Hollysys Automation Technologies Reports Unaudited Financial Results for the Fiscal year and the Fourth Quarter Ended June 30, 2019
Fiscal Year 2019 Financial Highlights
- Non-GAAP net income attributable to Hollysys was $126.2 million, an increase of 15.9% compared to the prior year.
- Total revenues were $570.3 million, an increase of 5.5% compared to the prior year.
- Non-GAAP gross margin was at 37.1%, compared to 38.2% for the prior year.
- Non-GAAP diluted EPS was $2.07, an increase of 16.3% compared to the prior year.
- Net cash provided by operating activities was $100.5 million for the fiscal year 2019.
- DSO of 180 days, compared to 174 days for the prior year.
- Inventory turnover days of 55 days, compared to 58 days for the prior year.
Fourth Quarter of Fiscal Year 2019 Financial Highlights
- Non-GAAP net income attributable to Hollysys was $25.7 million, a decrease of 10.1% compared to the comparable prior year period.
- Total revenues were $157.0 million, an increase of 6.6% compared to the comparable prior year period.
- Non-GAAP gross margin was at 34.0%, compared to 39.6% for the comparable prior year period.
- Non-GAAP diluted EPS was $0.42, a decrease of 8.7% compared to the comparable prior year period.
- Net cash provided by operating activities was $13.8 million for the current quarter.
- DSO of 160 days, compared to 166 days for the comparable prior year period.
- Inventory turnover days of 42 days, compared to 59 days for the comparable prior year period.
BEIJING, Aug. 14, 2019 /PRNewswire/ -- Hollysys Automation Technologies Ltd. (NASDAQ: HOLI) ("Hollysys" or the "Company"), a leading provider of automation and control technologies and applications in China, today announced its unaudited financial results for fiscal year 2019 and the fourth quarter ended June 30, 2019 (see attached tables). The management of Hollysys, stated:
IA business finished the fiscal year with revenue and contract at $233.8 million and $291.3 million, achieving 4.0% and 2.5% YOY growth respectively. For the quarter, revenue and new contract were $66.6 million and $83.9 million, representing 4.0% and 0.9% YOY growth respectively. We continued our effort in market penetration and addressing the demand from current customer base. Within high-end coal fire market, we signed contracts to provide DEH (Digital Electric Hydraulic Control System) to Guohua Jinjie 2*660MW and Huaneng Shengli 2*660MW power stations. Despite slowdown in coal fire, we continued to explore opportunities in new energy, and managed to maintain our leading position, especially in garbage power. In the chemical and petrochemical industries, we have optimized our team to facilitate market penetration and comprehensive solution offering in different sub-verticals. Meanwhile, our milestone Zhong'an coal-chemical project is approaching its completion. We provided in total over 70,000 DCS control points and the execution of the project last for more than two years. Our capability has been highly praised by our client and we believe this project will help build up our reputation as a competitive solution provider for large-size projects and high-end clients in the industry. The momentum of after-sales services continued, driven by the demand from rebuilding and upgrade. We are also improving internal coordination when connecting with our customer base. Through visiting our clients in a team of members from different product divisions, we hope to create better engagement and explore the opportunities of cross-selling. Furthermore, we are actively promoting our smart plant initiatives through direct communication with key potential clients as well as open marketing activities involving clients, governments and other industry players.
Rail business finished the fiscal year with revenue and contract at $208.9 million and $340.3 million, recording 9.6% and 37.7% YOY growth respectively. For the last quarter, revenue and contract were $48.3 million and $60.8 million, representing 19.6% and 4.6% YOY growth respectively. We signed several contracts to provide ATP advanced maintenance to local railway bureaus. Going forward and given a visible long-term railway construction plan, we will continue to adhere to the diversity strategy for stable and healthy growth and to improve our local service network for more value-adding and differentiated services. With urbanization as an ongoing process, we will keep leveraging our strong R&D capacity and prepare for the application of various types of railway transportation systems in the future.
In our overseas business, M&E finished the fiscal year with revenue and contract at $127.6 million and $93.4 million, recording 1.8% YOY growth and 9.1% YOY decrease respectively. For the quarter, revenue and contract were $42.1 million and $25.2 million, representing 1.7% and 37.0% YOY decrease. Given the macro economy in Southeast Asia and the Middle East, risk control remains to be the key focus of our M&E business. Going forward, we will continue our effort in developing partnership with key EPC players, and strengthening localization in manufacture, marketing and services.
Fiscal year and the Fourth Quarter Ended June 30, 2019 Unaudited Financial Results Summary
To facilitate a clear understanding of Hollysys' operational results, a summary of unaudited non-GAAP financial results is shown as below:
(In USD thousands, except for number of shares and per share data)
|
||||||||
Fiscal year ended |
Three months ended |
|||||||
Jun 30, |
Jun 30, |
% |
Jun 30, |
Jun 30, |
% |
|||
Revenues |
$ |
570,341 |
540,768 |
5.5% |
$ |
156,991 |
147,239 |
6.6% |
Integrated contract revenue |
$ |
467,371 |
466,461 |
0.2% |
$ |
132,753 |
131,616 |
0.6% |
Products sales |
$ |
33,102 |
40,233 |
(17.7)% |
$ |
5,958 |
11,149 |
(46.6)% |
Service rendered |
$ |
69,868 |
34,074 |
105.0% |
$ |
18,280 |
4,474 |
308.6% |
Cost of revenues |
$ |
358,864 |
334,290 |
7.4% |
$ |
103,645 |
88,890 |
16.6% |
Gross profit |
$ |
211,477 |
206,478 |
2.4% |
$ |
53,346 |
58,349 |
(8.6)% |
Total operating expenses |
$ |
87,302 |
84,429 |
3.4% |
$ |
31,408 |
25,459 |
23.4% |
Selling |
$ |
28,926 |
27,158 |
6.5% |
$ |
6,883 |
6,515 |
5.6% |
General and administrative |
$ |
40,463 |
45,116 |
(10.3)% |
$ |
11,524 |
14,365 |
(19.8)% |
Goodwill impairment charge |
$ |
11,623 |
- |
100% |
$ |
11,623 |
- |
100% |
Research and development |
$ |
37,025 |
36,605 |
1.1% |
$ |
9,200 |
8,630 |
6.6% |
VAT refunds and government subsidies |
$ |
(30,735) |
(24,450) |
25.7% |
$ |
(7,822) |
(4,051) |
93.1% |
Income from operations |
$ |
124,175 |
122,049 |
1.7% |
$ |
21,938 |
32,890 |
(33.3)% |
Other income, net |
$ |
8,824 |
4,274 |
106.5% |
$ |
1,139 |
1,212 |
(6.0)% |
Foreign exchange (loss) gain |
$ |
(1,161) |
(1,099) |
5.6% |
$ |
2 |
882 |
(99.8)% |
Share of net income (loss) of equity investees |
$ |
404 |
(1,571) |
(125.7)% |
$ |
1,576 |
(4,038) |
(139.0)% |
Dividend income from investment securities |
1,112 |
1,093 |
1.7% |
$ |
- |
- |
- |
|
Interest income |
$ |
11,839 |
7,318 |
61.8% |
$ |
2,863 |
2,275 |
25.8% |
Interest expenses |
$ |
(575) |
(692) |
(16.9)% |
$ |
(204) |
116 |
(275.9)% |
Income tax expenses |
$ |
18,184 |
22,205 |
(18.1)% |
$ |
1,471 |
4,621 |
(68.2)% |
Net income attributable to non-controlling interests |
$ |
278 |
276 |
0.7% |
$ |
145 |
115 |
26.1% |
Non-GAAP net income attributable to Hollysys |
$ |
126,156 |
108,891 |
15.9% |
$ |
25,698 |
28,601 |
(10.1)% |
Non-GAAP basic EPS |
$ |
2.09 |
1.80 |
16.1% |
$ |
0.43 |
0.47 |
(8.5)% |
Non-GAAP diluted EPS |
$ |
2.07 |
1.78 |
16.3% |
$ |
0.42 |
0.46 |
(8.7)% |
Share-based compensation expenses |
$ |
238 |
1,207 |
(80.3)% |
$ |
37 |
625 |
(94.1)% |
Amortization of acquired intangible assets |
$ |
311 |
598 |
(48.0)% |
$ |
77 |
321 |
(76.0)% |
Fair value adjustments of a bifurcated |
$ |
346 |
(75) |
(561.3)% |
$ |
326 |
(75) |
(534.7)% |
GAAP Net income attributable to Hollysys |
$ |
125,261 |
107,161 |
16.9% |
$ |
25,258 |
27,730 |
(8.9)% |
GAAP basic EPS |
$ |
2.07 |
1.77 |
16.9% |
$ |
0.42 |
0.46 |
(8.7)% |
GAAP diluted EPS |
$ |
2.05 |
1.75 |
17.1% |
$ |
0.42 |
0.45 |
(6.7)% |
Basic weighted average common shares |
60,456,524 |
60,434,019 |
0.0% |
60,465,005 |
60,442,504 |
0.0% |
||
Diluted weighted average common shares |
61,273,884 |
61,248,565 |
0.0% |
61,278,773 |
61,277,059 |
0.0% |
Operational Results Analysis for the Fiscal year Ended June 30, 2019
Comparing to the prior fiscal year, the total revenues for fiscal year 2019 increased from $540.8 million to $570.3 million, representing an increase of 5.5%. Broken down by the revenue types, integrated contracts revenue increased by 0.2% to $467.4 million, products sales revenue decreased by 17.7% to $33.1 million, and services revenue increased by 105.0% to $69.9 million.
The Company's total revenues can also be presented in segments as shown in the following chart:
(In USD thousands) |
|||||||||
Fiscal year ended Jun 30, |
|||||||||
2019 |
2018 |
||||||||
$ |
% to Total Revenue |
$ |
% to Total Revenue |
||||||
Industrial Automation |
233,798 |
41.0% |
224,793 |
41.5% |
|||||
Rail Transportation Automation |
208,917 |
36.6% |
190,645 |
35.3% |
|||||
Mechanical and Electrical Solution |
127,626 |
22.4% |
125,330 |
23.2% |
|||||
Total |
570,341 |
100.0% |
540,768 |
100.0% |
|||||
Overall gross margin excluding non-cash amortization of acquired intangibles (non-GAAP gross margin) was 37.1% for fiscal year 2019, as compared to 38.2% for the prior year. The non-GAAP gross margin for integrated contracts, product sales, and services rendered were 30.4%, 77.1% and 62.7% for fiscal year 2019, as compared to 32.8%, 73.2% and 71.0% for the prior year, respectively. The gross margin fluctuation was mainly due to the different revenue mix with different margins. The GAAP overall gross margin which includes non-cash amortization of acquired intangibles was 37.0% for fiscal year 2019, as compared to 38.1% for the prior year. The GAAP gross margin for integrated contracts, product sales, and service rendered were 30.4%, 77.1% and 62.7% for fiscal year 2019, as compared to 32.6%, 73.2% and 71.0% for the prior year, respectively.
Selling expenses were $28.9 million for fiscal year 2019, representing an increase of $1.8 million or 6.5% compared to $27.2 million for the prior year. Presented as a percentage of total revenues, selling expenses were 5.1% and 5.0% for fiscal year 2019, and 2018, respectively.
General and administrative expenses, excluding non-cash share-based compensation expenses (non-GAAP G&A expenses), were $40.5 million for fiscal year 2019, representing a decrease of $4.7 million or 10.3% compared to $45.1 million for the prior year, which was primarily due to decrease of bad debt allowance. Presented as a percentage of total revenues, non-GAAP G&A expenses were 7.1% and 8.3% for fiscal year 2019 and 2018, respectively. The GAAP G&A expenses which include the non-cash share-based compensation expenses were $40.7 million and $46.3 million for fiscal year 2019 and 2018, respectively.
Goodwill impairment charge was $11.6 million for fiscal year 2019. Taking into consideration the macro environment and other relevant factors, Concord expects future lower profit resulting from increased competition and decrease in market demand.
Research and development expenses were $37.0 million for fiscal 2019, representing an increase of $0.4 million or 1.1% compared to $36.6 million for the prior year. Presented as a percentage of total revenues, R&D expenses were 6.5% and 6.8% for fiscal year 2019 and 2018, respectively.
The VAT refunds and government subsidies were $30.7 million for fiscal year 2019, as compared to $24.5 million for the prior year, representing a $6.3 million or 25.7% increase, which was primarily due to an increase of the VAT refunds.
The income tax expenses and the effective tax rate were $18.2 million and 12.7% for fiscal year 2019, as compared to $22.2 million and 17.1% for the prior year. The effective tax rate fluctuation was mainly due to the different pre-tax income mix with different tax rates, as the Company's subsidiaries are subject to different tax rates in various jurisdictions.
The non-GAAP net income attributable to Hollysys, which excludes the non-cash share-based compensation expenses calculated based on the grant-date fair value of shares or options granted, amortization of acquired intangible assets, and fair value adjustments of a bifurcated derivative, was $126.2 million or $2.07 per diluted share based on 61.3 million diluted weighted average common shares outstanding for fiscal year 2019. This represents a 15.9% increase over $108.9 million or $1.78 per share based on 61.2 diluted weighted average common million shares outstanding reported in the comparable prior year period. On a GAAP basis, net income attributable to Hollysys was $125.3 million or $2.05 per diluted share representing an increase of 16.9% over $107.2 million or $1.75 per diluted share reported in the comparable prior year period.
Operational Results Analysis for the Fourth Quarter Ended June 30, 2019
Comparing to the fourth quarter of the prior fiscal year, the total revenues for the three months ended June 30, 2019 increased from $147.2 million to $157.0 million, representing an increase of 6.6%. Broken down by the revenue types, integrated contracts revenue increased by 0.9% to $132.8 million, products sales revenue decreased by 46.6% to $6.0 million, and services revenue increased by 308.6% to $18.3 million.
The Company's total revenues can also be presented in segments as shown in the following chart:
(In USD thousands) |
|||||||||||
Three months ended Jun 30, |
|||||||||||
2019 |
2018 |
||||||||||
$ |
% to Total Revenue |
$ |
% to Total Revenue |
||||||||
Industrial Automation |
66,557 |
42.4% |
64,013 |
43.5% |
|||||||
Rail Transportation Automation |
48,288 |
30.8% |
40,368 |
27.4% |
|||||||
Mechanical and Electrical Solution |
42,146 |
26.8% |
42,858 |
29.1% |
|||||||
Total |
156,991 |
100.0% |
147,239 |
100.0% |
|||||||
Overall gross margin excluding non-cash amortization of acquired intangibles (non-GAAP gross margin) was 34.0% for the three months ended June 30, 2019, as compared to 39.6% for the same period of the prior year. The non-GAAP gross margin for integrated contracts, product sales, and services rendered were 29.9%, 66.3% and 52.9% for the three months ended June 30, 2019, as compared to 35.7%, 72.4% and 73.2% for the same period of the prior year, respectively. The gross margin fluctuation was mainly due to the different revenue mix with different margins. The GAAP overall gross margin which includes non-cash amortization of acquired intangibles was 33.9% for the three months ended June 30, 2019, as compared to 39.4% for the same period of the prior year. The GAAP gross margin for integrated contracts, product sales, and service rendered were 29.9%, 66.3% and 52.9% for the three months ended June 30, 2019, as compared to 35.5%, 72.4% and 73.2% for the same period of the prior year, respectively.
Selling expenses were $6.9 million for the three months ended June 30, 2019, representing an increase of $0.4 million or 5.6% compared to $6.5 million for the same quarter of the prior year. Presented as a percentage of total revenues, selling expenses were 4.4% and 4.4% for the three months ended June 30, 2019, and 2018, respectively.
General and administrative expenses, excluding non-cash share-based compensation expenses (non-GAAP G&A expenses), were $11.5 million for the quarter ended June 30, 2019, representing a decrease of $2.8 million or 19.8% compared to $14.4 million for the same quarter of the prior year, which was primarily due to decrease of bad debt allowance. Presented as a percentage of total revenues, non-GAAP G&A expenses were 7.3% and 9.8% for quarters ended June 30, 2019 and 2018, respectively. The GAAP G&A expenses which include the non-cash share-based compensation expenses were $11.6 million and $15.0 million for the three months ended June 30, 2019 and 2018, respectively.
Research and development expenses were $9.2 million for the three months ended June 30, 2019, representing an increase of $0.6 million or 6.6% compared to $8.6 million for the same quarter of the prior year. Presented as a percentage of total revenues, R&D expenses were 5.9% and 5.9% for the quarter ended June 30, 2019 and 2018, respectively.
The VAT refunds and government subsidies were $7.8 million for three months ended June 30, 2019, as compared to $4.1 million for the same period in the prior year, representing a $3.8 million or 93.1% increase, which was primarily due to an increase of the VAT refunds.
The income tax expenses and the effective tax rate were $1.5 million and 5.5% for the three months ended June 30, 2019, as compared to $4.6 million and 14.2% for comparable prior year period. The effective tax rate fluctuation was mainly due to the different pre-tax income mix with different tax rates, as the Company's subsidiaries are subject to different tax rates in various jurisdictions.
The non-GAAP net income attributable to Hollysys, which excludes the non-cash share-based compensation expenses calculated based on the grant-date fair value of shares or options granted, amortization of acquired intangible assets, and fair value adjustments of a bifurcated derivative, was $25.7 million or $0.42 per diluted share based on 61.3 million diluted weighted average common shares outstanding for the three months ended June 30, 2019. This represents a 10.1% decrease over $28.6 million or $0.46 per share based on 61.3 diluted weighted average common million shares outstanding reported in the comparable prior year period. On a GAAP basis, net income attributable to Hollysys was $25.3 million or $0.42 per diluted share representing a decrease of 8.9% over $27.7 million or $0.45 per diluted share reported in the comparable prior year period.
Contracts and Backlog Highlights
Hollysys achieved $169.8 million of new contracts for the three months ended June 30, 2019. The backlog as of June 30, 2019 was $594.2 million. The detailed breakdown of the new contracts and backlog by segments is shown below:
(In USD thousands) |
New contracts achieved |
New contracts achieved |
Backlog |
|||||||
for the fiscal year ended Jun 30, 2019 |
for the three months ended Jun 30, 2019 |
as of Jun 30, 2019 |
||||||||
$ |
% to Total |
$ |
% to Total |
$ |
% to Total |
|||||
Industrial Automation |
291,259 |
40.2% |
83,853 |
49.4% |
191,026 |
32.1% |
||||
Rail Transportation |
340,300 |
46.9% |
60,803 |
35.8% |
326,523 |
55.0% |
||||
Mechanical and Electrical Solutions |
93,349 |
12.9% |
25,174 |
14.8% |
76,624 |
12.9% |
||||
Total |
724,908 |
100.0% |
169,830 |
100.0% |
594,173 |
100.0% |
||||
Cash Flow Highlights
For the fiscal year ended June 30, 2019, the total net cash inflow was $71.1 million. The net cash provided by operating activities was $100.5 million. The net cash used in investing activities was $9.9 million, mainly consisted of $10.6 million purchases of property, plant and equipment and prepaid land leases, and $256.3 million time deposits placed with banks, which was partially offset by $245.9 million maturity of time deposits, $8.9 million dividends received in excess of cumulative equity in earnings from an equity investee, and $4.5 million advance from a shareholder of an equity method investee. The net cash used in financing activities was $10.2 million, mainly consisted of $10.9 million payment of dividends, and $6.9 million repayments of short-term bank loans, which were partially offset by $5.9 million proceeds from short-term bank loans, and $1.5 million cash injected by noncontrolling interests.
For the three months ended June 30, 2019, the total net cash inflow was $81.9 million. The net cash provided by operating activities was $13.8 million. The net cash provided by investing activities was $73.1 million, mainly consisted of $70.3 million maturity of time deposits, $8.9 million dividends received in excess of cumulative equity in earnings from an equity investee, and $4.5 million advance from a shareholder of an equity method investee, which was partially offset by $5.2 million purchases of property, plant and equipment and prepaid land leases, and $5.6 million time deposits placed with banks. The net cash provided by financing activities was $1.2 million, mainly consisted of $1.5 million cash injected by noncontrolling interests, and $1.0 million proceeds from short-term bank loans, which were partially offset by $1.4 million repayments of short-term bank loans.
Balance Sheet Highlights
The total amount of cash and cash equivalents were $332.5 million, $253.4 million, and $265.7 million as of June 30, 2019, March 31, 2019 and June 30, 2018, respectively.
For fiscal year ended June 30, 2019, Days Sales Outstanding ("DSO") was 180 days, as compared to 174 days from the prior year; and inventory turnover was 55 days, as compared to 58 days from the prior year.
For the three months ended June 30, 2019, DSO was 160 days, as compared to 166 days for the comparable prior year period and 193 days for the last quarter; and inventory turnover was 42 days, as compared to 59 days for the comparable prior year period and 50 days for the last quarter.
Conference Call
The Company will host a conference call at 9:00 pm August 14, 2019 U.S. Eastern Time / 9:00 am August 15, 2019 Beijing Time, to discuss the financial results for fiscal year 2019 and the fourth quarter ended June 30, 2019 and business outlook.
To participate, please call the following numbers ten minutes before the scheduled start of the call. The conference call identification number is 2099053.
Standard International Dial-In Number: |
+65 67135090 |
Participant Local Dial-In Numbers: |
|
Australia, Sydney |
+61 290833212 |
China, Domestic |
4006208038 |
China, Domestic Landline only |
8008190121 |
China, Hong Kong |
+852 30186771 |
Japan, Tokyo |
+81 345036012 |
Korea (South), Seoul |
+82 27395177 |
China, Taiwan |
+886 255723895 |
United Kingdom, London |
+44 2036214779 |
United States, New York |
+1 8456750437 |
Participant ITFS Dial-In Numbers: |
|
Australia, |
1800411623 |
Australia, |
1300717205 |
Belgium |
080071900 |
Canada |
18663861016 |
France |
0800912761 |
Germany |
08001820671 |
China, Hong Kong |
800906601 |
India |
18002666846 |
Indonesia, PT Indosat access |
0018030179156 |
Indonesia, PT Telkom access |
0078030179156 |
Italy |
800874737 |
Japan |
0120925376 |
Korea (South), Domestic |
0808500474 |
Malaysia |
1800820152 |
Netherlands |
08000221931 |
New Zealand |
0800880084 |
Norway |
80010719 |
Philippines |
180016120306 |
Switzerland |
0800561006 |
China, Taiwan |
0809091568 |
Thailand |
001800656772 |
United Kingdom |
08082346646 |
United States |
18665194004 |
In addition, a recording of the conference call will be accessible within 48 hours via Hollysys' website at: http://hollysys.investorroom.com
About Hollysys Automation Technologies Ltd. (NASDAQ: HOLI)
Hollysys is a leading automation control system solutions provider in China, with overseas operations in eight other countries and regions throughout Asia. Leveraging its proprietary technology and deep industry know-how, Hollysys empowers its customers with enhanced operational safety, reliability, efficiency, and intelligence which are critical to their businesses. Hollysys derives its revenues mainly from providing integrated solutions for industrial automation and rail transportation. In industrial automation, Hollysys delivers the full spectrum of automation hardware, software, and services spanning field devices, control systems, enterprise manufacturing management and cloud-based applications. In rail transportation, Hollysys provides advanced signaling control and SCADA (Supervisory Control and Data Acquisition) systems for high-speed rail and urban rail (including subways). Founded in 1993, with technical expertise and innovation, Hollysys has grown from a research team specializing in automation control in the power industry into a group providing integrated automation control system solutions for customers in diverse industry verticals. As of March 2019, Hollysys had cumulatively carried out more than 25,000 projects for approximately 15,000 customers in various sectors including power, petrochemical, high-speed rail, and urban rail, in which Hollysys has established leading market positions.
SAFE HARBOUR:
This release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All statements, other than statements of historical fact included herein are "forward-looking statements," including statements regarding: the ability of the Company to achieve its commercial objectives; the business strategy, plans and objectives of the Company and its subsidiaries; and any other statements of non-historical information. These forward-looking statements are often identified by the use of forward-looking terminology such as "believes," "expects" or similar expressions, involve known and unknown risks and uncertainties. Such forward-looking statements, based upon the current beliefs and expectations of Hollysys' management, are subject to risks and uncertainties, which could cause actual results to differ from the forward looking statements. Although the Company believes that the expectations reflected in these forward-looking statements are reasonable, they do involve assumptions, risks and uncertainties, and these expectations may prove to be incorrect. Investors should not place undue reliance on these forward-looking statements, which speak only as of the date of this press release. The Company's actual results could differ materially from those anticipated in these forward-looking statements as a result of a variety of factors, including those discussed in the Company's reports that are filed with the Securities and Exchange Commission and available on its website (http://www.sec.gov). All forward-looking statements attributable to the Company or persons acting on its behalf are expressly qualified in their entirety by these factors. Other than as required under the securities laws, the Company does not assume a duty to update these forward-looking statements.
For further information, please contact:
Hollysys Automation Technologies Ltd.
www.hollysys.com
+86-10-5898-1386
[email protected]
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 |
Fiscal year ended |
|||||||
2019 |
2018 |
2019 |
2018 |
|||||
(Unaudited) |
(Unaudited) |
(Unaudited) |
||||||
Net revenues |
||||||||
Integrated contract revenue |
$ |
132,753 |
$ |
131,616 |
$ |
467,371 |
$ |
466,461 |
Products sales |
5,958 |
11,149 |
33,102 |
40,233 |
||||
Revenue from services |
18,280 |
4,474 |
69,868 |
34,074 |
||||
Total net revenues |
156,991 |
147,239 |
570,341 |
540,768 |
||||
Cost of integrated contracts |
93,112 |
84,938 |
325,523 |
314,233 |
||||
Cost of products sold |
2,005 |
3,074 |
7,571 |
10,770 |
||||
Costs of services rendered |
8,605 |
1,199 |
26,081 |
9,885 |
||||
Gross profit |
53,269 |
58,028 |
211,166 |
205,880 |
||||
Operating expenses |
||||||||
Selling |
6,883 |
6,515 |
28,926 |
27,158 |
||||
General and administrative |
11,561 |
14,990 |
40,701 |
46,323 |
||||
Goodwill impairment charge |
11,623 |
- |
11,623 |
- |
||||
Research and development |
9,200 |
8,630 |
37,025 |
36,605 |
||||
VAT refunds and government subsidies |
(7,822) |
(4,051) |
(30,735) |
(24,450) |
||||
Total operating expenses |
31,445 |
26,084 |
87,540 |
85,636 |
||||
Income from operations |
21,824 |
31,944 |
123,626 |
120,244 |
||||
Other income, net |
813 |
1,287 |
8,478 |
4,349 |
||||
Foreign exchange gain (loss) |
2 |
882 |
(1,161) |
(1,099) |
||||
Share of net income (loss) of equity investees |
1,576 |
(4,038) |
404 |
(1,571) |
||||
Dividend income from investment securities |
- |
- |
1,112 |
1,093 |
||||
Interest income |
2,863 |
2,275 |
11,839 |
7,318 |
||||
Interest expenses |
(204) |
116 |
(575) |
(692) |
||||
Income before income taxes |
26,874 |
32,466 |
143,723 |
129,642 |
||||
Income taxes expenses |
1,471 |
4,621 |
18,184 |
22,205 |
||||
Net income |
25,403 |
27,845 |
125,539 |
107,437 |
||||
Net income attributable to non-controlling interests |
145 |
115 |
278 |
276 |
||||
Net income attributable to Hollysys Automation |
$ |
25,258 |
$ |
27,730 |
$ |
125,261 |
$ |
107,161 |
Other comprehensive income (loss), net of tax of nil |
||||||||
Translation adjustments |
(19,998) |
(45,644) |
(31,602) |
17,410 |
||||
Comprehensive income |
5,405 |
(17,799) |
93,937 |
124,847 |
||||
Less: comprehensive income attributable to non-controlling |
145 |
116 |
17 |
280 |
||||
Comprehensive income (loss) attributable to Hollysys |
$ |
5,260 |
$ |
(17,915) |
$ |
93,920 |
$ |
124,567 |
Net income per ordinary share: |
||||||||
Basic |
0.42 |
0.46 |
2.07 |
1.77 |
||||
Diluted |
0.42 |
0.45 |
2.05 |
1.75 |
||||
Shares used in income per ordinary share |
||||||||
Weighted average number of ordinary shares |
60,465,005 |
60,442,504 |
60,456,524 |
60,434,019 |
||||
Weighted average number of diluted ordinary shares |
61,278,773 |
61,277,059 |
61,273,884 |
61,248,565 |
HOLLYSYS AUTOMATION TECHNOLOGIES LTD. |
||||||
CONSOLIDATED BALANCE SHEETS |
||||||
(In USD thousands except for number of shares and per share data) |
||||||
Jun 30, |
Mar 31, |
|||||
2019 |
2019 |
|||||
(Unaudited) |
(Unaudited) |
|||||
ASSETS |
||||||
Current assets |
||||||
Cash and cash equivalents |
$ |
332,509 |
$ |
253,388 |
||
Time deposits with maturities over three months |
145,139 |
212,997 |
||||
Restricted cash |
22,260 |
18,931 |
||||
Accounts receivable, net of allowance for doubtful accounts of $47,162 |
282,594 |
242,195 |
||||
Costs and estimated earnings in excess of billings, net of allowance for doubtful |
197,955 |
226,896 |
||||
Accounts receivable retention |
5,468 |
4,329 |
||||
Other receivables, net of allowance for doubtful accounts of $4,879 and $4,741 as |
27,109 |
21,119 |
||||
Advances to suppliers |
12,901 |
11,262 |
||||
Amounts due from related parties |
36,295 |
38,182 |
||||
Inventories |
42,983 |
45,278 |
||||
Prepaid expenses |
644 |
927 |
||||
Income tax recoverable |
3,621 |
283 |
||||
Total current assets |
1,109,478 |
1,075,787 |
||||
Non-current assets |
||||||
Restricted cash |
3,618 |
4,156 |
||||
Accounts receivable retention |
6,390 |
17,090 |
||||
Prepaid expenses |
2 |
4 |
||||
Property, plant and equipment, net |
76,006 |
80,002 |
||||
Prepaid land leases |
16,599 |
9,910 |
||||
Intangible assets, net |
1,383 |
1,492 |
||||
Investments in equity investees |
40,386 |
47,421 |
||||
Investment securities |
4,776 |
4,879 |
||||
Goodwill |
37,054 |
48,671 |
||||
Deferred tax assets |
13,331 |
12,584 |
||||
Total non-current assets |
199,545 |
226,209 |
||||
Total assets |
1,309,023 |
1,301,996 |
||||
LIABILITIES AND STOCKHOLDERS' EQUITY |
||||||
Current liabilities |
||||||
Derivative financial liability |
758 |
432 |
||||
Short-term bank loans |
1,909 |
2,033 |
||||
Current portion of long-term loans |
20,310 |
20,297 |
||||
Accounts payable |
110,384 |
116,276 |
||||
Construction cost payable |
94 |
- |
||||
Deferred revenue |
141,385 |
137,840 |
||||
Accrued payroll and related expenses |
14,512 |
11,794 |
||||
Income tax payable |
2,541 |
4,259 |
||||
Warranty liabilities |
9,085 |
5,409 |
||||
Other tax payables |
665 |
13,951 |
||||
Accrued liabilities |
32,229 |
21,689 |
||||
Amounts due to related parties |
5,395 |
4,982 |
||||
Total current liabilities |
339,267 |
338,962 |
||||
Non-current liabilities |
||||||
Accrued liabilities |
3,530 |
6,000 |
||||
Long-term loans |
978 |
914 |
||||
Deferred tax liabilities |
11,779 |
11,284 |
||||
Warranty liabilities |
6,309 |
2,536 |
||||
Total non-current liabilities |
22,596 |
20,734 |
||||
Total liabilities |
361,863 |
359,696 |
||||
Commitments and contingencies |
- |
- |
||||
Stockholders' equity: |
||||||
Ordinary shares, par value $0.001 per share, 100,000,000 shares authorized; |
60 |
60 |
||||
Additional paid-in capital |
223,635 |
223,597 |
||||
Statutory reserves |
48,698 |
48,706 |
||||
Retained earnings * |
708,515 |
686,561 |
||||
Accumulated other comprehensive income |
(35,522) |
(16,796) |
||||
Total Hollysys Automation Technologies Ltd. stockholder's equity |
945,386 |
942,128 |
||||
Non-controlling interests |
1,774 |
172 |
||||
Total equity |
947,160 |
942,300 |
||||
Total liabilities and equity |
$ |
1,309,023 |
$ |
1,301,996 |
||
* The adoption of ASC 606 commenced on July 1, 2018 had a one-off effect on the beginning of balance sheet accounts. |
HOLLYSYS AUTOMATION TECHNOLOGIES LTD CONSOLIDATED STATEMENTS OF CASH FLOWS (In USD thousands). |
|||||
Three months ended |
Fiscal year ended |
||||
Jun 30, 2019 |
Jun 30, 2019 |
||||
(Unaudited) |
(Unaudited) |
||||
Cash flows from operating activities: |
|||||
Net income |
$ |
25,403 |
$ |
125,539 |
|
Adjustments to reconcile net income to net cash provided by operating activities: |
|||||
Depreciation of property, plant and equipment |
1,959 |
7,879 |
|||
Amortization of prepaid land leases |
66 |
264 |
|||
Amortization of intangible assets |
77 |
311 |
|||
Allowance for doubtful accounts |
1,555 |
2,119 |
|||
(Gain) loss on disposal of long-lived assets |
(30) |
13 |
|||
Goodwill impairment charge |
11,623 |
11,623 |
|||
Share of net gain from equity investees |
(1,576) |
(404) |
|||
Share-based compensation expenses |
37 |
238 |
|||
Deferred income tax expenses |
(3,697) |
(6,197) |
|||
Accretion of convertible bond |
57 |
230 |
|||
Fair value adjustments of a bifurcated derivative |
326 |
346 |
|||
Gains on deconsolidation of a subsidiary |
- |
(5,768) |
|||
Dividends received from an equity investee |
(1,663) |
3,865 |
|||
Changes in operating assets and liabilities: |
|||||
Accounts receivable |
(37,485) |
(33,782) |
|||
Costs and estimated earnings in excess of billings |
25,150 |
(2,757) |
|||
Inventories |
1,333 |
(3,773) |
|||
Advances to suppliers |
(1,862) |
(5,357) |
|||
Other receivables |
(6,340) |
2,647 |
|||
Deposits and other assets |
281 |
62 |
|||
Due from related parties |
1,103 |
6,600 |
|||
Accounts payable |
(4,268) |
(14,027) |
|||
Deferred revenue |
6,310 |
10,836 |
|||
Accruals and other payables |
13,149 |
11,488 |
|||
Due to related parties |
526 |
(1,494) |
|||
Income tax payable |
(5,069) |
1,740 |
|||
Other tax payables |
(13,159) |
(11,720) |
|||
Net cash provided by operating activities |
13,806 |
100,521 |
|||
Cash flows from investing activities: |
|||||
Time deposits placed with banks |
(5,611) |
(256,328) |
|||
Purchases of property, plant and equipment |
(1,587) |
(3,488) |
|||
Prepaid land leases |
(3,575) |
(7,099) |
|||
Proceeds from disposal of property, plant and equipment |
44 |
301 |
|||
Maturity of time deposits |
70,331 |
245,880 |
|||
Advance from a shareholder of an equity method investee |
4,544 |
4,544 |
|||
Investment securities |
- |
(740) |
|||
Cash reduced upon deconsolidation of subsidiary |
- |
(1,878) |
|||
Dividends received in excess of cumulative equity in earnings from an equity investee |
8,920 |
8,920 |
|||
Net cash provided by (used in) investing activities |
73,066 |
(9,888) |
|||
Cash flows from financing activities: |
|||||
Proceeds from short-term bank loans |
981 |
5,908 |
|||
Repayments of short-term bank loans |
(1,403) |
(6,875) |
|||
Proceeds from long-term bank loans |
256 |
730 |
|||
Repayments of long-term bank loans |
(109) |
(512) |
|||
Cash injected by noncontrolling interests |
1,456 |
1,456 |
|||
Payment of dividends |
- |
(10,862) |
|||
Net cash provided by (used in) financing activities |
1,181 |
(10,155) |
|||
Effect of foreign exchange rate changes |
(6,141) |
(9,400) |
|||
Net decrease increase in cash, cash equivalents and restricted cash |
$ |
81,912 |
71,078 |
||
Cash, cash equivalents and restricted cash, beginning of period |
$ |
276,475 |
287,309 |
||
Cash, cash equivalents and restricted cash, end of period |
358,387 |
358,387 |
Non-GAAP Measures
In evaluating our results, the non-GAAP measures of "Non-GAAP cost of integrated contracts", "Non-GAAP general and administrative expenses", "Non-GAAP other income, net", "Non-GAAP net income attributable to Hollysys Automation Technologies Ltd. stockholders", "Non-GAAP basic earnings per share", and "Non-GAAP diluted earnings per share" serve as additional indicators of our operating performance and not as a replacement for other measures in accordance with U.S. GAAP. We believe these non-GAAP measures are useful to investors, as they exclude the non-cash share-based compensation expenses, which is calculated based on the number of shares or options granted and the fair value as of the grant date, amortization of acquired intangible assets, and fair value adjustments of a bifurcated derivative. They will not result in any cash inflows or outflows. We believe that using non-GAAP measures help our shareholders to have a better understanding of our operating results and growth prospects. In addition, given the business nature of the Company, it has been a common practice for investors to use such non-GAAP measures to evaluate the Company.
The following table provides a reconciliation of U.S. GAAP measures to the non-GAAP measures for the periods indicated:
(In USD thousands, except for number of shares and per share data) |
||||||||
Three months ended |
Fiscal year ended |
|||||||
Jun 30, |
Jun 30, |
|||||||
2019 |
2018 |
2019 |
2018 |
|||||
(Unaudited) |
(Unaudited) |
(Unaudited) |
(Unaudited) |
|||||
Cost of integrated contracts |
$ |
93,112 |
$ |
84,938 |
$ |
325,523 |
$ |
314,233 |
Less: Amortization of acquired intangible assets |
77 |
321 |
311 |
598 |
||||
Non-GAAP cost of integrated contracts |
$ |
93,035 |
$ |
84,617 |
$ |
325,212 |
$ |
313,635 |
General and administrative expenses |
$ |
11,561 |
$ |
14,990 |
$ |
40,701 |
$ |
46,323 |
Less: Share-based compensation expenses |
37 |
625 |
238 |
1,207 |
||||
Non-GAAP general and administrative expenses |
$ |
11,524 |
$ |
14,365 |
$ |
40,463 |
$ |
45,116 |
Other income, net |
$ |
813 |
$ |
1,287 |
$ |
8,478 |
$ |
4,349 |
Add: Fair value adjustments of a bifurcated derivative |
326 |
(75) |
346 |
(75) |
||||
Non-GAAP other income, net |
$ |
1,139 |
$ |
1,212 |
$ |
8,824 |
$ |
4,274 |
Net income attributable to Hollysys Automation |
$ |
25,258 |
$ |
27,730 |
$ |
125,261 |
$ |
107,161 |
Add: |
||||||||
Share-based compensation expenses |
37 |
625 |
238 |
1,207 |
||||
Amortization of acquired intangible assets |
77 |
321 |
311 |
598 |
||||
Fair value adjustments of a bifurcated derivative |
326 |
(75) |
346 |
(75) |
||||
Non-GAAP net income attributable to Hollysys |
$ |
25,698 |
$ |
28,601 |
$ |
126,156 |
$ |
108,891 |
Weighted average number of basic ordinary shares |
60,465,005 |
60,442,504 |
60,456,524 |
60,434,019 |
||||
Weighted average number of diluted ordinary shares |
61,278,773 |
61,277,059 |
61,273,884 |
61,248,565 |
||||
Non-GAAP basic earnings per share |
$ |
0.43 |
$ |
0.47 |
$ |
2.09 |
$ |
1.80 |
Non-GAAP diluted earnings per share |
$ |
0.42 |
$ |
0.46 |
$ |
2.07 |
$ |
1.78 |
SOURCE Hollysys Automation Technologies, Ltd
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