EX-99.1 2 ex99-1.htm Unassociated Document
Exhibit 99.1
 

Pansoft Announces Second Fiscal Quarter 2010 Financial Results

JINAN, China, February 9, 2010, 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 financial results for the second fiscal quarter ended December 31, 2009.
 
Highlights for the Second Quarter 2010

l  
Total revenues were $4.9 million, an increase of 47% compared to $3.3 million for the quarter ended December 31, 2008
l  
Gross profit was $2.6 million, an increase of 56% compared to $1.7 million for the quarter ended December 31, 2008
l  
Gross margin was 53%, compared to 50% in the for the quarter ended December 31, 2008
l  
Operating profit was $2.1 million, an increase of 93% compared to $1.1 million for the quarter ended December 31, 2008
l  
Net income was $1.9 million, an increase of 94% compared to $1.0 million for the quarter ended December 31, 2008
l  
Diluted earnings per share was $0.36, an increase of 64% compared to $0.22 for the quarter ended December 31, 2008
l  
Adjusted net income excluding share-based compensation expenses was $2.01 million, an increase of 80% compared to $1.16 million for the quarter ended December 31, 2008.
l  
Adjusted Diluted EPS excluding share-based compensation expenses was $0.42, an increase of 68% compared to $0.25 for the quarter ended December 31, 2008
 
On December 11, 2009, Pansoft’s Board of Directors authorized a change in the Company's fiscal year end to June 30 from December 31 because the new fiscal year end is more consistent with the purchasing cycle of its major customers.  As a result of this change, the quarter ended December 31, 2009 represents the second quarter of the fiscal year ending June 30, 2010.

To assist shareholders with understanding the change in fiscal year, the company is presenting pro-forma financial information for the twelve month period ended December 31, 2009.

Highlights for Twelve Month Period ended December 31, 2009

l  
Total revenues were $10.0 million, an increase of 46% compared to $6.9 million for the twelve month ended December 31, 2008, exceeding the company’s previous guidance of a 40% increase.
l  
Gross profit was $5.0 million, an increase of 43% compared to $3.5 million for the twelve month ended December 31, 2008
l  
Gross margin was 50%, compared to 51% for the twelve month ended December 31, 2008
l  
Operating profit was $3.1 million, an increase of 22% compared to $2.6 million for the twelve month ended December 31, 2008
l  
Net income was $3.0 million, an increase of 31% compared to $2.3 million for the twelve month ended December 31, 2008
l  
Adjusted net income excluding share-based compensation expenses was $3.65 million, an increase of 46%, compared to $2.5 million for the twelve month ended December 31, 2008
l  
Diluted earnings per share was $0.55, an increase of 10% compared to $0.50 for the twelve month ended December 31, 2008
l  
Adjusted Diluted EPS excluding share-based compensation expenses was $0.67, an increase of 24% compared to $0.54 for the twelve months period ended December 31, 2008

“Once again we delivered solid quarter and calendar year results driven by our focus on execution,” said Guoqiang Lin, Pansoft’s CEO.  “We continued to see large orders from our long term customers and their subsidiaries. Our centralized accounting system has been implemented at our two largest clients, PetroChina and Sinopec, and is also in the process of being integrated with other ERP systems within their operations, which should provide continued demand for our services.  In addition, we have taken a number of initiatives to penetrate into new markets and win new clients and have achieved preliminary success, although yet to significantly  impact our total revenue.  We believe that our strategy to expand our business operations and diversify our customer base will position Pansoft well to achieve our long-term growth and profitability objectives.”
 
“We enjoyed healthy top and bottom line growth in the second quarter of fiscal year 2010 and over the last twelve months. Adjusted EPS increased by 24% year-over-year driven by our exceptional financial and operational performance” added Allen Zhang, Pansoft’s Chief Financial Officer. “Looking ahead, increasing investments in engineering capabilities, sales and marketing efforts, and system development efficiencies will continue to be key drivers for Pansoft.”
 
1
 
 
 
Financial Results Highlights for the Three Months Ended December 31, 2009
 
Total revenue for the three months ended December 31, 2009 was $4.9 million, a 47% increase from $3.3 million in the three months ended December 31, 2008.  The increase in revenue was due to the increased number and value of contracts for development and integration services.

Cost of sales was $2.3 million, an increase of 38% from $1.7 million in the three months ended December 31, 2008. Cost of sales increased at a slower pace than revenue as a result of cost control measures designed to contain expenses.

Gross profit in the quarter was $2.6 million, an increase of 56% from $1.7 million in three months ended December 31, 2008. Gross margin was 53%, compared to 50% in three months ended December 31, 2008.

Operating expenses were $0.5 million, a decrease of 13% from $0.6 million in the three months ended December 31, 2008.

Operating profit was $2.1 million, an increase of 93% from $1.1 million in the three months ended December 31, 2008. Operating margin was 42% compared to 32% in three months ended December 31, 2008.

Net income was $1.9 million, an increase of 94% from $1.0 million in the corresponding period in 2008. The significant increase in our operating and net profit were due to a substantial increase in revenues from our major contracts and reduction of operating expenses. Diluted earnings per share was $0.36, an increase of 64% from $0.22 in the corresponding period in 2008. Adjusted Diluted EPS excluding share-based compensation expenses was $0.42, an increase of 68% compared to $0.25 for three months ended December 31, 2009.
 
Financial Results Highlights for the Twelve Months ended December 31, 2008
 
Pansoft has changed its fiscal year end to June 30.  A transition report on Form 20-F will be filed for the six month transition period ended June 30, 2009. The results for the six month period ended December 31, 2009 will be included in the annual report on Form 20-F for the fiscal year ending June 30, 2010.  To further assist shareholders in understanding the transition to the new fiscal year, pro-forma operating results for the twelve months ended December 31, 2009 are provided below.
 
Total revenue for the twelve months ended December 31, 2009 was $10.0 million, an increase of 46% from $6.9 million in the twelve months ended December 31, 2008. The increase in revenue was mainly due to increase in number of contracts as well as size of contracts signed with our major long term clients.  This is consistent with Pansoft’s strategy to become an important part of the clients’ IT platform and solicit their IT expansion projects.
 
Cost of sales was $5.1 million, an increase of 49% from $3.4 million in the twelve months ended in 2008.  Cost of sales increased at a faster rate than revenue growth due to a significant increase in the number of employees as a part of our corporate expansion strategy and technical team enhancement.
 
Gross profit was $5.0 million, an increase of 43% from $3.5 million in the twelve months ended in 2008. Gross margin was 50%, compared to 51% for the twelve months ended December 31, 2008
 
Operating expenses were $1.9 million, an increase of 100% from $0.9 million in twelve months ended in 2008. Operating expenses consist primarily of general and administrative expenses, selling expenses, professional fees and stock option expenses. The increase in operating expenses in 2009 was mainly due to the increase in stock based compensation and public listing expenses,  which accounted for 34% and 20% of total operating expenses, respectively.
 
Operating profit was $3.1 million, an increase of 22% from $2.6 million in twelve months ended December 31, 2008. Operating margin was 31%, compared to 37% in twelve months ended December 31, 2008.
 
Net income was $3.0 million, an increase of 31% from $2.3 million in the corresponding period in 2008. Adjusted net income, excluding stock-based compensation totaled $3.7 million, an increase of 46% compared to $2.5 million in the twelve months ended December 31, 2008. Diluted earnings per share was $0.55, an increase of 10% from $0.50 in the corresponding period in 2008. Adjusted diluted EPS excluding share-based compensation expenses was $0.67, an increase of 24% from $0.54 for the twelve months ended December 31, 2008.
 
As of December 31, 2009, Pansoft’s cash and cash equivalents is $14.7 million, an increase of 21% compared to $12.2 million in December 31, 2008. The increase in cash and cash equivalents was primarily a result of increased collection of accounts receivable in the last calendar quarter of 2009. Cash flow from operating activities in 2009 was $2.8 million, an increase of 80% compared to $1,5 million from twelve months ended December 31, 2008.
 
2
 
 
 
Business Outlook

Despite the worldwide financial crisis and economic recession in 2009, Pansoft has delivered strong performance, including a 46% increase in revenue in the twelve months ended December 31, 2009, exceeding its previous guidance of 40% revenue growth. In addition, Pansoft’s net profit increased by 31% and adjusted net income increased by 46%.

The Company expects its customization, integration services and solutions will continue to win major contracts from large customers. Going forward the Company intends to expand its business by reorganizing its technical service and development force by establishing four new business departments with the objective to penetrate into new markets and industries. Pansoft’s management believes that demand for its services will continue to grow as the Company leverages its advanced technology and application development expertise within the system integration services domain. Pansoft expects to achieve 40% organic growth in revenue year-over-year for the fiscal year ending in June 30, 2010.

“In addition, the Company has RMB 100 million, or approximately $14.7 million, in cash or cash equivalent on its balance sheet.  This cash reserve allows the Company to focus aggressively on potential acquisition targets as part of its strategy to expand into additional industries.” Said Hugh Wang, Chairman of Board.
 
Adjusted Financial Measures
 
This release contains adjusted financial measures. These adjusted financial measures, which are used as measures of the Company’s performance, should be considered in addition to, not as a substitute for, measures of the Company’s financial performance prepared in accordance with United States Generally Accepted Accounting Principles (“GAAP”). The Company’s adjusted financial measures may be defined differently than similar terms used by other companies. Accordingly, care should be exercised in understanding how the Company defines its adjusted financial measures.
 
Reconciliations of the Company’s adjusted measures to the nearest GAAP measures are set forth in the section below titled “Reconciliation of adjusted to GAAP Results.” These adjusted measures include adjusted gross profit, adjusted operating expenses, adjusted income from operations, non-GAAP net income, adjusted diluted net income per share and adjusted gross margin.
 
The Company’s management uses adjusted financial measures to gain an understanding of the Company’s comparative operating performance (when comparing such results with previous periods or forecasts) and future prospects. The Company’s adjusted financial measures exclude certain special items, including stock-based compensation charge from its internal financial statements for purposes of its internal budgets. adjusted financial measures are used by the Company’s management in their financial and operating decision-making, because management believes they reflect the Company’s ongoing business in a manner that allows meaningful period-to-period comparisons. The Company’s management believes that these adjusted financial measures provide useful information to investors and others in the following ways: 1) in understanding and evaluating the Company’s current operating performance and future prospects in the same manner as management does, if they so choose, and 2) in comparing in a consistent manner the Company’s current financial results with the Company’s past financial results.
 
The Company’s management believes excluding stock-based compensation from its adjusted financial measures is useful for itself and investors, as such expense will not result in future cash payment and is not an indicator used by management to measure the Company’s core operating results and business outlook.
 
The adjusted financial measures have limitations. They do not include all items of income and expense that affect the Company’s operations. Specifically, these adjusted financial measures are not prepared in accordance with GAAP, may not be comparable to adjusted financial measures used by other companies and, with respect to the adjusted financial measures that exclude certain items under GAAP, do not reflect any benefit that such items may confer to the Company. Management compensates for these limitations by also considering the Company’s financial results as determined in accordance with GAAP.
 
 3
 
 
 
Conference Call Information

The Company will host a conference call at 8:30 a.m. ET on February 9, 2010 (9:30 p.m. Beijing Time) to review the Company's financial results and answer questions.

To participate in the conference call, please dial the following number five to ten minutes prior to the scheduled conference call time: 877-369-6556. International callers should dial +1 706- 758-6238. The conference ID for the call is 54471389.

If you are unable to participate in the call at this time, a replay will be available for 14 days starting on Tuesday, February 9, 2010 at 10:00 a.m. ET. To access the replay, dial 800-642-1687. International callers should dial +1 706-645-9291 and enter the conference ID 54471389.

A live and archived webcast of the call will be available on the Company's website at http://www.pansoft.com/
 
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.
 
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.
Contact:
 
Pansoft Company Limited
Allen Zhang, Chief Financial Officer
Phone: 531-8887-1159
Email: allen.zhang@pansoft.com
 
CCG Investor Relations Inc
Mr. Crocker Coulson, President
Phone: 646-213-1915 (New York)
Email: crocker.coulson@ccgir.com
www.ccgirasia.com
 
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 Unaudited Consolidated Statements of Income and Comprehensive Income
 (In US Dollars)
 
   
(Unaudited)
    
(Unaudited)
        
In USD
  
For Three Months Ended December 31,
    
For Six Months Ended December 31,
    
For 12 Months Ended  December 31,
  
   
2009
    
2008
    
2009
    
2008
    
2009
    
2008
  
                           
(Unaudited)
    
(Audited)
  
Sales
     4,910,177       3,343,408       7,115,646       5,514,446       10,055,552       6,891,710  
Cost of sales
     2,308,226       1,670,275       3,336,573       2,365,278       5,051,491       3,395,695  
Gross profit
     2,601,951       1,673,133       3,779,073       3,149,168       5,004,061       3,496,015  
Gross Margin
     53 %     50 %     53 %     57 %     50 %     51 %
Expenses
                                                
G/M expenses
     119,431       355,625       236,399       486,452       485,641       566,716  
Selling expenses
     160,297       21,010       254,917       29,516       376,711       36,047  
Professional fees
     87,656       51,423       217,437       78,535       387,824       140,072  
Stock based compensation
     151,127       164,197       302,254       203,012       644,228       203,012  
Gain on disposition of  property & equipment
     (955 )     (30 )     (964 )     (184 )     (1,696 )     (1,558 )
Total Expenses
     517,556       592,225       1,010,043       797,331       1,892,708       944,289  
                                                 
Income from operations
     2,084,395       1,080,908       2,769,030       2,351,837       3,111,353       2,551,726  
                                                 
Other income (expenses) net,
     17,950       13,995       17,035       13,995       13,263       14,532  
Government grant
     30       -       47        -       161,028       -  
Finance cost
     (1,952 )     (3,326 )     (1,930 )     (3,781 )     (1,952 )     (4,199 )
Interest income
     48,502       56,262       86,562       83,817       150,150       126,294  
Income before provision from income taxes
     2,148,925       1,147,839       2,870,744       2,445,868       3,433,842       2,688,353  
Provision for current income taxes
     74,759       197,563       74,759       197,563       87,541       197,563  
Provision for deferred income taxes
     139,356       (45,526 )     173,120       190,633       340,216       190,633  
                                                 
Net income
     1,934,810       995,802       2,622,865       2,057,672       3,006,085       2,300,157  
Other comprehensive (loss) income
     (720 )     (24,358 )     9,749       34,493       (7,968 )      328,521  
Comprehensive income
     1,934,090       971,444       2,632,614       2,092,165       2,998,117       2,628,678  
 

5
 
 
 

Consolidated Balance Sheet
(In US Dollars)

       
December 31, 2009
      
December 31, 2008
  
       
(Unaudited)
      
(Audited)
  
Assets
                
 
Current assets
                
 
Cash and cash equivalents
     $ 14,708,248        $ 12,185,950  
 
Account receivables, net
       1,747,376         1,136,159  
 
Unbilled revenues
       3,393,563         2,221,142  
 
Prepayment, deposits and other receivables
       107,040         107,785  
 
Inventory
       117,967         68,348  
 
Income tax receivable
                    
                       
Total current assets
       20,074,194         15,719,384  
Non-current assets
                    
 
Property and equipment, net
       689,462         650,708  
 
Deferred software development cost
       -         73,287  
Total assets
     $ 20,763,656         16,443,379  
                       
Liabilities
                    
Current liabilities
                    
 
Accounts payable and accrued liabiliites
     $ 648,957         905,748  
 
Deferred revenue
       891,297         181,192  
 
Income tax payable
       76,794         192,470  
 
Deferred income taxes
 　     531,330   　     172,505  
                       
Total current liabitilies
       2,148,378         1,451,915  
Long term liabilities
                    
 
Deferred income taxes
 　     -         18,531  
                       
Total liabilities
       2,148,378         1,470,446  
                       
Shareholders' 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 September 30, 2009)
                    
 
Share capital
       32,080         32,080  
 
Additional paid-in capital
       8,866,282         8,222,054  
 
Retained earnings
       8,270,822         5,711,114  
 
Statutory reserves
                 363,063  
 
Accumulated other comprehensive income
       636,654         644,622  
Total stockholders's equity
       18,615,278         14,972,933  
                       
Total liabilities and stockholders equity
     $ 20,763,656         16,443,379  

 
6
 
 
 
RECONCILIATION OF ADJUSTED FINANCIALS TO GAAP RESULTS
(In US Dollars)
 
     
For 12 Months Ended December 31
  
     
Actual Results
Adjustment
Adjusted Results
Adjustment
Adjusted Results
     
2009
  
2009
  
2008
               
Sales
    
10,055,552
  
10,055,552
  
6,891,710
Cost of sales
  
5,051,491
  
5,051,491
  
3,395,695
               
Gross profit
  
5,004,061
  
5,004,061
  
3,496,015
     
50%
  
50%
  
51%
Expenses
            
 
General and administrative expenses
  
485,641
  
485,641
  
566,716
 
Selling expenses
  
376,711
  
376,711
  
36,047
 
Professional fees
  
387,824
  
387,824
  
140,072
 
Stock based compensation
  
644,228
(644228) (a)
  
(203,012)  (a)
  
 
Gain on disposition of property and equipment
  
(1,696)
  
(1,696)
  
(1,558)
     
1,892,708
  
1,248,480
  
741,277
               
 
Income from operations
  
3,111,353
  
3,755,581
  
2,754,738
               
 
Other income (expenses), net
  
13,263
  
13,263
  
14,532
 
Government grant
  
161,028
  
161,028
    
 
Finance cost
  
(1,952)
  
(1,952)
  
(4,199)
 
Interest income
  
150,150
  
150,150
  
126,294
               
 
Income before provision from income taxes
  
3,433,842
  
4,078,070
  
2,891,365
               
 
Provision for current income taxes
  
87,541
  
87,541
  
197,563
 
Provision for deferred income taxes
  
340,216
  
340,216
  
190,633
               
 
Net income
  
3,006,085
  
3,650,313
  
2,503,169
               
 
Other comprehensive (loss) income
  
(7,968)
  
(7,968)
  
328,521
               
 
Comprehensive income
  
2,998,117
  
3,642,345
  
2,831,690
               
               
 
Basic and diluted net income per share
  
0.55
  
0.67
  
0.54
               
               
 
Basic and diluted weighted average number of shares outstanding shares outstanding
  
5,438,232
  
5,438,232
  
4,613,027
(a)  
To adjust stock-based compensation charges

 
7
 
 
 


                       For the Three Months Ended      
   
Actual
Adjustment
Adjusted
Adjustment
    
   
Results
  
Results
      
   
2009
  
2009
  
2008
  
               
Sales
4,910,177
  
4,910,177
  
3,343,408
  
 Cost of sales
2,308,226
  
2,308,226
  
1,670,275
  
   
-
  
-
      
 Gross profit
2,601,951
  
2,601,951
  
1,673,133
  
   
53%
  
53%
  
50%
  
Expenses
-
  
-
      
　
 General and administrative expenses
119,431
  
119,431
  
355,625
  
　
 Selling expenses
160,297
  
160,297
  
21,010
  
　
 Professional fees
87,656
  
87,656
  
51,423
  
　
 Stock based compensation
151,127
(151,127) (b)
-
        (164,197) (b)
　
　
 Gain on disposition of property and equipment
(955)
  
(955)
  
(30)
  
   
517,556
  
366,429
  
428,028
  
   
-
  
-
  
　
  
　
 Income from operations
2,084,395
  
2,235,522
  
1,245,105
  
   
-
  
-
  
　
  
　
 Other income (expenses), net
17,950
  
17,950
  
13,995
  
　
 Government grant
30
  
30
  
                    -
  
　
 Finance cost
(1,952)
  
(1,952)
  
(3,326)
  
　
 Interest income
48,502
  
48,502
  
56,262
  
　
　
-
  
-
  
　
  
　
 Income before provision from income taxes
2,148,925
  
2,300,052
  
1,312,036
  
　
　
-
  
-
  
　
  
　
 Provision for current income taxes
74,759
  
74,759
  
197,563
  
　
 Provision for deferred income taxes
139,356
  
139,356
  
(45,526)
  
　
　
-
  
-
  
　
  
　
 Net income
1,934,810
  
2,085,937
  
1,159,999
  
　
　
-
  
-
  
　
  
　
 Other comprehensive (loss) income
(720)
  
(720)
  
(24,358)
  
　
　
-
  
-
  
　
  
　
 Comprehensive income
1,934,090
  
2,085,217
  
1,135,641
  
　
　
-
  
-
  
　
  
　
　
-
  
-
  
　
  
　
 Basic and diluted net income per share
0.36
  
0.42
  
0.25
  
 
　
-
  
-
  
　
  
　
 
Basic and diluted weighted average number of shares outstanding shares outstanding
5,438,232
  
5,438,232
  
4,613,027
  
(b)  
To adjust stock-based compensation charges
 
8