Recon Technology Reports Fiscal 2018 First Quarter and First Three Months Financial Results

BEIJING, Nov. 15, 2017

First Quarter FY2018 Financial Highlights (all comparable to the prior year period):

• Total revenues for the first quarter of FY2018 increased by 56% to RMB 12.2 million ($1.8 million);
• Gross profit for the first quarter of FY2018 was RMB 2.1 million ($0.3 million);
• Gross profit margin increased to 17.2%, largely due to continued higher margin generated from automation business;
• Net loss attributable to Recon for the first quarter of FY2018 was RMB 6.7 million ($1.0 million), or RMB 0.97 ($0.15) per basic and diluted share, compared to net loss attributable to Recon of RMB 5.5 million, or RMB 0.92 per basic and diluted share, for the same period of last fiscal year;
• Non-GAAP net loss attributable to common shareholders excluding certain non-cash expenses was RMB 2.3 million ($341,093), or RMB 0.33 ($0.05) per basic and diluted share, for the first quarter of FY2018, compared to non-GAAP net loss attributable to common shareholders of RMB 3.2 million, or RMB 0.54 per basic and diluted share, for the same period last fiscal year.

Management Commentary

Mr. Shenping Yin, Chairman and CEO of Recon stated, "Revenue of this quarter is mainly driven by equipment and integration of automation business, the basic two legs of Recon, as we stated in our open letter to shareholders (Refer to the following link for more details: http://recon.mediaroom.com/2017-06-12-Recon-Outlines-2017-Strategy-and-China-Oil-and-Gas-Market-Outlook-in-Open-Letter-to-Shareholders?pagetemplate=widgetpopup). As most of our projects of waste water treatments are currently in progress, we expect revenue of this business line will contribute significantly to the overall revenues in the coming quarters. The rally in crude prices helped generate positive sentiment and we did see more investments in oil extraction by our clients and thus more opportunities for Recon. Based on our current estimation, we remain confident in our ability to achieve our goal of a minimum 30% increase in revenues for this fiscal year. This estimation was also mentioned by the open letter to shareholders as above."

Mr. Yin continued, "Our Gansu subsidiary construction projects, focusing on oilfield sewage treatment and oily sludge disposal treatment project with an annual processing capacity of 60,000 tons of oily waste ("Project"), is also proceeding well (Refer to the following link for more details: http://recon.mediaroom.com/2017-11-07-Recon-Announces-Investment-to-Expand-Services-for-Oily-Sludge-Market-in-Yumen-Oilfield?pagetemplate=widgetpopup). Total investment of this project is expected to about RMB100 million. Approximately RMB5.4 million, which mainly consisted of the purchase of land use right and prepayment for equipments and construction supplies, has been devoted into the first stage of construction. We expect this project to be operational by June 2018 and annual revenue to be generated by the Project is estimated to be over RMB 50 million." 

Results of Operations

The following unaudited condensed consolidated results of operations which include the Company's wholly owned subsidiaries, their variable interest entities ("VIEs") and VIE's subsidiaries. The VIEs are Nanjing Recon Technology Co. Ltd ("Nanjing Recon"), Beijing BHD Petroleum Technology Co, Ltd ("BHD"). BHD owns 100% of the equity interest of Huang Hua BHD Petroleum Equipment Manufacturing Co. LTD ("HH BHD") and 51% of the equity interest of Gansu BHD Environmental Technology Ltd ("Gansu BHD").