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Hollysys Automation Technologies Reports Unaudited Financial Results for the Fiscal year and the Fourth Quarter Ended June 30, 2019

Fiscal Year 2019 Financial Highlights

  • Non-GAAP net income attributable to Hollysys was $126.2 million, an increase of 15.9% compared to the prior year.
  • Total revenues were $570.3 million, an increase of 5.5% compared to the prior year.
  • Non-GAAP gross margin was at 37.1%, compared to 38.2% for the prior year.
  • Non-GAAP diluted EPS was $2.07, an increase of 16.3% compared to the prior year.
  • Net cash provided by operating activities was $100.5 million for the fiscal year 2019.
  • DSO of 180 days, compared to 174 days for the prior year.
  • Inventory turnover days of 55 days, compared to 58 days for the prior year.

Fourth Quarter of Fiscal Year 2019 Financial Highlights

  • Non-GAAP net income attributable to Hollysys was $25.7 million, a decrease of 10.1% compared to the comparable prior year period.
  • Total revenues were $157.0 million, an increase of 6.6% compared to the comparable prior year period.
  • Non-GAAP gross margin was at 34.0%, compared to 39.6% for the comparable prior year period.
  • Non-GAAP diluted EPS was $0.42, a decrease of 8.7% compared to the comparable prior year period.
  • Net cash provided by operating activities was $13.8 million for the current quarter.
  • DSO of 160 days, compared to 166 days for the comparable prior year period.
  • Inventory turnover days of 42 days, compared to 59 days for the comparable prior year period.

BEIJING, Aug. 14, 2019 /PRNewswire/ -- Hollysys Automation Technologies Ltd. (NASDAQ: HOLI) ("Hollysys" or the "Company"), a leading provider of automation and control technologies and applications in China, today announced its unaudited financial results for fiscal year 2019 and the fourth quarter ended June 30, 2019 (see attached tables). The management of Hollysys, stated:

IA business finished the fiscal year with revenue and contract at $233.8 million and $291.3 million, achieving 4.0% and 2.5% YOY growth respectively. For the quarter, revenue and new contract were $66.6 million and $83.9 million, representing 4.0% and 0.9% YOY growth respectively. We continued our effort in market penetration and addressing the demand from current customer base. Within high-end coal fire market, we signed contracts to provide DEH (Digital Electric Hydraulic Control System) to Guohua Jinjie 2*660MW and Huaneng Shengli 2*660MW power stations. Despite slowdown in coal fire, we continued to explore opportunities in new energy, and managed to maintain our leading position, especially in garbage power. In the chemical and petrochemical industries, we have optimized our team to facilitate market penetration and comprehensive solution offering in different sub-verticals. Meanwhile, our milestone Zhong'an coal-chemical project is approaching its completion. We provided in total over 70,000 DCS control points and the execution of the project last for more than two years. Our capability has been highly praised by our client and we believe this project will help build up our reputation as a competitive solution provider for large-size projects and high-end clients in the industry. The momentum of after-sales services continued, driven by the demand from rebuilding and upgrade. We are also improving internal coordination when connecting with our customer base. Through visiting our clients in a team of members from different product divisions, we hope to create better engagement and explore the opportunities of cross-selling. Furthermore, we are actively promoting our smart plant initiatives through direct communication with key potential clients as well as open marketing activities involving clients, governments and other industry players.  

Rail business finished the fiscal year with revenue and contract at $208.9 million and $340.3 million, recording 9.6% and 37.7% YOY growth respectively. For the last quarter, revenue and contract were $48.3 million and $60.8 million, representing 19.6% and 4.6% YOY growth respectively. We signed several contracts to provide ATP advanced maintenance to local railway bureaus. Going forward and given a visible long-term railway construction plan, we will continue to adhere to the diversity strategy for stable and healthy growth and to improve our local service network for more value-adding and differentiated services. With urbanization as an ongoing process, we will keep leveraging our strong R&D capacity and prepare for the application of various types of railway transportation systems in the future.  

In our overseas business, M&E finished the fiscal year with revenue and contract at $127.6 million and $93.4 million, recording 1.8% YOY growth and 9.1% YOY decrease respectively. For the quarter, revenue and contract were $42.1 million and $25.2 million, representing 1.7% and 37.0% YOY decrease. Given the macro economy in Southeast Asia and the Middle East, risk control remains to be the key focus of our M&E business. Going forward, we will continue our effort in developing partnership with key EPC players, and strengthening localization in manufacture, marketing and services.

Fiscal year and the Fourth Quarter Ended June 30, 2019 Unaudited Financial Results Summary

To facilitate a clear understanding of Hollysys' operational results, a summary of unaudited non-GAAP financial results is shown as below:






(In USD thousands, except for number of shares and per share data)

 



Fiscal year ended


Three months ended



Jun 30,
2019

 Jun 30,
2018

%
Change


Jun 30,
2019

 Jun 30,
2018

%
Change










Revenues

$

570,341

540,768

5.5%

$

156,991

147,239

6.6%

    Integrated contract revenue

$

467,371

466,461

0.2%

$

132,753

131,616

0.6%

    Products sales

$

33,102

40,233

(17.7)%

$

5,958

11,149

(46.6)%

    Service rendered

$

69,868

34,074

105.0%

$

18,280

4,474

308.6%

Cost of revenues

$

358,864

334,290

7.4%

$

103,645

88,890

16.6%

Gross profit

$

211,477

206,478

2.4%

$

53,346

58,349

(8.6)%

Total operating expenses

$

87,302

84,429

3.4%

$

31,408

25,459

23.4%

    Selling

$

28,926

27,158

6.5%

$

6,883

6,515

5.6%

    General and administrative

$

40,463

45,116

(10.3)%

$

11,524

14,365

(19.8)%

Goodwill impairment charge

$

11,623

-

100%

$

11,623

-

100%

    Research and development

$

37,025

36,605

1.1%

$

9,200

8,630

6.6%

    VAT refunds and government subsidies

$

(30,735)

(24,450)

25.7%

$

(7,822)

(4,051)

93.1%

Income from operations

$

124,175

122,049

1.7%

$

21,938

32,890

(33.3)%

Other income, net

$

8,824

4,274

106.5%

$

1,139

1,212

(6.0)%

Foreign exchange (loss) gain

$

(1,161)

(1,099)

5.6%

$

2

882

(99.8)%

Share of net income (loss) of equity investees

$

404

(1,571)

(125.7)%

$

1,576

(4,038)

(139.0)%

Dividend income from investment securities


1,112

1,093

1.7%

$

-

-

-

Interest income

$

11,839

7,318

61.8%

$

2,863

2,275

25.8%

Interest expenses

$

(575)

(692)

(16.9)%

$

(204)

116

(275.9)%

Income tax expenses

$

18,184

22,205

(18.1)%

$

1,471

4,621

(68.2)%

Net income attributable to non-controlling interests

$

278

276

0.7%

$

145

115

26.1%

Non-GAAP net income attributable to Hollysys
     Automation Technologies Ltd.

$

126,156

108,891

15.9%

$

25,698

28,601

(10.1)%

Non-GAAP basic EPS

$

2.09

1.80

16.1%

$

0.43

0.47

(8.5)%

Non-GAAP diluted EPS

$

2.07

1.78

16.3%

$

0.42

0.46

(8.7)%










Share-based compensation expenses

$

238

1,207

(80.3)%

$

37

625

(94.1)%

Amortization of acquired intangible assets

$

311

598

(48.0)%

$

77

321

(76.0)%

Fair value adjustments of a bifurcated
     derivative

$

346

(75)

(561.3)%

$

326

(75)

(534.7)%

GAAP Net income attributable to Hollysys
     Automation Technologies Ltd.

$

125,261

107,161

16.9%

$

25,258

27,730

(8.9)%

GAAP basic EPS

$

2.07

1.77

16.9%

$

0.42

0.46

(8.7)%

GAAP diluted EPS

$

2.05

1.75

17.1%

$

0.42

0.45

(6.7)%










Basic weighted average common shares
     outstanding


60,456,524

60,434,019

0.0%


60,465,005

60,442,504

0.0%

Diluted weighted average common shares
     outstanding


61,273,884

61,248,565

0.0%


61,278,773

61,277,059

0.0%

Operational Results Analysis for the Fiscal year Ended June 30, 2019

Comparing to the prior fiscal year, the total revenues for fiscal year 2019 increased from $540.8 million to $570.3 million, representing an increase of 5.5%. Broken down by the revenue types, integrated contracts revenue increased by 0.2% to $467.4 million, products sales revenue decreased by 17.7% to $33.1 million, and services revenue increased by 105.0% to $69.9 million.

The Company's total revenues can also be presented in segments as shown in the following chart:

(In USD thousands)








Fiscal year ended Jun 30,




2019


2018




$

% to Total Revenue


$

% to Total Revenue


Industrial Automation


233,798

41.0%


224,793

41.5%


Rail Transportation Automation


208,917

36.6%


190,645

35.3%


Mechanical and Electrical Solution


127,626

22.4%


125,330

23.2%


Total


570,341

100.0%


540,768

100.0%












Overall gross margin excluding non-cash amortization of acquired intangibles (non-GAAP gross margin) was 37.1% for fiscal year 2019, as compared to 38.2% for the prior year. The non-GAAP gross margin for integrated contracts, product sales, and services rendered were 30.4%, 77.1% and 62.7% for fiscal year 2019, as compared to 32.8%, 73.2% and 71.0% for the prior year, respectively. The gross margin fluctuation was mainly due to the different revenue mix with different margins. The GAAP overall gross margin which includes non-cash amortization of acquired intangibles was 37.0% for fiscal year 2019, as compared to 38.1% for the prior year. The GAAP gross margin for integrated contracts, product sales, and service rendered were 30.4%, 77.1% and 62.7% for fiscal year 2019, as compared to 32.6%, 73.2% and 71.0% for the prior year, respectively.

Selling expenses were $28.9 million for fiscal year 2019, representing an increase of $1.8 million or 6.5% compared to $27.2 million for the prior year. Presented as a percentage of total revenues, selling expenses were 5.1% and 5.0% for fiscal year 2019, and 2018, respectively.

General and administrative expenses, excluding non-cash share-based compensation expenses (non-GAAP G&A expenses), were $40.5 million for fiscal year 2019, representing a decrease of $4.7 million or 10.3% compared to $45.1 million for the prior year, which was primarily due to decrease of bad debt allowance. Presented as a percentage of total revenues, non-GAAP G&A expenses were 7.1% and 8.3% for fiscal year 2019 and 2018, respectively. The GAAP G&A expenses which include the non-cash share-based compensation expenses were $40.7 million and $46.3 million for fiscal year 2019 and 2018, respectively.

Goodwill impairment charge was $11.6 million for fiscal year 2019. Taking into consideration the macro environment and other relevant factors, Concord expects future lower profit resulting from increased competition and decrease in market demand.

Research and development expenses were $37.0 million for fiscal 2019, representing an increase of $0.4 million or 1.1% compared to $36.6 million for the prior year. Presented as a percentage of total revenues, R&D expenses were 6.5% and 6.8% for fiscal year 2019 and 2018, respectively.

The VAT refunds and government subsidies were $30.7 million for fiscal year 2019, as compared to $24.5 million for the prior year, representing a $6.3 million or 25.7% increase, which was primarily due to an increase of the VAT refunds.

The income tax expenses and the effective tax rate were $18.2 million and 12.7% for fiscal year 2019, as compared to $22.2 million and 17.1% for the prior year. The effective tax rate fluctuation was mainly due to the different pre-tax income mix with different tax rates, as the Company's subsidiaries are subject to different tax rates in various jurisdictions.

The non-GAAP net income attributable to Hollysys, which excludes the non-cash share-based compensation expenses calculated based on the grant-date fair value of shares or options granted, amortization of acquired intangible assets, and fair value adjustments of a bifurcated derivative, was $126.2 million or $2.07 per diluted share based on 61.3 million diluted weighted average common shares outstanding for fiscal year 2019. This represents a 15.9% increase over $108.9 million or $1.78 per share based on 61.2 diluted weighted average common million shares outstanding reported in the comparable prior year period. On a GAAP basis, net income attributable to Hollysys was $125.3 million or $2.05 per diluted share representing an increase of 16.9% over $107.2 million or $1.75 per diluted share reported in the comparable prior year period.  

Operational Results Analysis for the Fourth Quarter Ended June 30, 2019

Comparing to the fourth quarter of the prior fiscal year, the total revenues for the three months ended June 30, 2019 increased from $147.2 million to $157.0 million, representing an increase of 6.6%. Broken down by the revenue types, integrated contracts revenue increased by 0.9% to $132.8 million, products sales revenue decreased by 46.6% to $6.0 million, and services revenue increased by 308.6% to $18.3 million.

The Company's total revenues can also be presented in segments as shown in the following chart:

(In USD thousands)









Three months ended Jun 30,




2019


2018




$

% to Total Revenue


$

% to Total Revenue


Industrial Automation


66,557

42.4%


64,013

43.5%


Rail Transportation Automation


48,288

30.8%


40,368

27.4%


Mechanical and Electrical Solution


42,146

26.8%


42,858

29.1%


Total


156,991

100.0%


147,239

100.0%














Overall gross margin excluding non-cash amortization of acquired intangibles (non-GAAP gross margin) was 34.0% for the three months ended June 30, 2019, 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 29.9%, 66.3% and 52.9% for the three months ended June 30, 2019, as compared to 35.7%, 72.4% and 73.2% for the same period of the prior year, respectively. The gross margin fluctuation was mainly due to the different revenue mix with different margins. The GAAP overall gross margin which includes non-cash amortization of acquired intangibles was 33.9% for the three months ended June 30, 2019, as compared to 39.4% for the same period of the prior year. The GAAP gross margin for integrated contracts, product sales, and service rendered were 29.9%, 66.3% and 52.9% for the three months ended June 30, 2019, as compared to 35.5%, 72.4% and 73.2% for the same period of the prior year, respectively.

Selling expenses were $6.9 million for the three months ended June 30, 2019, representing an increase of $0.4 million or 5.6% compared to $6.5 million for the same quarter of the prior year. Presented as a percentage of total revenues, selling expenses were 4.4% and 4.4% for the three months ended June 30, 2019, and 2018, respectively.

General and administrative expenses, excluding non-cash share-based compensation expenses (non-GAAP G&A expenses), were $11.5 million for the quarter ended June 30, 2019, representing a decrease of $2.8 million or 19.8% compared to $14.4 million for the same quarter of the prior year, which was primarily due to decrease of bad debt allowance. Presented as a percentage of total revenues, non-GAAP G&A expenses were 7.3% and 9.8% for quarters ended June 30, 2019 and 2018, respectively. The GAAP G&A expenses which include the non-cash share-based compensation expenses were $11.6 million and $15.0 million for the three months ended June 30, 2019 and 2018, respectively.

Research and development expenses were $9.2 million for the three months ended June 30, 2019, representing an increase of $0.6 million or 6.6% compared to $8.6 million for the same quarter of the prior year. Presented as a percentage of total revenues, R&D expenses were 5.9% and 5.9% for the quarter ended June 30, 2019 and 2018, respectively.

The VAT refunds and government subsidies were $7.8 million for three months ended June 30, 2019, as compared to $4.1 million for the same period in the prior year, representing a $3.8 million or 93.1% increase, which was primarily due to an increase of the VAT refunds.

The income tax expenses and the effective tax rate were $1.5 million and 5.5% for the three months ended June 30, 2019, as compared to $4.6 million and 14.2% for comparable prior year period. The effective tax rate fluctuation was mainly due to the different pre-tax income mix with different tax rates, as the Company's subsidiaries are subject to different tax rates in various jurisdictions.

The non-GAAP net income attributable to Hollysys, which excludes the non-cash share-based compensation expenses calculated based on the grant-date fair value of shares or options granted, amortization of acquired intangible assets, and fair value adjustments of a bifurcated derivative, was $25.7 million or $0.42 per diluted share based on 61.3 million diluted weighted average common shares outstanding for the three months ended June 30, 2019. This represents a 10.1% decrease over $28.6 million or $0.46 per share based on 61.3 diluted weighted average common million shares outstanding reported in the comparable prior year period. On a GAAP basis, net income attributable to Hollysys was $25.3 million or $0.42 per diluted share representing a decrease of 8.9% over $27.7 million or $0.45 per diluted share reported in the comparable prior year period.

Contracts and Backlog Highlights

Hollysys achieved $169.8 million of new contracts for the three months ended June 30, 2019. The backlog as of June 30, 2019 was $594.2 million. The detailed breakdown of the new contracts and backlog by segments is shown below:

(In USD thousands)

New contracts achieved


New contracts achieved


Backlog


for the fiscal year

 ended Jun 30, 2019


for the three months

 ended Jun 30, 2019


as of Jun 30, 2019


$

% to Total
Contract


$

% to Total
Contract


$

% to Total
Backlog

Industrial Automation


291,259

40.2%


83,853

49.4%


191,026

32.1%

Rail Transportation


340,300

46.9%


60,803

35.8%


326,523

55.0%

Mechanical and Electrical Solutions


93,349

12.9%


25,174

14.8%


76,624

12.9%

Total


724,908

100.0%


169,830

100.0%


594,173

100.0%











Cash Flow Highlights

For the fiscal year ended June 30, 2019, the total net cash inflow was $71.1 million. The net cash provided by operating activities was $100.5 million. The net cash used in investing activities was $9.9 million, mainly consisted of $10.6 million purchases of property, plant and equipment and prepaid land leases, and $256.3 million time deposits placed with banks, which was partially offset by $245.9 million maturity of time deposits, $8.9 million dividends received in excess of cumulative equity in earnings from an equity investee, and $4.5 million advance from a shareholder of an equity method investee. The net cash used in financing activities was $10.2 million, mainly consisted of $10.9 million payment of dividends, and $6.9 million repayments of short-term bank loans, which were partially offset by $5.9 million proceeds from short-term bank loans, and $1.5 million cash injected by noncontrolling interests.

For the three months ended June 30, 2019, the total net cash inflow was $81.9 million. The net cash provided by operating activities was $13.8 million. The net cash provided by investing activities was $73.1 million, mainly consisted of $70.3 million maturity of time deposits, $8.9 million dividends received in excess of cumulative equity in earnings from an equity investee, and $4.5 million advance from a shareholder of an equity method investee, which was partially offset by $5.2 million purchases of property, plant and equipment and prepaid land leases, and $5.6 million time deposits placed with banks. The net cash provided by financing activities was $1.2 million, mainly consisted of $1.5 million cash injected by noncontrolling interests, and $1.0 million proceeds from short-term bank loans, which were partially offset by $1.4 million repayments of short-term bank loans.

Balance Sheet Highlights

The total amount of cash and cash equivalents were $332.5 million, $253.4 million, and $265.7 million as of June 30, 2019, March 31, 2019 and June 30, 2018, respectively.

For fiscal year ended June 30, 2019, Days Sales Outstanding ("DSO") was 180 days, as compared to 174 days from the prior year; and inventory turnover was 55 days, as compared to 58 days from the prior year.

For the three months ended June 30, 2019, DSO was 160 days, as compared to 166 days for the comparable prior year period and 193 days for the last quarter; and inventory turnover was 42 days, as compared to 59 days for the comparable prior year period and 50 days for the last quarter.

Conference Call

The Company will host a conference call at 9:00 pm August 14, 2019 U.S. Eastern Time / 9:00 amAugust 15, 2019 Beijing Time, to discuss the financial results for fiscal year 2019 and the fourth quarter ended June 30, 2019 and business outlook.

To participate, please call the following numbers ten minutes before the scheduled start of the call. The conference call identification number is 2099053.

Standard International Dial-In Number: 

+65 67135090

Participant Local Dial-In Numbers:


Australia, Sydney

+61 290833212

China, Domestic

4006208038

China, Domestic Landline only

8008190121

China, Hong Kong

+852 30186771

Japan, Tokyo

+81 345036012

Korea (South), Seoul

+82 27395177

China, Taiwan

+886 255723895

United Kingdom, London

+44 2036214779

United States, New York

+1 8456750437

Participant ITFS Dial-In Numbers:


Australia,

1800411623

Australia,

1300717205

Belgium

080071900

Canada

18663861016

France

0800912761

Germany

08001820671

China, Hong Kong

800906601

India

18002666846

Indonesia, PT Indosat access

0018030179156

Indonesia, PT Telkom access

0078030179156

Italy

800874737

Japan

0120925376

Korea (South), Domestic

0808500474

Malaysia

1800820152

Netherlands

08000221931

New Zealand

0800880084

Norway

80010719

Philippines

180016120306

Switzerland

0800561006

China, Taiwan

0809091568

Thailand

001800656772

United Kingdom

08082346646

United States

18665194004

In addition, a recording of the conference call will be accessible within 48 hours via Hollysys' website at: http://hollysys.investorroom.com

About Hollysys Automation Technologies Ltd. (NASDAQ: HOLI)

Hollysys is a leading automation control system solutions provider in China, with overseas operations in eight other countries and regions throughout Asia. Leveraging its proprietary technology and deep industry know-how, Hollysys empowers its customers with enhanced operational safety, reliability, efficiency, and intelligence which are critical to their businesses. Hollysys derives its revenues mainly from providing integrated solutions for industrial automation and rail transportation. In industrial automation, Hollysys delivers the full spectrum of automation hardware, software, and services spanning field devices, control systems, enterprise manufacturing management and cloud-based applications. In rail transportation, Hollysys provides advanced signaling control and SCADA (Supervisory Control and Data Acquisition) systems for high-speed rail and urban rail (including subways). Founded in 1993, with technical expertise and innovation, Hollysys has grown from a research team specializing in automation control in the power industry into a group providing integrated automation control system solutions for customers in diverse industry verticals. As of March 2019, Hollysys had cumulatively carried out more than 25,000 projects for approximately 15,000 customers in various sectors including power, petrochemical, high-speed rail, and urban rail, in which Hollysys has established leading market positions.

SAFE HARBOUR:

This release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All statements, other than statements of historical fact included herein are "forward-looking statements," including statements regarding: the ability of the Company to achieve its commercial objectives; the business strategy, plans and objectives of the Company and its subsidiaries; and any other statements of non-historical information. These forward-looking statements are often identified by the use of forward-looking terminology such as "believes," "expects" or similar expressions, involve known and unknown risks and uncertainties. Such forward-looking statements, based upon the current beliefs and expectations of Hollysys' management, are subject to risks and uncertainties, which could cause actual results to differ from the forward looking statements. Although the Company believes that the expectations reflected in these forward-looking statements are reasonable, they do involve assumptions, risks and uncertainties, and these expectations may prove to be incorrect. Investors should not place undue reliance on these forward-looking statements, which speak only as of the date of this press release. The Company's actual results could differ materially from those anticipated in these forward-looking statements as a result of a variety of factors, including those discussed in the Company's reports that are filed with the Securities and Exchange Commission and available on its website (http://www.sec.gov). All forward-looking statements attributable to the Company or persons acting on its behalf are expressly qualified in their entirety by these factors. Other than as required under the securities laws, the Company does not assume a duty to update these forward-looking statements.

For further information, please contact:

Hollysys Automation Technologies Ltd.
www.hollysys.com
+86-10-5898-1386
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
Jun 30,


Fiscal year ended
Jun 30,



2019


2018


2019


2018



(Unaudited)


(Unaudited)


(Unaudited)



Net revenues









Integrated contract revenue

$

132,753

$

131,616

$

467,371

$

466,461

Products sales


5,958


11,149


33,102


40,233

Revenue from services


18,280


4,474


69,868


34,074

Total net revenues


156,991


147,239


570,341


540,768










Cost of integrated contracts


93,112


84,938


325,523


314,233

Cost of products sold


2,005


3,074


7,571


10,770

Costs of services rendered


8,605


1,199


26,081


9,885

Gross profit


53,269


58,028


211,166


205,880










Operating expenses









Selling


6,883


6,515


28,926


27,158

General and administrative


11,561


14,990


40,701


46,323

Goodwill impairment charge


11,623


-


11,623


-

Research and development


9,200


8,630


37,025


36,605

VAT refunds and government subsidies


(7,822)


(4,051)


(30,735)


(24,450)

Total operating expenses


31,445


26,084


87,540


85,636










Income from operations


21,824


31,944


123,626


120,244










Other income, net


813


1,287


8,478


4,349

Foreign exchange gain (loss)


2


882


(1,161)


(1,099)

Share of net income (loss) of equity investees


1,576


(4,038)


404


(1,571)

Dividend income from investment securities


-


-


1,112


1,093

Interest income


2,863


2,275


11,839


7,318

Interest expenses


(204)


116


(575)


(692)

Income before income taxes


26,874


32,466


143,723


129,642










Income taxes expenses


1,471


4,621


18,184


22,205

Net income


25,403


27,845


125,539


107,437










Net income attributable to non-controlling interests

145


115


278


276

Net income attributable to Hollysys Automation
Technologies Ltd.

$

25,258

$

27,730

$

125,261

$

107,161










Other comprehensive income (loss), net of tax of nil








Translation adjustments


(19,998)


(45,644)


(31,602)


17,410

Comprehensive income


5,405


(17,799)


93,937


124,847










Less: comprehensive income attributable to non-controlling
     interests

145


116


17


280

Comprehensive income (loss) attributable to Hollysys
Automation Technologies Ltd.

$

5,260

$

(17,915)

$

93,920

$

124,567










Net income per ordinary share:









Basic


0.42


0.46


2.07


1.77

Diluted


0.42


0.45


2.05


1.75

Shares used in income per ordinary share
     computation:









Weighted average number of ordinary shares

60,465,005


60,442,504


60,456,524


60,434,019

Weighted average number of diluted ordinary shares

61,278,773


61,277,059


61,273,884


61,248,565

 


 

 

HOLLYSYS AUTOMATION TECHNOLOGIES LTD.

CONSOLIDATED BALANCE SHEETS

(In USD thousands except for number of shares and per share data)












Jun 30,


Mar 31,





2019


2019





(Unaudited)


(Unaudited)

ASSETS






Current assets







Cash and cash equivalents

$

332,509

$

253,388



Time deposits with maturities over three months


145,139


212,997



Restricted cash


22,260


18,931



Accounts receivable, net of allowance for doubtful accounts of $47,162
    and $46,177 as of June 30, 2019 and March 31, 2019, respectively


282,594


242,195



Costs and estimated earnings in excess of billings, net of allowance for doubtful
    accounts of $6,981 and $8,024 as of June 30, 2019 and March 31, 2019,
    respectively


197,955


226,896



Accounts receivable retention


5,468


4,329



Other receivables, net of allowance for doubtful accounts of $4,879 and $4,741 as
    of June 30, 2019 and March 31, 2019, respectively


27,109


21,119



Advances to suppliers


12,901


11,262



Amounts due from related parties


36,295


38,182



Inventories


42,983


45,278



Prepaid expenses


644


927



Income tax recoverable


3,621


283


Total current assets


1,109,478


1,075,787








Non-current assets







Restricted cash


3,618


4,156



Accounts receivable retention


6,390


17,090



Prepaid expenses


2


4



Property, plant and equipment, net


76,006


80,002



Prepaid land leases


16,599


9,910



Intangible assets, net


1,383


1,492



Investments in equity investees


40,386


47,421



Investment securities


4,776


4,879



Goodwill


37,054


48,671



Deferred tax assets


13,331


12,584


Total non-current assets


199,545


226,209


Total assets


1,309,023


1,301,996








LIABILITIES AND STOCKHOLDERS' EQUITY






Current liabilities







Derivative financial liability


758


432



Short-term bank loans


1,909


2,033



Current portion of long-term loans


20,310


20,297



Accounts payable


110,384


116,276



Construction cost payable


94


-



Deferred revenue


141,385


137,840



Accrued payroll and related expenses


14,512


11,794



Income tax payable


2,541


4,259



Warranty liabilities


9,085


5,409



Other tax payables


665


13,951



Accrued liabilities


32,229


21,689



Amounts due to related parties


5,395


4,982


Total current liabilities


339,267


338,962








Non-current liabilities







Accrued liabilities


3,530


6,000



Long-term loans


978


914



Deferred tax liabilities


11,779


11,284



Warranty liabilities


6,309


2,536


Total non-current liabilities


22,596


20,734


Total liabilities


361,863


359,696









Commitments and contingencies


-


-









Stockholders' equity:







Ordinary shares, par value $0.001 per share, 100,000,000 shares authorized;
    60,342,099 shares issued and outstanding as of June 30, 2019 and March 31,
    2019


60


60



Additional paid-in capital


223,635


223,597



Statutory reserves


48,698


48,706



Retained earnings *


708,515


686,561



Accumulated other comprehensive income


(35,522)


(16,796)


Total Hollysys Automation Technologies Ltd. stockholder's equity


945,386


942,128



Non-controlling interests


1,774


172


Total equity


947,160


942,300









Total liabilities and equity

$

1,309,023

$

1,301,996


* The adoption of ASC 606 commenced on July 1, 2018 had a one-off effect on the beginning of balance sheet accounts.

 

 


 


HOLLYSYS AUTOMATION TECHNOLOGIES LTD

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In USD thousands).




 

Three months ended


Fiscal year ended

Jun 30, 2019


Jun 30, 2019




(Unaudited)


(Unaudited)

Cash flows from operating activities:






Net income

$

25,403

$

125,539

Adjustments to reconcile net income to net cash provided by operating activities:






Depreciation of property, plant and equipment


1,959


7,879


Amortization of prepaid land leases


66


264


Amortization of intangible assets


77


311


Allowance for doubtful accounts


1,555


2,119


(Gain) loss on disposal of long-lived assets


(30)


13


Goodwill impairment charge


11,623


11,623


Share of net gain from equity investees


(1,576)


(404)


Share-based compensation expenses


37


238


Deferred income tax expenses


(3,697)


(6,197)


Accretion of convertible bond


57


230


Fair value adjustments of a bifurcated derivative


326


346


Gains on deconsolidation of a subsidiary


-


(5,768)


Dividends received from an equity investee


(1,663)


3,865

Changes in operating assets and liabilities:






Accounts receivable


(37,485)


(33,782)


Costs and estimated earnings in excess of billings


25,150


(2,757)


Inventories 


1,333


(3,773)


Advances to suppliers


(1,862)


(5,357)


Other receivables 


(6,340)


2,647


Deposits and other assets


281


62


Due from related parties


1,103


6,600


Accounts payable


(4,268)


(14,027)


Deferred revenue


6,310


10,836


Accruals and other payables


13,149


11,488


Due to related parties


526


(1,494)


Income tax payable


(5,069)


1,740


Other tax payables


(13,159)


(11,720)


Net cash provided by operating activities


13,806


100,521







Cash flows from investing activities:






Time deposits placed with banks


(5,611)


(256,328)


Purchases of property, plant and equipment


(1,587)


(3,488)


Prepaid land leases


(3,575)


(7,099)


Proceeds from disposal of property, plant and equipment


44


301


Maturity of time deposits


70,331


245,880


Advance from a shareholder of an equity method investee


4,544


4,544


Investment securities


-


(740)


Cash reduced upon deconsolidation of subsidiary


-


(1,878)


Dividends received in excess of cumulative equity in earnings from an equity investee


8,920


8,920


Net cash provided by (used in) investing activities


73,066


(9,888)







Cash flows from financing activities:






Proceeds from short-term bank loans


981


5,908


Repayments of short-term bank loans


(1,403)


(6,875)


Proceeds from long-term bank loans


256


730


Repayments of long-term bank loans


(109)


(512)


Cash injected by noncontrolling interests


1,456


1,456


Payment of dividends


-


(10,862)


Net cash provided by (used in) financing activities


1,181


(10,155)








Effect of foreign exchange rate changes


(6,141)


(9,400)


Net decrease increase in cash, cash equivalents and restricted cash

$

81,912


71,078








Cash, cash equivalents and restricted cash, beginning of period

$

276,475


287,309


Cash, cash equivalents and restricted cash, end of period


358,387


358,387

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, 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 U.S. GAAP measures to the non-GAAP measures for the periods indicated:

(In USD thousands, except for number of shares and per share data)



Three months ended


Fiscal year ended



Jun 30,


Jun 30,



2019


2018


2019


2018



(Unaudited)


(Unaudited)


(Unaudited)


(Unaudited)










Cost of integrated contracts

$

93,112

$

84,938

$

325,523

$

314,233

Less: Amortization of acquired intangible assets


77


321


311


598

Non-GAAP cost of integrated contracts

$

93,035

$

84,617

$

325,212

$

313,635










General and administrative expenses

$

11,561

$

14,990

$

40,701

$

46,323

Less: Share-based compensation expenses


37


625


238


1,207

Non-GAAP general and administrative expenses

$

11,524

$

14,365

$

40,463

$

45,116










Other income, net

$

813

$

1,287

$

8,478

$

4,349

Add: Fair value adjustments of a bifurcated derivative


326


(75)


346


(75)

Non-GAAP other income, net

$

1,139

$

1,212

$

8,824

$

4,274










Net income attributable to Hollysys Automation
Technologies Ltd.

$

25,258

$

27,730

$

125,261

$

107,161

Add:









     Share-based compensation expenses


37


625


238


1,207

     Amortization of acquired intangible assets


77


321


311


598

     Fair value adjustments of a bifurcated derivative


326


(75)


346


(75)

Non-GAAP net income attributable to Hollysys
Automation Technologies Ltd.

$

25,698

$

28,601

$

126,156

$

108,891










     Weighted average number of basic ordinary shares


60,465,005


60,442,504


60,456,524


60,434,019

     Weighted average number of diluted ordinary shares


61,278,773


61,277,059


61,273,884


61,248,565

Non-GAAP basic earnings per share

$

0.43

$

0.47

$

2.09

$

1.80

Non-GAAP diluted earnings per share

$

0.42

$

0.46

$

2.07

$

1.78

Cision View original content:http://www.prnewswire.com/news-releases/hollysys-automation-technologies-reports-unaudited-financial-results-for-the-fiscal-year-and-the-fourth-quarter-ended-june-30-2019-300901695.html

SOURCE Hollysys Automation Technologies, Ltd

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