Recon Technology Reports Financial Results for Fiscal Year 2017 Highlighted by 40% Revenue Increase Driven by Traditional and Oilfield Waste Water Treatment Business Growth

BEIJING, Sept. 28, 2017 /PRNewswire/ -- Recon Technology, Ltd. (NASDAQ:RCON), ("Recon" or the "Company"), a China's leading independent solutions integrator operating in oilfield service, electric power and coal chemical industries, today announced its financial results for fiscal year ended June 30, 2017.

Fiscal Year 2017 Financial Highlights (all comparisons to the prior fiscal year):

• Revenues increased 40.5% to a record RMB60.1 million (approximately $8.9 million) for the year ended June 30, 2017, from RMB42.7 million.
• During fiscal year 2017, the Company's oilfield waste water treatment business continued to expand rapidly, with revenue of RMB11.0 million (approximately $1.6 million) increasing 371.1% compared to RMB2.3 million.
• Gross profit was approximately RMB16.0 million (approximately $2.4 million) for the year ended June 30, 2017, compared to approximately RMB7.2 million.
• Gross margins improved to 26.6% in fiscal year 2017 from 17.0%
• Operating loss narrowed considerably to RMB30.6 million (approximately $4.5 million) for fiscal year 2017, compared to operating loss of RMB39.9 million.
• Net loss attributable to Recon for fiscal year 2017 was RMB31.4 million (approximately $4.6 million), or RMB4.90($0.72) per diluted share, compared to net loss attributable to Recon of RMB40.9 million, or RMB7.23 per diluted share, for fiscal year 2016.

Management Commentary

Mr. Shenping Yin, Chairman and CEO of Recon stated, "We were pleased to report progress across several facets of the Company over 2017, with revenues accelerating and margins expanding in the fourth quarter. As stated in our 2017 open letter to shareholders, we will continue to leverage Recon's ability to uniquely integrate equipment and automation with a strong client base, specifically a new client PetroChina Changqing Oilfield Company ("PCOC").  Further, our market for wastewater treatment continues to expand rapidly. This market is one that both serves to diversify Recon's revenue streams, while simultaneously addressing significant environmental concerns around industrial water in China. This has served as a primary revenue driver for the Company, and we believe will be integral in our success in fiscal 2018.  We also continued to reinvest in our business with a robust R&D effort, and believe that our Company is recognized as a cutting-edge research entity within the energy industry in China.  We anticipate revenues growing at minimum of 30% in the coming year, driven by the wastewater agreement signed in the second half of 2017 and others in our pipeline. Our financial position remains strong and we look forward to updating investors of our progress in the coming months."

Recent Developments

• On September 25, 2017, the Company announced the signing of several contracts totaling approximately RMB 6.1 million, or approximately USD 0.9 million, to develop four Internet of Things ("IoT") Oil and Gas Production Projects (the "Projects") for three plants of PetroChina Changqing Oilfield Company ("PCOC"), China's largest producing oilfield company and a subsidiary of PetroChina ("CNPC", NYSE: PTR )
• On June 12, 2017, two co-founders of the Company, Messrs.Shenping Yin (Chairman and Chief Executive Officer) and Guangqiang Chen (Chief Technology Officer and Director) released a Letter to Shareholders updating current activities of the Company and future development of China Oil and Gas Market.  The full text of the letter can be read here: http://www.recon.cn/investors_investorroom3.asp
• One of the Company's VIE companies has invested RMB4.6 million to a newly established company Gan Su BHD Environmental Technology Co., Ltd ("Gan Su BHD"). Based on its revised chapter dated August 11, 2017, this VIE company owns an interest of 51% of Gan Su BHD. Gan Su BHD was established on May 23, 2017, with registered capital of RMB 50 million. It focuses on oilfield sewage treatment and oily sludge disposal projects.

Fiscal Year 2017 Financial Results

Revenues

Total revenues for the year ended June 30, 2017 were RMB60.1 million (approximately $8.9 million), an increase of RMB17.3 million or 40.5% from RMB42.7 million for the year ended June 30, 2016.

The overall increase in revenue was primarily due to increased sales of equipment, primarily more furnaces provided to Recon's new client, PCOC, a major subsidiary of PetroChina and the largest producing oilfield of China.

The Company invested heavily in R&D of new products used for oilfield waste water treatment throughout 2016, and the outcome has been gradually reflected in its operating results. For the year ended June 30, 2017, this new business line continued to contribute revenue and margin, increasing from RMB2.3 million to RMB11.0 million this year. Management expects to win additional business in the coming months due to its technical advantage and long-term cooperation with oilfield companies.

In December 2016, the Company granted 3,010,000 ordinary shares of restricted stock to the management that are forfeited and cancelled automatically in the event that the Company fails to meet certain operating performance goals. As the total revenue of RMB 60.1 million for the year ended June 30, 2017 exceeds the highest performance goal of RMB 59.8 million this year, the Company had positive gross margin this year, and it is expected the management will be employed as of the time of the filing of the annual report, the Company expects the 800,000 restricted shares granted to the management will not be forfeited and cancelled.

Gross profit and gross margin

Gross profit increased to RMB16.0 million (approximately $2.4 million) for the year ended June 30, 2017 from RMB7.2 million for the same period in 2016. Gross margin was 26.6% for the year ended June 30, 2017, compared to 17.0% for the same period of 2016.

Operating income (loss) and operating (loss) margin

Selling and distribution expenses decreased RMB1.1 million to RMB4.5 million for the year ended June 30, 2017, compared to the same period in 2016. General and administrative expenses increased by 62.2% or RMB12.6 million (approximately $1.9 million), from RMB20.2 million in the year ended June 30, 2016 to RMB32.8 million (approximately $4.8 million) in the same period of 2017.

Research and development expenses increased from RMB6.9 million for the year ended June 30, 2016 to RMB7.6 million (approximately $1.1 million) for the same period of 2017.

Total operating expenses decreased by RMB0.6 million, or 1.2%, to RMB46.6 million for the twelve months ended June 30, 2017 from RMB47.2 million for the same period of last fiscal year.

Operating loss was RMB30.6 million (approximately $4.5 million) for the year ended June 30, 2017, compared to a loss of RMB39.9 million for the same period of 2016. Operating loss margin was 51.0% for the year ended June 30, 2017, compared to operating loss margin of 93.4% for the same period of last fiscal year.

Net income (loss)

Net loss was RMB31.2 million (approximately $4.6 million) for the year ended June 30, 2017, an improvement of RMB9.7 million (approximately $1.4 million) from net loss of RMB40.9 million for the same period of 2016.

Financial Position  

As of June 30, 2017, Recon had cash in the amount of RMB3.8 million (approximately $0.6 million), compared to RMB1.8 million for the same period of 2016. Working capital as of June 30, 2017 was RMB38.9 million ($5.7 million) as compared to RMB44.5 million at June 30, 2016. Net cash provided by operating activities was RMB5.7 million (approximately $0.8 million) for the year ended June 30, 2017, compared to net cash used in operating activities ofRMB0.3 million for the year ended June 30, 2016. Net cash used in investing activities was RMB0.6 million (approximately $86,500) for the year ended June 30, 2017, which was an increase in cash used in investing activities of RMB0.5 million compared to the same period in 2016. Net cash used in financing activities amounted to RMB3.1 million (approximately $0.5 million) for the year ended June 30, 2017, as compared to net cash used in financing activities of RMB10.2 million for the same period in 2016.

About Recon Technology, Ltd. ("Recon")

Recon Technology, Ltd. ("Recon") is China's first listed non-state owned oil and gas field service company on NASDAQ. Recon supplies China's largest oil exploration companies, such as PetroChina (NYSE: PTR) and Sinopec (NYSE: SNP), with advanced automated technologies, efficient gathering and transportation equipment and reservoir stimulation measure for increasing petroleum extraction levels, reducing impurities and lowering production costs. Through the years, Recon has taken leading positions on several segmented markets of the oil and gas filed service industry. Recon also has developed stable long-term cooperation relationship with its major clients, and its products and service are also well accepted by clients. The Company is also developing new markets of oilfield environmental protection, sewage treatment sector and power and coal chemical industry based on its advantage on technic and market resources. For additional information please visit: www.recon.cn .

Company Contact
Liu Jia, CFO
Recon Technology, Ltd.
+86 (10) 84945799
info@recon.cn

Investor Relations
The Equity Group Inc.

In China
Katherine Yao, Senior Associate
+86-10-6587-6435
kyao@equityny.com

In the U.S.
Adam Prior, Senior Vice President
+1 (212) 836-9606
aprior@equityny.com

Safe Harbor

This news release contains forward-looking statements as defined by the Private Securities Litigation Reform Act of 1995. Forward-looking statements include statements concerning plans, objectives, goals, strategies, future events or performance, and underlying assumptions and other statements that are other than statements of historical facts. These statements are subject to uncertainties and risks 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. 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.

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SOURCE Recon Technology, Ltd.