RECON REPORTS LOWER FIRST QUARTER RESULTS BUT MAINTAINS FULL YEAR GROWTH OUTLOOK
BEIJING, Nov. 13, 2014 /PRNewswire/ -- Recon Technology, Ltd. (NASDAQ: RCON), ("Recon" or the "Company"), a leading independent oilfield services provider operating primarily in China, today reported that in its fiscal 2015 first quarter ended September 30, 2014, results were impacted by capital expenditure reductions by its industry leading state-owned customers reflecting changing industry conditions. One major consequence was the temporary postponement of a number of oil and gas projects. To a lesser extent, the reduced capital expenditures also resulted in some reduction in sales opportunities for Recon as compared to the same period last year. These factors translated to a year over year decline in FY 2015 first quarter revenues and profitability and resulted in a loss in the period.
Mr. Sheping Yin, Chairman and CEO of Recon stated, "We fully expect that projects originally scheduled to be completed in the quarter will be completed in subsequent periods during the fiscal year. Coupled with the continuing high degree of interest we are seeing in our products and technology we are anticipating a significant recovery and increase in revenues as projects are expected to be completed during this fiscal year that we believe will keep us on track with our growth plans."
In the first quarter ended September, 30, 2014:
Revenues declined 62.6% to $699,450 from $1,870,951* in the first fiscal quarter last year for the reasons noted above. Nevertheless, we believe customer interest in Recon products and technology remained strong.
With the decline in revenues, adjusted net income attributable to Recon (non-U.S. GAAP)** declined to a loss of approximately $(432,936) from a gain of approximately $135,862* in the same period last year.
Adjusted EBIDTA (non-U.S. GAAP) decreased year over year from approximately $240,611* in the first quarter of FY 2014 to a loss of approximately $(368,662) in first quarter of FY 2015.
The net loss attributable to Recon (U.S. GAAP) was approximately $(676,299), compared with net income of approximately $7,548* a year earlier.
Diluted EPS (U.S. GAAP) was a loss of $(0.14) per share in the first quarter of FY 2015, compared with a net profit of $0.002 per share in the first quarter of FY2014.
Adjusted diluted EPS** (non-U. S. GAAP) was a loss of $(0.09) compared with a gain of $0.03 in the year ago first quarter.
* Based on the exchange rate of RMB 6.1534 to US $1.00.
** Non-U.S. GAAP measures are explained in tables 1 and 2 below. Non-U.S. GAAP adjusted net income (loss) and EPS exclude certain special non-cash after tax expenses totaling $243,363, or $0.05 per share that are included in net income (loss).
Other FY 2015 First Quarter Highlights
Finished goods in inventory totaled $2.4 million, of which approximately 20% were furnaces shipped to customer sites.
Gross margins declined to 14.3% from 46% a year earlier mainly reflecting the sharp decline in revenues, as well as decreased revenue from higher gross margin software.
Operating income declined to a loss of $(722,446) compared with $81, 687 in the year ago quarter.
Current assets as of September 30, 2014 were approximately $20.5 million, including approximately $7.5 million in accounts receivable and about $1 million in cash and cash equivalents.
The Company reported no long term debt and total current liabilities of approximately $7.3 million as of September 30, 2014. After the end of the quarter, the Company received a short term loan of $975,071 from a founder of the Company.
Working capital as of September 30, 2014 was approximately $13.2 million.
Weighted average outstanding ordinary shares as of September 30, 2014 were approximately 4.76 million.
Mr. Yin commented further, "Despite reduced drilling and lower oil prices -- as well as the continuing reforms taking place in China's oil industry -- we see continuing opportunity to expand our share of our customers' budgets with products and services that improve their productivity, safety and reduce their costs. Currently they are looking to us primarily for hardware -- in particular our oilfield furnaces -- as well as our automation products and services. We believe that with current conditions in the industry, the budgets of our customers will be shifting from exploration to increased production and development expenditures. We think we can meet their needs with our products and will continue to seek additional opportunities to expand our role on their behalf."
Research and Development and Fracking
"While focused on generating increasing near term revenue and profit," Mr. Yin continued, "we are also focused on developing new products with our outstanding research and development team that we count on to expand our Company's role in China's oil and gas fields in the future. A particular focus in recent months has been on reducing the high cost of fracking in China, which has been a major obstacle to its growth. We are confident of achieving breakthroughs in this area that will keep Recon in the forefront of future fracking activity in China."
Growth Goals: at least 20% year over year
"In our year end press release," Mr. Yin said, "we announced and discussed the growth goals we have developed. It is our belief that an achievable goal for Recon is average annual revenue growth of a minimum of 20%. Additionally, we believe that if we couple this with appropriate acquisitions, we can aim to double our revenues over the next two to three years. We further believe that with respect to our current fiscal year 2015, despite the poor start, we are still on track to achieve at least 20% year over year growth in revenues which should become more evident over the course of the year."
Conference Call Invitation
The Company will discuss Fiscal Year 2015 First Quarter results during a live conference call and webcast on Friday, November 14, 2014 at 8:00 am Eastern Standard Time.
To participate in the call, interested participants should call 1-866-620-9467 or 0086-010-95057 when calling within the United States or 010-95057 when calling from China. The Password for the Recon Technology First Quarter Investor Conference Call is: 9739 9962. Playback of the call will be available on the Recon website: www.recon.cn
SEE ATTACHED TABLES
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
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.
Investor Relations Contacts:
Chief Financial Officer
Recon Technology, Ltd.
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DGI Investor Relations