China Customer Relations Centers, Inc. Announces Unaudited Financial Results for the First Half of 2019
TAI'AN, China, Nov. 22, 2019 /PRNewswire/ -- China Customer Relations Centers, Inc. (NASDAQ: CCRC) ("CCRC" or the "Company"), a leading call center business process outsourcing ("BPO") service provider in China, today announced its financial results for the six months ended June 30, 2019.
First Half of 2019 Highlights (all comparisons to prior year unless noted)
-- Revenues increased by 11.0% to $73.3 million driven by continued
expansion of business.
-- Gross profit decreased by 7.8% to $18.7 million. Gross margin decreased
by 5.1 percentage points to 25.5%.
-- Operating income decreased by 57.2% to $5.3 million. Operating margin
was 7.3%, compared to 18.8% for the same period of the prior year.
-- Net income attributable to common shareholders decreased by 54.7% to
$5.0 million.
-- EPS attributable to common shareholders was $0.27, versus $0.60 for the
same period of the prior year.
-- As of June 30, 2019, the Company had service capacity of 21,216 seats,
compared to 18,384 seats at the end of 2018.
First Half of 2019 Unaudited Financial Results
For the Six Months Ended June 30,
($ millions, except per share data) 2019 2018
% Change
Revenues $73.3 $66.0 11.0%
Gross profit $18.7 $20.2 -7.8%
Gross margin 25.5% 30.6%
-5.1 pp
Operating income $5.3 $12.4 -57.2%
Operating margin 7.3% 18.8%
-11.5 pp
Net income attributable to CCRC $5.0 $11.0 -54.7%
EPS - basic and diluted $0.27 $0.60 -54.7%
Revenues
For the six months ended June 30, 2019, revenues increased by $7.2 million, or 11.0%, to $73.3 million from $66.0 million for the same period of the prior year. We continued to see strong demand for our business from existing BPO clients as well as new clients during the six months ended June 30, 2019. As of June 30, 2019, The Company had 33 call center locations in 16 provinces, autonomous regions and municipalities in China, including Shandong, Jiangsu, Anhui, Hebei, Xinjiang, Guangxi, Jiangxi, Chongqing, Beijing, Henan, Shanghai, Sichuan, Yunnan, Guangdong, Heilongjiang and Hubei with a capacity approximately of 21,216 seats which increased by 15.4% from 18,384 seats at the end of 2018.
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, information technology costs, and facilities support. Cost of revenues increased by $8.8 million, or 19.3%, to $54.6 million for the six months ended June 30, 2019 from $45.8 million for the same period of the prior year. As a percentage of revenues, cost of revenues was 74.5% for the six months ended June 30, 2019, compared to 69.4% for the same period of the prior year.
Gross profit and gross margin
Gross profit decreased by $1.6 million, or 7.8%, to $18.7 million for the six months ended June 30, 2019 from $20.2 million for the same period of the prior year. Gross margin decreased by 5.1 percentage points to 25.5% for the six months ended June 30, 2019 from 30.6% for the same period of the prior year.
Selling, general and administrative expense
Selling, general and administrative ("SG&A") expenses increased by $5.5 million, or 71.2%, to $13.3 million for the six months ended June 30, 2019 from $7.8 million for the same period of the prior year. The increase in SG&A expenses was primarily related to higher payroll expenses as a result of increased headcount, as well as increased marketing and R&D expenses. As a percentage of revenues, SG&A expenses increased from 11.8% for the six months ended June 30, 2018 to 18.2% for the six months ended June 30, 2019.
Operating income and operating margin
Income from operations decreased by $7.1 million, or 57.2%, to $5.3 million for the six months ended June 30, 2019 from $12.4 million for the same period of the prior year. The decrease in operating income was mainly due to a significant increase in SG&A expenses. Operating margin was 7.3% for the six months ended June 30, 2019, compared to 18.8% for the same period of the prior year.
Other income
We received government grants, which are discretionary and unpredictable in nature, of $0.6 million during the six months ended June 30, 2019, in line with the amount received during the same period of the prior year. Government grants as a percentage of net income were 11.0% for the six months ended June 30, 2019, compared to 5.2% for the same period of the prior year. Total other income, net of other expenses, increased by $0.2 million, or 35.0%, to $0.7 million for the six months ended June 30, 2019 from $0.5 million for the same period of the prior year.
Income before provision for income taxes
Income before provision for income taxes decreased by $6.9 million, or 53.5%, to $6.0 million for the six months ended June 30, 2019 from $13.0 million for the same period of the prior year. The decrease in income before provision for income taxes was mainly due to the increase in SG&A expenses and the decrease of gross profit.
Income taxes
Provision for income taxes was $1.0 million for the six months ended June 30, 2019, compared to $1.9 million for the same period of the prior year.
Net income and earnings per share
Net income decreased by $6.0 million, or 54.4%, to $5.1 million for the six months ended June 30, 2019 from $11.1 million for the same period of the prior year. After deducting net income attributable to noncontrolling interest, net income attributable to common shareholders was $5.0 million, or $0.27 per basic and diluted share, for the six months ended June 30, 2019, compared to $11.0 million, or $0.60 per basic and diluted share, for the same period of the prior year.
Financial Conditions
As of June 30, 2019, the Company had cash of $21.8 million, compared to $24.4 million at December 31, 2018. Total working capital was $43.8 million as of June 30, 2019, compared to $41.1 million at the end of 2018.
Net cash used in operating activities was $1.3 million for the six months ended June 30, 2019, compared to $0.1 million for the same period of the prior year. Net cash used in investing activities was $1.3 million for the six months ended June 30, 2019, compared to $1.6 million for the same period of the prior year. Net cash provided by financing activities was $31,215 for the six months ended June 30, 2019, compared to $3.9 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's service is currently delivered from call centers located in Provinces of Shandong, Jiangsu, Henan, Guangdong, Yunnan, Hubei, Jiangxi, Hebei, Anhui, Sichuan, the Xinjiang Uygur Autonomous Region, the Guangxi Zhuang Autonomous Region, and Chongqing City, with a capacity of approximately 21,216 seats. 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) anticipated increase in SG&A costs; and 2) continued growth 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:
Tony Tian, CFA
Weitian Group LLC
Email: ttian@weitianco.com
Phone: +1-732-910-9692
CHINA CUSTOMER RELATIONS CENTERS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
June 30, December 31,
2019 2018
(Unaudited)
ASSETS
Cash and cash
equivalents $
21,752,754 $
24,419,912
Accounts receivable, net 35,526,298 30,050,506
Prepayments 2,223,098 1,689,835
Prepayment, related party 93,524 91,618
Due from related parties, net 156,612 199,994
Income taxes recoverable 323,421 527,995
Other current assets 2,058,991 1,959,923
Total current assets 62,134,698 58,939,783
Equity investments 3,497,145 3,491,653
Property and equipment, net 8,100,759 8,290,460
Deferred tax assets 486,774 486,009
Operating lease right-of-use
assets (1) 6,048,124
Operating lease right-of-use
assets - related party (1) 246,424
Total non-current assets 18,379,226 12,268,122
Total assets $
80,513,924 $
71,207,905
LIABILITIES AND EQUITY
Accounts payable $
454,489 $
610,724
Accounts payable -related
parties 107,787 162,112
Accrued liabilities and other
payables 3,498,630 5,673,159
Deferred revenue 248,642 361,636
Wages payable 7,500,248 7,082,138
Income taxes payable 308,838 364,157
Operating lease liabilities,
current (1) 2,371,341
Operating lease liabilities -
related party, current (1) 162,134
Short term loan 3,641,342 3,635,623
Total current liabilities 18,293,451 17,889,549
Operating lease liabilities, non-
current (1) 3,762,816
Operating lease liabilities -
related party, non-current (1) 84,290
Total non-current liabilities 3,847,106
Total liabilities 22,140,557 17,889,549
Equity
Common shares, $0.001 par value,
100,000,000 shares authorized,
18,329,600 shares issued and
outstanding as of June 30, 2019
and December 31, 2018 18,330 18,330
Additional paid-in capital 15,074,267 11,202,396
Retained earnings 40,384,829 40,065,822
Statutory reserves 4,714,362 3,916,149
Accumulated other comprehensive
loss (2,599,026) (2,592,289)
Total China Customer Relations
Centers, Inc. shareholders'
equity 57,592,762 52,610,408
Noncontrolling interest 780,605 707,948
Total equity 58,373,367 53,318,356
Total liabilities and
equity $
80,513,924 $
71,207,905
(1) On January 1, 2019, the Company adopted ASU 2016-02, "Leases (Topic 842)", using the optional
transition method where no adjustments are made to the comparative periods. Adoption of the standard
resulted in the recognition of operating lease right-of-use assets and operating lease liabilities for
lease contracts having terms beyond 12 months period on the consolidated balance sheet as of January 1,
2019.
CHINA CUSTOMER RELATIONS CENTERS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
(Unaudited)
For The Six Months Ended
June 30,
2019 2018
Revenues, net $
73,274,748 $
66,036,657
Cost of revenues 54,623,472 45,803,839
Gross profit 18,651,276 20,232,818
Operating expenses:
Selling, general & administrative
expenses 13,329,194 7,787,102
Total operating expenses 13,329,194 7,787,102
Income from operations 5,322,082 12,445,716
Interest expense (30,475) (120,659)
Government grants 555,229 572,245
Other income 201,945 80,470
Other expense (20,722) (9,270)
Total other income 705,977 522,786
Income before provision for income
taxes 6,028,059 12,968,502
Income tax provision 961,021 1,863,761
Net income 5,067,038 11,104,741
Less: net income attributable to
noncontrolling interest 77,947 96,893
Net income attributable to
China Customer Relations
Centers, Inc. $
4,989,091 $
11,007,848
Comprehensive income
Net income $
5,067,038 $
11,104,741
Other comprehensive income (loss)
Foreign currency translation
adjustment (6,737) (1,097,615)
Total Comprehensive income 5,060,301 10,007,126
Less: Comprehensive income
attributable to noncontrolling
interest 140,467 74,487
Comprehensive income
attributable to China
Customer Relations
Centers, Inc. $
4,919,834 $
9,932,639
Earnings per share attributable to
China Customer Relations Centers,
Inc.
Basic $
0.27 $
0.60
Diluted $
0.27 $
0.60
Weighted average common shares
outstanding
Basic 18,329,600 18,329,600
Diluted 18,329,600 18,329,600
CHINA CUSTOMER RELATIONS CENTERS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
For The Six Months Ended
June 30,
2019 2018
---
$
$
Cash flows from operating activities
Net income 5,067,038 11,104,741
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and
amortization 2,845,134 1,219,183
Loss on disposal of
property and
equipment 68,475 3,366
Deferred income taxes (128,150)
Changes in assets and liabilities:
Accounts receivable,
net (5,493,897) (9,911,512)
Due from related
parties, net (94,772)
Prepayments (917,156) (1,178,806)
Prepayment, related
party (1,783)
Operating lease
liabilities (843,053)
Other current assets (97,228) (377,832)
Accounts payable (130,978) 624,601
Accounts payable -
related parties (55,237) (6,414)
Wages payable 412,029 398,411
Income taxes
recoverable 207,879
Income taxes payable (56,564) 322,647
Deferred revenue (114,931) (186,486)
Accrued liabilities
and other payables (2,226,854) (1,896,512)
Net cash used in
operating activities (1,337,126) (107,535)
---
Cash flows from investing activities
Purchase of property
and equipment (1,371,577) (1,720,478)
Proceeds from sale of
property and
equipment 28,210 71
Repayment from
related parties 44,222 117,802
Net cash used in
investing activities (1,299,145) (1,602,605)
---
Cash flows from financing activities
Borrowings from short
term loans 3,725,560 3,891,596
Repayment of short
term loans (3,694,345)
Net cash provided by
financing activities 31,215 3,891,596
Effect of exchange
rate changes on cash
and cash equivalents (62,102) (358,552)
---
Net change in cash
and cash equivalents (2,667,158) 1,822,904
Cash and cash
equivalents,
beginning of the
period 24,419,912 18,628,365
---
Cash and cash
equivalents, end of
the period 21,752,754 20,451,269
===
Supplemental cash flow information
Interest paid 82,531 120,659
===
Income taxes paid 1,139,416 1,647,613
===
Non-cash investing and financing activities
Transfer from
prepayments to
property and
equipment 176,730
Liabilities assumed
in connection with
purchase of property
and equipment 17,792 49,318
===
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SOURCE China Customer Relations Centers, Inc.
