Hollysys Automation Technologies Reports Unaudited Financial Results for the Third Quarter and the First Nine Months Ended March 31, 2024
First Nine Months of Fiscal Year 2024 Financial Highlights
-- Total revenues were $597.1 million, an increase of 2.5% compared to the
comparable prior year period.
-- Gross margin was 31.0%, compared to 33.4% for the comparable prior year
period. Non-GAAP gross margin was 31.2%, compared to 33.6% for the
comparable prior year period.
-- Net income attributable to Hollysys was $49.7 million, a decrease of
38.8% compared to the comparable prior year period. Non-GAAP net income
attributable to Hollysys was $51.0 million, a decrease of 40.1% compared
to the comparable prior year period.
-- Diluted earnings per share was $0.80, a decrease of 38.9% compared to
the comparable prior year period. Non-GAAP diluted earnings per share
was $0.82, a decrease of 40.1% compared to the comparable prior year
period.
-- Net cash provided by operating activities was $50.9 million.
-- Days sales outstanding ("DSO") was 151 days, compared to 151 days for
the comparable prior year period.
-- Inventory turnover days were 79 days, compared to 78 days for the
comparable prior year period.
Third Quarter of Fiscal Year 2024 Financial Highlights
-- Total revenues were $173.5 million, an increase of 3.5% compared to the
comparable prior year period.
-- Gross margin was 28.9%, compared to 26.8% for the comparable prior year
period. Non-GAAP gross margin was 29.1%, compared to 27.0% for the
comparable prior year period.
-- Net income attributable to Hollysys was $3.9 million, a decrease of
66.2% compared to the comparable prior year period. Non-GAAP net income
attributable to Hollysys was $4.2 million, a decrease of 66.6% compared
to the comparable prior year period.
-- Diluted earnings per share was $0.06, a decrease of 68.4% compared to
the comparable prior year period. Non-GAAP diluted earnings per share
was $0.07, a decrease of 65.0% compared to the comparable prior year
period.
-- Net cash used in operating activities was $37.4 million.
-- DSO was 183 days, compared to 176 days for the comparable prior year
period.
-- Inventory turnover days were 84 days, compared to 87 days for the
comparable prior year period.
See the section entitled "Non-GAAP Measures" for more information about non-GAAP gross margin, non-GAAP net income attributable to Hollysys and non-GAAP diluted earnings per share.
BEIJING, May 16, 2024 /PRNewswire/ -- Hollysys Automation Technologies Ltd. (NASDAQ: HOLI) ("Hollysys," the "Company" or "we"), a leading provider of automation and control technologies and applications in China, today announced its unaudited financial results for the third quarter and the first nine months of fiscal year 2024 ended March 31, 2024.
In this fiscal quarter, Hollysys overcame numerous challenges and achieved remarkable breakthroughs. Leveraging its years of technological strength, the Company was recognized as one of the Top 50 Brands in China's Automation and Digitalization Industry for 2024. Additionally, the Company was successfully named in the first batch in the classification and grading assessment for intelligent manufacturing system solution providers, receiving AAA-level rating for integrated implementation. The Company was also honored with the titles of "Enterprise of the Year 2023 in China's Automation Field" and "2023 Beijing Benchmark Enterprise for Digital Empowerment." Furthermore, the Company secured national high-tech enterprise accreditation for the sixth consecutive times in this quarter, which demonstrates its innovation capabilities.
In the Industrial Automation segment, the Company successfully collaborated with a subsidiary of Ansteel Group to carry out the retrofit and upgrade of a 2*2.4 million tons coal pelletizing DCS/IODS project, providing multiple products including the MACS V6 series DCS controller. This project achieved independent control and intelligent transformation of the pelletizing production process control in the iron and steel industry. Meanwhile, the Company successfully supported the grid-connected power generation project of a 300-megawatt compressed air energy storage power station in China, which was designated as a national pilot demonstration for new energy storage. In this project, the Company utilized its key product K-series hardware for the core expander control system and designed Automatic Power Plant Startup and Shutdown System with outstanding advantages such as simple operation, high reliability, strong safety, and convenient start-stop, to accommodate frequent startup and shutdown conditions. This project innovatively integrated Hollysys' diverse range of superior products, showcasing the exceptional compatibility and operability between Hollysys products. The Company also successfully signed a contract within the food and pharmaceutical sectors to undertake the integrated intelligent management and control project for an ampicillin workshop. The Company will provide its HiaPlant intelligent factory solution, which encompassed an integrated intelligent management and control system including instrumentation, Distributed Control System (DCS), Intelligent Operating Data System (IODS), Operator Training Simulator (OTS), among others, aiming to achieve the overall intelligence of the project. Additionally, the Company will also adopt the Industrial Optical Bus Control System (OCS) based on the actual situation of the client, which is expected to effectively save total cost, significantly reduce the cabinet space, and ensure the safety and reliability of the production process.
In the Rail Transportation Automation segment, the Company continued to promote the innovation and integration of new technologies and industries, and foster diverse cooperation mechanisms to promote the high-quality development of the rail transit industry. Meanwhile, the Company's technological strength gained recognition in the industry. In this fiscal quarter, Hollysys was certified with International Railway Industry Standard (IRIS) silver level. Notably, the scientific and technological achievements of "ZPW-2000S Track Circuit contactless key technology research and high-altitude engineering application" won the First Prize of the Science and Technology Progress Award. Additionally, the "research and demonstration application of key technologies of urban rail transit cloud edge computing platform" was awarded the Second Prize of 2023 Urban Rail Transit Science and Technology Progress Award. In the high-speed rail sector, the Company signed the contract for the train control project of the new-build Xiangyang-Jingmen high-speed railway, providing Train Control Center (TCC), Lineside Electronic Unit (LEU), and safety data network for the project. The project presents great significance for the Company in terms of sustainable development, enabling it to introduce other projects for expansion and renovation in the future. In addition, the full site testing of the first station of the Ziyang Rail Transit Line, in which the Company participated, achieved phased results. The Company provided Integrated Supervisory Control System (ISCS), Building Automation System (BAS), Supervisor Control and Data Acquisition (SCADA), communication systems and so forth for the project.
In the mechanical and electrical solutions ("M&E") segment, the Company achieved stable performance with smooth executions on various projects.
With the Company's continuous dedication to the industry and the support of experienced and passionate experts, Hollysys believes that it will continue to create greater value for clients and shareholders.
Third Quarter and the First Nine months Ended March 31, 2024 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,
2024 2023 2024 2023
%
%
Change Change
Revenues $
173,466 167,636 3.5 % $
597,090 582,410 2.5 %
Integrated solutions contracts $
138,455 139,149 (0.5) % $
468,674 471,204 (0.5) %
Products sales $
16,474 10,386 58.6 % $
40,195 34,174 17.6 %
Service rendered $
18,537 18,101 2.4 % $
88,221 77,032 14.5 %
Cost of revenues $
123,343 122,641 0.6 % $
411,779 387,727 6.2 %
Gross profit $
50,123 44,995 11.4 % $
185,311 194,683 (4.8) %
Total operating expenses $
47,404 33,973 39.5 % $
134,569 119,269 12.8 %
Selling $
15,470 14,577 6.1 % $
51,524 43,615 18.1 %
General and administrative $
22,771 11,921 91.0 % $
47,165 44,394 6.2 %
Research and development $
19,287 15,662 23.1 % $
65,912 53,452 23.3 %
VAT refunds and government subsidies $
(10,124) (8,187) 23.7 % $
(30,032) (22,192) 35.3 %
Income from operations $
2,719 11,022 (75.3) % $
50,742 75,414 (32.7) %
Other income, net $
1,139 1,626 (30.0) % $
836 2,748 (69.6) %
Foreign exchange gain (loss) $
207 (1,244) (116.6) % $
(847) 2,280 (137.1) %
Impairment loss of investments in securities
$ $
(69)
Share of net (loss) income of equity $
(912) 690 (232.2) % $
(614) 2,355 (126.1) %
investees
Gains on disposal of an investment in
$
$ 845 (100.0) %
securities
Interest income $
3,675 2,941 25.0 % $
10,343 9,020 14.7 %
Interest expenses $
(704) (252) 179.4 % $
(1,435) (621) 131.1 %
Income tax expenses $
2,320 3,188 (27.2) % $
9,444 10,694 (11.7) %
Net (loss) income attributable to non- $
(105) 27 (488.9) % $
(177) 136 (230.1) %
controlling interests
Net income attributable to Hollysys $
3,909 11,568 (66.2) % $
49,689 81,211 (38.8) %
Automation Technologies Ltd.
Basic earnings per share $
0.06 0.19 (68.4) % $
0.80 1.32 (39.4) %
Diluted earnings per share $
0.06 0.19 (68.4) % $
0.80 1.31 (38.9) %
Share-based compensation expenses
$ 672 (100.0) % $
348 2,849 (87.8) %
Amortization of acquired intangible assets $
290 340 (14.7) % $
937 1,017 (7.9) %
Non-GAAP net income attributable to $
4,199 12,580 (66.6) % $
50,974 85,077 (40.1) %
Hollysys Automation Technologies Ltd.(1)
Non-GAAP basic earnings per share(1) $
0.07 0.20 (65.0) % $
0.82 1.38 (40.6) %
Non-GAAP diluted earnings per share(1) $
0.07 0.20 (65.0) % $
0.82 1.37 (40.1) %
Basic weighted average number of ordinary 62,127,607 61,595,286 0.9 % 61,987,252 61,449,939 0.9 %
shares outstanding
Diluted weighted average number of 62,426,784 62,127,557 0.5 % 62,312,957 62,015,929 0.5 %
ordinary shares outstanding
(1) See the section entitled "Non-GAAP Measures" for more information about these non-GAAP measures.
Operational Results Analysis for the Third Quarter Ended March 31, 2024
Total revenues for the three months ended March 31, 2024 were $173.5 million, as compared to $167.6 million for the same period of the prior fiscal year, representing an increase of 3.5%. In terms of revenues by type, integrated contracts revenue decreased by 0.5% to $138.5 million, products sales revenue increased by 58.6% to $16.5 million, and services revenue increased by 2.4% to $18.5 million.
The following table sets forth the Company's total revenues by segment for the periods indicated.
(In USD thousands, except for %)
Three months ended March 31, Nine months ended March 31,
2024 2023 2024 2023
$ % of
$ % of
$ % of
$ % of
Total Total Total Total
Revenues Revenues Revenues Revenues
Industrial Automation 117,361 67.6 112,407 67.0 369,764 61.9 365,183 62.7
Rail Transportation 39,998 23.1 36,197 21.6 164,333 27.5 153,265 26.3
Mechanical and 16,107 9.3 19,032 11.4 62,993 10.6 63,962 11.0
Electrical Solution
Total 173,466 100.0 167,636 100.0 597,090 100.0 582,410 100.0
Gross margin was 28.9% for the three months ended March 31, 2024, as compared to 26.8% for the same period of the prior fiscal year. The overall gross margin fluctuated, as the gross margin for integrated solutions contracts varied. Gross margin of integrated solutions contracts, product sales, and service rendered was 18.9%, 75.3% and 62.4% for the three months ended March 31, 2024, respectively, as compared to 18.3%, 69.5% and 68.3% for the same period of the prior fiscal year. Non-GAAP gross margin was 29.1% for the three months ended March 31, 2024, as compared to 27.0% for the same period of the prior fiscal year. Non-GAAP gross margin of integrated solutions contracts was 19.1% for the three months ended March 31, 2024, as compared to 18.5% for the same period of the prior fiscal year. See the section entitled "Non-GAAP Measures" for more information about non-GAAP gross margin and non-GAAP gross margin of integrated solutions contracts.
Selling expenses were $15.5 million for the three months ended March 31, 2024, representing an increase of $0.9 million, or 6.1%, compared to $14.6 million for the same period of the prior fiscal year. Selling expenses as a percentage of total revenues were 8.9% and 8.7% for the three months ended March 31, 2024 and 2023, respectively.
General and administrative expenses were $22.8 million for the quarter ended March 31, 2024, representing an increase of $10.9 million, or 91.0%, compared to $11.9 million for the same period of the prior fiscal year. The increase was primarily attributable to a $6.9 million increase in third-party consulting fees and a $2.6 million increase in credit losses. General and administrative expenses as a percentage of total revenues were 13.1% and 7.1% for the three months ended March 31, 2024 and 2023, respectively.
Research and development expenses were $19.3 million for the three months ended March 31, 2024, representing an increase of $3.6 million, or 23.1%, compared to $15.7 million for the same period of the prior fiscal year, which was primarily due to a $3.7 million increase in labor cost for the increase in research and development staff for strategic technological innovation. Research and development expenses as a percentage of total revenues were 11.1% and 9.3% for the three months ended March 31, 2024 and 2023, respectively.
The VAT refunds and government subsidies were $10.1 million for three months ended March 31, 2024, as compared to $8.2 million for the same period of the prior fiscal year, representing a $1.9 million, or 23.7%, increase.
The income tax expenses and the effective tax rate were $2.3 million and 37.9% for the three months ended March 31, 2024, respectively, as compared to $3.2 million and 21.6% for comparable period in the prior fiscal year, respectively. The effective tax rate fluctuates, as the Company's subsidiaries contributed different pre-tax income at different tax rates.
Net income attributable to Hollysys was $3.9 million, representing a decrease of 66.2% from $11.6 million reported in the comparable period in the prior fiscal year. Non-GAAP net income attributable to Hollysys, was $4.2 million or $0.07 per diluted share. See the section entitled "Non-GAAP Measures" for more information about non-GAAP net income attributable to Hollysys.
Diluted earnings per share was $0.06 for the three months ended March 31, 2024, a decrease of 68.4% from $0.19 reported in the comparable period in the prior fiscal year. Non-GAAP diluted earnings per share was $0.07 for the three months ended March 31, 2024, a decrease of 65.0% from $0.20 reported in the comparable period in the prior fiscal year. These were calculated based on 62.4 million and 62.1 million diluted weighted average ordinary shares outstanding for the three months ended March 31, 2024 and 2023, respectively. See the section entitled "Non-GAAP Measures" for more information about non-GAAP diluted earnings per share.
Contracts and Backlog Highlights
Hollysys achieved $240.4 million of value of new contracts for the three months ended March 31, 2024. Order backlog of contracts presents the amount of unrealized revenue to be earned from the contracts that Hollysys won. The backlog was $992.2 million as of March 31, 2024. The following table sets forth a breakdown of the value of new contracts achieved and backlog by segment.
(In USD thousands, except for %)
Value of new contracts
achieved Backlog
for the three months as of March 31,
2024
ended March 31, 2024
$ % of Total
$ % of Total
Contract Backlog
Value
Industrial Automation 183,941 76.5 412,094 41.5
Rail Transportation 34,158 14.2 393,073 39.6
Mechanical and Electrical Solutions 22,328 9.3 187,053 18.9
Total 240,427 100.0 992,220 100.0
Cash Flow Highlights
For the three months ended March 31, 2024, the total net cash outflow was $50.0 million. The net cash used in operating activities was $37.4 million. The net cash used in investing activities was $6.5 million, mainly consisting of $1.5 million purchases of short-term investments and $4.9 million purchases of property, plant and equipment. The net cash provided by financing activities was $2.2 million, mainly consisting of $2.3 million proceeds from long-term bank loans.
Balance Sheet Highlights
The total amount of cash and cash equivalents were $697.9 million, $747.5 million, and $640.2 million as of March 31, 2024, December 31, 2023, and March 31, 2023, respectively.
For the three months ended March 31, 2024, DSO was 183 days, as compared to 176 days for the comparable period of prior fiscal year and 138 days for the last fiscal quarter; inventory turnover days were 84 days, as compared to 87 days for the comparable period of prior fiscal year and 68 days for the last fiscal quarter.
About Hollysys Automation Technologies Ltd.
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 automation. 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 automation, 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 30, 2023, Hollysys had cumulatively carried out more than 45,000 projects for approximately 23,000 customers in various sectors including power, petrochemical, high-speed rail, and urban rail, in which Hollysys has established leading market positions.
SAFE HARBOR STATEMENTS
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 "will," "expects," "anticipates," "future," "intends," "plans," "believes," "estimates," "target," "confident," 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
March 31, March 31,
2024 2023 2024 2023
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
Net revenues
Integrated solutions contracts $
138,455 $
139,149 $
468,674 $
471,204
Products sales 16,474 10,386 40,195 34,174
Revenue from services 18,537 18,101 88,221 77,032
Total net revenues 173,466 167,636 597,090 582,410
Costs of integrated solutions contracts 112,303 113,732 371,276 351,879
Cost of products sold 4,061 3,170 10,501 8,410
Costs of services rendered 6,979 5,739 30,002 27,438
Gross profit 50,123 44,995 185,311 194,683
Operating expenses
Selling 15,470 14,577 51,524 43,615
General and administrative 22,771 11,921 47,165 44,394
Research and development 19,287 15,662 65,912 53,452
VAT refunds and government subsidies (10,124) (8,187) (30,032) (22,192)
Total operating expenses 47,404 33,973 134,569 119,269
Income from operations 2,719 11,022 50,742 75,414
Other income, net 1,139 1,626 836 2,748
Foreign exchange gain (loss) 207 (1,244) (847) 2,280
Gains on disposal of an investment in securities 845
Impairment loss of investments in investment in securities (69)
Share of net (loss) income of equity investees (912) 690 (614) 2,355
Interest income 3,675 2,941 10,343 9,020
Interest expenses (704) (252) (1,435) (621)
Income before income taxes 6,124 14,783 58,956 92,041
Income taxes expenses 2,320 3,188 9,444 10,694
Net income 3,804 11,595 49,512 81,347
Net (loss) income attributable to non-controlling interests (105) 27 (177) 136
Net income attributable to Hollysys Automation $
3,909 $
11,568 $
49,689 $
81,211
Technologies Ltd.
Other comprehensive (loss) income, net of tax of nil
Translation adjustments (16,355) 20,805 4,792 (29,577)
Comprehensive income (12,551) 32,400 54,304 51,770
Less: comprehensive (loss) income attributable to non- (122) 345 (177) 536
controlling interests
Comprehensive (loss) income attributable to Hollysys $
(12,429) $
32,055 $
54,481 $
51,234
Automation Technologies Ltd.
Net income per ordinary share:
Basic 0.06 0.19 0.80 1.32
Diluted 0.06 0.19 0.80 1.31
Shares used in net income per share computation:
Basic 62,127,607 61,595,286 61,987,252 61,449,939
Diluted 62,426,784 62,127,557 62,312,957 62,015,929
HOLLYSYS AUTOMATION TECHNOLOGIES LTD.
CONSOLIDATED BALANCE SHEETS
(In USD thousands except for number of shares and per share data)
March 31, December
31,
2024 2023
(Unaudited) (Unaudited)
ASSETS
Current assets
Cash and cash equivalents $
697,936 $
747,507
Short-term investments 9,902 9,074
Restricted cash 24,217 24,492
Accounts receivable, net of allowance for credit losses of
$64,232 and $62,968 as 330,311 352,399
of March 31, 2024 and December 31, 2023, respectively
Costs and estimated earnings in excess of billings, net of
allowance for credit losses 253,859 244,154
of $12,698 and $12,431 as of March 31, 2024 and December 31,
2023,
respectively
Accounts receivable retention 5,128 5,297
Other receivables, net of allowance for credit losses of
$15,796 and $15,707 as of 21,871 16,011
March 31, 2024 and December 31, 2023, respectively
Advances to suppliers 29,059 31,687
Amounts due from related parties 30,521 22,482
Inventories 111,061 106,691
Prepaid expenses 778 441
Income tax recoverable 1,109 1,115
Total current assets 1,515,752 1,561,350
Non-current assets
Restricted cash 11,297 11,425
Costs and estimated earnings in excess of billings 2,086 1,570
Accounts receivable retention 6,337 7,070
Prepaid expenses 3 2
Property, plant and equipment, net 162,225 164,833
Prepaid land leases 11,278 11,569
Intangible assets, net 8,169 8,598
Investments in equity investees 47,887 48,683
Investments securities 1,535 1,552
Goodwill 19,247 19,359
Deferred tax assets 12,404 9,454
Operating lease right-of-use assets 2,985 3,435
Total non-current assets 285,453 287,550
Total assets 1,801,205 1,848,900
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Short-term bank loans 53 67
Current portion of long-term loans 15,241 15,245
Accounts payable 173,457 181,618
Construction costs payable 15,443 18,650
Deferred revenue 216,702 223,005
Accrued payroll and related expenses 21,521 39,496
Income tax payable 5,221 4,004
Warranty liabilities 3,712 3,663
Other tax payables 5,604 10,540
Accrued liabilities 39,263 35,580
Amounts due to related parties 3,890 4,043
Operating lease liabilities 1,497 1,934
Total current liabilities 501,604 537,845
Non-current liabilities
Accrued liabilities 728 666
Long-term loans 50,279 48,638
Accounts payable 2,789 2,851
Deferred tax liabilities 11,178 11,665
Warranty liabilities 2,564 2,573
Operating lease liabilities 1,180 1,227
Total non-current liabilities 68,718 67,620
Total liabilities 570,322 605,465
Commitments and contingencies
Stockholders' equity:
Ordinary shares, par value $0.001 per share, 100,000,000
shares authorized; 62 62
62,199,672 shares and 62,095,839 shares issued and
outstanding as of March
31, 2024 and December 31, 2023.
Additional paid-in capital 247,255 247,256
Statutory reserves 86,914 81,060
Retained earnings 1,003,430 1,005,375
Accumulated other comprehensive income (107,625) (91,287)
Total Hollysys Automation Technologies Ltd. stockholder's
equity 1,230,036 1,242,466
Non-controlling interests 847 969
Total equity 1,230,883 1,243,435
Total liabilities and equity $
1,801,205 $
1,848,900
HOLLYSYS AUTOMATION TECHNOLOGIES LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In USD thousands)
Three months Nine months
ended ended
March 31, 2024 March 31,
2024
---
(Unaudited) (Unaudited)
Cash flows from operating activities:
Net income $
3,804 $
49,512
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation of property, plant and equipment 2,969 7,543
Amortization of prepaid land leases 81 244
Amortization of intangible assets 290 937
Allowance for credit losses 2,915 (4,924)
Loss (gain) on disposal of property, plant and equipment (70) (136)
Share of net income (loss) of equity investees 912 614
Share-based compensation expenses 348
Deferred income tax expenses (3,456) (2,337)
Impairment loss of investments in investment in securities 69
Changes in operating assets and liabilities:
Accounts receivable and retention 13,100 (11,796)
Costs and estimated earnings in excess of billings (13,117) 427
Inventories (5,554) 1,753
Advances to suppliers 2,266 (424)
Other receivables (6,033) (2,442)
Prepaid expenses (344) (180)
Due from related parties (8,280) (4,482)
Accounts payable (5,837) 2,089
Deferred revenue (3,707) 33,372
Accruals and other payables (13,646) (10,376)
Due to related parties (154) (2,265)
Income tax payable 1,250 (1,679)
Other tax payables (4,803) (4,983)
Net cash (used in) provided by operating activities (37,414) 50,884
Cash flows from investing activities:
Purchases of short-term investments (1,492) (21,965)
Purchases of property, plant and equipment (4,873) (25,499)
Proceeds from disposal of property, plant and equipment 111 268
Maturity of short-term investments 399 45,260
Investment of an investment in securities (35)
Investment of an equity investee (664) (664)
Proceeds from acquisition of a subsidiary 390
Net cash used in investing activities (6,519) (2,245)
Cash flows from financing activities:
Proceeds from short-term bank loans 171 237
Repayments of short-term bank loans (184) (184)
Proceeds from long-term bank loans 2,348 33,915
Repayments of long-term bank loans (136) (510)
Net cash provided by financing activities 2,199 33,458
Effect of foreign exchange rate changes (8,240) 3,223
Net (decrease) increase in cash, cash equivalents and
restricted cash $
(49,974) 85,320
Cash, cash equivalents and restricted cash, beginning of
period $
783,424 648,130
Cash, cash equivalents and restricted cash, end of period 733,450 733,450
Non-GAAP Measures
To supplement our consolidated financial statements, which are prepared and presented in accordance with GAAP, in evaluating our results, we use the following non-GAAP financial measures: non-GAAP gross profit and non-GAAP gross margin, non-GAAP gross profit and non-GAAP gross margin of integrated solutions contracts, non-GAAP net income attributable to Hollysys Automation Technologies Ltd., as well as non-GAAP basic and diluted earnings per share.
These non-GAAP financial measures serve as additional indicators of our operating performance and not as any replacement for other measures in accordance with U.S. GAAP. We believe these non-GAAP measures help identify underlying trends in the Company's business that could otherwise be distorted by the effect of the share-based compensation expenses, which are calculated based on the number of shares or options granted and the fair value as of the grant date, and amortization of acquired intangible assets. 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.
Non-GAAP gross profit and non-GAAP gross margin, non-GAAP gross profit and non-GAAP gross margin of integrated solutions contracts, non-GAAP net income attributable to Hollysys Automation Technologies Ltd., as well as non-GAAP basic and diluted earnings per share should not be considered in isolation or construed as an alternative to gross profit and gross margin, gross profit and gross margin of integrated solutions contracts, net income attributable to Hollysys Automation Technologies Ltd., basic and diluted earnings per share, or any other measure of performance, or as an indicator of the Company's operating performance. Investors are encouraged to review the historical non-GAAP financial measures to the most directly comparable GAAP measures. Non-GAAP gross profit and gross margin, non-GAAP gross profit and non-GAAP gross margin of integrated solutions contracts, non-GAAP net income attributable to Hollysys Automation Technologies Ltd., as well as non-GAAP basic and diluted earnings per share presented here may not be comparable to similarly titled measures presented by other companies. Other companies may calculate similarly titled measures differently, limiting their usefulness as comparative measures to the Company's data. The Company encourages investors and others to review the Company's financial information in its entirety and not rely on a single financial measure.
We define non-GAAP gross profit and non-GAAP gross margin as gross profit and gross margin, respectively, adjusted to exclude non-cash amortization of acquired intangibles. The following table provides a reconciliation of our gross profit and gross margin to non-GAAP gross profit and non-GAAP gross margin for the periods indicated.
(In USD thousands, except for %)
Three months ended Nine months ended
March 31, March 31
2024 2023 2024 2023
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
Gross profit $
50,123 $
44,995 185,311 $
194,683
Gross margin(1) 28.9 % 26.8 % 31.0 % 33.4 %
Add:
Amortization of acquired intangible assets 290 340 937 1,017
Non-GAAP gross profit $
50,413 $
45,335 $
186,248 $
195,700
Non-GAAP gross margin(2) 29.1 % 27.0 % 31.2 % 33.6 %
(1) Gross margin represents gross profit for the period as a percentage of revenue for such period.
(2) Non-GAAP gross margin represents non-GAAP gross profit for the period as a percentage of revenue for such period.
We define non-GAAP gross profit and non-GAAP gross margin of integrated solutions contracts as gross profit and gross margin of integrated solutions contracts, respectively, adjusted to exclude non-cash amortization of acquired intangibles associated with integrated solutions contracts. The following table provides a reconciliation of the gross profit of integrated solutions contracts to non-GAAP gross profit and non-GAAP gross margin of integrated solutions contracts for the periods indicated.
(In USD thousands, except for %)
Three months ended March 31, Nine months ended March 31,
2024 2023 2024 2023
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
Gross profit of integrated $
26,152 $
25,417 $
97,398 $
119,325
solutions contracts
Gross margin of integrated 18.9 % 18.3 % 20.8 % 25.3 %
solutions contracts(1)
Add: 290 340 937 1,017
Amortization of acquired intangible
assets
Non-GAAP gross profit of $
26,442 $
25,757 $
98,335 $
120,342
integrated solutions contracts
Non-GAAP gross margin of 19.1 % 18.5 % 21.0 % 25.5 %
integrated solutions contracts(2)
(1) Gross margin of integrated solutions contracts represents gross profit of integrated solutions contracts for the period as a
percentage of integrated solutions contracts revenue for such period.
(2) Non-GAAP gross margin of integrated solutions contracts represents non-GAAP gross profit of integrated solutions contracts
for the period as a percentage of integrated solutions contracts revenue for such period.
We define non-GAAP net income attributable to Hollysys as net income attributable to Hollysys adjusted to exclude the share-based compensation expenses and non-cash amortization of acquired intangible assets. The following table provides a reconciliation of net income attributable to Hollysys to non-GAAP net income attributable to Hollysys for the periods indicated.
(In USD thousands)
Three months ended Nine months ended
March 31, March 31,
2024 2023 2024 2023
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
Net income attributable to Hollysys Automation $
3,909 $
11,568 $
49,689 $
81,211
Technologies Ltd.
Add:
Share-based compensation
expenses 672 348 2,849
Amortization of acquired
intangible assets 290 340 937 1,017
Non-GAAP net income attributable to Hollysys $
4,199 $
12,580 $
50,974 $
85,077
Automation Technologies Ltd.
Non-GAAP basic (or diluted) earnings per share represents non-GAAP net income attributable to Hollysys divided by the weighted average number of ordinary shares outstanding during the periods (or on a diluted basis). The following table provides a reconciliation of our basic (or diluted) earnings per share to non-GAAP basic (or diluted) earnings per share 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,
2024 2023 2024 2023
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
Net income attributable to Hollysys Automation $
3,909 $
11,568 $
49,689 $
81,211
Technologies Ltd.
Add:
Share-based compensation expenses 672 348 2,849
Amortization of acquired intangible assets 290 340 937 1,017
Non-GAAP net income attributable to $
4,199 $
12,580 $
50,974 $
85,077
Hollysys Automation Technologies Ltd.
Weighted average number of basic ordinary 62,127,607 61,595,286 61,987,252 61,449,939
shares
Weighted average number of diluted ordinary 62,426,784 62,127,557 62,312,957 62,015,929
shares
Basic earnings per share(1) 0.06 0.19 0.80 1.32
Add: 0.01 0.01 0.02 0.06
Non-GAAP adjustments to net income per share(2)
Non-GAAP basic earnings per share(3) $
0.07 $
0.20 $
0.82 $
1.38
Diluted earnings per share(1) 0.06 0.19 0.80 1.31
Add: 0.01 0.01 0.02 0.06
Non-GAAP adjustments to net income per
share(2)
Non-GAAP diluted earnings per share(3) $
0.07 $
0.20 $
0.82 $
1.37
(1) Basic (or diluted) earnings per share is derived from net income attributable to Hollysys Automation Technologies Ltd. for
computing basic (or diluted) earnings per share divided by weighted average number of shares (or on a diluted basis).
(2) Non-GAAP adjustments to net income per share is derived from non-GAAP adjustments to net income divided by weighted
average number of shares (or on a diluted basis).
(3) Non-GAAP basic (or diluted) earnings per share is derived from non-GAAP net income attributable to Hollysys Automation
Technologies Ltd. for computing non-GAAP basic (or diluted) earnings per share divided by weighted average number of shares (or on
a diluted basis).
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SOURCE Hollysys Automation Technologies Ltd
