Hebron Technology Co., Ltd. Reports Financial Results for the First Half of 2017

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WENZHOU, China, Dec. 29, 2017 — Hebron Technology Co., Ltd. (“Hebron” or the “Company”) (Nasdaq: HEBT), a developer, manufacturer and installer of valves and pipe fittings for use in the pharmaceutical, biological, food and beverage, and other clean industries, today announced its financial results for the six months ended June 30, 2017.

Mr. Anyuan Sun, Chairman and Chief Executive Officer of Hebron, commented, “With revenues decreasing by 27.9% to $7.74 million, our first half financial results reflected the impact of fewer projects being completed for our installation services as the relocation of our manufacturing facility caused a temporary interruption to our business during the six months ended June 30, 2017. However, with recent multiple project wins and a growing project pipeline, we are confident about our near-term outlook and expect the growth to return in the near future.”

Six Months Ended June 30, 2017 Financial Results

  • Total revenues decreased by 27.9% to $7.74 million for the six months ended June 30, 2017. The decrease in total revenues was due to a decrease in the number of projects and average revenues per project for installation services and partially offset by an increase in fluid equipment sales.
  • Gross and operating margins were 37.1% and 2.1%, respectively, for the six months ended June 30, 2017, compared to 38.2% and 27.0%, respectively, for the same period of last year.
  • Net loss was $0.34 million, or a loss per share of $0.02, for the six months ended June 30, 2017, compared to net income of $2.14 million, or earnings per share of $0.18, for the same period of last year.

For the Six Months Ended June 30,

($ millions)

2017

2016

% Change

Revenues

7.74

10.74

-27.9%

Installation service

6.35

9.82

-35.3%

Fluid equipment sales

1.39

0.92

50.8%

Gross profit

2.87

4.11

-30.1%

Gross margin

37.1%

38.2%

-1.2 pp*

Installation service

40.3%

40.0%

0.4 pp*

Fluid equipment sales

22.2%

20.0%

2.2 pp*

Operating income

0.17

2.90

-94.3%

Operating margin

2.1%

27.0%

-24.9 pp*

Net income (loss)

-0.34

2.14

-116.0%

Net income (loss) margin

-4.4%

20.0%

-24.4 pp*

Diluted earnings (loss) per share

-0.02

0.18

-113.1%

*pp represents percentage points

Revenues

For the six months ended June 30, 2017, total revenues decreased by $3.00 million, or 27.9%, to $7.74 million from $10.74 million for the same period of last year. The decrease in total revenues was related to a decrease in revenues from installation services as fewer projects were completed during the six months ended June 30, 2017.

Revenues from installation services decreased by $3.47 million, or 35.3%, to $6.35 million for the six months ended June 30, 2017 from $9.82 million for the same period of last year. We provided installation services for 3 projects with an average project revenue of $2.12 million during the six months ended June 30, 2017, compared to 4 projects with an average project revenue of $2.46 million during the same period of last year. Revenues from fluid equipment sales increased by $0.47 million, or 50.8%, to $1.39 million for the six months ended June 30, 2017 from $0.92 million for the same period of last year.

Cost of revenues and gross profit

Total cost of revenues decreased by $1.76 million, or 26.6%, to $4.87 million for the six months ended June 30, 2017 from $6.64 million for the same period of last year. Overall gross profit decreased by $1.24 million, or 30.1%, to $2.87 million for the six months ended June 30, 2017 from $4.11 million for the same period of last year. Overall gross margin was 37.1% for the six months ended June 30, 2017, down 1.2 percentage points from 38.2% for the same period of last year.

Cost of revenues for installation services decreased by $2.11 million, or 35.7%, to $3.79 million for the six months ended June 30, 2017 from $5.90 million for the same period of last year. The decrease in cost of revenues was in line with the decrease in revenues for installation services. Gross profit for installation services decreased by $1.36 million, or 34.7%, to $2.56 million for the six months ended June 30, 2017 from $3.92 million for the same period of last year. Gross margin for installation services was 40.3% for the six months ended June 30, 2017, compared to 40.0% for the same period of last year.

Cost of revenues for fluid equipment sales increased by $0.34 million, or 46.6%, to $1.08 million for the six months ended June 30, 2017 from $0.74 million for the same period of last year. Gross profit for fluid equipment sales increased by $0.12 million, or 67.5%, to $0.31 million for the six months ended June 30, 2017 from $0.18 million for the same period of last year. Gross margin for fluid equipment sales was 22.2% for the six months ended June 30, 2017, compared to 20.0% for the same period of last year.

Operating expenses

General and administrative expenses increased by $1.00 million, or 215.3%, to $1.47 million for the six months ended June 30, 2017 from $0.47 million for the same period of last year. The increase was mainly due to higher professional accounting and legal fees incurred during the six months ended June 30, 2017 associated with the Company's listing on NASDAQ. Selling expenses were $0.75 million for the six months ended June 30, 2017, compared to $0.72 million for the same period of last year. Research and development expenses were $0.49 million for the six months ended June 30, 2017, compared to $0.02 million for the same period of last year. The increase in research and development expenses was mainly due to increased R&D activities in developing the intelligent valve controller system during the six months ended June 30, 2017. As such, total operating expenses increased by $1.50 million, or 123.9%, to $2.70 million for the six months ended June 30, 2017 from $1.21 million for the same period of last year.

Operating income

Operating income decreased by $2.73 million, or 94.3%, to $0.17 million for the six months ended June 30, 2017 from $2.90 million for the same period of last year. The decrease in operating income was due to the combined effect of a decrease in revenues and an increase in operating expenses. Operating margin was 2.1% for the six months ended June 30, 2017, compared to 27.0% for the same period of last year.

Income before income taxes and income tax

Income before income taxes decreased by $2.74 million, or 95.0%, to $0.14 million for the six months ended June 30, 2017 from $2.89 million for the same period of last year. Income tax provision was $0.49 million for the six months ended June 30, 2017, compared to $0.74 million for the same period of last year.

Net income (loss) and earnings (loss) per share

Net loss was $0.34 million, or loss per share of $0.02, for the six months ended June 30, 2017, compared to net income of $2.14 million, or earnings per share of $0.18, for the same period of last year. The decrease in net earnings was primarily related to the decrease in revenues and, to a lesser extent, the increase in operating expenses.

About Hebron Technology Co., Ltd.

Established in January 2005 and headquartered in Wenzhou City, Zhejiang Province, China, Hebron Technology Co., Ltd. (“Hebron” or the “Company”) engages in research, development, and manufacture of highly specialized valves and pipe fitting products for use in the pharmaceutical, biological, food and beverage, and other clean industries. The Company also offers its customers comprehensive pipeline design, installation, construction, and ongoing maintenance services as holistic solution services.

Forward-Looking Statements

This press release contains information about Hebron's view of its future expectations, plans and prospects that constitute forward-looking statements. Actual results may differ materially from historical results or those indicated by these forward-looking statements as a result of a variety of factors including, but not limited to, risks and uncertainties associated with its ability to raise additional funding, its ability to maintain and grow its business, variability of operating results, its ability to maintain and enhance its brand, its development and introduction of new products and services, the successful integration of acquired companies, technologies and assets into its portfolio of products and services, marketing and other business development initiatives, competition in the industry, general government regulation, economic conditions, dependence on key personnel, the ability to attract, hire and retain personnel who possess the technical skills and experience necessary to meet the requirements of its clients, and its ability to protect its intellectual property. Hebron encourages you to review other factors that may affect its future results in Hebron's registration statement and in its other filings with the Securities and Exchange Commission.

For more information, please contact:

At the Company
Yingping Chen, Secretary
Phone: +86-180-6776-3129

Investor Relations
Tony Tian, CFA                    
Weitian Group LLC
Email: [email protected]
Phone: +1-732-910-9692

HEBRON TECHNOLOGY CO., LIMITED 

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

June 30,

December 31,

2017

2016

ASSETS

CURRENT ASSETS:

Cash

$

3,610,585

$

11,875,893

Contracts receivable, net

13,293,350

12,928,033

Accounts receivable, net

265,002

187,852

Notes receivable

14,611

277,745

Retainage receivables, net

2,552,813

2,425,500

Inventories

3,775,477

2,249,623

Prepayments and advances to suppliers, net

9,024,485

4,537,823

Other receivables, net

618,977

96,602

TOTAL CURRENT ASSETS

33,155,300

34,579,071

Property and equipment at cost, net of accumulated depreciation

13,153,805

11,186,013

Land use right, net of accumulated amortization

1,070,006

1,071,310

Deferred tax assets

207,687

242,963

TOTAL  ASSETS

$

47,586,798

$

47,079,357

LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES:

Short-term loans

$

250,760

$

287,986

Accounts payable

1,221,616

1,185,215

Accrued expenses and other current liabilities

886,930

1,009,878

Advances from customers

2,997,590

3,060,962

Deferred revenue

877,095

1,042,511

Taxes payable

9,353,299

8,744,563

Due to related parties

68,397

TOTAL CURRENT LIABILITIES

15,587,290

15,399,512

Long-term loans

395,315

532,775

TOTAL LIABILITIES

15,982,605

15,932,287

COMMITMENTS AND CONTINGENCIES

SHAREHOLDERS' EQUITY:

Common stock, $0.001 par value, 50,000,000 shares authorized,

14,695,347 and 14,695,347 shares issued and outstanding as of June 30,
2017 and December 31, 2016, respectively

14,695

14,695

Additional paid-in capital

10,237,965

10,237,965

Retained earnings

22,397,770

22,741,104

Accumulated other comprehensive loss

(1,046,237)

(1,846,694)

TOTAL SHAREHOLDERS' EQUITY

31,604,193

31,147,070

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY

$

47,586,798

$

47,079,357

HEBRON TECHNOLOGY CO., LIMITED

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

 (Unaudited)

For The Six Months Ended June 30,

2017

2016

REVENUE

 Installation service

$

6,352,092

$

9,820,436

 Fluid equipment sales

1,391,348

922,697

7,743,440

10,743,133

COST OF REVENUE

Cost of product and services

4,769,712

6,482,331

Business and sales related taxes

103,923

153,099

GROSS PROFIT

2,869,805

4,107,703

OPERATING EXPENSES

General and administrative expenses

1,469,722

466,192

Selling expenses

749,522

719,230

Research and development expenses

485,335

22,440

Total operating expenses

2,704,579

1,207,862

INCOME FROM OPERATIONS

165,226

2,899,841

OTHER INCOME (EXPENSE)

 Other income, net

2,256

283

 Interest expense

(23,518)

(12,114)

 Total other expense, net

(21,262)

(11,831)

INCOME BEFORE INCOME TAXES

143,964

2,888,010

PROVISION FOR INCOME TAXES

487,298

744,118

NET INCOME (LOSS)

$

(343,334)

$

2,143,892

OTHER COMPREHENSIVE INCOME (LOSS)

Foreign currency translation gain (loss)

800,457

(437,776)

COMPREHENSIVE INCOME

$

457,123

$

1,706,116

Basic and diluted earnings per common share

Basic

$

(0.02)

$

0.18

Diluted

$

(0.02)

$

0.18

Weighted average number of shares outstanding

Basic

14,695,347

12,000,000

Diluted

14,695,347

12,000,000

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SOURCE Hebron Technology Co., Ltd.

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