China Customer Relations Centers, Inc. Announces Financial Results for the Second Half and Fiscal Year of 2019
TAI'AN, China, May 29, 2020 /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 and twelve months ended December 31, 2019.
Second Half of 2019 Highlights (all comparisons to prior year unless noted)
-- Revenues increased by 32.8% to a Company record of $100.13 million
driven by continued expansion of business.
-- Gross profit increased by 8.7% to $20.25 million. Gross margin was
20.2%, compared to 24.7% for the same period of the prior year.
-- Operating income increased by 42.7% to $7.26 million. Operating margin
increased by 0.5 percentage point to 7.3%.
-- Net income attributable to common shareholders increased by 58.7% to
$8.07 million.
-- EPS attributable to common shareholders was $0.44, compared to $0.28 for
the same period of the prior year.
Mr. Gary Wang, Chairman and Chief Executive Officer of CCRC, commented, "We saw a strong uptick in our business through the second half of 2019, leading to increases in revenues of 32.8% year-over-year and 36.7% sequentially, thanks to increased sales volume at some of the key existing customers as well as contributions from new customers. Both operating and net margins for the second half of 2019 also increased year-over-year."
Fiscal Year 2019 Highlights
-- Revenues increased by 22.6% to $173.41 million driven by continued
expansion of business.
-- Gross profit increased by 0.1% to $38.90 million. Gross margin was
22.4%, compared to 27.5% for 2018,
-- Operating income decreased by 28.2% to $12.59 million. Operating margin
was 7.3%, compared to 12.4% for 2018.
-- Net income attributable to common shareholders decreased by 18.9% to
$13.06 million.
-- EPS attributable to common shareholders was $0.71, compared to $0.88 for
2018.
-- As of December 31, 2019, the Company had service capacity of 22,360
seats, compared to 18,384 seats at the end of 2018.
"Looking forward, despite the negative impact of the COVID-19 outbreak earlier this year that caused disruption and deemed to take a toll on China's economy and our business, we believe our well diversified customer base and strong market position will continue to drive long-term growth and generate significant returns for shareholders," concluded Mr. Wang.
Second Half of 2019 Financial Results (Unaudited)
For the Six Months Ended December 31,
($ millions, except per share data) 2019 2018
% Change
Revenues $100.13 $75.40 32.8%
Gross profit $20.25 $18.63 8.7%
Gross margin 20.2% 24.7%
-4.5 pp
Operating income $7.26 $5.09 42.7%
Operating margin 7.3% 6.8%
0.5 pp
Net income attributable to CCRC $8.07 $5.08 58.7%
EPS - basic and diluted $0.44 $0.28 57.1%
Revenues
For the six months ended December 31, 2019, revenues increased by $24.74 million, or 32.8%, to $100.13 million from $75.40 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 December 31, 2019.
As of December 31, 2019, the Company had call centers located in Shandong Province, Jiangsu Province, Henan Province, Guangdong Province, Yunnan Province, Hubei Province, Sichuan Province, Hebei Province, Anhui Province, Heilongjiang Province, the Xinjiang Uygur Autonomous Region, the Guangxi Zhuang Autonomous Region, Jiangxi Province and Chongqing City, with a capacity approximately of 22,360 seats which compared to 21,216 seats as of June 30, 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 $23.12 million, or 40.7%, to $79.88 million for the six months ended December 31, 2019 from $56.76 million for the same period of the prior year. As a percentage of revenues, cost of revenues was 79.8% for the six months ended December 31, 2019, compared to 75.3% for the same period of the prior year.
Gross profit and gross margin
Gross profit increased by $1.62 million, or 8.7%, to $20.25 million for the six months ended December 31, 2019 from $18.63 million for the same period of the prior year. Gross margin decreased by 4.5 percentage points to 20.2% for the six months ended December 31, 2019 from 24.7% for the same period of the prior year. The decrease in gross margin was related to increased employees' compensation and benefits.
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 decreased by $0.55 million, or 4.1%, to $12.99 million for the six months ended December 31, 2019 from $13.54 million for the same period of the prior year. As a percentage of revenues, SG&A expenses decreased from 18.0% for the six months ended December 31, 2018 to 13.0% for the six months ended December 31, 2019.
Operating income and operating margin
Income from operations increased by $2.17 million, or 42.7%, to $7.26 million for the six months ended December 31, 2019 from $5.09 million for the same period of the prior year. The increase in operating income was related to increased gross profit as well as decreased SG&A expenses. Operating margin was 7.3% for the six months ended December 31, 2019, compared to 6.8% for the same period of the prior year.
Other income
We recognized government grants, which are discretionary and unpredictable in nature, of $1.27 million during the six months ended December 31, 2019, compared to $1.14 million recognized during the same period of the prior year. Total other income, net of other expenses, increased by $1.06 million, or 88.0%, to $2.27 million for the six months ended December 31, 2019 from $1.21 million for the same period of the prior year.
Income before provision for income taxes
Income before provision for income taxes increased by $3.24 million, or 51.4%, to $9.54 million for the six months ended December 31, 2019 from $6.30 million for the same period of the prior year. The increase in income before provision for income taxes was due to increased operating income and total other income.
Income taxes
Provision for income taxes was $1.43 million for the six months ended December 31, 2019, compared to $1.10 million for the same period of the prior year.
Net income and earnings per share
Net income increased by $2.91 million, or 56.0%, to $8.11 million for the six months ended December 31, 2019 from $5.20 million for the same period of the prior year. After deducting net income attributable to noncontrolling interest, net income attributable to common shareholders was $8.07 million, or $0.44 per basic and diluted share, for the six months ended December 31, 2019, compared to $5.08 million, or $0.28 per basic and diluted share, for the same period of the prior year.
Fiscal Year 2019 Financial Results
For the Twelve Months Ended December 31,
($ millions, except per share data) 2019 2018 % Change
Revenues $173.41 $141.43 22.6%
Gross profit $38.90 $38.87 0.1%
Gross margin 22.4% 27.5%
-5.1 pp
Operating income $12.59 $17.54 -28.2%
Operating margin 7.3% 12.4%
-5.1 pp
Net income attributable to CCRC $13.06 $16.09 -18.9%
EPS - basic and diluted $0.71 $0.88 -19.3%
Revenues
For the year of 2019, revenues increased by $31.98 million, or 22.6%, to $173.41 million from $141.43 million for 2018. We continued to see strong demand for our business from existing BPO clients as well as new clients during 2019. Inbound calling, outbound calling, and other services accounted for 44%, 34%, and 22% of total revenues for 2019, compared to 49%, 30%, and 21% of total revenues for 2018, respectively.
During 2019, the Company generated revenue from over 160 customers, including the subsidiaries of China Mobile, Didi Chuxing (a mobile taxi-calling company), Ping An Insurance, Haier, and HiSense. We also signed outsourcing contracts with some of China's largest banks, based upon assets held, including China Construction Bank, China CITIC Bank, and China Merchants Bank, and we also signed outsourcing contracts with Qunar, SF Express, and subsidiaries of China's online retailer, Alibaba Group (including Taobao, Tmall, and Alipay).
As of December 31, 2019,the Company had a capacity approximately of 22,360 seats which compared to 18,384 seats at the end of 2018.
Cost of revenues
Cost of revenues increased by $31.94 million, or 31.1%, to $134.50 million for 2019 from $102.57 million for 2018. As a percentage of revenues, cost of revenues was 77.6% for 2019, compared to 72.5% for 2018.
Gross profit and gross margin
Gross profit increased by $0.03 million, or 0.1%, to $38.90 million for 2019 from $38.87 million for 2018. Gross margin decreased by 5.0 percentage points to 22.4% for 2019 from 27.5% for 2018. The decrease in gross margin was related to increased employees' compensation and benefits.
Selling, general and administrative expense
SG&A expenses increased by $4.99 million, or 23.4%, to $26.32 million for 2019 from $21.33 million for 2018. The increase in SG&A expenses was primarily related to higher payroll and bonus expenses paid to the administrative and research personnel and the management team. As a percentage of revenues, SG&A expenses was 15.2% for 2019, compared to 15.1% for 2018.
Operating income and operating margin
Income from operations decreased by $4.95 million, or 28.2%, to $12.59 million for 2019 from $17.54 million for 2018. Operating margin was 7.3% for 2019, compared to 12.4% for 2018. The decrease in operating margin was mainly due to decreased gross margin as above explained.
Other income
We recognized government grants, which are discretionary and unpredictable in nature, of $1.83 million in 2019, compared to $1.71 million recognized in 2018. Government grants as a percentage of net income were 13.9% for 2019, compared to 10.5% for 2018. Total other income, net of other expenses, increased by $1.25 million to $2.98 million for 2019 from $1.73 million for 2018.
Income before provision for income taxes
Income before provision for income taxes decreased by $3.70 million, or 19.2%, to $15.57 million for 2019 from $19.27 million for 2018. The decrease in income before provision for income taxes was mainly due to decreased operating income and partially offset by increased total other income.
Income taxes
Provision for income taxes was $2.39 million for 2019, compared to $2.97 million for 2018.
Net income and earnings per share
Net income decreased by $3.13 million, or 19.2%, to $13.17 million for 2019 from $16.3 million for 2018. After deducting net income attributable to noncontrolling interest, net income attributable to common shareholders was $13.06 million, or $0.71 per basic and diluted share, for 2019, compared to $16.09 million, or $0.88 per basic and diluted share, for 2018.
Financial Conditions
As of December 31, 2019, the Company had cash of $25.33 million, compared to $24.42 million at December 31, 2018. Total working capital was $47.50 million as of December 31, 2019, compared to $41.05 million at the end of 2018.
Net cash provided by operating activities was $5.21 million for 2019, compared to $12.14 million for 2018. Net cash used in investing activities was $4.46 million for 2019, compared to $4.75 million for 2018. Net cash provided by financing activities was $0.54 million for 2019, compared net cash used in financing activities of $0.09 million for 2018.
Recent Development
The outbreak of the COVID-19 pandemic in China starting from the beginning of 2020 has posed limitations to the Company's normal operating routine. The Company followed the restrictive measures implemented in China, by suspending onsite operation and having employees work remotely until late March 2020, when the Company started to gradually resume normal operation. Consequently, the COVID-19 pandemic may adversely affect the Company's business operations, financial condition and operating results for 2020, including but not limited to material negative impact to the Company's total revenues, slower collection of accounts receivables and significant impairment to the Company's equity investments. Due to the high uncertainty of the evolving situation, the Company has limited visibility on the full impact brought upon by the COVID-19 pandemic and the related financial impact cannot be estimated at this time.
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, Sichuan, Hebei, Anhui, Xinjiang, Guangxi, Jiangxi, Heilongjiang, and Chongqing, with a capacity of approximately 22,360 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) 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:
Tony Tian, CFA
Weitian Group LLC
Email: ttian@weitianco.com
Phone: +1-732-910-9692
CHINA CUSTOMER RELATIONS CENTERS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
For The Years Ended December 31,
2019 2018 2017
---
Revenues, net $
173,409,113 $
141,433,641 $
88,971,787
Cost of revenues 134,504,540 102,567,896 65,562,563
Gross profit 38,904,573 38,865,745 23,409,224
Operating expenses:
Selling, general & administrative
expenses 26,318,771 21,329,908 14,766,524
Total operating expenses 26,318,771 21,329,908 14,766,524
Income from operations 12,585,802 17,535,837 8,642,700
Interest expense (190,808) (404,958) (1,609)
Government grants 1,825,402 1,709,297 1,885,340
Other income 1,547,788 552,205 175,995
Other expense (202,688) (124,370) (331,641)
Total other income 2,979,694 1,732,174 1,728,085
Income before provision for income
taxes 15,565,496 19,268,011 10,370,785
Income tax provision 2,391,371 2,966,880 1,255,654
Net income 13,174,125 16,301,131 9,115,131
Less: net income attributable to
noncontrolling interest 118,114 208,593 341,672
Net income attributable to
China Customer Relations
Centers, Inc. $
13,056,011 16,092,538 8,773,459
===
Comprehensive income
Net income $
13,174,125 $
16,301,131 $
9,115,131
Other comprehensive income (loss)
Foreign currency translation
adjustment (828,331) (2,741,283) 2,141,796
Total Comprehensive income 12,345,794 13,559,848 11,256,927
Less: Comprehensive income
attributable to noncontrolling
interest 109,238 140,467 401,324
Comprehensive income
attributable to China
Customer Relations
Centers, Inc. $
12,236,556 $
13,419,381 $
10,855,603
===
Earnings per share attributable to
China Customer Relations Centers,
Inc.
Basic $
0.71 $
0.88 $
0.48
===
Diluted $
0.71 $
0.88 $
0.48
===
Weighted average common shares
outstanding
Basic 18,329,600 18,329,600 18,329,600
Diluted 18,329,600 18,329,600 18,329,600
CHINA CUSTOMER RELATIONS CENTERS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 31, December?31,
2019 2018
---
ASSETS
Cash and cash equivalents $
25,328,486 $
24,419,912
Accounts receivable, net 42,606,485 30,050,506
Prepayments 2,396,646 1,689,835
Prepayment, related party 90,429 91,618
Due from related party, current 199,994
Income taxes recoverable 712,459 527,995
Other current assets 3,408,704 1,959,923
Total current assets 74,543,209 58,939,783
Equity investments 3,446,346 3,491,653
Property and equipment, net 10,115,782 8,290,460
Deferred tax assets 242,863 486,009
Due from related party, non-
current 215,307
Operating lease right-of-use
assets 9,827,114
Operating lease right-of-use
assets - related party 172,121
Total non-current assets 24,019,533 12,268,122
Total assets $
98,562,742 $
71,207,905
===
LIABILITIES AND EQUITY
Accounts payable $
2,602,972 $
610,724
Accounts payable -related parties 149,658 162,112
Accrued liabilities and other
payables 4,641,892 5,673,159
Deferred revenue 456,331 361,636
Wages payable 10,472,596 7,082,138
Income taxes payable 452,961 364,157
Operating lease liabilities,
current 3,797,069
Operating lease liabilities -
related party, current 163,995
Short term loans 4,306,138 3,635,623
Total current liabilities 27,043,612 17,889,549
Operating lease liabilities, non-
current 6,068,702
Total non-current liabilities 6,068,702
Total liabilities 33,112,314 17,889,549
Equity
Common shares, $0.001 par value,
100,000,000 shares authorized,
18,329,600 shares issued and
outstanding as of December 31,
2019 and December 31, 2018 18,330 18,330
Additional paid-in capital 15,074,267 11,202,396
Retained earnings 47,347,781 40,065,822
Statutory reserves 5,818,330 3,916,149
Accumulated other comprehensive
loss (3,411,744) (2,592,289)
Total China Customer Relations
Centers, Inc. shareholders' equity 64,846,964 52,610,408
Noncontrolling interest 603,464 707,948
Total equity 65,450,428 53,318,356
Total liabilities and
equity $
98,562,742 $
71,207,905
===
CHINA CUSTOMER RELATIONS CENTERS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For The Years Ended December 31,
2018 2018 2017
---
Cash flows from operating activities
Net income $
13,174,125 $
16,301,131 $
9,115,131
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 3,404,912 2,635,242 1,852,152
Allowance for doubtful accounts 952,439 429,803
Loss on disposal of property and equipment 19,091 34,166 2,416
Deferred income taxes 238,883 (196,909) (230,043)
Non-cash lease expense 3,501,753
Changes in assets and liabilities:
Accounts receivable (13,057,615) (7,937,804) (9,269,755)
Prepayments (2,097,963) (887,778) (1,313,830)
Prepayment, related party (95,244)
Other current assets (1,510,847) (970,199) 25,925
Operating lease liabilities (3,037,030)
Accounts payable 2,017,431 147,818 (505,372)
Accounts payable - related parties (10,440) 122,630 (88,136)
Wages payable 3,511,093 1,884,440 2,393,214
Income taxes recoverable (192,965) (548,893)
Income taxes payable 94,336 (153,896) (386,825)
Deferred revenue 100,245 (221,771) (38,813)
Accrued liabilities and other payables (941,772) 1,077,098 1,016,373
Net cash provided by operating activities 5,213,237 12,142,470 3,002,240
Cash flows from investing activities
Purchase of property and equipment (4,481,450) (4,768,139) (2,082,719)
Proceeds from sale of property and equipment 36,693 9,197 108
Payments for equity investments (1,461) (3,509,404)
Repayments from third party 233,596
Advance to related parties (214,111) (105,827) (7,400)
Repayment from related parties 198,017 117,802
Net cash used in investing activities (4,460,851) (4,748,428) (5,365,819)
Cash flows from financing activities
Contribution from noncontrolling investor in
subsidiary 353,581
Dividend distributed to noncontrolling investor in
subsidiary (213,722) (355,232)
Repayments to related parties (473,914)
Borrowings from short term loans 4,452,368 3,891,596 3,780,490
Repayment of short term loans (3,694,345) (3,625,448)
Net cash provided by (used in) financing activities 544,301 (89,084) 3,660,157
Effect of exchange rate changes on cash, cash
equivalents and restricted cash (388,113) (1,513,411) 884,519
Net change in cash, cash equivalents and restricted
cash 908,574 5,791,547 2,181,097
Cash, cash equivalents and restricted cash, beginning
of the year 24,419,912 18,628,365 16,447,268
Cash, cash equivalents and restricted cash,
end of the year $
25,328,486 $
24,419,912 $
18,628,365
===
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SOURCE China Customer Relations Centers, Inc.
