HOLI
$13.00
Hollysys Automation
$.34
2.69%
Earnings Details
3rd Quarter March 2021
Thursday, May 13, 2021 5:00:00 PM
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Summary

Hollysys Automation (HOLI) Recent Earnings

Hollysys Automation (HOLI) reported 3rd Quarter March 2021 earnings of $0.26 per share on revenue of $109.9 million. The consensus earnings estimate was $0.39 per share on revenue of $94.6 million. Revenue grew 36.1% on a year-over-year basis.

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
$0.26
Earnings Whisper
-
Consensus Estimate
$0.39
Reported Revenue
$109.9 Mil
Revenue Estimate
$94.6 Mil
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, 2021

First Nine months of Fiscal Year 2021 Financial Highlights

  • Total revenues were $434.7 million, an increase of 16.2% compared to the comparable prior year period.
  • Non-GAAP gross margin was at 36.4%, compared to 35.6% for the comparable prior year period.
  • Non-GAAP net income attributable to Hollysys was $71.7 million, a decrease of 7.9% compared to the comparable prior year period.
  • Non-GAAP diluted EPS was $1.18, a decrease of 7.8% compared to the comparable prior year period.
  • Net cash provided by operating activities was $48.6 million for the current period.
  • DSO of 186 days, compared to 188 days for the comparable prior year period.
  • Inventory turnover days of 52 days, compared to 57 days for the comparable prior year period.

Third Quarter of Fiscal Year 2021 Financial Highlights

  • Total revenues were $109.9 million, an increase of 36.1% compared to the comparable prior year period.
  • Non-GAAP gross margin was at 37.5%, compared to 30.8% for the comparable prior year period.
  • Non-GAAP net income attributable to Hollysys was $18.7 million, an increase of 34.0% compared to the comparable prior year period.
  • Non-GAAP diluted EPS were at $0.31, an increase of 34.8% compared to the comparable prior year period.
  • Net cash used in operating activities was $6.4 million for the current quarter.
  • DSO of 279 days, compared to 266 days for the comparable prior year period.
  • Inventory turnover days of 58 days, compared to 71 days for the comparable prior year period.

BEIJING, May 13, 2021 /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 the third quarter and first nine months ended March 31, 2021 (see attached tables). The management of Hollysys stated:

Industrial Automation ("IA") business finished the third quarter with revenue and new contracts at $67.5 million and $106.7 million, representing 97.1% and 68.7% YOY growth, respectively. For the first nine months of the 2021 fiscal year, IA revenue and new contracts achieved 44.1% and 34.0% YOY growth, respectively.

  • In the power sector, we employed sustainable development tactics in order to address the needs of former customers. By offering these various upgraded products and wider range of services, we were able to increase market share. Highlights of the quarter:
    • Signed two 2X600 MW power plant replacement contracts. This repeat business demonstrated industry recognition of Hollysys for quality system replacements, product offering depth, and reliable engineering services.
    • Signed service contracts for digital upgrades for Distributed Control Systems ("DCS") of 2X1000MW units for a power plant. We increased the number of digital projects year-over-year increasing our sales of construction of digitally optimized factories for existing customers.
  • In the chemical and petrochemical sector, we continued to win mid- and high-profile projects through effective marketing and promotion coupled with our strong customer relationships. Highlights of the quarter included:
    • The Zhong'an United Coal Co., Ltd. ("ZAUCC") project gained industry recognition for both economic and social benefits, and was awarded the Special Award on Science and Technology of 2019-2020 for Chinese Petroleum and Chemical Automation.
    • Signed a polycarbonate project contract in Pingdingshan, Henan Province, establishing new foothold in the polycarbonate field. This important project highlights Hollysys' capabilities, positioning the Company to win more mid and high-profile contracts.
    • Signed a contract with China National Offshore Oil Corporation ("CNOOC") for their Sanya gas field upgrade project. An integrated control system with upgraded products will be implemented and demonstrated in this project.
    • The installation of HollySys' control system for CNOOC's offshore 'green oilfield', zero discharge and low carbon project was successfully completed. This pilot 'green oilfield' program was the first domestic control system adopted by CNOOC. Hollysys' integrated control systems successfully achieved efficiency improvement and cost reduction, while promoting low-carbon and zero discharge management of offshore oil production. The Company will participate in future exploration, construction, and development on green oilfield projects. HollySys' offering will contribute to realizing the national goal of reducing carbon dioxide emissions and becoming carbon neutral.
  • In the food & beverage and pharmaceutical sector, we are driving technological innovation by providing high-quality engineering in partnership with our key customers. In this quarter, a contract was signed with a Shandong pharmaceutical company to provide instruments, DCS and a Safety Instrumentation System ("SIS"), for the production of 2,800 tons per year of active pharmaceutical ingredients. In addition, the Company continues to pursue cooperation agreements with other leaders in pharmaceutical industry. A significant contract was signed with one of the subsidiaries of Sino-Biopharmaceutical Limited, establishing a solid foundation for future work with the client.
  • In the smart factory business, we are promoting solution upgrades and staying attuned to market demands while helping clients develop technologically innovative factories with digitized solutions for production and management. Highlights of the quarter included:
    • Signed a contract to provide our smart factory solution for a Tangshan chemical company after winning the bid for a silicone smart factory project last quarter. Smart solutions for DCS+SIS+MES+BATCH+IODS were included in the offering, which marks another advancement for the Company in the Fine Chemical Smart Factory space. HollySys will construct a data integrated platform which will achieve seamless information flow between the operations and management levels, creating the foundation of the client's digital transformation.
    • A contract was signed to provide a smart power solution for a client's 2X125MW power plants, along with a DCS. Hollysys leverages existing skills and experience to pioneer the implementation of smart industrial platforms, customized smart solutions to meet the comprehensive needs of customers across verticals such as power, fine chemicals, etc.
  • A contract covering the production of approximately 500,000 tons of paper goods was signed with a large paper manufacturer. We offered a solution with DCS, Intelligent Operational Data System ("IODS"), instruments, etc. This project represents the largest contract amount and production scale that Hollysys has won in the paper industry, it will boost Hollysys' industry credibility, creating a platform for the Company to further penetrate the market.
  • Aftersales business of IA is keeping a healthy pace. Under our big automation initiatives, we continued to strengthen customer relations management and improve our capabilities for wider range of solutions. Under the influence of the COVID-19 pandemic, the Company launched Fangcun smart service APP, through which users can purchase spare parts, submit service requirements, and participate in remote professional courses. The APP is also an e-commerce platform of industrial products for existing customers or partners to further enhance customer stickiness and boost future business development.

Rail business finished the quarter with revenue and new contracts at $30.7 million and $15.7 million, recording 7.0% YOY growth and 215.2% YOY growth, respectively. For the first nine months of the 2021 fiscal year, rail business revenue and new contracts showed a 7.5% YOY decrease and 10.2% YOY growth, respectively.

  • In the high-speed rail ("HSR") sector, we continued to deliver on existing projects, while maintaining our market position in existing product lines plus exploring opportunities in new markets. HollySys continues to apply smart and upgraded solutions designed to meet the emerging needs of the market. Highlights of the quarter include:
    • Offering Automation Train Operation ("ATO") to Beijing-Xiong'an Railway and offering Automation Train Protection ("ATP") to Beijing-Harbin Railway. Our efforts are aligned with the established national rail strategies and our strong operational performance has been recognized by our clients.
    • Applying the track circuit in Sichuan-Tibet Railway resulted in winning the first place Progress Prize in Science awarded by China Communications and Transportation Association. The application marks our entry into the track circuit field and contribution to the construction and development of railway networks in southwest China.
  • In the subway sector, we continued our efforts in upgrading technologies and refining our solutions. We provided the complete system of CBTC and integrated with its subsidiary systems for the first time. The system had entered its pilot operation in Kunming Changshui Airport Express successfully. In addition, our smart metro station upgrading solution implemented in Shenzhen Subway Line 11 is helping clients establish a safer, more efficient, ecofriendly station. HollySys' track record on SCADA, active automation improvements on existing products and integration of cloud computing, big data, AI, etc. allows us to meet the needs of an increasingly demanding marketplace.
  • With the guideline of the Fourteenth Five-Year Plan of China, Hollysys is making great strides in the area of modernization and digitalization of infrastructure construction. Our Weather Effect Monitoring solution was widely recognized and was granted with Innovation Award of Excellent Products of Highway Industry of 2020.

Mechanical and Electrical Solutions ('M&E') business finished the quarter with revenue and new contracts at $11.8 million and $19.6 million, recording 34.1% and 1.2% YOY decrease respectively. For the first nine months of the 2021 fiscal year, M&E revenue and new contracts recorded 3.9% and 16.4% YOY decrease, respectively.

COVID-19 remains a challenge to M&E and overseas business. We will keep monitoring the impact on this sector and risk control remains a key focus.

Third Quarter and First Nine Months Ended March 31, 2021 Unaudited Financial Results Summary

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








Three months ended


Nine months ended



March 31, 2021

 March 31, 2020

%
Change


March 31, 2021

 March 31, 2020

%
Change










Revenues

$

109,907

80,768

36.1%

$

434,702

374,106

16.2%

    Integrated solutions contracts revenue

$

85,769

67,673

26.7%

$

333,943

301,814

10.6%

    Products sales

$

6,543

3,588

82.4%

$

21,569

16,249

32.7%

    Service rendered

$

17,595

9,507

85.1%

$

79,190

56,043

41.3%

Cost of revenues

$

68,737

55,928

22.9%

$

276,257

240,977

14.6%

Gross profit

$

41,170

24,840

65.7%

$

158,445

133,129

19.0%

Total operating expenses

$

20,978

13,317

57.5%

$

82,945

65,121

27.4%

    Selling

$

7,160

6,168

16.1%

$

25,596

23,838

7.4%

    General and administrative

$

12,215

8,946

36.5%

$

36,035

30,130

19.6%

    Research and development

$

13,159

10,221

28.7%

$

41,760

32,969

26.7%

    VAT refunds and government subsidies

$

(11,556)

(12,018)

(3.8)%

$

(20,446)

(21,816)

(6.3)%

Income from operations

$

20,192

11,523

75.2%

$

75,500

68,008

11.0%

Other income, net

$

813

1,031

(21.1)%

$

3,587

4,357

(17.7)%

Foreign exchange gain (loss)

$

391

98

299.0%

$

(5,277)

647

(915.6)%

Gains on disposal of an investment in an
   equity investee

$

-

-

-

$

-

5,763

(100.0)%

Share of net income (loss) of equity
   investees

$

(2,725)

570

(578.1)%

$

1,934

4,108

(52.9)%

Dividend income from equity security
   investments

$

453

-

100.0%

$

456

1,141

(60.0)%

Interest income

$

3,132

3,271

(4.2)%

$

9,852

9,399

4.8%

Interest expenses

$

(151)

(16)

843.8%

$

(428)

(135)

217.0%

Income tax expenses

$

3,571

2,422

47.4%

$

14,237

15,424

(7.7)%

Net income (loss) attributable to non-
   controlling interests

$

(145)

119

(221.8)%

$

(296)

(7)

4128.6%

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

$

18,679

13,936

34.0%

$

71,683

77,871

(7.9)%

Non-GAAP basic EPS

$

0.31

0.23

34.8%

$

1.18

1.29

(8.5)%

Non-GAAP diluted EPS

$

0.31

0.23

34.8%

$

1.18

1.28

(7.8)%










Share-based compensation expenses

$

2,750

15

18233.3%

$

3,688

55

6605.5%

Amortization of acquired intangible assets

$

70

75

(6.7)%

$

225

226

(0.4)%

GAAP Net income attributable to Hollysys
   Automation Technologies Ltd.

$

15,859

13,846

14.5%

$

67,770

77,590

(12.7)%

GAAP basic EPS

$

0.26

0.23

13.0%

$

1.12

1.28

(12.5)%

GAAP diluted EPS

$

0.26

0.23

13.0%

$

1.12

1.28

(12.5)%










Basic weighted average common shares
   outstanding


60,522,107

60,552,099

(0.0)%


60,502,714

60,520,329

(0.0)%

Diluted weighted average common shares
   outstanding


60,559,890

60,552,099

(0.0)%


60,736,180

60,694,045

0.1%

Operational Results Analysis for the Third Quarter Ended March 31, 2021

Comparing to the third quarter of the prior fiscal year, the total revenues for the three months ended March 31 2021 increased from $80.8 million to $109.9 million, representing an increase of 36.1%. Broken down by the revenue types, integrated contracts revenue increased by 26.7% to $85.8 million, products sales revenue increased by 82.4% to $6.5 million, and services revenue increased by 85.1% to $17.6 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,




2021


2020


2021


2020




$

% to
Total
Revenue


$

% to
Total
Revenue


$

% to
Total
Revenue


$

% to
Total
Revenue


Industrial Automation


67,454

61.4%


34,228

42.4%


242,273

55.7%


168,155

45.0%


Rail Transportation Automation


30,673

27.9%


28,672

35.5%


140,638

32.4%


152,071

40.6%


Mechanical and Electrical Solution


11,780

10.7%


17,868

22.1%


51,791

11.9%


53,880

14.4%


Total


109,907

100.0%


80,768

100.0%


434,702

100.0%


374,106

100.0%




















Overall gross margin excluding non-cash amortization of acquired intangibles (non-GAAP gross margin) was 37.5% for the three months ended March 31, 2021, as compared to 30.8% for the same period of the prior year. The non-GAAP gross margin for integrated contracts, product sales, and services rendered were 25.9%, 81.2% and 77.4% for the three months ended March 31, 2021, as compared to 22.3%, 71.3% and 75.3% 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 37.4% for the three months ended March 31, 2021, as compared to 30.7% for the same period of the prior year. The GAAP gross margin for integrated contracts, product sales, and service rendered was 25.9%, 81.2% and 77.4% for the three months ended March 31, 2021, as compared to 22.2%, 71.3% and 75.3% for the same period of the prior year, respectively.

Selling expenses were $7.2 million for the three months ended March 31, 2021, representing an increase of $1.0 million or 16.1% compared to $6.2 million for the same quarter of the prior year. Presented as a percentage of total revenues, selling expenses were 6.5% and 7.6% for the three months ended March 31, 2021, and 2020, respectively.

General and administrative expenses, excluding non-cash share-based compensation expenses (non-GAAP G&A expenses), were $12.2 million for the quarter ended March 31, 2021, representing an increase of $3.3 million or 36.5% compared to $8.9 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 11.1% for quarters ended March 31, 2021 and 2020, respectively. The GAAP G&A expenses which include the non-cash share-based compensation expenses were $15.0 million and $9.0 million for the three months ended March 31, 2021 and 2020, respectively.

Research and development expenses were $13.2 million for the three months ended March 31, 2021, representing an increase of $2.9 million or 28.7% compared to $10.2 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 12.0% and 12.7% for the quarter ended March 31, 2021 and 2020, respectively.

The VAT refunds and government subsidies were $11.6 million for three months ended March 31, 2021, as compared to $12.0 million for the same period in the prior year, representing a $0.4 million or 3.8% decrease.

The income tax expenses and the effective tax rate were $3.6 million and 18.5% for the three months ended March 31, 2021, respectively, as compared to $2.4 million and 14.8% for comparable prior year period, respectively.

The non-GAAP net income attributable to Hollysys, which excluded 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 $18.7 million or $0.31 per diluted share based on 60.6 million diluted weighted average ordinary shares outstanding for the three months ended March 31, 2021. This represented a 34.0% increase from $13.9 million or $0.23 per share based on 60.6 million diluted weighted average ordinary shares outstanding reported in the comparable prior year period. On a GAAP basis, net income attributable to Hollysys was $15.9 million or $0.26 per diluted share representing an increase of 14.5% from $13.8 million or $0.23 per diluted share reported in the comparable prior year period.

Contracts and Backlog Highlights

Hollysys achieved $142.0 million of new contracts for the three months ended March 31, 2021. The backlog as of March 31, 2021 was $617.7 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, 2021


as of March 31, 2021






(In USD
thousands)


% to Total
Contract


(In USD
thousands)

% to Total
Backlog

Industrial Automation


106,666

75.0%


262,319

42.5%

Rail Transportation


15,698

11.2%


256,397

41.5%

Mechanical and Electrical Solutions


19,625

13.8%


98,939

16.0%

Total


141,989

100.0%


617,655

100.0%









Cash Flow Highlights

For the three months ended March 31, 2021, the total net cash inflow was $109.0 million. The net cash used in operating activities was $6.4 million. The net cash provided by investing activities was $112.7 million, mainly consisted of $163.8 million of matured short-term investments, partially offset by 45.7 million investment of an equity investee, 4.9 million purchases of property, plant and equipment, and $1.3 million purchases of short-term investments. The net cash provided by financing activities was $nil.

Balance Sheet Highlights

The total amount of cash and cash equivalents were $466.1 million, $356.9 million, and $366.4 million as of March 31, 2021, December 31, 2020 and March 31, 2020, respectively.

For the three months ended March 31, 2021, DSO was 279 days, as compared to 266 days for the comparable prior year period and 142 days for the last quarter; and inventory turnover was 58 days, as compared to 71 days for the comparable prior year period and 40 days for the last quarter.

Conference Call

The Company will host a conference call at 9:00 pm May 13, 2021 U.S. Eastern Time / 9:00 am May 14, 2021 Beijing Time, to discuss the financial results for fiscal year 2021 third quarter ended March 31, 2021 and business outlook.

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/5252367

Please use Conference ID 5252367 for entry if the link fails to lead directly to the registration page.

SAFE HARBOUR:

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

HOLLYSYS AUTOMATION TECHNOLOGIES LTD.

CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

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















Three months ended



Nine months ended



Mar 31,



Mar 31,



2021



2020



2021



2020



(Unaudited)



(Unaudited)



(Unaudited)



(Unaudited)

Net revenues












Integrated solutions contracts revenue

$

85,769


$

67,673


$

333,943


$

301,814

Products sales


6,543



3,588



21,569



16,249

Revenue from services


17,595



9,507



79,190



56,043

Total net revenues


109,907



80,768



434,702



374,106













Costs of integrated solutions contracts


63,593



52,628



245,330



216,613

Cost of products sold


1,230



1,031



4,177



4,461

Costs of services rendered


3,984



2,344



26,975



20,129

Gross profit


41,100



24,765



158,220



132,903













Operating expenses












Selling 


7,160



6,168



25,596



23,838

General and administrative


14,965



8,961



39,723



30,185

Research and development


13,159



10,221



41,760



32,969

VAT refunds and government subsidies


(11,556)



(12,018)



(20,446)



(21,816)

Total operating expenses


23,728



13,332



86,633



65,176

Income from operations


17,372



11,433



71,587



67,727













Other income, net


813



1,031



3,587



4,357

Foreign exchange gain (loss)


391



98



(5,277)



647

Gains on disposal of an investment in an equity investee


-



-



-



5,763

Share of net (losses) income of equity investees


(2,725)



570



1,934



4,108

Dividend income from equity security investments


453



-



456



1,141

Interest income


3,132



3,271



9,852



9,399

Interest expenses


(151)



(16)



(428)



(135)

Income before income taxes


19,285



16,387



81,711



93,007













Income taxes expenses 


3,571



2,422



14,237



15,424

Net income


15,714



13,965



67,474



77,583













Net income (losses) attributable to non-controlling interests


(145)



119



(296)



(7)

Net income attributable to Hollysys Automation
Technologies Ltd. 

$

15,859


$

13,846


$

67,770


$

77,590













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












Translation adjustments


(5,356)



(18,493)



78,297



(31,746)

Comprehensive income (loss)


10,358



(4,528)



145,771



45,837













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


(165)



79



(113)



1,030

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

$

10,523


$

(4,607)


$

145,884


$

44,807













Net income per share:












Basic


0.26



0.23



1.12



1.28

Diluted


0.26



0.23



1.12



1.28

Shares used in net income per share computation:












Basic


60,522,107



60,552,099



60,502,714



60,520,329

Diluted


60,559,890



60,552,099



60,736,180



60,694,045

 

 

HOLLYSYS AUTOMATION TECHNOLOGIES LTD.

CONSOLIDATED BALANCE SHEETS

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









Mar- 31,



Dec- 31,



2021



2020



(Unaudited)



(Unaudited)







ASSETS






  Current assets






     Cash and cash equivalents

$

466,079


$

356,904

     Short-term investments 


173,549



340,904

     Restricted cash


9,073



9,210

     Accounts receivable, net of allowance for credit losses of $65,987 and $64,573 as
          of March 31, 2021 and December 31, 2020, respectively


335,778



326,606

     Costs and estimated earnings in excess of billings, net of allowance for credit losses
          of $12,576 and $12,322 as of March 31, 2021 and December 31, 2020,
          respectively


182,653



211,630

     Accounts receivable retention


4,190



4,521

     Other receivables, net of allowance for credit losses of $6,463 and $6,508 as of
          March 31, 2021 and December 31, 2020, respectively


32,140



27,712

     Advances to suppliers


18,383



16,700

     Amounts due from related parties


21,319



24,498

     Inventories


47,559



35,898

     Prepaid expenses


975



1,009

     Income tax recoverable


7



7

  Total current assets


1,291,705



1,355,599







  Non-current assets






     Restricted cash


21,522



21,512

     Costs and estimated earnings in excess of billings


1,336



578

     Accounts receivable retention


5,334



5,135

     Prepaid expenses


1



1

     Property, plant and equipment, net


88,190



88,364

     Prepaid land leases, net


16,471



16,716

     Intangible assets, net


1,494



1,618

     Investments in equity investees


95,030



50,026

     Investments securities


4,999



5,018

     Goodwill


1,574



1,580

     Deferred tax assets


16,913



15,237

     Operating lease right-of-use assets


6,639



7,483

  Total non-current assets


259,503



213,268

  Total assets


1,551,208



1,568,867







LIABILITIES AND STOCKHOLDERS' EQUITY






  Current liabilities






     Current portion of long-term loans


321



326

     Accounts payable


134,253



139,701

     Construction costs payable


3,026



3,804

     Deferred revenue 


185,675



185,418

     Accrued payroll and related expenses


15,089



30,305

     Income tax payable


6,400



11,090

     Warranty liabilities


8,350



7,474

     Other tax payables


5,735



13,306

     Accrued liabilities


35,056



36,081

     Amounts due to related parties


3,632



3,959

     Operating lease liabilities


2,517



2,896

  Total current liabilities


400,054



434,360







  Non-current liabilities






     Accrued liabilities


6,784



3,966

     Long-term loans


15,660



15,773

     Accounts payable


1,811



1,854

     Deferred tax liabilities


14,931



14,892

     Warranty liabilities


4,250



3,003

     Operating lease liabilities


3,815



4,227

  Total non-current liabilities


47,251



43,715

  Total liabilities


447,305



478,075







  Commitments and contingencies


-



-







  Stockholders' equity:






     Ordinary shares, par value $0.001 per share, 100,000,000 shares authorized;
          61,275,099 shares and 60,855,099 shares issued and outstanding as of March
          31, 2021 and December 31, 2020


61



61

     Additional paid-in capital


227,731



224,981

     Statutory reserves


59,039



58,954

     Retained earnings* 


798,184



782,408

     Accumulated other comprehensive income 


14,597



19,932

  Total Hollysys Automation Technologies Ltd. stockholder's equity


1,099,612



1,086,336

     Non-controlling interests


4,291



4,456

  Total equity


1,103,903



1,090,792

  Total liabilities and equity

$

1,551,208


$

1,568,867


* ASC 326 was adopted on July 1, 2020 and resulted in $22,338 adjustment to opening retained earnings

 

 

HOLLYSYS AUTOMATION TECHNOLOGIES LTD

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In USD thousands).




Three months
ended


Nine months
ended

March 31, 2021


March 31, 2021




(Unaudited)


(Unaudited)

Cash flows from operating activities:






Net income

$

15,714

$

67,474

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






Depreciation of property, plant and equipment


2,553


7,260


Amortization of prepaid land leases


102


311


Amortization of intangible assets


80


235


Allowance for doubtful accounts


1,967


3,447


Loss on disposal of property, plant and equipment


(26)


(65)


Share of net losses (income) of equity investees


2,725


(1,934)


Share-based compensation expenses


2,750


3,688


Deferred income tax expenses


(1,675)


(4,042)


Dividends received from equity investees


91


91

Changes in operating assets and liabilities:






Accounts receivable and retention


(15,327)


(90,899)


Costs and estimated earnings in excess of billings


26,403


13,798


Inventories 


(11,353)


4,244


Advances to suppliers


(1,692)


176


Other receivables 


(4,671)


(2,357)


Deposits and other assets


30


(307)


Due from related parties


733


(1,268)


Accounts payable


(5,019)


8,429


Deferred revenue


1,348


34,971


Accruals and other payables


(9,238)


(813)


Due to related parties


(327)


56


Income tax payable


(4,449)


3,852


Other tax payables


(7,102)


2,277


Net cash (used in) provided by operating activities


(6,383)


48,624







Cash flows from investing activities:






Purchases of short-term investments


(1,299)


(146,004)


Purchases of property, plant and equipment


(4,868)


(11,069)


Proceeds from disposal of property, plant and equipment


1


241


Maturity of short-term investments


163,826


317,477


Proceeds from disposal of investments in equity investee


762


762


Investment of an equity investee


(45,730)


(45,730)


Net cash provided by investing activities


112,692


115,677







Cash flows from financing activities:






Proceeds from long-term bank loans


7


281


Repayments of long-term bank loans


-


(407)


Payment of dividends

 


-


(12,107)


Net cash provided by (used in) financing activities


7


(12,233)








Effect of foreign exchange rate changes


2,732


25,509


Net increase in cash, cash equivalents and restricted cash

$

109,048


177,577








Cash, cash equivalents and restricted cash, beginning of period

$

387,626


319,097


Cash, cash equivalents and restricted cash, end of period


496,674


496,674

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 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,




2021


2020


2021


2020




(Unaudited)


(Unaudited)


(Unaudited)


(Unaudited)











Cost of integrated solutions contracts

$

63,593

$

52,628

$

245,330

$

216,613

Less: Amortization of acquired intangible assets


70


75


225


226

Non-GAAP cost of integrated solutions contracts

$

63,523

$

52,553

$

245,105

$

216,387











General and administrative expenses

$

14,965

$

8,961

$

39,723

$

30,185

Less: Share-based compensation expenses


2,750


15


3,688


55

Non-GAAP general and administrative expenses

$

12,215

$

8,946

$

36,035

$

30,130










Net income attributable to Hollysys Automation
Technologies Ltd.

$

15,859

$

13,846

$

67,770

$

77,590

Add:









     Share-based compensation expenses



2,750


15


3,688


55

     Amortization of acquired intangible assets



70


75


225


226

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

$

18,679

$

13,936

$

71,683

$

77,871











     Weighted average number of basic ordinary shares


60,522,107


60,552,099


60,502,714


60,520,329

     Weighted average number of diluted ordinary shares


60,559,890


60,552,099


60,736,180


60,694,045

Non-GAAP basic earnings per share

$

0.31

$

0.23

$

1.18

$

1.29

Non-GAAP diluted earnings per share

$

0.31

$

0.23

$

1.18

$

1.28












 

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SOURCE Hollysys Automation Technologies Ltd.