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
- Comprehensive income
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 Limited Pansoft 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 Statements This 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:
allen.zhang@pansoft.com Investor Contact: CCG Investor
Relations Mr. John Harmon, CFA Sr. Account Manager Phone:
+86-10-6561-6886 Ext. 807 (Beijing) E-mail: john.harmon@ccgir.com
www.ccgirasia.com
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