HOLI
$21.91
Hollysys Automation
$1.35
6.57%
Earnings Details
2nd Quarter December 2018
Friday, February 15, 2019 5:00:00 PM
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Summary

Hollysys Automation (HOLI) Recent Earnings

Hollysys Automation (HOLI) reported 2nd Quarter December 2018 earnings of $0.73 per share on revenue of $149.5 million. The consensus earnings estimate was $0.63 per share. Revenue fell 5.0% 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
$0.73
Earnings Whisper
-
Consensus Estimate
$0.63
Reported Revenue
$149.5 Mil
Revenue Estimate
Growth
Earnings Growth
Revenue Growth
Power Rating
Grade
Earnings Release

Hollysys Automation Technologies Reports Unaudited Financial Results for the Second Quarter and the First Half Year Ended December 31, 2018

First Half Year of Fiscal Year 2019 Financial Highlights

  • Non-GAAP net income attributable to Hollysys was $72.4 million, an increase of 24.3% compared to the comparable prior year period.
  • Total revenues were $288.2 million, an increase of 5.6% compared to the comparable prior year period.
  • Non-GAAP gross margin was at 37.7%, compared to 38.2% for the comparable prior year period.
  • Non-GAAP diluted EPS were at $1.19, an increase of 24.0% compared to the comparable prior year period.
  • Net cash provided by operating activities was $61.5 million for the current period.
  • DSO of 171 days, compared to 166 days for the comparable prior year period.
  • Inventory turnover days of 51 days, compared to 52 days for the comparable prior year period.

Second Quarter of Fiscal Year 2019 Financial Highlights

  • Non-GAAP net income attributable to Hollysys was $44.3 million, an increase of 22.2% compared to the comparable prior year period.
  • Total revenues were $149.5 million, a decrease of 5.0% compared to the comparable prior year period.
  • Non-GAAP gross margin was at 38.2%, compared to 39.4% for the comparable prior year period.
  • Non-GAAP diluted EPS were at $0.73, an increase of 21.7% compared to the comparable prior year period.
  • Net cash provided by operating activities was $28.5 million for the current quarter.
  • DSO of 157 days, compared to 147 days for the comparable prior year period.
  • Inventory turnover days of 39 days, compared to 48 days for the comparable prior year period.

BEIJING, Feb. 15, 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 the second quarter and the first half of fiscal year 2019 ended December 31, 2018 (see attached tables). The management of Hollysys, stated:

Revenue and new contract for our IA business for the quarter stayed at $49.5 million and $43.9 million, representing a 14.2% and 4.1% YOY decrease, respectively. From a half year perspective, revenue and contract present a 6.9% YOY decrease and 4.5% YOY increase, respectively. Despite macro-economic headwind, management believe that our IA business remains on a healthy path and several highlights are worth mentioning. We kept our leadership in power, and devoted adequate resource in chemical and petrochemical for expansion, while maintaining our involvement in various other industries. In power, despite a slowdown in coal fire construction, steady performance in thermal power and new energy, as well as after-sale services have been stabilizing factors for our power business that should not be ignored. We kept addressing our valuable customer base to respond to various services demand. The communication with our customers have been fruitful and constructive, evidenced by the steady after-sale growth. Beyond that, we are also actively building our matrix of intelligent solution that help bring our customers to the next era of manufacture. Our effort was well rewarded as our value-adding solution on equipment management, control optimization, and information security, etc. were accepted by more customers. Furthermore, we are proud to announce our first intelligent plant solution in the power industry with Liaoning Diaobingshan Power Company. With full-scale data integration as the key, the solution will help realize greater visibility on equipment consumption, greater operational flexibility in power unit and will ultimately improve efficiency and management. With this milestone, we will continue to leverage the know-how we have accumulated and join hands with more customers from various industries to reshape their way of manufacture.

Quarterly revenue and new contract for our railway business were $63.5 million and $173.1 million, representing an 8.7% YOY decrease and 20.4% YOY increase, respectively. From a half year perspective, revenue and new contract recorded an 8.7% and 61.8% YOY increase, respectively. In high-speed rail, we signed 98 sets of C3 ATP for the quarter, along with numerous advanced and heavy maintenance contracts. We also signed a track circuit contract for the regular speed freight railway from Jingbian to Shenmu, Shaanxi Province, China. In subway business, milestone was achieved as we provided our first "SCADA + Integrated Cloud Platform" solution to Hohhot subway line 1 & line 2, as well as Shenzhen Subway Line 6. We see this as an effective addition to our subway business as we keep executing the steady expansion strategy. For high-speed rail business, calendar 2019 is expected to be a busy year as 13th Five Year Plan period is entering its final two years. Going forward into the future and given a visible long-term railway construction plan, we will continue to adhere to the diversity strategy for stable and healthy growth, to improve our local service network for more value-adding and differentiated services, and to keep leveraging our strong R&D capacity for the preparation of next generation railway technology.

In overseas business, M&E recorded a quarterly revenue and new contract of $36.5 million and $36.5 million, representing a 20.8% and 20.1% YOY increase respectively. From a half year perspective, revenue and new contract recorded a 26.6% and 23.3% YOY increase respectively. Measures taken to improve operation have brought constant benefit to the M&E business, while the geopolitical issues in Middle East as well as the macro economy in Southeast Asia remained to be watched. In our IA overseas business, we continued to work with major domestic SOEs on EPC projects while at the same time, contributed adequate effort to expand our partnership. We took one step further in the localization of our business as the construction of our India assembly and testing plant was completed. With this we have set a foothold for improved response time to our overseas customers. Going forward, we expect increasing level of coordination to be built between our overseas and domestic business.

Second Quarter and First Half Year Ended December 31, 2018 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)








Three months ended


Six months ended



Dec 31,
2018

 Dec 31,
2017

%
Change


Dec 31,
2018

 Dec 31,
2017

%
Change










Revenues

$

149,464

157,404

(5.0)%

$

288,182

272,914

5.6%

    Integrated contract revenue

$

116,683

134,419

(13.2)%

$

233,333

230,109

1.4%

    Products sales

$

5,917

9,717

(39.1)%

$

13,957

19,177

(27.2)%

    Service rendered

$

26,864

13,268

102.5%

$

40,892

23,628

73.1%

Cost of revenues

$

92,389

95,424

(3.2)%

$

179,567

168,663

6.5%

Gross profit

$

57,075

61,980

(7.9)%

$

108,615

104,251

4.2%

Total operating expenses

$

15,076

21,072

(28.5)%

$

36,576

40,277

(9.2)%

    Selling

$

7,860

7,740

1.6%

$

15,569

14,438

7.8%

    General and administrative

$

11,626

12,177

(4.5)%

$

20,196

23,134

(12.7)%

    Research and development

$

10,402

10,585

(1.7)%

$

19,170

19,216

(0.2)%

    VAT refunds and government subsidies

$

(14,812)

(9,430)

57.1%

$

(18,359)

(16,511)

11.2%

Income from operations

$

41,999

40,908

2.7%

$

72,039

63,974

12.6%

Other income, net

$

5,937

2,271

161.4%

$

6,495

2,710

139.7%

Foreign exchange (loss) gain

$

(704)

29

(2527.6)%

$

(827)

(1,104)

(25.1)%

Share of net (loss) income of equity investees

$

(386)

1,337

(128.9)%

$

(287)

2,273

(112.6)%

Dividend income from a cost investee


1,113

-

-

$

1,113

1,057

5.3%

Interest income

$

2,896

1,560

85.6%

$

5,995

3,036

97.5%

Interest expenses

$

(210)

(497)

(57.7)%

$

(316)

(634)

(50.2)%

Income tax expenses

$

6,312

9,295

(32.1)%

$

11,767

13,031

(9.7)%

Net income attributable to non-controlling interests

$

37

52

(28.8)%

$

83

86

(3.5)%

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

$

44,296

36,261

22.2%

$

72,362

58,195

24.3%

Non-GAAP basic EPS

$

0.73

0.60

21.7%

$

1.20

0.96

25.0%

Non-GAAP diluted EPS

$

0.73

0.60

21.7%

$

1.19

0.96

24.0%










Share-based compensation expenses

$

67

(67)

(200.0)%

$

151

325

(53.4)%

Amortization of acquired intangible assets

$

75

101

(25.7)%

$

155

279

(44.4)%

Fair value adjustments of a bifurcated derivative

$

20

-

-


20

-

-

GAAP Net income attributable to Hollysys Automation Technologies Ltd.

$

44,134

36,227

21.8%

$

72,036

57,591

25.1%

GAAP basic EPS

$

0.73

0.60

21.7%

$

1.19

0.95

25.3%

GAAP diluted EPS

$

0.72

0.60

20.0%

$

1.18

0.95

24.2%







-

-


Basic weighted average common shares outstanding


60,453,770

60,431,250

0.0%


60,450,930

60,428,431

0.0%

Diluted weighted average common shares outstanding


61,273,353

61,251,116

0.0%


61,271,864

61,241,092

0.0%

Operational Results Analysis for the Second Quarter Ended December 31, 2018

Comparing to the second quarter of the prior fiscal year, the total revenues for the three months ended December 31, 2018 decreased from $157.4 million to $149.5 million, representing a decrease of 5.0%. Broken down by the revenue types, integrated contracts revenue decreased by 13.2% to $116.7 million, products sales revenue decreased by 39.1% to $5.9 million, and services revenue increased by 102.5% to $26.9 million.

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

(In USD thousands)


Three months ended Dec 31,


Six months ended Dec 31,


2018


2017


2018


2017


$

% to
Total
Revenue


$

% to
Total
Revenue


$

% to
Total
Revenue


$

% to
Total
Revenue

Industrial Automation

49,458

33.1%


57,647

36.6%


107,177

37.2%


115,130

42.2%

Rail Transportation Automation

63,503

42.5%


69,550

44.2%


113,871

39.5%


104,745

38.4%

Mechanical and Electrical Solution

36,503

24.4%


30,207

19.2%


67,134

23.3%


53,039

19.4%

Total

149,464

100.0%


157,404

100.0%


288,182

100.0%


272,914

100.0%

Overall gross margin excluding non-cash amortization of acquired intangibles (non-GAAP gross margin) was 38.2% for the three months ended December 31, 2018, as compared to 39.4% for the same period of the prior year. The non-GAAP gross margin for integrated contracts, product sales, and services rendered were 30.8%, 72.0% and 62.9% for the three months ended December 31, 2018, as compared to 34.5%, 67.4% and 68.6% 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 38.1% for the three months ended December 31, 2018, as compared to 39.3% for the same period of the prior year. The GAAP gross margin for integrated contracts, product sales, and service rendered were 30.7%, 72.0% and 62.9% for the three months ended December 31, 2018, as compared to 34.4%, 67.4% and 68.6% for the same period of the prior year, respectively.

Selling expenses were $7.9 million for the three months ended December 31, 2018, representing an increase of $0.2 million or 1.6% compared to $7.7 million for the same quarter of the prior year. Presented as a percentage of total revenues, selling expenses were 5.3% and 4.9% for the three months ended December 31, 2018, and 2017, respectively.

General and administrative expenses, excluding non-cash share-based compensation expenses (non-GAAP G&A expenses), were $11.6 million for the quarter ended December 31, 2018, representing a decrease of $0.6 million or 4.5% compared to $12.2 million for the same quarter of the prior year. Presented as a percentage of total revenues, non-GAAP G&A expenses were 7.8% and 7.7% for quarters ended December 31, 2018 and 2017, respectively. The GAAP G&A expenses which include the non-cash share-based compensation expenses were $11.7 million and $12.1 million for the three months ended December 31, 2018 and 2017, respectively.

Research and development expenses were $10.4 million for the three months ended December 31, 2018, representing a decrease of $0.2 million or 1.7% compared to $10.6 million for the same quarter of the prior year. Presented as a percentage of total revenues, R&D expenses were 7.0% and 6.7% for the quarter ended December 31, 2018 and 2017, respectively.

The VAT refunds and government subsidies were $14.8 million for three months ended December 31, 2018, as compared to $9.4 million for the same period in the prior year, representing a $5.4 million or 57.1% increase, which was primarily due to increase of the VAT refunds.

The income tax expenses and the effective tax rate were $6.3 million and 12.5% for the three months ended December 31, 2018, as compared to $9.3 million and 20.4% 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 grant-date fair value of shares or options granted, amortization of acquired intangible assets, and fair value adjustments of a bifurcated derivative, was $44.3 million or $0.73 per diluted share based on 61.3 million diluted weighted average common shares outstanding for the three months ended December 31, 2018. This represents a 22.2% increase over the $36.3 million or $0.60 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 $44.1 million or $0.72 per diluted share representing an increase of 21.8% over the $36.2 million or $0.60 per diluted share reported in the comparable prior year period.  

Contracts and Backlog Highlights

Hollysys achieved $253.5 million of new contracts for the three months ended December 31, 2018. The backlog as of December 31, 2018 was $590.1 million. The detailed breakdown of the new contracts and backlog by segments is shown below:

(In USD thousands)


New contracts achieved


Backlog



for the three months

ended Dec 31, 2018


as of Dec 31, 2018



$

% to Total Contract


$

% to Total Backlog

Industrial Automation


43,927

17.3%


165,285

28.0%

Rail Transportation


173,056

68.3%


329,744

55.9%

Mechanical and Electrical Solutions


36,496

14.4%


95,032

16.1%

Total


253,479

100.0%


590,061

100.0%

Cash Flow Highlights

For the three months ended December 31, 2018, the total net cash outflow was $2.2 million. The net cash provided by operating activities was $28.5 million. The net cash used in investing activities was $20.4 million, mainly consisted of $108.5 million time deposits placed with banks, which was partially offset by $88.6 million maturity of time deposits. The net cash used in financing activities was $11.1 million, mainly consisted of $10.9 million payment of dividends, and $3.2 million repayments of short-term bank loans, which were partially offset by $2.9 million proceeds from short-term bank loans.

Balance Sheet Highlights

The total amount of cash and cash equivalents were $270.8 million, $276.9 million, and $231.1 million as of December 31, 2018, September 30, 2018 and December 31, 2017, respectively.

For the three months ended December 31, 2018, DSO was 157 days, as compared to 147 days for the comparable prior year period and 170 days for the last quarter; and inventory turnover was 39 days, as compared to 48 days for the comparable prior year period and 51 days for the last quarter.

Conference Call

The Company will host a conference call at 8:00 pm February 17, 2019 U.S. Eastern Time / 9:00 am February 18, 2019 Beijing Time, to discuss the financial results for the second quarter and the first half of fiscal year 2019 ended December 31, 2018 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 2182982.

Standard International Dial-In Number: 

+65 67135090



Participant Local Dial-In Numbers:


Australia, Sydney *NEW*

+61 290833212

China, Domestic

8008190121

China, Domestic

4006208038

China, Hong Kong

+852 30186771

Japan, Tokyo

+81 345036012

Korea (South), Seoul

+82 27395177

China, Taiwan

+886 255723895

United Kingdom, London *NEW*

+44 2036214779

United States, New York

+1 8456750437



Participant ITFS Dial-In Numbers:


Australia, *NEW*

1800411623

Australia, *NEW*

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 Automation Technologies is a leading provider of automation and control technologies and applications in China that enables its diversified industry and utility customers to improve operating safety, reliability, and efficiency. Founded in 1993, Hollysys has approximately 3,300 employees with nationwide presence in over 60 cities in China, with subsidiaries and offices in Singapore, Malaysia, Dubai, India, and serves over 10,000 customers more than 30,000 projects in the industrial, railway, subway & nuclear industries in China, South-East Asia, and the Middle East. Its proprietary technologies are applied in its industrial automation solution suite including DCS (Distributed Control System), PLC (Programmable Logic Controller), RMIS (Real-time Management Information System), HAMS (HolliAS Asset Management System), OTS (Operator Training System), HolliAS BATCH (Batch Application Package), HolliAS APC Suite (Advanced Process Control Package), SIS (Safety Instrumentation System), high-speed railway signaling system of TCC (Train Control Center), ATP (Automatic Train Protection), Subway Supervisory and Control platform, SCADA (Supervisory Control and Data Acquisition), nuclear power plant automation and control system and other products.

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
+8610-58981386
investors@hollysys.com

 

HOLLYSYS AUTOMATION TECHNOLOGIES LTD.
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
(In USD thousands except for number of shares and per share data)



Three months ended
Dec 31,
 


Six months ended
Dec 31,



2018


2017



2018


2017



(Unaudited)


(Unaudited)



(Unaudited)


(Unaudited)

Net revenues










Integrated contract revenue

$

116,683

$

134,419


$

233,333

$

230,109

Products sales


5,917


9,717



13,957


19,177

Revenue from services


26,864


13,268



40,892


23,628

Total net revenues


149,464


157,404



288,182


272,914











Cost of integrated contracts


80,845


88,186



161,593


155,998

Cost of products sold


1,654


3,167



3,662


5,834

Costs of services rendered


9,965


4,172



14,467


7,110

Gross profit


57,000


61,879



108,460


103,972











Operating expenses










Selling 


7,860


7,740



15,569


14,438

General and administrative


11,693


12,110



20,347


23,459

Research and development


10,402


10,585



19,170


19,216

VAT refunds and government subsidies


(14,812)


(9,430)



(18,359)


(16,511)

Total operating expenses


15,143


21,005



36,727


40,602











Income from operations


41,857


40,874



71,733


63,370











Other income, net


5,917


2,271



6,475


2,710

Foreign exchange loss


(704)


29



(827)


(1,104)

Share of net (loss) income of equity investees


(386)


1,337



(287)


2,273

Dividend income from a cost investee


1,113


-



1,113


1,057

Interest income


2,896


1,560



5,995


3,036

Interest expenses


(210)


(497)



(316)


(634)

Income before income taxes


50,483


45,574



83,886


70,708











Income taxes expenses 


6,312


9,295



11,767


13,031

Net income


44,171


36,279



72,119


57,677











Net income attributable to non-controlling interests


37


52



83


86

Net income attributable to Hollysys Automation Technologies Ltd. 

$

44,134

$

36,227


$

72,036

$

57,591











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










Translation adjustments


2,046


17,512



(27,090)


32,270

Comprehensive income 


46,217


53,791



45,029


89,947











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


(225)


54



(179)


87

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

$

46,442

$

53,737


$

45,208

$

89,860











Net income per ordinary share:










Basic


0.73


0.60



1.19


0.95

Diluted


0.72


0.60



1.18


0.95

Shares used in income per share computation:










Weighted average number of ordinary shares


60,453,770


60,431,250



60,450,930


60,428,431

Weighted average number of diluted ordinary shares


61,273,353


61,251,116



61,271,864


61,241,092

 

 

HOLLYSYS AUTOMATION TECHNOLOGIES LTD.
CONSOLIDATED BALANCE SHEETS
(In USD thousands except for number of shares and per share data)













Dec 31,


Sep 30,





2018


2018





(Unaudited)


(Unaudited)

ASSETS






Current assets







Cash and cash equivalents

$

270,806

$

276,867



Time deposits with maturities over three months


168,999


148,659



Restricted cash


16,897


15,795



Accounts receivable, net of allowance for doubtful accounts of $45,125 and $45,139 as of December 31,2018 and September 31, 2018, respectively


272,008


248,875



Costs and estimated earnings in excess of billings, net of allowance for doubtful accounts of $7,881 and $9,205 as of December 31, 2018 and September 30, 2018, respectively


221,581


210,935



Other receivables, net of allowance for doubtful accounts of $4,914 and $4,874 as of December 31, 2018 and September 30, 2018, respectively


18,470


21,025



Advances to suppliers


15,374


13,413



Amounts due from related parties


33,424


38,335



Inventories


35,568


36,583



Prepaid expenses


911


645



Income tax recoverable


276


6,155


Total current assets


1,054,314


1,017,287








Non-current assets







Restricted cash


4,076


1,348



Prepaid expenses


4


1



Property, plant and equipment, net


75,119


74,803



Prepaid land leases


9,832


9,867



Intangible assets, net


1,540


1,610



Investments in equity investees


52,708


46,705



Investments in cost investees


4,785


4,765



Goodwill


48,346


48,263



Deferred tax assets


11,714


7,142


Total non-current assets


208,124


194,504


Total assets


1,262,438


1,211,791








LIABILITIES AND STOCKHOLDERS' EQUITY






Current liabilities







Derivative financial liability


432


412



Short-term bank loans


2,215


2,293



Current portion of long-term loans


20,258


313



Dividends payable


-


10,862



Accounts payable


116,362


121,807



Construction costs payable


-


304



Deferred revenue


141,365


126,688



Accrued payroll and related expenses


19,557


15,035



Income tax payable


3,668


4,330



Warranty liabilities


5,318


5,284



Other tax payables


6,054


10,252



Accrued liabilities


23,322


19,859



Amounts due to related parties


4,596


3,775


Total current liabilities


343,147


321,214








Non-current liabilities







Accrued liabilities


5,885


5,800



Long-term loans


900


20,719



Deferred tax liabilities


12,083


10,828



Warranty liabilities


2,363


2,186


Total non-current liabilities


21,231


39,533


Total liabilities


364,378


360,747









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 December, 2018 and September 30, 2018


60


60



Additional paid-in capital


223,547


223,481



Statutory reserves


46,283


45,970



Retained earnings *


660,329


615,775



Accumulated other comprehensive income


(32,281)


(34,589)


Total Hollysys Automation Technologies Ltd. stockholder's equity


897,938


850,697



Non-controlling interests


122


347


Total equity


898,060


851,044









Total liabilities and equity

$

1,262,438

$

1,211,791


* 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


Six months ended

Dec 31, 2018


Dec 31, 2018




(Unaudited)


(Unaudited)

Cash flows from operating activities:






Net income

$

44,172

$

72,119

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






Depreciation of property, plant and equipment


1,688


3,826


Amortization of prepaid land leases


66


132


Amortization of intangible assets


77


155


Allowance for doubtful accounts


71


514


Loss (gain) on disposal of property, plant and equipment


(2)


39


Share of net loss from equity investees


386


287


Share-based compensation expenses


67


151


Deferred income tax expenses


(3,366)


(899)


Accretion of convertible bond


57


115


Fair value adjustments of a bifurcated derivative


20


20


Gains on deconsolidation of a subsidiary


(4,748)


(4,748)

Changes in operating assets and liabilities:






Accounts receivable


(22,465)


(9,041)


Costs and estimated earnings in excess of billings


9,473


(27,703)


Inventories 


(13,203)


3,603


Advances to suppliers


(3,421)


(7,843)


Other receivables 


2,606


11,345


Deposits and other assets


(268)


(211)


Due from related parties


5,149


9,571


Accounts payable


(6,154)


(7,883)


Deferred revenue


14,305


10,420


Accruals and other payables


6,924


9,638


Due to related parties


820


(2,312)


Income tax payable


5,274


6,275


Other tax payables


(9,044)


(6,092)


Net cash provided by operating activities


28,484


61,478







Cash flows from investing activities:






Time deposits placed with banks


(108,521)


(156,940)


Purchases of property, plant and equipment


(743)


(1,234)


Proceeds from disposal of property, plant and equipment


178


251


Maturity of time deposits


88,647


122,854


Investment of an equity investee


-


(740)


Cash reduced upon deconsolidation of subsidiary


-


(1,878)


Net cash used in investing activities


(20,439)


(37,687)







Cash flows from financing activities:






Proceeds from short-term bank loans


2,934


3,207


Repayments of short-term bank loans


(3,229)


(3,555)


Proceeds from long-term bank loans


332


332


Repayments of long-term bank loans


(300)


(300)


Payment of Dividends

 


(10,862)


(10,862)


Net cash used in financing activities


(11,125)

 


(11,178)

 








Effect of foreign exchange rate changes


849


(8,143)


Net (decrease) increase in cash, cash equivalents and restricted cash

$

(2,231)


4,470








Cash, cash equivalents and restricted cash, beginning of period

$

294,010


287,309


Cash, cash equivalents and restricted cash, end of period


291,779


291,779

Non-GAAP Measures

In evaluating our results, the non-GAAP measures of "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 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


Six months ended



Dec 31,


Dec 31,



2018


2017


2018


2017



(Unaudited)


(Unaudited)


(Unaudited)


(Unaudited)










Cost of integrated contracts

$

80,845

$

88,186

$

161,593

$

155,998

Less: Amortization of acquired intangible assets


75


101


155


279

Non-GAAP cost of integrated contracts

$

80,770

$

88,085

$

161,438

$

155,719










General and administrative expenses

$

11,693

$

12,110

$

20,347

$

23,459

Less: Share-based compensation expenses


67


(67)


151


325

Non-GAAP general and administrative expenses

$

11,626

$

12,177

$

20,196

$

23,134










Other income (expenses), net

$

5,917


2,271


6,475


2,710

Add: Fair value adjustments of a bifurcated derivative


20


-


20


-

Non-GAAP other income (expenses), net

$

5,937


2,271


6,495


2,710










Net income attributable to Hollysys Automation Technologies Ltd.

$

44,134

$

36,227

$

72,036

$

57,591

Add:









     Share-based compensation expenses


67


(67)


151


325

     Amortization of acquired intangible assets


75


101


155


279

     Fair value adjustments of a bifurcated derivative


20


-


20


-

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

$

44,296

$

36,261

$

72,362

$

58,195










     Weighted average number of basic ordinary shares


60,453,770


60,431,250


60,450,930


60,428,431

     Weighted average number of diluted ordinary shares


61,273,353


61,251,116


61,271,864


61,241,092

Non-GAAP basic earnings per share

$

0.73

$

0.60

$

1.20

$

0.96

Non-GAAP diluted earnings per share

$

0.73

$

0.60

$

1.19

$

0.96


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SOURCE Hollysys Automation Technologies, Ltd