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Published: 2021-03-04 17:00:56 ET
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EX-99.1 2 d149027dex991.htm EX-99.1 EX-99.1

Exhibit 99.1

 

LOGO

FOR IMMEDIATE RELEASE

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.


Hollysys Automation Technologies Ltd

March 4, 2021

     Page  2  

 

 

Inventory turnover days of 40 days, compared to 39 days for the comparable prior year period.

Beijing, China – March 4, 2021 – 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.


Hollysys Automation Technologies Ltd

March 4, 2021

     Page  3  

 

 

 

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.


Hollysys Automation Technologies Ltd

March 4, 2021

     Page  4  

 

 

 

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.


Hollysys Automation Technologies Ltd

March 4, 2021

     Page  5  

 

 

 

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.


Hollysys Automation Technologies Ltd

March 4, 2021

     Page  6  

 

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


Hollysys Automation Technologies Ltd

March 4, 2021

     Page  7  

 

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.


Hollysys Automation Technologies Ltd

March 4, 2021

     Page  8  

 

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.


Hollysys Automation Technologies Ltd

March 4, 2021

     Page  9  

 

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.


Hollysys Automation Technologies Ltd

March 4, 2021

     Page  10  

 

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.


Hollysys Automation Technologies Ltd

March 4, 2021

     Page  11  

 

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:

*0 - Operator assistance

*6 - Self mute/unmute

Direct Event online registration: http://apac.directeventreg.com/registration/event/8870789

Please use Conference ID 8870789 for entry if the link fails to lead directly to the registration page.


Hollysys Automation Technologies Ltd

March 4, 2021

     Page  12  

 

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

March 4, 2021

     Page  13  

 

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

March 4, 2021

     Page  14  

 

HOLLYSYS AUTOMATION TECHNOLOGIES LTD.

CONSOLIDATED BALANCE SHEETS

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

 

                                             
     Dec- 31,
2020
     Sep- 30,
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  


Hollysys Automation Technologies Ltd

March 4, 2021

     Page  15  

 

                                             

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

March 4, 2021

     Page  16  

 

HOLLYSYS AUTOMATION TECHNOLOGIES LTD

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In USD thousands).

 

                                                 
     Three months
ended
December 31,
2020
(Unaudited)
    Six months
ended
December 31,
2020
(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  


Hollysys Automation Technologies Ltd

March 4, 2021

     Page  17  

 

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
December 31,
     Six months ended
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