China Customer Relations Centers, Inc. Announces First Half of 2017 Financial Results

China Customer Relations Centers, Inc. Announces First Half of 2017 Financial Results

TAI'AN, China, Dec. 15, 2017 /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, 2017.

Mr. Gary Wang, Chairman and Chief Executive Officer of CCRC, commented, "The momentum of our business remained strong as we maintained nearly full capacity during the first half of this year. However, due to capacity limitations, we were forced to give up on several low priority clients to make room for new clients that included China Merchants Bank, ofo, Rong360.com, TianAn Life Insurance, and J.K. Life Insurance. Due to our business portfolio restructuring, our revenues were essentially flat year over year while margins and profitability decreased. The minor decline in margins and profitability was primarily due to higher operating expenses incurred during the first half of this year. Looking ahead, we have been taking steps to add additional capacity, and we expect growth to return in the second half of the year."

Six Months Ended June 30, 2017 Unaudited Financial Results



For the Six Months Ended June 30,

($ millions, except per share data)


2017


2016


% Change

Revenues


$34.7


$34.5


0.7%

Gross profit


$9.9


$10.0


-0.9%

Gross margin


28.6%


29.1%


-0.5 pp*

Operating income


$3.1


$5.2


-40.6%

Operating margin


8.8%


15.0%


-6.1 pp*

Net income attributable to CCRC


$4.0


$4.6


-11.2%

EPS - basic and diluted


$0.22


$0.28


-22.4%








* PP: percentage points







Revenues

For the six months ended June 30, 2017, revenues increased by $0.3 million, or 0.7%, to $34.7 million from $34.5 million for the same period last year. We continued to see strong demand for our business from existing BPO clients as well as new clients with nearly full seat utilization rate during the six months ended June 30, 2017. We added several high-profile clients, including China Merchants Bank, ofo, Rong360.com, Tianan Life Insurance, and J.K. Life Insurance, and dropped several lower volume clients due to seat limitations during the six months ended June 30, 2017. 

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 $0.3 million, or 1.4%, to $24.8 million for the six months ended June 30, 2017 from $24.5 million for the same period last year. As a percentage of revenues, cost of revenues was 71.4% for the six months ended June 30, 2017, compared to 70.9% for the same period last year.

Gross profit and gross margin

Gross profit decreased by $0.1 million, or 0.9%, to $9.9 million for the six months ended June 30, 2017 from $10.0 million for the same period last year. Gross margin decreased by 0.5 percentage points to 28.6% for the six months ended June 30, 2017 from 29.1% for the same period last year.

Selling, general and administrative expense

Selling, general and administrative expenses increased by $2.0 million, or 41.2%, to $6.9 million for the six months ended June 30, 2017 from $4.9 million for the same period last year. The increase in selling, general and administrative expenses was a result of higher payroll and bonus expenses paid to the administrative personnel and the management team, and increase in our research and development activities. 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 the second half of 2017 due to the continuing expansion of our business.

Operating income and operating margin

Income from operations decreased by $2.1 million, or 40.6%, to $3.1 million for the six months ended June 30, 2017 from $5.2 million for the same period last year. The decrease in operating income was mainly driven by an increase in selling, general and administrative expenses. Operating margin was 8.8% for the six months ended June 30, 2017, compared to 15.0% for the same period last year.

Other income (expenses)

We received government grants, which are discretionary and unpredictable in nature, of $1.3 million during the six months ended June 30, 2017, compared to $0.4 million during the same period of last year. Government grants as a percentage of net income were 31.0% for the six months ended June 30, 2017, compared to 9.7% for the same period of last year. Total other income, net of other expenses, increased by $1.0 million, or 230.0%, to $1.4 million for the six months ended June 30, 2017, compared to $0.4 million for the same period of last year.

Income before provision for income taxes

Income before provision for income taxes decreased by $1.1 million, or 19.7%, to $4.5 million for the six months ended June 30, 2017 from $5.6 million for the same period of last year. The decrease in income before provision for income taxes was mainly due to the increase in selling, general and administrative expenses and partially offset by the increase in government grants received.

Income taxes

Provision for income taxes was $0.3 million for the six months ended June 30, 2017, compared to $1.0 million for the same period of last year.

Net income

Net income decreased by $0.3 million, or 7.2%, to $4.2 million for the six months ended June 30, 2017 from $4.6 million for the same period last year. After deducting net income attributable to noncontrolling interest, net income attributable to common shareholders was $4.0 million, or $0.22 per basic and diluted share, for the six months ended June 30, 2017, compared to $4.6 million, or $0.28 per basic and diluted share, for the same period of last year.

Financial Conditions

As of June 30, 2017, the Company had cash of $14.9 million, compared to $15.9 million at December 31, 2016. Total working capital was $25.8 million as of June 30, 2017, compared to $22.7 million at the end of 2016.

Net cash provided by operating activities was $1.1 million for the first half of 2017, compared to net cash used in operating activities of $0.6 million for the same period of last year. Net cash used in investing activities was $2.3 million for the first half of 2017, compared to $0.5 million for the same period of last year. Net cash used in financing activities was $0.1 million for the first half of 2017, compared to $1.3 million for the same period of last year.

Recent Development

On September 16, 2017, The Company held its 2017 Annual Meeting of Shareholders at its headquarters in Taian City, Shandong Province.  The Company's shareholders: 1) ratified the appointment of MaloneBailey, LLC as its independent registered public accounting firm for the fiscal year of 2017; and 2) reelected Jie Xu and Tianjun Zhang as Class I Directors.

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 BPO service provider 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 20 cities across 12 provinces, autonomous regions and municipalities in China, including Shandong, Jiangsu, Anhui, Hebei, Xinjiang, Guangxi, Jiangxi, Chongqing, Beijing, Henan, Shanghai and Sichuan. 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 continued growth and business outlook, are forward-looking statements.  Forward-looking statements are not guarantees 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: tony.tian@weitian-ir.com
Phone: +1-732-910-9692

 

CHINA CUSTOMER RELATIONS CENTERS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS








 June 30, 


December 31,



2017


2016



 Unaudited 



ASSETS

Cash 

$

14,945,618

$

15,947,268

Accounts receivable, net


14,494,561


13,595,396

Notes receivable, current


560,728


547,259

Prepayments


1,035,794


504,780

Due from related parties


202,930


248,866

Restricted cash


500,000


-

Other current assets


1,490,701


1,041,923

    Total current assets


33,230,332


31,885,492

Restricted cash, non-current


-


500,000

Cost method investments


2,065,841


-

Notes receivable - related party, non-current


929,629


907,297

Property and equipment, net


4,832,675


4,360,976

Deferred tax assets


126,753


69,864

Total assets

$

41,185,230

$

37,723,629






LIABILITIES AND EQUITY

Accounts payable

$

552,836

$

664,838

Accounts payable - related party


58,235


129,489

Accrued liabilities and other payables


2,504,389


3,603,471

Deferred revenue


579,415


607,160

Wage payable


3,511,181


2,885,735

Income taxes payable


187,975


883,654

Due to related parties


-


446,050

    Total current liabilities


7,394,031


9,220,397

    Total liabilities


7,394,031


9,220,397

Equity 





Common shares, $0.001 par value, 100,000,000 shares authorized,
18,329,600 shares issued and outstanding as of June 30, 2017 and December
31, 2016


18,330


18,330

Additional paid-in capital


10,821,525


11,178,774

Retained earnings


21,172,631


17,226,261

Statutory reserves


2,165,686


2,067,835

Accumulated other comprehensive loss


(1,285,836)


(1,987,968)

    Total China Customer Relations Centers, Inc. shareholders' equity  


32,892,336


28,503,232

Noncontrolling interest


898,863


-

    Total equity  


33,791,199


28,503,232

Total liabilities and equity 

$

41,185,230

$

37,723,629






 

 

CHINA CUSTOMER RELATIONS CENTERS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

(Unaudited)












For The Six Months Ended June 30,





2017


2016









Revenues, net

$

34,737,119

$

34,479,256


Cost of revenues


24,799,720


24,453,004


Gross profit


9,937,399


10,026,252


Operating expenses:






Selling, general & administrative expenses


6,870,337


4,867,054



Total operating expenses


6,870,337


4,867,054


Income from operations


3,067,062


5,159,198


Other income (expenses):






Interest expense


-


(43,591)


Government grants


1,309,558


442,758


Other income


170,032


162,198


Other expense


(57,080)


(130,247)



Total other income


1,422,510


431,118


Income before provision for income taxes


4,489,572


5,590,316


Income tax provision 


262,223


1,036,174


Net income


4,227,349


4,554,142


Less: net income attributable to noncontrolling interest


183,128


-


Net income attributable to China Customer Relations Centers, Inc.

$

4,044,221

$

4,554,142









Comprehensive income






Net income 

$

4,227,349

$

4,554,142


Other comprehensive income (loss)







Foreign currency translation adjustment


707,037


(453,333)


Comprehensive income


4,934,386


4,100,809


Less: Comprehensive income attributable to noncontrolling interest


201,341


-


Comprehensive income attributable to China Customer Relations
Centers, Inc.

$

4,733,045

$

4,100,809







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











Basic

$

0.22

$

0.28


Diluted

$

0.22

$

0.28


Weighted average common shares outstanding






Basic


18,329,600


16,015,079


Diluted


18,329,600


16,015,079

 

 

CHINA CUSTOMER RELATIONS CENTERS, INC. AND SUBSIDIARIES 

CONSOLIDATED STATEMENTS OF CASH FLOWS 

(Unaudited)









For The Six Months Ended June 30,



2017



2016

Cash flows from operating activities






Net income 

$

4,227,349


$

4,554,142

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






 Loss on disposal of property and equipment


2,541



-

 Depreciation 


808,302



495,286

 Deferred income taxes


(54,388)



(50,935)

Changes in assets and liabilities:






 Accounts receivable


(556,543)



(6,248,292)

 Due from related parties


-



(12,684)

 Prepayments


(1,341,182)



144,551

 Other current assets


(415,423)



(28,387)

 Accounts payable


(171,593)



22,160

 Accounts payable - related party


(73,387)



-

 Wage Payable


546,565



59,114

 Income taxes payable


(707,263)



144,352

 Deferred revenue


(42,085)



-

 Accrued liabilities and other payables


(1,125,830)



276,715

Net cash provided by (used in) operating activities


1,097,063



(643,978)

Cash flows from investing activities






 Purchases of property and equipment


(251,460)



(519,431)

 Proceed from disposal of property and equipment


73



-

 Advance to related party


(21,821)



-

 Payments for cost method investments


(2,025,526)



-

Net cash used in investing activities


(2,298,734)



(519,431)

Cash flows from financing activities






 Contribution from noncontrolling investor in subsidiary


353,581



-

 Repayments to related parties


(465,828)



-

 Borrowings from short term loans


-



266,829

 Repayment of short term loans


-



(1,531,213)

Net cash used in financing activities


(112,247)



(1,264,384)

Effect of exchange rate changes on cash and cash equivalents


312,268



(162,770)

Net change in cash and cash equivalents


(1,001,650)



(2,590,563)

Cash and cash equivalents, beginning of the period


15,947,268



13,623,849

Cash and cash equivalents, end of the period

$

14,945,618


$

11,033,286

Supplemental cash flow information






    Interest paid

$

-


$

43,591

    Income taxes paid

$

989,916


$

739,233

Non-cash investing and financing activities






Transfer from prepayments to property and equipment

$

829,939


$

472,105

Liabilities assumed in connection with purchase of property and equipment

$

91,023


$

292,585

 

 

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