China Customer Relations Centers, Inc. Announces Financial Results for the First Half of 2020
*Revenues and EPS Increased by 33.4% and 106.4%, Respectively, for the First Half of 2020 *
TAI'AN, China, Dec. 19, 2020 /PRNewswire/ -- China Customer Relations Centers, Inc. (NASDAQ: CCRC) ("CCRC" or the "Company"), a leading business process outsourcing ("BPO") service provider serving internet, e-commerce, banking, and telecommunications clients in China, today announced its unaudited financial results for the six months ended June 30, 2020.
*First Half of 2020 Highlights (all comparisons to prior year unless noted)*
· Revenues increased by 33.4% to $97.72 million, driven by strong demand for our business from existing BPO clients and the contribution from new clients including Huaxia Bank, Ping'An Bank, Suning Insurance, and Vipshop, among others.
· Gross profit increased by 38.9% to $25.91 million. Gross margin was 26.5%, compared to 25.5% for the same period of the prior year.
· Operating income increased by 89.1% to $10.06 million. Operating margin increased by 3.0 percentage point to 10.3%.
· Net income attributable to common shareholders increased by 106.4% to $10.30 million.
· Earnings per share was $0.56, compared to $0.27 for the same period of the prior year.
*First Half of 2020 Financial Results (Unaudited)*
*For the Six Months Ended June 30,*
($ millions, except per share data)
*2020*
*2019*
*% Change*
Revenues
$97.72
$73.27
33.4%
Gross profit
$25.91
$18.65
38.9%
Gross margin
26.5%
25.5%
1.0 pp*
Operating income
$10.06
$5.32
89.1%
Operating margin
10.3%
7.3%
3.0 pp*
Net income attributable to CCRC
$10.30
$4.99
106.4%
EPS - basic and diluted
$0.56
$0.27
107.4%
*pp: percent points
Revenues
For the six months ended June 30, 2020, revenues increased by $24.45 million, or 33.4%, to $97.72 million from $73.27 million for the same period of the prior year. We continued to see strong demand for our business from existing BPO clients while adding new clients with notable additions including Huaxia Bank, Ping'An Bank, Suning Insurance, and Vipshop, among others, during the six months ended June 30, 2020.
We continued to increase our service capacity, which increased by 2,969 seats, or 13.3%, to 25,329 seats as of June 30, 2020 from 22,360 seats at the end of 2019.
Cost of revenues
Cost of revenues consists primarily of salaries, payroll taxes and employee benefits costs of our customer service associates and other operations personnel. Cost of revenues also includes direct communications costs, rent expense, IT costs, and facilities support expenses. Cost of revenues increased by $17.19 million, or 31.5%, to $71.81 million for the six months ended June 30, 2020 from $54.62 million for the same period of the prior year. The increase in cost of revenues was in line with the increase in revenues. As a percentage of revenues, cost of revenues was 73.5% for the six months ended June 30, 2020, compared to 74.5% for the same period of the prior year.
Gross profit and gross margin
Gross profit increased by $7.26 million, or 38.9%, to $25.91 million for the six months ended June 30, 2020 from $18.65 million for the same period of the prior year. The increase in gross profit was primarily driven by increased revenues as well as COVID-19 related social security and rent relief benefits received during the pandemic. Gross margin increased by 1.0 percentage point to 26.5% for the six months ended June 30, 2020 from 25.5% for the same period of the prior year.
Selling, general and administrative expense
Selling, general and administrative ("SG&A") expenses consist primarily of sales and administrative employee-related expenses, professional fees, travel costs, research and development costs, and other corporate expenses. SG&A expenses increased by $2.52 million, or 18.9%, to $15.85 million for the six months ended June 30, 2020 from $13.33 million for the same period of the prior year. As a percentage of revenues, SG&A expenses decreased from 18.2% for the six months ended June 30, 2019 to 16.2% for the six months ended June 30, 2020.
Operating income and operating margin
Income from operations increased by $4.74 million, or 89.1%, to $10.06 million for the six months ended June 30, 2020 from $5.32 million for the same period of the prior year. The increase in operating income was related to increased gross profit which was partially offset by increased SG&A expenses. Operating margin was 10.3% for the six months ended June 30, 2020, compared to 7.3% for the same period of the prior year.
Other income
We recognized government grants, which are discretionary and unpredictable in nature, of $1.38 million during the six months ended June 30, 2020, compared to $0.56 million recognized during the same period of the prior year. Total other income, net of other expenses, increased by $1.30 million, or 184.7%, to $2.01 million for the six months ended June 30, 2020 from $0.71 million for the same period of the prior year.
Income before provision for income taxes
Income before provision for income taxes increased by $6.05 million, or 100.3%, to $12.07 million for the six months ended June 30, 2020 from $6.03 million for the same period of the prior year. The increase in income before provision for income taxes was due to increased operating income as well as government grants and other income.
Income taxes
Provision for income taxes was $1.73 million for the six months ended June 30, 2020, compared to $0.96 million for the same period of the prior year.
Net income and earnings per share
Net income increased by $5.27 million, or 104.1%, to $10.34 million for the six months ended June 30, 2020 from $5.07 million for the same period of the prior year. After deducting net income attributable to noncontrolling interest, net income attributable to common shareholders was $10.30 million, or $0.56 per basic and diluted share, for the six months ended June 30, 2020, compared to $4.99 million, or $0.27 per basic and diluted share, for the same period of the prior year.
*Financial Conditions*
As of June 30, 2020, the Company had cash of $28.67 million, compared to $25.33 million at December 31, 2019. Total working capital was $58.59 million as of June 30, 2020, compared to $47.50 million at the end of 2019.
Net cash provided by operating activities was $7.87 million for the six months ended June 30, 2020, compared to net cash used in operating activities of $1.34 million for the same period of the prior year. Net cash used in investing activities was $1.81 million for the six months ended June 30, 2020, compared to $1.30 million for the same period of the prior year. Net cash used in financing activities was $2.17 million for the six months ended June 30, 2020, compared to net cash provided by financing activities of $0.03 million for the same period of the prior year.
*Notice*
Rounding amounts and percentages: Certain amounts and percentages included in this press release have been rounded for ease of presentation. Percentage figures included in this press release have not in all cases been calculated on the basis of such rounded figures, but on the basis of such amounts prior to rounding. For this reason, certain percentage amounts in this press release may vary from those obtained by performing the same calculations using the figures in the financial statements. In addition, certain other amounts that appear in this press release may not sum due to rounding.
*About China Customer Relations Centers, Inc.*
The Company is a leading BPO service provider in China focusing on the complex, voice-based and online-based segments of customer care services, including:
· customer relationship management;
· technical support;
· sales;
· customer retention;
· marketing surveys; and
· research.
The Company currently has a service capacity of approximately 25,329 seats for its call centers. More information about the Company can be found at: www.ccrc.com.
*Forward-Looking Statement*
This press 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. When the Company uses words such as "may," "will," "intend," "should," "believe," "expect," "anticipate," "project," "estimate" or similar expressions that do not relate solely to historical matters, it is making forward-looking statements. Specifically, the Company's statements regarding its: 1) the impact of COVID-19; and 2) continued growth, shareholder returns and business outlook, are forward-looking statements. Forward-looking statements are not guarantee of future performance and involve risks and uncertainties that may cause the actual results to differ materially from the Company's expectations discussed in the forward-looking statements. These statements are subject to uncertainties and risks including, but not limited to, the following: the Company's goals and strategies; the Company's future business development; product and service demand and acceptance; changes in technology; economic conditions; the growth of the call center business process outsourcing market in China; reputation and brand; the impact of competition and pricing; government regulations; fluctuations in general economic and business conditions in China and assumptions underlying or related to any of the foregoing and other risks contained in reports filed by the Company with the Securities and Exchange Commission. For these reasons, among others, investors are cautioned not to place undue reliance upon any forward-looking statements in this press release. Additional factors are discussed in the Company's filings with the U.S. Securities and Exchange Commission, which are available for review at www.sec.gov. The Company undertakes no obligation to publicly revise these forward–looking statements to reflect events or circumstances that arise after the date hereof.
*For more information, please contact:*
Sherry Zheng
Weitian Group LLC
Email: shunyu.zheng@weitian-ir.com
Phone: +1-718-213-7386
*CHINA CUSTOMER RELATIONS CENTERS, INC. AND SUBSIDIARIES
**CONSOLIDATED BALANCE SHEETS*
* June 30, *
* December 31, *
*2020*
*2019*
*(Unaudited)*
*ASSETS*
Cash and cash equivalents
$
28,673,083
$
25,328,486
Accounts receivable, net
47,438,549
42,606,485
Prepayments
2,912,547
2,396,646
Prepayment, related party
78,109
90,429
Due from related party, current
212,218
-
Income taxes recoverable
201,283
712,459
Other current assets
3,911,556
3,408,704
Total current assets
83,427,345
74,543,209
Equity investments
3,396,904
3,446,346
Property and equipment, net
9,788,227
10,115,782
Deferred tax assets
239,379
242,863
Due from related party, non-current
-
215,307
Operating lease right-of-use assets
9,882,185
9,827,114
Operating lease right-of-use assets - related party
92,732
172,121
Total non-current assets
23,399,427
24,019,533
Total assets
$
106,826,772
$
98,562,742
* LIABILITIES AND EQUITY *
Accounts payable
$
2,836,918
$
2,602,972
Accounts payable - related parties
49,945
149,658
Accrued liabilities and other payables
4,677,490
4,641,892
Deferred revenue
235,293
456,331
Wages payable
10,261,274
10,472,596
Income taxes payable
1,247,114
452,961
Operating lease liabilities, current
3,369,036
3,797,069
Operating lease liabilities - related party, current
40,670
163,995
Short term loans
2,122,181
4,306,138
Total current liabilities
24,839,921
27,043,612
Operating lease liabilities, non-current
7,164,013
6,068,702
Total non-current liabilities
7,164,013
6,068,702
Total liabilities
32,003,934
33,112,314
Equity
Common shares, $0.001 par value, 100,000,000 shares authorized, 18,329,600 shares issued and outstanding as of June 30, 2020 and December 31, 2019
18,330
18,330
Additional paid-in capital
18,485,598
15,074,267
Retained earnings
52,891,042
47,347,781
Statutory reserves
7,161,554
5,818,330
Accumulated other comprehensive loss
(4,352,452)
(3,411,744)
Total China Customer Relations Centers,
Inc. shareholders' equity
74,204,072
64,846,964
Noncontrolling interest
618,766
603,464
Total equity
74,822,838
65,450,428
Total liabilities and equity
$
106,826,772
$
98,562,742
*CHINA CUSTOMER RELATIONS CENTERS, INC. AND SUBSIDIARIES
**CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
**(Unaudited)*
*For The Six Months Ended June 30,*
*2020*
*2019*
Revenues, net
$
97,720,912
$
73,274,748
Cost of revenues
71,809,229
54,623,472
*Gross profit*
25,911,683
18,651,276
Operating expenses:
Selling, general & administrative expenses
15,848,053
13,329,194 Total operating expenses
15,848,053
13,329,194
*Income from operations*
10,063,630
5,322,082
Interest expense
(109,430)
(30,475)
Government grants
1,384,198
555,229
Other income
758,268
201,945
Other expense
(23,242)
(20,722) Total other income
2,009,794
705,977
*Income before provision for income taxes*
12,073,424
6,028,059
Income tax provision
1,733,355
961,021
*Net income*
10,340,069
5,067,038
Less: net income attributable to noncontrolling interest
42,253
77,947
*Net income attributable to China Customer Relations Centers, Inc.*
$
10,297,816
$
4,989,091
*Comprehensive income*
Net income
$
10,340,069
$
5,067,038
Other comprehensive income (loss)
Foreign currency translation adjustment
(967,659)
(6,737)
*Total Comprehensive income*
9,372,410
5,060,301
Less: Comprehensive income attributable to noncontrolling interest
15,302
140,467
*Comprehensive income attributable to China Customer Relations Centers, Inc.*
$
9,357,108
$
4,919,834
*Earnings per share attributable to China Customer Relations Centers, Inc. *
Basic
$
0.56
$
0.27
Diluted
$
0.56
$
0.27
*CHINA CUSTOMER RELATIONS CENTERS, INC. AND SUBSIDIARIES
**CONSOLIDATED STATEMENTS OF CASH FLOWS
**(Unaudited)*
*For The Six Months Ended June 30,*
*2020*
*2019*
*Cash flows from operating activities*
Net income
$
10,340,069
$
5,067,038
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation
2,445,941
2,845,134
Loss on disposal of property and equipment
226,974
68,475
Non-cash lease expense
436,327
-
Changes in assets and liabilities:
Accounts receivable
(5,471,004)
(5,493,897)
Prepayments
(1,010,254)
(917,156)
Prepayment, related party
11,079
(1,783)
Other current assets
(554,215)
(97,228)
Operating lease liabilities
135,277
(843,053)
Accounts payable
272,668
(130,978)
Accounts payable - related parties
(98,062)
(55,237)
Wages payable
(62,836)
412,029
Income taxes recoverable
503,504
207,879
Income taxes payable
804,727
(56,564)
Deferred revenue
(215,584)
(114,931)
Accrued liabilities and other payables
101,960
(2,226,854)
*Net cash provided by (used in) operating activities*
*7,866,571*
*(1,337,126)*
*Cash flows from investing activities*
Purchase of property and equipment
(1,808,750)
(1,371,577)
Proceeds from sale of property and equipment
988
28,210
Repayment from related parties
-
44,222
*Net cash used in investing activities*
*(1,807,762)*
*(1,299,145)*
*Cash flows from financing activities*
Borrowings from short-term loans
4,231,293
3,725,560
Repayment of short-term loans
(6,398,592)
(3,694,345)
*Net cash provided by (used in) financing activities*
*(2,167,299)*
*31,215*
*Effect of exchange rate changes on cash and cash equivalents *
(546,913)
(62,102)
*Net change in cash and cash equivalents*
3,344,597
(2,667,158)
*Cash and cash equivalents, beginning of the period*
25,328,486
24,419,912
*Cash and cash equivalents, end of the period*
$
28,673,083
$
21,752,754
*Supplemental cash flow information*
Interest paid
$
109,433
$
82,531
Income taxes paid
$
905,535
$
1,139,416
*Non-cash investing and financing activities*
Transfer from prepayments to property and equipment
$
457,666
$
-
Liabilities assumed in connection with purchase of property and equipment
$
-
$
17,792