Hollysys Automation Technologies Reports Unaudited Financial Results for the Fiscal year and the Fourth Quarter Ended June 30, 2018

Aug 14, 2018

Fiscal Year 2018 Financial Highlights

  • Non-GAAP net income attributable to Hollysys was $108.9 million, an increase of 55.4% compared to the comparable prior year period.
  • Total revenues were $540.8 million, an increase of 25.2% compared to the comparable prior year period.
  • Non-GAAP gross margin was at 38.2%, compared to 32.7% for the comparable prior year period.
  • Non-GAAP diluted EPS were at $1.78, an increase of 53.4% compared to the comparable prior year period.
  • Net cash provided by operating activities was $122.2 million for the current year.
  • DSO of 174 days, compared to 201 days for the comparable prior year period.
  • Inventory turnover days of 58 days, compared to 51 days for the comparable prior year period.

Fourth Quarter of Fiscal Year 2018 Financial Highlights

  • Non-GAAP net income attributable to Hollysys was $28.6 million, an increase of 26.5% compared to the comparable prior year period.
  • Total revenues were $147.2 million, an increase of 6.7% compared to the comparable prior year period.
  • Non-GAAP gross margin was at 39.6%, compared to 39.1% for the comparable prior year period.
  • Non-GAAP diluted EPS were at $0.46, an increase of 24.3% compared to the comparable prior year period.
  • Net cash provided by operating activities was $45.1 million for the current quarter.
  • DSO of 166 days, compared to 153 days for the comparable prior year period.
  • Inventory turnover days of 59 days, compared to 50 days for the comparable prior year period.

BEIJING, Aug. 14, 2018 /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 2018 and the fourth quarter ended June 30, 2018 (see attached tables). The management of Hollysys, stated:

Industrial automation recorded a 46.2% YOY growth in quarterly revenue, at $64.0 million. Annual revenue and new contract recorded a 30.2% and 16.0% YOY growth respectively. Management continued to execute the low-to-high end market expansion strategy for Process Automation business. Contract growth in chemical and petrochemical remained healthy. Major contracts include a DCS+SIS+ITCC+AMS solution for Shandong Haiyou Chemical's 1 million tons delayed coking equipment project, and a DCS solution for Suzhou Sinye Materials Technology Co., Ltd covering its furan, cold-core, and sulfonic curing agent project. We signed several additional contracts for the milestone Zhong'an United Coal Chemical Project, where we applied our comprehensive solution to many new equipment for the first time. On power, despite the slowdown of the coal fire industry, growth in thermal power and new energy remained healthy. We continued to maintain our market share in high end coal fire market, while actively expanding market for multiple product lines. Major contracts signed include a DCS solution for Shenhua Wucaiwan 2X660MW power station and a DEH solution for Datang Pingluo 2X660MW turbine unit. We continued to address service and upgrading demand from the entire customer base. Our data-based value-added solution, including energy saving, control optimization and information security, etc. have received growing acceptance from customers of several industries. With our widespread national service network, we are capable of communicating with and delivering to our customers from various industries regular and value-added customized services and products they need.

Rail business recorded a 37.6% YOY decline in quarterly revenue at $40.4 million, while quarterly new contract decline YOY by 16.8%, at $58.1 million. Annually, new contracts increase YOY by 24.2%, while revenue increase YOY by 22.4%. Breakthrough was made as we signed a C2 track circuit contract for Guiyang Southwest line. New contracts were also signed on subway SCADA for Beijing Subway Line 17 and Line 19. As for the ATP product line, CRC started the bidding of C3 ATP in early June, but contract has not been signed yet. We continued to strengthen our marketing capacity through reviewing and updating strategic partnership and improving local service network coverage, and signed several maintenance contracts covering both on-board and on-ground equipment. Management team will adhere to the diversity strategy to create revenue stream from more new products and services, and to maintain a stable and healthy growth into the future.

In oversea business, we continued to seek opportunities in Process Automation business through EPC projects and direct sales. Contracts were signed on DCS, DEH, BATCH, etc. solution with customers from India and Southeast Asia. The M&E business, performed by Concord and Bond, recorded a 45.1% YOY growth in quarterly revenue, at $42.9 million, and a 150.9% quarterly new contract growth, at $40.0 million. Annual M&E revenue and new contracts recorded 21.0% and 134.5% YOY growth respectively. Effort on improving management and risk control in this fiscal year has taken effect and will be ongoing. The economic and political circumstances in South East Asia and Middle East will continue to be closely followed.

Fiscal year and The Fourth Quarter Ended June 30, 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


Fiscal year ended



Jun 30,
2018

 Jun 30,
2017

%
Change


Jun 30,
2018

Jun 30,
2017

%
Change










Revenues

$

147,239

137,961

6.7%

$

540,768

431,943

25.2%

    Integrated contract revenue

$

131,616

124,733

5.5%

$

466,461

385,500

21.0%

    Products sales

$

11,149

8,549

30.4%

$

40,233

32,665

23.2%

    Service rendered

$

4,474

4,679

(4.4)%

$

34,074

13,778

147.3%

Cost of revenues

$

88,890

84,065

5.7%

$

334,288

290,891

14.9%

Gross profit

$

58,349

53,896

8.3%

$

206,480

141,052

46.4%

Total operating expenses

$

25,459

33,894

(24.9)%

$

84,429

79,737

5.9%

    Selling

$

6,515

6,593

(1.2)%

$

27,158

24,412

11.2%

    General and administrative

$

14,365

14,586

(1.5)%

$

45,116

43,833

2.9%

Goodwill impairment charge

$

-

11,211

(100.0)%

$

-

11,211

(100.0)%

    Research and development

$

8,630

8,026

7.5%

$

36,605

30,109

21.6%

    VAT refunds and government subsidies

$

(4,051)

(6,522)

(37.9)%

$

(24,450)

(29,828)

(18.0)%

Income from operations

$

32,890

20,002

64.4%

$

122,051

61,315

99.1%

Other income (expenses), net

$

1,212

(20)

6160.0%

$

4,274

1,811

136.0%

Foreign exchange gain (loss)

$

882

(267)

430.3%

$

(1,099)

(135)

714.1%

Share of net (loss) income of equity
     investees

$

(4,038)

(1,063)

(279.9)%

$

(1,571)

3,607

(143.6)%

Gains on disposal of a subsidiary

$

-

628

(100.0)%


-

628

(100.0)%

Gains on deconsolidation of the Company's
     interests in Beijing Hollycon Electronic
     Technology Co., Ltd

$

-

8,085

(100.0)%

$

-

14,514

(100.0)%

Dividend income from a cost investee

$

-

(450)

(100.0)%

$

1,093

-

100%

Interest income

$

2,275

1,256

81.1%

$

7,318

3,687

98.5%

Interest expenses

$

116

(144)

(180.6)%

$

(692)

(938)

26.2%

Income tax expenses

$

4,621

5,383

(14.2)%

$

22,205

14,386

54.4%

Net income attributable to non-controlling
     interests

$

115

42

173.8%

$

276

25

1004.0%

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

$

28,601

22,602

26.5%

$

108,893

70,078

55.4%

Non-GAAP basic EPS

$

0.47

0.37

27.0%

$

1.80

1.16

55.2%

Non-GAAP diluted EPS

$

0.46

0.37

24.3%

$

1.78

1.16

53.4%










Share-based compensation expenses

$

625

534

17.0%

$

1,207

464

160.1%

Amortization of acquired intangible assets

$

321

318

0.9%

$

600

581

3.3%

(Gain) loss on convertible bond related fair
     value adjustments

$

(75)

89

(184.3)%

$

(75)

89

(184.3)%

GAAP Net income attributable to Hollysys
     Automation Technologies Ltd.

$

27,730

21,661

28.0%

$

107,161

68,944

55.4%

GAAP basic EPS

$

0.46

0.36

27.8%

$

1.77

1.15

53.9%

GAAP diluted EPS

$

0.45

0.36

25.0%

$

1.75

1.14

53.5%










Basic weighted average common shares
     outstanding


60,442,504

60,420,004

0.0%


60,434,019

60,189,004

0.4%

Diluted weighted average common shares
     outstanding


61,277,059

61,268,999

0.0%


61,248,565

61,011,510

0.4%

Operational Results Analysis for the Fiscal year Ended June 30, 2018

Comparing to the prior fiscal year, the total revenues for fiscal year 2018 increased from $431.9 million to $540.8 million, representing an increase of 25.2%. Broken down by the revenue types, integrated contracts revenue increased by 21.0% to $466.5 million, products sales revenue increased by 23.2% to $40.2 million, and services revenue increased by 147.3% to $34.1 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,


2018


2017


$

% to Total Revenue


$

% to Total Revenue

Industrial Automation

224,793

41.5%


172,667

39.9%

Rail Transportation Automation

190,645

35.3%


155,732

36.1%

Mechanical and Electrical Solution

125,330

23.2%


103,544

24.0%

Total

540,768

100.0%


431,943

100.0%

Overall gross margin excluding non-cash amortization of acquired intangibles (non-GAAP gross margin) was 38.2% for fiscal year 2018, as compared to 32.7% for the prior year. The non-GAAP gross margin for integrated contracts, product sales, and services rendered were 32.8%, 73.2% and 71.0% for fiscal year 2018, as compared to 28.2%, 69.5% and 70.8% for the prior year respectively. The gross margin fluctuation was mainly due to the different revenue mix with different margin. The GAAP overall gross margin which includes non-cash amortization of acquired intangibles was 38.1% for fiscal year 2018, as compared to 32.5% for the prior year. The GAAP gross margin for integrated contracts, product sales, and service rendered were 32.6%, 73.2% and 71.0% for fiscal year 2018, as compared to 28.0%, 69.5% and 70.8% for the prior year respectively.

Selling expenses were $27.2 million for fiscal year 2018, representing an increase of $2.8 million or 11.2% compared to $24.4 million for the prior year. Presented as a percentage of total revenues, selling expenses were 5.0% and 5.7% for fiscal year 2018 and 2017, respectively.

General and administrative expenses, excluding non-cash share-based compensation expenses (non-GAAP G&A expenses), were $45.1 million for fiscal year 2018, representing an increase of $1.3 million or 2.9% compared to $43.8 million for the prior year. Presented as a percentage of total revenues, non-GAAP G&A expenses were 8.3% and 10.1% for fiscal year 2018 and 2017 respectively. The GAAP G&A expenses which include the non-cash share-based compensation expenses were $46.3 million and $44.3 million for fiscal year 2018 and 2017, respectively.

Research and development expenses were $36.6 million for fiscal year 2018, representing an increase of $6.5 million or 21.6% compared to $30.1 million for the prior year, mainly due to increased research and development activities. Presented as a percentage of total revenues, R&D expenses were 6.8% and 7.0% for fiscal year 2018 and 2017, respectively.

The VAT refunds and government subsidies were $24.5 million for fiscal year 2018, as compared to $29.8 million for the prior year, representing a $5.3 million or 18.0% decrease, which was primarily due to decrease of the government subsidies.

The income tax expenses and the effective tax rate were $22.2 million and 17.1% for fiscal year 2018, as compared to $14.4 million and 17.3% for comparable prior year period.

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 $108.9 million or $1.78 per diluted share based on 61.2 million diluted weighted average common shares outstanding for fiscal year 2018. This represents a 55.4% increase over the $70.1 million or $1.16 per share based on 61.0 million diluted weighted average common shares outstanding reported in the comparable prior year. On a GAAP basis, net income attributable to Hollysys was $107.2 million or $1.75 per diluted share representing an increase of 55.4% over the $68.9 million or $1.14 per diluted share reported in the comparable prior year.  

Operational Results Analysis for the Fourth Quarter Ended June 30, 2018

Comparing to the fourth quarter of the prior fiscal year, the total revenues for the three months ended June 30, 2018 increased from $138.0 million to $147.2 million, representing an increase of 6.7%. Broken down by the revenue types, integrated contracts revenue increased by 5.5% to $131.6 million, products sales revenue increased by 30.4% to $11.1 million, and services revenue decreased by 4.4% to $4.5 million.

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

(In USD thousands)


Three months ended Jun 30,


2018


2017


$

% to Total Revenue


$

% to Total Revenue

Industrial Automation

64,013

43.5%


43,783

31.7%

Rail Transportation Automation

40,368

27.4%


64,647

46.9%

Mechanical and Electrical Solution

42,858

29.1%


29,531

21.4%

Total

147,239

100.0%


137,961

100.0%

Overall gross margin excluding non-cash amortization of acquired intangibles (non-GAAP gross margin) was 39.6% for the three months ended June 30, 2018, as compared to 39.1% for the same period of the prior year. The non-GAAP gross margin for integrated contracts, product sales, and services rendered were 35.7%, 72.4% and 73.2% for the three months ended June 30, 2018, as compared to 35.7%, 71.5% and 69.9% for the same period of the prior year respectively. The gross margin fluctuation was mainly due to the different revenue mix with different margin. The GAAP overall gross margin which includes non-cash amortization of acquired intangibles was 39.4% for the three months ended June 30, 2018, as compared to 38.8% for the same period of the prior year. The GAAP gross margin for integrated contracts, product sales, and service rendered were 35.5%, 72.4% and 73.2% for the three months ended June 30, 2018, as compared to 35.4%, 71.5% and 69.9% for the same period of the prior year respectively.

Selling expenses were $6.5 million for the three months ended June 30, 2018, representing a decrease of $0.1 million or 1.2% compared to $6.6 million for the same quarter of the prior year. Presented as a percentage of total revenues, selling expenses were 4.4% and 4.8% for the three months ended June 30, 2018, and 2017, respectively.

General and administrative expenses, excluding non-cash share-based compensation expenses (non-GAAP G&A expenses), were $14.4 million for the quarter ended June 30, 2018, representing a decrease of $0.2 million or 1.5% compared to $14.6 million for the same quarter of the prior year. Presented as a percentage of total revenues, non-GAAP G&A expenses were 9.8% and 10.6% for quarters ended June 30, 2018 and 2017 respectively. The GAAP G&A expenses which include the non-cash share-based compensation expenses were $15.0 million and $15.1 million for the three months ended June 30, 2018 and 2017, respectively.

Research and development expenses were $8.6 million for the three months ended June 30, 2018, representing an increase of $0.6 million or 7.5% compared to $8.0 million for the same quarter of the prior year. Presented as a percentage of total revenues, R&D expenses were 5.9% and 5.8% for the quarter ended June 30, 2018 and 2017, respectively.

The VAT refunds and government subsidies were $4.1 million for three months ended June 30, 2018, as compared to $6.5 million for the same period in the prior year, representing a $2.4 million or 37.9% decrease, which was primarily due to decrease of the government subsidies.

The income tax expenses and the effective tax rate were $4.6 million and 14.2% for the three months ended June 30, 2018, as compared to $5.4 million and 19.9% for comparable prior year period.

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 $28.6 million or $0.46 per diluted share based on 61.3 million diluted weighted average common shares outstanding for the three months ended June 30, 2018. This represents a 26.5% increase over the $22.6 million or $0.37 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 $27.7 million or $0.45 per diluted share representing an increase of 28.0% over the $21.7 million or $0.36 per diluted share reported in the comparable prior year period.  

Contracts and Backlog Highlights

Hollysys achieved $181.2 million new contracts for the three months ended June 30, 2018. And the backlog as of June 30, 2018 was $569.0 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 Jun 30, 2018


as of Jun 30, 2018



$

% to Total
Contract


$

% to Total
Backlog

Industrial Automation


83,081

45.8%


184,576

32.4%

Rail Transportation


58,113

32.1%


272,035

47.8%

Mechanical and Electrical Solutions


39,963

22.1%


112,405

19.8%

Total


181,157

100.0%


569,016

100.0%

Cash Flow Highlights

For the fiscal year ended June 30, 2018, the total net cash inflow was $64.4 million. The net cash provided by operating activities was $122.2 million. The net cash used in investing activities was $50.4 million, mainly consisted of $179.8 million time deposit with original maturities over three months placed with banks, which was partially offset by the $137.8 million generated from matured time deposits with original maturities over three months. The net cash used in financing activities was $12.2 million, mainly consisted of $7.2 million used for payment of dividends, $11.3 million used for repayments of short-term loans, which was partially offset by $5.9 million proceeds from short-term bank loans.

For the three months ended June 30, 2018, the total net cash inflow was $24.1 million. The net cash provided by operating activities was $45.1 million. The net cash used in investing activities was $6.4 million, mainly consisted of $30.2 million time deposits placed with banks, which was partially offset by $25.1 million maturity of time deposits. The net cash used in financing activities was $4.7 million, mainly consisted of $9.3 million repayments of short-term bank loans, which was partially offset by $4.5 million proceeds from short-term bank loans.

Balance Sheet Highlights

The total amount of cash and cash equivalents were $262.1 million, $238.0 million, and $197.6 million as of June 30, 2018, March 31, 2018 and June 30, 2017, respectively.

For fiscal year ended June 30, 2018, Days Sales Outstanding ("DSO") was 174 days, as compared to 201 days from the prior year; and inventory turnover was 58 days, as compared to 51 days from the prior year.

For the three months ended June 30, 2018, DSO was 166 days, as compared to 153 days for the comparable prior year period and 196 days for the last quarter; and inventory turnover was 59 days, as compared to 50 days for the comparable prior year period and 63 days for the last quarter.

Conference Call

The Company will host a conference call at 9:00 pm August 14, 2018 U.S. Eastern Time / 9:00 am August 15, 2018 Beijing Time, to discuss the financial results for fiscal year 2018 and the fourth quarter ended June 30, 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 6893555.

Standard International Dial-In Number:

+65 67135090

Participant Local Dial-In Numbers:


Australia, Sydney *NEW*

+61 290833212

China, Domestic

4006208038

China, Domestic

8008190121

Hong Kong

+852 30186771

Japan, Tokyo

+81 345036012

Korea (South), Seoul

+82 27395177

Taiwan, Taipei

+886 255723895

United Kingdom, London *NEW*

+44 2036214779

United States, New York

+1 8456750437

Participant ITFS Dial-In Numbers:


Australia, *NEW*

1300717205

Australia, *NEW*

1800411623

Belgium

080071900

Canada

18663861016

France

0800912761

Germany

08001820671

Hong Kong

800906601

India

180030105440

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

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 3,200 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 25,000 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 COMPREHENSIVE INCOME

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




Three months ended
Jun 30,


Fiscal year ended
Jun 30,



2018


2017


2018


2017



(Unaudited)


(Unaudited)


(Unaudited)


(Audited)

Net revenues









Integrated contract revenue

$

131,616

$

124,733

$

466,461

$

385,500

Products sales


11,149


8,549


40,233


32,665

Revenue from services


4,474


4,679


34,074


13,778

Total net revenues


147,239


137,961


540,768


431,943










Cost of integrated contracts


84,938


80,540


314,233


277,476

Cost of products sold


3,074


2,434


10,770


9,971

Costs of services rendered


1,199


1,409


9,885


4,025

Gross profit


58,028


53,578


205,880


140,471










Operating expenses









Selling


6,515


6,593


27,158


24,412

General and administrative


14,990


15,120


46,323


44,297

Goodwill impairment charge


-


11,211


-


11,211

Research and development


8,630


8,026


36,605


30,109

VAT refunds and government subsidies


(4,051)


(6,522)


(24,450)


(29,828)

Total operating expenses


26,084


34,428


85,636


80,201










Income from operations


31,944


19,150


120,244


60,270










Other income (expenses), net


1,287


(109)


4,349


1,722

Foreign exchange gain (loss)


882


(267)


(1,099)


(135)

Share of net (loss) income of equity investees


(4,038)


(1,063)


(1,571)


3,607

Gains on disposal of a subsidiary


-


628


-


628

Gains on deconsolidation of the Company's interests in
     Beijing Hollycon Electronic Technology Co., Ltd


-


8,085


-


14,514

Dividend income from a cost investee


-


(450)


1,093


-

Interest income


2,275


1,256


7,318


3,687

Interest expenses


116


(144)


(692)


(938)

Income before income taxes


32,466


27,086


129,642


83,355










Income taxes expenses


4,621


5,383


22,205


14,386

Net income


27,845


21,703


107,437


68,969










Net income attributable to non-controlling interests


115


42


276


25

Net income attributable to Hollysys Automation
Technologies Ltd.

$

27,730

$

21,661

$

107,161

$

68,944










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









Translation adjustments


(45,644)


11,659


17,410


(14,428)

Comprehensive income (loss)


(17,799)


33,362


124,847


54,541










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


116


44


280


(11)

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

$

(17,915)

$

33,318

$

124,567

$

54,552










Net income per ordinary share:









Basic


0.46


0.36


1.77


1.15

Diluted


0.45


0.36


1.75


1.14

Shares used in income per share computation:









Weighted average number of ordinary shares


60,442,504


60,420,004


60,434,019


60,189,004

Weighted average number of diluted ordinary shares


61,277,059


61,268,999


61,248,565


61,011,510


 

 

HOLLYSYS AUTOMATION TECHNOLOGIES LTD.

CONSOLIDATED BALANCE SHEETS

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






Jun 30,


Mar 31,





2018


2018





(Unaudited)


(Unaudited)

ASSETS






Current assets







Cash and cash equivalents

$

262,052

$

237,971



Time deposits with maturities over three months


140,037


146,984



Restricted cash


23,252


28,888



Accounts receivable, net of allowance for doubtful accounts of $49,093 and
     $51,049 as of June 30,2018 and March 31, 2018, respectively


275,216


267,799



Costs and estimated earnings in excess of billings, net of allowance for doubtful
     accounts of $9,929 and $12,192 as of June 30, 2018 and March 31, 2018,
     respectively


161,012


212,603



Other receivables, net of allowance for doubtful accounts of $4,946 and $1,472 as
     of June 30, 2018 and March 31, 2018, respectively


30,467


24,498



Advances to suppliers


9,685


11,577



Amounts due from related parties


33,678


33,187



Inventories


58,074


56,893



Prepaid expenses


713


707



Income tax recoverable


6,712


457


Total current assets


1,000,898


1,021,564








Non-current assets







Restricted cash


1,401


1,479



Prepaid expenses


-


1



Property, plant and equipment, net


80,210


86,082



Prepaid land leases


10,172


10,742



Intangible assets, net


3,186


1,631



Investments in equity investees


53,389


60,580



Investments in cost investees


4,195


4,349



Goodwill


48,359


52,192



Deferred tax assets


8,318


8,376


Total non-current assets


209,230


225,432


Total assets


 

1,210,128


1,246,996








LIABILITIES AND STOCKHOLDERS' EQUITY






Current liabilities







Derivative financial liability


412


535



Short-term bank loans


2,865


7,930



Current portion of long-term loans


350


387



Accounts payable


129,477


138,061



Construction costs payable


304


173



Deferred revenue


137,692


144,216



Accrued payroll and related expenses


14,299


11,417



Income tax payable


3,746


3,354



Warranty liabilities


5,622


5,907



Other tax payables


7,801


6,599



Accrued liabilities


25,133


22,927



Amounts due to related parties


5,353


3,788


Total current liabilities


333,054


345,294








Non-current liabilities







Accrued liabilities


2,410


6,078



Long-term loans


20,709


21,212



Deferred tax liabilities


9,366


12,168



Warranty liabilities


2,236


2,715


Total non-current liabilities


34,721


42,173








Total liabilities


367,775


387,467









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 June 30, 2018 and March 31,
     2018


60


60



Additional paid-in capital


223,396


222,771



Statutory reserves


41,131


43,611



Retained earnings


582,917


552,711



Accumulated other comprehensive income


(5,452)


40,192


Total Hollysys Automation Technologies Ltd. stockholder's equity


842,052


859,345










Non-controlling interests


301


184


Total equity


842,353


859,529









Total liabilities and equity

$

1,210,128

$

1,246,996

 

 

                HOLLYSYS AUTOMATION TECHNOLOGIES LTD.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In USD thousands)




Three
months
ended


Fiscal year
ended

Jun 30, 2018


Jun 30, 2018




(Unaudited)


(Unaudited)

Cash flows from operating activities:






Net income

$

27,845

$

107,437

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






Depreciation of property, plant and equipment


3,305


8,217


Amortization of prepaid land leases


72


270


Amortization of intangible assets


374


801


Allowance for doubtful accounts


4,462


8,033


Loss on disposal of property, plant and equipment


324


292


Share of net loss from equity investees


4,038


1,571


Share-based compensation expenses


625


1,207


Deferred income tax expenses


(3,067)


(1,439)


Accretion of convertible bond


58


230


Fair value adjustments of a bifurcated derivative


(123)


(75)


Gain from the derecognition of nonfinancial assets


-


(2,345)

Changes in operating assets and liabilities:






Accounts receivable


(24,699)


(28,369)


Costs and estimated earnings in excess of billings


41,372


1,817


Inventories 


(4,185)


(11,429)


Advances to suppliers


1,302


232


Other receivables 


(7,135)


(9,973)


Deposits and other assets


4,132


16,370


Due from related parties


(2,268)


1,286


Accounts payable


(1,811)


4,113


Deferred revenue


697


28,150


Accruals and other payables


2,236


(3,163)


Due to related parties


1,777


3,023


Income tax payable


(5,770)


(1,124)


Other tax payables


1,574


(2,959)


Net cash provided by operating activities


45,135


122,173







Cash flows from investing activities:






Time deposits placed with banks


(30,206)


(179,798)


Purchases of property, plant and equipment


(1,446)


(2,304)


Maturity of time deposits


25,061


137,839


Proceeds from disposal of property, plant and equipment


225


376


Investment of an equity/cost investee


(76)


(5,882)


Acquisition of a subsidiary, net of cash acquired


-


(583)


Net cash used in investing activities


(6,442)


(50,352)







Cash flows from financing activities:






Proceeds from short-term bank loans


4,471


5,942


Repayments of short-term bank loans


(9,281)


(11,334)


Proceeds from long-term bank loans


447


984


Repayments of long-term bank loans


(328)


(548)


Payment of dividends


-


(7,241)


Net cash used in financing activities


(4,691)


(12,197)








Effect of foreign exchange rate changes


(9,921)


4,788


Net increase in cash and cash equivalents

$

24,081

$

64,412








Cash and cash equivalents, beginning of period

$

237,971

$

197,640


Cash and cash equivalents, end of period


262,052


262,052

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


Fiscal ended



Jun 30,


Jun 30,



2018


2017


2018


2017



(Unaudited)


(Unaudited)


(Unaudited)


(Unaudited)










Cost of integrated contracts

$

84,938

$

80,540

$

314,233

$

277,476

Less: Amortization of acquired intangible assets


321


318


600


581

Non-GAAP cost of integrated contracts

$

84,617

$

80,222

$

313,633

$

276,895










General and administrative expenses

$

14,990

$

15,120

$

46,323

$

44,297

Less: Share-based compensation expenses


625


534


1,207


464

Non-GAAP general and administrative expenses

$

14,365

$

14,586

$

45,116

$

43,833










Other income (expenses), net

$

1,287

$

(109)

$

4,349

$

1,722

Add: Convertible bond related fair value adjustments


(75)


89


(75)


89

Non-GAAP other income (expenses), net

$

1,212

$

(20)

$

4,274

$

1,811










Net income attributable to Hollysys Automation
Technologies Ltd.

$

27,730

$

21,661

$

107,161

$

68,944

Add:









     Share-based compensation expenses


625


534


1,207


464

     Amortization of acquired intangible assets


321


318


600


581

     Convertible bond related fair value adjustments


(75)


89


(75)


89

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

$

28,601

$

22,602

$

108,893

$

70,078










     Weighted average number of basic ordinary shares


60,442,504


60,420,004


60,434,019


60,189,004

     Weighted average number of diluted ordinary shares


61,277,059


61,268,999


61,248,565


61,011,510

Non-GAAP basic earnings per share

$

0.47

$

0.37

$

1.80

$

1.16

Non-GAAP diluted earnings per share

$

0.46

$

0.37

$

1.78

$

1.16

 

SOURCE Hollysys Automation Technologies, Ltd