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China Customer Relations Centers (CCRC)

Filed: 18 Dec 20, 4:54pm

Exhibit 99.1

 

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%  1.0pp*
Operating income $10.06  $5.32   89.1%
Operating margin  10.3%  7.3%  3.0pp*
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.

 

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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.

 

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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

 

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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 

 

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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 

 

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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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