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Hollysys Automation Technologies Reports Unaudited Financial Results for the Third Quarter and the First Nine Months Ended March 31, 2019

First Nine months of Fiscal Year 2019 Financial Highlights

  • Non-GAAP net income attributable to Hollysys was $100.5 million, an increase of 25.1% compared to the comparable prior year period.
  • Total revenues were $413.4 million, an increase of 5.0% compared to the comparable prior year period.
  • Non-GAAP gross margin was at 38.3%, compared to 37.6% for the comparable prior year period.
  • Non-GAAP diluted EPS were at $1.65, an increase of 25.0% compared to the comparable prior year period.
  • Net cash provided by operating activities was $86.7 million for the current period.
  • DSO of 176 days, compared to 176 days for the comparable prior year period.
  • Inventory turnover days of 59 days, compared to 58 days for the comparable prior year period.

Third Quarter of Fiscal Year 2019 Financial Highlights

  • Non-GAAP net income attributable to Hollysys was $28.1 million, an increase of 27.1% compared to the comparable prior year period.
  • Total revenues were $125.2 million, an increase of 3.8% compared to the comparable prior year period.
  • Non-GAAP gross margin was at 39.6%, compared to 36.5% for the comparable prior year period.
  • Non-GAAP diluted EPS were at $0.46, an increase of 27.8% compared to the comparable prior year period.
  • Net cash provided by operating activities was $25.2 million for the current quarter.
  • DSO of 193 days, compared to 196 days for the comparable prior year period.
  • Inventory turnover days of 50 days, compared to 63 days for the comparable prior year period.

BEIJING, May 13, 2019 /PRNewswire/ -- Hollysys Automation Technologies Ltd. (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 of fiscal year 2019 ended March 31, 2019 (see attached tables). The management of Hollysys, stated:

Revenue and new contract for our IA business for the quarter were $60.1 million and $84.0 million, representing a 31.6% and 2.2% YOY increase, respectively. For the first nine months of the fiscal year, revenue and contract presented a 4.0% and 3.5% YOY increase, respectively. Our effort in market penetration and addressing the current customer base for maintenance and upgrade opportunities continued. Within high-end coal fire market, our solid performance in the past have earned us reputation. We signed a breakthrough contract to provide DCS+DEH solution to the 660MW power units of China Huaneng Group, which is the first time that Huaneng has accepted Hollysys' control solution for its 660MW power units. We continued to address other sub-verticals of power including garbage power, biomass and solar thermal power. In solar thermal, we entered into a strategic relationship with Zhongnan Engineering Corporation Limited on jointly developing the control solution for the world first molten salt linear Fresnel solar thermal power station in Gansu, China. In chemical and petrochemical, our effort in penetrating the market continued, and with the execution of our previous breakthrough projects as reference, we continued to actively promote ourselves. We signed a contract to provide control solution to coal-to-clean industrial gas project in Jiangxi with a design capacity of 13 billion normal cubic meter per year, which is to be the world largest project of such kind once completed. We kept addressing our valuable customer base and the momentum of aftersales services continued. In addition to regular maintenance, our value adding industrial software that covers advanced process control, industrial information security, etc. are being accepted by more of our customers. Following the breakthrough in our first intelligent plant solution in the last quarter, we maintained close communication with potential customers. Meanwhile, our intelligence-oriented solutions are earning its reputation. In February, Hollysys was named by Ministry of Industry and Information Technology of the People's Republic of China (MIIT) as outstanding data collection and edge computing technology provider, outstanding PaaS technology provider and outstanding SaaS technology provider. Our "HolliMachine Smart Equipment Cloud Industrial Internet APP" was also listed in the Outstanding Industrial Internet APP Solution published by MIIT. Furthermore, we have recently formed a strategic partnership with Arup, one of the largest global engineering consulting firms, to develop and implement world-leading intelligent solutions and expand into overseas markets together.

Quarterly revenue and new contract for our railway business were $46.8 million and $35.5 million, representing an 2.7% YOY increase and 6.3% YOY decrease, respectively. For the first nine month of the fiscal year, revenue and new contract recorded an 6.9% and 48.1% YOY increase, respectively. With 13th Five Year Plan period entering its final two years and the amount of contract signed previously, we have been busy delivering. 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 and to improve our local service network for more value-adding and differentiated services. With urbanization as an ongoing process, we will keep leveraging our strong R&D capacity and prepare for the application of various types of railway transportation system in the future. 

In overseas business, M&E recorded a quarterly revenue and new contract of $18.4 million and $16.8 million, representing a 37.7% and 20.8% YOY decrease respectively. For the first nine months of the fiscal year, revenue and new contract recorded a 3.6% and 8.4% YOY increase respectively. Given the macro economy in Southeast Asia and the Middle East, risk control remains to be the key focus of our M&E business. In IA overseas business, we continued our effort in developing partnership with key EPC players, and to create opportunity to join EPC project in its early project cycle by cooperating with design institution. We have achieved our first cooperation with Shanghai Electric overseas as we signed a contract on a 2*300MW power unit optimization project in Malaysia. Going forward, we will take gradual steps to improve the marketing and service capability of our overseas business for greater localization.

Third Quarter and First Nine Months Ended March 31, 2019 Unaudited Financial Results Summary

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


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




Three months ended


Nine months ended



Mar 31, 2019

Mar 31, 2018

%
Change


Mar 31, 2019

Mar 31, 2018

%
Change










Revenues

$

125,167

120,617

3.8%

$

413,350

393,531

5.0%

Integrated contract revenue

$

101,285

104,736

(3.3)%

$

334,618

334,845

(0.1)%

Products sales

$

13,187

9,908

33.1%

$

27,144

29,085

(6.7)%

Service rendered

$

10,695

5,973

79.1%

$

51,588

29,601

74.3%

Cost of revenues

$

75,652

76,608

(1.2)%

$

255,219

245,398

4.0%

Gross profit

$

49,515

44,009

12.5%

$

158,131

148,133

6.7%

Total operating expenses

$

19,319

18,820

2.7%

$

55,895

58,971

(5.2)%

Selling

$

6,474

6,205

4.3%

$

22,043

20,643

6.8%

General and administrative

$

8,743

7,745

12.9%

$

28,939

30,752

(5.9)%

Research and development

$

8,655

8,758

(1.2)%

$

27,825

27,975

(0.5)%

VAT refunds and government subsidies

$

(4,553)

(3,888)

17.1%

$

(22,912)

(20,399)

12.3%

Income from operations

$

30,196

25,189

19.9%

$

102,236

89,162

14.7%

Other income, net

$

1,190

352

238.1%

$

7,685

3,062

151.0%

Foreign exchange loss

$

(333)

(877)

(62.0)%

$

(1,163)

(1,981)

(41.3)%

Share of net (loss) income of equity investees

$

(885)

194

(556.2)%

$

(1,172)

2,466

(147.5)%

Dividend income from a cost investee


-

38

(100.0)%

$

1,116

1,096

1.8%

Interest income

$

2,978

2,006

48.5%

$

8,973

5,041

78.0%

Interest expenses

$

(54)

(175)

(69.1)%

$

(371)

(808)

(54.1)%

Income tax expenses

$

4,946

4,553

8.6%

$

16,713

17,584

(5.0)%

Net income attributable to non-controlling interests

$

50

75

(33.3)%

$

132

161

(18.0)%

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

$

28,096

22,099

27.1%

$

100,459

80,293

25.1%

Non-GAAP basic EPS

$

0.46

0.37

24.3%

$

1.66

1.33

24.8%

Non-GAAP diluted EPS

$

0.46

0.36

27.8%

$

1.65

1.32

25.0%










Share-based compensation expenses

$

50

129

(61.2)%

$

201

581

(65.4)%

Amortization of acquired intangible assets

$

78

128

(39.1)%

$

234

279

(16.1)%

Fair value adjustments of a bifurcated derivative

$

-

-

-

$

20

-

100%

GAAP Net income attributable to Hollysys Automation Technologies Ltd.

$

27,968

21,842

28.0%

$

100,004

79,433

25.9%

GAAP basic EPS

$

0.46

0.36

27.8%

$

1.65

1.31

26.0%

GAAP diluted EPS

$

0.46

0.36

27.8%

$

1.64

1.31

25.2%










Basic weighted average common shares outstanding


60,459,370

60,436,871

0.0%


60,453,704

60,431,201

0.0%

Diluted weighted average common shares outstanding


61,276,829

61,296,907

0.0%


61,273,073

61,245,982

0.0%

Operational Results Analysis for the Third Quarter Ended March 31, 2019

Comparing to the third quarter of the prior fiscal year, the total revenues for the three months ended March 31, 2019 increased from $120.6 million to $125.2 million, representing an increase of 3.8%. Broken down by the revenue types, integrated contracts revenue decreased by 3.3% to $101.3 million, products sales revenue increased by 33.1% to $13.2 million, and services revenue increased by 79.1% to $10.7 million.

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

(In USD thousands)


Three months ended Mar 31,


Nine months ended Mar 31,


2019


2018


2019


2018


$

% to Total Revenue


$

% to Total Revenue


$

% to Total Revenue


$

% to Total Revenue

Industrial Automation

60,063

47.9%


45,651

37.8%


167,241

40.4%


160,780

40.8%

Rail Transportation Automation

46,759

37.4%


45,533

37.8%


160,630

38.9%


150,279

38.2%

Mechanical and Electrical Solution

18,345

14.7%


29,433

24.4%


85,479

20.7%


82,472

21.0%

Total

125,167

100.0%


120,617

100.0%


413,350

100.0%


393,531

100.0%

Overall gross margin excluding non-cash amortization of acquired intangibles (non-GAAP gross margin) was 39.6% for the three months ended March 31, 2019, as compared to 36.5% for the same period of the prior year. The non-GAAP gross margin for integrated contracts, product sales, and services rendered were 30.2%, 85.6% and 71.9% for the three months ended March 31, 2019, as compared to 30.1%, 81.2% and 73.6% 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 39.5% for the three months ended March 31, 2019, as compared to 36.4% for the same period of the prior year. The GAAP gross margin for integrated contracts, product sales, and service rendered were 30.1%, 85.6% and 71.9% for the three months ended March 31, 2019, as compared to 30.0%, 81.2% and 73.6% for the same period of the prior year, respectively.

Selling expenses were $6.5 million for the three months ended March 31, 2019, representing an increase of $0.3 million or 4.3% compared to $6.2 million for the same quarter of the prior year. Presented as a percentage of total revenues, selling expenses were 5.2% and 5.1% for the three months ended March 31, 2019, and 2018, respectively.

General and administrative expenses, excluding non-cash share-based compensation expenses (non-GAAP G&A expenses), were $8.7 million for the quarter ended March 31, 2019, representing an increase of $1.0 million or 12.9% compared to $7.7 million for the same quarter of the prior year, which was primarily due to increase of bad debt allowance. Presented as a percentage of total revenues, non-GAAP G&A expenses were 7.0% and 6.4% for quarters ended March 31, 2019 and 2018, respectively. The GAAP G&A expenses which include the non-cash share-based compensation expenses were $8.8 million and $7.9 million for the three months ended March 31, 2019 and 2018, respectively.

Research and development expenses were $8.7 million for the three months ended March 31, 2019, representing a decrease of $0.1 million or 1.2% compared to $8.8 million for the same quarter of the prior year. Presented as a percentage of total revenues, R&D expenses were 6.9% and 7.3% for the quarter ended March 31, 2019 and 2018, respectively.

The VAT refunds and government subsidies were $4.6 million for three months ended March 31, 2019, as compared to $3.9 million for the same period in the prior year, representing a $0.7 million or 17.1% increase, which was primarily due to increase of the VAT refunds.

The income tax expenses and the effective tax rate were $4.9 million and 15.0% for the three months ended March 31, 2019, as compared to $4.6 million and 17.2% for comparable prior year period. The effective tax rate fluctuation was mainly due to the different pre-tax income mix with different tax rates, as the Company's subsidiaries are subject to different tax rates in various jurisdictions.

The non-GAAP net income attributable to Hollysys, which excludes the non-cash share-based compensation expenses calculated based on grant-date fair value of shares or options granted, amortization of acquired intangible assets, and fair value adjustments of a bifurcated derivative, was $28.1 million or $0.46 per diluted share based on 61.3 million diluted weighted average common shares outstanding for the three months ended March 31, 2019. This represents a 27.1% increase over the $22.1 million or $0.36 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 $28.0 million or $0.46 per diluted share representing an increase of 28.0% over the $21.8 million or $0.36 per diluted share reported in the comparable prior year period.

Contracts and Backlog Highlights

Hollysys achieved $136.2 million of new contracts for the three months ended March 31, 2019. The backlog as of March 31, 2019 was $599.2 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 Mar 31, 2019


as of Mar 31, 2019



$

% to Total Contract


$

% to Total Backlog

Industrial Automation


84,010

61.7%


182,567

30.5%

Rail Transportation


35,471

26.0%


322,091

53.8%

Mechanical and Electrical Solutions


16,754

12.3%


94,546

15.8%

Total


136,235

100.0%


599,204

100.0%

Cash Flow Highlights

For the three months ended March 31, 2019, the total net cash outflow was $15.3 million. The net cash provided by operating activities was $25.2 million. The net cash used in investing activities was $45.3 million, mainly consisted of $93.8 million time deposits placed with banks, and $4.2 million purchases of property, plant and equipment, which was partially offset by $52.7 million maturity of time deposits. The net cash used in financing activities was $0.2 million, mainly consisted of $1.9 million repayments of short-term bank loans, which were partially offset by $1.7 million proceeds from short-term bank loans.

Balance Sheet Highlights

The total amount of cash and cash equivalents were $253.4 million, $270.8 million, and $238.0 million as of March 31, 2019, December 31, 2018 and March 31, 2018, respectively.

For the three months ended March 31, 2019, DSO was 193 days, as compared to 196 days for the comparable prior year period and 157 days for the last quarter; and inventory turnover was 50 days, as compared to 63 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 13, 2019 U.S. Eastern Time / 9:00 am May 14, 2019 Beijing Time, to discuss the financial results for fiscal year 2019 third quarter ended March 31, 2019 and business outlook.

To participate, please call the following numbers ten minutes before the scheduled start of the call. The conference call identification number is 1568415.


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. (HOLI)

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

SAFE HARBOUR:

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

For further information, please contact:

Hollysys Automation Technologies Ltd.
www.hollysys.com
+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
Mar 31,


Nine months ended
Mar 31,



2019
(Unaudited)


2018
(Unaudited)


2019
(Unaudited)


2018
(Unaudited)

Net revenues









Integrated contract revenue

$

101,285

$

104,736

$

334,618

$

334,845

Products sales


13,187


9,908


27,144


29,085

Revenue from services


10,695


5,973


51,588


29,601

Total net revenues


125,167


120,617


413,350


393,531










Cost of integrated contracts


70,818


73,297


232,411


229,295

Cost of products sold


1,903


1,863


5,566


7,696

Costs of services rendered


3,009


1,576


17,476


8,686

Gross profit


49,437


43,881


157,897


147,854










Operating expenses









Selling


6,474


6,205


22,043


20,643

General and administrative


8,793


7,874


29,140


31,333

Research and development


8,655


8,758


27,825


27,975

VAT refunds and government subsidies


(4,553)


(3,888)


(22,912)


(20,399)

Total operating expenses


19,369


18,949


56,096


59,552










Income from operations


30,068


24,932


101,801


88,302










Other income, net


1,190


352


7,665


3,062

Foreign exchange loss


(333)


(877)


(1,163)


(1,981)

Share of net (loss) income of equity investees


(885)


194


(1,172)


2,466

Dividend income from a cost investee


-


38


1,116


1,096

Interest income


2,978


2,006


8,973


5,041

Interest expenses


(54)


(175)


(371)


(808)

Income before income taxes


32,964


26,470


116,849


97,178










Income taxes expenses


4,946


4,553


16,713


17,584

Net income


28,018


21,917


100,136


79,594










Net income attributable to non-controlling interests

50


75


132


161

Net income attributable to Hollysys Automation Technologies Ltd.

$

27,968

$

21,842

$

100,004

$

79,433










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








Translation adjustments


14,871


30,784


(11,604)


63,054

Comprehensive income


42,889


52,701


88,532


142,648










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

50


76


(129)


163

Comprehensive income attributable to Hollysys Automation Technologies Ltd.

$

42,839

$

52,625

$

88,661

$

142,485










Net income per ordinary share:









Basic


0.46


0.36


1.65


1.31

Diluted


0.46


0.36


1.64


1.31

Shares used in income per share computation:









Weighted average number of ordinary shares

60,459,370


60,436,871


60,453,704


60,431,201

Weighted average number of diluted ordinary shares

61,276,829


61,296,907


61,273,073


61,245,982


 

HOLLYSYS AUTOMATION TECHNOLOGIES LTD.

CONSOLIDATED BALANCE SHEETS

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












Mar 31,
2019


Dec 31,
2018












(Unaudited)


(Unaudited)

ASSETS






Current assets







Cash and cash equivalents

$

253,388

$

270,806



Time deposits with maturities over three months


212,997


168,999



Restricted cash


18,931


16,897



Accounts receivable, net of allowance for doubtful accounts of $46,177 and $45,125 as of March 31,2019 and December 31, 2018, respectively


263,614


272,008



Costs and estimated earnings in excess of billings, net of allowance for doubtful accounts of $8,024 and $7,881 as of March 31, 2019 and December 31, 2018, respectively


226,896


221,581



Other receivables, net of allowance for doubtful accounts of $4,741 and $4,914 as of March 31, 2019 and December 31, 2018, respectively


21,119


18,470



Advances to suppliers


11,262


15,374



Amounts due from related parties


38,182


33,424



Inventories


45,278


35,568



Prepaid expenses


927


911



Income tax recoverable


283


276


Total current assets


1,092,877


1,054,314








Non-current assets







Restricted cash


4,156


4,076



Prepaid expenses


4


4



Property, plant and equipment, net


80,002


75,119



Prepaid land leases


9,910


9,832



Intangible assets, net


1,492


1,540



Investments in equity investees


47,421


52,708



Investments in cost investees


4,879


4,785



Goodwill


48,671


48,346



Deferred tax assets


12,584


11,714


Total non-current assets


209,119


208,124


Total assets


1,301,996


1,262,438








LIABILITIES AND STOCKHOLDERS' EQUITY






Current liabilities







Derivative financial liability


432


432



Short-term bank loans


2,033


2,215



Current portion of long-term loans


20,297


20,258



Accounts payable


116,276


116,362



Deferred revenue


137,840


141,365



Accrued payroll and related expenses


11,794


19,557



Income tax payable


4,259


3,668



Warranty liabilities


5,409


5,318



Other tax payables


13,951


6,054



Accrued liabilities


21,689


23,322



Amounts due to related parties


4,982


4,596


Total current liabilities


338,962


343,147








Non-current liabilities







Accrued liabilities


6,000


5,885



Long-term loans


914


900



Deferred tax liabilities


11,284


12,083



Warranty liabilities


2,536


2,363


Total non-current liabilities


20,734


21,231


Total liabilities


359,696


364,378









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 March 31, 2019 and December 31, 2018


60


60



Additional paid-in capital


223,597


223,547



Statutory reserves


48,706


46,283



Retained earnings *


686,561


660,329



Accumulated other comprehensive income


(16,796)


(32,281)


Total Hollysys Automation Technologies Ltd. stockholder's equity


942,128


897,938



Non-controlling interests


172


122


Total equity


942,300


898,060









Total liabilities and equity

$

1,301,996

$

1,262,438


* 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
Mar 31, 2019


Nine months
ended
Mar 31, 2019




(Unaudited)


(Unaudited)

Cash flows from operating activities:






Net income

$

28,018

$

100,136

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






Depreciation of property, plant and equipment


2,094


5,920


Amortization of prepaid land leases


66


198


Amortization of intangible assets


78


234


Allowance for doubtful accounts


50


564


Loss on disposal of property, plant and equipment


5


43


Share of net loss from equity investees


885


1,172


Share-based compensation expenses


50


201


Deferred income tax expenses


(1,602)


(2,501)


Accretion of convertible bond


57


172


Fair value adjustments of a bifurcated derivative


-


20


Gains on deconsolidation of a subsidiary


(1,020)


(5,768)


Dividends received from an equity investee


5,527


5,527

Changes in operating assets and liabilities:






Accounts receivable


12,744


3,702


Costs and estimated earnings in excess of billings


(204)


(27,907)


Inventories 


(8,709)


(5,106)


Advances to suppliers


4,347


(3,495)


Other receivables 


(2,359)


8,986


Deposits and other assets


(8)


(219)


Due from related parties


(4,074)


5,497


Accounts payable


(1,876)


(9,759)


Deferred revenue


(5,894)


4,526


Accruals and other payables


(11,299)


(1,661)


Due to related parties


293


(2,019)


Income tax payable


534


6,809


Other tax payables


7,531


1,442


Net cash provided by operating activities


25,234


86,714







Cash flows from investing activities:






Time deposits placed with banks


(93,777)


(250,717)


Purchases of property, plant and equipment


(4,192)


(5,426)


Proceeds from disposal of property, plant and equipment


7


258


Maturity of time deposits


52,693


175,548


Investment of an equity investee


-


(740)


Cash reduced upon deconsolidation of subsidiary


-


(1,878)


Net cash used in investing activities


(45,269)


(82,955)







Cash flows from financing activities:






Proceeds from short-term bank loans


1,721


4,927


Repayments of short-term bank loans


(1,917)


(5,472)


Proceeds from long-term bank loans


142


474


Repayments of long-term bank loans


(103)


(402)


Payment of Dividends

 


-


(10,862)


Net cash used in financing activities


(157)


(11,335)








Effect of foreign exchange rate changes


4,888


(3,258)


Net decrease increase in cash, cash equivalents and restricted cash

$

(15,304)


(10,834)








Cash, cash equivalents and restricted cash, beginning of period

$

291,779


287,309


Cash, cash equivalents and restricted cash, end of period


276,475


276,475

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


Nine months ended



Mar 31,


Mar 31,



2019


2018


2019


2018



(Unaudited)


(Unaudited)


(Unaudited)


(Unaudited)










Cost of integrated contracts

$

70,818

$

73,297

$

232,411

$

229,295

Less: Amortization of acquired intangible assets


78


128


234


279

Non-GAAP cost of integrated contracts

$

70,740

$

73,169

$

232,177

$

229,016










General and administrative expenses

$

8,793

$

7,874

$

29,140

$

31,333

Less: Share-based compensation expenses


50


129


201


581

Non-GAAP general and administrative expenses

$

8,743

$

7,745

$

28,939

$

30,752










Other income, net

$

1,190

$

352

$

7,665

$

3,062

Add: Fair value adjustments of a bifurcated derivative


-


-


20


-

Non-GAAP other income, net

$

1,190

$

352

$

7,685

$

3,062










Net income attributable to Hollysys Automation Technologies Ltd.

$

27,968

$

21,842

$

100,004

$

79,433

Add:










Share-based compensation expenses


50


129


201


581


Amortization of acquired intangible assets


78


128


234


279


Fair value adjustments of a bifurcated derivative


-


-


20


-

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

$

28,096

$

22,099

$

100,459

$

80,293











Weighted average number of basic ordinary shares


60,459,370


60,436,871


60,453,704


60,431,201


Weighted average number of diluted ordinary shares


61,276,829


61,296,907


61,273,073


61,245,982

Non-GAAP basic earnings per share

$

0.46

$

0.37

$

1.66

$

1.33

Non-GAAP diluted earnings per share

$

0.46

$

0.36

$

1.65

$

1.32

 

 


Cision

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