Hollysys Automation Technologies Reports Unaudited Financial Results for the Third Quarter and the First Nine Months Ended March 31, 2021

First Nine months of Fiscal Year 2021 Financial Highlights

Total revenues were $434.7 million,an increase of 16.2% compared to the comparable prior year period.

Non-GAAP gross margin was at 36.4%,compared to 35.6% for the comparable prior year period.

Non-GAAP net income attributable to Hollysys was $71.7 million,a decrease of 7.9% compared to the comparable prior year period.

Non-GAAP diluted EPS was $1.18,a decrease of 7.8% compared to the comparable prior year period.

Net cash provided by operating activities was $48.6 million for the current period.

DSO of 186 days,compared to 188 days for the comparable prior year period.

Inventory turnover days of 52 days,compared to 57 days for the comparable prior year period.

Third Quarter of Fiscal Year 2021 Financial Highlights

Total revenues were $109.9 million,an increase of 36.1% compared to the comparable prior year period.

Non-GAAP gross margin was at 37.5%,compared to 30.8% for the comparable prior year period.

Non-GAAP net income attributable to Hollysys was $18.7 million,an increase of 34.0% compared to the comparable prior year period.

Non-GAAP diluted EPS were at $0.31,an increase of 34.8% compared to the comparable prior year period.

Net cash used in operating activities was $6.4 million for the current quarter.

DSO of 279 days,compared to 266 days for the comparable prior year period.

Inventory turnover days of 58 days,compared to 71 days for the comparable prior year period.

BEIJING,May 14,2021 -- 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 third quarter and first nine months ended March 31,2021 (see attached tables). The management of Hollysys stated:

Industrial Automation ("IA") business finished the third quarter with revenue and new contracts at $67.5 million and $106.7 million,representing 97.1% and 68.7% YOY growth,respectively. For the first nine months of the 2021 fiscal year,IA revenue and new contracts achieved 44.1% and 34.0% YOY growth,respectively.

In the power sector,we employed sustainable development tactics in order to address the needs of former customers. By offering these various upgraded products and wider range of services,we were able to increase market share. Highlights of the quarter:

Signed two2X600MWpower plantreplacementcontracts. This repeat business demonstrated industry recognition of Hollysys for quality system replacements,product offering depth,and reliable engineering services.

Signed service contracts for digital upgrades for Distributed Control Systems("DCS") of 2X1000MW units for a power plant. We increased the number of digital projects year-over-year increasing our sales of construction of digitally optimized factories for existing customers.

In the chemical and petrochemical sector,we continued to win mid- and high-profile projects through effective marketing and promotion coupled with our strong customer relationships. Highlights of the quarter included:

The Zhong'an United Coal Co.,Ltd. ("ZAUCC") project gained industry recognition for both economic and social benefits,and was awarded the Special Award on Science and Technology of 2019-2020 for Chinese Petroleum and Chemical Automation.

Signed a polycarbonate project contract in Pingdingshan,Henan Province,establishing new foothold in the polycarbonate field. This important project highlights Hollysys' capabilities,positioning the Company to win more mid and high-profile contracts.

Signed a contract with China National Offshore Oil Corporation ("CNOOC") for their Sanya gas field upgrade project. An integrated control system with upgraded products will be implemented and demonstrated in this project.

The installation of HollySys' control system for CNOOC's offshore 'green oilfield',zero discharge and low carbon project was successfully completed. This pilot 'green oilfield' program was the first domestic control system adopted by CNOOC. Hollysys' integrated control systems successfully achieved efficiency improvement and cost reduction,while promoting low-carbon and zero discharge management of offshore oil production. The Company will participate in future exploration,construction,and development on green oilfield projects. HollySys' offering will contribute to realizing the national goal of reducing carbon dioxide emissions and becoming carbon neutral.

In the food & beverage and pharmaceutical sector,we are driving technological innovation by providing high-quality engineering in partnership with our key customers. In this quarter,a contract was signed with a Shandong pharmaceutical company to provide instruments,DCS and a Safety Instrumentation System ("SIS"),for the production of 2,800 tons per year of active pharmaceutical ingredients. In addition,the Company continues to pursue cooperation agreements with other leaders in pharmaceutical industry. A significant contract was signed with one of the subsidiaries of Sino-Biopharmaceutical Limited,establishing a solid foundation for future work with the client.

In the smart factory business,we are promoting solution upgrades and staying attuned to market demands while helping clients develop technologically innovative factories with digitized solutions for production and management. Highlights of the quarter included:

Signed a contract to provide oursmart factorysolution for a Tangshan chemical companyafter winning the bid for a silicone smart factory project last quarter. Smart solutions for DCS+SIS+MES+BATCH+IODS were included in the offering,which marks another advancement for the Company in the Fine Chemical Smart Factory space. HollySys will construct adata integrated platform which will achieve seamless information flow between the operations and management levels,creating the foundation of the client's digital transformation.

Acontract was signed to provide a smart power solution for a client's 2X125MW power plants,along with a DCS. Hollysys leverages existing skills and experience to pioneer the implementation of smart industrial platforms,customized smart solutions to meet the comprehensive needs of customers across verticals such as power,fine chemicals,etc.

A contract covering the production of approximately 500,000 tons of paper goods was signed with a large paper manufacturer. We offered a solution with DCS,Intelligent Operational Data System ("IODS"),instruments,etc. This project represents the largest contract amount and production scale that Hollysys has won in the paper industry,it will boost Hollysys' industry credibility,creating a platform for the Company to further penetrate the market.

Aftersales business of IA is keeping a healthy pace. Under our big automation initiatives,we continued to strengthen customer relations management and improve our capabilities for wider range of solutions. Under the influence of the COVID-19 pandemic,the Company launched Fangcun smart service APP,through which users can purchase spare parts,submit service requirements,and participate in remote professional courses. The APP is also an e-commerce platform of industrial products for existing customers or partners to further enhance customer stickiness and boost future business development.

Rail business finished the quarter with revenue and new contractsat $30.7 million and $15.7 million,recording 7.0% YOY growth and 215.2% YOY growth,rail business revenue and new contracts showed a 7.5% YOY decrease and 10.2% YOY growth,respectively.

In the high-speed rail ("HSR") sector,we continued to deliver on existing projects,while maintaining our market position in existing product lines plus exploring opportunities in new markets. HollySys continues to apply smart and upgraded solutions designed to meet the emerging needs of the market. Highlights of the quarter include:

Offering Automation Train Operation ("ATO") to Beijing-Xiong'an Railway and offering Automation Train Protection ("ATP") to Beijing-Harbin Railway. Our efforts are aligned with the established national rail strategies and our strong operational performance has been recognized by our clients.

Applying the track circuit in Sichuan-Tibet Railway resulted in winning the first place Progress Prize in Science awarded by China Communications and Transportation Association. The application marks our entry into the track circuit field and contribution to the construction and development of railway networks in southwest China.

In the subway sector,we continued our efforts in upgrading technologies and refining our solutions. We provided the complete system of CBTC and integrated with its subsidiary systems for the first time. The system had entered its pilot operation in Kunming Changshui Airport Express successfully. In addition,our smart metro station upgrading solution implemented in Shenzhen Subway Line 11 is helping clients establish a safer,more efficient,ecofriendly station. HollySys' track record on SCADA,active automation improvements on existing products and integration of cloud computing,big data,AI,etc. allows us to meet the needs of an increasingly demanding marketplace.

With the guideline of the Fourteenth Five-Year Plan of China,Hollysys is making great strides in the area of modernization and digitalization of infrastructure construction. Our Weather Effect Monitoring solution was widely recognized and was granted with Innovation Award of Excellent Products of Highway Industry of 2020.

Mechanical and Electrical Solutions ('M&E') business finished the quarter with revenue and new contracts at$11.8 million and $19.6 million,recording34.1% and 1.2% YOY decrease respectively. For the first nine months of the 2021 fiscal year,M&E revenue and new contracts recorded 3.9% and 16.4% 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 a key focus.

Third Quarterand First Nine Months Ended March 31,2021 Unaudited Financial Results Summary

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

Three months ended

Nine months ended

March 31,2021

March 31,2020

%

Change

March 31,2020

%

Change

Revenues

$

109,907

80,768

36.1%

$

434,702

374,106

16.2%

Integrated solutions contracts revenue

$

85,769

67,673

26.7%

$

333,943

301,814

10.6%

Products sales

$

6,543

3,588

82.4%

$

21,569

16,249

32.7%

Service rendered

$

17,595

9,507

85.1%

$

79,190

56,043

41.3%

Cost of revenues

$

68,737

55,928

22.9%

$

276,257

240,977

14.6%

Gross profit

$

41,170

24,840

65.7%

$

158,445

133,129

19.0%

Total operating expenses

$

20,978

13,317

57.5%

$

82,945

65,121

27.4%

Selling

$

7,160

6,168

16.1%

$

25,596

23,838

7.4%

General and administrative

$

12,215

8,946

36.5%

$

36,035

30,130

19.6%

Research and development

$

13,159

10,221

28.7%

$

41,760

32,969

26.7%

VAT refunds and government subsidies

$

(11,556)

(12,018)

(3.8)%

$

(20,446)

(21,816)

(6.3)%

Income from operations

$

20,192

11,523

75.2%

$

75,500

68,008

11.0%

Other income,net

$

813

1,031

(21.1)%

$

3,587

4,357

(17.7)%

Foreign exchange gain (loss)

$

391

98

299.0%

$

(5,277)

647

(915.6)%

Gains on disposal of an investment in an

equity investee

$

-

-

-

$

-

5,763

(100.0)%

Share of net income (loss) of equity

investees

$

(2,725)

570

(578.1)%

$

1,934

4,108

(52.9)%

Dividend income from equity security

investments

$

453

-

100.0%

$

456

1,141

(60.0)%

Interest income

$

3,132

3,271

(4.2)%

$

9,852

9,399

4.8%

Interest expenses

$

(151)

(16)

843.8%

$

(428)

(135)

217.0%

Income tax expenses

$

3,571

2,422

47.4%

$

14,237

15,424

(7.7)%

Net income (loss) attributable to non-

controlling interests

$

(145)

119

(221.8)%

$

(296)

(7)

4128.6%

Non-GAAP net income attributable to

Hollysys Automation Technologies Ltd.

$

18,679

13,936

34.0%

$

71,683

77,871

(7.9)%

Non-GAAP basic EPS

$

0.31

0.23

34.8%

$

1.18

1.29

(8.5)%

Non-GAAP diluted EPS

$

0.31

0.23

34.8%

$

1.18

1.28

(7.8)%

Share-based compensation expenses

$

2,750

15

18233.3%

$

3,688

55

6605.5%

Amortization of acquired intangible assets

$

70

75

(6.7)%

$

225

226

(0.4)%

GAAP Net income attributable to Hollysys

Automation Technologies Ltd.

$

15,859

13,846

14.5%

$

67,770

77,590

(12.7)%

GAAP basic EPS

$

0.26

0.23

13.0%

$

1.12

1.28

(12.5)%

GAAP diluted EPS

$

0.26

0.23

13.0%

$

1.12

1.28

(12.5)%

Basic weighted average common shares

outstanding

60,522,107

60,552,099

(0.0)%

60,502,714

60,520,329

(0.0)%

Diluted weighted average common shares

outstanding

60,559,890

60,736,180

60,694,045

0.1%

Operational Results Analysis for the Third Quarter Ended March 31,2021

Comparing to the third quarter of the prior fiscal year,the total revenues for the three months ended March 31 2021 increased from $80.8 million to $109.9 million,representing an increase of 36.1%. Broken down by the revenue types,integrated contracts revenue increased by 26.7% to $85.8 million,products sales revenue increased by 82.4% to $6.5 million,and services revenue increased by 85.1% to $17.6 million.

The Company's total revenues can also be presented in segments as shown in the following chart:

(In USD thousands)

Three months ended March 31,

Nine months ended March 31,

2021

2020

2021

2020

$

% to

Total

Revenue

$

% to

Total

Revenue

$

% to

Total

Revenue

$

% to

Total

Revenue

Industrial Automation

67,454

61.4%

34,228

42.4%

242,273

55.7%

168,155

45.0%

Rail Transportation Automation

30,673

27.9%

28,672

35.5%

140,638

32.4%

152,071

40.6%

Mechanical and Electrical Solution

11,780

10.7%

17,868

22.1%

51,791

11.9%

53,880

14.4%

Total

109,907

100.0%

80,768

100.0%

434,702

100.0%

374,106

100.0%

Overallgross marginexcluding non-cash amortization of acquired intangibles (non-GAAP gross margin)was 37.5%for the three months endedMarch 31,2021,as compared to 30.8% for the same period of the prior year.The non-GAAP gross margin for integrated contracts,product sales,and services renderedwere 25.9%,81.2% and 77.4% for the three months endedMarch 31,as compared to 22.3%,71.3% and 75.3% for the same period of the prioryear,respectively. The gross margin fluctuated mainly due to the different revenue mix with different margins. The GAAPoverall gross marginwhich includesnon-cash amortization of acquired intangibles was 37.4% for the three months endedMarch 31,as compared to 30.7% for the same period of the prior year.The GAAP gross margin for integrated contracts,and service renderedwas25.9%,as compared to 22.2%,respectively.

Selling expenseswere $7.2 millionfor the three months ended March 31,representing an increase of $1.0 million or 16.1% compared to $6.2 million for the same quarter of the prior year. Presented as a percentage of total revenues,selling expenses were6.5%and7.6% for the three months ended March 31,and 2020,respectively.

General and administrativeexpenses,excluding non-cash share-based compensation expenses (non-GAAP G&A expenses),were$12.2million forthe quarter ended March 31,representing an increase of $3.3 million or 36.5% compared to $8.9 million for the same quarter of the prior year. Presented as a percentage oftotal revenues,non-GAAP G&A expenses were11.1% and 11.1% for quartersended March 31,2021and 2020,respectively.The GAAP G&A expenses which include the non-cash share-based compensation expenses were $15.0 million and $9.0 million for the three months ended March 31,2021 and 2020,respectively.

Research and development expenseswere$13.2 millionfor the three months ended March 31,representing an increase of $2.9 million or 28.7% compared to $10.2 million for the same quarter of the prior year,mainly due to increased research and development activities. Presentedas a percentage of total revenues,R&Dexpenses were12.0%and 12.7%for the quarter ended March 31,respectively.

The VAT refunds and government subsidieswere $11.6 million for three months ended March 31,as compared to $12.0 million for the same period in the prior year,representing a $0.4 million or 3.8% decrease.

The income tax expenses and the effective tax ratewere $3.6 million and 18.5% for the three months ended March 31,respectively,as compared to $2.4 million and 14.8% for comparable prior year period,respectively.

The non-GAAP net income attributable to Hollysys,which excluded 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 $18.7 million or $0.31 per diluted share based on 60.6 million diluted weighted average ordinary shares outstanding for the three months ended March 31,2021. This represented a 34.0% increase from $13.9 million or $0.23 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 $15.9millionor $0.26 per diluted sharerepresentinganincrease of 14.5% from $13.8millionor $0.23per diluted share reported in thecomparableprior year period.

Contracts and Backlog Highlights

Hollysys achieved $142.0 millionof new contracts for the three months ended March 31,2021. The backlogas of March 31,2021was $617.7million. The detailed breakdown of new contracts and backlog by segmentsis shown below:

New contracts achieved

Backlog

for the three months

ended March 31,2021

as of March 31,2021

(In USD

thousands)

% to Total

Contract

(In USD

thousands)

% to Total

Backlog

Industrial Automation

106,666

75.0%

262,319

42.5%

Rail Transportation

15,698

11.2%

256,397

41.5%

Mechanical and Electrical Solutions

19,625

13.8%

98,939

16.0%

Total

141,989

100.0%

617,655

100.0%

Cash Flow Highlights

For the three months ended March 31,thetotal net cash inflow was $109.0 million. The net cash used in operating activitieswas$6.4 million. The net cash provided by investing activities was $112.7 million,mainly consisted of $163.8 million of matured short-term investments,partially offset by 45.7 million investment of an equity investee,4.9 million purchases of property,plant and equipment,and $1.3 million purchases of short-term investments. The net cash provided by financing activities was $nil.

Balance Sheet Highlights

The total amount of cash and cash equivalents were$466.1 million,$356.9 million,and $366.4 million as of March 31,December 31,2020 and March 31,2020,respectively.

For the three months ended March 31,DSO was279 days,as compared to266 days for the comparable prior year periodand 142 days for the last quarter; and inventory turnover was58 days,as compared to 71days for the comparable prior year periodand 40days for the last quarter.

Conference Call

The Company will host a conference call at9:00 pmMay 13,2021 U.S. Eastern Time / 9:00 am May 14,2021 Beijing Time,to discuss the financial resultsfor fiscal year 2021 third quarter ended March 31,2021 and business outlook.

Joining the Conference Call:

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.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/unmuteDirect Event online registration:http://apac.directeventreg.com/registration/event/5252367Please use Conference ID 5252367for entry if the link fails to lead directly to the registration page.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.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

Nine months ended

Mar 31,

Mar 31,

2021

2020

2021

2020

(Unaudited)

(Unaudited)

(Unaudited)

(Unaudited)Net revenues

Integrated solutions contracts revenue$85,769

$67,673

$333,943

$301,814Products sales

6,543

3,588

21,569

16,249Revenue from services

17,595

9,507

79,190

56,043Total net revenues

109,907

80,768

434,702

374,106

Costs of integrated solutions contracts

63,593

52,628

245,330

216,613Cost of products sold

1,230

1,031

4,177

4,461Costs of services rendered

3,984

2,344

26,975

20,129Gross profit

41,100

24,765

158,220

132,903

Operating expenses

Selling

7,160

6,168

25,596

23,838General and administrative

14,965

8,961

39,723

30,185Research and development

13,159

10,221

41,760

32,969VAT refunds and government subsidies

(11,556)

(12,018)

(20,446)

(21,816)Total operating expenses

23,728

13,332

86,633

65,176Income from operations

17,372

11,433

71,587

67,727

Other income,net

813

1,031

3,587

4,357Foreign exchange gain (loss)

391

98

(5,277)

647Gains on disposal of an investment in an equity investee

-

-

-

5,763Share of net (losses) income of equity investees

(2,725)

570

1,934

4,108Dividend income from equity security investments

453

-

456

1,141Interest income

3,132

3,271

9,852

9,399Interest expenses

(151)

(16)

(428)

(135)Income before income taxes

19,285

16,387

81,711

93,007

Income taxes expenses

3,571

2,422

14,237

15,424Net income

15,714

13,965

67,474

77,583

Net income (losses) attributable to non-controlling interests

(145)

119

(296)

(7)Net income attributable to Hollysys Automation

Technologies Ltd.$15,859

$13,846

$67,770

$77,590

Other comprehensive (loss) income,net of tax of nil

Translation adjustments

(5,356)

(18,493)

78,297

(31,746)Comprehensive income (loss)

10,358

(4,528)

145,771

45,837

Less: comprehensive (loss) income attributable to non-

controlling interests

(165)

79

(113)

1,030Comprehensive income (loss) attributable to Hollysys

Automation Technologies Ltd.$10,523

$(4,607)

$145,884

$44,807

Net income per share:

Basic

0.26

0.23

1.12

1.28Diluted

0.26

0.23

1.12

1.28Shares used in net income per share computation:

Basic

60,107

60,099

60,714

60,329Diluted

60,890

60,180

60,045HOLLYSYS AUTOMATION TECHNOLOGIES LTD.CONSOLIDATED BALANCE SHEETS(In USD thousands except for number of shares and per share data)

Mar- 31,

Dec- 31,

2021

2020

(Unaudited)

(Unaudited)

ASSETS

Current assets

Cash and cash equivalents$466,079

$356,904Short-term investments

173,549

340,904Restricted cash

9,073

9,210Accounts receivable,net of allowance for credit losses of $65,987 and $64,573 as

of March 31,2021 and December 31,respectively

335,778

326,606Costs and estimated earnings in excess of billings,net of allowance for credit losses

of $12,576 and $12,322 as of March 31,

respectively

182,653

211,630Accounts receivable retention

4,190

4,521Other receivables,net of allowance for credit losses of $6,463 and $6,508 as of

March 31,respectively

32,140

27,712Advances to suppliers

18,383

16,700Amounts due from related parties

21,319

24,498Inventories

47,559

35,898Prepaid expenses

975

1,009Income tax recoverable

7

7 Total current assets

1,291,705

1,355,599

Non-current assets

Restricted cash

21,522

21,512Costs and estimated earnings in excess of billings

1,336

578Accounts receivable retention

5,334

5,135Prepaid expenses

1

1Property,net

88,190

88,364Prepaid land leases,net

16,471

16,716Intangible assets,net

1,494

1,618Investments in equity investees

95,030

50,026Investments securities

4,999

5,018Goodwill

1,574

1,580Deferred tax assets

16,913

15,237Operating lease right-of-use assets

6,639

7,483 Total non-current assets

259,503

213,268 Total assets

1,551,208

1,568,867

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities

Current portion of long-term loans

321

326Accounts payable

134,253

139,701Construction costs payable

3,026

3,804Deferred revenue

185,675

185,418Accrued payroll and related expenses

15,089

30,305Income tax payable

6,400

11,090Warranty liabilities

8,350

7,474Other tax payables

5,735

13,306Accrued liabilities

35,056

36,081Amounts due to related parties

3,632

3,959Operating lease liabilities

2,517

2,896 Total current liabilities

400,054

434,360

Non-current liabilities

Accrued liabilities

6,784

3,966Long-term loans

15,660

15,773Accounts payable

1,811

1,854Deferred tax liabilities

14,931

14,892Warranty liabilities

4,250

3,003Operating lease liabilities

3,815

4,227 Total non-current liabilities

47,251

43,715 Total liabilities

447,305

478,075

Commitments and contingencies

-

-

Stockholders' equity:

Ordinary shares,par value $0.001 per share,100,000,000 shares authorized;

61,275,099 shares and 60,855,099 shares issued and outstanding as of March

31,2020

61

61Additional paid-in capital

227,731

224,981Statutory reserves

59,039

58,954Retained earnings*

798,184

782,408Accumulated other comprehensive income

14,597

19,932 Total Hollysys Automation Technologies Ltd. stockholder's equity

1,099,612

1,086,336Non-controlling interests

4,291

4,456Total equity

1,103,903

1,090,792 Total liabilities and equity$1,208

$1,867

* ASC 326 was adopted on July 1,2020 and resulted in $22,338 adjustment to opening retained earningsHOLLYSYS AUTOMATION TECHNOLOGIES LTDCONSOLIDATED STATEMENTS OF CASH FLOWS(In USD thousands).

Three months

ended

Nine months

endedMarch 31,2021

March 31,2021

(Unaudited)

(Unaudited)Cash flows from operating activities:

Net income$15,714$67,474Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation of property,plant and equipment

2,553

7,260

Amortization of prepaid land leases

102

311

Amortization of intangible assets

80

235

Allowance for doubtful accounts

1,967

3,447

Loss on disposal of property,plant and equipment

(26)

(65)

Share of net losses (income) of equity investees

2,725

(1,934)

Share-based compensation expenses

2,750

3,688

Deferred income tax expenses

(1,675)

(4,042)

Dividends received from equity investees

91

91Changes in operating assets and liabilities:

Accounts receivable and retention

(15,327)

(90,899)

Costs and estimated earnings in excess of billings

26,403

13,798

Inventories

(11,353)

4,244

Advances to suppliers

(1,692)

176

Other receivables

(4,671)

(2,357)

Deposits and other assets

30

(307)

Due from related parties

733

(1,268)

Accounts payable

(5,019)

8,429

Deferred revenue

1,348

34,971

Accruals and other payables

(9,238)

(813)

Due to related parties

(327)

56

Income tax payable

(4,449)

3,852

Other tax payables

(7,102)

2,277

Net cash (used in) provided by operating activities

(6,383)

48,624

Cash flows from investing activities:

Purchases of short-term investments

(1,299)

(146,004)

Purchases of property,plant and equipment

(4,868)

(11,069)

Proceeds from disposal of property,plant and equipment

1

241

Maturity of short-term investments

163,826

317,477

Proceeds from disposal of investments in equity investee

762

762

Investment of an equity investee

(45,730)

(45,730)

Net cash provided by investing activities

112,692

115,677

Cash flows from financing activities:

Proceeds from long-term bank loans

7

281

Repayments of long-term bank loans

-

(407)

Payment of dividends

-

(12,107)

Net cash provided by (used in) financing activities

7

(12,233)

Effect of foreign exchange rate changes

2,732

25,509

Net increase in cash,cash equivalents and restricted cash$109,048

177,577

Cash,cash equivalents and restricted cash,beginning of period$387,626

319,097

Cash,end of period

496,674

496,674Non-GAAP MeasuresIn 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 dilutedearnings 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 thenon-cash share-based compensation expenses,whichis calculated based on the number of sharesor optionsgranted and the fair valueas of the grant date,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

Nine months ended

March 31,

March 31,

2021

2020

2021

2020

(Unaudited)

(Unaudited)

(Unaudited)

(Unaudited)

Cost of integrated solutions contracts$63,593$52,628$245,330$216,613Less: Amortization of acquired intangible assets

70

75

225

226Non-GAAP cost of integrated solutions contracts$63,523$52,553$245,105$216,387

General and administrative expenses$14,965$8,961$39,723$30,185Less: Share-based compensation expenses

2,750

15

3,688

55Non-GAAP general and administrative expenses$12,215$8,946$36,035$30,130

Net income attributable to Hollysys Automation

Technologies Ltd.$15,859$13,846$67,770$77,590Add:

Share-based compensation expenses

2,688

55Amortization of acquired intangible assets

70

75

225

226Non-GAAP net income attributable to Hollysys

Automation Technologies Ltd.$18,679$13,936$71,683$77,871

Weighted average number of basic ordinary shares

60,329Weighted average number of diluted ordinary shares

60,045Non-GAAP basic earnings per share$0.31$0.23$1.18$1.29Non-GAAP diluted earnings per share$0.31$0.23$1.18$1.28

View original content:/news-releases/hollysys-automation-technologies-reports-unaudited-financial-results-for-the-third-quarter-and-the-first-nine-months-ended-march-31-2021-301290602.html