PR Newswire | Dec 18, 2020 04:30PM EST

First Half of 2020

12/18 15:30 CST

China Customer Relations Centers, Inc. Announces Financial Results for the First Half of 2020 TAI'AN, China, Dec. 18, 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 LLCEmail: shunyu.zheng@weitian-ir.comPhone: +1-718-213-7386

CHINA CUSTOMER RELATIONS CENTERS, INC. AND SUBSIDIARIESCONSOLIDATED 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, 40,670 163,995current

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 sharesauthorized, 18,329,600 shares issued and outstanding 18,330 18,330as of June 30, 2020 and December 31, 2019

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 64,846,964Inc. 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 SUBSIDIARIESCONSOLIDATED 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 SUBSIDIARIESCONSOLIDATED 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 cashprovided 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 (546,913) (62,102)equivalents

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 $ - $ 17,792property and equipment

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SOURCE China Customer Relations Centers, Inc.