Recon Technology, Ltd. Reports Fiscal Year 2016 First Quarter Financial Results

BEIJING, Nov. 13, 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 first quarter of fiscal year 2016, which ended September 30, 2015.

Q1 FY2016 Financial Highlights:  

Total revenues for the first quarter of FY2016 were RMB3.59 million ($0.57 million), a decrease of 16.5% as compared to the same period last fiscal year.

• Gross profit for the first quarter of FY2016 was RMB0.40 million ($0.06 million), a decrease of 34.7% as compared to the same period last fiscal year. Gross margin was 11.2% for the first quarter of FY2016, as compared to 14.3% for the same period last fiscal year.
• Operating loss was RMB8.68 million ($1.37 million) for the first quarter of FY2016, compared to RMB4.45 million for the same period last fiscal year.
• Net loss attributable to Recon for the first quarter of FY2016 was RMB8.85 million ($1.39 million), or RMB1.63 ($0.26) per diluted share, compared to RMB4.16 million, or RMB0.87 per diluted share, for the same period last fiscal year.
• Adjusted EBITDA (non-GAAP) was negative RMB7.00 million ($1.10 million) for the first quarter of FY2016, compared to negative RMB2.27 million for the same period last fiscal year.
• Adjusted net loss attributable to Recon was RMB7.52 million ($1.18 million), or RMB1.38 ($0.22) per diluted shares, for the first quarter of FY2016, compared to RMB2.66 million, or RMB0.56 per diluted share, for the same period last fiscal year.

Mr. Shenping Yin, Chairman and CEO of Recon stated, "During the three-month period ended September 30, 2015, we saw a continued downturn in oil and gas prices. Our customers still have not increased their investment in the upstream business. However, we are actively seeking new breakthrough business opportunities and we are confident for our future growth."

Q1 FY2016 Financial Results

Revenues

For the three months ended September 30, 2015, total revenues decreased by RMB0.71 million, or 16.5%, to RMB3.59 million ($0.57 million) from RMB4.30 million for the same period last fiscal year mainly as a result of decreased sales of automation software. Revenues from non-related party hardware and software sales decreased by RMB0.76 million, or 18.0%, to RMB3.48 million ($0.55 million) for the three months ended September 30, 2015, as compared to RMB4.25 million for the same period of last fiscal year. The Company did not book revenues from related-party hardware and software sales for the three months ended September 30, for either this fiscal year or last fiscal year.

Gross profit and gross margin 

Cost of revenues decreased by RMB0.50 million, or 13.5%, to RMB3.19 million ($0.50 million) for the three months ended September 30, 2015 from RMB3.69 million for the same period of last fiscal year. As a percentage of revenues, cost of revenues increased slightly to 88.8% for the three months ended September 30, 2015 from 85.7% for the same period last fiscal year.

Gross profit decreased by RMB0.21 million, or 34.7%, to RMB0.40 million ($0.06 million) for the three months ended September 30, 2015 from RMB0.62 million for the same period last fiscal year. Overall gross margin was 11.2% for the three months ended September 30, 2015, compared to 14.3% for the same period last fiscal year.

Operating income (loss) and operating (loss) margin 

Selling and distribution expenses increased by RMB0.41 million, or 58.8%, to RMB1.11 million ($0.18 million) for the three months ended September 30, 2015 from RMB0.70 million for the same period last fiscal year. General and administrative expenses increased by RMB2.47 million, or 66.8%, to RMB6.18 million ($0.97 million) for the three months ended September 30, 2015 from RMB3.70 million for the same period last fiscal year. Research and development expenses increased by RMB1.14 million, or 173.0%, to RMB1.79 million ($0.28 million) for the three months ended September 30, 2015 from RMB0.66 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 RMB4.02 million, or 79.5%, to RMB9.08 million ($1.43 million) for the three months ended September 30, 2015 from RMB5.06 million for the same period during last fiscal year.

Operating loss was RMB8.68 million ($1.37 million) for the three months ended September 30, 2015, compared to RMB4.45 million for the same period last fiscal year. Operating loss margin was 241.5% for the three months ended September 30, 2015, compared to 103.3% for the same period last fiscal year. 

Net income (loss)

Net loss to our shareholders for the three months ended September 30, 2015 was RMB8.85 million ($1.39 million), or RMB1.63 ($0.26) per diluted share, compared to RMB4.16 million, or RMB0.87 per diluted share, for the same period 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, non-cash stock compensation expense, depreciation and amortization, was negative RMB7.00 million ($1.10 million) for the three months ended September 30, 2015, compared to negative RMB2.27 million for the same period last fiscal year. This was mainly due to decreased revenue and increased research and development expenses. Adjusted net loss attributable to our shareholders was RMB7.52 million ($1.18 million), or RMB1.38 ($0.22) per diluted shares, for the three months ended September 30, 2015, compared to RMB2.66 million, or RMB0.56 per diluted share, for the same period last fiscal year.

Financial Position：

As of September 30, 2015, the Company had cash and cash equivalents of RMB3.88 million ($0.61 million), short-term bank loans of RMB7.00 million ($1.10 million), and short-term borrowings from related parties of RMB9.41 million ($1.48 million), compared to RMB12.34 million, RMB7.00 million, and RMB16.92 million, respectively, at June 30, 2015. Working capital as of September 30, 2015 was RMB66.48 million ($10.46 million) as compared to RMB72.43 million at June 30, 2015. Net cash used in operating activities was RMB0.97 million ($0.15 million) for the three months ended September 30, 2015, compared to RMB9.97 million for the same period of last fiscal year. Net cash used in investing activities was RMB0.47 million ($0.07 million) for the three months ended September 30, 2015, compared to RMB0.10 million for the same period of last fiscal year. Net cash used in financing activities was RMB7.13 million ($1.12 million) for the three months ended September 30, 2015, compared to RMB2.00 million for the same period last fiscal year. During the three-month period ended September 30, 2015, we repaid RMB9.10 million ($1.43 million) in short-term borrowings to two related parties and received RMB1.80 million ($0.28 million) in short-term borrowings from one related party.

Recent Development 

On September 22, 2015, the Company entered into an amendment to the Letter Agreement with Maxim Group LLC, dated January 28, 2015, extending the term of the Letter Agreement for an additional six months, or until February 29, 2016. As of November 13, 2015, a total of 313,071 shares have been issued under this Letter Agreement. 

On August 6, 2015, the Company announced that it will set up a scientific research and training base (the "Workstation") in collaboration with the College of Information Science & Technology of Nanjing Agricultural University ("CIST-NAU").  With a current enrollment of more than 26,400 full-time students, including more than 9,400 full-time master's and doctoral students, NAU is a premier university under the administration of Ministry of Education. Often ranked among the nation's top 100 universities, NAU is a national key university with both Project 211 and Project 985 designations

On July 29, 2015, the Company entered into a memorandum of understanding (the "MOU") with Qinghai Huayou Downhole Technologies Co., Ltd. ("QHHY"), a PRC corporation and oilfield service provider in Qinghai province, to acquire a 100% stake in QHHY with a combination of cash and the Company stock (the "Transaction"). The terms and conditions of a definitive agreement are currently being negotiated between the two parties. Further details will be disclosed upon completion of a definitive agreement.

About Recon

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. Ivy Xia Tel: +86-10-8494-5799 Email: [email protected]

Weitian Investor Relations Tina Xiao Tel: +1-917-609-0333 Email: [email protected]

 

 

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SOURCE Recon Technology, Ltd.