Hollysys Automation Technologies Reports Unaudited Financial Results for the Third Quarter and the First Nine Months Ended March 31, 2019
First Nine months of Fiscal Year 2019 Financial Highlights
-- Non-GAAP net income attributable to Hollysys was $100.5 million, an
increase of 25.1% compared to the comparable prior year period.
-- Total revenues were $413.4 million, an increase of 5.0% compared to the
comparable prior year period.
-- Non-GAAP gross margin was at 38.3%, compared to 37.6% for the comparable
prior year period.
-- Non-GAAP diluted EPS were at $1.65, an increase of 25.0% compared to the
comparable prior year period.
-- Net cash provided by operating activities was $86.7 million for the
current period.
-- DSO of 176 days, compared to 176 days for the comparable prior year
period.
-- Inventory turnover days of 59 days, compared to 58 days for the
comparable prior year period.
Third Quarter of Fiscal Year 2019 Financial Highlights
-- Non-GAAP net income attributable to Hollysys was $28.1 million, an
increase of 27.1% compared to the comparable prior year period.
-- Total revenues were $125.2 million, an increase of 3.8% compared to the
comparable prior year period.
-- Non-GAAP gross margin was at 39.6%, compared to 36.5% for the comparable
prior year period.
-- Non-GAAP diluted EPS were at $0.46, an increase of 27.8% compared to the
comparable prior year period.
-- Net cash provided by operating activities was $25.2 million for the
current quarter.
-- DSO of 193 days, compared to 196 days for the comparable prior year
period.
-- Inventory turnover days of 50 days, compared to 63 days for the
comparable prior year period.
BEIJING, May 13, 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 third quarter of fiscal year 2019 ended March 31, 2019 (see attached tables). The management of Hollysys, stated:
Revenue and new contract for our IA business for the quarter were $60.1 million and $84.0 million, representing a 31.6% and 2.2% YOY increase, respectively. For the first nine months of the fiscal year, revenue and contract presented a 4.0% and 3.5% YOY increase, respectively. Our effort in market penetration and addressing the current customer base for maintenance and upgrade opportunities continued. Within high-end coal fire market, our solid performance in the past have earned us reputation. We signed a breakthrough contract to provide DCS+DEH solution to the 660MW power units of China Huaneng Group, which is the first time that Huaneng has accepted Hollysys' control solution for its 660MW power units. We continued to address other sub-verticals of power including garbage power, biomass and solar thermal power. In solar thermal, we entered into a strategic relationship with Zhongnan Engineering Corporation Limited on jointly developing the control solution for the world first molten salt linear Fresnel solar thermal power station in Gansu, China. In chemical and petrochemical, our effort in penetrating the market continued, and with the execution of our previous breakthrough projects as reference, we continued to actively promote ourselves. We signed a contract to provide control solution to coal-to-clean industrial gas project in Jiangxi with a design capacity of 13 billion normal cubic meter per year, which is to be the world largest project of such kind once completed. We kept addressing our valuable customer base and the momentum of aftersales services continued. In addition to regular maintenance, our value adding industrial software that covers advanced process control, industrial information security, etc. are being accepted by more of our customers. Following the breakthrough in our first intelligent plant solution in the last quarter, we maintained close communication with potential customers. Meanwhile, our intelligence-oriented solutions are earning its reputation. In February, Hollysys was named by Ministry of Industry and Information Technology of the People's Republic of China (MIIT) as outstanding data collection and edge computing technology provider, outstanding PaaS technology provider and outstanding SaaS technology provider. Our "HolliMachine Smart Equipment Cloud Industrial Internet APP" was also listed in the Outstanding Industrial Internet APP Solution published by MIIT. Furthermore, we have recently formed a strategic partnership with Arup, one of the largest global engineering consulting firms, to develop and implement world-leading intelligent solutions and expand into overseas markets together.
Quarterly revenue and new contract for our railway business were $46.8 million and $35.5 million, representing an 2.7% YOY increase and 6.3% YOY decrease, respectively. For the first nine month of the fiscal year, revenue and new contract recorded an 6.9% and 48.1% YOY increase, respectively. With 13(th) Five Year Plan period entering its final two years and the amount of contract signed previously, we have been busy delivering. 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 and to improve our local service network for more value-adding and differentiated services. With urbanization as an ongoing process, we will keep leveraging our strong R&D capacity and prepare for the application of various types of railway transportation system in the future.
In overseas business, M&E recorded a quarterly revenue and new contract of $18.4 million and $16.8 million, representing a 37.7% and 20.8% YOY decrease respectively. For the first nine months of the fiscal year, revenue and new contract recorded a 3.6% and 8.4% YOY increase respectively. Given the macro economy in Southeast Asia and the Middle East, risk control remains to be the key focus of our M&E business. In IA overseas business, we continued our effort in developing partnership with key EPC players, and to create opportunity to join EPC project in its early project cycle by cooperating with design institution. We have achieved our first cooperation with Shanghai Electric overseas as we signed a contract on a 2*300MW power unit optimization project in Malaysia. Going forward, we will take gradual steps to improve the marketing and service capability of our overseas business for greater localization.
Third Quarter and First Nine Months Ended March 31, 2019 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
Nine months ended
Mar 31, 2019
Mar 31, 2018
%
Mar 31, 2019
Mar 31, 2018
%
Change Change
Revenues $
125,167 120,617 3.8% $
413,350 393,531 5.0%
Integrated contract revenue $
101,285 104,736 (3.3)% $
334,618 334,845 (0.1)%
Products sales $
13,187 9,908 33.1% $
27,144 29,085 (6.7)%
Service rendered $
10,695 5,973 79.1% $
51,588 29,601 74.3%
Cost of revenues $
75,652 76,608 (1.2)% $
255,219 245,398 4.0%
Gross profit $
49,515 44,009 12.5% $
158,131 148,133 6.7%
Total operating expenses $
19,319 18,820 2.7% $
55,895 58,971 (5.2)%
Selling $
6,474 6,205 4.3% $
22,043 20,643 6.8%
General and administrative $
8,743 7,745 12.9% $
28,939 30,752 (5.9)%
Research and development $
8,655 8,758 (1.2)% $
27,825 27,975 (0.5)%
VAT refunds and government subsidies $
(4,553) (3,888) 17.1% $
(22,912) (20,399) 12.3%
Income from operations $
30,196 25,189 19.9% $
102,236 89,162 14.7%
Other income, net $
1,190 352 238.1% $
7,685 3,062 151.0%
Foreign exchange loss $
(333) (877) (62.0)% $
(1,163) (1,981) (41.3)%
Share of net (loss) income of equity investees $
(885) 194 (556.2)% $
(1,172) 2,466 (147.5)%
Dividend income from a cost investee 38 (100.0)% $
1,116 1,096 1.8%
Interest income $
2,978 2,006 48.5% $
8,973 5,041 78.0%
Interest expenses $
(54) (175) (69.1)% $
(371) (808) (54.1)%
Income tax expenses $
4,946 4,553 8.6% $
16,713 17,584 (5.0)%
Net income attributable to non-controlling interests $
50 75 (33.3)% $
132 161 (18.0)%
Non-GAAP net income attributable to Hollysys Automation Technologies Ltd. $
28,096 22,099 27.1% $
100,459 80,293 25.1%
Non-GAAP basic EPS $
0.46 0.37 24.3% $
1.66 1.33 24.8%
Non-GAAP diluted EPS $
0.46 0.36 27.8% $
1.65 1.32 25.0%
Share-based compensation expenses $
50 129 (61.2)% $
201 581 (65.4)%
Amortization of acquired intangible assets $
78 128 (39.1)% $
234 279 (16.1)%
Fair value adjustments of a bifurcated derivative
$ $
20 100%
GAAP Net income attributable to Hollysys Automation Technologies Ltd. $
27,968 21,842 28.0% $
100,004 79,433 25.9%
GAAP basic EPS $
0.46 0.36 27.8% $
1.65 1.31 26.0%
GAAP diluted EPS $
0.46 0.36 27.8% $
1.64 1.31 25.2%
Basic weighted average common shares outstanding 60,459,370 60,436,871 0.0% 60,453,704 60,431,201 0.0%
Diluted weighted average common shares outstanding 61,276,829 61,296,907 0.0% 61,273,073 61,245,982 0.0%
Operational Results Analysis for the Third Quarter Ended March 31, 2019
Comparing to the third quarter of the prior fiscal year, the total revenues for the three months ended March 31, 2019 increased from $120.6 million to $125.2 million, representing an increase of 3.8%. Broken down by the revenue types, integrated contracts revenue decreased by 3.3% to $101.3 million, products sales revenue increased by 33.1% to $13.2 million, and services revenue increased by 79.1% to $10.7 million.
The Company's total revenues can also be presented in segments as shown in the following chart:
(In USD thousands)
Three months ended Mar 31, Nine months ended Mar 31,
2019 2018 2019 2018
$ % to Total Revenue
$ % to Total Revenue
$ % to Total Revenue
$ % to Total Revenue
Industrial Automation 60,063 47.9% 45,651 37.8% 167,241 40.4% 160,780 40.8%
Rail Transportation Automation 46,759 37.4% 45,533 37.8% 160,630 38.9% 150,279 38.2%
Mechanical and Electrical Solution 18,345 14.7% 29,433 24.4% 85,479 20.7% 82,472 21.0%
Total 125,167 100.0% 120,617 100.0% 413,350 100.0% 393,531 100.0%
Overall gross margin excluding non-cash amortization of acquired intangibles (non-GAAP gross margin) was 39.6% for the three months ended March 31, 2019, as compared to 36.5% for the same period of the prior year. The non-GAAP gross margin for integrated contracts, product sales, and services rendered were 30.2%, 85.6% and 71.9% for the three months ended March 31, 2019, as compared to 30.1%, 81.2% and 73.6% 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 39.5% for the three months ended March 31, 2019, as compared to 36.4% for the same period of the prior year. The GAAP gross margin for integrated contracts, product sales, and service rendered were 30.1%, 85.6% and 71.9% for the three months ended March 31, 2019, as compared to 30.0%, 81.2% and 73.6% for the same period of the prior year, respectively.
Selling expenses were $6.5 million for the three months ended March 31, 2019, representing an increase of $0.3 million or 4.3% compared to $6.2 million for the same quarter of the prior year. Presented as a percentage of total revenues, selling expenses were 5.2% and 5.1% for the three months ended March 31, 2019, and 2018, respectively.
General and administrative expenses, excluding non-cash share-based compensation expenses (non-GAAP G&A expenses), were $8.7 million for the quarter ended March 31, 2019, representing an increase of $1.0 million or 12.9% compared to $7.7 million for the same quarter of the prior year, which was primarily due to increase of bad debt allowance. Presented as a percentage of total revenues, non-GAAP G&A expenses were 7.0% and 6.4% for quarters ended March 31, 2019 and 2018, respectively. The GAAP G&A expenses which include the non-cash share-based compensation expenses were $8.8 million and $7.9 million for the three months ended March 31, 2019 and 2018, respectively.
Research and development expenses were $8.7 million for the three months ended March 31, 2019, representing a decrease of $0.1 million or 1.2% compared to $8.8 million for the same quarter of the prior year. Presented as a percentage of total revenues, R&D expenses were 6.9% and 7.3% for the quarter ended March 31, 2019 and 2018, respectively.
The VAT refunds and government subsidies were $4.6 million for three months ended March 31, 2019, as compared to $3.9 million for the same period in the prior year, representing a $0.7 million or 17.1% increase, which was primarily due to increase of the VAT refunds.
The income tax expenses and the effective tax rate were $4.9 million and 15.0% for the three months ended March 31, 2019, as compared to $4.6 million and 17.2% 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 $28.1 million or $0.46 per diluted share based on 61.3 million diluted weighted average common shares outstanding for the three months ended March 31, 2019. This represents a 27.1% increase over the $22.1 million or $0.36 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 $28.0 million or $0.46 per diluted share representing an increase of 28.0% over the $21.8 million or $0.36 per diluted share reported in the comparable prior year period.
Contracts and Backlog Highlights
Hollysys achieved $136.2 million of new contracts for the three months ended March 31, 2019. The backlog as of March 31, 2019 was $599.2 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 Mar 31, 2019
ended Mar 31, 2019
$ % to Total Contract
$ % to Total Backlog
Industrial Automation 84,010 61.7% 182,567 30.5%
Rail Transportation 35,471 26.0% 322,091 53.8%
Mechanical and Electrical
Solutions 16,754 12.3% 94,546 15.8%
Total 136,235 100.0% 599,204 100.0%
Cash Flow Highlights
For the three months ended March 31, 2019, the total net cash outflow was $15.3 million. The net cash provided by operating activities was $25.2 million. The net cash used in investing activities was $45.3 million, mainly consisted of $93.8 million time deposits placed with banks, and $4.2 million purchases of property, plant and equipment, which was partially offset by $52.7 million maturity of time deposits. The net cash used in financing activities was $0.2 million, mainly consisted of $1.9 million repayments of short-term bank loans, which were partially offset by $1.7 million proceeds from short-term bank loans.
Balance Sheet Highlights
The total amount of cash and cash equivalents were $253.4 million, $270.8 million, and $238.0 million as of March 31, 2019, December 31, 2018 and March 31, 2018, respectively.
For the three months ended March 31, 2019, DSO was 193 days, as compared to 196 days for the comparable prior year period and 157 days for the last quarter; and inventory turnover was 50 days, as compared to 63 days for the comparable prior year period and 39 days for the last quarter.
Conference Call
The Company will host a conference call at 9:00 pm May 13, 2019 U.S. Eastern Time / 9:00 am May 14, 2019 Beijing Time, to discuss the financial results for fiscal year 2019 third quarter ended March 31, 2019 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 1568415.
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 is a leading automation control system solutions provider in China, with overseas operations in eight other countries and regions throughout Asia. Leveraging its proprietary technology and deep industry know-how, Hollysys empowers its customers with enhanced operational safety, reliability, efficiency, and intelligence which are critical to their businesses. Hollysys derives its revenues mainly from providing integrated solutions for industrial automation and rail transportation. In industrial automation, Hollysys delivers the full spectrum of automation hardware, software, and services spanning field devices, control systems, enterprise manufacturing management and cloud-based applications. In rail transportation, Hollysys provides advanced signaling control and SCADA (Supervisory Control and Data Acquisition) systems for high-speed rail and urban rail (including subways). Founded in 1993, with technical expertise and innovation, Hollysys has grown from a research team specializing in automation control in the power industry into a group providing integrated automation control system solutions for customers in diverse industry verticals. As of March 2019, Hollysys had cumulatively carried out more than 25,000 projects for approximately 15,000 customers in various sectors including power, petrochemical, high-speed rail, and urban rail, in which Hollysys has established leading market positions.
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 Nine months ended
Mar 31, Mar 31,
2019 2018 2019 2018
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
Net revenues
Integrated contract revenue $
101,285 $
104,736 $
334,618 $
334,845
Products sales 13,187 9,908 27,144 29,085
Revenue from services 10,695 5,973 51,588 29,601
Total net revenues 125,167 120,617 413,350 393,531
Cost of integrated contracts 70,818 73,297 232,411 229,295
Cost of products sold 1,903 1,863 5,566 7,696
Costs of services rendered 3,009 1,576 17,476 8,686
Gross profit 49,437 43,881 157,897 147,854
Operating expenses
Selling 6,474 6,205 22,043 20,643
General and administrative 8,793 7,874 29,140 31,333
Research and development 8,655 8,758 27,825 27,975
VAT refunds and government subsidies (4,553) (3,888) (22,912) (20,399)
Total operating expenses 19,369 18,949 56,096 59,552
Income from operations 30,068 24,932 101,801 88,302
Other income, net 1,190 352 7,665 3,062
Foreign exchange loss (333) (877) (1,163) (1,981)
Share of net (loss) income of equity
investees (885) 194 (1,172) 2,466
Dividend income from a cost investee 38 1,116 1,096
Interest income 2,978 2,006 8,973 5,041
Interest expenses (54) (175) (371) (808)
Income before income taxes 32,964 26,470 116,849 97,178
Income taxes expenses 4,946 4,553 16,713 17,584
Net income 28,018 21,917 100,136 79,594
Net income attributable to non-controlling
interests 50 75 132 161
Net income attributable to Hollysys
Automation Technologies Ltd. $
27,968 $
21,842 $
100,004 $
79,433
Other comprehensive income (loss), net of tax of nil
Translation adjustments 14,871 30,784 (11,604) 63,054
Comprehensive income 42,889 52,701 88,532 142,648
Less: comprehensive income (loss)
attributable to non-controlling interests 50 76 (129) 163
Comprehensive income attributable
to Hollysys Automation
Technologies Ltd. $
42,839 $
52,625 $
88,661 $
142,485
Net income per ordinary share:
Basic 0.46 0.36 1.65 1.31
Diluted 0.46 0.36 1.64 1.31
Shares used in income per share computation:
Weighted average number of ordinary shares 60,459,370 60,436,871 60,453,704 60,431,201
Weighted average number of diluted ordinary
shares 61,276,829 61,296,907 61,273,073 61,245,982
HOLLYSYS AUTOMATION TECHNOLOGIES LTD.
CONSOLIDATED BALANCE SHEETS
(In USD thousands except for number of shares and per share data)
Mar 31, Dec 31,
2019 2018
(Unaudited) (Unaudited)
ASSETS
Current assets
Cash and cash equivalents $
253,388 $
270,806
Time deposits with maturities over three months 212,997 168,999
Restricted cash 18,931 16,897
Accounts receivable, net of allowance for
doubtful accounts of $46,177 and $45,125 as of
March 31,2019 and December 31, 2018,
respectively 263,614 272,008
Costs and estimated earnings in excess of
billings, net of allowance for doubtful
accounts of $8,024 and $7,881 as of March 31,
2019 and December 31, 2018, respectively 226,896 221,581
Other receivables, net of allowance for
doubtful accounts of $4,741 and $4,914 as of
March 31, 2019 and December 31, 2018,
respectively 21,119 18,470
Advances to suppliers 11,262 15,374
Amounts due from related parties 38,182 33,424
Inventories 45,278 35,568
Prepaid expenses 927 911
Income tax recoverable 283 276
Total current assets 1,092,877 1,054,314
Non-current assets
Restricted cash 4,156 4,076
Prepaid expenses 4 4
Property, plant and equipment, net 80,002 75,119
Prepaid land leases 9,910 9,832
Intangible assets, net 1,492 1,540
Investments in equity investees 47,421 52,708
Investments in cost investees 4,879 4,785
Goodwill 48,671 48,346
Deferred tax assets 12,584 11,714
Total non-current
assets 209,119 208,124
Total assets 1,301,996 1,262,438
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Derivative financial liability 432 432
Short-term bank loans 2,033 2,215
Current portion of long-term loans 20,297 20,258
Accounts payable 116,276 116,362
Deferred revenue 137,840 141,365
Accrued payroll and related expenses 11,794 19,557
Income tax payable 4,259 3,668
Warranty liabilities 5,409 5,318
Other tax payables 13,951 6,054
Accrued liabilities 21,689 23,322
Amounts due to related parties 4,982 4,596
Total current
liabilities 338,962 343,147
Non-current
liabilities
Accrued liabilities 6,000 5,885
Long-term loans 914 900
Deferred tax liabilities 11,284 12,083
Warranty liabilities 2,536 2,363
Total non-current
liabilities 20,734 21,231
Total liabilities 359,696 364,378
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 March 31,
2019 and December 31, 2018 60 60
Additional paid-in capital 223,597 223,547
Statutory reserves 48,706 46,283
Retained earnings * 686,561 660,329
Accumulated other comprehensive income (16,796) (32,281)
Total Hollysys
Automation
Technologies Ltd.
stockholder's equity 942,128 897,938
Non-controlling interests 172 122
Total equity 942,300 898,060
Total liabilities and
equity $
1,301,996 $
1,262,438
* 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 Nine months
ended ended
Mar 31, 2019 Mar 31, 2019
(Unaudited) (Unaudited)
Cash flows from operating activities:
Net income $
28,018 $
100,136
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation of property, plant and equipment 2,094 5,920
Amortization of prepaid land leases 66 198
Amortization of intangible assets 78 234
Allowance for doubtful accounts 50 564
Loss on disposal of property, plant and
equipment 5 43
Share of net loss from equity investees 885 1,172
Share-based compensation expenses 50 201
Deferred income tax expenses (1,602) (2,501)
Accretion of convertible bond 57 172
Fair value adjustments of a bifurcated
derivative 20
Gains on deconsolidation of a subsidiary (1,020) (5,768)
Dividends received from an equity investee 5,527 5,527
Changes in operating assets and liabilities:
Accounts receivable 12,744 3,702
Costs and estimated earnings in excess of
billings (204) (27,907)
Inventories (8,709) (5,106)
Advances to suppliers 4,347 (3,495)
Other receivables (2,359) 8,986
Deposits and other assets (8) (219)
Due from related parties (4,074) 5,497
Accounts payable (1,876) (9,759)
Deferred revenue (5,894) 4,526
Accruals and other payables (11,299) (1,661)
Due to related parties 293 (2,019)
Income tax payable 534 6,809
Other tax payables 7,531 1,442
Net cash provided by operating activities 25,234 86,714
Cash flows from investing activities:
Time deposits placed with banks (93,777) (250,717)
Purchases of property, plant and equipment (4,192) (5,426)
Proceeds from disposal of property, plant and
equipment 7 258
Maturity of time deposits 52,693 175,548
Investment of an equity investee (740)
Cash reduced upon deconsolidation of subsidiary (1,878)
Net cash used in investing activities (45,269) (82,955)
Cash flows from financing activities:
Proceeds from short-term bank loans 1,721 4,927
Repayments of short-term bank loans (1,917) (5,472)
Proceeds from long-term bank loans 142 474
Repayments of long-term bank loans (103) (402)
Payment of Dividends (10,862)
Net cash used in financing activities (157) (11,335)
Effect of foreign exchange rate changes 4,888 (3,258)
Net decrease increase in cash, cash equivalents
and restricted cash $
(15,304) (10,834)
Cash, cash equivalents and restricted cash,
beginning of period $
291,779 287,309
Cash, cash equivalents and restricted cash, end
of period 276,475 276,475
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 Nine months ended
Mar 31, Mar 31,
2019 2018 2019 2018
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
Cost of integrated contracts $
70,818 $
73,297 $
232,411 $
229,295
Less: Amortization of acquired intangible assets 78 128 234 279
Non-GAAP cost of integrated contracts $
70,740 $
73,169 $
232,177 $
229,016
General and administrative expenses $
8,793 $
7,874 $
29,140 $
31,333
Less: Share-based compensation expenses 50 129 201 581
Non-GAAP general and administrative expenses $
8,743 $
7,745 $
28,939 $
30,752
Other income, net $
1,190 $
352 $
7,665 $
3,062
Add: Fair value adjustments of a bifurcated derivative 20
Non-GAAP other income, net $
1,190 $
352 $
7,685 $
3,062
Net income attributable to Hollysys Automation Technologies Ltd. $
27,968 $
21,842 $
100,004 $
79,433
Add:
Share-based compensation expenses 50 129 201 581
Amortization of acquired intangible assets 78 128 234 279
Fair value adjustments of a bifurcated derivative 20 -
Non-GAAP net income attributable to Hollysys Automation Technologies Ltd. $
28,096 $
22,099 $
100,459 $
80,293
Weighted average number of basic ordinary shares 60,459,370 60,436,871 60,453,704 60,431,201
Weighted average number of diluted ordinary shares 61,276,829 61,296,907 61,273,073 61,245,982
Non-GAAP basic earnings per share $
0.46 $
0.37 $
1.66 $
1.33
Non-GAAP diluted earnings per share $
0.46 $
0.36 $
1.65 $
1.32
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SOURCE Hollysys Automation Technologies, Ltd
