China Customer Relations Centers, Inc. Announces Company Record Financial Results for the First Half of 2018

    Both Revenues and Net Profit Hit Company Record Highs, Following Growth of 90% and 172%, Respectively

    TAI'AN, China, Oct. 12, 2018 /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, 2018.

    First Half of 2018 Highlights (all comparisons to prior year unless noted)

    • Revenues increased by 90.1% to a Company record of $66.0 million driven by continued expansion of its business.
    • Gross profit increased by 103.6% to $20.2 million. Gross margin increased by 2% to 30.6%.
    • Operating income increased by 305.8% to $12.4 million. Operating margin increased by 10% to 18.8%.
    • Net income attributable to common shareholders increased by 172.2% to $11.0 million.
    • EPS attributable to common shareholders was $0.60, versus $0.22 for the same period of last year.
    • As of June 30, 2018, the Company had service capacity of 15,709 seats, compared to 13,992 seats at the end of 2017.

    Mr. Gary Wang, Chairman and Chief Executive Officer of CCRC, commented, "We continue to see strong momentum in our business with both revenues and net profit reaching Company record highs following growth of 90.1% and 172.2%, respectively, in the first half of 2018. Gross and operating margins also increased by 2% and 10% percent, respectively, as we also managed our costs and expenses carefully while pursuing growth. As we continue to gain growth from BPO clients, new clients also contributed significantly to the growth in the first half of 2018. These new clients included some high-profile companies such as, Bank of China (Hefei City Branch), China Unicom (Chongqing Provincial Branch), China Post (Chongqing Provincial Branch), China Mobile (Yunnan Provincial Branch), and BAIC BJEV."

    Six Months Ended June 30, 2018 Financial Results (Unaudited)  



    For the Six Months Ended June 30,

    ($ millions, except per share data)


    2018


    2017


    % Change

    Revenues


    $66.0


    $34.7


    90.1%

    Gross profit


    $20.2


    $9.9


    103.6%

    Gross margin


    30.6%


    28.6%


    2.0 pp

    Operating income


    $12.4


    $3.1


    305.8%

    Operating margin


    18.8%


    8.8%


    10.0 pp

    Net income attributable to CCRC


    $11.0


    $4.0


    172.2%

    EPS attributable to CCRC - basic and
    diluted


    $0.60


    $0.22


    172.2%








    Revenues

    For the six months ended June 30, 2018, revenues increased by $31.3 million, or 90.1%, to a company record high of $66.0 million from $34.7 million for the same period of last 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, 2018. As of June 30, 2018, The Company had call centers located at 24 cities across 14 provinces, autonomous regions and municipalities in China, including Shandong, Jiangsu, Anhui, Hebei, Xinjiang, Guangxi, Jiangxi, Chongqing, Beijing, Henan, Shanghai, Sichuan, Yunnan and Guangdong with a capacity approximately of 15,709 seats.

    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 $21.0 million, or 84.7%, to $45.8 million for the six months ended June 30, 2018 from $24.8 million for the same period of last year. As a percentage of revenues, cost of revenues was 69.4% for the six months ended June 30, 2018, compared to 71.4% for the same period of last year.

    Gross profit and gross margin

    Gross profit increased by $10.3 million, or 103.6%, to $20.2 million for the six months ended June 30, 2018 from $9.9 million for the same period of last year. Gross margin increased by 2% to 30.6%, the highest level since 2013, for the six months ended June 30, 2018 from 28.6% for the same period of last year.

    Selling, general and administrative expense

    Selling, general and administrative expenses increased by $0.9 million, or 13.3%, to $7.8 million for the six months ended June 30, 2018 from $6.9 million for the same period of last year. The increase in selling, general and administrative expenses was a result of higher payroll and bonus expenses paid to the administrative and research personnel and the management team. As a percentage of revenues, SG&A decreased from 19.8% for the six months ended June 30, 2017 to 11.8% for the six months ended June 30, 2018. We are able to maintain our current cost level for administration departments despite the increase in our business for the first half of 2018 due to increased efficiency in our management team. We anticipate that our administrative expenses, particularly those related to support personnel costs, professional fees, as well as Sarbanes-Oxley compliance, will continue to increase in 2018 due to the continuing expansion of our business.

    Operating income and operating margin

    Income from operations increased by $9.4 million, or 305.8%, to $12.4 million for the six months ended June 30, 2018 from $3.1 million for the same period of last year. The increase in operating income was mainly driven by an increase in revenues and improvement in gross margin and partially offset by increases in selling, general and administrative expenses. Operating margin was 18.8% for the six months ended June 30, 2018, compared to 8.8% for the same period of last 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, 2018, compared to $1.3 million during the same period of last year. Government grants as a percentage of net income were 5.2% for the six months ended June 30, 2018, compared to 31.0% for the same period of last year. Total other income, net of other expenses, decreased by $0.9 million, or 63.2%, to $0.5 million for the six months ended June 30, 2018 from $1.4 million for the same period of last year.

    Income before provision for income taxes

    Income before provision for income taxes increased by $8.5 million, or 188.9%, to $13.0 million for the six months ended June 30, 2018 from $4.5 million for the same period of last year. The increase in income before provision for income taxes was mainly due to the increase in income from operations and partially offset by decrease in other income.

    Income taxes

    Provision for income taxes was $1.9 million for the six months ended June 30, 2018, compared to $0.3 million for the same period of last year.

    Net income and earnings per share

    Net income increased by $6.9 million, or 162.7%, to $11.1 million for the six months ended June 30, 2018 from $4.2 million for the same period of last year. After deducting net income attributable to noncontrolling interest, net income attributable to common shareholders was $11.0 million, or $0.60 per basic and diluted share, for the six months ended June 30, 2018, compared to $4.0 million, or $0.22 per basic and diluted share, for the same period of last year.

    Financial Conditions

    As of June 30, 2018, the Company had cash of $20.5 million, compared to $18.6 million at December 31, 2017. Total working capital was $39.4 million as of June 30, 2018, compared to $30.0 million at the end of 2017.

    Net cash used in operating activities was $0.1 million for the six months ended June 30, 2018, compared to net cash provided by operating activities of $1.1 million for the same period of last year. Net cash used in investing activities was $1.6 million for the six months ended June 30, 2018, compared to $2.3 million for the same period of last year. Net cash provided by financing activities was $3.9 million for the six months ended June 30, 2018, compared to net cash used in financing activities of $0.1 million for the same period of last year.

    Recent Development

    On August 11, 2018, The Company held its 2018 Annual Meeting of Stockholders at its headquarters in Tai'An City, Shandong Province.  The Company's shareholders: 1) reelected Weixin Wang and Owens Meng as Class II Directors; 2) ratified the appointment of MaloneBailey, LLP as its independent registered public accounting firm for the fiscal year of 2018; and 3) approved the 2018 Share Incentive Plan.

    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 segment 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 at over 24 cities across 14 provinces, autonomous regions and municipalities in China, including Shandong, Jiangsu, Anhui, Hebei, Xinjiang, Guangxi, Jiangxi, Chongqing, Beijing, Henan, Shanghai, Sichuan, Yunnan and Guangdong with a capacity of approximately 15,709 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 administrative 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: [email protected]
    Phone: +1-732-910-9692

     

    CHINA CUSTOMER RELATIONS CENTERS, INC. AND SUBSIDIARIES

    CONSOLIDATED BALANCE SHEETS










     June 30, 


     December 31, 




    2018


    2017




    (Unaudited)



    ASSETS






     Cash and cash equivalents 


    $

    20,451,269

    $

    18,628,365

     Accounts receivable, net 



    32,819,649


    23,689,583

     Notes receivable - related party 



    951,791


    968,277

     Prepayments 



    2,221,324


    1,277,149

     Due from related parties, net 



    193,170


    219,051

     Other current assets 



    1,429,910


    1,084,929

         Total current assets 



    58,067,113


    45,867,354

     Equity investments 



    3,625,871


    3,688,676

     Property and equipment, net 



    6,655,375


    6,067,338

     Deferred tax assets 



    431,388


    313,463

         Total non-current assets 



    10,712,634


    10,069,477

     Total assets 


    $

    68,779,747

    $

    55,936,831







     LIABILITIES AND EQUITY 






     Accounts payable 


    $

    1,124,730

    $

    495,177

     Accounts payable - related parties 



    39,698


    46,661

     Accrued liabilities and other payables 



    2,826,636


    4,724,823

     Deferred revenue 



    417,941


    607,660

     Wages payable 



    5,853,536


    5,565,078

     Income taxes payable 



    842,443


    541,321

     Short term loan 



    7,553,897


    3,842,371

         Total current liabilities 



    18,658,881


    15,823,091

         Total liabilities 



    18,658,881


    15,823,091

     Equity  






     Common shares, $0.001 par value, 100,000,000 shares
    authorized, 18,329,600 shares issued and outstanding as
    of June 30, 2018 and December 31, 2017 



    18,330


    18,330

     Additional paid-in capital 



    11,202,396


    11,202,396

     Retained earnings 



    35,478,905


    25,292,402

     Statutory reserves 



    3,418,376


    2,597,031

     Accumulated other comprehensive income (loss) 



    (994,341)


    80,868

         Total China Customer Relations Centers, Inc.
    shareholders' equity   



    49,123,666


    39,191,027

     Noncontrolling interest 



    997,200


    922,713

         Total equity   



    50,120,866


    40,113,740

     Total liabilities and equity  


    $

    68,779,747

    $

    55,936,831

     

     

    CHINA CUSTOMER RELATIONS CENTERS, INC. AND SUBSIDIARIES

    CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

    (Unaudited)










    For The Six Months Ended June 30,




    2018


    2017







    Revenues, net


    $

    66,036,657

    $

    34,737,119

    Cost of revenues



    45,803,839


    24,799,720

    Gross profit



    20,232,818


    9,937,399

    Operating expenses:






    Selling, general & administrative expenses


    7,787,102


    6,870,337

         Total operating expenses



    7,787,102


    6,870,337

    Income from operations



    12,445,716


    3,067,062

    Interest expense



    (120,659)


    -

    Government grants



    572,245


    1,309,558

    Other income



    80,470


    170,032

    Other expense



    (9,270)


    (57,080)

         Total other income



    522,786


    1,422,510

    Income before provision for income taxes


    12,968,502


    4,489,572

    Income tax provision 



    1,863,761


    262,223

    Net income



    11,104,741


    4,227,349

    Less: net income attributable to noncontrolling interest

    96,893


    183,128

    Net income attributable to China Customer Relations
    Centers, Inc.

    $

    11,007,848

    $

    4,044,221







    Comprehensive income






    Net income 


    $

    11,104,741

    $

    4,227,349

    Other comprehensive income (loss)





    Foreign currency translation adjustment


    (1,097,615)


    707,037

    Total Comprehensive income


    10,007,126


    4,934,386

    Less: Comprehensive income attributable to noncontrolling
    interest

    74,487


    201,341

    Comprehensive income attributable to China Customer
    Relations Centers, Inc.

    $

    9,932,639

    $

    4,733,045







    Earnings per share attributable to China Customer
    Relations Centers, Inc. 

    Basic


    $

    0.60

    $

    0.22

    Diluted


    $

    0.60

    $

    0.22

    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,




    2018


    2017







    Cash flows from operating activities






    Net income 


    $

    11,104,741

    $

    4,227,349

    Adjustments to reconcile net income to net cash
    provided by (used in) operating activities:






    Depreciation



    1,219,183


    808,302

    Loss on disposal of property and equipment



    3,366


    2,541

    Deferred income taxes



    (128,150)


    (54,388)

    Changes in assets and liabilities:






    Accounts receivable



    (9,911,512)


    (556,543)

    Due from related parties, net



    (94,772)


    -

    Prepayments



    (1,178,806)


    (1,341,182)

    Other current assets



    (377,832)


    (415,423)

    Accounts payable



    624,601


    (171,593)

    Accounts payable - related parties



    (6,414)


    (73,387)

    Wages payable



    398,411


    546,565

    Income taxes payable



    322,647


    (707,263)

    Deferred revenue



    (186,486)


    (42,085)

    Accrued liabilities and other payables



    (1,896,512)


    (1,125,830)

    Net cash provided by (used in) operating
    activities



    (107,535)


    1,097,063

    Cash flows from investing activities






    Purchase of property and equipment



    (1,720,478)


    (251,460)

    Proceeds from sale of property and equipment



    71


    73

    Payments for equity investments



    -


    (2,025,526)

    Advances to related parties



    -


    (21,821)

    Repayments from related parties



    117,802


    -

    Net cash used in investing activities



    (1,602,605)


    (2,298,734)

    Cash flows from financing activities






    Contribution from noncontrolling investor in
    subsidiary



    -


    353,581

    Repayments to related parties



    -


    (465,828)

    Borrowings from short term loan



    3,891,596


    -

    Net cash provided by (used in) financing
    activities



    3,891,596


    (112,247)

    Effect of exchange rate changes on cash and
    cash equivalents



    (358,552)


    312,268

    Net change in cash and cash equivalents



    1,822,904


    (1,001,650)

    Cash and cash equivalents, beginning of the
    period


    $

    18,628,365

    $

    15,947,268

    Cash and cash equivalents, end of the period


    $

    20,451,269

    $

    14,945,618

    Supplemental cash flow information






       Interest paid


    $

    120,659

    $

    43,591

       Income taxes paid


    $

    1,647,613

    $

    739,233

    Non-cash investing and financing activities






    Transfer from prepayments to property and
    equipment


    $

    176,730

    $

    472,105

    Liabilities assumed in connection with purchase of
    property and equipment


    $

    49,318

    $

    292,585

     

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