Hollysys Automation Technologies Ltd (HOLI) 2021 Q3 法說會逐字稿

Ladies and gentlemen, thank you for standing by, and welcome to the Hollysys Automation Technologies Earnings Conference Call for Fiscal Year 2021 Third Quarter ended March 31, 2021. (Operator Instructions) Please be advised that this conference is being recorded today, May 14, 2021, Beijing Time. I would now like to hand the conference over to Mr. Arden Xia, the Investor Relations Director of Hollysys Automation Technologies. Please go ahead, Mr. Xia.

女士們，先生們，感謝大家的支持，歡迎參加和利時自動化技術公司 2021 財年第三季（截至 2021 年 3 月 31 日）收益電話會議。(操作員指示)請注意，本次會議將於今天（2021 年 5 月 14 日，北京時間）進行錄製。現在，我想將會議交給和利時自動化技術公司投資者關係總監Arden Xia先生。夏先生，請講。

Hello, everyone, and thank you for joining us. Today, our attendees will be CEO, Mr. Colin Sung; CFO, Mr. Steven Wang; Mr. Yi Ma, Chairman of the Hollysys Group, one of the company's subsidiary; Co-COO, Mr. Yue Xu and Mr. Lei Fang, who are in charge of IA and the Railway business, respectively. On today's call, Mr. Sung will provide a general overview of our business, including some highlights for the third quarter and the first 9 months of fiscal year 2021. Mr. Steven Wang will discuss our performance from financial perspective, and all management team will answer questions afterwards.

大家好，感謝大家的參與。今天，我們的出席者是執行長 Colin Sung 先生；首席財務長王先生；該公司旗下和利時集團董事長馬毅先生；聯席首席營運官為徐越先生和方雷先生，分別負責IA和鐵路業務。在今天的電話會議上，宋先生將概述我們的業務，包括 2021 財年第三季和前 9 個月的一些亮點。王先生將從財務角度討論我們的業績，之後所有管理團隊將回答問題。

Before getting started, I would like to remind everyone that this conference call will contain forward-looking statements within the meaning of Private Securities Litigation Reform Act of 1995. Forward-looking statements are the statements that are not historical facts, including statements relating to the expected growth of Hollysys' future product introductions, the mix of products in the future periods and future operating results. 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.

在開始之前，我想提醒大家，本次電話會議將包含 1995 年《私人證券訴訟改革法案》所定義的前瞻性陳述。前瞻性陳述是不屬於歷史事實的陳述，包括與和利時未來產品​​推出的預期成長、未來期間的產品組合和未來營運績效有關的陳述。此類基於和利時管理層當前信念和期望的前瞻性陳述具有風險和不確定性，可能導致實際結果與前瞻性陳述不同。

The following factors, among others, could cause actual results to differ from those set forth in these statements: business conditions in China and in Southeast Asia; continued compliance with government regulations; [legislation] or regulatory environments; requirements or changes adversely affecting the business in which Hollysys is engaged; cessation or changes in government incentive programs; potential trade barriers affecting international expansion; fluctuation in customer demand; management of rapid growth and transitions to new markets; intensity of competition from or introduction of new and superior products by other providers of automation and control system technology; timing, approval and market acceptance of new product introductions; general economic conditions; geopolitical events and regulatory changes; as well as other relevant risks detailed in Hollysys' filings with Securities and Exchange Commission.

以下因素（包括但不限於）可能導致實際結果與這些聲明中所述的結果不同：中國和東南亞的商業狀況；繼續遵守政府法規； [立法]或監管環境；對和利時所從事的業務產生不利影響的要求或變化；政府激勵計劃終止或改變；影響國際擴張的潛在貿易壁壘；客戶需求波動；管理快速增長和向新市場的轉型；來自其他自動化和控制系統技術供應商的競爭強度或其他供應商推出的新產品和優質產品；新產品推出的時機、批准和市場接受度；一般經濟狀況；地緣政治事件和監管變化；以及和利時向美國證券交易委員會提交的文件中詳細說明的其他相關風險。

The information set forth herein should be [read] in light of such risks. Hollysys does not assume any obligation to update the information discussed in the conference call or in its filings. Please note that all amounts noted in this conference call will be in U.S. dollars, unless otherwise noted.

應根據此類風險來閱讀此處列出的資訊。和利時不承擔更新電話會議或文件中討論的資訊的任何義務。請注意，除非另有說明，本次電話會議中提到的所有金額均以美元為單位。

And now I'd like to turn the call to Mr. Colin Sung. Please go ahead, Mr. Sung.

現在我想把電話轉給 Colin Sung 先生。宋先生，請繼續。

Thank you, Arden, and greeting to everyone. Industrial Automation, AI (sic) [IA], business finished the third quarter with revenue and new contract at $67.5 million and $106.7 million, representing 97.1% and 68.7% year-on-year growth. For the first 9 months of the 2021 fiscal year, IA revenue and new contract achieved 44.1% and 34% year-on-year growth, respectively.

謝謝你，阿登，向大家問好。工業自動化、人工智慧 (IA) 業務第三季的營收和新合約分別為 6,750 萬美元和 1.067 億美元，年增 97.1% 和 68.7%。2021財年前9個月，IA營收和新合約分別實現年增44.1%和34%。

In the power sector, we employed sustainable development tactics in order to address the needs of former customers. By offering these various upgrade products and wider range of services, we were able to increase market share.

在電力領域，我們採用永續發展策略來滿足以前客戶的需求。透過提供各種升級產品和更廣泛的服務，我們能夠增加市場份額。

Highlights of the quarter. Signed 2 600-megawatt power plant replacement contracts. This repeat business demonstrated industry recognition of Hollysys for quality system replacement, product offering depth and reliable engineering services. Signed service contract for digital upgrade for Distributed Control Systems, DCS, of 2 1,000 megawatt units for a power plant. We increased the number of digital projects year-over-year, increasing our sales of construction of digitally optimized factories for existing customers.

本季的亮點。簽訂2座600兆瓦電廠置換合約。此次重複業務顯示了業界對和利時公司優質系統更換、產品深度和可靠工程服務的認可。簽訂某發電廠2台1000兆瓦機組分散控制系統DCS數位化升級服務合約。我們的數位化專案數量逐年增加，現有客戶建造數位化優化工廠的銷售額也隨之增加。

In the chemical and the petrochemical sector, we continued to win mid- and high-profile projects through effective marketing and promotion coupled with our strong customer relationships. Highlights of the quarter include: the Zhong'an United Coal Co., Ltd. project gained industry recognition for both economic and social benefits and was awarded the Special Award on Science and Technology of 2019 to 2020 for Chinese Petroleum and Chemical Automation; signed a polycarbonate project contract in Pingdingshan, Henan Province, establishing new foothold in polycarbonate field. This important project highlights Hollysys' capability, positioning the company to win more mid- and high-profile contracts.

在化學和石化領域，我們透過有效的營銷和推廣以及強大的客戶關係繼續贏得中高端專案。本季度的亮點包括：中安聯合煤炭有限公司。項目經濟效益和社會效益得到業界認可，榮獲2019-2020年度中國石油和化工自動化科學技術特等獎；在河南平頂山簽訂聚碳酸酯項目合同，在聚碳酸酯領域邁出新的一步。這項重要項目凸顯了和利時的實力，使公司能夠贏得更多中高端合約。

Signed a contract with China National Offshore Oil Corporation, CNOOC, for their Sanya gas field upgrade project. An integrated control system with upgraded products will be implemented and demonstrated in this project. The installation of Hollysys' control system for CNOOC's offshore greenfield, zero discharge and low carbon project was successfully completed. This pilot green oilfield program was the first domestic control system adopted by CNOOC. Hollysys' integrated control system successfully achieved efficiency improvement and cost reduction while promoting low carbon and zero discharge management of offshore oil production. The company will participate in future exploration, construction and development on green oilfield projects. Hollysys' offering will contribute to realize the national goal of reducing carbon dioxide emission and becoming carbon neutral.

與中國海洋石油總公司（CNOOC）簽署三亞氣田升級專案合約。本計畫將實施並示範升級產品的整合控制系統。和利時公司為中海油海上綠地零排放低碳專案實施的控制系統順利安裝完畢。該綠色油田試點計畫是中海油在國內率先採用的管控體系。和利時整合控制系統在推動海上石油生產低碳、零排放管理的同時，成功實現了效率提升、成本降低。公司未來將參與綠色油田項目的勘探、建設和開發。和利時的產品將有助於實現國家減少二氧化碳排放和實現碳中和的目標。

In the food and beverage and pharmaceutical sector, we are driving technological innovation by providing high-quality engineering in partnership with our key customers. In this quarter, a contract was signed with a Shandong pharmaceutical company to provide instruments, DCS and a Safety Instrument (sic) [Instrumentation] System for the production of 2,800 tons per year of active pharmaceutical ingredients. In addition, the company continues to pursue cooperation agreement with other leader in pharmaceutical industry. A significant contract was signed with one of the subsidiary of Sino Biopharmaceutical Ltd., establishing a solid foundation for the future work with the client.

在食品飲料和製藥領域，我們與主要客戶合作提供高品質的工程，推動技術創新。本季與山東某製藥公司簽訂合同，為其年產2800噸原料藥生產提供儀表、DCS和安全儀表系統。此外，該公司還繼續與製藥業的其他領導者尋求合作協議。與中國生物製藥有限公司旗下一家子公司簽署了重要合同，為未來與客戶的合作奠定了堅實的基礎。

In the smart factory business, we are promoting solution upgrade and staying attuned to market demand while helping clients develop technology innovative factories with digitized solution for production and management. Highlights of the quarter include: signed a contract to provide our smart factory solution for a Tangshan chemical company after winning the bid for a silicone smart factory project last quarter. Smart solution for DCS, SIS, MES, BATCH and IODS were included in the offering, which marks another advancement for the company in the fine chemical smart factory space. Hollysys will construct a data integrated platform which will achieve seamless information flow between the operation and management levels, creating the foundation of the client's digital transformation.

在智慧工廠業務方面，我們不斷推動解決方案升級，跟上市場需求，幫助客戶打造技術創新工廠，提供生產和管理的數位化解決方案。本季的亮點包括：繼上季中標矽膠智慧工廠專案後，又簽署了為唐山一家化工企業提供智慧工廠解決方案的合約。該產品包含DCS、SIS、MES、BATCH、IODS等智慧解決方案，標誌著該公司在精細化工智慧工廠領域的又一進步。和利時將建構數據整合平台，實現營運層與管理階層之間的資訊無縫流通，為客戶的數位轉型奠定基礎。

A contract was signed to provide smart power solution for a client's 2 125-megawatt power plant along with a DCS. Hollysys leveraging existing skills and experience to pioneer the implementation of a smart industrial platform, customized smart solution to meet the comprehensive needs of customers across verticals, such as power and fine chemicals.

簽訂合同，為客戶的2座125兆瓦發電廠提供智慧電力解決方案以及DCS。和利時利用現有的技術和經驗，率先實施智慧工業平台，客製化智慧解決方案，滿足電力、精細化工等垂直產業客戶的綜合需求。

A contract covering the production of approximately 500,000 tons of paper goods was signed with a large paper manufacturer. We offer a solution with DCS, Intelligent Operational Data System and instruments. This project representing the largest contract amount and production scale that Hollysys had won in the paper industry. It will boost Hollysys' industry credibility, creating a platform for the company to further penetrate the market.

與一家大型造紙廠簽訂了生產約50萬噸紙製品的合約。我們提供 DCS、智慧操作數據系統和儀器的解決方案。該項目是和利時公司在造紙業中標的最大合約金額和生產規模。此舉將提升和利時的產業信譽，為公司進一步滲透市場創造平台。

Aftersales business of IA is keeping a healthy pace. Under our big automation initiative, we continued to strengthen customer relationship management and improve our capability for wider range of solutions. Under the influence of COVID-19 pandemic, the company launched Fangcun (inaudible) smart services APP through which users can purchase spare parts, submit service requirements and participate in remote professional courses. The APP is also an e-commerce platform of industrial products for existing customers or partners to further enhance customer stickiness and boost future business development.

IA售後業務維持健康發展。在我們的大型自動化計劃下，我們繼續加強客戶關係管理並提高我們提供更廣泛解決方案的能力。在新冠疫情影響下，公司推出芳村（聽不清楚）智能服務APP，用戶可透過該APP購買配件、提交服務需求、參加遠距專業課程等。該APP同時也是現有客戶或合作夥伴的工業產品電商平台，進一步增強客戶黏著度，助力未來業務發展。

Rail business finished the quarter with revenue and new contract at $30.7 million and $15.7 million, recording a 7% year-on-year growth and 215.2% year-on-year growth. For the first 9 months of 2021 fiscal year, rail business revenue and new contracts showed a 7.5% year-on-year decrease and a 10.2% year-on-year growth, respectively.

本季度，鐵路業務收入和新合約金額分別為 3,070 萬美元和 1,570 萬美元，年增 7% 和 215.2%。2021財年前9個月，鐵路業務收入較去年同期下降7.5%，新簽合約年增10.2%。

In the high-speed rail, HSR, sector, we continue to deliver on existing projects while maintaining our market position in existing product lines plus exploring opportunity in new markets. Hollysys continue to apply smart and upgraded solution designed to meet the emerging needs of the market. Highlights of the quarter include: offering Automation Train Operation, ATO, to Beijing-Xiong'an railroad and offer Automation Train Protection, ATP, to Beijing-Harbin railroad. Our efforts are aligned with the established national rail strategies, and our strong operation performance has been recognized by our clients.

在高速鐵路、高鐵領域，我們持續完成現有項目，同時維持現有產品線的市場地位，並探索新市場的機會。和利時不斷應用智慧升級的解決方案，旨在滿足市場的新興需求。本季的亮點包括：為京雄鐵路提供列車自動化運行系統ATO，為京哈鐵路提供列車自動化防護系統ATP。我們的努力與既定的國家鐵路策略一致，強勁的營運表現得到了客戶的認可。

Applying the track circuit in Sichuan-Tibet railroad resulted in winning the first place Progress Prize in Science awarded by China Communications and Transportation Association. The application marks our entry in the track circuit field and contribution to the construction and development of a railway network in Southwest China.

該軌道電路在川藏鐵路的應用，榮獲中國交通運輸協會科技進步一等獎。此次應用標誌著我公司正式進軍軌道電路領域，為西南地區鐵路網的建設和發展做出貢獻。

In the subway sector, we continue our efforts in upgrading technologies and refining our solutions. We provide the complete system of CBTC and integrated with subsidiary system for the first time. The system has entered its pilot operation in Kunming Changshui Airport Express successfully. In addition, our smart metro station upgrading solution implemented in Shenzhen Subway Line 11 is helping clients establish a safer, more efficient, ecofriendly station. Hollysys' track record on SCADA, active automation improvement on existing products and integration of cloud computing, big data, AI, allow us to meet the needs of an increasingly demanding marketplace.

在地鐵領域，我們不斷努力升級技術並完善解決方案。我們首次提供完整的CBTC系統並與子公司係統整合。該系統目前已在昆明長水機場快線成功試運行。此外，我們在深圳地鐵11號線實施的智慧地鐵站升級解決方案正在幫助客戶建立更安全、更有效率、更環保的車站。和利時在 SCADA 方面的業績、對現有產品的積極自動化改進以及雲端運算、大數據和人工智慧的集成，使我們能夠滿足日益苛刻的市場需求。

With the guidelines of the 14th 5-year plan of China, Hollysys is making great strides in the area of modernization and digitalization of infrastructure construction. Our Weather Effect Monitoring solution was widely recognized and was granted with Innovation Award of Excellent Products of Highway Industry of 2020.

在國家「十四五」規劃的指引下，和利時在基礎建設現代化、數位化領域取得了長足進步。我司天氣影響監測解決方案廣受認可，榮獲2020年公路產業優秀產品創新獎。

Mechanical and Electrical Solutions, M&E, business finished the quarter with revenue and new contract at $11.8 million and $19.6 million, recording a 34.1% and a 1.2% year-on-year decrease. For the first 9 months of 2021 fiscal year, M&E revenue and new contract recorded 3.9% and 16.4% year-on-year decrease, respectively. COVID-19 remains a challenge to M&E and overseas business. We will keep monitoring the impact on this sector, and risk control remain a key focus.

機電解決方案 (M&E) 業務本季的營收和新合約分別為 1,180 萬美元和 1,960 萬美元，年比分別下降 34.1% 和 1.2%。2021財年前9個月，機電收入和新合約分別較去年同期下降3.9%和16.4%。新冠疫情對機電及海外業務仍是一項挑戰。我們將繼續監測該行業受到的影響，風險控制仍然是重點。

With that, I would like to turn the call over to Steven Wang, our company's CFO, who will provide a financial results analysis. Steven?

接下來，我想將電話轉給我們公司的財務長 Steven Wang，他將提供財務結果分析。史蒂文？

Yes. Thank you, Mr. Sung. I would like to share some financial highlights for the third quarter ended March 31, 2021. Comparing to the third quarter of the prior fiscal year, the total revenues for the 3 months ended March 31, 2021, increased from $80.8 million to $109.9 million, an increase of 36.1%. Broken down by the revenue types, integrated contracts revenue increased by 26.7% to $85.8 million, product sales revenue increased by 82.4% to $6.5 million and service revenue increased by 85.1% to $17.6 million.

是的。謝謝您，宋先生。我想分享截至 2021 年 3 月 31 日的第三季的一些財務亮點。與上一財年第三季相比，截至 2021 年 3 月 31 日的三個月總收入從 8,080 萬美元增加到 1.099 億美元，增幅為 36.1%。按收入類型細分，綜合合約收入成長26.7%至8,580萬美元，產品銷售收入成長82.4%至650萬美元，服務收入成長85.1%至1,760萬美元。

The company's total revenue can also be presented in segments as follows. For the third quarter, Industrial Automation revenue achieved $67.5 million; Rail Transportation Automation revenue, $30.7 million; Mechanical and Electrical Solution revenue, $11.8 million. For the 9 months ended March 31, 2021, Industrial Automation revenue achieved $242.3 million; Rail Transportation Automation revenue, $140.6 million; M&E Solution revenue, $51.8 million.

該公司的總收入也可以按以下部分呈現。第三季度，工業自動化收入實現6,750萬美元；軌道運輸自動化收入3,070萬美元；機電解決方案收入1,180萬美元。截至2021年3月31日的9個月，工業自動化收入實現2.423億美元；軌道運輸自動化收入1.406億美元； M&E 解決方案收入 5,180 萬美元。

The overall non-GAAP gross margin was 37.5% for the 3 months ended March 31, 2021, as compared to 30.8% for the same period of the prior year. The non-GAAP gross margin for integrated contracts, product sales and services rendered were 25.9%, 81.2% and 77.4% for the 3 months ended March 31, 2021, as compared to 22.3%, 71.3% and 75.3% for the same period of prior year, respectively. The gross margin fluctuated mainly due to the different revenue mix with different margins during the period.

截至 2021 年 3 月 31 日的 3 個月，整體非 GAAP 毛利率為 37.5%，去年同期為 30.8%。截至 2021 年 3 月 31 日的三個月，綜合合約、產品銷售及服務的非公認會計準則毛利率分別為 25.9%、81.2% 和 77.4%，而去年同期分別為 22.3%、71.3% 和 75.3%。毛利率波動主要是因為期內收入結構不同，利潤率不同所致。

Selling expenses were $7.2 million for the 3 months ended March 31, 2021, representing an increase of $1 million or 16.1% compared to $6.2 million for the same quarter of the prior year. Presented as a percentage of our total revenues, selling expenses were 6.5% and 7.6% for the 3 months ended March 31, 2021 and 2020, respectively.

截至 2021 年 3 月 31 日的三個月，銷售費用為 720 萬美元，較去年同期的 620 萬美元增加 100 萬美元，增幅為 16.1%。以我們總收入的百分比表示，截至 2021 年 3 月 31 日和 2020 年 3 月 31 日的 3 個月的銷售費用分別為 6.5% 和 7.6%。

The non-GAAP G&A expenses were $12.2 million for the quarter ended March 31, 2021, an increase of $3.3 million or 36.5% compared to $8.9 million for the same quarter of the prior year. Presented as a percentage of total revenues, the non-GAAP G&A expenses were 11.1% and 11.1% for the quarters ended March 31, 2021 and 2020, respectively.

截至 2021 年 3 月 31 日的季度，非 GAAP G&A 費用為 1,220 萬美元，較去年同期的 890 萬美元增加 330 萬美元，增幅為 36.5%。以總收入的百分比表示，截至 2021 年 3 月 31 日和 2020 年 3 月 31 日的季度，非 GAAP G&A 費用分別為 11.1% 和 11.1%。

The R&D expenses were $13.2 million for the 3 months ended March 31, 2021, representing an increase of $2.9 million or 28.7% compared to $10.2 million for the same quarter of prior year, mainly due to the increased research and development activities. Presented as a percentage of total revenue, R&D expenses were 12% and 12.7% for the quarter ended March 31, 2021 and 2020, respectively.

截至 2021 年 3 月 31 日的三個月，研發費用為 1,320 萬美元，較去年同期的 1,020 萬美元增加 290 萬美元，增幅為 28.7%，主要原因是研發活動增加。以總收入的百分比表示，截至 2021 年 3 月 31 日和 2020 年 3 月 31 日的季度，研發費用分別為 12% 和 12.7%。

The VAT refunds and government subsidies were $11.6 million for the 3 months ended March 31, 2021, as compared to $12 million for the same period in the prior fiscal year, representing $0.4 million or 3.8% decrease. Income tax expenses and effective tax rate were $3.6 million and 18.5% for the 3 months ended March 31, 2021, respectively, as compared to $2.4 million and 14.8% for the comparable prior year period, respectively.

截至 2021 年 3 月 31 日的 3 個月，增值稅退稅和政府補貼為 1,160 萬美元，而上一財年同期為 1,200 萬美元，減少 40 萬美元，降幅為 3.8%。截至 2021 年 3 月 31 日的 3 個月，所得稅費用和有效稅率分別為 360 萬美元和 18.5%，而去年同期分別為 240 萬美元和 14.8%。

The non-GAAP net income attributable to Hollysys was $18.7 million or $0.31 per diluted share based on 60.6 million shares outstanding for the 3 months ended March 31, 2021. This represented a 34% increase from $13.9 million or $0.23 per share reported in the prior year period.

截至 2021 年 3 月 31 日的 3 個月，基於 6,060 萬股流通股，歸屬於和利時的未平凡 GAAP 淨利潤為 1,870 萬美元，或每股攤薄收益 0.31 美元。這比去年同期的 1,390 萬美元或每股 0.23 美元增長了 34%。

Contracts and backlog highlights. Hollysys achieved a total of $142 million of new contracts for the 3 months ended March 31, 2021. Backlog as of March 31, 2021 was $617.7 million. The detailed breakdown of new contracts and backlog by segment are as follows: new contracts achieved for the third quarter, Industrial Automation achieved new contracts of $106.7 million; Rail Transportation achieved $15.7 million; M&E business, $19.6 million. Backlog as of the end of Q3: Industrial Automation backlog, 263 -- excuse me, $262.3 million; Rail Transportation, $256.4 million; M&E business, $98.9 million.

合約和積壓訂單亮點。截至2021年3月31日的三個月，和利時共獲得1.42億美元的新合約。截至 2021 年 3 月 31 日的積壓訂單為 6.177 億美元。按部門劃分的新合約和積壓合同詳細分類如下：第三季度實現的新合同，工業自動化實現新合同1.067億美元；鐵路運輸實現1570萬美元； M&E 業務，1960 萬美元。截至第三季末的積壓訂單：工業自動化積壓訂單，263—對不起，2.623 億美元；鐵路運輸，2.564 億美元； M&E 業務，9,890 萬美元。

Now the cash flow highlights. For the 3 months ended March 31, 2021, the total net cash inflow was $109 million. The operating cash outflows was $6.4 million. The investing cash flow was $112.7 million and mainly consisted of $163.8 million of matured short-term investments, partially offset by $45.7 million investment of an equity investee; $4.9 million purchase of property, plant and equipment; and $1.3 million purchase of a short-term investment.

現在現金流凸顯。截至 2021 年 3 月 31 日的 3 個月，總淨現金流入為 1.09 億美元。經營現金流出為 640 萬美元。投資現金流為 1.127 億美元，主要包括 1.638 億美元的到期短期投資，部分被股權投資公司的 4,570 萬美元投資所抵銷； 490 萬美元購買財產、廠房和設備；以及 130 萬美元的短期投資購買。

Now the balance sheet highlights. The total amount of cash and cash equivalents were $466.1 million, $356.9 million and $366.4 million as of March 31, 2021, December 31, 2020 and March 31, 2020, respectively. For the 3 months ended March 31, 2021, DSO was 279 days as compared to 266 days for the comparable prior year period and 142 days for the last quarter. The inventory turnover was 58 days as compared to 71 days for the comparable prior year period and 40 days for the last quarter.

現在資產負債表重點突出。截至2021年3月31日、2020年12月31日及2020年3月31日，現金及現金等價物總額分別為4.661億美元、3.569億美元及3.664億美元。截至 2021 年 3 月 31 日的 3 個月，DSO 為 279 天，去年同期為 266 天，上一季為 142 天。庫存週轉率為 58 天，而去年同期為 71 天，上一季為 40 天。

With that, I pass the call to Arden Xia.

說完，我將電話轉給了 Arden Xia。

At this time, we'd like to open up for the QA session. (foreign language) Operator, please.

現在，我們想開始 QA 環節。（外語）請接線員接聽。

(Operator Instructions) Your first question comes from Kevin Luo of Morgan Stanley.

（操作員指示）您的第一個問題來自摩根士丹利的 Kevin Luo。

(foreign language)

（外語）

[Interpreted] Okay. Thank you, Kevin. The question is from Kevin, a Morgan Stanley analyst, and also company with the -- along with the company for -- focus on company for a long time, several years. And the first question is about the third quarter and the first 9 months about the Industrial Automation. [No matter] from the new contract or revenue or compare increase very fast, and for right now, we could see the revenue already doubled compared year-on-year growth. And what about the next quarter and the next fiscal year 2022, the guidance for the IA?

[翻譯] 好的。謝謝你，凱文。這個問題來自摩根士丹利分析師凱文，他也是該公司長期（數年）關注的焦點。第一個問題是關於第三季和前九個月的工業自動化情況。無論從新合約或收入來看，成長都非常快，就目前來看，我們可以看到收入已經同比增長了一倍。那麼下一季和 2022 財年，IA 的指導是什麼？

And the second question is about the -- we know about Hollysys have a lot of investment joint venture company, and like we provide the equipment system to the [Haidilao]. And also in the medical area, we also have a Chinese [producer] medicine company. And what about this company current revenue and the net income performance because I can [saw] from the financials that the equity investee compare decrease and this time is record a loss. So how about performance behind?

第二個問題是關於──我們知道和利時有很多投資合資公司，像是我們為海底撈提供設備系統。在醫療領域，我們還有一家中國醫藥公司。那麼這家公司目前的營收和淨收入表現如何呢？因為我可以從財務報表中看到，股權投資公司的表現相比下降，而且這次是虧損的。那麼後面的表現又如何呢？

And the third question is about the dividend. Right now, we could see the cash and cash equivalents, [plus the] time deposits already are close to USD 700 million, and also Hollysys always have strong operating cash flow. So are you thinking about to raise the dividend payout ratio?

第三個問題是關於股息。目前，我們看到現金和現金等價物，[加上]定期存款已經接近7億美元，而且和利時一直擁有強勁的經營現金流。那麼您是否考慮提高股息支付率？

(foreign language)

（外語）

[Interpreted] The first question will answered by Mr. Fang in charge of IA business.

[口譯]第一個問題由IA業務負責人方先生回答。

(foreign language)

（外語）

[Interpreted] The Industrial Automation right now performance compare increased and very strong, and we think it can keep this trend even in the coming years. And it's mainly because of 2 reasons. One is, currently, the market is recovering and especially domestic market is relatively strong. And we -- our performance could over the growth of the market growth itself. And the second one is about the business adjustment. We focus on the chemical, petrochemical area. And also compare to traditional power sector, even right now, power is also very good. But we reinforce our chemical, petrochemical penetration and also the medical food beverage area and especially focused on the upgrading for the (inaudible) of the digitalization and also intellectual smart manufacturing.

[解讀] 工業自動化目前的表現較為強勁，我們認為在未來幾年它還能維持這種趨勢。主要有兩個原因。一是目前市場正在復甦，特別是國內市場較強勁。我們的業績可能超過市場本身的成長。第二個是關於業務調整。我們專注於化工、石化領域。而且與傳統電力產業相比，即使是現在，電力也非常好。但我們加強了在化學、石化以及醫療食品飲料領域的滲透，尤其註重數位化和智慧製造的升級。

Okay. And the second question regarding the performance of our subsidiary. The [couple of 2 major our] subsidiary, one is regarding the [nuclear] operation and the other one is regarding the smart or intelligent services for [Haidilao]. At the current stage, those 2 companies just went through a reorganization, and we do see a certain cost increase for the quarter. And in relation to the third question regarding the dividend increase for the company, I think this is also the plan. Company will have a discussion with analysts as well as individual shareholders in the coming days and weeks. And it is part of the company's overall M&A strategy as well as the [user policy or user] capital to have more in-depth discussion with the shareholders in the coming days.

好的。第二個問題涉及我們子公司的業績。我們有兩個主要的子公司，一個是核心業務，另一個是為海底撈提供智慧服務。目前，這兩家公司剛剛完成重組，我們確實看到本季成本增加。關於第三個問題，關於公司股利的增加，我認為這也是一個計畫。公司將在未來幾天和幾週內與分析師以及個人股東進行討論。這是公司整體併購策略的一部分，也是未來幾天與股東進行更深入的討論（使用者政策或使用者）資本的一部分。

Can I have a follow-up question regarding the joint venture? You mentioned that this year, this fiscal year, some of the JVs that are happening, some of the organization. But [may I know] the revenue, the [lovely] revenue number? And how about the revenue outlook and the [profitability] in the next fiscal year?

我可以問一個關於合資企業的後續問題嗎？您提到今年，在本財政年度，一些合資企業正在成立，一些組織正在成立。但是[我可以知道]收入，[可愛的]收入數字嗎？下一財年的營收前景和獲利能力如何？

I think at this stage, we still is not a majority shareholder, and we do not give any guidance or any particular figures regarding those revenue. I think company in the process to reorganize along with the management team of subsidiary. In the near future, once company made the decision, I think we will give you more insight to those figures, Kevin.

我認為在現階段，我們仍然不是大股東，我們不會就這些收入提供任何指導或任何具體數字。我認為公司正處於與子公司管理團隊一起重組的過程中。在不久的將來，一旦公司做出決定，我想我們會讓你更深入地了解這些數據，凱文。

Okay. Thank you, Kevin.

好的。謝謝你，凱文。

(foreign language) You're probably looking at the line of share of net income loss of equity investees. You see a fluctuation. Again, that's really a fluctuation. We're actually expecting for the total fiscal year for that line to actually increase compared to last year. So that's probably a fluctuation for this quarter.

（外語）您可能正在查看股權投資對象的淨收入損失份額。您會看到波動。再說一遍，這確實是一個波動。我們實際上預計該系列產品整個財年的銷售額與去年相比會增加。所以這可能是本季的波動。

Your next question comes from Lingxin Kong of CICC.

您的下一個問題來自中金公司的孔令欣。

(foreign language)

（外語）

[Interpreted] Okay. Thank you. The first question about the Industrial Automation. And I also saw from the press release that you're already launching Fangcun (inaudible) smart service APP and this is based on the cloud service and also the users can purchase spare parts, submit service requirements like -- stuff like that. And my question is about this kind of platform is just to focus on Hollysys' own [after sales] spare parts or it can also service the other like competitors, ABB, Schneider, for example? And also beyond that, a lot of Japanese company also focus on this area like to do the MRO, the industrial automation spare parts, those industry are already success. So what about your consideration from this [stack]?

[翻譯] 好的。謝謝。第一個問題關於工業自動化。而且我還從新聞稿中看到，你們已經推出了芳村（聽不清楚）智慧服務APP，這是基於雲端服務的，用戶還可以購買備件，提交服務需求之類的。我的問題是，這種平台是否只專注於和利時自己的售後備件，還是也可以為其他競爭對手（例如 ABB、施耐德）提供服務？除此之外，許多日本公司也專注於這個領域，例如做MRO，工業自動化備件，這些產業已經成功了。那麼您對這個[堆疊]的看法是什麼？

And the second question is about the Rail Transportation, and we saw you won a CBTC system in Kunming and congratulations. And can you give more colors about background, how long your -- from your participated the bidding and to win the contract? And also, is there any other new opportunity for the coming year to have the CBTC contracts? And the third question about the production business itself. No matter, IA or Rail Transportation, we are all provide a control system. However, right now, spread across the whole world that the chips is [lack of] supply and also the raw material cost is growing. And have you ever meet any issue in this area? Especially, do you have enough chips to support the production for the business?

第二個問題是關於軌道交通的，我們看到您在昆明贏得了CBTC系統，恭喜您。您能否詳細介紹一下背景，您從參與競標到贏得合約花了多久時間？另外，來年還有其他新機會可以簽訂 CBTC 合約嗎？第三個問題是關於生產業務本身的。無論是工業自動化還是軌道交通，我們都提供控制系統。然而，目前全球都傳出晶片供應不足、原料成本不斷上漲的消息。您在這方面有遇到任何問題嗎？特別是，您是否有足夠的晶片來支援企業的生產？

(foreign language)

（外語）

[Interpreted] About the first question, I want to emphasize that to be -- that relate to the Industrial Automation are different with the customer side. And naturally, we want to do it. The purpose is to provide high-quality services and also very quick response time to our customer. So that's why the current Fangcun (inaudible) smart service APP is just to focus on Hollysys' after sale. And it's a combination of our supply and also -- upside or downside supply chain and also focus on the customer together to provide better services.

[口譯] 關於第一個問題，我想強調的是，與工業自動化相關的內容與客戶端是不同的。當然，我們也想這麼做。目的是為客戶提供高品質的服務和非常快速的回應時間。所以現在的芳村（聽不清楚）智能服務APP就是針對和利時的售後。它是我們的供應和上行或下行供應鏈的結合，同時也關注客戶，以提供更好的服務。

(foreign language)

（外語）

(foreign language)

（外語）

(foreign language)

（外語）

[Interpreted] The CBTC, we won the contract in Kunming Changshui Airport line and right now is in operating. And we've made -- we've been made recognition by the experts within the industry and also recognition by the customer. So right now, this is a good demonstration that we could have capability to provide CBTC system to the other cities. So that's why right now, we also focus several potential targets, and right now it's under the discussion. And then this is including the local government and even the subway operating company. Maybe we could use the way to set up joint venture with them to better explain our platform within the subway sector.

[翻譯] CBTC，我們贏得了昆明長水機場線的合同，現在正在運營。我們已經獲得了業內專家和客戶的認可。所以現在，這是一個很好的證明，我們有能力向其他城市提供 CBTC 系統。所以這就是為什麼現在我們也關注幾個潛在的目標，現在正在討論中。這也包括當地政府甚至地鐵營運公司。也許我們可以採取和他們合資的方式，在地鐵領域更好地詮釋我們的平台。

And also, Mr. Kong Lingxin asked a supplement about the joint venture. [You mean to cooperate] with the local government or the local private sector companies. And the answer is more close to the government because the government have the policy to do the innovation and the upgrading for the whole industry. So they want to import the [good entrepreneur] and the company to join this area. So that's why this is also a [few chance]. Thank you.

另外孔令新先生也就合資事宜進行了補充詢問。[你的意思是與當地政府或當地私部門公司合作。答案更接近政府，因為政府有政策來推動整個產業的創新和升級。所以他們想引進優秀的企業家和公司加入這個地區。所以這也是一個[很少的機會]。謝謝。

(foreign language)

（外語）

[Interpreted] The third question also answered by Mr. Fang, the IA COO. Actually, you mentioned that the chips already started from last year to now, and we could see a lot of company be influenced by that. However, this is not influenced by our production because 2 years ago, we already got to start to prepare this kind of situation. So we have several ways. One is for the short-term chips. We have enough preparing in the -- in our backlog. And the second one is about the long-term chips. We are focused on the replacement -- I mean, the -- to find the other available supplier to [instead of] the situation.

[譯]第三個問題也由IA COO方先生回答。實際上，您提到晶片從去年到現在已經開始了，我們可以看到很多公司都受到了它的影響。不過這並不影響我們的生產，因為兩年前我們就已經開始準備這種情況了。所以我們有幾種方法。一類是短期籌碼。我們的積壓工作已經做好了足夠的準備。第二個是關於長期籌碼。我們專注於替代方案——我的意思是——尋找其他可用的供應商來解決這個問題。

The third way is for develop the next new generation DCS and also the other automation system, and right now, we already close to the end. I mean for the second half of this calendar year, we will provide our new generation DCS, including a lot of the other new products that [based on] to solve the supply chain and that they are our own IP and we could easy to solve the supply chain issue.

第三條路是開發下一代DCS以及其他自動化系統，現在我們已經接近尾聲。我的意思是，在今年下半年，我們將提供新一代 DCS，包括許多其他基於解決供應鏈問題的新產品，它們是我們自己的 IP，我們可以輕鬆解決供應鏈問題。

Your next question comes from [Joseph Gu] of JPMorgan.

您的下一個問題來自摩根大通的[Joseph Gu]。

(foreign language)

（外語）

[Interpreted] Okay. Thank you. Two questions. One is about the chips and the raw material cost is growing, and what about the influence for the gross margin. And I also saw about your inventory and also cash flow, especially [in freight] compare increased a lot. So is this because of the -- of your [pre-procurement] of the raw material and chips? And the second question about IA. The IA revenue, could you give me a breaking down by industry niche market revenue or percentage? And for example, like the chemical, petrochemical and the pharmaceutical, food beverage right now compare increase relatively good, you mentioned. So what about the percentage contribution within IA right now? Thank you.

[翻譯] 好的。謝謝。兩個問題。一個是關於晶片和原物料成本在成長，對毛利率有什麼影響。而且我還看到了你們的庫存和現金流，尤其是運費，相比增加了很多。那麼這是因為——您對原料和晶片進行了預先採購嗎？第二個問題是關於 IA 的。IA 收入，您能否按行業利基市場收入或百分比細分一下？例如您提到的化工、石化、製藥、食品飲料現在成長比較好。那麼目前 IA 內的貢獻百分比是多少呢？謝謝。

(foreign language)

（外語）

[Interpreted] The first question about the cost. And we also know about, for example, like the copper, like the chips are increased the cost right now. But for us, we -- this has not too much influence about our gross margin and still within the [healthy] range. And you said right, the inventory increased because we also have the preparing for those raw materials.

[翻譯]第一個問題關於費用。我們也知道，例如銅、晶片等的成本現在都在增加。但對我們來說，這對我們的毛利率沒有太大影響，仍然在[健康]範圍內。你說得對，庫存增加是因為我們也在準備這些原料。

And the second one about IA proportion with the industry, because I cannot give you a number right now, but I can say from another [stack]. For example, like the petrochemical plus chemical, right now, the revenue contribution are already over the -- sorry, over the power sector. And the pharmaceutical, food beverage area right now is already reached to 2 (inaudible) contribution by the IA revenue and grow relatively very fast. So it's already be the third large contribution niche market.

第二個問題是關於 IA 與行業的比例，因為我現在無法給你一個數字，但我可以從另一個 [stack] 中得知。例如，像石化加化工，現在的收入貢獻已經超過了——抱歉，超過了電力產業。目前，製藥、食品飲料領域對 IA 收入的貢獻已達到 2（聽不清楚），且成長相對較快。所以它已經成為第三大貢獻利基市場。

Thank you, everyone, joining us on the call today. If you haven't got a chance to raise your questions, we will be pleased to answer them through follow-up contacts. We're looking forward to speaking with you again in the near future. Thank you.

感謝大家今天參加我們的電話會議。如果您還沒有機會提出您的問題，我們將很樂意透過後續聯繫來回答。我們期待在不久的將來再次與您交談。謝謝。

Thank you.

謝謝。

That does conclude today's conference call. Thank you for participating. You may all disconnect.

今天的電話會議到此結束。感謝您的參與。你們都可以斷開連線。