BEIJING, Feb. 16, 2016 /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 second quarter of fiscal year 2016, which ended December 31, 2015.

Q2 FY2016 Financial Highlights:

• Total revenues for the second quarter of FY2016 were RMB 28.84 million ($4.44 million), an increase of 35.2% from the same period of last fiscal year.
• Gross profit for the second quarter of FY2016 was RMB 5.76 million ($0.89 million), a decrease of 35.8% from the same period of last fiscal year. Gross margin was 20.0% for the second quarter of FY2016, compared to 42.1% for the same period of last fiscal year.
• Operating loss was RMB 3.27 million ($0.50 million) for the second quarter of FY2016, compared to operating income of RMB 2.39 million for the same period of last fiscal year.
• Net loss attributable to Recon for the second quarter of FY2016 was RMB 2.52 million ($0.39 million), or RMB 0.45 ($0.07) per diluted share, compared to RMB 5.33 million, or RMB 1.10 per diluted share, for the same period of last fiscal year.
• Adjusted EBITDA (non-GAAP) was negative RMB 1.13 million ($0.17 million) for the second quarter of FY2016, compared to RMB 3.49 million for the same period of last fiscal year.
• Adjusted net loss attributable to Recon was RMB 0.71 million ($0.11 million), or RMB 0.13 ($0.02) per diluted shares, for the second quarter of FY2016, compared to adjusted net income attributable to Recon of RMB 2.04 million, or RMB 0.42 per diluted share, for the same period of last fiscal year.

Mr. Shenping Yin, Chairman and CEO of Recon stated, "Despite continuing macro headwinds and sluggish oil prices, we ended the year of 2015 on a high note with revenues growing 35.2% to the highest level in two years, thanks to strong sales in hardware and service. Entering 2016, our furnace business is on the path to recovery following major bidding contract win and Class A Furnace Supplier qualification with PetroChina in December while our newly acquired QHHY subsidiary starts to make meaningful contribution to both our top line and bottom line. We look forward to a stronger year in 2016."  

Q2 FY2016 Financial Results

Revenues

For the three months ended December 31, 2015, total revenues increased by 35.2% to RMB 28.84 million ($4.44 million) from RMB 21.33 million for the same period of last fiscal year mainly as a result of increase in sales of hardware products. Revenues from non-related party hardware and software sales increased by RMB 7.34 million, or 35.8%, to RMB 27.86 million ($4.29 million) for the three months ended December 31, 2015, compared to RMB 20.52 million for the same period of last fiscal year. Revenues from service increased by RMB 0.94 million to RMB 0.99 million ($0.15 million) for the three months ended December 31, 2015, compared to RMB 0.05 million for the same period of last fiscal year. No hardware and software sales were made to related parties for the three months ended December 31, 2015, as compared to RMB 0.77 million for the same period of last fiscal year.

Gross profit and gross margin

Cost of revenues increased by RMB 10.73 million, or 86.9%, to RMB 23.08 million ($3.56 million) for the three months ended December 31, 2015 from RMB 12.35 million for the same period of last fiscal year. As a percentage of revenues, cost of revenues increased to 80.0% for the three months ended December 31, 2015 from 57.9% for the same period of last fiscal year.

Gross profit decreased by RMB 3.22 million, or 35.8%, to RMB 5.76 million ($0.89 million) for the three months ended December 31, 2015 from RMB 8.98 million for the same period of last fiscal year. Overall gross margin was 20.0% for the three months ended December 31, 2015, compared to 42.1% for the same period of last fiscal year.

Operating income (loss) and operating (loss) margin

Selling and distribution expenses increased by RMB 0.26 million, or 20.5%, to RMB 1.51 million ($0.23 million) for the three months ended December 31, 2015 from RMB 1.25 million for the same period of last fiscal year. General and administrative expenses increased by RMB 0.70 million, or 17.0%, to RMB 4.79 million ($0.74 million) for the three months ended December 31, 2015 from RMB 4.09 million for the same period of last fiscal year. Research and development expenses increased by RMB 1.49 million, or 120.1%, to RMB 2.74 million ($0.42 million) for the three months ended December 31, 2015 from RMB 1.24 million for the same period of last fiscal year as a result of increased research and development effort on downhole service tools. Total operating expenses increased by RMB 2.45 million, or 37.1%, to RMB 9.04 million ($1.39 million) for the three months ended December 31, 2015 from RMB 6.59 million for the same period of last fiscal year.

Operating loss was RMB 3.27 million ($0.50 million) for the three months ended December 31, 2015, compared to operating income of RMB 2.39 million for the same period of last fiscal year. Operating loss margin was 11.4% for the three months ended December, 2015, compared to operating profit margin of 11.2% for the same period of last fiscal year. 

Net income (loss) attributable to Recon

Net loss to our shareholders for the three months ended December 31, 2015 was RMB 2.52 million ($0.39 million), or RMB 0.45 ($0.07) per diluted share, compared to net income of RMB 5.33 million, or RMB1.10 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 (benefit), interest expense, change in fair value of warrants liability, restricted shares issued for consulting services, non-cash stock compensation expense, depreciation and amortization, was adjusted loss of  RMB 1.13 million ($0.17 million) for the three months ended December 31, 2015, compared to adjusted income of RMB 3.49 million for the same period of last fiscal year. Adjusted loss attributable to our shareholders was RMB 0.71 million ($0.11 million), or RMB 0.13 ($0.02) per diluted share, for the three months ended December 31, 2015, compared to adjusted income attributable to our shareholders of RMB 2.04 million, or RMB 0.42 per diluted share, for the same period of last fiscal year.

Year-to-Date (Six Months) FY2016 Financial Results

Revenues

Total revenues for the six months ended December 31, 2015 increased by RMB 6.80 million, or 26.5%, to RMB 32.44 million ($5.00 million) from RMB 25.63 million for the same period of last fiscal year. This increase was mainly due to increase in hardware sales to non-related parties and service revenues and partially offset by decrease in software sales.

Revenues from hardware and software to non-related parties increased by RMB 6.58 million, or 26.6%, to RMB 31.34 million ($4.83 million) for the six months ended December 31, 2015 from RMB 24.76 million for the same period of last fiscal year, mainly due to the increase in sales of hardware products. Revenues from service increased to RMB 1.10 million ($0.17 million) for the six months ended December 31, 2015 from RMB 0.10 million for the same period of last fiscal year. No sales of hardware and software were made to related parties for the six months ended December 31, 2015, versus RMB 0.77 million for the same period of last fiscal year.

Gross profit and gross margin

Cost of revenues increased by RMB 10.23 million, or 63.8%, to RMB 26.27 million ($4.05 million) for the six months ended December 31, 2015 from RMB 16.04 million for the same period of last fiscal year. As a percentage of revenues, our cost of revenues increased to 81.0% for the six months ended December 31, 2015 from 62.6% for the same period of last fiscal year.

Gross profit decreased by RMB3.43 million, or 35.7%, to RMB 6.16 million ($0.95 million) for the six months ended December 31, 2015 from RMB 9.59 million for the same period of last fiscal year. Overall gross margin was 19.0% for the six months ended December 31, 2015, compared to 37.4% for the same period of last fiscal year. The decrease in overall gross margin was mainly due to the decrease in software sales with high margins.

Operating income (loss) and operating (loss) margin

Selling and distribution expenses increased by RMB 0.67 million, or 34.2%, to RMB 2.62 million ($0.40 million) for the six months ended December 31, 2015 from RMB 1.96 million for the same period of last fiscal year. General and administrative expenses increased by RMB 3.17 million, or 40.7%, to RMB 10.97 million ($1.69 million) for the six months ended December 31, 2015 from RMB 7.80 million for the same period of last fiscal year. Research and development expenses increased by RMB 2.63 million, or 138.4%, to RMB 4.53 million ($0.70 million) for the six months ended December 31, 2015 from RMB 1.90 million for the same period of last fiscal year as a result of increased research and development effort on downhole service tools. Total operating expenses increased by RMB 6.47 million, or 55.5%, to RMB 18.12 million ($2.29 million) for the six months ended December 31, 2015 from RMB 11.65 million for the same period of last fiscal year.

Operating loss was RMB 11.96 million ($1.84 million) for the six months ended December 31, 2015, compared to RMB 2.06 million for the same period of last fiscal year. Operating loss margin was 36.9% for the six months ended December, 2015, compared to 8.0% for the same period of last fiscal year. 

Net income (loss) attributable to Recon

Net loss to our shareholders for the six months ended December 31, 2015 was RMB 11.37 million ($1.75 million), or RMB2.07 ($0.32) per diluted share, compared to net income of RMB 1.16 million, or RMB 0.24 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 (benefit), interest expense, change in fair value of warrants liability, restricted shares issued for consulting services, non-cash stock compensation expense, depreciation and amortization, was adjusted loss of RMB 8.13 million ($1.25 million) for the six months ended December 31, 2015, compared to adjusted income of RMB 1.22 million for the same period of last fiscal year. Adjusted net loss attributable to our shareholders was RMB 8.23 million ($1.27 million), or RMB 1.49 ($0.23) per diluted share, for the six months ended December 31, 2015, compared to RMB 0.63 million, or RMB 0.13 per diluted share, for the same period of last fiscal year.

Financial Position  

As of December 31, 2015, the Company had cash and cash equivalents of RMB 3.11 million ($0.48 million), short-term bank loans of RMB 6.50 million ($1.00 million), and short-term borrowings from related parties of RMB 7.23 million ($1.11 million), compared to RMB12.34 million, RMB 7.00 million, and RMB 16.92 million, respectively, at June 30, 2015. Working capital as of December 31, 2015 was RMB 68.64 million ($10.58 million) as compared to RMB 72.43 million at June 30, 2015. Net cash provided by operating activities was RMB 0.99 million ($0.15 million) for the six-month ended December 31, 2015, compared to net cash used in operating activities of RMB 15.39 million for the same period of last fiscal year. Net cash used in investing activities was RMB 0.50 million ($0.08 million) for the six months ended December 31, 2015, compared to RMB 0.17 million for the same period of last fiscal year. Net cash used in financing activities was RMB 9.85 million ($1.52 million) for the six months ended December 31, 2015, compared to net cash provided by financing activities of RMB 2.40 million for the same period of last fiscal year. During the six-month period ended December 31, 2015, we repaid RMB 15.52 million ($2.39 million) of short-term borrowings to two related parties, repaid RMB 0.50 million ($0.08 million) short-term bank loans, and received RMB 6.00 million ($0.92 million) from one related party. We also issued 15,874 shares of common stocks through an at-the-market offering and received net proceeds of RMB 0.17 million ($0.03 million) during the six-month period ended December 31, 2015.

Recent Development 

On February 2, 2016, Beijing BHD Petroleum Technology Co., Ltd. ("BHD"), a wholly-owned subsidiary of the Company, received two orders for a total of RMB 2.1 million (~US$0.3 million) from PetroChina's oilfield companies. The first order, dated January 12, 2016, is to supply two heat exchanger units, a major component of furnaces, to PetroChina's Jilin Oilfield for RMB650,000(~US$0.1 million), with a scheduled delivery date of no later than March 15, 2016. The second order, dated January 21, 2016, is to supply two furnaces to PetroChina's Huabei Oilfield for RMB1.47 million (~US$0.2 million), with a scheduled delivery date of February 29, 2016.

On January 20, 2016, Nanjing Recon Technology Co., Ltd. ("Nanjing Recon"), a subsidiary of the Company, obtained qualifications to provide services for some state-owned electric companies and, as a result, has participated in bidding projects, including projects for China Huadian Corp.

On January 12, 2016, BHD executed an agreement (the "Agreement") with Qinghai Oilfield, a PetroChina subsidiary, to sell chemical agents (the "Chemicals") to Qinghai Oilfield. The Chemicals, including Ion Modifiers and Water Quality Stabilizers, are designed and tested by BHD and are to be used for wastewater treatment at the Qinghai Oilfield. This Agreement, which is valued at RMB 3.98 million (~$0.6 million), is expected to be completed by the end of FY2016.  

On December 14, 2015, BHD won a major bidding contract with PetroChina and was deemed a Class A Furnace Supplier to all PetroChina's oilfield companies. With this bidding and qualification, BHD will participate in PetroChina's furnace procurement program, which was worth over RMB 2.9 billion (approximately $457 million) during the period Oct. 2015 to Sep. 2017. The Company also announced that BHD has secured a RMB 3.22 million (~$0.5 million) contract to supply five furnaces to PetroChina's Huabei Oilfield under this Bidding process.

On December 1, 2015, the Company entered into a share purchase agreement to acquire 100% equity interest in Qinghai Huayou Downhole Technologies Co., Ltd. ( "QHHY"), a PRC corporation and oilfield service provider in Qinghai province.

About Recon Technology, Ltd.

Recon Technology, Ltd. is China's first independent oil and gas field service company listed on NASDAQ (RCON). Working closely 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. 
Jia Liu
Tel: +86-10-8494-5799 
Email: info@recon.cn

Weitian Investor Relations 

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

 

 

 

 

 

 

 

SOURCE Recon Technology, Ltd.