BEIJING, May 18, 2015 /PRNewswire/ -- Recon Technology, Ltd. (NASDAQ: RCON), ("Recon" or the "Company"), a leading independent oilfield services provider operating primarily in China, today reported its financial results for the third quarter of fiscal year 2015, which ended March 31, 2015.

Q3 FY2015 Financial Highlights:

• Total revenues for the third quarter of FY2015 were RMB20.0 million ($3.3 million), an increase of 9.8% from the same period of FY2014.
• Gross profit for the third quarter of FY2015 was RMB6.2 million ($1.0 million), an increase of 19.1% from the same period of FY2014. Gross margin also expanded by 2.4 points to 31.2% for the third quarter of FY2015 from 28.8% for the same period of FY2014.
• Operating income was RMB0.4 million ($0.1 million) for the third quarter of FY2015, compared to an operating loss of RMB0.6 million for the same period of FY2014.
• Net loss attributable to Recon for the third quarter of FY2015 was RMB1.5 million ($0.2 million), or RMB0.32 ($0.05) loss per diluted share, compared to RMB1.9 million, or RMB0.43 loss per diluted share, for the same period of FY2014.
• Adjusted EBITDA (non-GAAP) was RMB1.7 million ($0.3 million) for the third quarter of FY2015, compared to RMB0.5 million for the same period of FY2014.
• Adjusted net income attributable to Recon was RMB1.3 million ($0.2 million), or RMB0.28 ($0.05) per diluted shares, for the third quarter of FY2015, compared to adjusted net loss attributable to Recon of RMB0.1 million, or RMB0.03 loss per diluted share, for the same period of FY2014.

Mr. Shenping Yin, Chairman and CEO of Recon stated, "It has been a challenging quarter for the oil and gas industry with the plunge in oil and gas prices continuing to put severe pressure on China's already-weak growth momentum, forcing many of our major customers to cut their CAPEX budget and to cancel or delay projects and thus hampering our efforts to carry out business plan. Despite these challenges, revenues increased by 9.8% from the same quarter last year while both gross and operating margins also improved from a year ago, thanks to solid contribution from our automation business as a result of our heightened sales and marketing effort."   

Mr. Yin continued, "While we continue to face significant headwinds in the near term, we believe challenges can turn into potential opportunities for us as our competitors also struggle to stay afloat. With relatively light in assets, strong R&D capability, and deep industry connections forged by years of providing a wide range of hardware, software and service solutions to leading SOEs such as Sinopec and Petro China, in our view Recon is well prepared to withstand the challenges ahead."   

Third Quarter FY2015 Financial Results

Revenues

For the three months ended March 31, 2015, total revenues increased by RMB1.8 million, or 9.8%, to RMB20.0 million ($3.3 million) from RMB18.2 million for the same period of last fiscal year. The increase in total revenues was mainly related to demand of our automation business from our related parties. Revenues from non-related parties hardware and software sales increased by RMB0.4 million, or 2.0%, to RMB18.4 million ($3.0 million) for the three months ended March 31, 2015, compared to RMB18.0 million for the same period of last fiscal year. Revenues from related-party hardware and software sales increased by RMB1.5 million, or 979.0%, to RMB1.7 million ($0.3 million) for the three months ended March 31, 2015, compared to RMB0.2 million for the same period of last fiscal year. We did not book revenues from our service business for the three months ended March 31, 2015, compared to RMB0.1 million for the same period of last fiscal year.

Gross profit and gross margin

Gross profit increased by RMB1.0 million, or 19.1%, to RMB6.2 million ($1.0 million) for the three months ended March 31, 2015 from RMB5.2 million for the same period of last fiscal year. Overall gross margin increased to 31.2% for the three months ended March 31, 2015 from 28.8% for the same period of last fiscal year. The increases in overall gross profit and gross margin were mainly related to our automation software business. Gross margins for hardware and software sales to non-related parties and related parties were 25.1% and 99.4% for the three months ended March 31, 2015, compared to 28.6% and 36.8% for the same period of last fiscal year, respectively. We did not book revenues for our service business for the three months ended March 31, 2015, compared to gross profit and gross margin for our service business of RMB0.04 million and 47.4%, respectively, for the same period of last fiscal year.

Operating income (loss) and operating (loss) margin

Selling and distribution expenses increased slightly by 1.1% to RMB1.1 million for the three months ended March 31, 2015. General and administrative expenses increased by RMB0.2 million, or 5.0%, to RMB4.2 million for the three months ended March 31, 2015 from RMB4.0 million for the same period of last fiscal year. Research and development expenses decreased by RMB0.2 million, or 24.5%, to RMB0.5 million for the three months ended March 31, 2015 from RMB0.7 million for the same period of last fiscal year. Total operating expenses were essentially unchanged at RMB5.8 million ($1.0 million) for the three months ended March 31, 2015.

Operating income of RMB0.4 million ($0.1 million) for the three months ended March 31, 2015 compared to operating loss of RMB0.6 million for the same period of last fiscal year. Operating margin was 2.0% for the three months ended March 31, 2015, compared to operating loss margin of 3.1% for the same period of last fiscal year. 

Net loss

Net loss for the three months ended March 31, 2015 was RMB1.4 million ($0.2 million), compared to RMB1.8 million for the same period of last fiscal year. After deduction of non-controlling interest, net loss for our shareholders was RMB1.5 million ($0.3 million), or RMB0.32 ($0.05) loss per diluted share, for the three months ended March 31, 2015, compared to RMB1.9 million, or RMB0.43 loss per diluted share, for the same period of last fiscal year. 

Non-GAAP Measures

Adjusted EBITDA (non-GAAP), which we define as net income (loss) adjusted for income tax expense, interest expense, loss from investment, non-cash stock compensation expense, depreciation and amortization, was RMB1.7 million ($0.3 million) for the three months ended March 31, 2015, compared to RMB0.5 million for the same period of last fiscal year. Adjusted net income attributable to our shareholders was RMB1.3 million ($0.2 million), or RMB0.28 ($0.05) per diluted shares, for the three months ended March 31, 2015, compared to adjusted net loss attributable to our common shareholders of RMB0.1 million, or RMB0.03 loss per diluted share, for the same period of last fiscal year.

Year-to-Date (Nine Months) FY2015 Financial Results

Revenues

For the nine months ended March 31, 2015, total revenues decreased by RMB30.4 million ($5.0 million), or 39.9%, to RMB45.7 million ($7.5 million) from RMB76.0 million for the same period of last fiscal year as a result of weakness across all of our businesses, particularly during the first half of fiscal year 2015. Revenues from non-related party hardware and software sales decreased by RMB30.2 million, or 41.2%, to RMB43.1 million ($7.1 million) for the nine months ended March 31, 2015, compared to RMB73.3 million for the same period of last fiscal year. Revenues from related-party hardware and software sales increased by RMB0.2 million, or 10.6%, to RMB2.4 million ($0.4 million) for the nine months ended March 31, 2015, compared to RMB2.2 million for the same period of last fiscal year. Revenues from service decreased by RMB0.4 million, or 78.3%, to RMB0.1 million ($0.02 million) for the nine months ended March 31, 2015, compared to RMB0.5 million for the same period of last fiscal year.

Gross profit and gross margin

Gross profit decreased by RMB11.2 million, or 41.5%, to RMB15.8 million ($2.6 million) for the nine months ended March 31, 2015 from RMB27.1 million for the same period of last fiscal year. Overall gross margin decreased to 34.7% for the nine months ended March 31, 2015 from 35.6% for the same period of last fiscal year. The decreases in gross profit were across all of our businesses. Gross margins for hardware and software sales to non-related parties and related parties were 30.9% and 98.9% for the nine months ended March 31, 2015, compared to 33.9% and 80.6% for the same period of last fiscal year, respectively.

Operating income (loss) and operating (loss) margin

Selling and distribution expenses decreased by RMB1.6 million, or 34.8%, to RMB3.1 million for the nine months ended March 31, 2015 from RMB4.7 million for the same period of last fiscal year. General and administrative expenses increased by RMB1.5 million, or 14.7%, to RMB12.0 million for the nine months ended March 31, 2015 from RMB10.5 million for the same period of last fiscal year. Research and development expenses decreased by RMB1.6 million, or 40.0%, to RMB2.4 million for the nine months ended March 31, 2015 from RMB4.1 million for the same period of last fiscal year. Total operating expenses decreased by RMB1.7 million, or 9.0%, to RMB17.5 million ($2.9 million) for the nine months ended March 31, 2015 from RMB19.2 million for the same period of last fiscal year.

Operating loss was RMB1.7 million ($0.3 million) for the nine months ended March 31, 2015, compared to operating income of RMB7.8 million for the same period of last fiscal year. Operating loss margin was 3.6% for the nine months ended March 31, 2015, compared to operating margin of 10.3% for the same period of last fiscal year. 

Net income (loss)

Net income for the nine months ended March 31, 2015 was RMB0.2 million ($0.03 million), compared to RMB5.0 million for the same period of last fiscal year. After deduction of non-controlling interest, net loss for our shareholders was RMB0.4 million ($0.06 million), or RMB0.08 ($0.01) loss per diluted share, for the nine months ended March 31, 2015, compared to net income attributable to our shareholders of RMB3.9 million, or RMB0.92 per diluted share, for the same period of last fiscal year. 

Non-GAAP Measures

Adjusted EBITDA (non-GAAP), which we define as net income (loss) adjusted for income tax expense, interest expense, loss from investment, non-cash stock compensation expense, depreciation and amortization, was RMB2.9 million ($0.5 million) for the nine months ended March 31, 2015, compared to RMB11.7 million for the same period of last fiscal year. Adjusted net income attributable to our shareholders was RMB0.7 million ($0.1 million), or RMB0.15 ($0.02) per diluted shares, for the nine months ended March 31, 2015, compared to RMB7.8 million, or RMB1.81 per diluted share, for the same period of last fiscal year.

Financial Position  

As of March 31, 2015, the Company had cash and cash equivalents of RMB4.7 million ($0.8 million), short-term bank loans of RMB8.0 million ($1.3 million), and short-term loan to related parties of RMB10.2 million ($1.7 million), compared to RMB18.1 million, RMB10.0 million, and RMB5.2 million, respectively, at June 30, 2014. Working capital as of March 31, 2015 was RMB90.1 million ($14.7 million) as compared to RMB83.1 million at June 30, 2014. Net cash used in operating activities was RMB16.2 million ($2.7 million) for the nine months ended March 31, 2015, compared to RMB15.3 million for the same period of last fiscal year. Net cash used in investing activities was RMB0.2 million ($0.03 million) for the nine months ended March 31, 2015, essentially unchanged from a year ago. Net cash provided by financing activities was RMB3.0 million ($0.5 million) for the nine months ended March 31, 2015, compared to RMB11.9 million for the same period of last fiscal year. During the fiscal 2015 nine-month period, we repaid RMB2.0 million in short term bank loans and received RMB5.0 million net proceeds from a related party.

Recent Development 

On February 18, 2015, the Company announced that it has signed an agreement with Aktobe Petroleum Machinery Co. Ltd., an affiliate of the Company's key customer -- Petro China, to jointly construct a pressure container technical service center for heating furnaces and separators in Kazakhstan.

On January 29, 2015, the Company held its annual general meeting of stockholders at which a majority of the Company's shareholders voted for: 1) an increase of authorized shares from 25 million to 75 million; 2) election of directors; 3) an approval of the Company's 2015 Equity Incentive Plan; and 4) the ratification of Friedman LLP as the Company's independent registered public accounting firm for FY2015 ending June 30, 2015.

About Recon

Recon Technology, Ltd. is China's first independent oil and gas field service company listed on NASDAQ (RCON). Closely working with leading global partners, Recon has achieved rapid growth supplying China's largest oil and gas exploration companies, including Sinopec and China National Petroleum Corporation, with advanced automated technologies, efficient gathering and transportation equipment and reservoir stimulation measures. The solutions Recon provides are aimed at increasing gas and petroleum extraction levels, reducing impurities, improving safety and lowering production costs. For additional information, please visit www.recon.cn.

Cautionary Statements

Statements made in this release with respect to Recon's current plans, estimates, strategies and beliefs and other statements that are not historical facts are forward-looking statements about the future performance of Recon. Forward-looking statements include, but are not limited to, those statements using words such as "believe," "expect," "plans," "strategy," "prospects," "forecast," "estimate," "project," "anticipate," "aim," "intend," "seek," "may," "might," "could" or "should," and words of similar meaning in connection with a discussion of future operations, financial performance, events or conditions. From time to time, oral or written forward-looking statements may also be included in other materials released to the public. These statements are based on management's assumptions, judgments and beliefs in light of the information currently available to it. Recon cautions investors that a number of important risks and uncertainties could cause actual results to differ materially from those discussed in the forward-looking statements, including but not limited to, product and service demand and acceptance, changes in technology, economic conditions, the impact of competition and pricing, government regulation, and other risks contained in reports filed by the company with the Securities and Exchange Commission. Therefore investors should not place undue reliance on such forward-looking statements. Actual results may differ significantly from those set forth in the forward-looking statements. 

All such forward-looking statements, whether written or oral, and whether made by or on behalf of the company, are expressly qualified by the cautionary statements and any other cautionary statements which may accompany the forward-looking statements. In addition, the company disclaims any obligation to update any forward-looking statements to reflect events or circumstances after the date hereof.

Contact:    

Recon Technology, Ltd.
Tel: +86-10-8494-5799
Email: info@recon.cn
Web: http://www.recon.cn

Weitian Investor Relations
Tina Xiao
Tel: +1-917-609-0333
Email: tina.xiao@weitian-ir.com

SOURCE Recon Technology, Ltd.