenses were $5.0 million, an increase of 129.2% from $2.2 million in the fiscal year ended June 30, 2010. The increase in operating expense was mainly due to: 1) higher general and administrative expense related to maintaining three additional subsidiary offices and their management teams; 2) amortization of intangible assets from the HongAo and ITLamp acquisitions; and 3) higher sales and marketing expense, particularly at HongAo and Pansoft-Japan. Operating profit was $1.4 million, compared to $3.6 million in the prior fiscal year. Net income attributable to Pansoft shareholders for the fiscal 2011 business year was $1.4 million, compared to $3.2 million in the prior fiscal year and was lower mainly due to start-up losses at Pansoft-Japan and higher amortization charges related to recent acquisitions. Comprehensive net income attributable to Pansoft shareholders was $2.2 million, compared to $3.3 million in the prior fiscal year. Net income per diluted share attributable to Pansoft shareholders for the 2011 fiscal year was $0.25, as compared to $0.59 in fiscal 2010. Segment Performance The Company is organized as three segments: (1) design, development, implementation and servicing of ERP systems for the energy industry such as oil/gas and coal mining; (2) provision of technology solutions and related services to thermal power industry; and (3) outsourced mobile phone software testing and development. Pansoft-China and ITLamp represent the core business of the Company and are engaged in the design, development, implementation and servicing of ERP systems for the energy industry such as oil/gas and coal mining, which contributed 81.2% of total revenue for the fiscal 2011 business year and experienced strong growth. In fiscal 2011, revenues increased 29.1% to $15.6 million, up from $12.1 million in fiscal 2010. Cost of revenues increased 47.6% to $9.2 million, primarily due to increases in headcount and new business operations under ITLamp.. Gross profit was $6.3 million, compared to $5.8 million in the year-ago period. Operating expenses increased slightly to $2.5 million, as compared to $2.2 million in the year ago period. Net Income was $3.3 million, an increase of 3.1% from $3.1 million in fiscal 2010. ITLamp, which was acquired in June 2010, operates as an oilfield software development and service provider, primarily serving the Tarim Oilfield in Xinjiang province. In the fiscal 2011 business year, ITLamp recorded revenues of $1.7 million and net income of $0.3 million.HongAo, in which Pansoft acquired a 55.01% stake in October 2010, serves the thermal power industry as a technical service provider in Shandong province. Net revenues were $2.4 million (12.7% of total fiscal 2011 revenue) and the net loss was $0.3 million, due to a slower pace of its revenue recognition for ongoing projects.Pansoft-Japan was established in August 2010 to provide outsourcing functions for Japanese clients, initially in the field of cell-phone software testing. The new testing operation was set up in Jinan, China with a front office in Osaka, Japan. Osaka is more than 600 km from the nuclear power plant damaged by the recent earthquake and was unaffected by this disaster. Team members, including trainees dispatched from China, are safe and are conducting business as usual. Although there was no direct impact from the disasters on Pansoft-Japan's business, business activity was indirectly disrupted from the fiscal third quarter. During the fiscal 2011 business year, Pansoft-Japan incurred start-up losses beyond budget expectations. Net revenues were $1.2 million (6.1% of total fiscal 2011 revenues) and the net loss was $2.1 million. The venture is now expected to break even in the 2012 calendar year. Pansoft Segment Income Statement USD Fiscal Year Ended June 30, 2011 ---------------------------------------------------- Pansoft-China Pansoft- + ITLamp HongAo Japan Total ------------- ---------- ------------ ------------ Revenues $ 15,563,549 $2,441,494 $ 1,160,326 $ 19,165,369 Cost of revenues 9,231,004 1,530,502 2,016,110 12,777,616 ------------- ---------- ------------ ------------ Gross profit 6,332,545 910,992 (855,784) 6,387,753 ------------- ---------- ------------ ------------ Net Income 3,543,088 (481,786) (2,189,021) 870,021 Note: Total net income includes a loss from Pansoft-BVI in amount of $2,260. Financial Condition As of June 30, Pansoft had $3.7 million in cash and equivalents, as compared to $2.7 million as of June 30, 2010, the increase mainly due to positive cash flow from operations. Cash and cash equivalents exclude $6.8 million in short-term investments, versus $7.4 million as of June 30, 2010. Total current assets were $23.9 million, as of June 30, 2011, versus $18.8 million as of June 30, 2010, owing to a $2.3 million increase in receivables, a $1.3 million increase in prepayments, deposits and prepaid expenses, a $0.9 million increase in inventory primarily for hardware equipment at HongAo, as well as higher cash and equivalents and higher unbilled revenues, offset by lower short-term investments. Current liabilities were $6.8 million as of June 30, 2011, up from $3.8 million as of June 30, 2010, owing to a $0.5 million acquisition payable for the fair value of restricted shares to be issued and cash consideration to be paid to the sellers of ITLamp, $0.7 million in unearned government research revenue, in addition to $1.6 million in higher accounts payable and accrued liabilities and $1.8 million in higher deferred revenues, primarily as a result of the slower pace of revenue recognition for the undergoing projects at HongAo. Total stockholders' equity was $23.5 million as of June 30, 2011 versus $19.6 million as of June 30, 2010. Recent Development On September 19, 2011, Pansoft announced signed an agreement to acquire all of the equity interests of Hefei Langji Technology Co., Ltd ("Langji") and its wholly-owned subsidiary, Shanghai Zhongrui ("Zhongrui"), on September 9, 2011, for a total purchase price of RMB 10.8 million (approximately $1.69 million). Founded in 2003, Langji is the leading HR solution provider to China's coal-mining industry and is based in Hefei in Anhui province. The company's major customers for its sophisticated human-resource management solutions are large, state-owned coal mining groups. Langji has more than 40 employees and in 2010 had total audited revenue and net income of $1 million and $0.26 million, respectively. Zhongrui, Langji's Shanghai-based sales and marketing arm, will remain a subsidiary of Langji and will focus on small and medium-sized companies in other industries. The acquisition was completed on October 19, 2011. Stock Repurchase Program On October 29, 2010, Pansoft announced that its Board of Directors had authorized the company to repurchase up to $1 million worth of the Company's common shares. The Board extended the stock repurchase program on March 1, 2011. As of December 15, 2011, the Company had repurchased a total of 178,900 shares, of which, 56,100 shares were acquired after June 30, 2011. Business Outlook In the fiscal 2012 business year, Pansoft expects to continue to experience sustainable organic growth from its existing customer base, mainly PetroChina and Sinopec and their subsidiaries, which accounted for 66% of revenues during fiscal 2011. In the intermediate term, Pansoft plans to expand its focus to include the more than 600 oil and gas subsidiaries of PetroChina, its subsidiary CNPC, and Sinopec, which are large-scale businesses that operate oilfields, refineries, oil and gas pipelines and finished oil sales. These subsidiaries, which still account for less than 5% of Pansoft's total sales, represent a large market opportunity for the Company to expand its client base, leveraging its branding and experience in developing software systems which are already operating at most of these subsidiaries. Pansoft is also making an aggressive entry into the coal industry. As Chinese coal companies are restructuring into large coal groups, ERP software applicable to large-sized enterprises will increasingly be required. In addition, information management in the coal industry largely lags behind other industries and there are no dominant software leaders in the coal industry. These factors together create more opportunities for Pansoft to increase its market reach in the coal-mining industry. "Beyond the integration of acquisitions, Pansoft's near-term strategy centers on expanding our addressable market by targeting the many subsidiaries of the Chinese oil and gas companies as well as adjacent sectors such as coal mining. To that end, Pansoft expects to transition from a project-based model to a solution-based model, which can significantly lower on-site development cost and accelerate market expansion. The Company also plans to provide solutions that integrate operational and production management to strengthen its competitive advantages. With a richer and more customized portfolio to balance our revenue structure, we look forward to solid revenue growth in fiscal 2012," commented Mr. Wang. For the fiscal year ending June 30, 2012, Pansoft expects revenues will keep a similar pace of growth as in recent fiscal years, representing approximately 40-60% annual growth. "We now expect Pansoft-Japan to break even in calendar 2012 due to lower visibility of market conditions. We remain optimistic that this segment's competitive advantage as a low-cost provider remains intact and we remain confident that, once this business passes the startup phase, it will achieve success," concluded Mr. Wang. Conference Call Information The Company will host a conference call at 8:00 a.m. Eastern Standard Time on Friday, December 30, 2011 to discuss its financial results for fiscal 2011 ended June 30, 2011. To participate in the conference call, please dial the following number five to ten minutes prior to the scheduled conference call time: (866) 394-2209. International callers should dial +1 (706) 758-1481. The conference ID for the call is 39756865. If you are unable to participate in the call at this time, a replay will be available for 14 days starting on Friday, December 30, 2011 at 9:00 a.m. Eastern Standard Time. To access the replay, dial (855) 859-2056. International callers should dial +1 (404) 537-3406 and enter the conference ID 39756865. About Pansoft Company LimitedPansoft is a leading enterprise resource planning ("ERP") software and professional services provider for the oil and gas industry in China. Its ERP software offers comprehensive solutions in various business operations including accounting, order processing, delivery, invoicing, inventory control, and customer relationship management. For more information visit http://www.pansoft.com. Forward-Looking StatementsThis press release contains forward-looking statements concerning Pansoft Company Limited, including but are not limited to, statements regarding Pansoft's acquisition strategies, projected revenue growth, contracts with customers, timing of development projects, and efforts to achieve business growth. The actual results may differ materially depending on a number of risk factors including but not limited to, the following: general economic and business conditions, development, shipment and market acceptance of products, additional competition from existing and new competitors, purchase cycle of major customers, changes in technology or product techniques, and various other factors beyond its control. All forward-looking statements are expressly qualified in their entirety by this Cautionary Statement and the risk factors detailed in the Company's reports filed with the Securities and Exchange Commission. Pansoft Company Limited undertakes no duty to revise or update any forward-looking statements to reflect events or circumstances after the date of this release. - Financial Tables Follow - Pansoft Company Limited Consolidated Statements of Operations and Comprehensive Income For the three-month and nine-month periods ended June 30, 2011 and 2010 (in U.S. Dollars) For the years ended June 30, 2011 2010 -------------- -------------- Revenues $ 19,165,369 $ 12,056,872 Cost of revenues 12,777,616 6,252,280 -------------- -------------- Gross profit 6,387,753 5,804,592 -------------- -------------- Operating expenses (income) Selling expenses 1,105,160 367,776 General and administrative expenses 3,249,849 910,698 Professional fees 366,456 459,728 Stock based compensation 270,592 441,232 -------------- -------------- 4,992,057 2,179,434 -------------- -------------- Income from operations 1,395,696 3,625,158 Investment income 279,233 208,824 Interest income 21,234 40,184 Finance cost (80,383) (19,915) - Change in fair value on contingent liabilities (232,310) - Government grant 164,713 18,895 Other income (expense), net 226,245 65,134 Impairment loss on intangible assets (428,028) - Gain on disposition of property and equipment (368) 1,242 -------------- -------------- Income before provision for income taxes 1,346,032 3,939,522 Income taxes 476,011 694,597 -------------- -------------- Net income $ 870,021 $ 3,244,925 Less: Net loss attributable to non- controlling interests (550,365) - -------------- -------------- Net income attributable to holders of ordinary shares 1,420,386 3,244,925 ============== ============== Net income $ 870,021 $ 3,244,925 Foreign currency translation adjustments 850,559 97,297 -------------- -------------- Comprehensive income 1,720,580 3,342,222 Comprehensive loss attributable to non- controlling interests 502,888 - -------------- -------------- Comprehensive income attributable to holders of ordinary shares $ 2,223,468 $ 3,342,222 ============== ============== Basic earnings per share attributable to Pansoft shareholders $ 0.26 $ 0.60 ============== ============== Diluted earnings per share attributable to Pansoft shareholders $ 0.25 $ 0.59 ============== ============== Basic weighted average number of shares outstanding 5,389,323 5,438,232 ============== ============== Diluted weighted average number of shares outstanding 5,572,695 5,484,986 ============== ============== Pansoft Company Limited Consolidated Balance Sheets (in U.S. Dollars) As of June 30, ------------------------------- 2011 2010 -------------- -------------- Assets Current assets Cash and cash equivalents $ 3,680,716 $ 2,705,957 Accounts receivable, net of allowance for doubtful accounts $175,481 (2010: $91,684) 3,678,463 1,391,960 Unbilled revenues 7,025,926 6,887,471 Prepayments, deposits and other receivables 1,713,575 386,420 Inventory 1,010,582 61,984 Short term investments - available-for-sale assets 6,829,841 7,399,608 -------------- -------------- Total current assets 23,939,103 18,833,400 -------------- -------------- Property and equipment, net 2,312,590 760,258 Deposit for acquisition - 1,340,029 Investments in equity method affiliates 28,418 - Intangible assets 2,706,197 1,729,553 Prepayment, deposits and other receivables 154,526 -------------- -------------- Goodwill 1,373,708 719,617 -------------- -------------- Total assets $ 30,514,542 $ 23,382,857 ============== ============== Liabilities Current liabilities Accounts payable and accrued liabilities $ 2,982,200 $ 1,347,421 Acquisition payable 525,709 1,419,519 Deferred revenue 2,048,858 244,110 Income tax payable 31,667 325,079 Deferred income taxes 570,712 486,925 Unearned government research revenue 683,286 - -------------- -------------- Total current liabilities 6,842,432 3,823,054 -------------- -------------- Non-current liabilities Deferred income taxes 181,610 - -------------- -------------- Total liabilities 7,024,042 -------------- -------------- Stockholders' equity Common stock (30,000,000 common shares authorized, par value of $0.0059 per share, 5,438,232 shares issued and outstanding as of June 30, 2011 and 2010) 32,080 32,080 Additional paid-in capital 9,281,752 9,011,160 Treasury stock, at cost, 121,200 shares and nil, as of June 30, 2011 and 2010, respectively (503,602) - Retained earnings 9,782,875 8,895,307 Statutory reserves 1,429,858 897,040 Accumulated other comprehensive income 1,527,298 724,216 -------------- -------------- Total Pansoft's stockholders' equity 21,550,261 19,559,803 Non-controlling interests 1,940,239 - -------------- -------------- Total equity 23,490,500 19,559,803 -------------- -------------- Total liabilities and stockholders' equity $ 30,514,542 $ 23,382,857 ============== ============== Pansoft Company Limited Consolidated Statements of Cash Flows (in U.S. dollars) For the years ended June 30, ------------------------------- 2011 2010 -------------- -------------- Cash flows from operating activities Net income $ 870,021 $ 3,244,925 Adjustments to reconcile net income to net cash provided by operating activities: Amortization and depreciation 1,348,700 289,273 Allowance for bad debt on accounts receivable 77,485 (19,756) Allowance of impairment loss on unbilled revenue 11,889 - Deferred income taxes (176,187) 193,053 Change in fair value change of contingent considerations 232,310 - Gain on disposition of property and equipment 357 (1,242) Issuance of warrants in exchange for consultancy service - 5,900 Impairment loss on intangible assets 428,028 - Stock-based compensation 270,592 441,232 Changes in operating assets and liabilities: Accounts receivable (1,246,097) (545,386) Unbilled revenues 188,362 (3,558,347) Prepayments, deposits and other receivables (1,067,119) (196,546) Inventory (428,155) 84,398 Accounts payable accrued liabilities 1,665,608 1,163,159 Advance from customers - (58,589) Deferred revenues 2,305,244 164,137 Income tax payable (280,184) 289,454 -------------- -------------- Cash generated from operating activities 4,200,854 1,495,665 Cash flows from investing activities Short term investments - available-for- sale assets 913,758 (7,360,238) Cash acquired from acquisition of IT Lamp (Note 4) - 704,688 Cash consideration for acquisition of IT Lamp (Note 4) (1,202,645) (1,913,371) Cash acquired from acquisition of HongAo (Note 4) 9,725 - Cash consideration for acquisition of HongAo (Note 4) (1,082,756) - Purchase of property and equipment (1,147,615) (234,470) Proceeds from disposition of property and equipment 1,542 4,074 Deposit for acquisition - (1,332,899) -------------- -------------- Cash used in investing activities (2,507,991) (10,132,216 Cash flows from financing activities Repurchase of common stock (503,602) - -------------- -------------- Cash used in financing activities (503,602) - -------------- -------------- Effect of exchange rate changes on cash and cash equivalents (214,502) 11,517 Increase (decrease) in cash and cash equivalents 974,759 (8,625,034) Cash and cash equivalents, beginning of year 2,705,957 11,330,991 -------------- -------------- Cash and cash equivalents, end of year $ 3,680,716 $ 2,705,957 ============== ============== Company Contact: Pansoft Company Limited Allen Zhang Chief Financial Officer Phone: +86-531-8887-4455 E-mail: [email protected] Investor Contact: CCG Investor Relations Mr. John Harmon, CFA Sr. Account Manager Phone: +86-10-6561-6886 Ext. 807 (Beijing) E-mail: [email protected] www.ccgirasia.com Source: Pansoft Company Limited |