Hollysys Automation Technologies Reports Unaudited Financial Results for the Second Quarter and the First Half Year Ended December 31, 2023
- Total revenues increased by 2.1% to $423.6 million compared to the prior year.
- Gross margin decreased to 31.9% from 36.1% in the prior year.
- Net income attributable to Hollysys decreased by 34.3% to $45.8 million.
- Second quarter revenues decreased by 8.6% to $223.7 million compared to the prior year.
- Gross margin for the second quarter dropped to 29.5% from 39.6% in the prior year.
- Net income for the second quarter decreased by 70.7% to $14.1 million.
- Decline in gross margin for both periods.
- Significant decrease in net income for both periods.
- Decrease in diluted earnings per share for both periods.
- Negative impact on cash flow from operating activities.
Insights
The reported decrease in net income by 34.3% for the first half and 70.7% for the second quarter, alongside the reduction in diluted earnings per share (EPS), is a significant concern for investors. These figures suggest that Hollysys is facing challenges in maintaining profitability, despite a slight increase in total revenues. The decline in gross margin from 36.1% to 31.9% in the first half and from 39.6% to 29.5% in the second quarter, indicates rising costs or pricing pressures, which could be attributed to various factors such as increased material costs, labor, or a shift in the sales mix towards lower-margin products or services.
Furthermore, the consistency in inventory turnover days shows operational stability, but the increase in days sales outstanding (DSO) from 144 to 146 days in the first half and a more pronounced increase from 119 to 138 days in the second quarter, raises concerns about the company's cash flow and the efficiency of its collections process. This could impact the company's liquidity and its ability to reinvest in operations or pay down debt.
Examining the broader market context, the performance of Hollysys should be compared against industry benchmarks and competitors. The decline in gross margin and net income might reflect sector-wide challenges or could be indicative of company-specific issues. If the latter, it could signal a loss of competitive advantage or operational inefficiencies that need to be addressed. The slight increase in revenues suggests that the company is still growing, albeit at a slow pace, which could be a positive sign if the company can manage to reverse the negative trends in profitability.
Additionally, it is important to consider the economic conditions during the reported periods, such as inflation rates, supply chain disruptions and shifts in consumer demand, as these can have a substantial impact on a company's financial performance. A deeper analysis into the reasons behind these financial metrics would provide investors with a clearer picture of the company's health and its future prospects.
First Half of Fiscal Year 2024 Financial Highlights
- Total revenues were
$423.6 million 2.1% compared to the comparable prior year period. - Gross margin was
31.9% , compared to36.1% for the comparable prior year period. Non-GAAP gross margin was32.1% , compared to36.3% for the comparable prior year period. - Net income attributable to Hollysys was
$45.8 million 34.3% compared to the comparable prior year period. Non-GAAP net income attributable to Hollysys was$46.8 million 35.5% compared to the comparable prior year period. - Diluted earnings per share was
$0.74 33.9% compared to the comparable prior year period. Non-GAAP diluted earnings per share was$0.75 35.9% compared to the comparable prior year period. - Net cash provided by operating activities was
$88.3 million - Days sales outstanding ("DSO") was 146 days, compared to 144 days for the comparable prior year period.
- Inventory turnover days were 74 days, compared to 74 days for the comparable prior year period.
Second Quarter of Fiscal Year 2024 Financial Highlights
- Total revenues were
$223.7 million 8.6% compared to the comparable prior year period. - Gross margin was
29.5% , compared to39.6% for the comparable prior year period. Non-GAAP gross margin was29.7% , compared to39.7% for the comparable prior year period. - Net income attributable to Hollysys was
$14.1 million 70.7% compared to the comparable prior year period. Non-GAAP net income attributable to Hollysys was$14.6 million 70.6% compared to the comparable prior year period. - Diluted earnings per share was
$0.23 70.5% compared to the comparable prior year period. Non-GAAP diluted earnings per share was$0.23 71.3% compared to the comparable prior year period. - Net cash provided by operating activities was
$60.1 million - DSO was 138 days, compared to 119 days for the comparable prior year period.
- Inventory turnover days were 68 days, compared to 72 days for the comparable prior year period.
See the section entitled "Non-GAAP Measures" for more information about non-GAAP gross margin, non-GAAP net income attributable to Hollysys and non-GAAP diluted earnings per share.
In the Industrial Automation segment, the Company's innovation and development capabilities have once again received industry recognition. In this quarter, the Company was selected for the "2023 Intelligent Manufacturing System Solution List Leading Projects" by the Ministry of Industry and Information Technology of
In the chemical and petrochemical sector, the Company utilized its Advanced Process Control ("APC") platform to successfully support a chemical company's first boiler optimization control project, and achieved a fully automatic optimization of boiler air, water, coal, and environmental protection systems, resulting in a significant improvement in the automatic input rate. Furthermore, the Company successfully signed a contract for a company's 120kt/a carbon fiber precursor production project, where Hollysys will provide production control systems and integrated solution. This project marked a major milestone for Hollysys' Industrial Optical Bus Control System ("OCS") and an expansion of its application in the field of carbon fiber precursor automation control.
In the smart factory sector, the Company successfully signed a contract for a 60,000-ton energy grade titanium (alloy) material intelligent manufacturing control platform project, where Hollysys will provide integrated intelligent manufacturing control solutions such as Distributed Control System ("DCS") and HiaPlant system to assist the company in intelligent production and operation. This project is significant for the Company's smart factory products and overall solutions in the titanium industry. Additionally, the Company signed a smart factory project to develop and utilize 10,000 tons of battery grade lithium carbonate in an environmentally friendly and comprehensive manner, where Hollysys will provide DCS and HOLLiAS MACS for this project. Upon completion, this project will play a crucial role in guaranteeing the security of local lithium resource supply.
In the electricity sector, the Company completed the optimization and control transformation project of the first heating boiler for a heat source plant in the power industry, in partnership with another company, based on the HOLLiAS APC platform.
In the Rail Transportation Automation segment, the Company maintained its market position. In the high-speed rail sector, the Company won the renovation project of ZPW-2000 track circuit equipment and coding equipment for the Zibo-Boshan railway. Meanwhile, the Company has witnessed significant progress in several key projects that it has been involved in. As the supplier of the Chinese Train Control System Level 3, the Company successfully contributed to the completion of the Guizhou-Guangzhou High-speed Railway upgrading and renovation project, as well as the official opening and operation of the Chengdu-Yibin High-speed Railway. In the urban rail transit sector, the Company acted as the equipment integrator and successfully assisted in the completion of the Integrated Supervisory and Control System upgrade project for Beijing Metro Line 10. The Company also supported the trial operation of the Shenzhen Metro Line 8 Phase II project, providing integrated monitoring system. Additionally, the Company contributed to the opening of the north section of Beijing Metro Line 17 with its Train Integration Automatic System.
In terms of overseas business, collaborating with other companies, the Company won the bid for the power supply system project of Jurong Regional Line and Sengkang-Punggol Light Rail Depot Line in
In the mechanical and electrical solutions ("M&E") segment, the Company achieved stable performance with smooth executions on various projects.
With the Company's continuous dedication to the industry and the support of experienced and passionate experts, Hollysys believes that it will continue to create greater value for clients and shareholders.
Second Quarter and First Half Year Ended December 31, 2023 Unaudited Financial Results Summary
(In USD thousands, except for %, number of shares and per share data) | ||||||||
Three months ended | Six months ended | |||||||
2023 | 2022 | % | 2023 | 2022 | % | |||
Revenues | $ | 223,723 | 244,731 | (8.6) % | $ | 423,623 | 414,774 | 2.1 % |
Integrated solutions contracts | $ | 180,518 | 188,929 | (4.5) % | $ | 330,219 | 332,055 | (0.6) % |
Products sales | $ | 9,402 | 12,014 | (21.7) % | $ | 23,721 | 23,788 | (0.3) % |
Service rendered | $ | 33,803 | 43,788 | (22.8) % | $ | 69,683 | 58,931 | 18.2 % |
Cost of revenues | $ | 157,711 | 147,892 | 6.6 % | $ | 288,435 | 265,085 | 8.8 % |
Gross profit | $ | 66,012 | 96,839 | (31.8) % | $ | 135,188 | 149,689 | (9.7) % |
Total operating expenses | $ | 52,241 | 48,993 | 6.6 % | $ | 87,166 | 85,296 | 2.2 % |
Selling | $ | 19,870 | 16,025 | 24.0 % | $ | 36,054 | 29,038 | 24.2 % |
General and administrative | $ | 18,864 | 19,741 | (4.4) % | $ | 24,394 | 32,473 | (24.9) % |
Research and development | $ | 28,270 | 20,431 | 38.4 % | $ | 46,626 | 37,790 | 23.4 % |
VAT refunds and government | $ | (14,763) | (7,204) | 104.9 % | $ | (19,908) | (14,005) | 42.1 % |
Income from operations | $ | 13,771 | 47,846 | (71.2) % | $ | 48,022 | 64,393 | (25.4) % |
Other (expense) income, net | $ | (653) | 56 | (1266.1) % | $ | (303) | 1,121 | (127.0) % |
Foreign exchange (loss) gain | $ | (1,009) | (574) | 75.8 % | $ | (1,054) | 3,523 | (129.9) % |
Impairment loss of investments in | $ | (69) | - | (100.0) % | $ | (69) | - | (100.0) % |
Share of net income of equity investees | $ | 1,241 | 1,068 | 16.2 % | $ | 298 | 1,665 | (82.1) % |
Gains on disposal of an investment in | $ | - | 845 | (100.0) % | $ | - | 845 | (100.0) % |
Interest income | $ | 3,108 | 2,918 | 6.5 % | $ | 6,669 | 6,079 | 9.7 % |
Interest expenses | $ | (414) | (225) | 84.0 % | $ | (731) | (369) | 98.1 % |
Income tax expenses | $ | 1,851 | 3,626 | (49.0) % | $ | 7,124 | 7,506 | (5.1) % |
Net (loss) income attributable to non- | $ | (15) | 65 | (123.1) % | $ | (71) | 108 | (165.7) % |
Net income attributable to Hollysys | $ | 14,139 | 48,243 | (70.7) % | $ | 45,779 | 69,643 | (34.3) % |
Basic earnings per share | $ | 0.23 | 0.79 | (70.9) % | $ | 0.74 | 1.13 | (34.5) % |
Diluted earnings per share | $ | 0.23 | 0.78 | (70.5) % | $ | 0.74 | 1.12 | (33.9) % |
Share-based compensation expenses | $ | 86 | 940 | (90.9) % | $ | 348 | 2,178 | (84.0) % |
Amortization of acquired intangible | $ | 326 | 337 | (3.3) % | $ | 648 | 677 | (4.3) % |
Non-GAAP net income attributable to | $ | 14,551 | 49,520 | (70.6) % | $ | 46,775 | 72,498 | (35.5) % |
Non-GAAP basic earnings per share(1) | $ | 0.23 | 0.81 | (71.6) % | $ | 0.76 | 1.18 | (35.6) % |
Non-GAAP diluted earnings per share(1) | $ | 0.23 | 0.80 | (71.3) % | $ | 0.75 | 1.17 | (35.9) % |
Basic weighted average number of | 61,987,791 | 61,440,191 | 0.9 % | 61,917,839 | 61,378,846 | 0.9 % | ||
Diluted weighted average number of | 62,305,532 | 62,007,655 | 0.5 % | 62,254,019 | 61,969,551 | 0.5 % | ||
(1) See the section entitled "Non-GAAP Measures" for more information about these non-GAAP measures. | ||||||||
Operational Results Analysis for the First Half Year Ended December 31, 2023
Total revenues for the six months ended December 31, 2023 were
The following table sets forth the Company's total revenues by segment for the periods indicated.
(In USD thousands, except for %) | |||||||||
Six months ended December 31, | |||||||||
2023 | 2022 | ||||||||
$ | % of Total | $ | % of Total | ||||||
Industrial Automation | 252,403 | 59.5 | 252,777 | 61.0 | |||||
Rail Transportation Automation | 124,334 | 29.4 | 117,068 | 28.2 | |||||
Mechanical and Electrical Solution | 46,886 | 11.1 | 44,929 | 10.8 | |||||
Total | 423,623 | 100.0 | 414,774 | 100.0 | |||||
Gross margin was
Selling expenses were
General and administrative expenses were
Research and development expenses were
The VAT refunds and government subsidies were
The income tax expenses and the effective tax rate were
Net income attributable to Hollysys was
Diluted earnings per share was
Operational Results Analysis for the Second Quarter Ended December 31, 2023
Total revenues for the three months ended December 31, 2023 were
The following table sets forth the Company's total revenues by segment for the periods indicated.
(In USD thousands, except for %) | ||||||||||
Three months ended December 31, | ||||||||||
2023 | 2022 | |||||||||
$ | % of Total | $ | % of Total | |||||||
Industrial Automation | 135,361 | 60.5 | 131,727 | 53.8 | ||||||
Rail Transportation Automation | 66,824 | 29.9 | 88,826 | 36.3 | ||||||
Mechanical and Electrical Solution | 21,538 | 9.6 | 24,178 | 9.9 | ||||||
Total | 223,723 | 100.0 | 244,731 | 100.0 | ||||||
Gross margin was
Selling expenses were
General and administrative expenses were
Research and development expenses were
The VAT refunds and government subsidies were
The income tax expenses and the effective tax rate were
Net income attributable to Hollysys was
Diluted earnings per share was
Contracts and Backlog Highlights
Hollysys achieved
(In USD thousands, except for %) | ||||||||
Value of new contracts | Value of new contracts | Backlog
| ||||||
for the six months ended December 31, 2023 | for the three months ended December 31, |
| ||||||
$ | % of Total | $ | % of | $ | % of Total | |||
Industrial Automation | 226,130 | 45.7 | 67,579 | 28.7 | 368,937 | 38.4 | ||
Rail Transportation Automation | 225,859 | 45.6 | 151,609 | 64.4 | 408,176 | 42.4 | ||
Mechanical and Electrical | 43,200 | 8.7 | 16,194 | 6.9 | 185,093 | 19.2 | ||
Total | 495,189 | 100.0 | 235,382 | 100.0 | 962,206 | 100.0 | ||
Cash Flow Highlights
For the six months ended December 31, 2023, the total net cash inflow was
For the three months ended December 31, 2023, the total net cash inflow was
Balance Sheet Highlights
The total amount of cash and cash equivalents was
For the six months ended December 31, 2023, DSO was 146 days, as compared to 144 days from the same period of the prior fiscal year, and inventory turnover days were 74 days, as compared to 74 days from the same period of the prior fiscal year.
For the three months ended December 31, 2023, DSO was 138 days, as compared to 119 days for the same period of the prior fiscal year and 145 days for the last fiscal quarter; inventory turnover days were 68 days, as compared to 72 days for the same period of the prior fiscal year and 84 days for the last fiscal quarter.
About Hollysys Automation Technologies Ltd.
Hollysys is a leading automation control system solutions provider in
SAFE HARBOR STATEMENTS
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 "will," "expects," "anticipates," "future," "intends," "plans," "believes," "estimates," "target," "confident," or similar expressions, involve known and unknown risks and uncertainties. Such forward-looking statements, based upon the current beliefs and expectations of Hollysys' management, are subject to risks and uncertainties, which could cause actual results to differ from the forward looking statements. Although the Company believes that the expectations reflected in these forward-looking statements are reasonable, they do involve assumptions, risks and uncertainties, and these expectations may prove to be incorrect. Investors should not place undue reliance on these forward-looking statements, which speak only as of the date of this press release. The Company's actual results could differ materially from those anticipated in these forward-looking statements as a result of a variety of factors, including those discussed in the Company's reports that are filed with the Securities and Exchange Commission and available on its website (http://www.sec.gov). All forward-looking statements attributable to the Company or persons acting on its behalf are expressly qualified in their entirety by these factors. Other than as required under the securities laws, the Company does not assume a duty to update these forward-looking statements.
For further information, please contact:
Hollysys Automation Technologies Ltd.
www.hollysys.com
+8610-58981386
investors@hollysys.com
HOLLYSYS AUTOMATION TECHNOLOGIES LTD. | ||||||||
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME | ||||||||
(In USD thousands except for number of shares and per share data)
| ||||||||
Three months ended | Six months ended | |||||||
2023 | 2022 | 2023 | 2022 | |||||
(Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | |||||
Net revenues | ||||||||
Integrated solutions contracts revenue | $ | 180,518 | $ | 188,929 | $ | 330,219 | $ | 332,055 |
Products sales | 9,402 | 12,014 | 23,721 | 23,788 | ||||
Revenue from services | 33,803 | 43,788 | 69,683 | 58,931 | ||||
Total net revenues | 223,723 | 244,731 | 423,623 | 414,774 | ||||
Costs of integrated solutions contracts | 142,387 | 130,751 | 258,973 | 238,147 | ||||
Cost of products sold | 3,234 | 1,775 | 6,440 | 5,240 | ||||
Costs of services rendered | 12,090 | 15,366 | 23,022 | 21,698 | ||||
Gross profit | 66,012 | 96,839 | 135,188 | 149,689 | ||||
Operating expenses | ||||||||
Selling | 19,870 | 16,025 | 36,054 | 29,038 | ||||
General and administrative | 18,864 | 19,741 | 24,394 | 32,473 | ||||
Research and development | 28,270 | 20,431 | 46,626 | 37,790 | ||||
VAT refunds and government subsidies | (14,763) | (7,204) | (19,908) | (14,005) | ||||
Total operating expenses | 52,241 | 48,993 | 87,166 | 85,296 | ||||
Income from operations | 13,771 | 47,846 | 48,022 | 64,393 | ||||
Other (expense) income, net | (653) | 56 | (303) | 1,121 | ||||
Foreign exchange (loss) gain | (1,009) | (574) | (1,054) | 3,523 | ||||
Impairment loss of investments in investment in securities | (69) | - | (69) | - | ||||
Gains on disposal of an investment in securities | - | 845 | - | 845 | ||||
Share of net income of equity investees | 1,241 | 1,068 | 298 | 1,665 | ||||
Interest income | 3,108 | 2,918 | 6,669 | 6,079 | ||||
Interest expenses | (414) | (225) | (731) | (369) | ||||
Income before income taxes | 15,975 | 51,934 | 52,832 | 77,257 | ||||
Income taxes expenses | 1,851 | 3,626 | 7,124 | 7,506 | ||||
Net income | 14,124 | 48,308 | 45,708 | 69,751 | ||||
Net (loss) income attributable to non-controlling interests | (15) | 65 | (71) | 108 | ||||
Net income attributable to Hollysys Automation | $ | 14,139 | $ | 48,243 | $ | 45,779 | $ | 69,643 |
Other comprehensive income, net of tax of nil | ||||||||
Translation adjustments | 28,499 | 20,110 | 21,147 | (50,382) | ||||
Comprehensive income | 42,623 | 68,418 | 66,855 | 19,369 | ||||
Less: comprehensive income (loss) attributable to non- | 9 | 75 | (55) | 190 | ||||
Comprehensive income attributable to Hollysys | $ | 42,614 | $ | 68,343 | $ | 66,910 | $ | 19,179 |
Net income per ordinary share: | ||||||||
Basic | 0.23 | 0.79 | 0.74 | 1.13 | ||||
Diluted | 0.23 | 0.78 | 0.74 | 1.12 | ||||
Shares used in net income per share computation: | ||||||||
Basic | 61,987,791 | 61,440,191 | 61,917,839 | 61,378,846 | ||||
Diluted | 62,305,532 | 62,007,655 | 62,254,019 | 61,969,551 | ||||
HOLLYSYS AUTOMATION TECHNOLOGIES LTD. | ||||||
CONSOLIDATED BALANCE SHEETS | ||||||
(In USD thousands except for number of shares and per share data) | ||||||
December | September | |||||
2023 | 2023 | |||||
(Unaudited) | (Unaudited) | |||||
ASSETS | ||||||
Current assets | ||||||
Cash and cash equivalents | $ | 747,507 | $ | 650,413 | ||
Short-term investments | 9,074 | 32,100 | ||||
Restricted cash | 24,492 | 24,392 | ||||
Accounts receivable, net of allowance for credit losses of | 352,399 | 308,788 | ||||
Costs and estimated earnings in excess of billings, net of allowance for credit losses | 244,154 | 285,218 | ||||
Accounts receivable retention | 5,297 | 5,783 | ||||
Other receivables, net of allowance for credit losses of | 16,011 | 20,389 | ||||
Advances to suppliers | 31,687 | 31,216 | ||||
Amounts due from related parties | 22,482 | 28,712 | ||||
Inventories | 106,691 | 112,261 | ||||
Prepaid expenses | 441 | 280 | ||||
Income tax recoverable | 1,115 | 449 | ||||
Total current assets | 1,561,350 | 1,500,001 | ||||
Non-current assets | ||||||
Restricted cash | 11,425 | 11,174 | ||||
Costs and estimated earnings in excess of billings | 1,570 | 1,451 | ||||
Accounts receivable retention | 7,070 | 7,418 | ||||
Prepaid expenses | 2 | 2 | ||||
Property, plant and equipment, net | 164,833 | 145,885 | ||||
Prepaid land leases | 11,569 | 11,357 | ||||
Intangible assets, net | 8,598 | 8,079 | ||||
Investments in equity investees | 48,683 | 46,381 | ||||
Investments securities | 1,552 | 1,552 | ||||
Goodwill | 19,359 | 18,827 | ||||
Deferred tax assets | 9,454 | 11,364 | ||||
Operating lease right-of-use assets | 3,435 | 2,997 | ||||
Total non-current assets | 287,550 | 266,487 | ||||
Total assets | 1,848,900 | 1,766,488 | ||||
LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||
Current liabilities | ||||||
Short-term bank loans | 67 | - | ||||
Current portion of long-term loans | 15,245 | 15,237 | ||||
Accounts payable | 181,618 | 174,713 | ||||
Construction costs payable | 18,650 | 11,328 | ||||
Deferred revenue | 223,005 | 202,782 | ||||
Accrued payroll and related expenses | 39,496 | 27,752 | ||||
Income tax payable | 4,004 | 5,667 | ||||
Warranty liabilities | 3,663 | 3,094 | ||||
Other tax payables | 10,540 | 14,197 | ||||
Accrued liabilities | 35,580 | 36,885 | ||||
Amounts due to related parties | 4,043 | 5,111 | ||||
Operating lease liabilities | 1,934 | 1,542 | ||||
Total current liabilities | 537,845 | 498,308 | ||||
Non-current liabilities | ||||||
Accrued liabilities | 666 | 2,118 | ||||
Long-term loans | 48,638 | 45,899 | ||||
Accounts payable | 2,851 | 2,754 | ||||
Deferred tax liabilities | 11,665 | 12,773 | ||||
Warranty liabilities | 2,573 | 2,885 | ||||
Operating lease liabilities | 1,227 | 1,024 | ||||
Total non-current liabilities | 67,620 | 67,453 | ||||
Total liabilities | 605,465 | 565,761 | ||||
Commitments and contingencies | - | - | ||||
Stockholders' equity: | ||||||
Ordinary shares, par value | 62 | 62 | ||||
Additional paid-in capital | 247,256 | 247,170 | ||||
Statutory reserves | 81,060 | 78,875 | ||||
Retained earnings | 1,005,375 | 993,423 | ||||
Accumulated other comprehensive income | (91,287) | (119,763) | ||||
Total Hollysys Automation Technologies Ltd. stockholder's equity | 1,242,466 | 1,199,767 | ||||
Non-controlling interests | 969 | 960 | ||||
Total equity | 1,243,435 | 1,200,727 | ||||
Total liabilities and equity | $ | 1,848,900 | $ | 1,766,488 | ||
HOLLYSYS AUTOMATION TECHNOLOGIES LTD CONSOLIDATED STATEMENTS OF CASH FLOWS (In USD thousands) | |||||
Three months | Six months | ||||
December 31, | December 31, | ||||
(Unaudited) | (Unaudited) | ||||
Cash flows from operating activities: | |||||
Net income | $ | 14,124 | $ | 45,708 | |
Adjustments to reconcile net income to net cash provided by operating activities: | |||||
Depreciation of property, plant and equipment | 2,457 | 4,574 | |||
Amortization of prepaid land leases | 82 | 163 | |||
Amortization of intangible assets | 326 | 648 | |||
Allowance for credit losses | (1,246) | (7,839) | |||
Gains on disposal of property, plant and equipment | (70) | (66) | |||
Share of net income of equity investees | (1,241) | (298) | |||
Share-based compensation expenses | 86 | 348 | |||
Deferred income tax expenses | 862 | 1,119 | |||
Impairment loss of investments in investment in securities | 69 | 69 | |||
Changes in operating assets and liabilities: | |||||
Accounts receivable and retention | (31,117) | (24,898) | |||
Costs and estimated earnings in excess of billings | 46,830 | 13,543 | |||
Inventories | 8,600 | 7,308 | |||
Advances to suppliers | 211 | (2,690) | |||
Other receivables | 4,832 | 3,592 | |||
Prepaid expenses | (151) | 164 | |||
Due from related parties | 6,767 | 3,798 | |||
Accounts payable | 2,612 | 7,926 | |||
Deferred revenue | 14,534 | 37,079 | |||
Accruals and other payables | (1,039) | 3,270 | |||
Due to related parties | (1,067) | (2,111) | |||
Income tax payable | (2,415) | (2,929) | |||
Other tax payables | (3,947) | (180) | |||
Net cash provided by operating activities | 60,099 | 88,298 | |||
Cash flows from investing activities: | |||||
Purchases of short-term investments | (2,268) | (20,474) | |||
Purchases of property, plant and equipment | (3,730) | (20,626) | |||
Proceeds from disposal of property, plant and equipment | 83 | 157 | |||
Maturity of short-term investments | 25,725 | 44,862 | |||
Investment of an investment in securities | (35) | (35) | |||
Proceeds from acquisition of a subsidiary | 390 | 390 | |||
Net cash provided by investing activities | 20,165 | 4,274 | |||
Cash flows from financing activities: | |||||
Proceeds from short-term bank loans | 66 | 66 | |||
Proceeds from long-term bank loans | 2,022 | 31,567 | |||
Repayments of long-term bank loans | (144) | (374) | |||
Net cash provided by financing activities | 1,944 | 31,259 | |||
Effect of foreign exchange rate changes | 15,237 | 11,463 | |||
Net increase in cash, cash equivalents and restricted cash | $ | 97,445 | 135,294 | ||
Cash, cash equivalents and restricted cash, beginning of period | $ | 685,979 | 648,130 | ||
Cash, cash equivalents and restricted cash, end of period | 783,424 | 783,424 | |||
Non-GAAP Measures
To supplement our consolidated financial statements, which are prepared and presented in accordance with GAAP, in evaluating our results, we use the following non-GAAP financial measures: non-GAAP gross profit and non-GAAP gross margin, non-GAAP gross profit and non-GAAP gross margin of integrated solutions contracts, non-GAAP net income attributable to Hollysys Automation Technologies Ltd., as well as non-GAAP basic and diluted earnings per share.
These non-GAAP financial measures serve as additional indicators of our operating performance and not as any replacement for other measures in accordance with
Non-GAAP gross profit and non-GAAP gross margin, non-GAAP gross profit and non-GAAP gross margin of integrated solutions contracts, non-GAAP net income attributable to Hollysys Automation Technologies Ltd., as well as non-GAAP basic and diluted earnings per share should not be considered in isolation or construed as an alternative to gross profit and gross margin, gross profit and gross margin of integrated solutions contracts, net income attributable to Hollysys Automation Technologies Ltd., basic and diluted earnings per share, or any other measure of performance, or as an indicator of the Company's operating performance. Investors are encouraged to review the historical non-GAAP financial measures to the most directly comparable GAAP measures. Non-GAAP gross profit and gross margin, non-GAAP gross profit and non-GAAP gross margin of integrated solutions contracts, non-GAAP net income attributable to Hollysys Automation Technologies Ltd., as well as non-GAAP basic and diluted earnings per share presented here may not be comparable to similarly titled measures presented by other companies. Other companies may calculate similarly titled measures differently, limiting their usefulness as comparative measures to the Company's data. The Company encourages investors and others to review the Company's financial information in its entirety and not rely on a single financial measure.
We define non-GAAP gross profit and non-GAAP gross margin as gross profit and gross margin, respectively, adjusted to exclude non-cash amortization of acquired intangibles. The following table provides a reconciliation of our gross profit and gross margin to non-GAAP gross profit and non-GAAP gross margin for the periods indicated.
(In USD thousands, except for %) | |||||||||
Three months ended | Six months ended | ||||||||
December 31, | December 31, | ||||||||
2023 | 2022 | 2023 | 2022 | ||||||
(Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | ||||||
Gross profit | $ | 66,012 | 96,839 | 135,188 | 149,689 | ||||
Gross margin(1) | 29.5 % | 39.6 % | 31.9 % | 36.1 % | |||||
Add: | |||||||||
Amortization of acquired intangible assets | 326 | 337 | 648 | 677 | |||||
Non-GAAP gross profit | $ | 66,338 | $ | 97,176 | $ | 135,836 | $ | 150,366 | |
Non-GAAP gross margin(2) | 29.7 % | 39.7 % | 32.1 % | 36.3 % | |||||
(1) Gross margin represents gross profit for the period as a percentage of revenue for such period. | |||||||||
(2) Non-GAAP gross margin represents non-GAAP gross profit for the period as a percentage of revenue for such period. | |||||||||
We define non-GAAP gross profit and non-GAAP gross margin of integrated solutions contracts as gross profit and gross margin of integrated solutions contracts, respectively, adjusted to exclude non-cash amortization of acquired intangibles associated with integrated solutions contracts. The following table provides a reconciliation of the gross profit of integrated solutions contracts to non-GAAP gross profit and non-GAAP gross margin of integrated solutions contracts for the periods indicated.
(In USD thousands, except for %) | ||||||||
Three months ended December 31, | Six months ended December 31, | |||||||
2023 | 2022 | 2023 | 2022 | |||||
(Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | |||||
Gross profit of integrated | $ | 38,131 | $ | 58,178 | $ | 71,246 | $ | 93,908 |
Gross margin of integrated | 21.1 % | 30.8 % | 21.6 % | 28.3 % | ||||
Add: Amortization of acquired | 326 | 337 | 648 | 677 | ||||
Non-GAAP gross profit of | $ | 38,457 | $ | 58,515 | $ | 71,894 | $ | 94,585 |
Non-GAAP gross margin of | 21.3 % | 31.0 % | 21.8 % | 28.5 % | ||||
(1) Gross margin of integrated solutions contracts represents gross profit of integrated solutions contracts for the period as a | ||||||||
(2) Non-GAAP gross margin of integrated solutions contracts represents non-GAAP gross profit of integrated solutions contracts | ||||||||
We define non-GAAP net income attributable to Hollysys as net income attributable to Hollysys adjusted to exclude the share-based compensation expenses and non-cash amortization of acquired intangible assets. The following table provides a reconciliation of net income attributable to Hollysys to non-GAAP net income attributable to Hollysys for the periods indicated.
(In USD thousands) | |||||||||
Three months ended | Six months ended | ||||||||
December 31, | December 31, | ||||||||
2023 | 2022 | 2023 | 2022 | ||||||
(Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | ||||||
Net income attributable to Hollysys Automation | $ | 14,139 | $ | 48,243 | $ | 45,779 | $ | 69,643 | |
Add: | |||||||||
Share-based compensation expenses | 86 | 940 | 348 | 2,178 | |||||
Amortization of acquired intangible assets | 326 | 337 | 648 | 677 | |||||
Non-GAAP net income attributable to Hollysys | $ | 14,551 | $ | 49,520 | $ | 46,775 | $ | 72,498 | |
Non-GAAP basic (or diluted) earnings per share represents non-GAAP net income attributable to Hollysys divided by the weighted average number of ordinary shares outstanding during the periods (or on a diluted basis). The following table provides a reconciliation of our basic (or diluted) earnings per share to non-GAAP basic (or diluted) earnings per share 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, | ||||||||
2023 | 2022 | 2023 | 2022 | ||||||
(Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | ||||||
Net income attributable to Hollysys Automation | $ | 14,139 | $ | 48,243 | $ | 45,779 | $ | 69,643 | |
Add: | |||||||||
Share-based compensation expenses | 86 | 940 | 348 | 2,178 | |||||
Amortization of acquired intangible assets | 326 | 337 | 648 | 677 | |||||
Non-GAAP net income attributable to | $ | 14,551 | $ | 49,520 | $ | 46,775 | $ | 72,498 | |
Weighted average number of basic ordinary | 61,987,791 | 61,440,191 | 61,917,839 | 61,378,846 | |||||
Weighted average number of diluted ordinary | 62,305,532 | 62,007,655 | 62,254,019 | 61,969,551 | |||||
Basic earnings per share(1) | 0.23 | 0.79 | 0.74 | 1.13 | |||||
Add: | 0.00 | 0.02 | 0.02 | 0.05 | |||||
Non-GAAP basic earnings per share(3) | $ | 0.23 | $ | 0.81 | $ | 0.76 | $ | 1.18 | |
Diluted earnings per share(1) | 0.23 | 0.78 | 0.74 | 1.12 | |||||
Add: | 0.00 | 0.02 | 0.01 | 0.05 | |||||
Non-GAAP diluted earnings per share(3) | $ | 0.23 | $ | 0.80 | $ | 0.75 | $ | 1.17 | |
(1) Basic (or diluted) earnings per share is derived from net income attributable to Hollysys Automation Technologies Ltd. for | |||||||||
(2) Non-GAAP adjustments to net income per share is derived from non-GAAP adjustments to net income divided by weighted | |||||||||
(3) Non-GAAP basic (or diluted) earnings per share is derived from non-GAAP net income attributable to Hollysys Automation | |||||||||
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SOURCE Hollysys Automation Technologies Ltd
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