Hollysys Automation Technologies Reports Unaudited Financial Results for the Second Quarter and the First Half Year Ended December 31, 2018

BEIJING, Feb. 15, 2019

• Non-GAAP net income attributable to Hollysys was $72.4 million, an increase of 24.3% compared to the comparable prior year period.
• Total revenues were $288.2 million, an increase of 5.6% compared to the comparable prior year period.
• Non-GAAP gross margin was at 37.7%, compared to 38.2% for the comparable prior year period.
• Non-GAAP diluted EPS were at $1.19, an increase of 24.0% compared to the comparable prior year period.
• Net cash provided by operating activities was $61.5 million for the current period.
• DSO of 171 days, compared to 166 days for the comparable prior year period.
• Inventory turnover days of 51 days, compared to 52 days for the comparable prior year period.

Second Quarter of Fiscal Year 2019 Financial Highlights

• Non-GAAP net income attributable to Hollysys was $44.3 million, an increase of 22.2% compared to the comparable prior year period.
• Total revenues were $149.5 million, a decrease of 5.0% compared to the comparable prior year period.
• Non-GAAP gross margin was at 38.2%, compared to 39.4% for the comparable prior year period.
• Non-GAAP diluted EPS were at $0.73, an increase of 21.7% compared to the comparable prior year period.
• Net cash provided by operating activities was $28.5 million for the current quarter.
• DSO of 157 days, compared to 147 days for the comparable prior year period.
• Inventory turnover days of 39 days, compared to 48 days for the comparable prior year period.

BEIJING, Feb. 15, 2019 /PRNewswire/ -- Hollysys Automation Technologies Ltd. (NASDAQ: HOLI) ("Hollysys" or the "Company"), a leading provider of automation and control technologies and applications in China, today announced its unaudited financial results for the second quarter and the first half of fiscal year 2019 ended December 31, 2018 (see attached tables). The management of Hollysys, stated:

Revenue and new contract for our IA business for the quarter stayed at $49.5 million and $43.9 million, representing a 14.2% and 4.1% YOY decrease, respectively. From a half year perspective, revenue and contract present a 6.9% YOY decrease and 4.5% YOY increase, respectively. Despite macro-economic headwind, management believe that our IA business remains on a healthy path and several highlights are worth mentioning. We kept our leadership in power, and devoted adequate resource in chemical and petrochemical for expansion, while maintaining our involvement in various other industries. In power, despite a slowdown in coal fire construction, steady performance in thermal power and new energy, as well as after-sale services have been stabilizing factors for our power business that should not be ignored. We kept addressing our valuable customer base to respond to various services demand. The communication with our customers have been fruitful and constructive, evidenced by the steady after-sale growth. Beyond that, we are also actively building our matrix of intelligent solution that help bring our customers to the next era of manufacture. Our effort was well rewarded as our value-adding solution on equipment management, control optimization, and information security, etc. were accepted by more customers. Furthermore, we are proud to announce our first intelligent plant solution in the power industry with Liaoning Diaobingshan Power Company. With full-scale data integration as the key, the solution will help realize greater visibility on equipment consumption, greater operational flexibility in power unit and will ultimately improve efficiency and management. With this milestone, we will continue to leverage the know-how we have accumulated and join hands with more customers from various industries to reshape their way of manufacture.

Quarterly revenue and new contract for our railway business were $63.5 million and $173.1 million, representing an 8.7% YOY decrease and 20.4% YOY increase, respectively. From a half year perspective, revenue and new contract recorded an 8.7% and 61.8% YOY increase, respectively. In high-speed rail, we signed 98 sets of C3 ATP for the quarter, along with numerous advanced and heavy maintenance contracts. We also signed a track circuit contract for the regular speed freight railway from Jingbian to Shenmu, Shaanxi Province, China. In subway business, milestone was achieved as we provided our first "SCADA + Integrated Cloud Platform" solution to Hohhot subway line 1 & line 2, as well as Shenzhen Subway Line 6. We see this as an effective addition to our subway business as we keep executing the steady expansion strategy. For high-speed rail business, calendar 2019 is expected to be a busy year as 13^th Five Year Plan period is entering its final two years. Going forward into the future and given a visible long-term railway construction plan, we will continue to adhere to the diversity strategy for stable and healthy growth, to improve our local service network for more value-adding and differentiated services, and to keep leveraging our strong R&D capacity for the preparation of next generation railway technology.

In overseas business, M&E recorded a quarterly revenue and new contract of $36.5 million and $36.5 million, representing a 20.8% and 20.1% YOY increase respectively. From a half year perspective, revenue and new contract recorded a 26.6% and 23.3% YOY increase respectively. Measures taken to improve operation have brought constant benefit to the M&E business, while the geopolitical issues in Middle East as well as the macro economy in Southeast Asia remained to be watched. In our IA overseas business, we continued to work with major domestic SOEs on EPC projects while at the same time, contributed adequate effort to expand our partnership. We took one step further in the localization of our business as the construction of our India assembly and testing plant was completed. With this we have set a foothold for improved response time to our overseas customers. Going forward, we expect increasing level of coordination to be built between our overseas and domestic business.

Second Quarter and First Half Year Ended December 31, 2018 Unaudited Financial Results Summary