Hollysys Automation Technologies Reports Unaudited Financial Results for the Second Quarter and the First Half Year Ended December 31, 2020

First Half of Fiscal Year 2021 Financial Highlights

  • Total revenues were $324.8 million, an increase of 10.7% compared to the comparable prior year period.
  • Non-GAAP gross margin was at 36.1%, compared to 36.9% for the comparable prior year period.
  • Non-GAAP net income attributable to Hollysys was $53.0 million, a decrease of 17.1% compared to the comparable prior year period.
  • Non-GAAP diluted EPS was $0.87, a decrease of 17.9% compared to the comparable prior year period.
  • Net cash provided by operating activities was $55.0 million for the current period.
  • DSO of 163 days, compared to 168 days for the comparable prior year period.
  • Inventory turnover days of 41 days, compared to 42 days for the comparable prior year period.

Second Quarter of Fiscal Year 2021 Financial Highlights

  • Total revenues were $195.3 million, an increase of 14.8% compared to the comparable prior year period.
  • Non-GAAP gross margin was at 37.7%, compared to 36.3% for the comparable prior year period.
  • Non-GAAP net income attributable to Hollysys was $32.2 million, a decrease of 5.7% compared to the comparable prior year period.
  • Non-GAAP diluted EPS were at $0.53, a decrease of 5.4% compared to the comparable prior year period.
  • Net cash provided by operating activities was $33.4 million for the current quarter.
  • DSO of 142 days, compared to 137 days for the comparable prior year period.
  • Inventory turnover days of 40 days, compared to 39 days for the comparable prior year period.

BEIJING, March 5, 2021 /PRNewswire/ — Hollysys Automation Technologies Ltd. (NASDAQ: HOLI) ("Hollysys" or the "Company"), a leading provider of automation and control technologies and applications in China, today announced its unaudited financial results for the second quarter and first half of fiscal year 2021 ended December 31, 2020 (see attached tables). The management of Hollysys, stated:

The Industrial Automation ("IA") business finished the second quarter with revenue and new contracts at $92.9 million and $71.4 million, achieving 34.1% and 2.7% YOY growth, respectively. For the first half of the fiscal year, IA revenue and contract grew 30.5% and 18.1% YOY, respectively.

  • In power sector, we maintained our market position. Highlights of the quarter include:
    • Won a bid for 1*600MW power units DCS replacement project, and the bid for 2*600MW power units DCS replacement project for two high profile clients. Both clients are switching from an overseas solution to a domestic solution for these two projects, and we expect these recent wins to be indications of further cooperation of this kind in the future
  • In chemical and petro-chemical sector, we continued penetrating into different verticals by winning key projects and solid execution. In addition, we are building our extensive capacity through our R&D efforts and collaboration with external parties along the value chain. With our consistent high-quality project delivery, we are recognized as a market leader by our clients and continued to enhance our reputation within the industry.
  • Sector highlights of the past quarter include:
    • Launching our new versatile I/O solution, specifically designed for clients in the chemical and petro-chemical sector with sizable production sites. Our solution aims to optimize the signal transmission section of the entire control solution in the field, and will lead to increased transmission reliability, as well as a substantial reduction in cable consumption and the space required for equipment cabinet layout. Petro-chemical clients will gain increased delivery efficiency and benefit from reduced project costs. We expect our solution to drive further penetration in the sector
    • Won the bid for DCS+ESD (emergency shutdown device) solution for a gas field platform project. The largest platform project for the Company to date in terms of contract value and SIS control points, demonstrating meaningful progress for Hollysys in this vertical.
    • Signed a comprehensive control solution contract with a client on its phenolic resin project. The contract covers both basic and advanced control solutions and the first time the Company has applied its solution to this specific chemical process, marking another breakthrough for the Company in the fine chemical vertical
    • Successfully delivered our DCS+GDS+SIS solution for a client on its oil refining capacity expansion project. The client’s production capacity is expected to increase to 10 million tons/year level and it is the first time this client has adopted a domestic control solution for an oil refining project with this level of production capacity
    • Successfully delivered an APC solution for a client on its organosilicone project. The value provided by our solution was greatly appreciated by the client. Our client has seen distinct improvement in terms of increase in the equipment self-control level, decrease in input consumption (steam, electricity, etc.) and an increase in production capacity, creating a substantial economic benefit
  • In aftersales service, we continued to leverage on our national service network to capture market opportunities from our existing client base, responding to various services and replacement demands in order to safeguard their production. Our consistent high-quality delivery continues to be well regarded. We successfully completed a DCS replacement and upgrade project for an existing client for its 5 million tons per year oil refining capacity. The project encompassed software/hardware upgrades, information security deployment, etc., delivering improved system performance and reliability.
  • In the smart factory business, we continue to actively engage potential clients through various marketing events, gaining an in-depth understanding of market demand. Hollysys continues to develop and improve its value creating solutions driving economic benefit and improved operational safety. Highlights of the past quarter include:
    • Established a cooperative relationship with a client from the chemical sector which the Company and the client aim to collaboratively promote future smart factory upgrades for other clients in the region
    • Won a smart factory contract for a client from the chemical sector for its organosilicone project. The project covers a comprehensive DCS + SIS + GDS + AMS + ODS control solution as well as the construction of an integrated data platform as the foundation for further digital upgrade initiatives.
    • Won a smart factory contract of an existing client from the power sector on its 2*1000MW power units. The project will cover control level solution such as smart control, equipment diagnosis, smart alarm, etc. and production management level solution.

Rail business finished the quarter with revenue and contract at $81.3 million and $99.9 million, recording 3.1% YOY growth and 4.2% YOY decrease, respectively. For the first half of the fiscal year, Rail revenue and contract achieved 10.9% and 0.6% YOY decrease, respectively.

  • In high-speed rail ("HSR") sector, with the rail-road construction progress, we continued to sign new contracts, deliver on existing projects, maintaining our position in existing product lines and exploring opportunities in new market lines. We have also been devoting consistent R&D resources to key technologies with the intention of expanding our solution capabilities and to drive our future performance. Highlights of the quarter include:
    • Won the bid for 50 sets (out of the total package of 166 sets) of ATP for C3 (350km) China Standard High-speed train during the quarter
    • Completed the delivery of several projects where the Company provided on-ground solutions such as TCC (Train Control Center), RBC (Radio Block Center) and TSRS (Temporary Speed Restriction), etc., and our high quality engineering continues to be recognized by our clients. Some of the completed projects include Weifang-laixi high-speed railway, Taiyuan-Jiaozuo session of Zhengzhou-Taiyuan high-speed railway and Shaanxi session of the Xi ‘an-Yinchuan high-speed railway, etc
    • Signed a regular speed track circuit contract for the Xingguo-Quanzhou railway Ninghua-Quanzhou session, the railway connects Jiangxi Province and Fujian Province. The contract marks another step forward for the Company in the regular speed track circuit market.
  • In subway sector, the Company provided several lines to which SCADA solution was put into operation in the quarter, including Phase 3 of Shenzhen Subway line 2, Phase 1 of Shenzhen Subway line 8 and line 2 of Hohhot Subway. Our role in those projects covered product provision, system integration and debugging, and our delivery quality continued to be trusted by our clients.
  • In aftersales business, we continued to strengthen local service network, to expand service solution and to develop technology-and-service-centered service for better differentiation. In HSR sector, we continued to respond to demand including advanced maintenance, system and software upgrade and part component sales, as well as total replacement. Our service capability continued to be highly recognized by our clients.
  • Following the breakthrough contract of smart highway solution in the previous quarter, we continued to get actively involved in marketing events for further market opportunities. Meanwhile, as an experienced and responsible player in the railway industry, we took part in the national initiatives on industry-education integration, and we jointly established Hollysys Institute of Railway Industry with a local vocational technical institute from Nanjing city this quarter. We expect to join hands with more railway transit schools in the future and, leveraging on our market experience, we hope to contribute more to the talent raising of the industry as well as deeper industry-education collaboration.

Mechanical and Electrical Solutions ("M&E") business finished the quarter with revenue and contract at $21.2 million and $22.3 million, recording 3.8% YOY decrease and 86.7% YOY increase respectively. For the first half of the fiscal year, M&E revenue and contract achieved 11.1% YOY growth and 23.9% YOY decrease, respectively.

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

Second Quarter and First Half Year Ended December 31, 2020 Unaudited Financial Results Summary

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

Three months ended

Six months ended

December 31, 2020

December 31, 2019

%
Change

December 31, 2020

December 31, 2019

%
Change

Revenues

$

195,328

170,109

14.8%

$

324,795

293,338

10.7%

    Integrated solutions contracts revenue

$

142,468

129,675

9.9%

$

248,174

234,141

6.0%

    Products sales

$

8,458

6,539

29.3%

$

15,026

12,661

18.7%

    Service rendered

$

44,402

33,895

31.0%

$

61,595

46,536

32.4%

Cost of revenues

$

121,630

108,278

12.3%

$

207,520

185,049

12.1%

Gross profit

$

73,698

61,831

19.2%

$

117,275

108,289

8.3%

Total operating expenses

$

39,409

28,511

38.2%

$

61,964

51,803

19.6%

    Selling

$

10,260

10,392

(1.3)%

$

18,435

17,670

4.3%

    General and administrative

$

13,641

10,591

28.8%

$

23,819

21,184

12.4%

    Research and development

$

18,620

13,806

34.9%

$

28,601

22,748

25.7%

    VAT refunds and government subsidies

$

(3,112)

(6,278)

(50.4)%

$

(8,890)

(9,799)

(9.3)%

Income from operations

$

34,289

33,320

2.9%

$

55,311

56,486

(2.1)%

Other income, net

$

1,545

1,301

18.8%

$

2,774

3,327

(16.6)%

Foreign exchange (loss) gain

$

(3,345)

(59)

5981.8%

$

(5,668)

545

(1140.0)%

Gains on disposal of investments in an 

equity investee

$

$

5,763

(100)%

Share of net income of equity investees

$

2,768

1,997

38.6%

$

4,659

3,538

31.7%

Dividend income from equity security investments

$

3

1,145

(99.7)%

$

3

1,145

(99.7)%

Interest income

$

2,922

3,099

(5.7)%

$

6,720

6,128

(9.7)%

Interest expenses

$

(141)

(6)

2250.0%

$

(277)

(119)

132.8%

Income tax expenses

$

5,906

6,792

(13.0)%

$

10,666

13,001

(18.0)%

Net loss attributable to non-controlling interests

$

(71)

(151)

(53.0)%

$

(151)

(125)

20.8%

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

$

32,206

34,156

(5.7)%

$

53,006

63,937

(17.1)%

Non-GAAP basic EPS

$

0.53

0.56

(5.4)%

$

0.88

1.06

(17.0)%

Non-GAAP diluted EPS

$

0.53

0.56

(5.4)%

$

0.87

1.06

(17.9)%

Share-based compensation expenses

$

763

15

4986.7%

$

938

40

2247.5%

Amortization of acquired intangible assets

$

79

75

5.3%

$

155

151

2.6%

GAAP Net income attributable to Hollysys Automation Technologies Ltd.

$

31,364

34,066

(7.9)%

$

51,913

63,746

(18.6)%

GAAP basic EPS

$

0.52

0.56

(7.1)%

$

0.86

1.05

(18.1)%

GAAP diluted EPS

$

0.51

0.56

(8.9)%

$

0.86

1.05

(18.1)%

Basic weighted average common shares outstanding

60,500,387

60,538,111

(0.1)%

60,498,431

60,504,151

0.0%

Diluted weighted average common shares outstanding

60,933,785

60,552,527

0.6%

60,693,633

60,517,798

0.3%

 

Operational Results Analysis for the Second Quarter Ended December 31, 2020

Compared to the second quarter of the prior fiscal year, the total revenues for the three months ended December 31, 2020 increased from $170.1 million to $195.3 million, represented an increase of 14.8%. Broken down by revenue type, integrated contracts revenue increased by 9.9% to $142.5 million, products sales revenue increased by 29.3% to $8.5 million, and services revenue increased by 31.0% to $44.4 million.

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

(In USD thousands)

Three months ended December 31,

Six months ended December 31,

2020

2019

2020

2019

$

% to Total Revenue

$

% to Total Revenue

$

% to Total Revenue

$

% to Total Revenue

Industrial Automation

92,889

47.6%

69,291

40.7%

174,819

53.8%

133,927

45.6%

Rail Transportation Automation

81,269

41.6%

78,823

46.3%

109,965

33.9%

123,399

42.1%

Mechanical and Electrical Solution

21,170

10.8%

21,995

13.0%

40,011

12.3%

36,012

12.3%

Total

195,328

100.0%

170,109

100.0%

324,795

100.0%

293,338

100.0%

 

Overall gross margin excluding non-cash amortization of acquired intangibles (non-GAAP gross margin) was 37.7% for the three months ended December 31, 2020, as compared to 36.3% for the same period of the prior year. The non-GAAP gross margin for integrated contracts, product sales, and services rendered were 28.0%, 85.6% and 59.8% for the three months ended December 31, 2020, as compared to 28.0%, 66.4% and 62.6% for the same period of the prior year, respectively. The gross margin fluctuated mainly due to the different revenue mix with different margins. The GAAP overall gross margin which includes non-cash amortization of acquired intangibles was 37.7% for the three months ended December 31, 2020, as compared to 36.3% for the same period of the prior year. The GAAP gross margin for integrated contracts, product sales, and service rendered was 27.9%, 85.6% and 59.8% for the three months ended December 31, 2020, as compared to 27.9%, 66.4% and 62.6% for the same period of the prior year, respectively.

Selling expenses were $10.3 million for the three months ended December 31, 2020, represented a decrease of $0.1 million or 1.3% compared to $10.4 million for the same quarter of the prior year. Presented as a percentage of total revenues, selling expenses were 5.3% and 6.1% for the three months ended December 31, 2020, and 2019, respectively.

General and administrative expenses, excluding non-cash share-based compensation expenses (non-GAAP G&A expenses), were $13.6 million for the quarter ended December 31, 2020, represented an increase of $3.1 million or 28.8% compared to $10.6 million for the same quarter of the prior year. Presented as a percentage of total revenues, non-GAAP G&A expenses were 7.0% and 6.2% for quarters ended December 31, 2020 and 2019, respectively. The GAAP G&A expenses which include the non-cash share-based compensation expenses were $14.4 million and $10.6 million for the three months ended December 31, 2020 and 2019, respectively.

Research and development expenses were $18.6 million for the three months ended December 31, 2020, represented an increase of $4.8 million or 34.9% compared to $13.8 million for the same quarter of the prior year, mainly due to increased research and development activities. Presented as a percentage of total revenues, R&D expenses were 9.5% and 8.1% for the quarter ended December 31, 2020 and 2019, respectively.

The VAT refunds and government subsidies were $3.1 million for three months ended December 31, 2020, as compared to $6.3 million for the same period in the prior year, represented a $3.2 million or 50.4% decrease, which was primarily due to decrease of the VAT refunds.

The income tax expenses and the effective tax rate were $5.9 million and 15.9% for the three months ended December 31, 2020, respectively, as compared to $6.8 million and 16.7% for comparable prior year period, respectively. The effective tax rate fluctuated 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 $32.2 million or $0.53 per diluted share based on 60.9 million diluted weighted average ordinary shares outstanding for the three months ended December 31, 2020. This represents a 5.7% decrease from $34.2 million or $0.56 per share based on 60.6 million diluted weighted average ordinary shares outstanding reported in the comparable prior year period. On a GAAP basis, net income attributable to Hollysys was $31.4 million or $0.51 per diluted share represented a decrease of 7.9% from $34.1 million or $0.56 per diluted share reported in the comparable prior year period.

Contracts and Backlog Highlights

Hollysys achieved $193.6 million of new contracts for the three months ended December 31, 2020. The backlog as of December 31, 2020 was $601.3 million. The detailed breakdown of new contracts and backlog by segments is shown below:

New contracts achieved

Backlog

for the three months

 ended December 31, 2020

as of December 31, 2020

(In USD thousands)

% to Total Contract

(In USD thousands)

% to Total Backlog

Industrial Automation

71,351

36.8%

234,213

39.0%

Rail Transportation

99,879

51.7%

273,298

45.5%

Mechanical and Electrical Solutions

22,345

11.5%

93,745

15.5%

Total

193,575

100.0%

601,256

100.0%

 

Cash Flow Highlights

For the three months ended December 31, 2020, the total net cash inflow was $33.6 million. The net cash provided by operating activities was $33.4 million. The net cash provided by investing activities was $0.4 million and mainly consisted of 2.8 million purchases of property, plant and equipment, and $35.9 million purchases of short-term investments, which were partially offset by $39.1 million of matured short-term investments The net cash used in financing activities was $12.1 million and mainly consisted of $12.1 million payment of dividends.

Balance Sheet Highlights

The total amount of cash and cash equivalents were $356.9 million, $321.6 million, and $403.9 million as of December 31, 2020, September 30, 2020 and December 30, 2019, respectively.

For the three months ended December 31, 2020, DSO was 142 days, as compared to 137 days for the comparable prior year period and 185 days for the last quarter; and inventory turnover was 40 days, as compared to 39 days for the comparable prior year period and 58 days for the last quarter.

Conference Call

The Company will host a conference call at 8:00 pm March 4, 2021 U.S. Eastern Time / 9:00 am March 5, 2021 Beijing Time, to discuss the financial results for fiscal year 2021 second quarter ended December 31, 2020 and business outlook.

Joining the Conference Call:

1. Please register in advance of the conference using the link provided below. Upon registering, you will be provided with participant dial-in numbers, Direct Event passcode and unique registrant ID.
2. In the 10 minutes prior to the call start time, you will need to use the conference access information provided in the email received at the point of registering.

Note: Due to regional restrictions some participants may receive operator assistance when joining this conference call and will not be automatically connected.

 Helpful keypad commands:
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Direct Event online registration: http://apac.directeventreg.com/registration/event/8870789
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SAFE HARBOUR:

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

HOLLYSYS AUTOMATION TECHNOLOGIES LTD.

CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

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

 

Three months ended
December 31,

Six months ended
December 31,

2020

2019

2020

2019

(Unaudited)

(Unaudited)

(Unaudited)

(Unaudited)

Net revenues

Integrated solutions contracts revenue

$

142,468

$

129,675

$

248,174

$

234,141

Products sales

8,458

6,539

15,026

12,661

Revenue from services

44,402

33,895

61,595

46,536

Total net revenues

195,328

170,109

324,795

293,338

Costs of integrated solutions contracts

102,656

93,485

181,737

163,985

Cost of products sold

1,218

2,199

2,947

3,430

Costs of services rendered

17,835

12,669

22,991

17,785

Gross profit

73,619

61,756

117,120

108,138

Operating expenses

Selling

10,260

10,392

18,435

17,670

General and administrative

14,404

10,606

24,757

21,224

Research and development

18,620

13,806

28,601

22,748

VAT refunds and government subsidies

(3,112)

(6,278)

(8,890)

(9,799)

Total operating expenses

40,172

28,526

62,903

51,843

Income from operations

33,447

33,230

54,217

56,295

Other income, net

1,545

1,301

2,774

3,327

Foreign exchange (loss) gain

(3,345)

(59)

(5,668)

545

Gains on disposal of investments in an equity investee

5,763

Share of net income of equity investees

2,768

1,997

4,659

3,538

Dividend income from equity security investments

3

1,145

3

1,145

Interest income

2,922

3,099

6,720

6,128

Interest expenses

(141)

(6)

(277)

(119)

Income before income taxes

37,199

40,707

62,428

76,622

Income taxes expenses

5,906

6,792

10,666

13,001

Net income

31,293

33,915

51,762

63,621

Net loss attributable to non-controlling interests

(71)

(151)

(151)

(125)

Net income attributable to Hollysys Automation Technologies Ltd.

$

31,364

$

34,066

$

51,913

$

63,746

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

Translation adjustments

44,703

20,921

83,652

(13,253)

Comprehensive income

75,996

54,836

135,414

50,368

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

(28)

977

52

951

Comprehensive income attributable to Hollysys Automation Technologies Ltd.

$

76,024

$

53,859

$

135,362

$

49,417

Net income per ordinary share:

Basic

0.52

0.56

0.86

1.05

Diluted

0.51

0.56

0.86

1.05

Shares used in net income per share computation:

Basic

60,500,387

60,538,111

60,498,431

60,504,151

Diluted

60,933,785

60,552,527

60,693,633

60,517,798

 

HOLLYSYS AUTOMATION TECHNOLOGIES LTD.

CONSOLIDATED BALANCE SHEETS

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

Dec- 31,

Sep- 30,

2020

2020

(Unaudited)

(Unaudited)

ASSETS

Current assets

Cash and cash equivalents

$

356,904

$

321,641

Short-term investments

340,904

330,432

Restricted cash

9,210

11,827

Accounts receivable, net of allowance for credit losses of $64,777 and $54,069 as

of December 31, 2020 and September 30, 2020, respectively

326,606

268,270

Costs and estimated earnings in excess of billings, net of allowance for credit losses

of $12,322 and $8,185 as of December 31, 2020 and September 30, 2020, respectively

211,630

189,834

Accounts receivable retention

4,521

5,227

Other receivables, net of allowance for credit losses of $6,508 and $6,382 as of December 31, 2020 and September 30, 2020, respectively

27,712

28,408

Advances to suppliers

16,700

18,614

Amounts due from related parties

24,498

22,222

Inventories

35,898

56,805

Prepaid expenses

1,009

654

Income tax recoverable

7

87

Total current assets

1,355,599

1,254,021

Non-current assets

Restricted cash

21,512

20,558

Costs and estimated earnings in excess of billings

578

1,771

Accounts receivable retention

5,135

5,559

Prepaid expenses

1

8

Property, plant and equipment, net

88,364

84,261

Prepaid land leases

16,716

16,168

Intangible assets, net

1,618

1,665

Investments in equity investees

50,026

45,814

Investments securities

5,018

4,816

Goodwill

1,580

1,516

Deferred tax assets

15,237

10,738

Operating lease right-of-use assets

7,483

6,496

Total non-current assets

213,268

199,370

Total assets

1,568,867

1,453,391

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities

Current portion of long-term loans

326

334

Accounts payable

139,701

129,336

Construction costs payable

3,804

1,762

Deferred revenue

185,418

161,692

Accrued payroll and related expenses

30,305

21,766

Income tax payable

11,090

7,021

Warranty liabilities

7,474

6,074

Other tax payables

13,306

4,129

Accrued liabilities

36,081

36,738

Amounts due to related parties

3,959

3,394

Operating lease liabilities

2,896

2,211

Total current liabilities

434,360

374,457

Non-current liabilities

Accrued liabilities

3,966

3,000

Long-term loans

15,773

15,885

Accounts payable

1,854

3,221

Deferred tax liabilities

14,892

14,307

Warranty liabilities

3,003

1,847

Operating lease liabilities

4,227

3,901

Total non-current liabilities

43,715

42,161

Total liabilities

478,075

416,618

Commitments and contingencies

Stockholders’ equity:

Ordinary shares, par value $0.001 per share, 100,000,000 shares authorized; 60,855,099 shares and 60,537,099 shares issued and outstanding as of December 31, 2020 and September 30, 2020

61

61

Additional paid-in capital

224,981

224,218

Statutory reserves

58,954

49,423

Retained earnings*

782,408

783,315

Accumulated other comprehensive income (loss)

19,932

(24,728)

Total Hollysys Automation Technologies Ltd. stockholder’s equity

1,086,336

1,032,289

Non-controlling interests

4,456

4,484

Total equity

1,090,792

1,036,773

Total liabilities and equity

$

1,568,867

$

1,453,391

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

 

HOLLYSYS AUTOMATION TECHNOLOGIES LTD

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In USD thousands).

 

Three months ended

Six months ended

December 31, 2020

December 31, 2020

(Unaudited)

(Unaudited)

Cash flows from operating activities:

Net income

$

31,293

$

51,762

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

Depreciation of property, plant and equipment

2,159

4,707

Amortization of prepaid land leases

108

209

Amortization of intangible assets

79

155

Allowance for doubtful accounts

528

1,480

Loss on disposal of property, plant and equipment

(29)

(39)

Share of net income of equity investees

(2,768)

(4,659)

Share-based compensation expenses

763

938

Deferred income tax expenses

(3,648)

(5,011)

Changes in operating assets and liabilities:

Accounts receivable and retention

(51,951)

(77,900)

Costs and estimated earnings in excess of billings

(12,052)

(7,656)

Inventories 

22,237

15,597

Advances to suppliers

2,570

1,868

Other receivables 

1,716

2,337

Deposits and other assets

(336)

(337)

Due from related parties

(853)

(2,002)

Accounts payable

5,546

13,448

Deferred revenue

16,660

33,623

Accruals and other payables

8,205

8,359

Due to related parties

565

383

Income tax payable

3,801

8,301

Other tax payables

8,666

9,377

Operating lease right-of-use assets

(709)

(1,015)

Operating lease liabilities

861

1,082

Net cash provided by operating activities

33,411

55,007

Cash flows from investing activities:

Purchases of Short-term investments

(35,948)

(144,705)

Purchases of property, plant and equipment

(2,848)

(6,202)

Proceeds from disposal of property, plant and equipment

176

241

Maturity of short-term investments

39,054

153,651

Net cash provided by investing activities

434

2,985

Cash flows from financing activities:

Proceeds from short-term bank loans

237

274

Repayments of short-term bank loans

(213)

(407)

Payment of dividends

(12,107)

(12,107)

Net cash used in financing activities

(12,083)

(12,240)

Effect of foreign exchange rate changes

11,838

22,777

Net increase in cash, cash equivalents and restricted cash

$

33,600

68,529

Cash, cash equivalents and restricted cash, beginning of period

$

354,026

319,097

Cash, cash equivalents and restricted cash, end of period

387,626

387,626

 

Non-GAAP Measures

In evaluating our results, the non-GAAP measures of "Non-GAAP cost of integrated contracts", "Non-GAAP general and administrative expenses", "Non-GAAP net income attributable to Hollysys Automation Technologies Ltd. stockholders", "Non-GAAP basic earnings per share", and "Non-GAAP diluted earnings per share" serve as additional indicators of our operating performance and not as a replacement for other measures in accordance with U.S. GAAP. We believe these non-GAAP measures are useful to investors, as they exclude the non-cash share-based compensation expenses, which is calculated based on the number of shares or options granted and the fair value as of the grant date, amortization of acquired intangible assets, and fair value adjustments of a bifurcated derivative. They will not result in any cash inflows or outflows. We believe that using non-GAAP measures help our shareholders to have a better understanding of our operating results and growth prospects. In addition, given the business nature of the Company, it has been a common practice for investors to use such non-GAAP measures to evaluate the Company.

 The following table provides a reconciliation of the non-GAAP measures with the most directly comparable U.S. GAAP measures for the periods indicated:

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

Three months ended

Six months ended

December 31,

December 31,

2020

2019

2020

2019

(Unaudited)

(Unaudited)

(Unaudited)

(Unaudited)

Cost of integrated solutions contracts

$

102,656

$

93,485

$

181,737

$

163,985

Less: Amortization of acquired intangible assets

79

75

155

151

Non-GAAP cost of integrated solutions contracts

$

102,577

$

93,410

$

181,582

$

163,834

General and administrative expenses

$

14,404

$

10,606

$

24,757

$

21,224

Less: Share-based compensation expenses

763

15

938

40

Non-GAAP general and administrative expenses

$

13,641

$

10,591

$

23,819

$

21,184

Net income attributable to Hollysys Automation Technologies Ltd.

$

31,364

$

34,066

$

51,913

$

63,746

Add:

Share-based compensation expenses

763

15

938

40

Amortization of acquired intangible assets

79

75

155

151

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

$

32,206

$

34,156

$

53,006

$

63,937

Weighted average number of basic ordinary shares

60,500,387

60,538,111

60,498,431

60,504,151

Weighted average number of diluted ordinary shares

60,933,785

60,552,527

60,693,633

60,517,798

Non-GAAP basic earnings per share

$

0.53

$

0.56

$

0.88

$

1.06

Non-GAAP diluted earnings per share

$

0.53

$

0.56

$

0.87

$

1.06

 

Related Links :

http://www.hollysys.com

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