Hollysys Automation Technologies (HOLI) 6-K Hollysys Automation Technologies Reports Unaudited

Exhibit 99.1

FOR IMMEDIATE RELEASE

Hollysys Automation Technologies Reports Unaudited

Financial Results for the Third Quarter and the First Nine Months Ended March 31, 2020

First Nine months of Fiscal Year 2020 Financial Highlights

• Non-GAAP net income attributable to Hollysys was $77.9 million, a decrease of 22.5% compared to the comparable prior year period.

• Total revenues were $374.1 million, a decrease of 9.5% compared to the comparable prior year period.

• Non-GAAP gross margin was at 35.6%, compared to 38.3% for the comparable prior year period.

• Non-GAAP diluted EPS was $1.28, a decrease of 22.0% compared to the comparable prior year period.

• Net cash provided by operating activities was $117.5 million for the current period.

• DSO of 188 days, compared to 176 days for the comparable prior year period.

• Inventory turnover days of 57 days, compared to 59 days for the comparable prior year period.

Third Quarter of Fiscal Year 2020 Financial Highlights

• Non-GAAP net income attributable to Hollysys was $13.9 million, a decrease of 50.4% compared to the comparable prior year period.

• Total revenues were $80.8 million, a decrease of 35.5% compared to the comparable prior year period.

• Non-GAAP gross margin was at 30.8%, compared to 39.6% for the comparable prior year period.

• Non-GAAP diluted EPS were at $0.23, a decrease of 50.0% compared to the comparable prior year period.

• Net cash provided by operating activities was $8.0 million for the current quarter.

• DSO of 266 days, compared to 193 days for the comparable prior year period.

• Inventory turnover days of 71 days, compared to 50 days for the comparable prior year period.

Beijing, China – May 14, 2020 – 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 fiscal year 2020 third quarter ended March 31, 2020(see attached tables). The management of Hollysys, stated:

COVID-19 has laid negative impact on our business. Contract bidding and project execution were delayed for Industrial Automation (“IA”) and rail business and only started to recover starting in March. In response to such impact, we have actively prepared internal work in advance, including staff training, marketing preparation, solution improvement, internal testing, etc. while also maintained communication with clients to the greatest extent, and made procurement in advance to counter the uncertainty of overseas supply chain. With the reopening of economy in China, we expect our business to recover to its normal course. Going forward, the Company will be imposing more stringent criteria on cash collection and payment, contract quality and expense.

Hollysys Automation Technologies Ltd May 14, 2020 Page  2

IA business finished the third quarter with revenue and contract at $34.2 million and $63.2 million, representing 43.0% and 24.7% YOY decrease, respectively. For the first nine months of the fiscal year, IA revenue and contract achieved 0.5% and 4.1% YOY growth, respectively.

• In coal fire sector, we continued our effort in strengthening our market position inhigh-end market and won the bidding for Xinjiang Wucaiwan 2*660MW power units this quarter.

• In chemical and petro-chemical sector, we continued our effort in key bidding tracking. Several major contracts that we signed this quarter include a 5 million tons/year oil treatment DCS upgrade project for Sinopec and a comprehensive surveillance project covering six LNG (Liquidated Natural Gas) storage centers of Henan Natural Gas Storage & Logistics Company, where we provided a wide range of solutions including SCADA, DCS, SIS, and GDS (Gas Detection System) etc. To assist with our market penetration strategy, we kept improving our solution and product through internal R&D and cooperation with external parties, with particular focus in the vertical of coal-chemical and oil & gas. We also continued to build the reputation of the Company in the industry in various manners, including industry conference, successful key project demonstration, cooperation with experts, key clients strategic relation management, etc.

• In smart factory business, internal structural optimization was made as we established the digital factory business unit (“BU”). The new BU will be responsible for the marketing, solution and software development and execution of smart factory project. We expect such change to lead to more focused internal resource deployment for serving client of various industries. As a comparison, the business used to be carried out separately by different industry teams, with our advantageous power industry being the primary focus. In solution preparation, we have gradually improved our solution through internal R&D and external cooperation for various industries, including oil & gas and fine chemical.

• Under the “3+1+N” strategy, we continued the effort to integrate the sales platform of the Company for greater internal synergy, to develop and strengthen our industrial cloud capacity covering cloud platform and cloud-based software, and to expand our solution for full lifecycle coverage. With the effort, we have made meaningful progress in pharmaceutical business in terms of solution expansion, thanks to the inclusion of design capacity and greater coordination between members of the Company. In this quarter, key contracts of pharmaceutical business include an engineering design contract with Shandong Fulkon, a renowned domestic pharmaceutical producer, and three tens of millions RMB level control system contracts.

Hollysys Automation Technologies Ltd May 14, 2020 Page  3

Rail business finished the third quarter with revenue and contract at $28.7 million and $5.0 million, recording 38.7% and 86.0% YOY decrease, respectively. For the first nine months of the fiscal year, revenue and contract recorded 5.3% and 53.5% YOY decrease, respectively.

• In high-speed rail (“HSR”) sector, major contracts include an ATP contract for cargo high-speed train, a TCC contract for Zhengzhou section of the Taiyuan-Jiaozuo High-speed Railway and several aftersales contracts covering part components, maintenance and upgrade.

• In subway sector, no significant contracts were signed this quarter. On quality management, following the successful delivery of Phase one of Hohhot subway line 1 cloud-based SCADA project last quarter, subway business continued to strengthen quality management, with particular focus on supply chain management and engineering standardization. On aftersales service, several contracts covering system upgrade and part components were signed.

• To actively address the aftersales opportunities in the market, rail business has been implementing the “service transformation” strategy, to strengthen local service network, to expand service solution and to developtechnology-and-service-centered service for better differentiation. In HSR sector, other than the current aftersales service provided toon-board products (ATP), we have been exploring and developing service solution foron-ground products. In subway sector, with current client base and numerous line under operation, we are gradually reviewing existing projects for maintenance and upgrade opportunities.

• As part of the “3+1+N” strategy, rail business is actively executing the digital empowerment for the current product line. New solutions on smart maintenance and smart workshop for clients from HSR and subway have been identified and are currently under development and testing. With urbanization as an ongoing process, we will keep leveraging our strong R&D capacity and prepare for the application of our solution in more verticals of transportation in the future. Going forward, our rail business will continue to adhere to the diversity strategy for stable and healthy growth.

M&E business finished the quarter with revenue and contract at $17.9 million and $19.9 million, recording 2.6% YOY decrease and 18.6% YOY increase respectively. For the first nine months of the fiscal year, revenue and contract recorded 37.0% and 3.7% YOY decrease respectively.

Given the macro economy in Southeast Asia and the Middle East, as well as the outbreak ofCOVID-19 and its potential impact, risk control remains to be the key focus of our M&E business. In our direct sales and overseas EPC project, progress is constantly made in terms of establishment of new cooperation with new key EPC players as well as ongoing cooperation with existing partners.

In addition to our previous effort on overseas headquarter upgrade and appointment of overseas officer, we have set up a3-year-long global management capacity action plan. The plan aims to gradually incorporate our current overseas business into the management system of the domestic business, and to ultimately build our global management capacity.

Hollysys Automation Technologies Ltd May 14, 2020 Page  4

Third Quarter and First Nine Months Ended March 31, 2020 Unaudited Financial Results Summary

(In USD thousands, except for number of shares and per share data)
	Three months ended									Nine months ended
	March 31, 2020			March 31, 2019			% Change			March 31, 2020			March 31, 2019			% Change
Revenues	$	80,768			125,167			(35.5	)%	$	374,106			413,350			(9.5	)%
Integrated solutions contracts revenue	$	67,673			101,285			(33.2	)%	$	301,814			334,618			(9.8	)%
Products sales	$	3,588			13,187			(72.8	)%	$	16,249			27,144			(40.1	)%
Service rendered	$	9,507			10,695			(11.1	)%	$	56,043			51,588			8.6	%
Cost of revenues	$	55,928			75,652			(26.1	)%	$	240,977			255,219			(5.6	)%
Gross profit	$	24,840			49,515			(49.8	)%	$	133,129			158,131			(15.8	)%
Total operating expenses	$	13,317			19,319			(31.1	)%	$	65,121			55,895			16.5	%
Selling	$	6,168			6,474			(4.7	)%	$	23,838			22,043			8.1	%
General and administrative	$	8,946			8,743			2.3	%	$	30,130			28,939			4.1	%
Research and development	$	10,221			8,655			18.1	%	$	32,969			27,825			18.5	%
VAT refunds and government subsidies	$	(12,018	)		(4,553	)		164.0	%	$	(21,816	)		(22,912	)		(4.8	)%
Income from operations	$	11,523			30,196			(61.8	)%	$	68,008			102,236			(33.5	)%
Other income, net	$	1,031			1,190			(13.4	)%	$	4,357			7,685			(43.3	)%
Foreign exchange gain (loss)	$	98			(333	)		(129.4	)%	$	647			(1,163	)		(155.6	)%
Gains on disposal of an investment in an equity investee	$	—			—			—		$	5,763			—			—
Share of net income (loss) of equity investees	$	570			(885	)		(164.4	)%	$	4,108			(1,172	)		(450.5	)%
Dividend income from equity security investments	$	—			—			—		$	1,141			1,116			2.2	%
Interest income	$	3,271			2,978			9.9	%	$	9,399			8,973			4.7	%
Interest expenses	$	(16	)		(54	)		(70.4	)%	$	(135	)		(371	)		(63.6	)%
Income tax expenses	$	2,422			4,946			(51.0	)%	$	15,424			16,713			(7.7	)%
Net income (loss) attributable tonon-controlling interests	$	119			50			138.0	%	$	(7	)		132			(105.3	)%
Non-GAAP net income attributable to Hollysys Automation Technologies Ltd.	$	13,936			28,096			(50.4	)%	$	77,871			100,459			(22.5	)%
Non-GAAP basic EPS	$	0.23			0.46			(50.0	)%	$	1.29			1.66			(22.3	)%
Non-GAAP diluted EPS	$	0.23			0.46			(50.0	)%	$	1.28			1.65			(22.0	)%
Share-based compensation expenses	$	15			50			(70.0	)%	$	55			201			(72.6	)%
Amortization of acquired intangible assets	$	75			78			(3.8	)%	$	226			234			(3.4	)%
Fair value adjustments of a bifurcated derivative	$	—			—			—		$	—			20			(100.0	)%
GAAP Net income attributable to Hollysys Automation Technologies Ltd.	$	13,846			27,968			(50.5	)%	$	77,590			100,004			(22.4	)%
GAAP basic EPS	$	0.23			0.46			(50.0	)%	$	1.28			1.65			(22.4	)%
GAAP diluted EPS	$	0.23			0.46			(50.0	)%	$	1.28			1.64			(22.0	)%
Basic weighted average common shares outstanding		60,552,099			60,459,370			0.2	%		60,520,329			60,453,704			0.1	%
Diluted weighted average common shares outstanding		60,552,099			61,276,829			(1.2	)%		60,694,045			61,273,073			(0.9	)%

Hollysys Automation Technologies Ltd May 14, 2020 Page  5

Operational Results Analysis for the Third Quarter Ended March 31, 2020

Comparing to the third quarter of the prior fiscal year, thetotal revenues for the three months ended March 31 2020 decreased from $125.2 million to $80.8 million, representing a decrease of 35.5%. Broken down by the revenue types, integrated contracts revenue decreased by 33.2% to $67.7 million, products sales revenue decreased by 72.8% to $3.6 million, and services revenue decreased by 11.1% to $9.5 million.

The Company’stotal 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,
	2020					2019					2020					2019
	$		% to Total Revenue			$		% to Total Revenue			$		% to Total Revenue			$		% to Total Revenue
Industrial Automation		34,228		42.4	%		60,063		47.9	%		168,155		45.0	%		167,241		40.4	%
Rail Transportation Automation		28,672		35.5	%		46,759		37.4	%		152,071		40.6	%		160,630		38.9	%
Mechanical and Electrical Solution		17,868		22.1	%		18,345		14.7	%		53,880		14.4	%		85,479		20.7	%
Total		80,768		100.0	%		125,167		100.0	%		374,106		100.0	%		413,350		100.0	%

Overall gross margin excludingnon-cash amortization of acquired intangibles(non-GAAP gross margin) was 30.8% for the three months ended March 31, 2020, as compared to 39.6% for the same period of the prior year.Thenon-GAAP gross margin for integrated contracts, product sales, and services rendered were 22.3%, 71.3% and 75.3% for the three months ended March 31, 2020, as compared to 30.2%, 85.6% and 71.9% for the same period of the prior year, respectively. The gross margin fluctuated mainly due to the different revenue mix with different margins.The GAAP overall gross margin which includesnon-cash amortization of acquired intangibles was 30.7% for the three months ended March 31, 2020, as compared to 39.5% for the same period of the prior year.The GAAP gross margin for integrated contracts, product sales, and service rendered was 22.2%, 71.3% and 75.3% for the three months ended March 31, 2020, as compared to 30.1%, 85.6% and 71.9% for the same period of the prior year, respectively.

Selling expenses were $6.2 million for the three months ended March 31, 2020, representing a decrease of $0.3 million or 4.7% compared to $6.5 million for the same quarter of the prior year. Presented as a percentage of total revenues, selling expenses were 7.6% and 5.2% for the three months ended March 31, 2020, and 2019, respectively.

General and administrative expenses, excludingnon-cash share-based compensation expenses(non-GAAP G&A expenses), were $8.9 million for the quarter ended March 31, 2020, representing an increase of $0.2 million or 2.3% compared to $8.7 million for the same quarter of the prior year. Presented as a percentage of total revenues,non-GAAP G&A expenses were 11.1% and 7.0% for quarters ended March 31, 2020 and 2019, respectively.The GAAP G&A expenses which include thenon-cash share-based compensation expenses were $9.0 million and $8.8 million for the three months ended March 31, 2020 and 2019, respectively.

Hollysys Automation Technologies Ltd May 14, 2020 Page  6

Research and development expenses were $10.2 million for the three months ended March 31, 2020, representing an increase of $1.5 million or 18.1% compared to $8.7 million for the same quarter of the prior year, mainly due to increased research and development activities. Presented as a percentage of total revenues, R&D expenses were 12.7% and 6.9% for the quarter ended March 31, 2020 and 2019, respectively.

The VAT refunds and government subsidies were $12.0 million for three months ended March 31, 2020, as compared to $4.6 million for the same period in the prior year, representing a $7.4 million or 164.0% increase, which was primarily due to increase of the VAT refunds.

The income tax expenses and the effective tax rate were $2.4 million and 14.8% for the three months ended March 31, 2020, respectively, as compared to $4.9 million and 15.0% for comparable prior year period, respectively,.

Thenon-GAAP net income attributable to Hollysys, which excludes thenon-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 $13.9 million or $0.23 per diluted share based on 60.6 million diluted weighted average ordinary shares outstanding for the three months ended March 31, 2020. This represents a 50.4% decrease from $28.1 million or $0.46 per share based on 61.3 million diluted weighted average ordinary shares outstanding reported in the comparable prior year period.On a GAAP basis, net income attributable to Hollysys was $13.8 million or $0.23 per diluted share representing a decrease of 50.5% from $28.0 million or $0.46 per diluted share reported in the comparable prior year period.

Contracts and Backlog Highlights

Hollysys achieved $88.1 million of new contracts for the three months ended March 31, 2020. The backlog as of March 31, 2020 was $574.1 million. The detailed breakdown of new contracts and backlog by segments is shown below:

	New contracts achieved				Backlog
	for the three months ended March 31, 2020				as of March 31, 2020
	(In USD thousands)		% to Total Contract		(In USD thousands)		% to Total Backlog
Industrial Automation		63,228		71.7%		211,437		36.8%
Rail Transportation		4,980		5.7%		277,962		48.4%
Mechanical and Electrical Solutions		19,867		22.6%		84,719		14.8%
Total		88,075		100.0%		574,118		100.0%

Hollysys Automation Technologies Ltd May 14, 2020 Page  7

Cash Flow Highlights

For the three months ended March 31, 2020, thetotal net cash outflowwas $60.1 million. The net cash provided by operating activities was $8.0 million. Thenet cash used in investing activities was $61.8 million and mainly consisted of 2.2 million purchases of property, plant and equipment, and $137.0 million of time deposits placed with banks, which were partially offset by $77.1 million of matured time deposits. Thenet cash used in financing activities was $1.1 million and mainly consisted of $1.2 million repayments of short-term bank loans.

Balance Sheet Highlights

The total amount ofcash and cash equivalentswere $366.4 million, $403.9 million, and $276.5 million as of March 31, 2020, December 31, 2019 and March 31, 2019, respectively.

For the three months ended March 31, 2020, DSO was 266 days, as compared to 193 days for the comparable prior year period and 137 days for the last quarter; and inventory turnover was 71 days, as compared to 50 days for the comparable prior year period and 39 days for the last quarter.

Conference Call

The Company will host a conference call at 9:00 pm May 14, 2020 U.S. Eastern Time / 9:00 am May 15, 2020 Beijing Time, to discuss the financial results for fiscal year 2020 third quarter ended March 31, 2020 and business outlook.

Joining the Conference Call:

Please note that our teleconference provider have fully moved to a new system, Direct Event, which delivers the same teleconference call service but bypre-registration only for the participants. Here is the instruction on joining the conference call:

1. Please register in advance of the conference using the link provided below. Upon registering, you will be provided with participantdial-in numbers, Direct Event passcode and unique registrant ID.

2. 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/unmute

Hollysys Automation Technologies Ltd May 14, 2020 Page  8

Direct Event online registration:http://apac.directeventreg.com/registration/event/7939828. Please use Conference ID 7939828 for entry if the link fails to lead directly to the registration page.

In addition, a recording of the conference call will be accessible within 48 hours via Hollysys’ website at:http://hollysys.investorroom.com

About Hollysys Automation Technologies Ltd. (NASDAQ: HOLI)

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. 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, 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 June 2019, Hollysys had cumulatively carried out more than 25,000 projects for approximately 15,000 customers in various sectors including power, petrochemical, high-speed rail, and urban rail, in which Hollysys has established leading market positions.

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 ofnon-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.

Hollysys Automation Technologies Ltd May 14, 2020 Page  9

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 May 14, 2020 Page  10

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 Mar 31,						Nine months ended Mar 31,
	2020			2019			2020			2019
	(Unaudited)			(Unaudited)			(Unaudited)			(Unaudited)
Net revenues
Integrated solutions contracts revenue	$	67,673		$	101,285		$	301,814		$	334,618
Products sales		3,588			13,187			16,249			27,144
Revenue from services		9,507			10,695			56,043			51,588
Total net revenues		80,768			125,167			374,106			413,350
Costs of integrated solutions contracts		52,628			70,818			216,613			232,411
Cost of products sold		1,031			1,903			4,461			5,566
Costs of services rendered		2,344			3,009			20,129			17,476
Gross profit		24,765			49,437			132,903			157,897
Operating expenses
Selling		6,168			6,474			23,838			22,043
General and administrative		8,961			8,793			30,185			29,140
Research and development		10,221			8,655			32,969			27,825
VAT refunds and government subsidies		(12,018	)		(4,553	)		(21,816	)		(22,912	)
Total operating expenses		13,332			19,369			65,176			56,096
Income from operations		11,433			30,068			67,727			101,801
Other income, net		1,031			1,190			4,357			7,665
Foreign exchange gain (loss)		98			(333	)		647			(1,163	)
Gains on disposal of an investment in an equity investee		—			—			5,763			—
Share of net income (losses) of equity investees		570			(885	)		4,108			(1,172	)
Dividend income from equity security investments		—			—			1,141			1,116
Interest income		3,271			2,978			9,399			8,973
Interest expenses		(16	)		(54	)		(135	)		(371	)
Income before income taxes		16,387			32,964			93,007			116,849
Income taxes expenses		2,422			4,946			15,424			16,713
Net income		13,965			28,018			77,583			100,136
Net income (losses) attributable tonon-controlling interests		119			50			(7	)		132
Net income attributable to Hollysys Automation Technologies Ltd.	$	13,846		$	27,968		$	77,590		$	100,004
Other comprehensive (loss) income, net of tax of nil
Translation adjustments		(18,493	)		14,871			(31,746	)		(11,604	)
Comprehensive income		(4,528	)		42,889			45,837			88,532
Less: comprehensive income (loss) attributable tonon-controlling interests		79			50			1,030			(129	)
Comprehensive (loss) income attributable to Hollysys Automation Technologies Ltd.	$	(4,607	)	$	42,839		$	44,807		$	88,661
Net income per share:
Basic		0.23			0.46			1.28			1.65
Diluted		0.23			0.46			1.28			1.64
Shares used in net income per share computation:
Basic		60,552,099			60,459,370			60,520,329			60,453,704
Diluted		60,552,099			61,276,829			60,694,045			61,273,073

Hollysys Automation Technologies Ltd May 14, 2020 Page  11

HOLLYSYS AUTOMATION TECHNOLOGIES LTD.

CONSOLIDATED BALANCE SHEETS

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

	March 31, 2020		December 31, 2019
	(Unaudited)		(Unaudited)
ASSETS
Current assets
Cash and cash equivalents	$	344,000	$	403,860
Time deposits with original maturities over three months		203,542		146,745
Restricted cash		15,020		19,985
Accounts receivable, net of allowance for doubtful accounts of $45,704 and $45,348 as of March 31, 2020 and December 31, 2019, respectively		215,247		239,492
Costs and estimated earnings in excess of billings, net of allowance for doubtful accounts of $6,189 and $6,672 as of March 31, 2020 and December 31, 2019, respectively		214,057		227,490
Accounts receivable retention		4,142		4,911
Other receivables, net of allowance for doubtful accounts of $4,346 and $4,390 as of March 31, 2020 and December 31, 2019, respectively		27,795		23,173
Advances to suppliers		16,228		17,522
Amounts due from related parties		24,808		26,515
Inventories		49,609		35,596
Prepaid expenses		821		510
Income tax recoverable		1,541		288
Total current assets		1,116,810		1,146,087
Non-current assets
Restricted cash		7,368		2,657
Costs and estimated earnings in excess of billings		2,542		2,700
Accounts receivable retention		6,490		7,300
Prepaid expenses		7		10
Property, plant and equipment, net		75,778		78,059
Prepaid land leases		15,719		16,224
Intangible assets, net		1,116		1,208
Investments in equity investees		40,052		40,077
Investments securities		4,623		4,693
Goodwill		35,834		37,845
Deferred tax assets		8,947		8,328
Operating leaseright-of-use assets		5,084		5,259
Totalnon-current assets		203,560		204,360
Total assets		1,320,370		1,350,447
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Short-term bank loans		279		1,436
Current portion of long-term loans		316		319
Accounts payable		114,363		115,166
Construction costs payable		1,461		1,289

Hollysys Automation Technologies Ltd May 14, 2020 Page  12

Deferred revenue		133,176			142,025
Accrued payroll and related expenses		11,972			21,473
Income tax payable		2,349			4,795
Warranty liabilities		6,205			6,597
Other tax payables		2,320			4,481
Accrued liabilities		31,315			29,337
Amounts due to related parties		3,534			4,218
Operating lease liabilities		1,679			1,673
Total current liabilities		308,969			332,809
Non-current liabilities
Accrued liabilities		5,534			7,620
Long-term loans		829			896
Accounts payable		3,690			3,824
Deferred tax liabilities		14,252			13,146
Warranty liabilities		3,681			4,117
Operating lease liabilities		3,075			3,180
Totalnon-current liabilities		31,061			32,783
Total liabilities		340,030			365,592
Commitments and contingencies		—			—
Stockholders’ equity:
Ordinary shares, par value $0.001 per share, 100,000,000 shares authorized; 60,537,099 shares issued and outstanding as of March 31, 2020 and December 31, 2019		61			61
Additionalpaid-in capital		223,690			223,673
Statutory reserves		49,424			49,427
Retained earnings		772,666			758,819
Accumulated other comprehensive loss		(68,305	)		(49,852	)
Total Hollysys Automation Technologies Ltd. stockholder’s equity		977,536			982,128
Non-controlling interests		2,804			2,727
Total equity		980,340			984,855
Total liabilities and equity	$	1,320,370		$	1,350,447

Hollysys Automation Technologies Ltd May 14, 2020 Page  13

HOLLYSYS AUTOMATION TECHNOLOGIES LTD CONSOLIDATED STATEMENTS OF CASH FLOWS (In USD thousands).
	Three months ended March 31, 2020 (Unaudited)			Nine months ended March 31, 2020 (Unaudited)
Cash flows from operating activities:
Net income	$	13,965		$	77,583
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation of property, plant and equipment		2,499			7,101
Amortization of prepaid land leases		97			294
Amortization of intangible assets		75			226
Allowance for doubtful accounts		716			1,311
Gains on disposal of property, plant and equipment		(11	)		(2	)
Share of net income of equity investees		(570	)		(4,108	)
Share-based compensation expenses		15			55
Deferred income tax expenses		477			6,712
Accretion of convertible bond		—			57
Gains on disposal of an investment of an equity investee		—			(5,763	)
Changes in operating assets and liabilities:
Accounts receivable and retention		17,872			57,723
Costs and estimated earnings in excess of billings		9,614			(25,469	)
Inventories		(14,712	)		(8,063	)
Advances to suppliers		1,019			(3,793	)
Other receivables		(5,407	)		(1,720	)
Deposits and other assets		(332	)		(204	)
Due from related parties		1,293			10,440
Accounts payable		2,587			13,381
Deferred revenue		(6,540	)		(3,675	)
Accruals and other payables		(8,173	)		(6,306	)
Due to related parties		(683	)		(1,861	)
Income tax payable		(3,666	)		1,875
Other tax payables		(2,118	)		1,670
Net cash provided by operating activities		8,017			117,464
Cash flows from investing activities:
Time deposits placed with banks		(136,982	)		(240,643	)
Purchases of property, plant and equipment		(2,174	)		(5,036	)
Proceeds from disposal of property, plant and equipment		264			556
Maturity of time deposits		77,108			177,044
Acquisition of a subsidiary, net of cash acquired		—			(150	)
Proceeds from disposal of investments in equity investee		—			4,458
Net cash used in investing activities		(61,784	)		(63,771	)
Cash flows from financing activities:
Proceeds from short-term bank loans		102			2,377
Repayments of short-term bank loans		(1,213	)		(3,965	)

Hollysys Automation Technologies Ltd May 14, 2020 Page  14

Proceeds from long-term bank loans		117		293
Repayments of long-term bank loans		(119	)	(379	)
Payment of dividends		—		(12,713	)
Repayments of bonds payable		—		(20,753	)
Net cash used in financing activities		(1,113	)	(35,140	)
Effect of foreign exchange rate changes		(5,234	)	(10,552	)
Net increase in cash, cash equivalents and restricted cash	$	(60,114	)	8,001
Cash, cash equivalents and restricted cash, beginning of period	$	426,502		358,387
Cash, cash equivalents and restricted cash, end of period		366,388		366,388

Hollysys Automation Technologies Ltd May 14, 2020 Page  15

Non-GAAP Measures

In evaluating our results, thenon-GAAP measures of“Non-GAAP cost of integrated contracts”,“Non-GAAP general and administrative expenses”,“Non-GAAP other income (expenses), net”,“Non-GAAP net income attributable to Hollysys Automation Technologies Ltd. stockholders”,“Non-GAAP basic earnings per share”, and“Non-GAAP diluted earnings 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 thesenon-GAAP measures are useful to investors, as they exclude thenon-cash share-based compensation expenses, which is calculated based on the number of shares or options granted and the fair value as of the grant date, amortization of acquired intangible assets, and fair value adjustments of a bifurcated derivative. They will not result in any cash inflows or outflows. We believe that usingnon-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 suchnon-GAAP measures to evaluate the Company.

The following table provides a reconciliation of thenon-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 March 31,				Nine months ended March 31,
	2020		2019		2020		2019
	(Unaudited)		(Unaudited)		(Unaudited)		(Unaudited)
Cost of integrated solutions contracts	$	52,628	$	70,818	$	216,613	$	232,411
Less: Amortization of acquired intangible assets		75		78		226		234
Non-GAAP cost of integrated solutions contracts	$	52,553	$	70,740	$	216,387	$	232,177
General and administrative expenses	$	8,961	$	8,793	$	30,185	$	29,140
Less: Share-based compensation expenses		15		50		55		201
Non-GAAP general and administrative expenses	$	8,946	$	8,743	$	30,130	$	28,939
Other income, net	$	1,031		1,190		4,357		7,665
Add: Fair value adjustments of a bifurcated derivative		—		—		—		20
Non-GAAP other income, net	$	1,031		1,190		4,357		7,685
Net income attributable to Hollysys Automation Technologies Ltd.	$	13,846	$	27,968	$	77,590	$	100,004
Add:
Share-based compensation expenses		15		50		55		201
Amortization of acquired intangible assets		75		78		226		234
Fair value adjustments of a bifurcated derivative		—		—		—		20
Non-GAAP net income attributable to Hollysys Automation Technologies Ltd.	$	13,936	$	28,096	$	77,871	$	100,459
Weighted average number of basic ordinary shares		60,552,099		60,459,370		60,520,329		60,453,704
Weighted average number of diluted ordinary shares		60,552,099		61,276,829		60,694,045		61,273,073
Non-GAAP basic earnings per share	$	0.23	$	0.46	$	1.29	$	1.66
Non-GAAP diluted earnings per share	$	0.23	$	0.46	$	1.28	$	1.65