Hollysys Automation Technologies Reports Unaudited Financial Results for the Second Quarter and the First Half Year Ended December 31, 2019
First Half of Fiscal Year 2020 Financial Highlights
-- Non-GAAP net income attributable to Hollysys was $63.9 million, a
decrease of 11.6% compared to the comparable prior year period.
-- Total revenues were $293.3 million, an increase of 1.8% compared to the
comparable prior year period.
-- Non-GAAP gross margin was at 36.9%, compared to 37.7% for the comparable
prior year period.
-- Non-GAAP diluted EPS was $1.06, a decrease of 10.9% compared to the
comparable prior year period.
-- Net cash provided by operating activities was $109.4 million for the
current period.
-- DSO of 168 days, compared to 171 days for the comparable prior year
period.
-- Inventory turnover days of 42 days, compared to 51 days for the
comparable prior year period.
Second Quarter of Fiscal Year 2020 Financial Highlights
-- Non-GAAP net income attributable to Hollysys was $34.2 million, a
decrease of 22.9% compared to the comparable prior year period.
-- Total revenues were $170.1 million, an increase of 13.8% compared to the
comparable prior year period.
-- Non-GAAP gross margin was at 36.3%, compared to 38.2% for the comparable
prior year period.
-- Non-GAAP diluted EPS were at $0.56, a decrease of 23.3% compared to the
comparable prior year period.
-- Net cash provided by operating activities was $70.5 million for the
current quarter.
-- DSO of 137 days, compared to 157 days for the comparable prior year
period.
-- Inventory turnover days of 39 days, compared to 39 days for the
comparable prior year period.
BEIJING, Feb. 19, 2020 /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 first half of fiscal year 2020 ended December 31, 2019 (see attached tables). The management of Hollysys, stated:
Industrial Automation ("IA") business finished the second quarter with revenue and contract at $69.3 million and $69.5 million, achieving 40.1% and 58.2% YOY growth, respectively. For the first half of the fiscal year, IA revenue and contract achieved 25.0% and 23.6% YOY growth, respectively.
-- In coal fire sector, despite slowdown in new construction market,
performance in aftersales remained healthy as we kept responding to
various demands from our existing customers in face of the replacement
cycle. We offered system upgrade and modification, security product and
regular maintenance, etc. that addressed the currently installed
solutions in part or in whole.
-- Our chemical and petro-chemical sector continued to see healthy growth,
thanks to our efforts in organization optimization, talent recruitment,
marketing and relationship maintenance, etc. With our quality in the
previous milestone project being recognized by clients, we moved on to
prepare for project quality assessment seminar to seek wider recognition
in the industry. To better showcase our capability, we have also
constructed a demo center for high-end ethylene project. Meanwhile, we
kept improving our solution for the industry through internal R&D and
cooperation with external parties. In the oil and gas vertical, we won a
new bidding this quarter in providing control solution to the Central
Equipment Platform (CEP) of the oil field for CNOOC (China National
Offshore Oil Corporation). It was also the first time that the client
has adopted domestic control solution on such production site. Going
forward, with successful projects as track record and with solid
technology and quality engineering as the gene of the Company, we will
maintain close interaction with the client base to gradually spread the
concept that Hollysys is a qualified provider for the chemical and
petro-chemical industry.
-- In smart factory sector, our boiler combustion optimization solution, a
solution within our industrial software matrix tailored-developed for
power-generating-related business, has gained wider acceptance. The
solution was widely welcomed by our customers, as we have received
numerous feedbacks from customers acknowledging the value of our
solution in cutting production cost and improving production stability.
We are continuing our internal R&D effort while also actively
collaborating with external parties along the value chain to expand and
improve the solution within our industrial software matrix.
Under the "3+1+N" strategy, we continued the effort to integrate internal sales platform for better cross selling. We expect such effort will put us in a better position to utilize the specialties of each member company for the offering of total solution of the Company. Meanwhile, we signed an EPC contract in December for a chemical project, in which we assumed the role as the general contractor. Such contract marked a step further toward our vision of offering comprehensive solution covering project full life cycle.
Rail business finished the second quarter with revenue and contract at $78.8 million and $104.2 million, recording 24.1% YOY growth and 39.8% YOY decrease, respectively. For the first half of the fiscal year, revenue and contract recorded 8.4% YOY growth and 48.8% YOY decrease, respectively.
-- In high-speed rail sector, we signed contracts of 40 sets of C3 ATP this
quarter. Meanwhile, we kept responding to the replacement demand of our
customers. In project delivery, several new lines commenced operation
this quarter, including Wuhan-Shiyan line, Zhengzhou-Xiangyang section
of the Zhengzhou-Wanzhou line, Zhengzhou-Fuyang line,
Qianjiang-Zhangjiajie-Changde line, Beijing-Zhangjiakou line and
Zhangjiakou-Datong line. Solutions that we have provided to these lines
include TCC (Train Control Center), RBC (Radio Block Center), TSRS
(Temporary Speed Restriction System) and LEU (Lineside Electronic Unit),
etc.
-- In subway sector, we signed an SCADA contract for Kunming Subway line 5.
In project delivery, we completed the Chengdu subway line 5 SCADA
project and were honored with the title "outstanding equipment
provider". We have also fully delivered Phase one of Hohhot subway line
1 cloud-based SCADA project. In this project, though given limited
execution time, we have showcased our consistency in quality
engineering. Through optimizing system deployment and promoting better
standardization in early stage, we have improved efficiency in design
and product delivery, while paving the way for easier maintenance
afterwards.
-- In subway signaling sector, we signed a contract in October to provide
CBTC to a 3-kilometer-long tramcar transportation within Kunming
Changshui Airport. With a value of around 25 million RMB, this is a
milestone contract in which the total function of our CBTC was fully
applied in the field.
Going forward, our rail business 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 systems in the future.
M&E business finished the quarter with revenue and contract at $22.0 million and $12.0 million, recording 39.7% and 67.2% YOY decrease respectively. For the first half of the fiscal year, revenue and contract recorded 46.4% and 11.0% YOY decrease 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 our direct sales and overseas EPC project, progress is constantly made in terms of establishment of new cooperation with new key EPC players as well as ongoing cooperation with existing partners.
To prepare our overseas business for the new era of development, further actions were taken following the upgrade of our Singapore overseas headquarter in mid-2019. We have recently undertaken organization adjustment and appointed a new head to lead the Singapore headquarter. With those actions taken as a beginning, we expect to upgrade our overseas business with improved management, marketing, R&D capability and deeper localization, and to create better synergy between all overseas businesses.
In response to the outbreak of the novel coronavirus, the Company has taken necessary actions to minimize the risk of spread of disease and adverse effects on the Company's business operation. Since late January, we have been monitoring the health condition of our employees through on-going online survey. Starting from early February, we have been implementing a two-week-long work-from-home scheme. Meanwhile, we have set forth general rules of action for operation in each of our bases for precautionary purpose. For particular urgent projects covering R&D, production and engineering, staff has been requested for on-site work in accordance with the rules of action. Going further, we are planning to gradually resume on-site work with the staff density in our bases being prudently controlled. However the potential downturn brought by and the duration of the coronavirus is difficult to assess or predict where actual effects will depend on many factors beyond our control. We are closely monitoring its impact on us. Our business, results of operations, financial conditions and prospects could be adversely affected directly, as well as to the extent that the coronavirus harms the Chinese economy in general.
Second Quarter and First Half Year Ended December 31, 2019 Unaudited Financial Results Summary
(In USD thousands, except for number of shares and per share data)
---
Three months ended
Six months ended
December
December
%
December
December
%
31, 2019 31, 2018 Change 31, 2019 31, 2018 Change
Revenues $
170,109 149,464 13.8% $
293,338 288,182 1.8%
Integrated solutions contracts revenue $
129,675 116,683 11.1% $
234,141 233,333 0.3%
Products sales $
6,539 5,917 10.5% $
12,661 13,957 (9.3)%
Service rendered $
33,895 26,864 26.2% $
46,536 40,892 13.8%
Cost of revenues $
108,278 92,389 17.2% $
185,049 179,567 3.1%
Gross profit $
61,831 57,075 8.3% $
108,289 108,615 (0.3)%
Total operating expenses $
28,511 15,076 89.1% $
51,803 36,576 41.6%
Selling $
10,392 7,860 32.2% $
17,670 15,569 13.5%
General and administrative $
10,591 11,626 (8.9)% $
21,184 20,196 4.9%
Research and development $
13,806 10,402 32.7% $
22,748 19,170 18.7%
VAT refunds and government subsidies $
(6,278) (14,812) (57.6)% $
(9,799) (18,359) (46.6)%
Income from operations $
33,320 41,999 (20.7)% $
56,486 72,039 (21.6)%
Other income, net $
1,301 5,937 (78.1)% $
3,327 6,495 (48.8)%
Foreign exchange (loss) gain $
(59) (704) (91.6)% $
545 (827) (165.9)%
Gains on disposal of investments in an
$ $
5,763
equity investee
Share of net income (loss) of equity $
1,997 (386) (617.4)% $
3,538 (287) (1332.8)%
investees
Dividend income from equity security $
1,145 1,115 2.7% $
1,145 1,113 2.9%
investments
Interest income $
3,099 2,894 7.1% $
6,128 5,995 2.2%
Interest expenses $
(6) (210) (97.1)% $
(119) (316) (62.3)%
Income tax expenses $
6,792 6,312 7.6% $
13,001 11,767 10.5%
Net (loss) income attributable to non- $
(151) 37 (508.1)% $
(125) 83 (250.6)%
controlling interests
Non-GAAP net income attributable to $
34,156 44,296 (22.9)% $
63,937 72,362 (11.6)%
Hollysys Automation Technologies Ltd.
Non-GAAP basic EPS $
0.56 0.73 (23.3)% $
1.06 1.20 (11.7)%
Non-GAAP diluted EPS $
0.56 0.73 (23.3)% $
1.06 1.19 (10.9)%
Share-based compensation expenses $
15 67 (77.6)% $
40 151 (73.5)%
Amortization of acquired intangible assets $
75 75 0.0% $
151 155 (2.6)%
Fair value adjustments of a bifurcated
$ 20 (100.0)%
$ 20 (100.0)%
derivative
GAAP Net income attributable to Hollysys $
34,066 44,134 (22.8)% $
63,746 72,036 (11.5)%
Automation Technologies Ltd.
GAAP basic EPS $
0.56 0.73 (23.3)% $
1.05 1.19 (11.8)%
GAAP diluted EPS $
0.56 0.72 (22.2)% $
1.05 1.18 (11.0)%
Basic weighted average common shares 60,538,111 60,453,770 0.1% 60,504,151 60,450,930 0.1%
outstanding
Diluted weighted average common shares 60,552,527 61,273,353 (1.2)% 60,517,798 61,271,864 (1.2)%
outstanding
Operational Results Analysis for the Second Quarter Ended December 31, 2019
Comparing to the second quarter of the prior fiscal year, the total revenues for the three months ended December 31 2019 increased from $149.5 million to $170.1 million, representing an increase of 13.8%. Broken down by the revenue types, integrated contracts revenue increased by 11.1% to $129.7 million, products sales revenue increased by 10.5% to $6.5 million, and services revenue increased by 26.2% to $33.9 million.
The Company's total revenues can also be presented in segments as shown in the following chart:
(In USD thousands)
Three months ended December 31, Six months ended December 31,
2019 2018 2019 2018
$ % to Total
$ % to
$ % to Total
$ % to
Revenue Total Revenue Total
Revenue Revenue
Industrial Automation 69,291 40.7% 49,458 33.1% 133,927 45.6% 107,177 37.2%
Rail Transportation Automation 78,823 46.3% 63,503 42.5% 123,399 42.1% 113,871 39.5%
Mechanical and Electrical 21,995 13.0% 36,503 24.4% 36,012 12.3% 67,134 23.3%
Solution
Total 170,109 100.0% 149,464 100.0% 293,338 100.0% 288,182 100.0%
Overall gross margin excluding non-cash amortization of acquired intangibles (non-GAAP gross margin) was 36.3% for the three months ended December 31, 2019, as compared to 38.2% for the same period of the prior year. The non-GAAP gross margin for integrated contracts, product sales, and services rendered were 28.0%, 66.4% and 62.6% for the three months ended December 31, 2019, as compared to 30.8%, 72.0% and 62.9% for the same period of the prior year, respectively. The gross margin fluctuated mainly due to the different revenue mix with different margins. The GAAP overall gross margin which includes non-cash amortization of acquired intangibles was 36.3% for the three months ended December 31, 2019, as compared to 38.1% for the same period of the prior year. The GAAP gross margin for integrated contracts, product sales, and service rendered was 27.9%, 66.4% and 62.6% for the three months ended December 31, 2019, as compared to 30.7%, 72.0% and 62.9% for the same period of the prior year, respectively.
Selling expenses were $10.4 million for the three months ended December 31, 2019, representing an increase of $2.5 million or 32.2% compared to $7.9 million for the same quarter of the prior year, mainly due to increased sales activities. Presented as a percentage of total revenues, selling expenses were 6.1% and 5.3% for the three months ended December 31, 2019, and 2018, respectively.
General and administrative expenses, excluding non-cash share-based compensation expenses (non-GAAP G&A expenses), were $10.6 million for the quarter ended December 31, 2019, representing a decrease of $1.0 million or 8.9% compared to $11.6 million for the same quarter of the prior year. Presented as a percentage of total revenues, non-GAAP G&A expenses were 6.2% and 7.8% for quarters ended December 31, 2019 and 2018, respectively. The GAAP G&A expenses which include the non-cash share-based compensation expenses were $10.6 million and $11.7 million for the three months ended December 31, 2019 and 2018, respectively.
Research and development expenses were $13.8 million for the three months ended December 31, 2019, representing an increase of $3.4 million or 32.7% compared to $10.4 million for the same quarter of the prior year, mainly due to increased research and development activities. Presented as a percentage of total revenues, R&D expenses were 8.1% and 7.0% for the quarter ended December 31, 2019 and 2018, respectively.
The VAT refunds and government subsidies were $6.3 million for three months ended December 31, 2019, as compared to $14.8 million for the same period in the prior year, representing a $8.5 million or 57.6% decrease, which was primarily due to decrease of the VAT refunds.
The income tax expenses and the effective tax rate were $6.8 million and 16.7% for the three months ended December 31, 2019, respectively, as compared to $6.3 million and 12.5% for comparable prior year period, respectively,. The effective tax rate fluctuated 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 the grant-date fair value of shares or options granted, amortization of acquired intangible assets, and fair value adjustments of a bifurcated derivative, was $34.2 million or $0.56 per diluted share based on 60.6 million diluted weighted average ordinary shares outstanding for the three months ended December 31, 2019. This represents a 22.9% decrease from $44.3 million or $0.73 per share based on 61.3 million diluted weighted average ordinary shares outstanding reported in the comparable prior year period. On a GAAP basis, net income attributable to Hollysys was $34.1 million or $0.56 per diluted share representing a decrease of 22.8% from $44.1 million or $0.72 per diluted share reported in the comparable prior year period.
Contracts and Backlog Highlights
Hollysys achieved $185.7 million of new contracts for the three months ended December 31, 2019. The backlog as of December 31, 2019 was $587.0 million. The detailed breakdown of new contracts and backlog by segments is shown below:
New contracts achieved Backlog
for the three months as of December 31, 2019
ended December 31, 2019
(In USD % to Total
(In USD % to Total
thousands) Contract thousands) Backlog
Industrial Automation 69,477 37.5% 192,445 32.8%
Rail Transportation 104,212 56.1% 307,291 52.3%
Mechanical and Electrical Solutions 11,970 6.4% 87,312 14.9%
Total 185,659 100.0% 587,048 100.0%
Cash Flow Highlights
For the three months ended December 31, 2019, the total net cash inflow was $52.8 million. The net cash provided by operating activities was $70.5 million. The net cash used in investing activities was $10.1 million and mainly consisted of 2.4 million purchases of property, plant and equipment, and $27.2 million of time deposits placed with banks, which were partially offset by $19.4 million of matured time deposits. The net cash used in financing activities was $13.7 million and mainly consisted of $12.7 million payment of dividends.
Balance Sheet Highlights
The total amount of cash and cash equivalents were $403.9 million, $340.0 million, and $270.8 million as of December 31, 2019, September 30, 2019 and December 30, 2018, respectively.
For the three months ended December 31, 2019, DSO was 137 days, as compared to 157 days for the comparable prior year period and 204 days for the last quarter; and inventory turnover was 39 days, as compared to 39 days for the comparable prior year period and 56 days for the last quarter.
Conference Call
The Company will host a conference call at 8:00 pm February 19, 2020 U.S. Eastern Time / 9:00 am February 20, 2020 Beijing Time, to discuss the financial results for fiscal year 2020 second quarter ended December 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 6396705.
Standard International Dial-In
Number:
+65 67135090
Participant Local Dial-In
Numbers:
Australia, Sydney
+61 290833212
China, Domestic 4006208038
China, Domestic Landline only 8008190121
China, Hong Kong
+852 30186771
China, Taiwan
+886 255723895
Japan, Tokyo
+81 345036012
Korea (South), Seoul
+82 27395177
United Kingdom, London
+44 2036214779
United States, New York
+1 8456750437
Participant ITFS Dial-In
Numbers:
Australia, 1800411623
Australia, 1300717205
Belgium 080071900
Canada 18663861016
France 0800912761
Germany 08001820671
China, Hong Kong 800906601
China, Taiwan 0809091568
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, PLDT Access Only 180016120306
Switzerland 0800561006
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 June 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.
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
December 31, December 31,
2019 2018 2019 2018
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
Net revenues
Integrated solutions contracts revenue $
129,675 $
116,683 $
234,141 $
233,333
Products sales 6,539 5,917 12,661 13,957
Revenue from services 33,895 26,864 46,536 40,892
Total net revenues 170,109 149,464 293,338 288,182
Costs of integrated solutions contracts 93,485 80,845 163,985 161,593
Cost of products sold 2,199 1,654 3,430 3,662
Costs of services rendered 12,669 9,965 17,785 14,467
Gross profit 61,756 57,000 108,138 108,460
Operating expenses
Selling 10,392 7,860 17,670 15,569
General and administrative 10,606 11,693 21,224 20,347
Research and development 13,806 10,402 22,748 19,170
VAT refunds and government subsidies (6,278) (14,812) (9,799) (18,359)
Total operating expenses 28,526 15,143 51,843 36,727
Income from operations 33,230 41,857 56,295 71,733
Other income, net 1,301 5,917 3,327 6,475
Foreign exchange (loss) gain (59) (704) 545 (827)
Gains on disposal of investments in an equity investee 5,763
Share of net income (loss) of equity investees 1,997 (386) 3,538 (287)
Dividend income from equity security investments 1,145 1,115 1,145 1,113
Interest income 3,099 2,894 6,128 5,995
Interest expenses (6) (210) (119) (316)
Income before income taxes 40,707 50,483 76,622 83,886
Income taxes expenses 6,792 6,312 13,001 11,767
Net income 33,915 44,171 63,621 72,119
Net (loss) income attributable to non-controlling interests (151) 37 (125) 83
Net income attributable to Hollysys Automation $
34,066 $
44,134 $
63,746 $
72,036
Technologies Ltd.
Other comprehensive income (loss), net of tax of nil
Translation adjustments 20,921 2,661 (13,253) (27,090)
Comprehensive income 54,836 46,832 50,368 45,029
Less: comprehensive income (loss) attributable to non- 977 (224) 951 (179)
controlling interests
Comprehensive income attributable to Hollysys $
53,859 $
47,056 $
49,417 $
45,208
Automation Technologies Ltd.
Net income per ordinary share:
Basic 0.56 0.73 1.05 1.19
Diluted 0.56 0.72 1.05 1.18
Shares used in net income per share computation:
Weighted average number of ordinary shares 60,538,111 60,453,770 60,504,151 60,450,930
Weighted average number of diluted ordinary shares 60,552,527 61,273,353 60,517,798 61,271,864
HOLLYSYS AUTOMATION TECHNOLOGIES LTD.
CONSOLIDATED BALANCE SHEETS
(In USD thousands except for number of shares and per share data)
December 31, September 30,
2019 2019
(Unaudited) (Unaudited)
ASSETS
Current assets
Cash and cash equivalents $
403,860 $
339,932
Time deposits with maturities over three months 146,745 136,200
Restricted cash 19,985 30,288
Accounts receivable, net of allowance for doubtful accounts of $45,348 and 239,492 245,696
$44,875 as of December 31, 2019 and September 30, 2019, respectively
Costs and estimated earnings in excess of billings, net of allowance for doubtful 227,490 192,201
accounts of $6,672 and $7,807 as of December 31, 2019 and September 30,
2019, respectively
Accounts receivable retention 4,911 11,660
Other receivables, net of allowance for doubtful accounts of $4,390 and $4,840 23,173 25,274
as of December 31, 2019 and September 30, 2019, respectively
Advances to suppliers 17,522 22,825
Amounts due from related parties 26,515 29,832
Inventories 35,596 46,319
Prepaid expenses 510 391
Income tax recoverable 288 1,832
Total current assets 1,146,087 1,082,450
Non-current assets
Restricted cash 2,657 3,485
Costs and estimated earnings in excess of billings 2,700 4,828
Accounts receivable retention 7,300 7,785
Prepaid expenses 10 8
Property, plant and equipment, net 78,059 72,718
Prepaid land leases 16,224 15,977
Intangible assets, net 1,208 1,258
Investments in equity investees 40,077 37,319
Investments securities 4,693 4,600
Goodwill 37,845 36,298
Deferred tax assets 8,328 9,313
Operating lease right-of-use assets 5,259 5,262
Total non-current assets 204,360 198,851
Total assets 1,350,447 1,281,301
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Short-term bank loans 1,436 1,585
Current portion of long-term loans 319 307
Dividends payable 12,672
Accounts payable 115,166 109,519
Construction costs payable 1,289 86
Deferred revenue 142,025 135,519
Accrued payroll and related expenses 21,473 15,577
Income tax payable 4,795 2,669
Warranty liabilities 6,597 8,212
Other tax payables 4,481 1,245
Accrued liabilities 29,337 28,139
Amounts due to related parties 4,218 3,714
Operating lease liabilities 1,673
Total current liabilities 332,809 319,244
Non-current liabilities
Accrued liabilities 7,620 5,084
Long-term loans 896 890
Accounts payable 3,824 4,473
Deferred tax liabilities 13,146 13,251
Warranty liabilities 4,117 3,245
Operating lease liabilities 3,180 5,072
Total non-current liabilities 32,783 32,015
Total liabilities 365,592 351,259
Commitments and contingencies -
Stockholders' equity:
Ordinary shares, par value $0.001 per share, 100,000,000 shares authorized; 61 60
60,537,099 shares and 60,342,099 shares issued and outstanding as of
December 31, 2019 and September 30, 2019
Additional paid-in capital 223,675 223,660
Statutory reserves 49,427 48,698
Retained earnings 758,819 725,521
Accumulated other comprehensive income (49,852) (69,645)
Total Hollysys Automation Technologies Ltd. stockholder's equity 982,130 928,294
Non-controlling interests 2,725 1,748
Total equity 984,855 930,042
Total liabilities and equity $
1,350,447 $
1,281,301
HOLLYSYS AUTOMATION TECHNOLOGIES LTD
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In USD thousands).
Three months ended Six months ended
December 31, 2019 December 31, 2019
---
(Unaudited) (Unaudited)
Cash flows from operating activities:
Net income $
33,915 $
63,621
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation of property, plant and equipment 2,185 4,602
Amortization of prepaid land leases 99 197
Amortization of intangible assets 75 151
Allowance for doubtful accounts (120) 596
Loss on disposal of property, plant and equipment 3 10
Share of net income of equity investees (1,997) (3,538)
Share-based compensation expenses 15 40
Deferred income tax expenses 924 6,235
Accretion of convertible bond 57
Gains on deconsolidation of an equity investee (5,763)
Changes in operating assets and liabilities:
Accounts receivable and retention 22,761 39,851
Costs and estimated earnings in excess of billings (29,001) (35,083)
Inventories 11,642 6,650
Advances to suppliers 5,755 (4,812)
Other receivables 2,683 3,687
Deposits and other assets (111) 128
Due from related parties 3,924 9,147
Accounts payable 3,647 10,794
Deferred revenue (814) 2,865
Accruals and other payables 7,579 1,861
Due to related parties 504 (1,178)
Income tax payable 3,648 5,541
Other tax payables 3,173 3,789
Net cash provided by operating activities 70,489 109,448
Cash flows from investing activities:
Time deposits placed with banks (27,208) (55,050)
Purchases of property, plant and equipment (2,372) (2,863)
Proceeds from disposal of property, plant and equipment 234 292
Maturity of time deposits 19,446 51,326
Acquisition of a subsidiary, net of cash acquired (150) (150)
Proceeds from disposal of investments in equity investee 4,458
Net cash used in investing activities (10,050) (1,987)
Cash flows from financing activities:
Proceeds from short-term bank loans 932 2,274
Repayments of short-term bank loans (1,120) (2,752)
Proceeds from long-term bank loans 136 177
Repayments of long-term bank loans (158) (260)
Payment of dividends (12,713) (12,713)
Repayments of bonds payable (758) (20,753)
Net cash used in financing activities (13,681) (34,027)
Effect of foreign exchange rate changes 6,039 (5,319)
Net increase in cash, cash equivalents and restricted cash $
52,797 68,115
Cash, cash equivalents and restricted cash, beginning of period $
373,705 358,387
Cash, cash equivalents and restricted cash, end of period 426,502 426,502
Non-GAAP Measures
In evaluating our results, the non-GAAP measures of "Non-GAAP cost of integrated contracts", "Non-GAAP general and administrative expenses", "Non-GAAP other income (expenses), net", "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 the non-GAAP measures with the most directly comparable U.S. GAAP measures for the periods indicated:
(In USD thousands, except for number of shares and per share data)
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Three months ended Six months ended
December 31, December 31,
2019 2018 2019 2018
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
Cost of integrated solutions contracts $
93,485 $
80,845 $
163,985 $
161,593
Less: Amortization of acquired intangible assets 75 75 151 155
Non-GAAP cost of integrated solutions contracts $
93,410 $
80,770 $
163,834 $
161,438
General and administrative expenses $
10,606 $
11,693 $
21,224 $
20,347
Less: Share-based compensation expenses 15 67 40 151
Non-GAAP general and administrative expenses $
10,591 $
11,626 $
21,184 $
20,196
Other
income
, net $
1,301 5,917 3,327 6,475
Add: Fair value adjustments of a bifurcated derivative 20 20
Non-GAAP other
income
, net $
1,301 5,937 3,327 6,495
Net income attributable to Hollysys Automation Technologies $
34,066 $
44,134 $
63,746 $
72,036
Ltd.
Add:
Share-based compensation expenses 15 67 40 151
Amortization of acquired intangible assets 75 75 151 155
Fair value adjustments of a bifurcated
derivative 20 20
Non-GAAP net income attributable to Hollysys Automation $
34,156 $
44,296 $
63,937 $
72,362
Technologies Ltd.
Weighted average number of basic ordinary
shares 60,538,111 60,453,770 60,504,151 60,450,930
Weighted average number of diluted ordinary
shares 60,552,527 61,273,353 60,517,798 61,271,864
Non-GAAP basic earnings per share $
0.56 $
0.73 $
1.06 $
1.20
Non-GAAP diluted earnings per share $
0.56 $
0.73 $
1.06 $
1.19
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SOURCE Hollysys Automation Technologies, Ltd
