Hollysys Automation Technologies Reports Unaudited Financial Results for the Second Quarter and the First Half Year Ended December 31, 2018
First Half Year of Fiscal Year 2019 Financial Highlights
-- Non-GAAP net income attributable to Hollysys was $72.4 million, an
increase of 24.3% compared to the comparable prior year period.
-- Total revenues were $288.2 million, an increase of 5.6% compared to the
comparable prior year period.
-- Non-GAAP gross margin was at 37.7%, compared to 38.2% for the comparable
prior year period.
-- Non-GAAP diluted EPS were at $1.19, an increase of 24.0% compared to the
comparable prior year period.
-- Net cash provided by operating activities was $61.5 million for the
current period.
-- DSO of 171 days, compared to 166 days for the comparable prior year
period.
-- Inventory turnover days of 51 days, compared to 52 days for the
comparable prior year period.
Second Quarter of Fiscal Year 2019 Financial Highlights
-- Non-GAAP net income attributable to Hollysys was $44.3 million, an
increase of 22.2% compared to the comparable prior year period.
-- Total revenues were $149.5 million, a decrease of 5.0% compared to the
comparable prior year period.
-- Non-GAAP gross margin was at 38.2%, compared to 39.4% for the comparable
prior year period.
-- Non-GAAP diluted EPS were at $0.73, an increase of 21.7% compared to the
comparable prior year period.
-- Net cash provided by operating activities was $28.5 million for the
current quarter.
-- DSO of 157 days, compared to 147 days for the comparable prior year
period.
-- Inventory turnover days of 39 days, compared to 48 days for the
comparable prior year period.
BEIJING, Feb. 15, 2019 /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 the second quarter and the first half of fiscal year 2019 ended December 31, 2018 (see attached tables). The management of Hollysys, stated:
Revenue and new contract for our IA business for the quarter stayed at $49.5 million and $43.9 million, representing a 14.2% and 4.1% YOY decrease, respectively. From a half year perspective, revenue and contract present a 6.9% YOY decrease and 4.5% YOY increase, respectively. Despite macro-economic headwind, management believe that our IA business remains on a healthy path and several highlights are worth mentioning. We kept our leadership in power, and devoted adequate resource in chemical and petrochemical for expansion, while maintaining our involvement in various other industries. In power, despite a slowdown in coal fire construction, steady performance in thermal power and new energy, as well as after-sale services have been stabilizing factors for our power business that should not be ignored. We kept addressing our valuable customer base to respond to various services demand. The communication with our customers have been fruitful and constructive, evidenced by the steady after-sale growth. Beyond that, we are also actively building our matrix of intelligent solution that help bring our customers to the next era of manufacture. Our effort was well rewarded as our value-adding solution on equipment management, control optimization, and information security, etc. were accepted by more customers. Furthermore, we are proud to announce our first intelligent plant solution in the power industry with Liaoning Diaobingshan Power Company. With full-scale data integration as the key, the solution will help realize greater visibility on equipment consumption, greater operational flexibility in power unit and will ultimately improve efficiency and management. With this milestone, we will continue to leverage the know-how we have accumulated and join hands with more customers from various industries to reshape their way of manufacture.
Quarterly revenue and new contract for our railway business were $63.5 million and $173.1 million, representing an 8.7% YOY decrease and 20.4% YOY increase, respectively. From a half year perspective, revenue and new contract recorded an 8.7% and 61.8% YOY increase, respectively. In high-speed rail, we signed 98 sets of C3 ATP for the quarter, along with numerous advanced and heavy maintenance contracts. We also signed a track circuit contract for the regular speed freight railway from Jingbian to Shenmu, Shaanxi Province, China. In subway business, milestone was achieved as we provided our first "SCADA + Integrated Cloud Platform" solution to Hohhot subway line 1 & line 2, as well as Shenzhen Subway Line 6. We see this as an effective addition to our subway business as we keep executing the steady expansion strategy. For high-speed rail business, calendar 2019 is expected to be a busy year as 13(th) Five Year Plan period is entering its final two years. Going forward into the future and given a visible long-term railway construction plan, we will continue to adhere to the diversity strategy for stable and healthy growth, to improve our local service network for more value-adding and differentiated services, and to keep leveraging our strong R&D capacity for the preparation of next generation railway technology.
In overseas business, M&E recorded a quarterly revenue and new contract of $36.5 million and $36.5 million, representing a 20.8% and 20.1% YOY increase respectively. From a half year perspective, revenue and new contract recorded a 26.6% and 23.3% YOY increase respectively. Measures taken to improve operation have brought constant benefit to the M&E business, while the geopolitical issues in Middle East as well as the macro economy in Southeast Asia remained to be watched. In our IA overseas business, we continued to work with major domestic SOEs on EPC projects while at the same time, contributed adequate effort to expand our partnership. We took one step further in the localization of our business as the construction of our India assembly and testing plant was completed. With this we have set a foothold for improved response time to our overseas customers. Going forward, we expect increasing level of coordination to be built between our overseas and domestic business.
Second Quarter and First Half Year Ended December 31, 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
Six months ended
Dec 31,
Dec 31,
%
Dec 31,
Dec 31,
%
2018 2017 Change 2018 2017 Change
Revenues $
149,464 157,404 (5.0)% $
288,182 272,914 5.6%
Integrated contract revenue $
116,683 134,419 (13.2)% $
233,333 230,109 1.4%
Products sales $
5,917 9,717 (39.1)% $
13,957 19,177 (27.2)%
Service rendered $
26,864 13,268 102.5% $
40,892 23,628 73.1%
Cost of revenues $
92,389 95,424 (3.2)% $
179,567 168,663 6.5%
Gross profit $
57,075 61,980 (7.9)% $
108,615 104,251 4.2%
Total operating expenses $
15,076 21,072 (28.5)% $
36,576 40,277 (9.2)%
Selling $
7,860 7,740 1.6% $
15,569 14,438 7.8%
General and administrative $
11,626 12,177 (4.5)% $
20,196 23,134 (12.7)%
Research and development $
10,402 10,585 (1.7)% $
19,170 19,216 (0.2)%
VAT refunds and government subsidies $
(14,812) (9,430) 57.1% $
(18,359) (16,511) 11.2%
Income from operations $
41,999 40,908 2.7% $
72,039 63,974 12.6%
Other income, net $
5,937 2,271 161.4% $
6,495 2,710 139.7%
Foreign exchange (loss) gain $
(704) 29 (2527.6)% $
(827) (1,104) (25.1)%
Share of net (loss) income of equity investees $
(386) 1,337 (128.9)% $
(287) 2,273 (112.6)%
Dividend income from a cost investee 1,113 $
1,113 1,057 5.3%
Interest income $
2,896 1,560 85.6% $
5,995 3,036 97.5%
Interest expenses $
(210) (497) (57.7)% $
(316) (634) (50.2)%
Income tax expenses $
6,312 9,295 (32.1)% $
11,767 13,031 (9.7)%
Net income attributable to non-controlling interests $
37 52 (28.8)% $
83 86 (3.5)%
Non-GAAP net income attributable to Hollysys Automation Technologies Ltd. $
44,296 36,261 22.2% $
72,362 58,195 24.3%
Non-GAAP basic EPS $
0.73 0.60 21.7% $
1.20 0.96 25.0%
Non-GAAP diluted EPS $
0.73 0.60 21.7% $
1.19 0.96 24.0%
Share-based compensation expenses $
67 (67) (200.0)% $
151 325 (53.4)%
Amortization of acquired intangible assets $
75 101 (25.7)% $
155 279 (44.4)%
Fair value adjustments of a bifurcated derivative $
20 20
GAAP Net income attributable to Hollysys Automation Technologies Ltd. $
44,134 36,227 21.8% $
72,036 57,591 25.1%
GAAP basic EPS $
0.73 0.60 21.7% $
1.19 0.95 25.3%
GAAP diluted EPS $
0.72 0.60 20.0% $
1.18 0.95 24.2%
Basic weighted average common shares outstanding 60,453,770 60,431,250 0.0% 60,450,930 60,428,431 0.0%
Diluted weighted average common shares outstanding 61,273,353 61,251,116 0.0% 61,271,864 61,241,092 0.0%
Operational Results Analysis for the Second Quarter Ended December 31, 2018
Comparing to the second quarter of the prior fiscal year, the total revenues for the three months ended December 31, 2018 decreased from $157.4 million to $149.5 million, representing a decrease of 5.0%. Broken down by the revenue types, integrated contracts revenue decreased by 13.2% to $116.7 million, products sales revenue decreased by 39.1% to $5.9 million, and services revenue increased by 102.5% to $26.9 million.
The Company's total revenues can also be presented in segments as shown in the following chart:
(In USD thousands)
Three months ended Dec 31, Six months ended Dec 31,
2018 2017 2018 2017
$ % to
$ % to
$ % to
$ % to
Total Total Total Total
Revenue Revenue Revenue Revenue
Industrial Automation 49,458 33.1% 57,647 36.6% 107,177 37.2% 115,130 42.2%
Rail Transportation Automation 63,503 42.5% 69,550 44.2% 113,871 39.5% 104,745 38.4%
Mechanical and Electrical Solution 36,503 24.4% 30,207 19.2% 67,134 23.3% 53,039 19.4%
Total 149,464 100.0% 157,404 100.0% 288,182 100.0% 272,914 100.0%
Overall gross margin excluding non-cash amortization of acquired intangibles (non-GAAP gross margin) was 38.2% for the three months ended December 31, 2018, as compared to 39.4% for the same period of the prior year. The non-GAAP gross margin for integrated contracts, product sales, and services rendered were 30.8%, 72.0% and 62.9% for the three months ended December 31, 2018, as compared to 34.5%, 67.4% and 68.6% for the same period of the prior year, respectively. The gross margin fluctuation was mainly due to the different revenue mix with different margins. The GAAP overall gross margin which includes non-cash amortization of acquired intangibles was 38.1% for the three months ended December 31, 2018, as compared to 39.3% for the same period of the prior year. The GAAP gross margin for integrated contracts, product sales, and service rendered were 30.7%, 72.0% and 62.9% for the three months ended December 31, 2018, as compared to 34.4%, 67.4% and 68.6% for the same period of the prior year, respectively.
Selling expenses were $7.9 million for the three months ended December 31, 2018, representing an increase of $0.2 million or 1.6% compared to $7.7 million for the same quarter of the prior year. Presented as a percentage of total revenues, selling expenses were 5.3% and 4.9% for the three months ended December 31, 2018, and 2017, respectively.
General and administrative expenses, excluding non-cash share-based compensation expenses (non-GAAP G&A expenses), were $11.6 million for the quarter ended December 31, 2018, representing a decrease of $0.6 million or 4.5% compared to $12.2 million for the same quarter of the prior year. Presented as a percentage of total revenues, non-GAAP G&A expenses were 7.8% and 7.7% for quarters ended December 31, 2018 and 2017, respectively. The GAAP G&A expenses which include the non-cash share-based compensation expenses were $11.7 million and $12.1 million for the three months ended December 31, 2018 and 2017, respectively.
Research and development expenses were $10.4 million for the three months ended December 31, 2018, representing a decrease of $0.2 million or 1.7% compared to $10.6 million for the same quarter of the prior year. Presented as a percentage of total revenues, R&D expenses were 7.0% and 6.7% for the quarter ended December 31, 2018 and 2017, respectively.
The VAT refunds and government subsidies were $14.8 million for three months ended December 31, 2018, as compared to $9.4 million for the same period in the prior year, representing a $5.4 million or 57.1% increase, which was primarily due to increase of the VAT refunds.
The income tax expenses and the effective tax rate were $6.3 million and 12.5% for the three months ended December 31, 2018, as compared to $9.3 million and 20.4% for comparable prior year period. The effective tax rate fluctuation was mainly due to the different pre-tax income mix with different tax rates, as the Company's subsidiaries are subject to different tax rates in various jurisdictions.
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 $44.3 million or $0.73 per diluted share based on 61.3 million diluted weighted average common shares outstanding for the three months ended December 31, 2018. This represents a 22.2% increase over the $36.3 million or $0.60 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 $44.1 million or $0.72 per diluted share representing an increase of 21.8% over the $36.2 million or $0.60 per diluted share reported in the comparable prior year period.
Contracts and Backlog Highlights
Hollysys achieved $253.5 million of new contracts for the three months ended December 31, 2018. The backlog as of December 31, 2018 was $590.1 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 Dec 31, 2018
ended Dec 31, 2018
$ % to Total Contract
$ % to Total Backlog
Industrial
Automation 43,927 17.3% 165,285 28.0%
Rail Transportation 173,056 68.3% 329,744 55.9%
Mechanical and
Electrical
Solutions 36,496 14.4% 95,032 16.1%
Total 253,479 100.0% 590,061 100.0%
Cash Flow Highlights
For the three months ended December 31, 2018, the total net cash outflow was $2.2 million. The net cash provided by operating activities was $28.5 million. The net cash used in investing activities was $20.4 million, mainly consisted of $108.5 million time deposits placed with banks, which was partially offset by $88.6 million maturity of time deposits. The net cash used in financing activities was $11.1 million, mainly consisted of $10.9 million payment of dividends, and $3.2 million repayments of short-term bank loans, which were partially offset by $2.9 million proceeds from short-term bank loans.
Balance Sheet Highlights
The total amount of cash and cash equivalents were $270.8 million, $276.9 million, and $231.1 million as of December 31, 2018, September 30, 2018 and December 31, 2017, respectively.
For the three months ended December 31, 2018, DSO was 157 days, as compared to 147 days for the comparable prior year period and 170 days for the last quarter; and inventory turnover was 39 days, as compared to 48 days for the comparable prior year period and 51 days for the last quarter.
Conference Call
The Company will host a conference call at 8:00 pm February 17, 2019 U.S. Eastern Time / 9:00 am February 18, 2019 Beijing Time, to discuss the financial results for the second quarter and the first half of fiscal year 2019 ended December 31, 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 2182982.
Standard International Dial-In
Number:
+65 67135090
Participant Local Dial-In
Numbers:
Australia, Sydney *NEW*
+61 290833212
China, Domestic 8008190121
China, Domestic 4006208038
China, Hong Kong
+852 30186771
Japan, Tokyo
+81 345036012
Korea (South), Seoul
+82 27395177
China, Taiwan
+886 255723895
United Kingdom, London *NEW*
+44 2036214779
United States, New York
+1 8456750437
Participant ITFS Dial-In Numbers:
Australia, *NEW* 1800411623
Australia, *NEW* 1300717205
Belgium 080071900
Canada 18663861016
France 0800912761
Germany 08001820671
China, Hong Kong 800906601
India 18002666846
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
China, 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 3,300 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 30,000 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 INCOME AND COMPREHENSIVE INCOME
(In USD thousands except for number of shares and per share data)
Three months ended Six months ended
Dec 31, Dec 31,
---
2018 2017 2018 2017
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
Net revenues
Integrated contract revenue $
116,683 $
134,419 $
233,333 $
230,109
Products sales 5,917 9,717 13,957 19,177
Revenue from services 26,864 13,268 40,892 23,628
Total net revenues 149,464 157,404 288,182 272,914
Cost of integrated contracts 80,845 88,186 161,593 155,998
Cost of products sold 1,654 3,167 3,662 5,834
Costs of services rendered 9,965 4,172 14,467 7,110
Gross profit 57,000 61,879 108,460 103,972
Operating expenses
Selling 7,860 7,740 15,569 14,438
General and administrative 11,693 12,110 20,347 23,459
Research and development 10,402 10,585 19,170 19,216
VAT refunds and government subsidies (14,812) (9,430) (18,359) (16,511)
Total operating expenses 15,143 21,005 36,727 40,602
Income from operations 41,857 40,874 71,733 63,370
Other income, net 5,917 2,271 6,475 2,710
Foreign exchange loss (704) 29 (827) (1,104)
Share of net (loss) income of equity investees (386) 1,337 (287) 2,273
Dividend income from a cost investee 1,113 1,113 1,057
Interest income 2,896 1,560 5,995 3,036
Interest expenses (210) (497) (316) (634)
Income before income taxes 50,483 45,574 83,886 70,708
Income taxes expenses 6,312 9,295 11,767 13,031
Net income 44,171 36,279 72,119 57,677
Net income attributable to non-controlling interests 37 52 83 86
Net income attributable to Hollysys Automation
Technologies Ltd. $
44,134 $
36,227 $
72,036 $
57,591
Other comprehensive income (loss), net of tax of nil
Translation adjustments 2,046 17,512 (27,090) 32,270
Comprehensive income 46,217 53,791 45,029 89,947
Less: comprehensive (loss) income attributable to non-
controlling interests (225) 54 (179) 87
Comprehensive (loss) income attributable to
Hollysys Automation Technologies Ltd. $
46,442 $
53,737 $
45,208 $
89,860
---
Net income per ordinary share:
Basic 0.73 0.60 1.19 0.95
Diluted 0.72 0.60 1.18 0.95
Shares used in income per share computation:
Weighted average number of ordinary shares 60,453,770 60,431,250 60,450,930 60,428,431
Weighted average number of diluted ordinary shares 61,273,353 61,251,116 61,271,864 61,241,092
HOLLYSYS AUTOMATION TECHNOLOGIES LTD.
CONSOLIDATED BALANCE SHEETS
(In USD thousands except for number of shares and per share data)
Dec 31, Sep 30,
2018 2018
(Unaudited) (Unaudited)
ASSETS
Current assets
Cash and cash equivalents $
270,806 $
276,867
Time deposits with maturities over
three months 168,999 148,659
Restricted cash 16,897 15,795
Accounts receivable, net of allowance
for doubtful accounts of $45,125 and
$45,139 as of December 31,2018 and
September 31, 2018, respectively 272,008 248,875
Costs and estimated earnings in
excess of billings, net of allowance
for doubtful accounts of $7,881 and
$9,205 as of December 31, 2018 and
September 30, 2018, respectively 221,581 210,935
Other receivables, net of allowance
for doubtful accounts of $4,914 and
$4,874 as of December 31, 2018 and
September 30, 2018, respectively 18,470 21,025
Advances to suppliers 15,374 13,413
Amounts due from related parties 33,424 38,335
Inventories 35,568 36,583
Prepaid expenses 911 645
Income tax recoverable 276 6,155
Total current
assets 1,054,314 1,017,287
Non-current
assets
Restricted cash 4,076 1,348
Prepaid expenses 4 1
Property, plant and equipment, net 75,119 74,803
Prepaid land leases 9,832 9,867
Intangible assets, net 1,540 1,610
Investments in equity investees 52,708 46,705
Investments in cost investees 4,785 4,765
Goodwill 48,346 48,263
Deferred tax assets 11,714 7,142
Total non-current
assets 208,124 194,504
Total assets 1,262,438 1,211,791
LIABILITIES AND STOCKHOLDERS' EQUITY
Current
liabilities
Derivative financial liability 432 412
Short-term bank loans 2,215 2,293
Current portion of long-term loans 20,258 313
Dividends payable 10,862
Accounts payable 116,362 121,807
Construction costs payable 304
Deferred revenue 141,365 126,688
Accrued payroll and related expenses 19,557 15,035
Income tax payable 3,668 4,330
Warranty liabilities 5,318 5,284
Other tax payables 6,054 10,252
Accrued liabilities 23,322 19,859
Amounts due to related parties 4,596 3,775
Total current
liabilities 343,147 321,214
Non-current
liabilities
Accrued liabilities 5,885 5,800
Long-term loans 900 20,719
Deferred tax liabilities 12,083 10,828
Warranty liabilities 2,363 2,186
Total non-current
liabilities 21,231 39,533
Total liabilities 364,378 360,747
Commitments and
contingencies -
Stockholders'
equity:
Ordinary shares, par value $0.001 per
share, 100,000,000 shares
authorized; 60,342,099 shares issued
and outstanding as of December, 2018
and September 30, 2018 60 60
Additional paid-in capital 223,547 223,481
Statutory reserves 46,283 45,970
Retained earnings * 660,329 615,775
Accumulated other comprehensive
income (32,281) (34,589)
Total Hollysys
Automation
Technologies Ltd.
stockholder's
equity 897,938 850,697
Non-controlling interests 122 347
Total equity 898,060 851,044
Total liabilities
and equity $
1,262,438 $
1,211,791
* The adoption of ASC 606 commenced on July 1, 2018 had a one-off effect on the beginning of balance sheet accounts.
HOLLYSYS AUTOMATION TECHNOLOGIES LTD
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In USD thousands).
Three months ended Six months ended
Dec 31, 2018 Dec 31, 2018
---
(Unaudited) (Unaudited)
Cash flows from operating activities:
Net income $
44,172 $
72,119
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation of property, plant and
equipment 1,688 3,826
Amortization of prepaid land leases 66 132
Amortization of intangible assets 77 155
Allowance for doubtful accounts 71 514
Loss (gain) on disposal of property,
plant and equipment (2) 39
Share of net loss from equity
investees 386 287
Share-based compensation expenses 67 151
Deferred income tax expenses (3,366) (899)
Accretion of convertible bond 57 115
Fair value adjustments of a bifurcated
derivative 20 20
Gains on deconsolidation of a
subsidiary (4,748) (4,748)
Changes in operating assets and
liabilities:
Accounts receivable (22,465) (9,041)
Costs and estimated earnings in excess
of billings 9,473 (27,703)
Inventories (13,203) 3,603
Advances to suppliers (3,421) (7,843)
Other receivables 2,606 11,345
Deposits and other assets (268) (211)
Due from related parties 5,149 9,571
Accounts payable (6,154) (7,883)
Deferred revenue 14,305 10,420
Accruals and other payables 6,924 9,638
Due to related parties 820 (2,312)
Income tax payable 5,274 6,275
Other tax payables (9,044) (6,092)
Net cash provided by operating
activities 28,484 61,478
Cash flows from investing activities:
Time deposits placed with banks (108,521) (156,940)
Purchases of property, plant and
equipment (743) (1,234)
Proceeds from disposal of property,
plant and equipment 178 251
Maturity of time deposits 88,647 122,854
Investment of an equity investee (740)
Cash reduced upon deconsolidation of
subsidiary (1,878)
Net cash used in investing activities (20,439) (37,687)
Cash flows from financing activities:
Proceeds from short-term bank loans 2,934 3,207
Repayments of short-term bank loans (3,229) (3,555)
Proceeds from long-term bank loans 332 332
Repayments of long-term bank loans (300) (300)
Payment of Dividends (10,862) (10,862)
Net cash used in financing activities (11,125) (11,178)
Effect of foreign exchange rate
changes 849 (8,143)
Net (decrease) increase in cash, cash
equivalents and restricted cash $
(2,231) 4,470
Cash, cash equivalents and restricted
cash, beginning of period $
294,010 287,309
Cash, cash equivalents and restricted
cash, end of period 291,779 291,779
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 Six months ended
Dec 31, Dec 31,
2018 2017 2018 2017
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
Cost of integrated contracts $
80,845 $
88,186 $
161,593 $
155,998
Less: Amortization of acquired intangible assets 75 101 155 279
Non-GAAP cost of integrated contracts $
80,770 $
88,085 $
161,438 $
155,719
---
General and administrative expenses $
11,693 $
12,110 $
20,347 $
23,459
Less: Share-based compensation expenses 67 (67) 151 325
Non-GAAP general and administrative expenses $
11,626 $
12,177 $
20,196 $
23,134
Other
income
(expenses), net $
5,917 2,271 6,475 2,710
Add: Fair value adjustments of a bifurcated derivative 20 20
Non-GAAP other
income (expenses), net $
5,937 2,271 6,495 2,710
---
Net income attributable to Hollysys Automation Technologies Ltd. $
44,134 $
36,227 $
72,036 $
57,591
---
Add:
67 (67) 151 325
Share-based compensation expenses
75 101 155 279
Amortization of acquired intangible assets
Fair value adjustments of a bifurcated derivative 20 20
Non-GAAP net income attributable to Hollysys Automation Technologies Ltd. $
44,296 $
36,261 $
72,362 $
58,195
---
60,453,770 60,431,250 60,450,930 60,428,431
Weighted average number of basic ordinary shares
61,273,353 61,251,116 61,271,864 61,241,092
Weighted average number of diluted ordinary shares
Non-GAAP basic earnings per share $
0.73 $
0.60 $
1.20 $
0.96
Non-GAAP diluted earnings per share $
0.73 $
0.60 $
1.19 $
0.96
---
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SOURCE Hollysys Automation Technologies, Ltd
