Hollysys Automation Technologies Reports Unaudited Financial Results for the First Quarter Ended September 30, 2022

First Quarter of Fiscal Year 2023 Financial Highlights

Total revenueswere $170.0 million,an increase of 10.9% compared to the comparable prior year period.

Gross marginwas 31.1%,compared to 34.2% for the comparable prior year period. Non-GAAP gross margin was 31.3%,compared to 34.3% for the comparable prior year period.

Net income attributable to Hollysyswas $21.4 million,an increase of 50.1% compared to the comparable prior year period. Non-GAAP net income attributable to Hollysys was $23.0 million,an increase of 26.7% compared to the comparable prior year period.

Diluted earnings per sharewas $0.35,an increase of 52.2% compared to the comparable prior year period. Non-GAAP diluted earnings per share was $0.37,an increase of 27.6% compared to the comparable prior year period.

Net cash provided by operating activitieswas $1.0 million.

DSOof 171 days,compared to 198 days for the comparable prior year period.

Inventory turnover daysof 79 days,compared to 55 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.

BEIJING,Nov. 16,2022 -- 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 first quarter of fiscal year 2023 ended September 30,2022.

The Industrial Automation ("IA") business maintained its strong momentum. In the petrochemical and chemical field,the Company continued to achieve breakthroughs on national key projects and cultivating major customers. The Company successfully signed the 100-billion-square-meter large gas field project,namely the Phase I Project of China National Offshore Oil Corporation ("CNOOC")'s largest condensate gas field in Bohai Bay,and will provide integrated solutions of Distributed Control System ("DCS"),Safety Instrumented System ("SIS") and Asset Management System ("AMS"),among others. The gas field will alleviate the gas shortage in North China and provide strong support for China's green and low-carbon transformation. Besides,the Sinopec Group Million Ton Ethylene Project signed in the last fiscal quarter will see the first batch delivery before the end of 2022. This project represents a milestone breakthrough in Hollysys' petrochemical business,as the Company accomplished the pilot application of optical bus control system ("OCS") related new technologies in ethylene units. This project will lay a solid technical foundation for the intellectualization of large production equipment and contribute to the sustainable development of the national energy.

In the smart factory field,Hollysys saw encouraging business growth with upgraded capabilities of integrated solutions. The Company signed the Sinopec power center simulation project which covers the whole range of high-precision excitation virtual imitation machine systems. The successful implementation of Hollysys simulation system in Sinopec will provide strong support and valuable field implementation experience for the Company's further cooperation with the "Chinese Three Barrels of Oil" and other oil and gas enterprises. Meanwhile,Hollysys completed the delivery of a 230,000 tons phenolic resin project signed with a company based in Shandong Province,providing fully autonomous and controllable HiaBatch Batch control system with DCS and Batch Processing System ("BATCH") control systems,which is expected to facilitate the industrial upgrading with digital customized solutions,and promote the standardization of the complex process for batch production enterprises.

The food and pharmaceutical sectors also demonstrated a steady business growth. The Company signed a significant project with a leading enterprise of generic contrast media products on producing iodiproamine and regadesone. Hollysys will act as the overall instrument control contractor that provides DCS system,instrument valves and installation in this project. The project will locate in Taizhou,Zhejiang Province,which is the national center for the production of active pharmaceutical ingredients ("APIs"),and such project will offer a significant strategic opportunity for the Company's further development in the pharmaceutical sector.

The strategic layout and developments in the Company's overseas business also witnessed steady progress. The Company successfully signed the OBI nickel-iron project in Indonesia with a resource company,with Hollysys providing DCS,Digital Electro-Hydraulic("DEH") control system with over 60,000 optical points,Manufacturing Execution System ("MES"),AMS,information security and other customized products with integrated and comprehensive intelligent solutions. This project is a large-scale smelting project built under the national "Belt and Road" initiative that will promote the comprehensive utilization of nickel ore resources and contribute to the security and sustainable development of nickel resource supply chain.

In the high-speed rail sector,the Company continued to sign new contracts and deliver on existing projects,maintaining its position in existing product lines and exploring opportunities in merging intelligent product lines. Leveraging the customer recognition of its technical strength and services,the Company signed a contract to provide Radio Block Center ("RBC"),Train Control Center ("TCC"),Lineside Electronic Unit ("LEU") and other equipment for the Guizhou section of Guiyang-Nanning Railway. The Company also delivered several projects,including the Yiyang-Changsha section of Changde-Yiyang-Changsha High-Speed Railway project,which went into operation in this fiscal quarter despite various challenges,with Hollysys being the main supplier of Chinese Train Control System Level 3 ("CTCS-3"),providing systems such as RBC,TCC and Temporary Speed Restriction Server ("TSRS"). In the subway sector,Traffic Operation System ("TOS") Platform,a smart urban rail solution based on cloud platform,pioneers the use of industrial Internet in the urban rail transit sector,and was applied in the Phase I Project of Beijing Metro Line 19. Hollysys has confidence in contributing to the rail transit system to become faster and smarter in the future based on its professional ability and experience accumulated over the past three decades.

The mechanical and electrical solutions ("M&E") segment of the Company also manifested a stable performance with our smooth executions on various projects. The risk monitor and control are still expected to be our future focus in this field.

With its 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.

FiscalQuarterEnded September 30,2022 UnauditedFinancial ResultsSummary

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

Three months ended

Sep 30,

2022

2021

%

Change

Revenues

$

170,041

153,385

10.9%

Integrated solutions contracts revenue

$

143,125

124,563

14.9%

Products sales

$

11,773

9,646

22.1%

Service rendered

$

15,143

19,176

(21.0)%

Cost of revenues

$

117,194

100,990

16.0%

Gross profit

$

52,847

52,395

0.9%

Total operating expenses

$

36,304

37,681

(3.7)%

Selling

$

13,013

9,409

38.3%

General and administrative

$

12,733

17,076

(25.4)%

Research and development

$

17,359

16,049

8.2%

VAT refunds and government subsidies

$

(6,801)

(4,853)

40.1%

Income from operations

$

16,543

14,714

12.4%

Other income,net

$

1,066

969

10.0%

Foreign exchange gain (loss)

$

4,097

(425)

(1064.0)%

Share of net income of equity investees

$

597

212

181.6%

Interest income

$

3,161

2,861

10.5%

Interest expenses

$

(143)

(344)

(58.4)%

Income tax expenses

$

3,880

3,902

(0.6)%

Net income (loss) attributable to non-controlling interests

$

44

(174)

(125.3)%

Net income attributable to Hollysys Automation Technologies Ltd.

$

21,397

14,259

50.1%

Basic earnings per share

$

0.35

0.23

52.2%

Diluted earnings per share

$

0.35

0.23

52.2%

Share-based compensation expenses

$

1,237

3,594

(65.6)%

Amortization of acquired intangible assets

$

340

280

21.4%

Non-GAAP net income attributable to Hollysys Automation Technologies Ltd.(1)

$

22,974

18,133

26.7%

Non-GAAP basic earnings per share(1)

$

0.37

0.30

23.3%

Non-GAAP diluted earnings per share(1)

$

0.37

0.29

27.6%

Basic weighted average common shares outstanding

61,317,302

60,822,091

0.8%

Diluted weighted average common shares outstanding

61,940,240

61,589,476

0.6%

__________

(1) See the section entitled "Non-GAAP Measures" for more information about these non-GAAP measures.

Operational Results Analysis for the First Quarter Ended September 30,2022

Compared to the first quarter of the prior fiscal year,the total revenues for the three months ended September 30,2022 increased from $153.4 million to $170.0 million,representing an increase of 10.9%. Broken down by the revenue types,integrated solutions contracts revenue increased by 14.9% to $143.1 million,products sales revenue increased by 22.1% to $11.8 million,and services revenue decreased by 21.0% to $15.1 million.

Since the majority of the Company's revenues are denominated in RMB,and the Company's financial results are reported in U.S. dollars,the recent depreciation of the RMB against the U.S. dollar has exerted a relatively significant negative impact on the value of contracts and revenue reported in U.S. dollar terms.

The Company's total revenues can also be presented by segment as shown in the table below:

(In USD thousands,except for %)

Three months ended Sep 30,

2022

2021

$

% to Total Revenues

$

% to Total Revenues

Industrial Automation

121,048

71.2

102,461

66.8

Rail Transportation Automation

28,242

16.6

35,935

23.4

Mechanical and Electrical Solution

20,751

12.2

14,989

9.8

Total

170,041

100.0

153,385

100.0

Gross marginwas 31.1% for the three months ended September 30,2022,as compared to 34.2% for the same period of the prior fiscal year.Gross margin of integrated solutions contracts,product sales,and service renderedwas25.0%,70.6% and 58.2% for the three months ended September 30,as compared to 25.1%,74.8% and 72.6% for the same period of the prior fiscal year,respectively. Non-GAAP gross marginwas 31.3%for the three months endedSeptember,as compared to 34.3% for the same period of the prior fiscal year.Non-GAAP gross margin of integrated solutions contractswas 25.2% for the three months endedSeptember 30,as compared to 25.3% for the same period of the priorfiscal year. See the section entitled "Non-GAAP Measures" for more information about non-GAAP gross margin and non-GAAP gross margin of integrated solutions contracts.

Selling expenseswere $13.0 millionfor the three months ended September 30,representing an increase of $3.6 million,or 38.3%,compared to $9.4 million for the same period of the prior fiscal year. The increase was in line with our sales growth. Selling expenses as a percentage of total revenueswere 7.7%and6.1% for the three months ended September 30,2022 and 2021,respectively.

General and administrativeexpenseswere$12.7million forthe three months ended September 30,representing a decrease of $4.3 million,or 25.4%,compared to $17.1 million for the same period of the prior fiscal year,which was primarily due to a $2.4 million decrease in share-based compensation expenses,a $1.3 million decrease in third-party consulting fees and a $1.3 million decrease in net of allowance for credit losses. Share-based compensation expenses were $1.2 million and $3.6 million for the three months ended September 30,respectively. General and administrative expensesas a percentage oftotal revenues were7.5% and 11.1%for the three months ended September 30,2022and 2021,respectively.

Research and development expenses were$17.4 millionfor the three months ended September 30,representing an increase of $1.3 million,or 8.2%,compared to $16.0 million for the same period of the prior fiscal year. Research and development expenses as a percentage of total revenues were10.2%and 10.5%for the three months ended September 30,respectively.

The increase in research and development expenses was mainly due to the Company's efforts to enhance its core competitiveness as a technology-driven company and its increased investments in the development of products and research and development capability,which was in line with its long-term strategy.

The VAT refunds and government subsidies were $6.8 million for three months ended September 30,as compared to $4.9 million for the same period in the prior fiscal year,representing a $1.9 million,or 40.1%,increase.

The income tax expenses and the effective tax ratewere $3.9 million and 15.3% for the three months ended September 30,respectively,as compared to $3.9 million and 21.7% for the comparable period in the prior fiscal year,respectively. The effective tax rate fluctuates,as the Company's subsidiaries contributed different pre-tax income at different tax rates.

Net income attributable to Hollysys was $21.4millionfor three months ended September 30,representinganincrease of 50.1% from $14.3 millionreported in thecomparableperiod in the prior fiscal year. Non-GAAP net income attributable to Hollysyswas $23.0 million or $0.37 per diluted share. See the section entitled "Non-GAAP Measures" for more information about non-GAAP net income attributable to Hollysys.

Diluted earnings per share was $0.35 for the three months ended September 30,representing an increase of 52.2% from $0.23 for the comparable period in the prior fiscal year.Non-GAAP diluted earnings per share was $0.37 for the three months ended September 30,representing an increase of 27.6% from $0.29 for the comparable period in the prior fiscal year.These were calculated based on 61.9 million and 61.6 million diluted weighted average ordinary shares outstanding for the three months ended September 30,respectively. See the section entitled "Non-GAAP Measures" for more information about non-GAAP diluted earnings per share.

Contracts and Backlog Highlights

Hollysys achieved $195.3 millionin terms of the value of new contracts for the three months ended September 30,2022. The order backlogof contracts as of September 30,2022 was $906.3million. The detailed breakdown of new contracts and backlog by segment is shown in the table below:

(In USD thousands,except for %)

Value of new contracts achieved for

the three months ended Sep 30,2022

Backlog as of Sep 30,2022

$

% to Total Contract Value

$

% to Total Backlog

Industrial Automation

159,629

81.7

387,984

42.8

Rail Transportation

16,422

8.4

325,936

36.0

Mechanical and Electrical Solutions

19,256

9.9

192,394

21.2

Total

195,307

100.0

906,314

100.0

Cash Flow Highlights

For the three months ended September 30,thetotal net cash outflow was $104.2 million. The net cash provided by operating activitieswas$1.0 million. The net cash used in investing activities was $69.5 million and mainly consisted of $71.1 million of purchases of short-term investments and $10.1 million of purchases of property,plant and equipment,which was partially offset by $11.6 million of maturity of short-term investments. The net cash provided by financing activities was $0.9 million.

Balance Sheet Highlights

The total amount of cash and cash equivalents was$575.1 million,$679.8 million,and $704.9 million as of September 30,June 30,2022 and September 30,2021,respectively.

For the three months ended September 30,DSO was 171 days,as compared to198 days for the comparable prior fiscal year and 174 days for the last fiscal quarter; inventory turnover days were79 days,as compared to 55days for the comparable prior fiscal year and 73days for the last fiscal quarter. The significant increase in inventories was mainly due to the Company's increase in safety stock in response to supply chain fluctuations.

About Hollysys Automation Technologies Ltd.

Hollysys is a leading automation control system solutions provider in China,with overseas operations in eight other countries and regions throughout Asia. Leveraging its proprietary technology and deep industryknow-how,Hollysys empowers its customers with enhanced operational safety,reliability,efficiency,and intelligence which are critical to their businesses. Hollysys derives its revenues mainly from providing integrated solutions for industrial automation and rail transportation automation. In industrial automation,Hollysys delivers the full spectrum of automation hardware,software,and services spanning field devices,control systems,enterprise manufacturing management and cloud-based applications. In rail transportation automation,Hollysys provides advanced signaling control and SCADA (Supervisory Control and Data Acquisition) systems for high-speed rail and urban rail (including subways). Founded in 1993,with technical expertise and innovation,Hollysys has grown from a research team specializing in automation control in the power industry into a group providing integrated automation control system solutions for customers in diverse industry verticals. As of June30,Hollysys had cumulatively carried out more than 40,000 projects for approximately 22,000 customers in various sectors including power,petrochemical,high-speed rail,and urban rail,in which Hollysys has established leading market positions.

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

Sep 30,

2022

2021

(Unaudited)

(Unaudited)

Net revenues

Integrated solutions contracts revenue

$

143,125

$

124,563

Products sales

11,773

9,646

Revenue from services

15,143

19,176

Total net revenues

170,041

153,385

Costs of integrated solutions contracts

107,396

93,309

Cost of products sold

3,465

2,429

Costs of services rendered

6,333

5,252

Gross profit

52,847

52,395

Operating expenses

Selling

13,013

9,409

General and administrative

12,733

17,076

Research and development

17,359

16,049

VAT refunds and government subsidies

(6,801)

(4,853)

Total operating expenses

36,304

37,681

Income from operations

16,543

14,714

Other income,net

1,066

969

Foreign exchange gain(loss)

4,097

(425)

Share of net income of equity investees

597

212

Interest income

3,161

2,861

Interest expenses

(143)

(344)

Income before income taxes

25,321

17,987

Income taxes expenses

3,880

3,902

Net income

21,441

14,085

Less: Net income(losses) attributable to non-controlling interests

44

(174)

Net income attributable to Hollysys Automation Technologies Ltd.

$

21,397

$

14,259

Other comprehensive income,net of tax of nil

Translation adjustments

(70,492)

(897)

Comprehensive (loss) income

(49,051)

13,188

Less: Comprehensive income (loss) attributable to non-controlling interests

116

(117)

Comprehensive (loss) income attributable to Hollysys Automation Technologies Ltd.

$

(49,167)

$

13,305

Net income per share:

Basic

0.35

0.23

Diluted

0.35

0.23

Shares used in income per share computation:

Basic

61,302

60,091

Diluted

61,240

61,476

HOLLYSYS AUTOMATION TECHNOLOGIES LTD.

CONSOLIDATED BALANCE SHEETS

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

Sep 30,

June 30,

2022

2022

(Unaudited)

(Audited)

ASSETS

Current assets

Cash and cash equivalents

$

575,148

$

679,754

Short-term investments

69,462

12,203

Restricted cash

38,932

38,486

Accounts receivable,net of allowance for credit losses of $73,470 and $77,603 as of

September 30,2022 and June 30,respectively

303,349

317,763

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

of $11,764 and $12,178 as of September 30,respectively

222,510

228,877

Accounts receivable retention

5,699

6,005

Other receivables,net of allowance for credit losses of $12,280 and $12,449 as of

September 30,respectively

25,928

26,100

Advances to suppliers

41,439

33,851

Amounts due from related parties

24,219

27,360

Inventories

104,417

91,243

Prepaid expenses

511

667

Income tax recoverable

1,550

258

Total current assets

1,413,164

1,462,567

Non-current assets

Restricted cash

743

787

Costs and estimated earnings in excess of billings

1,137

3,021

Accounts receivable retention

6,989

6,561

Prepaid expenses

-

1

Property,net

107,762

98,249

Prepaid land leases

11,754

12,447

Intangible assets,net

9,771

10,742

Investments in equity investees

44,529

46,581

Investments securities

1,598

1,693

Goodwill

19,379

20,539

Deferred tax assets

3,801

4,540

Operating lease right-of-use assets

3,341

4,045

Total non-current assets

210,804

209,206

Total assets

1,623,968

1,671,773

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities

Short-term bank loans

89

66

Current portion of long-term loans

260

15,210

Accounts payable

154,037

173,953

Construction costs payable

7,683

92

Deferred revenue

221,459

206,222

Accrued payroll and related expenses

23,239

23,535

Income tax payable

3,436

4,509

Warranty liabilities

4,349

3,280

Other tax payables

10,591

11,587

Accrued liabilities

34,954

37,282

Amounts due to related parties

6,401

6,299

Other liability

-

3

Operating lease liabilities

2,069

2,518

Total current liabilities

468,567

484,556

Non-current liabilities

Accrued liabilities

2,924

3,349

Long-term loans

15,439

434

Accounts payable

2,677

1,556

Deferred tax liabilities

12,887

12,966

Warranty liabilities

2,357

1,722

Operating lease liabilities

1,054

1,282

Other liability

49

80

Total non-current liabilities

37,387

21,389

Total liabilities

505,954

505,945

Commitments and contingencies

-

-

Stockholders' equity:

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

61,963,047 shares and 61,962,449 shares issued and outstanding as of

September 30,respectively

62

62

Additional paid-in capital

244,713

243,476

Statutory reserves

77,263

77,263

Retained earnings

878,538

857,141

Accumulated other comprehensive income

(83,219)

(12,655)

Total Hollysys Automation Technologies Ltd. stockholder's equity

1,117,357

1,165,287

Non-controlling interests

657

541

Total equity

1,118,014

1,828

Total liabilities and equity

$

1,968

$

1,773

HOLLYSYS AUTOMATION TECHNOLOGIES LTD

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In USD thousands).

Three months ended

Sep 30,2022

(Unaudited)

Cash flows from operating activities:

Net income

$

21,441

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation of property,plant and equipment

2,380

Amortization of prepaid land leases

81

Amortization of intangible assets

340

Allowance for credit losses

(1,142)

Gains on disposal of long-lived assets

(56)

Share of net income of equity investees

(597)

Share-based compensation expenses

1,237

Deferred income tax expenses

867

Changes in operating assets and liabilities:

Accounts receivable and retention

(8,373)

Costs and estimated earnings in excess of billings

(4,532)

Inventories

(18,855)

Advances to suppliers

(9,745)

Other receivables

(1,274)

Deposits and other assets

149

Due from related parties

1,641

Accounts payable

(2,484)

Deferred revenue

27,432

Accruals and other payables

(5,120)

Due to related parties

102

Income tax payable

(2,184)

Other tax payables

(358)

Net cash provided by operating activities

950

Cash flows from investing activities:

Purchases of short-term investments

(71,078)

Purchases of property,plant and equipment

(10,121)

Proceeds from disposal of property,plant and equipment

61

Maturity of short-term investments

11,599

Net cash used in investing activities

(69,539)

Cash flows from financing activities:

Proceeds from short-term bank loans

197

Repayments of short-term bank loans

(170)

Proceeds from long-term bank loans

986

Repayments of long-term bank loans

(144)

Net cash provided by financing activities

869

Effect of foreign exchange rate changes

(36,484)

Net decrease in cash,cash equivalents and restricted cash

$

(104,204)

Cash,cash equivalents and restricted cash,beginning of period

$

719,027

Cash,end of period

614,823

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 measuresserve as additional indicators of our operating performance and not as any replacement for other measures in accordance with U.S. GAAP. We believe these non-GAAP measures help identify underlying trends in the Company's business that could otherwise be distorted by the effect of the share-based compensation expenses,whichare calculated based on the number of sharesor optionsgranted and the fair valueas of the grant date,and amortization of acquired intangible assets. 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.

Non-GAAP gross profit and non-GAAP gross margin,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,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,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.

Three months ended

Sep 30,

2022

2021

(Unaudited)

(Unaudited)

Gross profit

$

52,847

$

52,395

Gross margin(1)

31.1%

34.2%

Add:

Amortization of acquired intangible assets

340

280

Non-GAAP gross profit

$

53,187

$

52,675

Non-GAAP gross margin(2)

31.3%

34.3%

__________

(1) Gross margin represents gross profit for the period as a percentage of revenues for such period.

(2) Non-GAAP gross margin represents non-GAAP gross profit for the period as a percentage of revenues 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,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,

2022

2021

(Unaudited)

(Unaudited)

Gross profit of integrated solutions contracts

$

35,729

$

31,254

Gross margin of integrated solutions contracts(1)

25.0%

25.1%

Add:

Amortization of acquired intangible assets

340

280

Non-GAAP gross profit of integrated solutions contracts

$

36,069

$

31,534

Non-GAAP gross margin of integrated solutions contracts(2)

25.2%

25.3%

__________

(1) Gross margin of integrated solutions contracts represents gross profit of integrated solutions contracts for the period as a

percentage of integrated solutions contracts revenue for such period.

(2) Non-GAAP gross margin of integrated solutions contracts represents non-GAAP gross profit of integrated solutions contracts for

the period as a percentage of integrated solutions contracts revenue for such period.

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.

Three months ended

Sep 30,

2022

2021

(Unaudited)

(Unaudited)

Net income attributable to Hollysys Automation Technologies Ltd.

$

21,397

$

14,259

Add:

Share-based compensation expenses

1,237

3,594

Amortization of acquired intangible assets

340

280

Non-GAAP net income attributable to Hollysys Automation Technologies Ltd.

$

22,974

$

18,133

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

Sep 30,133

Weighted average number of basic ordinary shares

61,091

Weighted average number of diluted ordinary shares

61,476

Basic earnings per share(1)

$

0.35

0.23

Add:

Non-GAAP adjustments to net income per share(2)

0.03

0.06

Non-GAAP basic earnings per share(3)

$

0.37

$

0.30

Diluted earnings per share(1)

$

0.35

0.23

Add:

Non-GAAP adjustments to net income per share(2)

0.03

0.06

Non-GAAP diluted earnings per share(3)

$

0.37

$

0.29

________

(1) Basic (or diluted) earnings per share is derived from net income attributable to ordinary shareholders for computing basic (or

diluted) earnings per share divided by weighted average number of shares (or on a diluted basis).

(2) Non-GAAP adjustments to net income per share are derived from non-GAAP adjustments to net income divided by weighted

average number of shares (or on a diluted basis).

(3) Non-GAAP basic (or diluted) earnings per share is derived from non-GAAP net income attributable to ordinary shareholders for

computing non-GAAP basic (or diluted) earnings per share divided by weighted average number of shares (or on a diluted basis).

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