Recon Technology, Ltd Reports Financial Results for the First Six Months of Fiscal Year 2024
Recon Technology, (NASDAQ: RCON) announced its financial results for the first six months of fiscal year 2024.
Total revenue was RMB45.3 million ($6.4 million), consistent with the same period in 2022. Gross profit decreased to RMB12.1 million ($1.7 million), and gross margin dropped to 26.7% from 28.8% in 2022.
The company reported a net loss of RMB23.1 million ($3.3 million), down from RMB29.9 million ($4.2 million) in the same period last year. Management highlighted recovery in the oilfield services business, development of new offshore customers, and ongoing construction of a chemical recycling plant, expected to generate substantial future returns.
Revenue from equipment and accessories rose by 83.6% to RMB8.1 million ($1.1 million), while revenue from oilfield environmental protection and platform outsourcing services saw declines of 37.0% and 55.3%, respectively.
Cost of revenues increased slightly to RMB33.2 million ($4.7 million). Gross profit from automation products and software decreased by 14.3%, while cost for equipment and accessories rose by 106.1%.
- Revenue from equipment and accessories increased by 83.6% to RMB8.1 million ($1.1 million).
- Net loss decreased to RMB23.1 million ($3.3 million) from RMB29.9 million ($4.2 million), a 22.6% improvement.
- General and administrative expenses decreased by 15.9%, or RMB4.2 million ($0.6 million).
- Net interest income increased by RMB5.4 million ($0.8 million).
- Gross profit decreased to RMB12.1 million ($1.7 million) from RMB13.1 million ($1.8 million), a drop of 7.8%.
- Gross margin fell to 26.7% from 28.8%.
- Revenue from oilfield environmental protection decreased by 37.0%, or RMB4.7 million ($0.7 million).
- Revenue from platform outsourcing services decreased by 55.3%, or RMB2.2 million ($0.3 million).
- Cost of revenue for equipment and accessories increased by 106.1%, or RMB6.6 million ($0.9 million).
- Loss from operations increased to RMB22.8 million ($3.2 million) from RMB15.1 million, a rise of RMB7.7 million ($1.1 million).
- The company recorded a net provision for credit losses of RMB1.6 million ($0.2 million), compared to a net recovery of RMB7.1 million in the previous period.
- Other net expenses increased to RMB8.6 million ($1.2 million) from other net income of RMB0.3 million.
Insights
Recon Technology, Ltd.'s financial results for the first six months of fiscal year 2024 present a mixed picture. Here are some key takeaways for investors:
Revenue: The company's revenue remained flat at
Gross Profit and Margin: The gross profit declined to
Net Loss: Despite the decrease in gross profit, the net loss improved, reducing to
Segment Performance: The performance across different business segments varied. The increase in revenue from equipment and accessories by
Operating Expenses: The increase in selling expenses and the decrease in general and administrative expenses show mixed results in cost management. The
Cash Position: The company’s cash and short-term investments amount to
Overall, the company’s performance shows some areas of improvement but also highlights the challenges it faces in maintaining profitability and segment revenue growth. Investors should closely monitor how the company addresses these concerns in the coming periods.
Recon Technology, Ltd.'s financial results reveal interesting facets about its market dynamics:
Industry Context: The company's involvement in oilfield services, environmental protection, electric power and coal chemical industries places it in markets with cyclical demand. The flat revenue growth suggests market saturation or increased competition, necessitating a strategic pivot or new market entry to achieve growth.
Oilfield Services Recovery: The recovery in the oilfield services segment is a positive sign, as this sector has high revenue potential. However, the company needs to ensure this growth is sustainable and not merely a short-term recovery.
Environmental Regulations Impact: The decrease in oilfield environmental protection revenue reflects the challenges posed by stringent environmental regulations in China, impacting operational continuity. The company's efforts to develop a chemical recycling plant for plastic waste show a proactive approach to compliance and market adaptation.
Customer Diversification: The shift from gasoline to diesel users and establishing new partnerships is a strategic move to diversify the customer base and reduce dependency on any single segment. However, the effectiveness of this strategy will only be visible in future periods.
In summary, while Recon Technology is making strategic moves to adapt to market conditions, the flat revenue growth and challenges in certain segments underscore the need for effective execution of these strategies to realize long-term growth.
First Six Months of Fiscal 2024 Financial Highlights:
- Total revenue was
- Gross profit decreased to
- Gross margin decreased to
- Net loss was
For the Six Months Ended | |||||||||||||||
December 31, | |||||||||||||||
(in RMB millions, except earnings per | 2023 | 2022 | Increase /(Decrease) | Percentage Change | |||||||||||
Revenue | RMB | 45.3 | RMB | 45.6 | RMB | 0.3 | (0.7) | % | |||||||
Gross profit | 12.1 | 13.1 | (1.0) | (7.8) | % | ||||||||||
Gross margin | 26.7 | % | 28.8 | % | (7.8) | % | / | ||||||||
Net loss | (23.1) | (29.9) | (6.8) | 22.6 | % | ||||||||||
Net loss per share – Basic | (8.27) | (15.46) | (7.19) | 46.5 | % | ||||||||||
Management Commentary
"We have had a good six months in all of our major businesses, especially our oilfield services business," said Mr. Shenping Yin, Founder and CEO of Recon. "Although our revenues were flat compared to last year, the structural improvement of our business is essentially complete. Our onshore oil and gas fields service business has shown good signs of recovery, and we have also developed new customers in offshore fields. We have purchased land to begin construction of a chemical plant for the chemical recycling of plastic waste, and are continuing to work on the pre-approval procedures required to operate the plant, which are essential to ensure future compliance in
First Six Months Fiscal 2024 Financial Results:
Revenue
Total revenues for the six months ended December 31, 2023 were approximately
- Revenue from automation product and software decreased by
- Revenue from equipment and accessories increased by
- Revenue from oilfield environmental protection decreased by
- Revenue from platform outsourcing services decreased by
Cost of revenue
Cost of revenues increased slightly from
- For the six months ended December 31, 2022 and 2023, cost of revenue from automation product and software was approximately
- For the six months ended December 31, 2022 and 2023, cost of revenue from equipment and accessories was approximately
- For the six months ended December 31,2022 and 2023, cost of revenue from oilfield environmental protection was approximately
- For the six months ended December 31,2022 and 2023, cost of revenue from platform outsourcing services was approximately
Gross profit
Gross profit decreased to
- For the six months ended December 31, 2022 and 2023, our gross profit from automation product and software was approximately
- For the six months ended December 31, 2022 and 2023, gross profit from equipment and accessories was approximately
- For the six months ended December 31, 2022 and 2023, gross profit from oilfield environmental protection was approximately
- For the six months ended December 31, 2022 and 2023, gross profit from platform outsourcing services was approximately
Operating expenses
Selling expenses increased by
General and administrative expenses decreased by
The Company also recorded a net recovery of credit losses of
Research and development expenses remained relatively stable with a slight increase by
Loss from operations
Loss from operations was
Change in fair value of warrant liability
The Company classified the warrants issued in connection with common share offering as liabilities at their fair value and adjusted the warrant instrument to fair value at each reporting period. This liability is subject to re-measurement at each balance sheet date until exercised, and any change in fair value is recognized in our statement of operations. Loss in fair value changes of warrant liability was
Interest income
Net interest income was
Other income (expenses), net.
Other net expenses was
Net loss
As a result of the factors described above, net loss was
Cash and short-term investment
As of June 30, 2023, we had cash in the amount of approximately
About Recon Technology, Ltd ("RCON")
Recon Technology, Ltd (NASDAQ: RCON) is
Forward-Looking Statements
Recon includes "forward-looking statements" within the meaning of the federal securities laws throughout this press release. A reader can identify forward-looking statements because they are not limited to historical fact or they use words such as "scheduled," "may," "will," "could," "should," "would," "expect," "believe," "anticipate," "project," "plan," "estimate," "forecast," "goal," "objective," "committed," "intend," "continue," or "will likely result," and similar expressions that concern Recon's strategy, plans, intentions or beliefs about future occurrences or results. Forward-looking statements are subject to risks, uncertainties and other factors that may change at any time and may cause actual results to differ materially from those that Recon expected. Many of these statements are derived from Recon's operating budgets and forecasts, which are based on many detailed assumptions that Recon believes are reasonable, or are based on various assumptions about certain plans, activities or events which we expect will or may occur in the future. However, it is very difficult to predict the effect of known factors, and Recon cannot anticipate all factors that could affect actual results that may be important to an investor. All forward-looking information should be evaluated in the context of these risks, uncertainties and other factors, including those factors disclosed under "Risk Factors" in Recon's most recent Annual Report on Form 20‑F and any subsequent half-year financial filings on Form 6‑K filed with the Securities and Exchange Commission. All forward-looking statements are qualified in their entirety by the cautionary statements that Recon makes from time to time in its SEC filings and public communications. Recon cannot assure the reader that it will realize the results or developments Recon anticipates, or, even if substantially realized, that they will result in the consequences or affect Recon or its operations in the way Recon expects. Forward-looking statements speak only as of the date made. Recon undertakes no obligation to update or revise any forward-looking statements to reflect events or circumstances arising after the date on which they were made, except as otherwise required by law. As a result of these risks and uncertainties, readers are cautioned not to place undue reliance on any forward-looking statements included herein or that may be made elsewhere from time to time by, or on behalf of, Recon.
For more information, please contact:
The Company
Ms. Liu Jia
Chief Financial Officer
Recon Technology, Ltd
Phone: +86 (10) 8494-5799
Email: info@recon.cn
RECON TECHNOLOGY, LTD | |||||||||
CONDENSED CONSOLIDATED INTERIM BALANCE SHEETS | |||||||||
(UNAUDITED) | |||||||||
As of June, 30 | As of December, 31 | As of December, 31 | |||||||
2023 | 2023 | 2023 | |||||||
RMB | RMB | US Dollars | |||||||
ASSETS | |||||||||
Current assets | |||||||||
Cash | ¥ | 104,125,800 | ¥ | 121,848,777 | $ | 17,162,041 | |||
Restricted cash | 731,545 | 3,904 | 550 | ||||||
Short-term investments | 184,184,455 | 133,950,650 | 18,866,554 | ||||||
Notes receivable | 3,742,390 | 12,532,717 | 1,765,196 | ||||||
Accounts receivable, net | 27,453,415 | 30,813,885 | 4,340,045 | ||||||
Inventories, net | 6,330,701 | 1,855,535 | 261,347 | ||||||
Other receivables, net | 2,185,733 | 4,184,778 | 589,414 | ||||||
Loans to third parties | 123,055,874 | 79,374,144 | 11,179,614 | ||||||
Purchase advances, net | 2,680,456 | 1,996,413 | 281,189 | ||||||
Contract costs, net | 49,572,685 | 37,323,824 | 5,256,951 | ||||||
Prepaid expenses | 350,119 | 295,384 | 41,603 | ||||||
Operating lease right-of-use assets, net - current (including ¥nil and | 879,288 | 123,845 | |||||||
Total current assets | 504,413,173 | 425,059,299 | 59,868,349 | ||||||
Property and equipment, net | 24,752,864 | 23,492,024 | 3,308,782 | ||||||
Long-term other receivables, net | 3,640 | — | — | ||||||
Long-term loan to third parties | — | 18,500,000 | 2,605,671 | ||||||
Operating lease right-of-use assets, net - non-current (including | 2,654,900 | 16,204,906 | 2,282,413 | ||||||
Total Assets | ¥ | 531,824,577 | ¥ | 483,256,229 | $ | 68,065,215 | |||
LIABILITIES AND EQUITY | |||||||||
Current liabilities | |||||||||
Short-term bank loans | ¥ | 12,451,481 | ¥ | 12,336,285 | $ | 1,737,529 | |||
Accounts payable | 10,791,721 | 12,062,861 | 1,699,018 | ||||||
Other payables | 5,819,010 | 1,688,166 | 237,773 | ||||||
Other payable- related parties | 2,592,395 | 2,209,017 | 311,134 | ||||||
Contract liabilities | 2,748,365 | 4,888,749 | 688,566 | ||||||
Accrued payroll and employees' welfare | 2,382,516 | 2,399,919 | 338,022 | ||||||
Taxes payable | 1,163,006 | 1,702,898 | 239,848 | ||||||
Short-term borrowings - related parties | 20,018,222 | 20,019,889 | 2,819,742 | ||||||
Operating lease liabilities - current (including | 3,066,146 | 1,038,354 | 146,248 | ||||||
Warrant liability - current | 8,519,880 | 1,200,000 | |||||||
Total Current Liabilities | 61,032,862 | 66,866,018 | 9,417,880 | ||||||
Operating lease liabilities - non-current (including ¥nil and ¥nil from a related party as of June 30, 2023 and December 31, | 25,144 | 25,869 | 3,644 | ||||||
Warrant liability - non-current | 31,615,668 | 993,986 | 140,000 | ||||||
Total Liabilities | 92,673,674 | 67,885,873 | 9,561,524 | ||||||
Commitments and Contingencies | |||||||||
Equity | |||||||||
Class A Ordinary Shares, | 26,932 | 27,791 | 3,914 | ||||||
Class B Ordinary Shares, | 4,693 | 4,693 | 661 | ||||||
Additional paid-in capital* | 580,340,061 | 584,275,905 | 82,293,540 | ||||||
Statutory reserve | 4,148,929 | 4,148,929 | 584,364 | ||||||
Accumulated deficit | (170,440,826) | (192,994,848) | (27,182,756) | ||||||
Accumulated other comprehensive income | 35,127,173 | 30,517,774 | 4,298,339 | ||||||
Total shareholders' equity | 449,206,962 | 425,980,244 | 59,998,062 | ||||||
Non-controlling interests | (10,056,059) | (10,609,888) | (1,494,371) | ||||||
Total equity | 439,150,903 | 415,370,356 | 58,503,691 | ||||||
Total Liabilities and Equity | ¥ | 531,824,577 | ¥ | 483,256,229 | $ | 68,065,215 | |||
* Retrospectively restated for the 1-for-18 reverse stock split on May 1, 2024 and change in capital structure on March 29, 2024. |
RECON TECHNOLOGY, LTD | |||||||||
CONDENSED CONSOLIDATED INTERIM STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS) | |||||||||
(UNAUDITED) | |||||||||
For the six months ended | |||||||||
December 31, | |||||||||
2022 | 2023 | 2023 | |||||||
RMB | RMB | USD | |||||||
Revenue | |||||||||
Revenue | ¥ | 45,559,591 | ¥ | 45,256,672 | $ | 6,374,269 | |||
Revenue | 45,559,591 | 45,256,672 | 6,374,269 | ||||||
Cost of revenue | |||||||||
Cost of revenue | 32,427,772 | 33,150,930 | 4,669,211 | ||||||
Cost of revenue | 32,427,772 | 33,150,930 | 4,669,211 | ||||||
Gross profit | 13,131,819 | 12,105,742 | 1,705,058 | ||||||
Selling and distribution expenses | 4,021,899 | 4,547,115 | 640,448 | ||||||
General and administrative expenses | 26,212,540 | 22,042,042 | 3,104,557 | ||||||
Allowance for (net recovery of) credit losses | (7,141,708) | 1,553,364 | 218,787 | ||||||
Research and development expenses | 5,109,302 | 6,765,287 | 952,871 | ||||||
Operating expenses | 28,202,033 | 34,907,808 | 4,916,663 | ||||||
Loss from operations | (15,070,214) | (22,802,066) | (3,211,605) | ||||||
Other income (expenses) | |||||||||
Subsidy income | 85,602 | 131,428 | 18,511 | ||||||
Interest income | 5,187,649 | 12,060,640 | 1,698,706 | ||||||
Interest expense | (169,091) | (1,683,289) | (237,086) | ||||||
Loss in fair value changes of warrants liability | (20,097,665) | (1,941,195) | (273,412) | ||||||
Foreign exchange transaction gain (loss) | 42,455 | (76,040) | (10,710) | ||||||
Other income | 157,753 | (8,701,288) | (1,225,550) | ||||||
Other income, net | (14,793,297) | (209,744) | (29,541) | ||||||
Loss before income tax | (29,863,511) | (23,011,810) | (3,241,146) | ||||||
Income tax expenses | 9,180 | 96,041 | 13,527 | ||||||
Net loss | (29,872,691) | (23,107,851) | (3,254,673) | ||||||
Less: Net loss attributable to non-controlling interests | 3,727 | (553,829) | (78,005) | ||||||
Net loss attributable to Recon Technology, Ltd | ¥ | (29,876,418) | ¥ | (22,554,022) | $ | (3,176,668) | |||
Comprehensive income (loss) | |||||||||
Net loss | (29,872,691) | (23,107,851) | (3,254,673) | ||||||
Foreign currency translation adjustment | 9,663,701 | (4,609,399) | (649,220) | ||||||
Comprehensive loss | (20,208,990) | (27,717,250) | (3,903,893) | ||||||
Less: Comprehensive Income (loss) attributable to non- controlling interests | 3,727 | (553,829) | (78,005) | ||||||
Comprehensive loss attributable to Recon Technology, Ltd | ¥ | (20,212,717) | ¥ | (27,163,421) | $ | (3,825,888) | |||
Loss per share - basic and diluted* | ¥ | (15.46) | ¥ | (8.27) | $ | (1.16) | |||
Weighted - average shares -basic and diluted* | 1,932,544 | 2,728,056 | 2,728,056 | ||||||
* Retrospectively restated for the 1-for-18 reverse stock split on May 1, 2024. |
RECON TECHNOLOGY, LTD | |||||||||
CONDENSED CONSOLIDATED INTERIM STATEMENTS OF CASH FLOWS | |||||||||
(UNAUDITED) | |||||||||
For the six months ended December 31, | |||||||||
2022 | 2023 | 2023 | |||||||
RMB | RMB | US Dollars | |||||||
Cash flows from operating activities: | |||||||||
Net loss | ¥ | (29,872,691) | ¥ | (23,107,851) | $ | (3,254,673) | |||
Adjustments to reconcile net loss to net cash used in operating activities: | |||||||||
Depreciation and amortization | 1,952,625 | 1,426,971 | 200,985 | ||||||
Loss (gain) from disposal of equipment | (12,782) | 32,252 | 4,543 | ||||||
Gain in fair value changes of warrants liability | 20,097,665 | 10,461,075 | 1,473,412 | ||||||
Allowance for (net recovery of) credit losses | (7,141,708) | 1,553,364 | 218,787 | ||||||
Allowance for slow moving inventories | 245,990 | (350,637) | (49,386) | ||||||
Amortization of right of use assets | 1,627,888 | 570,959 | 80,418 | ||||||
Restricted shares issued for management and employees | 1,796,417 | 2,866,560 | 403,747 | ||||||
Restricted shares issued for services | 4,304,857 | 1,070,143 | 150,726 | ||||||
Accrued interest income from loans to third parties | (3,757,041) | (4,415,298) | (621,882) | ||||||
Accrued interest income from short-term investment | — | (2,352,250) | (331,307) | ||||||
Changes in operating assets and liabilities: | |||||||||
Notes receivable | 2,356,367 | (8,790,327) | (1,238,092) | ||||||
Accounts receivable | (12,501,742) | (4,412,034) | (621,422) | ||||||
Inventories | (1,158,138) | 4,863,435 | 685,000 | ||||||
Other receivables | (9,673,906) | 5,465,227 | 769,761 | ||||||
Purchase advances | (449,477) | 558,040 | 78,598 | ||||||
Contract costs | 9,765,091 | 10,442,916 | 1,470,854 | ||||||
Prepaid expense | 10,345 | 54,734 | 7,709 | ||||||
Prepaid expense - related parties | 275,000 | — | — | ||||||
Operating lease liabilities | (1,619,168) | (2,027,067) | (285,506) | ||||||
Accounts payable | 247,387 | 1,271,140 | 179,036 | ||||||
Other payables | (1,414,691) | (4,103,150) | (577,918) | ||||||
Other payables-related parties | 231,133 | (383,378) | (53,998) | ||||||
Contract liabilities | (1,945,877) | 2,140,385 | 301,467 | ||||||
Accrued payroll and employees' welfare | 27,710 | 17,399 | 2,451 | ||||||
Taxes payable | 677,510 | 537,591 | 75,718 | ||||||
Net cash used in operating activities | (25,931,236) | (6,609,801) | (930,972) | ||||||
Cash flows from investing activities: | |||||||||
Purchases of property and equipment | (821,272) | (216,082) | (30,435) | ||||||
Proceeds from disposal of equipment | 31,950 | 20,000 | 2,817 | ||||||
Purchase of land use right | — | (15,000,251) | (2,112,741) | ||||||
Repayments of loans to third parties | 25,194,900 | 44,613,948 | 6,283,743 | ||||||
Payments made for loans to third parties | (58,488,100) | (16,600,000) | (2,338,061) | ||||||
Payments for short-term investments | — | (131,598,400) | (18,535,247) | ||||||
Redemption of short-term investments | — | 180,338,865 | 25,400,198 | ||||||
Net cash (used in) generated by investing activities | (34,082,522) | 61,558,080 | 8,670,274 | ||||||
Cash flows from financing activities: | |||||||||
Proceeds from short-term bank loans | 1,000,000 | — | — | ||||||
Repayments of short-term bank loans | — | (123,000) | (17,324) | ||||||
Proceeds from short-term borrowings-related parties | 10,000,000 | 10,000,000 | 1,408,471 | ||||||
Repayments of short-term borrowings-related parties | (9,000,000) | (10,018,222) | (1,411,037) | ||||||
Repayments of long-term borrowings-related party | (476,927) | — | — | ||||||
Redemption of warrants | — | (31,866,604) | (4,488,317) | ||||||
Net cash provided by (used in) financing activities | 1,523,073 | (32,007,826) | (4,508,207) | ||||||
Effect of exchange rate fluctuation on cash and restricted cash | 10,633,748 | (5,945,117) | (837,352) | ||||||
Net increase (decrease) in cash and restricted cash | (47,856,937) | 16,995,336 | 2,393,743 | ||||||
Cash and restricted cash at beginning of year | 317,698,417 | 104,857,345 | 14,768,848 | ||||||
Cash and restricted cash at end of year | ¥ | 269,841,480 | ¥ | 121,852,681 | $ | 17,162,591 | |||
Supplemental cash flow information | |||||||||
Cash paid during the year for interest | ¥ | 624,321 | ¥ | 468,440 | $ | 64,601 | |||
Cash paid during the year for taxes | ¥ | 9,180 | ¥ | 16,505 | $ | 2,276 | |||
Reconciliation of cash and restricted cash, beginning of year | |||||||||
Cash | ¥ | 316,974,857 | ¥ | 104,125,800 | ¥ | 14,665,812 | |||
Restricted cash | 723,560 | 731,545 | 103,036 | ||||||
Cash and restricted cash, beginning of year | ¥ | 317,698,417 | ¥ | 104,857,345 | $ | 14,768,848 | |||
Reconciliation of cash and restricted cash, end of year | |||||||||
Cash | ¥ | 269,111,420 | ¥ | 121,848,777 | ¥ | 17,162,041 | |||
Restricted cash | 730,060 | 3,904 | 550 | ||||||
Cash and restricted cash, end of year | ¥ | 269,841,480 | ¥ | 121,852,681 | $ | 17,162,591 | |||
Non-cash investing and financing activities | |||||||||
Right-of-use assets obtained in exchange for operating lease obligations | ¥ | — | ¥ | 298,783 | $ | 41,204 | |||
Reduction of right-of-use assets and operating lease obligations due to early termination of lease agreement | ¥ | 43,881 | ¥ | — | $ | — | |||
Inventories transferred to and used as fixed assets | ¥ | (65,456) | ¥ | — | $ | — | |||
The accompanying notes are an integral part of these unaudited condensed consolidated interim financial statements | |||||||||
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SOURCE Recon Technology, Ltd
FAQ
What were Recon Technology's financial results for the first six months of fiscal year 2024?
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