Recon Technology, Ltd Reports Financial Results for the First Six Months of Fiscal Year 2025
BEIJING, March 31, 2025 /PRNewswire/ -- Recon Technology, Ltd (NASDAQ: RCON) ("Recon" or the "Company"), a China-based independent solutions integrator in the oilfield service and environmental protection, electric power and coal chemical industries, today announced its financial results for the first six months of fiscal year 2025.
First Six Months of Fiscal 2025 Financial Highlights:
-- Total revenue decreased to RMB42.1 million ($5.8 million) for the six
months ended December 31, 2024, from RMB45.3 million ($6.2 million) for
the same period in 2023.
-- Gross profit increased to RMB13.4 million ($1.8 million) for the six
months ended December 31, 2024, from RMB12.1 million ($1.7 million) for
the same period in 2023.
-- Gross margin increased to 31.7% for the six months ended December 31,
2024 from 26.7% for the same period in 2023.
-- Net loss was RMB20.7 million ($2.8 million) for the six months ended
December 31, 2024, a decrease of RMB2.4 million ($0.3 million) from net
loss of RMB23.1 million ($3.2 million) for the same period of 2023.
For the Six Months Ended
December 31,
(in RMB millions, except
earnings per share; differences due 2024 2023 Increase Percentage
/(Decrease) Change
to rounding)
Revenue RMB 42.1 RMB 45.3 RMB (3.2) (7.0)
%
Gross profit 13.4 12.1 1.3 10.3
%
Gross margin 31.7 26.7 18.7
% % %
Net loss (20.7) (23.1) (2.4) (10.3)
%
Net loss per share - Basic and diluted (2.29) (8.27) 5.98 (72.3)
%
Management Commentary
Mr. Shenping Yin, Founder and CEO of Recon, said, "For the six months ended December 31, 2024, our oilfield customers' production continued to increase, and demand for our automation and oilfield specialized equipment also increased, with corresponding revenue and gross profit both rising and improving. However, our revenue as a whole declined slightly due to fluctuations in demand from some of our new businesses and customers. We anticipate a steady rebound in our business and operating quality, particularly in our two core segments: digital solutions and oilfield environmental protection. As China's oil service companies are in a stage of development driven by customers' rising demand for stable production and supply and technology upgrades, we will continue to increase our investment in technology and continue to improve our long-term corporate competitiveness. In addition, our ongoing project to build a chemical recycling plant for low-value plastics made a significant breakthrough during the period. We have successfully obtained the necessary qualifications for the production and commencement of construction of the plant, which is scheduled to begin in April 2025 and enter the formal production phase in the second half of 2025."
First Six Months Fiscal 2025 Financial Results:
Revenue
Total revenues for the six months ended December 31, 2024 were approximately RMB42.1 million ($5.8 million), a decrease of approximately RMB3.2 million ($0.4 million) or 7.0% from RMB45.3 million ($6.2 million) for the same period in 2023.
-- Revenue from automation product and software increased by RMB3.4 million
($0.5 million) or 19.2%. For the six months ended December 31, 2024, the
increase in revenue from automation products and software is primarily
due to the growing market demand for automated operations.
-- Revenue from equipment and accessories decreased by RMB2.2 million ($0.3
million) or 12.2%. For the six months ended December 31, 2024, revenues
from the heating furnace category increased by RMB1.9 million compared
to the same period in 2023, driven by our oilfield customers' expanded
production capacity. Revenues from equipment used in the offshore
oilfield category decreased by RMB3.3 million, primarily due to reduced
demand from our customers. We anticipate an overall increase in revenues
from offshore customers in 2025.
-- Revenue from oilfield environmental protection decreased by RMB5.3
million ($0.7 million) or 66.2%, primarily due to the expiration of
Gansu BHD's hazardous waste operation permit during the six-month period
ending December 31, 2024. As a result, no revenue was recorded. The
company is currently engaged in the active application process for the
renewal of relevant qualifications. Besides, some customers request and
we agreed to a lower price for a portion of our wastewater business in
order to establish a long-term relationship, resulting in a decrease in
revenue from that portion of the business.
-- Revenue from platform outsourcing services increased by RMB1.0 million
($0.1 million) or 53.7%. The increase was mainly due to the rise in
transaction volumes of diesel users and the higher settlement rates with
freight trading platforms clients.
Cost of revenue
Cost of revenues decreased from RMB33.2 million ($4.5 million) for the six months ended December 31, 2023 to RMB 28.7 million ($3.9 million) for the same period in 2024.
-- For the six months ended December 31, 2023 and 2024, cost of revenue
from automation product and software was approximately RMB14.0 million
and RMB12.4 million ($1.7 million), respectively, representing a
decrease of approximately RMB1.6 million ($0.2 million) or 11.8%. The
decrease in cost of revenue from automation product and software was
primarily attributable to the proportion of operation and maintenance
services, which have lower costs.
-- For the six months ended December 31, 2023 and 2024, cost of revenue
from equipment and accessories was approximately RMB12.8 million and
RMB11.2 million ($1.5 million), respectively, representing a decrease of
approximately RMB1.6 million ($0.2 million) or 12.7%. The costs of the
furnace business increased in this period due to the corresponding
increase in revenue, whereas the costs of the offshore oilfield
customers decreased in line with the decreased revenue, resulting in a
reduced total cost of sales.
-- For the six months ended December 31,2023 and 2024, cost of revenue from
oilfield environmental protection was approximately RMB6.0 million and
RMB4.9 million ($0.7 million), respectively, representing a decrease of
approximately RMB1.1 million ($0.2 million) or 19.4%. The decrease in
the cost of revenue from oilfield environmental protection was in line
with decrease in revenue.
-- For the six months ended December 31,2023 and 2024, cost of revenue from
platform outsourcing services remained stable at RMB0.3 million ($0.05
million).
Gross profit
Gross profit increased to RMB13.4 million ($1.8 million) for the six months ended December 31,2024 from RMB12.1million ($1.7 million) for the same period in 2023. Our gross profit as a percentage of revenue increased to 31.7% for the six months ended December 31, 2024 from 26.7% for the same period in 2023.
-- For the six months ended December 31, 2023 and 2024, our gross profit
from automation product and software was approximately RMB3.5 million
and RMB8.5 million ($1.2 million), respectively, representing an
increase in gross profit of approximately RMB5.0 million ($0.7 million)
or 143.2%. The increase in gross margin was primarily due to the
elevated proportion of high-margin service businesses.
-- For the six months ended December 31, 2023 and 2024, gross profit from
equipment and accessories was approximately RMB5.1 million and RMB4.5
million ($0.6 million), respectively, representing a decrease of
approximately RMB0.6 million ($0.1 million) or 10.9 %. The gross margin
for equipment and accessories has remained relatively stable in this
period.
-- For the six months ended December 31, 2023 and 2024, gross profit from
oilfield environmental protection was approximately RMB2.0 million and
negative RMB2.1 million (negative $0.3 million), respectively,
representing a decrease of RMB4.1 million ($0.6 million), or 204.8%. The
main reason for the decrease in gross margin is that one of our
customers reduced the settlement price.
-- For the six months ended December 31, 2023 and 2024, gross profit from
platform outsourcing services was approximately RMB1.5 million and
RMB2.4 million ($0.3 million), respectively, representing an increase of
approximately RMB0.9 million ($0.1 million), or 63.8%, primarily due to
the increase in the settlement rate.
Operating expenses
Selling expenses increased by 13.9%, or RMB0.7 million ($0.1 million), from RMB4.6 million for the six months ended December 31, 2023 to RMB5.2 million ($0.6 million) in the same period of 2024.
General and administrative expenses increased by 9.1%, or RMB2.0 million ($0.3 million), from RMB22.0 million for the six months ended December 31, 2023 to RMB24.0 million ($3.3 million) in the same period of 2024.
The Company also recorded allowance for credit losses of RMB1.6 million for the six months ended December 31, 2023 as compared to allowance for credit losses of RMB0.9 million ($0.1 million) for the same period in 2024.
Research and development expenses increased by 50.3%, or RMB3.4 million ($0.5 million) from RMB6.8 million for the six months ended December 31, 2023 to RMB10.2 million ($1.4 million) for the same period of 2024.
Loss from operations
Loss from operations was RMB26.9 million ($3.7 million) for the six months ended December 31, 2024, compared to a loss of RMB22.8 million for the same period of 2023. This RMB4.1 million ($0.6 million) increase in operating losses was mainly driven by higher operating expenses, as previously discussed.
Change in fair value of warrant liability
The Company classified the warrants issued in connection with common share offering as liabilities at their fair value and adjusted the warrant instrument to fair value at each reporting period. This liability is subject to re-measurement at each balance sheet date until exercised, and any change in fair value is recognized in our statement of operations. Loss in fair value changes of warrant liability was RMB1.9 million and RMB0.01 million ($0.001 million) for the six months ended December 31, 2023 and 2024, respectively. The primary reason for the decrease of loss in the fair value of the warrant liability was that on December 14, 2023, we redeemed an aggregate of 17,953,269 warrants (equivalent to 997,404 warrants post the 2024 Reverse Split) from the Sellers.
Interest income
Net interest income was RMB6.6 million ($0.9 million) for the six months ended December 31, 2024, compared to net interest income of RMB10.4 million for the same period of 2023. The RMB3.8 million ($0.5 million) decrease in net interest income was primarily due to the collection of loans to third parties and coupled with a reduction in interest rates for new loans.
Other income (expenses), net.
Other net expenses was RMB0.4 million ($0.1 million) for the six months ended December 31, 2024, compared to other net expenses of RMB8.6 million for the same period of 2023, the RMB8.2 million ($1.1 million) decrease in other net expenses was primarily due to a decrease of RMB0.1million($0.02 million) in subsidy income and a decrease in other expenses of RMB8.5 million ($1.2 million) which was partially offset by an increase loss from foreign currency of RMB0.2 million ($0.03 million). The decrease in other expenses, as we accrued RMB8.5 million ($1.2 million) estimated liability based on the potential for future significant transaction compensation in contracts to repurchase investor warrants during the six months ended December 31, 2023. For the six months ended December 31, 2024, we do not have this situation.
Net loss
As a result of the factors described above, net loss was RMB20.7 million ($2.8 million) for the six months ended December 31, 2024, a decrease of RMB2.4 million ($0.3 million) from net loss of RMB23.1 million for the same period of 2023.
Cash and short-term investment
As of June 30, 2024, we had cash in the amount of approximately RMB110.0 million ($15.1 million) and short-term investment in bank fixed income product of approximately RMB88.1 million ($12.1 million). As of December 31, 2024, we had cash in the amount of approximately RMB145.3 million ($19.9 million) and short-term investment in bank fixed income product of approximately nil.
About Recon Technology, Ltd ("RCON")
Recon Technology, Ltd (NASDAQ: RCON) is the People's Republic of China's first NASDAQ-listed non-state owned oil and gas field service company. Recon supplies China's largest oil exploration companies, Sinopec (NYSE: SNP) and The China National Petroleum Corporation ("CNPC"), with advanced automated technologies, efficient gathering and transportation equipment and reservoir stimulation measure for increasing petroleum extraction levels, reducing impurities and lowering production costs. Through the years, RCON has taken leading positions within several segmented markets of the oil and gas filed service industry. RCON also has developed stable long-term cooperation relationship with its major clients. For additional information please visit: http://www.recon.cn/.
Forward-Looking Statements
Recon includes "forward-looking statements" within the meaning of the federal securities laws throughout this press release. A reader can identify forward-looking statements because they are not limited to historical fact or they use words such as "scheduled," "may," "will," "could," "should," "would," "expect," "believe," "anticipate," "project," "plan," "estimate," "forecast," "goal," "objective," "committed," "intend," "continue," or "will likely result," and similar expressions that concern Recon's strategy, plans, intentions or beliefs about future occurrences or results. Forward-looking statements are subject to risks, uncertainties and other factors that may change at any time and may cause actual results to differ materially from those that Recon expected. Many of these statements are derived from Recon's operating budgets and forecasts, which are based on many detailed assumptions that Recon believes are reasonable, or are based on various assumptions about certain plans, activities or events which we expect will or may occur in the future. However, it is very difficult to predict the effect of known factors, and Recon cannot anticipate all factors that could affect actual results that may be important to an investor. All forward-looking information should be evaluated in the context of these risks, uncertainties and other factors, including those factors disclosed under "Risk Factors" in Recon's most recent Annual Report on Form 20?F and any subsequent half-year financial filings on Form 6?K filed with the Securities and Exchange Commission. All forward-looking statements are qualified in their entirety by the cautionary statements that Recon makes from time to time in its SEC filings and public communications. Recon cannot assure the reader that it will realize the results or developments Recon anticipates, or, even if substantially realized, that they will result in the consequences or affect Recon or its operations in the way Recon expects. Forward-looking statements speak only as of the date made. Recon undertakes no obligation to update or revise any forward-looking statements to reflect events or circumstances arising after the date on which they were made, except as otherwise required by law. As a result of these risks and uncertainties, readers are cautioned not to place undue reliance on any forward-looking statements included herein or that may be made elsewhere from time to time by, or on behalf of, Recon.
RECON TECHNOLOGY, LTD
CONDENSED CONSOLIDATED INTERIM BALANCE SHEETS
(UNAUDITED)
As of June 30, As of December As of December
31, 31,
2024 2024 2024
RMB RMB US Dollars
ASSETS
Current assets
Cash YEN 109,991,674 YEN 145,284,391 $
19,903,880
Restricted cash 848,936 8,123 1,113
Short-term investments 88,091,794
Notes receivable 1,341,820 3,206,733 439,321
Accounts receivable, net 38,631,762 40,366,074 5,530,129
Inventories, net 1,128,912 1,541,020 211,119
Other receivables, net 3,352,052 3,934,865 539,074
Other receivables - related parties 275,976 279,976 38,357
Loans to third parties 208,928,370 231,952,064 31,777,302
Purchase advances, net 5,156,550 9,485,972 1,299,573
Contract costs, net 48,335,817 41,628,922 5,703,139
Prepaid expenses 401,586 696,877 95,471
Deferred offering cost 810,082 110,981
Total current assets 506,485,249 479,195,099 65,649,459
Property and equipment, net 22,137,940 20,859,877 2,857,791
Construction in progress 219,132 1,144,095 156,740
Long-term loan to third parties 18,500,000 2,534,490
Operating lease right-of-use assets, net (including YEN1,769,840 and YEN1,269,146 ($173,872) from related parties as of June 30, 23,547,193 22,014,961 3,016,037
2024 and December 31, 2024, respectively)
Total Assets YEN 552,389,514 YEN 541,714,032 $
74,214,517
LIABILITIES AND EQUITY
Current liabilities
Short-term bank loans YEN 12,425,959 YEN 11,582,636 $
1,586,815
Accounts payable 10,187,518 14,100,871 1,931,811
Other payables 2,769,685 1,559,371 213,633
Other payable- related parties 2,299,069 1,787,315 244,861
Contract liabilities 1,820,481 4,098,136 561,442
Accrued payroll and employees' welfare 3,237,164 3,416,373 468,041
Taxes payable 993,365 1,685,496 230,912
Short-term borrowings - related parties 10,002,875 10,018,208 1,372,489
Operating lease liabilities - current (including YEN1,775,114 and YEN1,832,236 ($251,015) from related parties as of June 30, 2024 3,741,247 3,891,976 533,198
and December 31, 2024, respectively)
Total Current Liabilities 47,477,363 52,140,382 7,143,202
Operating lease liabilities - non-current (including YEN335,976 and YEN119,411 ($16,359) from related parties as of June 30, 2024 3,971,285 2,781,196 381,022
and December 31, 2024, respectively)
Long-term borrowings - related party 10,000,000 10,000,000 1,369,994
Warrant liability - non-current 6,969 17,504 2,398
Total Liabilities YEN 61,455,617 YEN 64,939,082 $
8,896,616
Commitments and Contingencies
Shareholders' Equity
Class A Ordinary Shares, $0.0001 US dollar par value, 500,000,000 shares authorized; 7,987,959 shares and 7,987,959 shares 99,634 99,634 13,650
issued and outstanding as of June 30, 2024 and December 31, 2024, respectively
Class B Ordinary Shares, $0.0001 US dollar par value, 80,000,000 shares authorized; 7,100,000 shares and 20,000,000 shares 4,693 14,038 1,923
issued and outstanding as of June 30, 2024 and December 31, 2024, respectively
Additional paid-in capital 681,476,717 686,830,523 94,095,396
Statutory reserve 4,148,929 4,148,929 568,401
Accumulated deficit (220,312,085) (240,900,414) (33,003,221)
Accumulated other comprehensive income 37,136,649 38,344,150 5,253,127
Total Recon Technology, Ltd' equity 502,554,537 488,536,860 66,929,276
Non-controlling interests (11,620,640) (11,761,910) (1,611,375)
Total shareholders' equity 490,933,897 476,774,950 65,317,901
Total Liabilities and Shareholders' Equity YEN 552,389,514 YEN 541,714,032 $
74,214,517
The accompanying notes are an integral part of these unaudited condensed consolidated interim financial statements.
RECON TECHNOLOGY, LTD
CONDENSED CONSOLIDATED INTERIM STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
(UNAUDITED)
For the six months ended
December 31,
2023 2024 2024
RMB RMB USD
Revenue 45,256,672 42,069,270 5,763,466
Cost of revenue 33,150,930 28,714,468 3,933,866
Gross profit 12,105,742 13,354,802 1,829,600
Selling and distribution expenses 4,547,115 5,177,944 709,375
General and administrative expenses 22,042,042 24,038,744 3,293,294
Allowance for credit losses 1,553,364 870,714 119,287
Research and development expenses 6,765,287 10,167,182 1,392,898
Operating expenses 34,907,808 40,254,584 5,514,854
Loss from operations (22,802,066) (26,899,782) (3,685,254)
Other income (expenses)
Subsidy income 131,428 21,045 2,883
Interest income 12,060,640 7,136,259 977,663
Interest expense (1,683,289) (580,977) (79,594)
Loss in fair value changes of warrants liability (1,941,195) (10,327) (1,415)
Foreign exchange transaction loss (76,040) (313,263) (42,917)
Other expenses (8,701,288) (80,945) (11,088)
Other income, net (209,744) 6,171,792 845,532
Loss before income tax (23,011,810) (20,727,990) (2,839,722)
Income tax expenses 96,041 1,609 220
Net loss (23,107,851) (20,729,599) (2,839,942)
Less: Net loss attributable to non-controlling interests (553,829) (141,270) (19,354)
Net loss attributable to Recon Technology, Ltd YEN (22,554,022) YEN (20,588,329) $
(2,820,588)
Comprehensive income (loss)
Net loss (23,107,851) (20,729,599) (2,839,942)
Foreign currency translation adjustment (4,609,399) 1,207,501 165,427
Comprehensive loss (27,717,250) (19,522,098) (2,674,515)
Less: Comprehensive loss attributable to non- controlling interests (553,829) (141,270) (19,354)
Comprehensive loss attributable to Recon Technology, Ltd YEN (27,163,421) YEN (19,380,828) $
(2,655,161)
Loss per share - basic and diluted YEN (8.27) YEN (2.29) $
(0.31)
Weighted - average shares -basic and diluted 2,728,056 8,978,328 8,978,328
The accompanying notes are an integral part of these unaudited condensed consolidated interim financial statements.
RECON TECHNOLOGY, LTD
CONDENSED CONSOLIDATED INTERIM STATEMENTS OF CASH FLOWS
(UNAUDITED)
For the six months ended December 31,
2023 2024 2024
RMB RMB US Dollars
Cash flows from operating activities:
Net loss YEN (23,107,851) YEN (20,729,599) $
(2,839,942)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization 1,426,971 1,724,066 236,196
Loss from disposal of equipment 32,252 9,607 1,316
Gain in fair value changes of warrants liability 10,461,075 10,327 1,415
Allowance for credit losses 1,553,364 870,714 119,287
Allowance for slow moving inventories (350,637) (523,228) (71,682)
Amortization of right-of-use assets 570,959 1,532,232 209,915
Restricted shares issued for management and employees 2,866,560 5,353,151 733,376
Restricted shares issued for services 1,070,143
Accrued interest income from loans to third parties (4,415,298) (6,779,697) (928,815)
Accrued interest income from short-term investment (2,352,250)
Changes in operating assets and liabilities:
Notes receivable (8,790,327) (1,864,913) (255,492)
Accounts receivable (4,412,034) (3,348,819) (458,786)
Inventories 4,863,435 (718,490) (98,433)
Other receivables 5,465,227 (358,057) (49,051)
Other receivables-related parties (4,000) (548)
Purchase advances 558,040 81,256 11,132
Contract costs 10,442,916 8,057,774 1,103,911
Prepaid expense 54,734 (295,291) (40,455)
Operating lease liabilities (2,027,067) (1,039,360) (142,392)
Accounts payable 1,271,140 3,913,353 536,127
Other payables (4,103,150) (1,194,817) (163,689)
Other payables-related parties (383,378) (511,754) (70,110)
Contract liabilities 2,140,385 2,277,655 312,037
Accrued payroll and employees' welfare 17,399 179,209 24,552
Taxes payable 537,591 691,901 94,790
Net cash used in operating activities (6,609,801) (12,666,780) (1,735,341)
Cash flows from investing activities:
Purchases of property and equipment (216,082) (455,380) (62,387)
Proceeds from disposal of equipment 20,000
Purchase of land use right (15,000,251)
Collection of loans to third parties 44,613,948 2,904,352 397,895
Payments made for loans to third parties (16,600,000) (36,897,900) (5,054,992)
Payments and prepayments for construction in progress (5,337,873) (731,286)
Payments for short-term investments (131,598,400)
Redemption of short-term investments 180,338,865 88,892,092 12,178,167
Net cash generated by investing activities 61,558,080 49,105,291 6,727,397
Cash flows from financing activities:
Repayments of short-term bank loans (123,000) (843,487) (115,557)
Proceeds from short-term borrowings-related parties 10,000,000
Repayments of short-term borrowings-related parties (10,018,222)
Deferred offering costs (810,082) (110,981)
Redemption of warrants (31,866,604)
Capital contribution by controlling shareholders 10,000 1,370
Net cash used in financing activities (32,007,826) (1,643,569) (225,168)
Effect of exchange rate fluctuation on cash and restricted cash (5,945,117) (343,038) (46,996)
Net increase in cash and restricted cash 16,995,336 34,451,904 4,719,892
Cash and restricted cash at beginning of period 104,857,345 110,840,610 15,185,101
Cash and restricted cash at end of period YEN 121,852,681 YEN 145,292,514 $
19,904,993
Supplemental cash flow information
Cash paid during the period for interest YEN 468,440 YEN 518,086 $
133,730
Cash paid during the period for taxes YEN 16,505 YEN 1,363,403 $
294,729
Reconciliation of cash and restricted cash, beginning of period
Cash YEN 104,125,800 YEN 109,991,674 $
15,068,797
Restricted cash 731,545 848,936 116,304
Cash and restricted cash, beginning of period YEN 104,857,345 YEN 110,840,610 $
15,185,101
Reconciliation of cash and restricted cash, end of period
Cash YEN 121,848,777 YEN 145,284,391 $
19,903,880
Restricted cash 3,904 8,123 1,113
Cash and restricted cash, end of period YEN 121,852,681 YEN 145,292,514 $
19,904,993
Non-cash investing and financing activities
Right-of-use assets obtained in exchange for operating lease obligations YEN 298,783 YEN
$
The accompanying notes are an integral part of these unaudited condensed consolidated interim financial statements.
View original content:https://www.prnewswire.com/news-releases/recon-technology-ltd-reports-financial-results-for-the-first-six-months-of-fiscal-year-2025-302415846.html
SOURCE Recon Technology, Ltd
