Hollysys Automation Technologies Reports Unaudited Financial Results for the Third Quarter and the First Nine Months Ended March 31, 2020
First Nine months of Fiscal Year 2020 Financial Highlights
-- Non-GAAP net income attributable to Hollysys was $77.9 million, a
decrease of 22.5% compared to the comparable prior year period.
-- Total revenues were $374.1 million, a decrease of 9.5% compared to the
comparable prior year period.
-- Non-GAAP gross margin was at 35.6%, compared to 38.3% for the comparable
prior year period.
-- Non-GAAP diluted EPS was $1.28, a decrease of 22.0% compared to the
comparable prior year period.
-- Net cash provided by operating activities was $117.5 million for the
current period.
-- DSO of 188 days, compared to 176 days for the comparable prior year
period.
-- Inventory turnover days of 57 days, compared to 59 days for the
comparable prior year period.
Third Quarter of Fiscal Year 2020 Financial Highlights
-- Non-GAAP net income attributable to Hollysys was $13.9 million, a
decrease of 50.4% compared to the comparable prior year period.
-- Total revenues were $80.8 million, a decrease of 35.5% compared to the
comparable prior year period.
-- Non-GAAP gross margin was at 30.8%, compared to 39.6% for the comparable
prior year period.
-- Non-GAAP diluted EPS were at $0.23, a decrease of 50.0% compared to the
comparable prior year period.
-- Net cash provided by operating activities was $8.0 million for the
current quarter.
-- DSO of 266 days, compared to 193 days for the comparable prior year
period.
-- Inventory turnover days of 71 days, compared to 50 days for the
comparable prior year period.
BEIJING, May 14, 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 fiscal year 2020 third quarter ended March 31, 2020 (see attached tables). The management of Hollysys, stated:
COVID-19 has laid negative impact on our business. Contract bidding and project execution were delayed for Industrial Automation ("IA") and rail business and only started to recover starting in March. In response to such impact, we have actively prepared internal work in advance, including staff training, marketing preparation, solution improvement, internal testing, etc. while also maintained communication with clients to the greatest extent, and made procurement in advance to counter the uncertainty of overseas supply chain. With the reopening of economy in China, we expect our business to recover to its normal course. Going forward, the Company will be imposing more stringent criteria on cash collection and payment, contract quality and expense.
IA business finished the third quarter with revenue and contract at $34.2 million and $63.2 million, representing 43.0% and 24.7% YOY decrease, respectively. For the first nine months of the fiscal year, IA revenue and contract achieved 0.5% and 4.1% YOY growth, respectively.
-- In coal fire sector, we continued our effort in strengthening our market
position in high-end market and won the bidding for Xinjiang Wucaiwan
2*660MW power units this quarter.
-- In chemical and petro-chemical sector, we continued our effort in key
bidding tracking. Several major contracts that we signed this quarter
include a 5 million tons/year oil treatment DCS upgrade project for
Sinopec and a comprehensive surveillance project covering six LNG
(Liquidated Natural Gas) storage centers of Henan Natural Gas Storage &
Logistics Company, where we provided a wide range of solutions including
SCADA, DCS, SIS, and GDS (Gas Detection System) etc. To assist with our
market penetration strategy, we kept improving our solution and product
through internal R&D and cooperation with external parties, with
particular focus in the vertical of coal-chemical and oil & gas. We also
continued to build the reputation of the Company in the industry in
various manners, including industry conference, successful key project
demonstration, cooperation with experts, key clients strategic relation
management, etc.
-- In smart factory business, internal structural optimization was made as
we established the digital factory business unit ("BU"). The new BU will
be responsible for the marketing, solution and software development and
execution of smart factory project. We expect such change to lead to
more focused internal resource deployment for serving client of various
industries. As a comparison, the business used to be carried out
separately by different industry teams, with our advantageous power
industry being the primary focus. In solution preparation, we have
gradually improved our solution through internal R&D and external
cooperation for various industries, including oil & gas and fine
chemical.
-- Under the "3+1+N" strategy, we continued the effort to integrate the
sales platform of the Company for greater internal synergy, to develop
and strengthen our industrial cloud capacity covering cloud platform and
cloud-based software, and to expand our solution for full lifecycle
coverage. With the effort, we have made meaningful progress in
pharmaceutical business in terms of solution expansion, thanks to the
inclusion of design capacity and greater coordination between members of
the Company. In this quarter, key contracts of pharmaceutical business
include an engineering design contract with Shandong Fulkon, a renowned
domestic pharmaceutical producer, and three tens of millions RMB level
control system contracts.
Rail business finished the third quarter with revenue and contract at $28.7 million and $5.0 million, recording 38.7% and 86.0% YOY decrease, respectively. For the first nine months of the fiscal year, revenue and contract recorded 5.3% and 53.5% YOY decrease, respectively.
-- In high-speed rail ("HSR") sector, major contracts include an ATP
contract for cargo high-speed train, a TCC contract for Zhengzhou
section of the Taiyuan-Jiaozuo High-speed Railway and several aftersales
contracts covering part components, maintenance and upgrade.
-- In subway sector, no significant contracts were signed this quarter. On
quality management, following the successful delivery of Phase one of
Hohhot subway line 1 cloud-based SCADA project last quarter, subway
business continued to strengthen quality management, with particular
focus on supply chain management and engineering standardization. On
aftersales service, several contracts covering system upgrade and part
components were signed.
-- To actively address the aftersales opportunities in the market, rail
business has been implementing the "service transformation" strategy, to
strengthen local service network, to expand service solution and to
develop technology-and-service-centered service for better
differentiation. In HSR sector, other than the current aftersales
service provided to on-board products (ATP), we have been exploring and
developing service solution for on-ground products. In subway sector,
with current client base and numerous line under operation, we are
gradually reviewing existing projects for maintenance and upgrade
opportunities.
-- As part of the "3+1+N" strategy, rail business is actively executing the
digital empowerment for the current product line. New solutions on smart
maintenance and smart workshop for clients from HSR and subway have been
identified and are currently under development and testing. With
urbanization as an ongoing process, we will keep leveraging our strong
R&D capacity and prepare for the application of our solution in more
verticals of transportation in the future. Going forward, our rail
business will continue to adhere to the diversity strategy for stable
and healthy growth.
M&E business finished the quarter with revenue and contract at $17.9 million and $19.9 million, recording 2.6% YOY decrease and 18.6% YOY increase respectively. For the first nine months of the fiscal year, revenue and contract recorded 37.0% and 3.7% YOY decrease respectively.
Given the macro economy in Southeast Asia and the Middle East, as well as the outbreak of COVID-19 and its potential impact, 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.
In addition to our previous effort on overseas headquarter upgrade and appointment of overseas officer, we have set up a 3-year-long global management capacity action plan. The plan aims to gradually incorporate our current overseas business into the management system of the domestic business, and to ultimately build our global management capacity.
Third Quarter and First Nine Months Ended March 31, 2020 Unaudited Financial Results Summary
(In USD thousands, except for number of shares and per share data)
---
Three months ended
Nine months ended
March 31,
March 31,
%
March 31,
March 31,
%
2020 2019 Change 2020 2019 Change
Revenues $
80,768 125,167 (35.5)% $
374,106 413,350 (9.5)%
Integrated solutions contracts revenue $
67,673 101,285 (33.2)% $
301,814 334,618 (9.8)%
Products sales $
3,588 13,187 (72.8)% $
16,249 27,144 (40.1)%
Service rendered $
9,507 10,695 (11.1)% $
56,043 51,588 8.6%
Cost of revenues $
55,928 75,652 (26.1)% $
240,977 255,219 (5.6)%
Gross profit $
24,840 49,515 (49.8)% $
133,129 158,131 (15.8)%
Total operating expenses $
13,317 19,319 (31.1)% $
65,121 55,895 16.5%
Selling $
6,168 6,474 (4.7)% $
23,838 22,043 8.1%
General and administrative $
8,946 8,743 2.3% $
30,130 28,939 4.1%
Research and development $
10,221 8,655 18.1% $
32,969 27,825 18.5%
VAT refunds and government subsidies $
(12,018) (4,553) 164.0% $
(21,816) (22,912) (4.8)%
Income from operations $
11,523 30,196 (61.8)% $
68,008 102,236 (33.5)%
Other income, net $
1,031 1,190 (13.4)% $
4,357 7,685 (43.3)%
Foreign exchange gain (loss) $
98 (333) (129.4)% $
647 (1,163) (155.6)%
Gains on disposal of an investment in an
$ $
5,763
equity investee
Share of net income (loss) of equity $
570 (885) (164.4)% $
4,108 (1,172) (450.5)%
investees
Dividend income from equity security
$ $
1,141 1,116 2.2%
investments
Interest income $
3,271 2,978 9.9% $
9,399 8,973 4.7%
Interest expenses $
(16) (54) (70.4)% $
(135) (371) (63.6)%
Income tax expenses $
2,422 4,946 (51.0)% $
15,424 16,713 (7.7)%
Net income (loss) attributable to non- $
119 50 138.0% $
(7) 132 (105.3)%
controlling interests
Non-GAAP net income attributable to $
13,936 28,096 (50.4)% $
77,871 100,459 (22.5)%
Hollysys Automation Technologies Ltd.
Non-GAAP basic EPS $
0.23 0.46 (50.0)% $
1.29 1.66 (22.3)%
Non-GAAP diluted EPS $
0.23 0.46 (50.0)% $
1.28 1.65 (22.0)%
Share-based compensation expenses $
15 50 (70.0)% $
55 201 (72.6)%
Amortization of acquired intangible assets $
75 78 (3.8)% $
226 234 (3.4)%
Fair value adjustments of a bifurcated
$
$ 20 (100.0)%
derivative
GAAP Net income attributable to Hollysys $
13,846 27,968 (50.5)% $
77,590 100,004 (22.4)%
Automation Technologies Ltd.
GAAP basic EPS $
0.23 0.46 (50.0)% $
1.28 1.65 (22.4)%
GAAP diluted EPS $
0.23 0.46 (50.0)% $
1.28 1.64 (22.0)%
Basic weighted average common shares 60,552,099 60,459,370 0.2% 60,520,329 60,453,704 0.1%
outstanding
Diluted weighted average common shares 60,552,099 61,276,829 (1.2)% 60,694,045 61,273,073 (0.9)%
outstanding
Operational Results Analysis for the Third Quarter Ended March 31, 2020
Comparing to the third quarter of the prior fiscal year, the total revenues for the three months ended March 31 2020 decreased from $125.2 million to $80.8 million, representing a decrease of 35.5%. Broken down by the revenue types, integrated contracts revenue decreased by 33.2% to $67.7 million, products sales revenue decreased by 72.8% to $3.6 million, and services revenue decreased by 11.1% to $9.5 million.
The Company's total revenues can also be presented in segments as shown in the following chart:
(In USD thousands)
Three months ended March 31, Nine months ended March 31,
2020 2019 2020 2019
$ % to
$ % to
$ % to
$ % to
Total Total Total Total
Revenue Revenue Revenue
Revenue
Industrial Automation 34,228 42.4% 60,063 47.9% 168,155 45.0% 167,241 40.4%
Rail Transportation Automation 28,672 35.5% 46,759 37.4% 152,071 40.6% 160,630 38.9%
Mechanical and Electrical 17,868 22.1% 18,345 14.7% 53,880 14.4% 85,479 20.7%
Solution
Total 80,768 100.0% 125,167 100.0% 374,106 100.0% 413,350 100.0%
Overall gross margin excluding non-cash amortization of acquired intangibles (non-GAAP gross margin) was 30.8% for the three months ended March 31, 2020, as compared to 39.6% for the same period of the prior year. The non-GAAP gross margin for integrated contracts, product sales, and services rendered were 22.3%, 71.3% and 75.3% for the three months ended March 31, 2020, as compared to 30.2%, 85.6% and 71.9% 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 30.7% for the three months ended March 31, 2020, as compared to 39.5% for the same period of the prior year. The GAAP gross margin for integrated contracts, product sales, and service rendered was 22.2%, 71.3% and 75.3% for the three months ended March 31, 2020, as compared to 30.1%, 85.6% and 71.9% for the same period of the prior year, respectively.
Selling expenses were $6.2 million for the three months ended March 31, 2020, representing a decrease of $0.3 million or 4.7% compared to $6.5 million for the same quarter of the prior year. Presented as a percentage of total revenues, selling expenses were 7.6% and 5.2% for the three months ended March 31, 2020, and 2019, respectively.
General and administrative expenses, excluding non-cash share-based compensation expenses (non-GAAP G&A expenses), were $8.9 million for the quarter ended March 31, 2020, representing an increase of $0.2 million or 2.3% compared to $8.7 million for the same quarter of the prior year. Presented as a percentage of total revenues, non-GAAP G&A expenses were 11.1% and 7.0% for quarters ended March 31, 2020 and 2019, respectively. The GAAP G&A expenses which include the non-cash share-based compensation expenses were $9.0 million and $8.8 million for the three months ended March 31, 2020 and 2019, respectively.
Research and development expenses were $10.2 million for the three months ended March 31, 2020, representing an increase of $1.5 million or 18.1% compared to $8.7 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 12.7% and 6.9% for the quarter ended March 31, 2020 and 2019, respectively.
The VAT refunds and government subsidies were $12.0 million for three months ended March 31, 2020, as compared to $4.6 million for the same period in the prior year, representing a $7.4 million or 164.0% increase, which was primarily due to increase of the VAT refunds.
The income tax expenses and the effective tax rate were $2.4 million and 14.8% for the three months ended March 31, 2020, respectively, as compared to $4.9 million and 15.0% for comparable prior year period, respectively,.
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 $13.9 million or $0.23 per diluted share based on 60.6 million diluted weighted average ordinary shares outstanding for the three months ended March 31, 2020. This represents a 50.4% decrease from $28.1 million or $0.46 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 $13.8 million or $0.23 per diluted share representing a decrease of 50.5% from $28.0 million or $0.46 per diluted share reported in the comparable prior year period.
Contracts and Backlog Highlights
Hollysys achieved $88.1 million of new contracts for the three months ended March 31, 2020. The backlog as of March 31, 2020 was $574.1 million. The detailed breakdown of new contracts and backlog by segments is shown below:
New contracts achieved Backlog
for the three months as of March 31, 2020
ended March 31, 2020
(In USD % to Total
(In USD % to Total
thousands) Contract Backlog
thousands)
Industrial
Automation 63,228 71.7% 211,437 36.8%
Rail Transportation 4,980 5.7% 277,962 48.4%
Mechanical and
Electrical
Solutions 19,867 22.6% 84,719 14.8%
Total 88,075 100.0% 574,118 100.0%
Cash Flow Highlights
For the three months ended March 31, 2020, the total net cash outflow was $60.1 million. The net cash provided by operating activities was $8.0 million. The net cash used in investing activities was $61.8 million and mainly consisted of 2.2 million purchases of property, plant and equipment, and $137.0 million of time deposits placed with banks, which were partially offset by $77.1 million of matured time deposits. The net cash used in financing activities was $1.1 million and mainly consisted of $1.2 million repayments of short-term bank loans.
Balance Sheet Highlights
The total amount of cash and cash equivalents were $366.4 million, $403.9 million, and $276.5 million as of March 31, 2020, December 31, 2019 and March 31, 2019, respectively.
For the three months ended March 31, 2020, DSO was 266 days, as compared to 193 days for the comparable prior year period and 137 days for the last quarter; and inventory turnover was 71 days, as compared to 50 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 14, 2020 U.S. Eastern Time / 9:00 am May 15, 2020 Beijing Time, to discuss the financial results for fiscal year 2020 third quarter ended March 31, 2020 and business outlook.
Joining the Conference Call:
Please note that our teleconference provider have fully moved to a new system, Direct Event, which delivers the same teleconference call service but by pre-registration only for the participants. Here is the instruction on joining the conference call:
1. Please register in advance of the conference using the link provided below. Upon registering, you will be provided with participant dial-in numbers, Direct Event passcode and unique registrant ID.
2. In the 10 minutes prior to the call start time, you will need to use the conference access information provided in the email received at the point of registering.
Note: Due to regional restrictions some participants may receive operator assistance when joining this conference call and will not be automatically connected.
Helpful keypad commands:
*0 - Operator assistance
*6 - Self mute/unmute
Direct Event online registration: http://apac.directeventreg.com/registration/event/7939828. Please use Conference ID 7939828 for entry if the link fails to lead directly to the registration page.
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 Nine months ended
Mar 31, Mar 31,
2020 2019 2020 2019
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
Net revenues
Integrated solutions
contracts revenue $
67,673 $
101,285 $
301,814 $
334,618
Products sales 3,588 13,187 16,249 27,144
Revenue from services 9,507 10,695 56,043 51,588
Total net revenues 80,768 125,167 374,106 413,350
Costs of integrated solutions
contracts 52,628 70,818 216,613 232,411
Cost of products sold 1,031 1,903 4,461 5,566
Costs of services rendered 2,344 3,009 20,129 17,476
Gross profit 24,765 49,437 132,903 157,897
Operating expenses
Selling 6,168 6,474 23,838 22,043
General and administrative 8,961 8,793 30,185 29,140
Research and development 10,221 8,655 32,969 27,825
VAT refunds and government
subsidies (12,018) (4,553) (21,816) (22,912)
Total operating expenses 13,332 19,369 65,176 56,096
Income from operations 11,433 30,068 67,727 101,801
Other income, net 1,031 1,190 4,357 7,665
Foreign exchange gain (loss) 98 (333) 647 (1,163)
Gains on disposal of an investment
in an equity investee 5,763
Share of net income (losses) of
equity investees 570 (885) 4,108 (1,172)
Dividend income from equity
security investments 1,141 1,116
Interest income 3,271 2,978 9,399 8,973
Interest expenses (16) (54) (135) (371)
Income before income taxes 16,387 32,964 93,007 116,849
Income taxes expenses 2,422 4,946 15,424 16,713
Net income 13,965 28,018 77,583 100,136
Net income (losses) attributable to
non-controlling interests 119 50 (7) 132
Net income attributable
to Hollysys Automation $
13,846 $
27,968 $
77,590 $
100,004
Technologies Ltd.
Other comprehensive (loss) income, net of tax of nil
Translation adjustments (18,493) 14,871 (31,746) (11,604)
Comprehensive income (4,528) 42,889 45,837 88,532
Less: comprehensive income (loss)
attributable to non-controlling
interests 79 50 1,030 (129)
Comprehensive (loss)
income attributable to
Hollysys $
(4,607) $
42,839 $
44,807 $
88,661
Automation Technologies Ltd.
Net income per share:
Basic 0.23 0.46 1.28 1.65
Diluted 0.23 0.46 1.28 1.64
Shares used in net income per share
computation:
Basic 60,552,099 60,459,370 60,520,329 60,453,704
Diluted 60,552,099 61,276,829 60,694,045 61,273,073
HOLLYSYS AUTOMATION TECHNOLOGIES LTD.
CONSOLIDATED BALANCE SHEETS
(In USD thousands except for number of shares and per share data)
March 31, December
31,
2020 2019
(Unaudited) (Unaudited)
ASSETS
Current assets
Cash and cash equivalents $
344,000 $
403,860
Time deposits with original
maturities over three months 203,542 146,745
Restricted cash 15,020 19,985
Accounts receivable, net of allowance
for doubtful accounts of $45,704 and
$45,348 215,247 239,492
as of March 31, 2020 and December 31,
2019, respectively
Costs and estimated earnings in
excess of billings, net of allowance
for doubtful 214,057 227,490
accounts of $6,189 and $6,672 as of
March 31, 2020 and December 31,
2019,
respectively
Accounts receivable retention 4,142 4,911
Other receivables, net of allowance
for doubtful accounts of $4,346 and
$4,390 as 27,795 23,173
of March 31, 2020 and December 31,
2019, respectively
Advances to suppliers 16,228 17,522
Amounts due from related parties 24,808 26,515
Inventories 49,609 35,596
Prepaid expenses 821 510
Income tax recoverable 1,541 288
Total current
assets 1,116,810 1,146,087
Non-current
assets
Restricted cash 7,368 2,657
Costs and estimated earnings in
excess of billings 2,542 2,700
Accounts receivable retention 6,490 7,300
Prepaid expenses 7 10
Property, plant and equipment, net 75,778 78,059
Prepaid land leases 15,719 16,224
Intangible assets, net 1,116 1,208
Investments in equity investees 40,052 40,077
Investments securities 4,623 4,693
Goodwill 35,834 37,845
Deferred tax assets 8,947 8,328
Operating lease right-of-use assets 5,084 5,259
Total non-current
assets 203,560 204,360
Total assets 1,320,370 1,350,447
LIABILITIES AND STOCKHOLDERS' EQUITY
Current
liabilities
Short-term bank loans 279 1,436
Current portion of long-term loans 316 319
Accounts payable 114,363 115,166
Construction costs payable 1,461 1,289
Deferred revenue 133,176 142,025
Accrued payroll and related expenses 11,972 21,473
Income tax payable 2,349 4,795
Warranty liabilities 6,205 6,597
Other tax payables 2,320 4,481
Accrued liabilities 31,315 29,337
Amounts due to related parties 3,534 4,218
Operating lease liabilities 1,679 1,673
Total current
liabilities 308,969 332,809
Non-current
liabilities
Accrued liabilities 5,534 7,620
Long-term loans 829 896
Accounts payable 3,690 3,824
Deferred tax liabilities 14,252 13,146
Warranty liabilities 3,681 4,117
Operating lease liabilities 3,075 3,180
Total non-current
liabilities 31,061 32,783
Total liabilities 340,030 365,592
Commitments and
contingencies -
Stockholders'
equity:
Ordinary shares, par value $0.001 per
share, 100,000,000 shares
authorized; 61 61
60,537,099 shares issued and
outstanding as of March 31, 2020 and
December
31, 2019
Additional paid-in capital 223,690 223,673
Statutory reserves 49,424 49,427
Retained earnings 772,666 758,819
Accumulated other comprehensive loss (68,305) (49,852)
Total Hollysys
Automation
Technologies Ltd.
stockholder's
equity 977,536 982,128
Non-controlling interests 2,804 2,727
Total equity 980,340 984,855
Total liabilities
and equity $
1,320,370 $
1,350,447
HOLLYSYS AUTOMATION TECHNOLOGIES LTD
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In USD thousands).
Three months ended Nine months ended
March 31, 2020 March 31, 2020
---
(Unaudited) (Unaudited)
Cash flows from operating activities:
Net income $
13,965 $
77,583
Adjustments to reconcile net income to
net cash provided by operating
activities:
Depreciation of property, plant and
equipment 2,499 7,101
Amortization of prepaid land leases 97 294
Amortization of intangible assets 75 226
Allowance for doubtful accounts 716 1,311
Gains on disposal of property,
plant and equipment (11) (2)
Share of net income of equity
investees (570) (4,108)
Share-based compensation expenses 15 55
Deferred income tax expenses 477 6,712
Accretion of convertible bond 57
Gains on disposal of an investment
of an equity investee (5,763)
Changes in operating assets and
liabilities:
Accounts receivable and retention 17,872 57,723
Costs and estimated earnings in
excess of billings 9,614 (25,469)
Inventories (14,712) (8,063)
Advances to suppliers 1,019 (3,793)
Other receivables (5,407) (1,720)
Deposits and other assets (332) (204)
Due from related parties 1,293 10,440
Accounts payable 2,587 13,381
Deferred revenue (6,540) (3,675)
Accruals and other payables (8,173) (6,306)
Due to related parties (683) (1,861)
Income tax payable (3,666) 1,875
Other tax payables (2,118) 1,670
Net cash provided by operating
activities 8,017 117,464
Cash flows from investing activities:
Time deposits placed with banks (136,982) (240,643)
Purchases of property, plant and
equipment (2,174) (5,036)
Proceeds from disposal of property,
plant and equipment 264 556
Maturity of time deposits 77,108 177,044
Acquisition of a subsidiary, net of
cash acquired (150)
Proceeds from disposal of
investments in equity investee 4,458
Net cash used in investing
activities (61,784) (63,771)
Cash flows from financing activities:
Proceeds from short-term bank
loans 102 2,377
Repayments of short-term bank
loans (1,213) (3,965)
Proceeds from long-term bank loans 117 293
Repayments of long-term bank loans (119) (379)
Payment of dividends (12,713)
Repayments of bonds payable (20,753)
Net cash used in financing
activities (1,113) (35,140)
Effect of foreign exchange rate
changes (5,234) (10,552)
Net increase in cash, cash
equivalents and restricted cash $
(60,114) 8,001
Cash, cash equivalents and
restricted cash, beginning of
period $
426,502 358,387
Cash, cash equivalents and
restricted cash, end of period 366,388 366,388
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)
---
Three months ended Nine months ended
March 31, March 31,
2020 2019 2020 2019
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
Cost of integrated solutions contracts $
52,628 $
70,818 $
216,613 $
232,411
Less: Amortization of acquired intangible assets 75 78 226 234
Non-GAAP cost of integrated solutions contracts $
52,553 $
70,740 $
216,387 $
232,177
General and administrative expenses $
8,961 $
8,793 $
30,185 $
29,140
Less: Share-based compensation expenses 15 50 55 201
Non-GAAP general and administrative expenses $
8,946 $
8,743 $
30,130 $
28,939
Other
income
, net $
1,031 1,190 4,357 7,665
Add: Fair value adjustments of a bifurcated derivative 20
Non-GAAP other
income
, net $
1,031 1,190 4,357 7,685
Net income attributable to Hollysys Automation $
13,846 $
27,968 $
77,590 $
100,004
Technologies Ltd.
Add:
Share-based compensation expenses 15 50 55 201
Amortization of acquired intangible assets 75 78 226 234
Fair value adjustments of a bifurcated derivative 20
Non-GAAP net income attributable to Hollysys $
13,936 $
28,096 $
77,871 $
100,459
Automation Technologies Ltd.
Weighted average number of basic ordinary shares 60,552,099 60,459,370 60,520,329 60,453,704
Weighted average number of diluted ordinary shares 60,552,099 61,276,829 60,694,045 61,273,073
Non-GAAP basic earnings per share $
0.23 $
0.46 $
1.29 $
1.66
Non-GAAP diluted earnings per share $
0.23 $
0.46 $
1.28 $
1.65
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SOURCE Hollysys Automation Technologies, Ltd
