CLPS Incorporation Reports Financial Results for the First Half of Fiscal Year 2021

 

CLPS Incorporation (the “Company” or “CLPS”) (Nasdaq: CLPS), today announced its unaudited financial results for the six months ended December 31, 2020, or the first half of the Company’s fiscal year 2021.

First Half of Fiscal 2021 Highlights (all results compared to the six months ended December 31, 2019) 

• Revenues increased by 37.0% to $58.3 million from $42.6 million.
• Operating income increased by 213.5% to $3.9 million from $1.2 million.
• Net income increased by 114.9% to $4.9 million from $2.3 million.
• Net income attributable to CLPS Incorporation’s shareholders increased by 105.2% to $4.9 million from $2.4 million.
• Basic and diluted earnings per share was $0.30 compared to $0.17 basic and diluted earnings per share.
• Net cash provided by operating activities increased by 66.2% to $9.4 million from $5.7 million.
• Non-GAAP net income guidance for the fiscal year 2021 was adjusted upwards to 60%-65% from 32%-37%.

Mr. Raymond Lin, Co-Founder and Chief Executive Officer of CLPS, commented, “We have taken extreme but decisive actions and showed highly resilient operational delivery while prioritizing our people and clients during the pandemic. As a professional IT services provider, we stood abreast with our clients to enable and speed up digital transformation ensuring uninterrupted business operations.”

“Our growth strategy continued to prove its value, enabling us to pivot with agility in this challenging moment. During the period, we have done well in gaining more overseas and domestic clients within our core industry scope. We maintained strong relationship with our existing clients, which resulted to a 98% client retention rate. In addition, we further advanced our mergers and acquisition efforts both domestically and overseas. Our acquisition of the remaining 20% ownership stake in Ridik enabled us to expand our footprint not only in Singapore, but also to its neighboring countries in the Southeast Asia and Asia Pacific regions. In our commitment to sustain a sufficient supply of IT talents, we launched training programs in partnership with educational institutions and non-profit organization in Hong Kong. On top of our annual internship training program, CLPS Academy, the Company’s training arm, has successfully carried out its second wave of Global Fintech Internship Program. It aims to introduce fresh talents with up-to-date knowledge and skills in global fintech industry perspective, thus meeting the talent demand from our top tier and global client base.”

“I am pleased with the solid level of stability and momentum we achieved during the first half of fiscal 2021.I would like to extend my gratitude to our staff, clients, partners, and shareholders for your continued support particularly during this challenging time. We attribute our success to you for your trust and confidence in the Company.”

Ms. Rui Yang, Chief Financial Officer of CLPS, commented, “CLPS ended the first half of fiscal year 2021 financial results on a solid note. We delivered total revenue of $58.3 million, a sustained growth of 37.0% year-over-year. Our operating income and net income increased by triple digits year-over-year by 213.5% and 114.9%, respectively, due to the positive effects of the Company’s economies of scale. Our GAAP and non-GAAP basic and diluted earnings per share were $0.30 and $0.39, respectively.  As a result of strong demand for IT services from our growing network of clients and enhanced operational efficiency, our non-GAAP net income guidance was adjusted upwards to 60%-65% from 32%-37% for the fiscal 2021. Looking forward, we remain focus and optimistic that our streamlined growth strategy will put us on a firm footing to reach our business goal for the remainder of fiscal 2021.”

First Half of Fiscal Year 2021 Financial Results

Revenues

In the first half of fiscal 2021, revenues increased by $15.7 million, or 37.0%, to $58.3 million from $42.6 million in the prior year period. This increase in revenue was mainly due to an increase in revenue from IT consulting services.

Revenues by Service

• Revenue from IT consulting services increased by $15.5 million, or 37.2%, to $57.1 million and accounted for 97.8% of total revenue in the first half of fiscal 2021 from $41.6 million, or 97.7% of total revenue, in the same period of the previous year. The increase was primarily due to increased demand from existing and new clients. For the six months ended December 31, 2020 and 2019, 41.0% and 41.3% of IT consulting services revenue were from international banks, respectively.
• Revenue from customized IT solution services increased by $0.4 million, or 51.1%, to $1.1 million and accounted for 1.8% of total revenue in the first half of fiscal 2021 from $0.7 million, or 1.6% of total revenue. The increase was primarily due to increased demand from existing clients in the banking and wealth management areas.
• Revenue from other services decreased by $0.1 million, or 25.3%, to $0.2 million and accounted for 0.3% of total revenue in the first half of fiscal year 2021 from $0.3 million, or 0.6% of total revenue in the same period of the previous year. The decrease was primarily due to decreased demand for other services, including headhunting service.

Revenues by Operational Areas

• Revenue from banking area increased by $7.1 million, or 33.1% to $28.7 million in the first half of fiscal 2021, from $21.6 million in the prior year period. Revenue from banking area accounted for 49.3% and 50.7% of total revenues in the first half of fiscal 2021 and 2020, respectively.
• Revenue from wealth management area increased by $2.0 million, or 21.8% to $11.4 million in the first half of fiscal 2021, from $9.4 million in the prior year period. Revenue from wealth management area accounted for 19.6% and 22.0% of total revenues in the first half of fiscal 2021 and 2020, respectively.
• Revenue from e-Commerce area increased by $2.3 million, or 42.0% to $7.7 million in the first half of fiscal 2021, from $5.4 million in the prior year period. Revenue from e-Commerce area accounted for 13.2% and 12.7% of total revenues in the first half of fiscal 2021 and 2020, respectively.
• Revenue from automotive area increased by $1.5 million, or 72.9% to $3.5 million in the first half of fiscal 2021, from $2.0 million in the prior year period. Revenue from automotive area accounted for 6.0% and 4.7% of total revenues in the first half of fiscal 2021 and 2020, respectively.

Revenues by Geography

• Revenue generated outside of Mainland China increased by 53.9% to $6.6 million in the first half of fiscal year 2021 from $4.3 million in the same period of the previous year. Revenue generated outside of Mainland China accounted for 11.4% of total revenue compared to 10.1% in the prior year period. The increase in revenue generated outside of Mainland China reflects the Company’s successful and continuous global expansion strategy.

Gross Profit

Gross profit increased by $3.1 million, or 20.2%, to $18.5 million in the first half of fiscal 2021 from $15.4 million in the prior year period.

Operating Expenses

Selling and marketing expenses increased by $0.4 million, or 27.7%, to $1.8 million in the first half of fiscal 2021 from $1.4 million in the prior year period due to the increase of salary expenses as new staff were hired, enabling the implementation of the Company’s global expansion strategy. As a percentage of total revenues, selling and marketing expenses decreased to 3.1% in the first half of fiscal 2021 compared to 3.3% in the prior year period. The decrease was primarily due to the increase in operational efficiency as a result of economies of scale brought about by the Company’s global expansion strategy.

Research and development expenses increased by $1.2 million, or 22.7%, to $6.2 million in the first half of fiscal 2021 from $5.0 million in the prior year period. The increase was primarily due to the increased research and development personnel related expenses which enables the Company’s continued R&D efforts in big data, cloud computing, robotic process automation (RPA) and artificial intelligence (AI). As a percentage of total revenues, research and development expenses decreased to 10.6% in the first half of fiscal 2021 compared to 11.8% in the prior year period. The decrease was primarily due to the increase in operational efficiency as a result of economies of scale.

General and administrative expenses decreased by $1.3 million, or 16.1%, to $6.6 million in the first half of fiscal 2021 from $7.9 million in the prior year period. As a percentage of total revenues, general and administrative expenses decreased to 11.4% in the first half of fiscal 2021 compared to 18.6% in the prior year period. The decrease was primarily due to the increase in operational efficiency as result of economies of scale and refined management, and decreased in general and administrative personnel expenses.

Operating Income

Operating income increased by $2.7 million, or 213.5%, to $3.9 million in the first half of fiscal 2021 from $1.2 million in the same period of the previous year. Operating margin was 6.7% in the first half of fiscal 2021 compared to 2.9% in the prior year period.

Other Income and Expenses

Total other income, net of other expenses decreased to $1.1 million in the first half of fiscal 2021 from $1.3 million in the prior year period.

Provision for Income Taxes

Provision for income taxes decreased by $0.3 million to $0.1 million in the first half of fiscal 2021 from $0.4 million in the same period of the previous year, mainly due to the accrued deferred income tax assets from accumulated losses of the Company’s subsidiaries.

Net Income and EPS

Net income increased by $2.6 million, or 114.9%, to $4.9 million in the first half of fiscal 2021 from $2.3 million in the prior year period. After excluding the impact of non-cash share-based compensation expenses, non-GAAP net income^[1] increased by $3.0 million, or 91.2%, to $6.4 million in the first half of fiscal 2021 from $3.4 million in the same period of the previous year.

After excluding the impact of non-controlling interests, net income attributable to CLPS Incorporation’s shareholders in the first half of fiscal 2021 was $4.9 million, or $0.30 basic and diluted earnings per share compared to net income attributable to CLPS Incorporation’s shareholders of $2.4 million, or $0.17 basic and diluted earnings per share. After excluding the impact of non-cash share-based compensation expenses, non-GAAP net income attributable to CLPS Incorporation’s shareholders^[2] in the first half of fiscal 2021 was $6.4 million, or $0.39 basic and diluted earnings per share. This is compared to non-GAAP net income attributable to CLPS Incorporation’s shareholders of $3.4 million, or $0.24 basic and diluted earnings per share, in the prior year period.

Cash Flow

As of December 31, 2020, the Company had cash and cash equivalents of $26.0 million compared to $12.7 million as of June 30, 2020.

Net cash provided by operating activities was approximately $9.4 million. Net cash provided by investing activities was approximately $0.1 million. Net cash provided by financing activities was approximately $2.4 million. The effect of exchange rate change on cash was approximately positive $1.4 million. The Company believes that its current cash position and cash flow from operations are sufficient to meet its anticipated cash needs for at least the next 12 months.

Financial Outlook

For fiscal year 2021, the Company expects, absent material acquisitions or non-recurring transactions, total sales growth in the range of approximately 30% to 35% compared to fiscal year 2020 financial results. The non-GAAP net income growth was adjusted in the range of approximately 60% to 65% from 32% to 37% as previously forecasted in the Company’s second half and full year of fiscal 2020 financial report.

This forecast reflects the Company’s current and preliminary views, which are subject to change and are subject to risks and uncertainties, including, but not limited to various risks and uncertainties facing the Company’s business and operations as identified in its public filings.

Exchange Rate

The balance sheet amounts with the exception of equity as of December 31, 2020, were translated at 6.5250 RMB to 1.00 USD compared to 6.9618 RMB to 1.00 USD as of December 31, 2019. The equity accounts were stated at their historical rate. The average translation rates applied to the income statements accounts for the periods ended December 31, 2020 and 2019 were 6.7734 RMB to 1.00 USD and 7.0297 RMB to 1.00 USD, respectively. The change in the value of the RMB relative to the U.S. dollar may affect our financial results reported in the U.S. dollar terms without giving effect to any underlying change in our business or results of operation.