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. 18, 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,                                                                    74,204,072                          64,846,964


     Inc. shareholders' equity



      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

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SOURCE China Customer Relations Centers, Inc.