HOLI
$12.41
Hollysys Automation
($.22)
(1.74%)
Earnings Details
3rd Quarter March 2020
Thursday, May 14, 2020 5:05:00 PM
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Summary

Hollysys Automation (HOLI) Recent Earnings

Hollysys Automation (HOLI) reported 3rd Quarter March 2020 earnings of $0.23 per share on revenue of $80.8 million. The consensus earnings estimate was $0.48 per share. Revenue fell 35.5% compared to the same quarter a year ago.

Hollysys Automation Technologies Ltd is a provider of automation and control technologies and applications in China. Its services include online equipment management services, upgrade services, inspection services, and among others.

Results
Reported Earnings
$0.23
Earnings Whisper
-
Consensus Estimate
$0.48
Reported Revenue
$80.8 Mil
Revenue Estimate
Growth
Earnings Growth
Revenue Growth
Power Rating
Grade
Earnings Release

Hollysys Automation Technologies Reports Unaudited Financial Results for the Third Quarter and the First Nine Months Ended March 31, 2020

First Nine months of Fiscal Year 2020 Financial Highlights

  • Non-GAAP net income attributable to Hollysys was $77.9 million, a decrease of 22.5% compared to the comparable prior year period.
  • Total revenues were $374.1 million, a decrease of 9.5% compared to the comparable prior year period.
  • Non-GAAP gross margin was at 35.6%, compared to 38.3% for the comparable prior year period.
  • Non-GAAP diluted EPS was $1.28, a decrease of 22.0% compared to the comparable prior year period.
  • Net cash provided by operating activities was $117.5 million for the current period.
  • DSO of 188 days, compared to 176 days for the comparable prior year period.
  • Inventory turnover days of 57 days, compared to 59 days for the comparable prior year period.

Third Quarter of Fiscal Year 2020 Financial Highlights

  • Non-GAAP net income attributable to Hollysys was $13.9 million, a decrease of 50.4% compared to the comparable prior year period.
  • Total revenues were $80.8 million, a decrease of 35.5% compared to the comparable prior year period.
  • Non-GAAP gross margin was at 30.8%, compared to 39.6% for the comparable prior year period.
  • Non-GAAP diluted EPS were at $0.23, a decrease of 50.0% compared to the comparable prior year period.
  • Net cash provided by operating activities was $8.0 million for the current quarter.
  • DSO of 266 days, compared to 193 days for the comparable prior year period.
  • Inventory turnover days of 71 days, compared to 50 days for the comparable prior year period.

BEIJING, May 14, 2020 /PRNewswire/ -- Hollysys Automation Technologies Ltd. (NASDAQ: HOLI) ("Hollysys" or the "Company"), a leading provider of automation and control technologies and applications in China, today announced its unaudited financial results for fiscal year 2020 third quarter ended March 31, 2020 (see attached tables). The management of Hollysys, stated:

COVID-19 has laid negative impact on our business. Contract bidding and project execution were delayed for Industrial Automation ("IA") and rail business and only started to recover starting in March. In response to such impact, we have actively prepared internal work in advance, including staff training, marketing preparation, solution improvement, internal testing, etc. while also maintained communication with clients to the greatest extent, and made procurement in advance to counter the uncertainty of overseas supply chain. With the reopening of economy in China, we expect our business to recover to its normal course. Going forward, the Company will be imposing more stringent criteria on cash collection and payment, contract quality and expense.

IA business finished the third quarter with revenue and contract at $34.2 million and $63.2 million, representing 43.0% and 24.7% YOY decrease, respectively. For the first nine months of the fiscal year, IA revenue and contract achieved 0.5% and 4.1% YOY growth, respectively.

  • In coal fire sector, we continued our effort in strengthening our market position in high-end market and won the bidding for Xinjiang Wucaiwan 2*660MW power units this quarter.
  • In chemical and petro-chemical sector, we continued our effort in key bidding tracking. Several major contracts that we signed this quarter include a 5 million tons/year oil treatment DCS upgrade project for Sinopec and a comprehensive surveillance project covering six LNG (Liquidated Natural Gas) storage centers of Henan Natural Gas Storage & Logistics Company, where we provided a wide range of solutions including SCADA, DCS, SIS, and GDS (Gas Detection System) etc. To assist with our market penetration strategy, we kept improving our solution and product through internal R&D and cooperation with external parties, with particular focus in the vertical of coal-chemical and oil & gas. We also continued to build the reputation of the Company in the industry in various manners, including industry conference, successful key project demonstration, cooperation with experts, key clients strategic relation management, etc.
  • In smart factory business, internal structural optimization was made as we established the digital factory business unit ("BU"). The new BU will be responsible for the marketing, solution and software development and execution of smart factory project. We expect such change to lead to more focused internal resource deployment for serving client of various industries. As a comparison, the business used to be carried out separately by different industry teams, with our advantageous power industry being the primary focus. In solution preparation, we have gradually improved our solution through internal R&D and external cooperation for various industries, including oil & gas and fine chemical.
  • Under the "3+1+N" strategy, we continued the effort to integrate the sales platform of the Company for greater internal synergy, to develop and strengthen our industrial cloud capacity covering cloud platform and cloud-based software, and to expand our solution for full lifecycle coverage. With the effort, we have made meaningful progress in pharmaceutical business in terms of solution expansion, thanks to the inclusion of design capacity and greater coordination between members of the Company. In this quarter, key contracts of pharmaceutical business include an engineering design contract with Shandong Fulkon, a renowned domestic pharmaceutical producer, and three tens of millions RMB level control system contracts.

Rail business finished the third quarter with revenue and contract at $28.7 million and $5.0 million, recording 38.7% and 86.0% YOY decrease, respectively. For the first nine months of the fiscal year, revenue and contract recorded 5.3% and 53.5% YOY decrease, respectively.

  • In high-speed rail ("HSR") sector, major contracts include an ATP contract for cargo high-speed train, a TCC contract for Zhengzhou section of the Taiyuan-Jiaozuo High-speed Railway and several aftersales contracts covering part components, maintenance and upgrade.
  • In subway sector, no significant contracts were signed this quarter. On quality management, following the successful delivery of Phase one of Hohhot subway line 1 cloud-based SCADA project last quarter, subway business continued to strengthen quality management, with particular focus on supply chain management and engineering standardization. On aftersales service, several contracts covering system upgrade and part components were signed.
  • To actively address the aftersales opportunities in the market, rail business has been implementing the "service transformation" strategy, to strengthen local service network, to expand service solution and to develop technology-and-service-centered service for better differentiation. In HSR sector, other than the current aftersales service provided to on-board products (ATP), we have been exploring and developing service solution for on-ground products. In subway sector, with current client base and numerous line under operation, we are gradually reviewing existing projects for maintenance and upgrade opportunities.
  • As part of the "3+1+N" strategy, rail business is actively executing the digital empowerment for the current product line. New solutions on smart maintenance and smart workshop for clients from HSR and subway have been identified and are currently under development and testing. With urbanization as an ongoing process, we will keep leveraging our strong R&D capacity and prepare for the application of our solution in more verticals of transportation in the future. Going forward, our rail business will continue to adhere to the diversity strategy for stable and healthy growth.

M&E business finished the quarter with revenue and contract at $17.9 million and $19.9 million, recording 2.6% YOY decrease and 18.6% YOY increase respectively. For the first nine months of the fiscal year, revenue and contract recorded 37.0% and 3.7% YOY decrease respectively.

Given the macro economy in Southeast Asia and the Middle East, as well as the outbreak of COVID-19 and its potential impact, risk control remains to be the key focus of our M&E business. In our direct sales and overseas EPC project, progress is constantly made in terms of establishment of new cooperation with new key EPC players as well as ongoing cooperation with existing partners.

In addition to our previous effort on overseas headquarter upgrade and appointment of overseas officer, we have set up a 3-year-long global management capacity action plan. The plan aims to gradually incorporate our current overseas business into the management system of the domestic business, and to ultimately build our global management capacity.

Third Quarter and First Nine Months Ended March 31, 2020 Unaudited Financial Results Summary

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








Three months ended


Nine months ended



March 31,
2020

 March 31,
2019

%
Change


March 31,
2020

 March 31,
2019

%
Change










Revenues

$

80,768

125,167

(35.5)%

$

374,106

413,350

(9.5)%

    Integrated solutions contracts revenue

$

67,673

101,285

(33.2)%

$

301,814

334,618

(9.8)%

    Products sales

$

3,588

13,187

(72.8)%

$

16,249

27,144

(40.1)%

    Service rendered

$

9,507

10,695

(11.1)%

$

56,043

51,588

8.6%

Cost of revenues

$

55,928

75,652

(26.1)%

$

240,977

255,219

(5.6)%

Gross profit

$

24,840

49,515

(49.8)%

$

133,129

158,131

(15.8)%

Total operating expenses

$

13,317

19,319

(31.1)%

$

65,121

55,895

16.5%

    Selling

$

6,168

6,474

(4.7)%

$

23,838

22,043

8.1%

    General and administrative

$

8,946

8,743

2.3%

$

30,130

28,939

4.1%

    Research and development

$

10,221

8,655

18.1%

$

32,969

27,825

18.5%

    VAT refunds and government subsidies

$

(12,018)

(4,553)

164.0%

$

(21,816)

(22,912)

(4.8)%

Income from operations

$

11,523

30,196

(61.8)%

$

68,008

102,236

(33.5)%

Other income, net

$

1,031

1,190

(13.4)%

$

4,357

7,685

(43.3)%

Foreign exchange gain (loss)

$

98

(333)

(129.4)%

$

647

(1,163)

(155.6)%

Gains on disposal of an investment in an
    equity investee

$

-

-

-

$

5,763

-

-

Share of net income (loss) of equity
    investees

$

570

(885)

(164.4)%

$

4,108

(1,172)

(450.5)%

Dividend income from equity security
    investments

$

-

-

-

$

1,141

1,116

2.2%

Interest income

$

3,271

2,978

9.9%

$

9,399

8,973

4.7%

Interest expenses

$

(16)

(54)

(70.4)%

$

(135)

(371)

(63.6)%

Income tax expenses

$

2,422

4,946

(51.0)%

$

15,424

16,713

(7.7)%

Net income (loss) attributable to non-
    controlling interests

$

119

50

138.0%

$

(7)

132

(105.3)%

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

$

13,936

28,096

(50.4)%

$

77,871

100,459

(22.5)%

Non-GAAP basic EPS

$

0.23

0.46

(50.0)%

$

1.29

1.66

(22.3)%

Non-GAAP diluted EPS

$

0.23

0.46

(50.0)%

$

1.28

1.65

(22.0)%










Share-based compensation expenses

$

15

50

(70.0)%

$

55

201

(72.6)%

Amortization of acquired intangible assets

$

75

78

(3.8)%

$

226

234

(3.4)%

Fair value adjustments of a bifurcated
    derivative

$

-

-

-

$

-

20

(100.0)%

GAAP Net income attributable to Hollysys
    Automation Technologies Ltd.

$

13,846

27,968

(50.5)%

$

77,590

100,004

(22.4)%

GAAP basic EPS

$

0.23

0.46

(50.0)%

$

1.28

1.65

(22.4)%

GAAP diluted EPS

$

0.23

0.46

(50.0)%

$

1.28

1.64

(22.0)%










Basic weighted average common shares
    outstanding


60,552,099

60,459,370

0.2%


60,520,329

60,453,704

0.1%

Diluted weighted average common shares
    outstanding


60,552,099

61,276,829

(1.2)%


60,694,045

61,273,073

(0.9)%











Operational Results Analysis for the Third Quarter Ended March 31, 2020

Comparing to the third quarter of the prior fiscal year, the total revenues for the three months ended March 31 2020 decreased from $125.2 million to $80.8 million, representing a decrease of 35.5%. Broken down by the revenue types, integrated contracts revenue decreased by 33.2% to $67.7 million, products sales revenue decreased by 72.8% to $3.6 million, and services revenue decreased by 11.1% to $9.5 million.

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

(In USD thousands)






Three months ended March 31,


Nine months ended March 31,




2020


2019


2020


2019




$

% to
Total
Revenue


$

% to
Total
Revenue


$

% to
Total
Revenue


$

% to
Total

Revenue


Industrial Automation


34,228

42.4%


60,063

47.9%


168,155

45.0%


167,241

40.4%


Rail Transportation Automation


28,672

35.5%


46,759

37.4%


152,071

40.6%


160,630

38.9%


Mechanical and Electrical
Solution


17,868

22.1%


18,345

14.7%


53,880

14.4%


85,479

20.7%


Total


80,768

100.0%


125,167

100.0%


374,106

100.0%


413,350

100.0%




















 

Overall gross margin excluding non-cash amortization of acquired intangibles (non-GAAP gross margin) was 30.8% for the three months ended March 31, 2020, as compared to 39.6% for the same period of the prior year. The non-GAAP gross margin for integrated contracts, product sales, and services rendered were 22.3%, 71.3% and 75.3% for the three months ended March 31, 2020, as compared to 30.2%, 85.6% and 71.9% for the same period of the prior year, respectively. The gross margin fluctuated mainly due to the different revenue mix with different margins. The GAAP overall gross margin which includes non-cash amortization of acquired intangibles was 30.7% for the three months ended March 31, 2020, as compared to 39.5% for the same period of the prior year. The GAAP gross margin for integrated contracts, product sales, and service rendered was 22.2%, 71.3% and 75.3% for the three months ended March 31, 2020, as compared to 30.1%, 85.6% and 71.9% for the same period of the prior year, respectively.

Selling expenses were $6.2 million for the three months ended March 31, 2020, representing a decrease of $0.3 million or 4.7% compared to $6.5 million for the same quarter of the prior year. Presented as a percentage of total revenues, selling expenses were 7.6% and 5.2% for the three months ended March 31, 2020, and 2019, respectively.

General and administrative expenses, excluding non-cash share-based compensation expenses (non-GAAP G&A expenses), were $8.9 million for the quarter ended March 31, 2020, representing an increase of $0.2 million or 2.3% compared to $8.7 million for the same quarter of the prior year. Presented as a percentage of total revenues, non-GAAP G&A expenses were 11.1% and 7.0% for quarters ended March 31, 2020 and 2019, respectively. The GAAP G&A expenses which include the non-cash share-based compensation expenses were $9.0 million and $8.8 million for the three months ended March 31, 2020 and 2019, respectively.

Research and development expenses were $10.2 million for the three months ended March 31, 2020, representing an increase of $1.5 million or 18.1% compared to $8.7 million for the same quarter of the prior year, mainly due to increased research and development activities. Presented as a percentage of total revenues, R&D expenses were 12.7% and 6.9% for the quarter ended March 31, 2020 and 2019, respectively.

The VAT refunds and government subsidies were $12.0 million for three months ended March 31, 2020, as compared to $4.6 million for the same period in the prior year, representing a $7.4 million or 164.0% increase, which was primarily due to increase of the VAT refunds.

The income tax expenses and the effective tax rate were $2.4 million and 14.8% for the three months ended March 31, 2020, respectively, as compared to $4.9 million and 15.0% for comparable prior year period, respectively,.

The non-GAAP net income attributable to Hollysys, which excludes the non-cash share-based compensation expenses calculated based on the grant-date fair value of shares or options granted, amortization of acquired intangible assets, and fair value adjustments of a bifurcated derivative, was $13.9 million or $0.23 per diluted share based on 60.6 million diluted weighted average ordinary shares outstanding for the three months ended March 31, 2020. This represents a 50.4% decrease from $28.1 million or $0.46 per share based on 61.3 million diluted weighted average ordinary shares outstanding reported in the comparable prior year period. On a GAAP basis, net income attributable to Hollysys was $13.8 million or $0.23 per diluted share representing a decrease of 50.5% from $28.0 million or $0.46 per diluted share reported in the comparable prior year period.

Contracts and Backlog Highlights

Hollysys achieved $88.1 million of new contracts for the three months ended March 31, 2020. The backlog as of March 31, 2020 was $574.1 million. The detailed breakdown of new contracts and backlog by segments is shown below:

 


New contracts achieved


Backlog


for the three months

 ended March 31, 2020


as of March 31, 2020


(In USD
thousands)


% to Total
Contract


(In USD

thousands)

% to Total
Backlog

Industrial Automation


63,228

71.7%


211,437

36.8%

Rail Transportation


4,980

5.7%


277,962

48.4%

Mechanical and Electrical Solutions


19,867

22.6%


84,719

14.8%

Total


88,075

100.0%


574,118

100.0%









 

Cash Flow Highlights

For the three months ended March 31, 2020, the total net cash outflow was $60.1 million. The net cash provided by operating activities was $8.0 million. The net cash used in investing activities was $61.8 million and mainly consisted of 2.2 million purchases of property, plant and equipment, and $137.0 million of time deposits placed with banks, which were partially offset by $77.1 million of matured time deposits. The net cash used in financing activities was $1.1 million and mainly consisted of $1.2 million repayments of short-term bank loans.

Balance Sheet Highlights

The total amount of cash and cash equivalents were $366.4 million, $403.9 million, and $276.5 million as of March 31, 2020, December 31, 2019 and March 31, 2019, respectively.

For the three months ended March 31, 2020, DSO was 266 days, as compared to 193 days for the comparable prior year period and 137 days for the last quarter; and inventory turnover was 71 days, as compared to 50 days for the comparable prior year period and 39 days for the last quarter.

Conference Call

The Company will host a conference call at 9:00 pm May 14, 2020 U.S. Eastern Time / 9:00 am May 15, 2020 Beijing Time, to discuss the financial results for fiscal year 2020 third quarter ended March 31, 2020 and business outlook.

Joining the Conference Call:

Please note that our teleconference provider have fully moved to a new system, Direct Event, which delivers the same teleconference call service but by pre-registration only for the participants. Here is the instruction on joining the conference call:

1.         Please register in advance of the conference using the link provided below. Upon registering, you will be provided with participant dial-in numbers, Direct Event passcode and unique registrant ID.

2.         In the 10 minutes prior to the call start time, you will need to use the conference access information provided in the email received at the point of registering.

Note: Due to regional restrictions some participants may receive operator assistance when joining this conference call and will not be automatically connected.

Helpful keypad commands:
*0 - Operator assistance
*6 - Self mute/unmute

Direct Event online registration: http://apac.directeventreg.com/registration/event/7939828. Please use Conference ID 7939828 for entry if the link fails to lead directly to the registration page.

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

About Hollysys Automation Technologies Ltd. (NASDAQ: HOLI)

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

SAFE HARBOUR:

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

 

 

 

HOLLYSYS AUTOMATION TECHNOLOGIES LTD.

CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

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




Three months ended
Mar 31,


Nine months ended
Mar 31,



2020


2019


2020


2019



(Unaudited)


(Unaudited)


(Unaudited)


(Unaudited)

Net revenues









Integrated solutions contracts revenue

$

67,673

$

101,285

$

301,814

$

334,618

Products sales


3,588


13,187


16,249


27,144

Revenue from services


9,507


10,695


56,043


51,588

Total net revenues


80,768


125,167


374,106


413,350










Costs of integrated solutions contracts


52,628


70,818


216,613


232,411

Cost of products sold


1,031


1,903


4,461


5,566

Costs of services rendered


2,344


3,009


20,129


17,476

Gross profit


24,765


49,437


132,903


157,897










Operating expenses









Selling


6,168


6,474


23,838


22,043

General and administrative


8,961


8,793


30,185


29,140

Research and development


10,221


8,655


32,969


27,825

VAT refunds and government subsidies


(12,018)


(4,553)


(21,816)


(22,912)

Total operating expenses


13,332


19,369


65,176


56,096

Income from operations


11,433


30,068


67,727


101,801










Other income, net


1,031


1,190


4,357


7,665

Foreign exchange gain (loss)


98


(333)


647


(1,163)

Gains on disposal of an investment in an equity investee


-


-


5,763


-

Share of net income (losses) of equity investees


570


(885)


4,108


(1,172)

Dividend income from equity security investments


-


-


1,141


1,116

Interest income


3,271


2,978


9,399


8,973

Interest expenses


(16)


(54)


(135)


(371)

Income before income taxes


16,387


32,964


93,007


116,849










Income taxes expenses


2,422


4,946


15,424


16,713

Net income


13,965


28,018


77,583


100,136










Net income (losses) attributable to non-controlling interests

119


50


(7)


132

Net income attributable to Hollysys Automation
Technologies Ltd.

$

13,846

$

27,968

$

77,590

$

100,004










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








Translation adjustments


(18,493)


14,871


(31,746)


(11,604)

Comprehensive income


(4,528)


42,889


45,837


88,532










Less: comprehensive income (loss) attributable to non-controlling interests

79


50


1,030


(129)

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

$

(4,607)

$

42,839

$

44,807

$

88,661










Net income per share:









Basic


0.23


0.46


1.28


1.65

Diluted


0.23


0.46


1.28


1.64

Shares used in net income per share computation:









Basic

60,552,099


60,459,370


60,520,329


60,453,704

Diluted

60,552,099


61,276,829


60,694,045


61,273,073









 

 

 

HOLLYSYS AUTOMATION TECHNOLOGIES LTD.

CONSOLIDATED BALANCE SHEETS

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












March 31,


December
31,





2020


2019





(Unaudited)


(Unaudited)

ASSETS






Current assets







Cash and cash equivalents

$

344,000

$

403,860



Time deposits with original maturities over three months


203,542


146,745



Restricted cash


15,020


19,985



Accounts receivable, net of allowance for doubtful accounts of $45,704 and $45,348
     as of March 31, 2020 and December 31, 2019, respectively


215,247


239,492



Costs and estimated earnings in excess of billings, net of allowance for doubtful
    accounts of $6,189 and $6,672 as of March 31, 2020 and December 31, 2019,

    respectively


214,057


227,490



Accounts receivable retention


4,142


4,911



Other receivables, net of allowance for doubtful accounts of $4,346 and $4,390 as
     of March 31, 2020 and December 31, 2019, respectively


27,795


23,173



Advances to suppliers


16,228


17,522



Amounts due from related parties


24,808


26,515



Inventories


49,609


35,596



Prepaid expenses


821


510



Income tax recoverable


1,541


288


Total current assets


1,116,810


1,146,087








Non-current assets







Restricted cash


7,368


2,657



Costs and estimated earnings in excess of billings


2,542


2,700



Accounts receivable retention


6,490


7,300



Prepaid expenses


7


10



Property, plant and equipment, net


75,778


78,059



Prepaid land leases


15,719


16,224



Intangible assets, net


1,116


1,208



Investments in equity investees


40,052


40,077



Investments securities


4,623


4,693



Goodwill


35,834


37,845



Deferred tax assets


8,947


8,328



Operating lease right-of-use assets


5,084


5,259


Total non-current assets


203,560


204,360


Total assets


1,320,370


1,350,447








LIABILITIES AND STOCKHOLDERS' EQUITY






Current liabilities







Short-term bank loans


279


1,436



Current portion of long-term loans


316


319



Accounts payable


114,363


115,166



Construction costs payable


1,461


1,289



Deferred revenue


133,176


142,025



Accrued payroll and related expenses


11,972


21,473



Income tax payable


2,349


4,795



Warranty liabilities


6,205


6,597



Other tax payables


2,320


4,481



Accrued liabilities


31,315


29,337



Amounts due to related parties


3,534


4,218



Operating lease liabilities


1,679


1,673


Total current liabilities


308,969


332,809








Non-current liabilities







Accrued liabilities


5,534


7,620



Long-term loans


829


896



Accounts payable


3,690


3,824



Deferred tax liabilities


14,252


13,146



Warranty liabilities


3,681


4,117



Operating lease liabilities


3,075


3,180


Total non-current liabilities


31,061


32,783


Total liabilities


340,030


365,592









Commitments and contingencies


-


-









Stockholders' equity:







Ordinary shares, par value $0.001 per share, 100,000,000 shares authorized;
    60,537,099 shares issued and outstanding as of March 31, 2020 and December

    31, 2019


61


61



Additional paid-in capital


223,690


223,673



Statutory reserves


49,424


49,427



Retained earnings


772,666


758,819



Accumulated other comprehensive loss


(68,305)


(49,852)


Total Hollysys Automation Technologies Ltd. stockholder's equity


977,536


982,128



Non-controlling interests


2,804


2,727


Total equity


980,340


984,855


Total liabilities and equity

$

1,320,370

$

1,350,447

 

 

 

HOLLYSYS AUTOMATION TECHNOLOGIES LTD

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In USD thousands).





Three months ended


Nine months ended




March 31, 2020


March 31, 2020




(Unaudited)


(Unaudited)

Cash flows from operating activities:






Net income

$

13,965

$

77,583

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






Depreciation of property, plant and equipment


2,499


7,101


Amortization of prepaid land leases


97


294


Amortization of intangible assets


75


226


Allowance for doubtful accounts


716


1,311


Gains on disposal of property, plant and equipment


(11)


(2)


Share of net income of equity investees


(570)


(4,108)


Share-based compensation expenses


15


55


Deferred income tax expenses


477


6,712


Accretion of convertible bond


-


57


Gains on disposal of an investment of an equity investee


-


(5,763)

Changes in operating assets and liabilities:






Accounts receivable and retention


17,872


57,723


Costs and estimated earnings in excess of billings


9,614


(25,469)


Inventories 


(14,712)


(8,063)


Advances to suppliers


1,019


(3,793)


Other receivables 


(5,407)


(1,720)


Deposits and other assets


(332)


(204)


Due from related parties


1,293


10,440


Accounts payable


2,587


13,381


Deferred revenue


(6,540)


(3,675)


Accruals and other payables


(8,173)


(6,306)


Due to related parties


(683)


(1,861)


Income tax payable


(3,666)


1,875


Other tax payables


(2,118)


1,670


Net cash provided by operating activities


8,017


117,464







Cash flows from investing activities:






Time deposits placed with banks


(136,982)


(240,643)


Purchases of property, plant and equipment


(2,174)


(5,036)


Proceeds from disposal of property, plant and equipment


264


556


Maturity of time deposits


77,108


177,044


Acquisition of a subsidiary, net of cash acquired

 


-


(150)


Proceeds from disposal of investments in equity investee

 


-


4,458


Net cash used in investing activities


(61,784)


(63,771)







Cash flows from financing activities:






Proceeds from short-term bank loans


102


2,377


Repayments of short-term bank loans


(1,213)


(3,965)


Proceeds from long-term bank loans


117


293


Repayments of long-term bank loans

 


(119)


(379)


Payment of dividends

 


-


(12,713)


Repayments of bonds payable

 


-


(20,753)


Net cash used in financing activities


(1,113)


(35,140)








Effect of foreign exchange rate changes


(5,234)

 


(10,552)

 


Net increase in cash, cash equivalents and restricted cash

$

(60,114)


8,001








Cash, cash equivalents and restricted cash, beginning of period

$

426,502


358,387


Cash, cash equivalents and restricted cash, end of period


366,388


366,388

 

 

Non-GAAP Measures

In evaluating our results, the non-GAAP measures of "Non-GAAP cost of integrated contracts", "Non-GAAP general and administrative expenses", "Non-GAAP other income (expenses), net", "Non-GAAP net income attributable to Hollysys Automation Technologies Ltd. stockholders", "Non-GAAP basic earnings per share", and "Non-GAAP diluted earnings per share" serve as additional indicators of our operating performance and not as a replacement for other measures in accordance with U.S. GAAP. We believe these non-GAAP measures are useful to investors, as they exclude the non-cash share-based compensation expenses, which is calculated based on the number of shares or options granted and the fair value as of the grant date, amortization of acquired intangible assets, and fair value adjustments of a bifurcated derivative. They will not result in any cash inflows or outflows. We believe that using non-GAAP measures help our shareholders to have a better understanding of our operating results and growth prospects. In addition, given the business nature of the Company, it has been a common practice for investors to use such non-GAAP measures to evaluate the Company.

The following table provides a reconciliation of the non-GAAP measures with the most directly comparable U.S. GAAP measures for the periods indicated:

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




Three months ended


Nine months ended




March 31,


March 31,




2020


2019


2020


2019




(Unaudited)


(Unaudited)


(Unaudited)


(Unaudited)











Cost of integrated solutions contracts

$

52,628

$

70,818

$

216,613

$

232,411

Less: Amortization of acquired intangible assets


75


78


226


234

Non-GAAP cost of integrated solutions contracts

$

52,553

$

70,740

$

216,387

$

232,177











General and administrative expenses

$

8,961

$

8,793

$

30,185

$

29,140

Less: Share-based compensation expenses


15


50


55


201

Non-GAAP general and administrative expenses

$

8,946

$

8,743

$

30,130

$

28,939










Other income, net

$

1,031


1,190


4,357


7,665

Add: Fair value adjustments of a bifurcated derivative


-


-


-


20

Non-GAAP other income, net

$

1,031


1,190


4,357


7,685











Net income attributable to Hollysys Automation
Technologies Ltd.

$

13,846

$

27,968

$

77,590

$

100,004

Add:









    Share-based compensation expenses


15


50


55


201

    Amortization of acquired intangible assets


75


78


226


234

    Fair value adjustments of a bifurcated derivative


-


-


-


20

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

$

13,936

$

28,096

$

77,871

$

100,459











    Weighted average number of basic ordinary shares

60,552,099


60,459,370


60,520,329


60,453,704

    Weighted average number of diluted ordinary shares

60,552,099


61,276,829


60,694,045


61,273,073

Non-GAAP basic earnings per share

$

0.23

$

0.46

$

1.29

$

1.66

Non-GAAP diluted earnings per share

$

0.23

$

0.46

$

1.28

$

1.65












 

 

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SOURCE Hollysys Automation Technologies, Ltd