Hollysys Automation Technologies Reports Unaudited Financial Results for the Fiscal year and the Fourth Quarter Ended June 30, 2018
Fiscal Year 2018 Financial Highlights
-- Non-GAAP net income attributable to Hollysys was $108.9 million, an
increase of 55.4% compared to the comparable prior year period.
-- Total revenues were $540.8 million, an increase of 25.2% compared to the
comparable prior year period.
-- Non-GAAP gross margin was at 38.2%, compared to 32.7% for the comparable
prior year period.
-- Non-GAAP diluted EPS were at $1.78, an increase of 53.4% compared to the
comparable prior year period.
-- Net cash provided by operating activities was $122.2 million for the
current year.
-- DSO of 174 days, compared to 201 days for the comparable prior year
period.
-- Inventory turnover days of 58 days, compared to 51 days for the
comparable prior year period.
Fourth Quarter of Fiscal Year 2018 Financial Highlights
-- Non-GAAP net income attributable to Hollysys was $28.6 million, an
increase of 26.5% compared to the comparable prior year period.
-- Total revenues were $147.2 million, an increase of 6.7% compared to the
comparable prior year period.
-- Non-GAAP gross margin was at 39.6%, compared to 39.1% for the comparable
prior year period.
-- Non-GAAP diluted EPS were at $0.46, an increase of 24.3% compared to the
comparable prior year period.
-- Net cash provided by operating activities was $45.1 million for the
current quarter.
-- DSO of 166 days, compared to 153 days for the comparable prior year
period.
-- Inventory turnover days of 59 days, compared to 50 days for the
comparable prior year period.
BEIJING, Aug. 14, 2018 /PRNewswire/ -- Hollysys Automation Technologies Ltd. (NASDAQ: HOLI) ("Hollysys" or the "Company"), a leading provider of automation and control technologies and applications in China, today announced its unaudited financial results for fiscal year 2018 and the fourth quarter ended June 30, 2018 (see attached tables). The management of Hollysys, stated:
Industrial automation recorded a 46.2% YOY growth in quarterly revenue, at $64.0 million. Annual revenue and new contract recorded a 30.2% and 16.0% YOY growth respectively. Management continued to execute the low-to-high end market expansion strategy for Process Automation business. Contract growth in chemical and petrochemical remained healthy. Major contracts include a DCS+SIS+ITCC+AMS solution for Shandong Haiyou Chemical's 1 million tons delayed coking equipment project, and a DCS solution for Suzhou Sinye Materials Technology Co., Ltd covering its furan, cold-core, and sulfonic curing agent project. We signed several additional contracts for the milestone Zhong'an United Coal Chemical Project, where we applied our comprehensive solution to many new equipment for the first time. On power, despite the slowdown of the coal fire industry, growth in thermal power and new energy remained healthy. We continued to maintain our market share in high end coal fire market, while actively expanding market for multiple product lines. Major contracts signed include a DCS solution for Shenhua Wucaiwan 2X660MW power station and a DEH solution for Datang Pingluo 2X660MW turbine unit. We continued to address service and upgrading demand from the entire customer base. Our data-based value-added solution, including energy saving, control optimization and information security, etc. have received growing acceptance from customers of several industries. With our widespread national service network, we are capable of communicating with and delivering to our customers from various industries regular and value-added customized services and products they need.
Rail business recorded a 37.6% YOY decline in quarterly revenue at $40.4 million, while quarterly new contract decline YOY by 16.8%, at $58.1 million. Annually, new contracts increase YOY by 24.2%, while revenue increase YOY by 22.4%. Breakthrough was made as we signed a C2 track circuit contract for Guiyang Southwest line. New contracts were also signed on subway SCADA for Beijing Subway Line 17 and Line 19. As for the ATP product line, CRC started the bidding of C3 ATP in early June, but contract has not been signed yet. We continued to strengthen our marketing capacity through reviewing and updating strategic partnership and improving local service network coverage, and signed several maintenance contracts covering both on-board and on-ground equipment. Management team will adhere to the diversity strategy to create revenue stream from more new products and services, and to maintain a stable and healthy growth into the future.
In oversea business, we continued to seek opportunities in Process Automation business through EPC projects and direct sales. Contracts were signed on DCS, DEH, BATCH, etc. solution with customers from India and Southeast Asia. The M&E business, performed by Concord and Bond, recorded a 45.1% YOY growth in quarterly revenue, at $42.9 million, and a 150.9% quarterly new contract growth, at $40.0 million. Annual M&E revenue and new contracts recorded 21.0% and 134.5% YOY growth respectively. Effort on improving management and risk control in this fiscal year has taken effect and will be ongoing. The economic and political circumstances in South East Asia and Middle East will continue to be closely followed.
Fiscal year and The Fourth Quarter Ended June 30, 2018 Unaudited Financial Results Summary
To facilitate a clear understanding of Hollysys' operational results, a summary of unaudited non-GAAP financial results is shown as below:
(In USD thousands, except for number of shares and per share data)
-----------------------------------------------------------------
Three months ended Fiscal year ended
------------------ -----------------
Jun 30, Jun 30, % Jun 30, Jun 30, %
2018 2017 Change 2018 2017 Change
---- ---- ------ ---- ---- ------
Revenues $147,239 137,961 6.7% $540,768 431,943 25.2%
Integrated contract revenue $131,616 124,733 5.5% $466,461 385,500 21.0%
Products sales $11,149 8,549 30.4% $40,233 32,665 23.2%
Service rendered $4,474 4,679 (4.4)% $34,074 13,778 147.3%
Cost of revenues $88,890 84,065 5.7% $334,288 290,891 14.9%
Gross profit $58,349 53,896 8.3% $206,480 141,052 46.4%
Total operating expenses $25,459 33,894 (24.9)% $84,429 79,737 5.9%
Selling $6,515 6,593 (1.2)% $27,158 24,412 11.2%
General and administrative $14,365 14,586 (1.5)% $45,116 43,833 2.9%
Goodwill impairment charge $ - 11,211 (100.0)% $ - 11,211 (100.0)%
Research and development $8,630 8,026 7.5% $36,605 30,109 21.6%
VAT refunds and government subsidies $(4,051) (6,522) (37.9)% $(24,450) (29,828) (18.0)%
Income from operations $32,890 20,002 64.4% $122,051 61,315 99.1%
Other income (expenses), net $1,212 (20) 6160.0% $4,274 1,811 136.0%
Foreign exchange gain (loss) $882 (267) 430.3% $(1,099) (135) 714.1%
Share of net (loss) income of equity $(4,038) (1,063) (279.9)% $(1,571) 3,607 (143.6)%
investees
Gains on disposal of a subsidiary $ - 628 (100.0)% - 628 (100.0)%
Gains on deconsolidation of the Company's $ - 8,085 (100.0)% $ - 14,514 (100.0)%
interests in Beijing Hollycon Electronic
Technology Co., Ltd
Dividend income from a cost investee $ - (450) (100.0)% $1,093 - 100%
Interest income $2,275 1,256 81.1% $7,318 3,687 98.5%
Interest expenses $116 (144) (180.6)% $(692) (938) 26.2%
Income tax expenses $4,621 5,383 (14.2)% $22,205 14,386 54.4%
Net income attributable to non-controlling $115 42 173.8% $276 25 1004.0%
interests
Non-GAAP net income attributable to $28,601 22,602 26.5% $108,893 70,078 55.4%
Hollysys Automation Technologies Ltd.
Non-GAAP basic EPS $0.47 0.37 27.0% $1.80 1.16 55.2%
Non-GAAP diluted EPS $0.46 0.37 24.3% $1.78 1.16 53.4%
Share-based compensation expenses $625 534 17.0% $1,207 464 160.1%
Amortization of acquired intangible assets $321 318 0.9% $600 581 3.3%
(Gain) loss on convertible bond related fair $(75) 89 (184.3)% $(75) 89 (184.3)%
value adjustments
GAAP Net income attributable to Hollysys $27,730 21,661 28.0% $107,161 68,944 55.4%
Automation Technologies Ltd.
GAAP basic EPS $0.46 0.36 27.8% $1.77 1.15 53.9%
GAAP diluted EPS $0.45 0.36 25.0% $1.75 1.14 53.5%
Basic weighted average common shares 60,442,504 60,420,004 0.0% 60,434,019 60,189,004 0.4%
outstanding
Diluted weighted average common shares 61,277,059 61,268,999 0.0% 61,248,565 61,011,510 0.4%
outstanding
Operational Results Analysis for the Fiscal year Ended June 30, 2018
Comparing to the prior fiscal year, the total revenues for fiscal year 2018 increased from $431.9 million to $540.8 million, representing an increase of 25.2%. Broken down by the revenue types, integrated contracts revenue increased by 21.0% to $466.5 million, products sales revenue increased by 23.2% to $40.2 million, and services revenue increased by 147.3% to $34.1 million.
The Company's total revenues can also be presented in segments as shown in the following chart:
(In USD thousands)
Fiscal year ended Jun 30,
-------------------------
2018 2017
---- ----
$ % to Total Revenue $ % to Total Revenue
--- ------------------ --- ------------------
Industrial Automation 224,793 41.5% 172,667 39.9%
Rail Transportation Automation 190,645 35.3% 155,732 36.1%
Mechanical and Electrical Solution 125,330 23.2% 103,544 24.0%
Total 540,768 100.0% 431,943 100.0%
------- ----- ------- -----
Overall gross margin excluding non-cash amortization of acquired intangibles (non-GAAP gross margin) was 38.2% for fiscal year 2018, as compared to 32.7% for the prior year. The non-GAAP gross margin for integrated contracts, product sales, and services rendered were 32.8%, 73.2% and 71.0% for fiscal year 2018, as compared to 28.2%, 69.5% and 70.8% for the prior year respectively. The gross margin fluctuation was mainly due to the different revenue mix with different margin. The GAAP overall gross margin which includes non-cash amortization of acquired intangibles was 38.1% for fiscal year 2018, as compared to 32.5% for the prior year. The GAAP gross margin for integrated contracts, product sales, and service rendered were 32.6%, 73.2% and 71.0% for fiscal year 2018, as compared to 28.0%, 69.5% and 70.8% for the prior year respectively.
Selling expenses were $27.2 million for fiscal year 2018, representing an increase of $2.8 million or 11.2% compared to $24.4 million for the prior year. Presented as a percentage of total revenues, selling expenses were 5.0% and 5.7% for fiscal year 2018 and 2017, respectively.
General and administrative expenses, excluding non-cash share-based compensation expenses (non-GAAP G&A expenses), were $45.1 million for fiscal year 2018, representing an increase of $1.3 million or 2.9% compared to $43.8 million for the prior year. Presented as a percentage of total revenues, non-GAAP G&A expenses were 8.3% and 10.1% for fiscal year 2018 and 2017 respectively. The GAAP G&A expenses which include the non-cash share-based compensation expenses were $46.3 million and $44.3 million for fiscal year 2018 and 2017, respectively.
Research and development expenses were $36.6 million for fiscal year 2018, representing an increase of $6.5 million or 21.6% compared to $30.1 million for the prior year, mainly due to increased research and development activities. Presented as a percentage of total revenues, R&D expenses were 6.8% and 7.0% for fiscal year 2018 and 2017, respectively.
The VAT refunds and government subsidies were $24.5 million for fiscal year 2018, as compared to $29.8 million for the prior year, representing a $5.3 million or 18.0% decrease, which was primarily due to decrease of the government subsidies.
The income tax expenses and the effective tax rate were $22.2 million and 17.1% for fiscal year 2018, as compared to $14.4 million and 17.3% for comparable prior year period.
The non-GAAP net income attributable to Hollysys, which excludes the non-cash share-based compensation expenses calculated based on the grant-date fair value of shares or options granted, amortization of acquired intangible assets, and fair value adjustments of a bifurcated derivative, was $108.9 million or $1.78 per diluted share based on 61.2 million diluted weighted average common shares outstanding for fiscal year 2018. This represents a 55.4% increase over the $70.1 million or $1.16 per share based on 61.0 million diluted weighted average common shares outstanding reported in the comparable prior year. On a GAAP basis, net income attributable to Hollysys was $107.2 million or $1.75 per diluted share representing an increase of 55.4% over the $68.9 million or $1.14 per diluted share reported in the comparable prior year.
Operational Results Analysis for the Fourth Quarter Ended June 30, 2018
Comparing to the fourth quarter of the prior fiscal year, the total revenues for the three months ended June 30, 2018 increased from $138.0 million to $147.2 million, representing an increase of 6.7%. Broken down by the revenue types, integrated contracts revenue increased by 5.5% to $131.6 million, products sales revenue increased by 30.4% to $11.1 million, and services revenue decreased by 4.4% to $4.5 million.
The Company's total revenues can also be presented in segments as shown in the following chart:
(In USD thousands)
Three months ended Jun 30,
--------------------------
2018 2017
---- ----
$ % to Total Revenue $ % to Total Revenue
--- ------------------ --- ------------------
Industrial Automation 64,013 43.5% 43,783 31.7%
Rail Transportation Automation 40,368 27.4% 64,647 46.9%
Mechanical and Electrical Solution 42,858 29.1% 29,531 21.4%
Total 147,239 100.0% 137,961 100.0%
------- ----- ------- -----
Overall gross margin excluding non-cash amortization of acquired intangibles (non-GAAP gross margin) was 39.6% for the three months ended June 30, 2018, as compared to 39.1% for the same period of the prior year. The non-GAAP gross margin for integrated contracts, product sales, and services rendered were 35.7%, 72.4% and 73.2% for the three months ended June 30, 2018, as compared to 35.7%, 71.5% and 69.9% for the same period of the prior year respectively. The gross margin fluctuation was mainly due to the different revenue mix with different margin. The GAAP overall gross margin which includes non-cash amortization of acquired intangibles was 39.4% for the three months ended June 30, 2018, as compared to 38.8% for the same period of the prior year. The GAAP gross margin for integrated contracts, product sales, and service rendered were 35.5%, 72.4% and 73.2% for the three months ended June 30, 2018, as compared to 35.4%, 71.5% and 69.9% for the same period of the prior year respectively.
Selling expenses were $6.5 million for the three months ended June 30, 2018, representing a decrease of $0.1 million or 1.2% compared to $6.6 million for the same quarter of the prior year. Presented as a percentage of total revenues, selling expenses were 4.4% and 4.8% for the three months ended June 30, 2018, and 2017, respectively.
General and administrative expenses, excluding non-cash share-based compensation expenses (non-GAAP G&A expenses), were $14.4 million for the quarter ended June 30, 2018, representing a decrease of $0.2 million or 1.5% compared to $14.6 million for the same quarter of the prior year. Presented as a percentage of total revenues, non-GAAP G&A expenses were 9.8% and 10.6% for quarters ended June 30, 2018 and 2017 respectively. The GAAP G&A expenses which include the non-cash share-based compensation expenses were $15.0 million and $15.1 million for the three months ended June 30, 2018 and 2017, respectively.
Research and development expenses were $8.6 million for the three months ended June 30, 2018, representing an increase of $0.6 million or 7.5% compared to $8.0 million for the same quarter of the prior year. Presented as a percentage of total revenues, R&D expenses were 5.9% and 5.8% for the quarter ended June 30, 2018 and 2017, respectively.
The VAT refunds and government subsidies were $4.1 million for three months ended June 30, 2018, as compared to $6.5 million for the same period in the prior year, representing a $2.4 million or 37.9% decrease, which was primarily due to decrease of the government subsidies.
The income tax expenses and the effective tax rate were $4.6 million and 14.2% for the three months ended June 30, 2018, as compared to $5.4 million and 19.9% for comparable prior year period.
The non-GAAP net income attributable to Hollysys, which excludes the non-cash share-based compensation expenses calculated based on grant-date fair value of shares or options granted, amortization of acquired intangible assets, and fair value adjustments of a bifurcated derivative, was $28.6 million or $0.46 per diluted share based on 61.3 million diluted weighted average common shares outstanding for the three months ended June 30, 2018. This represents a 26.5% increase over the $22.6 million or $0.37 per share based on 61.3 diluted weighted average common million shares outstanding reported in the comparable prior year period. On a GAAP basis, net income attributable to Hollysys was $27.7 million or $0.45 per diluted share representing an increase of 28.0% over the $21.7 million or $0.36 per diluted share reported in the comparable prior year period.
Contracts and Backlog Highlights
Hollysys achieved $181.2 million new contracts for the three months ended June 30, 2018. And the backlog as of June 30, 2018 was $569.0 million. The detailed breakdown of the new contracts and backlog by segments is shown below:
(In USD thousands) New contracts achieved Backlog
for the three months as of Jun 30, 2018
ended Jun 30, 2018
$ % to Total $ % to Total
Contract Backlog
-------- -------
Industrial Automation 83,081 45.8% 184,576 32.4%
Rail Transportation 58,113 32.1% 272,035 47.8%
Mechanical and Electrical Solutions 39,963 22.1% 112,405 19.8%
Total 181,157 100.0% 569,016 100.0%
------- ----- ------- -----
Cash Flow Highlights
For the fiscal year ended June 30, 2018, the total net cash inflow was $64.4 million. The net cash provided by operating activities was $122.2 million. The net cash used in investing activities was $50.4 million, mainly consisted of $179.8 million time deposit with original maturities over three months placed with banks, which was partially offset by the $137.8 million generated from matured time deposits with original maturities over three months. The net cash used in financing activities was $12.2 million, mainly consisted of $7.2 million used for payment of dividends, $11.3 million used for repayments of short-term loans, which was partially offset by $5.9 million proceeds from short-term bank loans.
For the three months ended June 30, 2018, the total net cash inflow was $24.1 million. The net cash provided by operating activities was $45.1 million. The net cash used in investing activities was $6.4 million, mainly consisted of $30.2 million time deposits placed with banks, which was partially offset by $25.1 million maturity of time deposits. The net cash used in financing activities was $4.7 million, mainly consisted of $9.3 million repayments of short-term bank loans, which was partially offset by $4.5 million proceeds from short-term bank loans.
Balance Sheet Highlights
The total amount of cash and cash equivalents were $262.1 million, $238.0 million, and $197.6 million as of June 30, 2018, March 31, 2018 and June 30, 2017, respectively.
For fiscal year ended June 30, 2018, Days Sales Outstanding ("DSO") was 174 days, as compared to 201 days from the prior year; and inventory turnover was 58 days, as compared to 51 days from the prior year.
For the three months ended June 30, 2018, DSO was 166 days, as compared to 153 days for the comparable prior year period and 196 days for the last quarter; and inventory turnover was 59 days, as compared to 50 days for the comparable prior year period and 63 days for the last quarter.
Conference Call
The Company will host a conference call at 9:00 pm August 14, 2018 U.S. Eastern Time / 9:00 am August 15, 2018 Beijing Time, to discuss the financial results for fiscal year 2018 and the fourth quarter ended June 30, 2018 and business outlook..
To participate, please call the following numbers ten minutes before the scheduled start of the call. The conference call identification number is 6893555.
Standard International Dial-In
Number: +65 67135090
Participant Local Dial-In Numbers:
Australia, Sydney *NEW* +61 290833212
China, Domestic 4006208038
China, Domestic 8008190121
Hong Kong +852 30186771
Japan, Tokyo +81 345036012
Korea (South), Seoul +82 27395177
Taiwan, Taipei +886 255723895
United Kingdom, London *NEW* +44 2036214779
United States, New York +1 8456750437
Participant ITFS Dial-In Numbers:
Australia, *NEW* 1300717205
Australia, *NEW* 1800411623
Belgium 080071900
Canada 18663861016
France 0800912761
Germany 08001820671
Hong Kong 800906601
India 180030105440
Indonesia, PT Indosat access 0018030179156
Indonesia, PT Telkom access 0078030179156
Italy 800874737
Japan 0120925376
Korea (South), Domestic 0808500474
Malaysia 1800820152
Netherlands 08000221931
New Zealand 0800880084
Norway 80010719
Philippines 180016120306
Switzerland 0800561006
Taiwan 0809091568
Thailand 001800656772
United Kingdom 08082346646
United States 18665194004
In addition, a recording of the conference call will be accessible within 48 hours via Hollysys' website at: http://hollysys.investorroom.com
About Hollysys Automation Technologies Ltd. (NASDAQ: HOLI)
Hollysys Automation Technologies is a leading provider of automation and control technologies and applications in China that enables its diversified industry and utility customers to improve operating safety, reliability, and efficiency. Founded in 1993, Hollysys has approximately 3,200 employees with nationwide presence in over 60 cities in China, with subsidiaries and offices in Singapore, Malaysia, Dubai, India, and serves over 10,000 customers more than 25,000 projects in the industrial, railway, subway & nuclear industries in China, South-East Asia, and the Middle East. Its proprietary technologies are applied in its industrial automation solution suite including DCS (Distributed Control System), PLC (Programmable Logic Controller), RMIS (Real-time Management Information System), HAMS (HolliAS Asset Management System), OTS (Operator Training System), HolliAS BATCH (Batch Application Package), HolliAS APC Suite (Advanced Process Control Package), SIS (Safety Instrumentation System), high-speed railway signaling system of TCC (Train Control Center), ATP (Automatic Train Protection), Subway Supervisory and Control platform, SCADA (Supervisory Control and Data Acquisition), nuclear power plant automation and control system and other products.
SAFE HARBOUR:
This release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All statements, other than statements of historical fact included herein are "forward-looking statements," including statements regarding: the ability of the Company to achieve its commercial objectives; the business strategy, plans and objectives of the Company and its subsidiaries; and any other statements of non-historical information. These forward-looking statements are often identified by the use of forward-looking terminology such as "believes," "expects" or similar expressions, involve known and unknown risks and uncertainties. Such forward-looking statements, based upon the current beliefs and expectations of Hollysys' management, are subject to risks and uncertainties, which could cause actual results to differ from the forward looking statements. Although the Company believes that the expectations reflected in these forward-looking statements are reasonable, they do involve assumptions, risks and uncertainties, and these expectations may prove to be incorrect. Investors should not place undue reliance on these forward-looking statements, which speak only as of the date of this press release. The Company's actual results could differ materially from those anticipated in these forward-looking statements as a result of a variety of factors, including those discussed in the Company's reports that are filed with the Securities and Exchange Commission and available on its website (http://www.sec.gov). All forward-looking statements attributable to the Company or persons acting on its behalf are expressly qualified in their entirety by these factors. Other than as required under the securities laws, the Company does not assume a duty to update these forward-looking statements.
For further information, please contact:
Hollysys Automation Technologies Ltd.
www.hollysys.com
+8610-58981386
investors@hollysys.com
HOLLYSYS AUTOMATION TECHNOLOGIES LTD.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In USD thousands except for number of shares and per share data)
Three months ended Fiscal year ended
Jun 30, Jun 30,
------- -------
2018 2017 2018 2017
---- ---- ---- ----
(Unaudited) (Unaudited) (Unaudited) (Audited)
---------- ---------- ---------- --------
Net revenues
Integrated contract revenue $131,616 $124,733 $466,461 $385,500
Products sales 11,149 8,549 40,233 32,665
Revenue from services 4,474 4,679 34,074 13,778
Total net revenues 147,239 137,961 540,768 431,943
Cost of integrated contracts 84,938 80,540 314,233 277,476
Cost of products sold 3,074 2,434 10,770 9,971
Costs of services rendered 1,199 1,409 9,885 4,025
Gross profit 58,028 53,578 205,880 140,471
Operating expenses
Selling 6,515 6,593 27,158 24,412
General and administrative 14,990 15,120 46,323 44,297
Goodwill impairment charge - 11,211 - 11,211
Research and development 8,630 8,026 36,605 30,109
VAT refunds and government subsidies (4,051) (6,522) (24,450) (29,828)
Total operating expenses 26,084 34,428 85,636 80,201
Income from operations 31,944 19,150 120,244 60,270
Other income (expenses), net 1,287 (109) 4,349 1,722
Foreign exchange gain (loss) 882 (267) (1,099) (135)
Share of net (loss) income of equity investees (4,038) (1,063) (1,571) 3,607
Gains on disposal of a subsidiary - 628 - 628
Gains on deconsolidation of the Company's interests in - 8,085 - 14,514
Beijing Hollycon Electronic Technology Co., Ltd
Dividend income from a cost investee - (450) 1,093 -
Interest income 2,275 1,256 7,318 3,687
Interest expenses 116 (144) (692) (938)
Income before income taxes 32,466 27,086 129,642 83,355
Income taxes expenses 4,621 5,383 22,205 14,386
Net income 27,845 21,703 107,437 68,969
Net income attributable to non-controlling interests 115 42 276 25
Net income attributable to Hollysys Automation $27,730 $21,661 $107,161 $68,944
Technologies Ltd.
Other comprehensive (loss) income, net of tax of nil
Translation adjustments (45,644) 11,659 17,410 (14,428)
Comprehensive income (loss) (17,799) 33,362 124,847 54,541
Less: comprehensive income (loss) attributable to non- 116 44 280 (11)
controlling interests
Comprehensive income (loss) attributable to Hollysys $(17,915) $33,318 $124,567 $54,552
Automation Technologies Ltd.
Net income per ordinary share:
Basic 0.46 0.36 1.77 1.15
Diluted 0.45 0.36 1.75 1.14
Shares used in income per share computation:
Weighted average number of ordinary shares 60,442,504 60,420,004 60,434,019 60,189,004
Weighted average number of diluted ordinary shares 61,277,059 61,268,999 61,248,565 61,011,510
HOLLYSYS AUTOMATION TECHNOLOGIES LTD.
CONSOLIDATED BALANCE SHEETS
(In USD thousands except for number of shares and per share data)
Jun 30, Mar 31,
------- -------
2018 2018
---- ----
(Unaudited) (Unaudited)
---------- ----------
ASSETS
Current assets
Cash and cash equivalents $262,052 $237,971
Time deposits with maturities over three months 140,037 146,984
Restricted cash 23,252 28,888
Accounts receivable, net of allowance for doubtful accounts of $49,093 and 275,216 267,799
$51,049 as of June 30,2018 and March 31, 2018, respectively
Costs and estimated earnings in excess of billings, net of allowance for doubtful 161,012 212,603
accounts of $9,929 and $12,192 as of June 30, 2018 and March 31, 2018,
respectively
Other receivables, net of allowance for doubtful accounts of $4,946 and $1,472 as 30,467 24,498
of June 30, 2018 and March 31, 2018, respectively
Advances to suppliers 9,685 11,577
Amounts due from related parties 33,678 33,187
Inventories 58,074 56,893
Prepaid expenses 713 707
Income tax recoverable 6,712 457
----- ---
Total current assets 1,000,898 1,021,564
Non-current assets
Restricted cash 1,401 1,479
Prepaid expenses - 1
Property, plant and equipment, net 80,210 86,082
Prepaid land leases 10,172 10,742
Intangible assets, net 3,186 1,631
Investments in equity investees 53,389 60,580
Investments in cost investees 4,195 4,349
Goodwill 48,359 52,192
Deferred tax assets 8,318 8,376
----- -----
Total non-current assets 209,230 225,432
Total assets 1,246,996
1,210,128
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Derivative financial liability 412 535
Short-term bank loans 2,865 7,930
Current portion of long-term loans 350 387
Accounts payable 129,477 138,061
Construction costs payable 304 173
Deferred revenue 137,692 144,216
Accrued payroll and related expenses 14,299 11,417
Income tax payable 3,746 3,354
Warranty liabilities 5,622 5,907
Other tax payables 7,801 6,599
Accrued liabilities 25,133 22,927
Amounts due to related parties 5,353 3,788
----- -----
Total current liabilities 333,054 345,294
Non-current liabilities
Accrued liabilities 2,410 6,078
Long-term loans 20,709 21,212
Deferred tax liabilities 9,366 12,168
Warranty liabilities 2,236 2,715
----- -----
Total non-current liabilities 34,721 42,173
Total liabilities 367,775 387,467
Commitments and contingencies - -
Stockholders' equity:
Ordinary shares, par value $0.001 per share, 100,000,000 shares authorized; 60 60
60,342,099 shares issued and outstanding as of June 30, 2018 and March 31,
2018
Additional paid-in capital 223,396 222,771
Statutory reserves 41,131 43,611
Retained earnings 582,917 552,711
Accumulated other comprehensive income (5,452) 40,192
------ ------
Total Hollysys Automation Technologies Ltd. stockholder's equity 842,052 859,345
Non-controlling interests 301 184
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Total equity 842,353 859,529
Total liabilities and equity $1,210,128 $1,246,996
HOLLYSYS AUTOMATION TECHNOLOGIES LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In USD thousands)
Three Fiscal year
months ended
ended
-----
Jun 30, 2018 Jun 30, 2018
------------ ------------
(Unaudited) (Unaudited)
---------- ----------
Cash flows from operating activities:
Net income $27,845 $107,437
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation of property, plant and equipment 3,305 8,217
Amortization of prepaid land leases 72 270
Amortization of intangible assets 374 801
Allowance for doubtful accounts 4,462 8,033
Loss on disposal of property, plant and equipment 324 292
Share of net loss from equity investees 4,038 1,571
Share-based compensation expenses 625 1,207
Deferred income tax expenses (3,067) (1,439)
Accretion of convertible bond 58 230
Fair value adjustments of a bifurcated derivative (123) (75)
Gain from the derecognition of nonfinancial assets - (2,345)
Changes in operating assets and liabilities:
Accounts receivable (24,699) (28,369)
Costs and estimated earnings in excess of billings 41,372 1,817
Inventories (4,185) (11,429)
Advances to suppliers 1,302 232
Other receivables (7,135) (9,973)
Deposits and other assets 4,132 16,370
Due from related parties (2,268) 1,286
Accounts payable (1,811) 4,113
Deferred revenue 697 28,150
Accruals and other payables 2,236 (3,163)
Due to related parties 1,777 3,023
Income tax payable (5,770) (1,124)
Other tax payables 1,574 (2,959)
Net cash provided by operating activities 45,135 122,173
Cash flows from investing activities:
Time deposits placed with banks (30,206) (179,798)
Purchases of property, plant and equipment (1,446) (2,304)
Maturity of time deposits 25,061 137,839
Proceeds from disposal of property, plant and equipment 225 376
Investment of an equity/cost investee (76) (5,882)
Acquisition of a subsidiary, net of cash acquired - (583)
Net cash used in investing activities (6,442) (50,352)
Cash flows from financing activities:
Proceeds from short-term bank loans 4,471 5,942
Repayments of short-term bank loans (9,281) (11,334)
Proceeds from long-term bank loans 447 984
Repayments of long-term bank loans (328) (548)
Payment of dividends - (7,241)
Net cash used in financing activities (4,691) (12,197)
Effect of foreign exchange rate changes (9,921) 4,788
Net increase in cash and cash equivalents $24,081 $64,412
Cash and cash equivalents, beginning of period $237,971 $197,640
Cash and cash equivalents, end of period 262,052 262,052
Non-GAAP Measures
In evaluating our results, the non-GAAP measures of "Non-GAAP general and administrative expenses", "Non-GAAP net income attributable to Hollysys Automation Technologies Ltd. stockholders", "Non-GAAP basic earnings per share", and "Non-GAAP diluted earnings per share" serve as additional indicators of our operating performance and not as a replacement for other measures in accordance with U.S. GAAP. We believe these non-GAAP measures are useful to investors, as they exclude the non-cash share-based compensation expenses, which is calculated based on the number of shares or options granted and the fair value as of the grant date, amortization of acquired intangible assets, and fair value adjustments of a bifurcated derivative. They will not result in any cash inflows or outflows. We believe that using non-GAAP measures help our shareholders to have a better understanding of our operating results and growth prospects. In addition, given the business nature of the Company, it has been a common practice for investors to use such non-GAAP measures to evaluate the Company.
The following table provides a reconciliation of U.S. GAAP measures to the non-GAAP measures for the periods indicated:
(In USD thousands, except for number of shares and per share data)
Three months ended Fiscal ended
------------------ ------------
Jun 30, Jun 30,
------- -------
2018 2017 2018 2017
---- ---- ---- ----
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
---------- ---------- ---------- ----------
Cost of integrated contracts $84,938 $80,540 $314,233 $277,476
Less: Amortization of acquired intangible assets 321 318 600 581
Non-GAAP cost of integrated contracts $84,617 $80,222 $313,633 $276,895
------- ------- -------- --------
General and administrative expenses $14,990 $15,120 $46,323 $44,297
Less: Share-based compensation expenses 625 534 1,207 464
Non-GAAP general and administrative expenses $14,365 $14,586 $45,116 $43,833
------- ------- ------- -------
Other income (expenses), net $1,287 $(109) $4,349 $1,722
Add: Convertible bond related fair value adjustments (75) 89 (75) 89
Non-GAAP other income (expenses), net $1,212 $(20) $4,274 $1,811
------ ---- ------ ------
Net income attributable to Hollysys Automation $27,730 $21,661 $107,161 $68,944
Technologies Ltd.
Add:
Share-based compensation expenses 625 534 1,207 464
Amortization of acquired intangible assets 321 318 600 581
Convertible bond related fair value adjustments (75) 89 (75) 89
Non-GAAP net income attributable to Hollysys $28,601 $22,602 $108,893 $70,078
Automation Technologies Ltd.
Weighted average number of basic ordinary shares 60,442,504 60,420,004 60,434,019 60,189,004
Weighted average number of diluted ordinary shares 61,277,059 61,268,999 61,248,565 61,011,510
Non-GAAP basic earnings per share $0.47 $0.37 $1.80 $1.16
Non-GAAP diluted earnings per share $0.46 $0.37 $1.78 $1.16
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SOURCE Hollysys Automation Technologies, Ltd
