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China Customer Relations Centers, Inc. Announces Second Half and Full Year 2016 Financial Results

TAI'AN, China, April 28, 2017 /PRNewswire/ -- China Customer Relations Centers, Inc. (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 and twelve months ended December 31, 2016.

Second Half 2016 Financial Highlights (all comparisons to prior year unless noted)

  • Revenues increased by 13.6% to $38.3 million driven by continued expansion of business. 
  • Gross margin increased by 4.1 percentage points to 25.1%.
  • Net income increased by 25.6% to $3.7 million.
  • Earnings per share increased by 10.3% to $0.20, versus $0.18 for the same period of last year.

Full Year 2016 Financial Highlights

  • Revenues increased by 22.5% to $72.7 million driven by continued expansion of business. 
  • Gross margin expanded by 6.0 percentage points to 27.0% while operating margin increased by 3.0 percentage points to 11.8%, due to improved operating efficiency and the non-renewal of less profitable customer contracts.
  • Net income increased by 73.4% to $8.3 million. Earnings per share increased by 50.0% to $0.45.

Mr. Gary Wang, Chairman and Chief Executive Officer of CCRC, commented, "2016 turned out to be another strong year for CCRC with revenues and net income increasing by 22.5% and 73.4%, respectively, highlighting continuing momentum in our business. While our relationships with key existing clients, such as the provincial subsidiaries of China Mobile and China Telecom, remained steady and strong in 2016, our expanding footprint and increasing publicity post our successful IPO in late 2015 allowed us to keep attracting new clients and extend growth momentum in 2016 and into 2017. Looking ahead, we firmly believe that CCRC is poised to capture its fair share of the quickly evolving Chinese call center BPO market."

Six Months Ended December, 2016 Unaudited Financial Results



For the Six Months Ended December 31,

($ millions, except per share data


2016


2015


% Change

Revenues


$38.3


$33.7


13.6%

Gross profit


$9.6


$7.1


35.9%

Gross margin


25.1%


21.0%


4.1 pp

Operating income


$3.4


$3.3


3.7%

Operating margin


8.9%


9.7%


(0.8 pp)

Net income


$3.7


$3.0


25.6%

EPS


$0.20


$0.18


10.3%

Revenues

For the six months ended December 31, 2016, revenues increased by $4.6 million, or 13.6%, to $38.3 million from $33.7 million for the same period last year. This increase was mainly driven by the growth of our BPO business with increased sales to our existing BPO clients and sales to new BPO clients.

Cost of revenue

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 $2.0 million, or 7.7%, to $28.7 million for the six months ended December 31, 2016 from $26.6 million for the same period last year. As a percentage of revenues, cost of revenues was 74.9% for the six months ended December 31, 2016, compared to 79.0% for the same period last year.

Gross profit and gross margin

Gross profit increased by $2.5 million, or 35.9%, to $9.6 million for the six months ended December 31, 2016 from $7.1 million for the same period last year. Gross margin increased by 4.1 percentage points to 25.1% for the six months ended December 31, 2016 from 21.0% for the same period last year. The increase in gross margin was primarily due to improvement in overall operating efficiency and the termination of certain less profitable customer contracts.

Selling, general and administrative expense

Selling, general and administrative expenses increased by $2.4 million, or 63.6%, to $6.2 million for the six months ended December 31, 2016 from $3.8 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 2017 due to becoming a public company.

Operating income and operating margin

Income from operations increased by $0.1 million, or 3.7%, to $3.4 million for the six months ended December 31, 2016 from $3.3 million for the same period last year. The increase in operating income was mainly driven by an increase in revenues as a result of expansion of our BPO business and improvement in gross margin as a result of improvement in overall operating efficiency. Operating margin was 8.9% for the six months ended December 31, 2016, compared to 9.7% for the same period last year.

Government grants

We received government grants, which are discretionary and unpredictable in nature, of $0.4 million during the six months ended December 31, 2016, compared to $0.6 million during the same period of last year. Government grants as a percentage of net income were 9.6% for the six months ended December 31, 2016, compared to 21.2% for the same period of last year.

Income taxes

Provision for income taxes was $0.4 million for the six months ended December 31, 2016, compared to $0.8 million for the same period of last year. We were entitled to a preferential enterprise income tax ("EIT") rate of 15% in 2015 and 2016. The standard enterprise income tax rate in China is 25%.

Net income

Net income increased by $0.7 million, or 25.6%, to $3.7 million for the six months ended December 31, 2016 from $3.0 million for the same period last year. Earnings per basic and diluted share was $0.20 for the six months ended December 31, 2016, compared to $0.18 for the same period of last year.

 Full Year 2016 Financial Results



For the Twelve Months Ended December 31,

($ millions, except per share data)


2016


2015


% Change

Revenues


$72.7


$59.4


22.5%

Gross profit


$19.6


$12.5


57.6%

Gross margin


27.0%


21.0%


6.0 pp

Operating income


$8.6


$5.2


64.4%

Operating margin


11.8%


8.8%


3.0 pp

Net income


$8.3


$4.8


73.4%

EPS


$0.45


$0.30


50.0%

Revenues

For the year of 2016, revenues increased by $13.4 million, or 22.5%, to $72.7 million from $59.4 million for 2015. This increase was mainly driven by the growth of our BPO business with increased sales to our existing BPO clients and sales to new BPO clients. Revenues generated from inbound calling, outbound calling and other services accounted for 78%, 14%, and 8% of total revenues in 2016.

The provincial subsidiaries of China Mobile and China Telecom remained the two largest customers and accounted for 34% and 14%, respectively, of total revenues in 2016. Top 5 customers accounted for 71% of revenues in 2016.

Cost of revenue

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 $6.2 million, or 13.2%, to $53.1 million for the year of 2016 from $46.9 million for 2015. As a percentage of revenues, cost of revenues was 73.0% for the year of 2016, compared to 79.0% for 2015.

Gross profit and gross margin

Gross profit increased by $7.2 million, or 57.6%, to $19.6 million for the year of 2016 from $12.5 million for 2015. Gross margin increased by 6.0 percentage points to 27.0% for the year of 2016 from 21.0% for 2015. The increase in gross margin was primarily due to improvement in overall operating efficiency and the termination of certain less profitable businesses.

Selling, general and administrative expense

Selling, general and administrative expenses increased by $3.8 million, or 52.7%, to $11.1 million for the year of 2016 from $7.3 million for 2015. 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 2017 due to becoming a public company. We expect to incur additional expenses of between $0.5 million and $1 million per year that we did not experience as a private company.

Operating income and operating margin

Income from operations increased by $3.4 million, or 64.4%, to $8.6 million for the year of 2016 from $5.2 million for 2015. Operating margin was 11.8% for the year of 2016, compared to 8.8% for 2015. The increase in operating income and operating margin was mainly driven by an increase in revenues as a result of expansion of our BPO business and improvement in gross margin as a result of improvement in overall operating efficiency.

Government grants

We received government grants, which are discretionary and unpredictable in nature, of $0.8 million during 2016, compared to $1.0 million during 2015. Government grants as a percentage of net income were 9.7% for the year of 2016, compared to 21.5% for 2015.

Income taxes

Provision for income taxes was $1.4 million for the year of 2016, an increase of $0.2 million, or 13.6%, from $1.3 million for 2015. We were entitled to a preferential enterprise income tax ("EIT") rate of 15% in 2015 and 2016. The standard enterprise income tax rate in China is 25%.

Net income

Net income increased by $3.5 million, or 73.4%, to $8.3 million for the year of 2016 from $4.8 million for 2015. The increase in net income was a result of our increased revenues and higher gross margin, offset by increased selling, general and administrative expenses and decreased government grants in 2016. Earnings per basic and diluted share was $0.45 for the year of 2016, compared to $0.30 for 2015.

Financial Conditions

As of December 31, 2016, the Company had cash of $15.9 million, compared to $13.6 million at December 31, 2015. Total working capital was $22.7 million as of December 31, 2016, compared to $16.1 million at the end of 2015.

Net cash provided by operating activities was $5.7 million for the year of 2016, compared to $6.0 million for 2015. Net cash used in investing activities was $1.0 million for the year of 2016, compared to $2.0 million for 2015. Net cash used in financing activities was $1.5 million for the year of 2016, compared to net cash provided by financing activities of $4.8 million for 2015.

Recent Developments

On December 15, 2016, The Company held its 2016 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 2016; and 2) elected Jie Xu and Tianjun Zhang as Class I Directors, Weixin Wang and Owens Meng as Class II Directors, and Gary Wang, David Wang and Guoan Xu as Class III Directors.

On November 12, 2016, the Company entered into a Share Subscription Agreement to acquire a minority equity interest in Beijing Ling Ban Future Technology Co. Ltd. ("Ling Ban") for a cash consideration of RMB 18 million. Additionally, the Company and Ling Ban agreed to establish a new joint venture, Beijing Ling Ban Intelligent Online Services Co., Ltd. ("Ling Ban Online"), with the Company contributing an additional RMB 12 million in cash in exchange for a minority equity interest in Ling Ban Online. Ling Ban is an emerging startup focusing on automatic speech recognition-related technology development and applications.

In July 2016, Hebei Taiying Communication BPO Co., Ltd. ("HTCC,"), its parent company Shandong Taiying Technology Co., Ltd. ("Taiying"), and Beijing Jiate Information Technology Co., Ltd. ("Jiate") entered into an investment agreement, pursuant to which Jiate will contribute RMB4,900,000 (approximately $706,000) into HTCC in order to obtain a 49% equity interest in HTCC. Based on the agreement, all the parties agreed to complete the registration process with local administrative department within 30 days after the agreement was signed and Jiate is entitled to HTCC's earnings after injecting the first portion of investment in the amount of RMB2,450,000 (approximately $356,000) prior to February 1, 2017. The registration process was completed on July 11, 2016 and HTCC received the capital contribution of $356,000 on January 31, 2017.

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 11 call centers throughout China, that enable us to service clients throughout Shandong province (Taian City, Yantai City, Jinan City), Jiangsu province (Taizhou City, Huaqiao City, Huaian City), Anhui province (Hefei City), Hebei province (Yanjiao City), the Xinjiang Uygur Autonomous Region (Changju City), the Guangxi Zhuang Autonomous Region (Nanning City), Jiangxi province (Nanchang City), Chongqing (Yongchuan City), Beijing centrally-administered City, and Henan province (Zhengzhou City), with a capacity approximately of 11,057 seats.

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




December 31,



December 31,




2016



2015









ASSETS









Cash


$

15,947,268



$

13,623,849


Accounts receivable, net



13,595,396




8,852,024


Accounts receivable - related party



-




353,513


Notes receivable, current



547,259




125,687


Prepayments



504,780




708,549


Due from related parties



248,866




675,623


Deferred tax assets, current



69,864




-


Other current assets



1,041,923




1,045,932


    Total current assets



31,955,356




25,385,177


Restricted cash



500,000




500,000


Notes receivable – related party, non-current



907,297




970,620


Property and equipment, net



4,360,976




4,129,561


Deferred tax assets, non-current



-




23,974


    Total non-current assets



5,768,273




5,624,155


Total assets


$

37,723,629



$

31,009,332











LIABILITIES AND SHAREHOLDERS' EQUITY









Accounts payable


$

664,838



$

310,216


Accounts payable - related party



129,489




-


Accrued liabilities and other payables



3,603,471




3,333,960


Deferred revenue



607,160




-


Wages payable



2,885,735




2,803,294


Income taxes payable



883,654




1,014,595


Short term loans



-




1,748,479


Due to related parties



446,050




-


Deferred tax liabilities, current



-




35,273


    Total current liabilities



9,220,397




9,245,817


    Total liabilities



9,220,397




9,245,817


Shareholders' equity









Common shares, $0.001 par value, 100,000,000 shares authorized, 18,329,600 shares issued and outstanding as of December 31, 2016 and 2015



18,330




18,330


Additional paid-in capital



11,178,774




11,178,774


Retained earnings



17,226,261




9,728,228


Statutory reserves



2,067,835




1,288,617


Accumulated other comprehensive loss



(1,987,968)




(450,434)


    Total shareholders' equity



28,503,232




21,763,515


Total liabilities and shareholders' equity


$

37,723,629



$

31,009,332


CHINA CUSTOMER RELATIONS CENTERS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME




For The Years Ended December 31,




2016



2015



2014












Revenues, net


$

72,731,706



$

59,350,721



$

42,661,732


Revenues - related party



-




-




11,407


Total revenues



72,731,706




59,350,721




42,673,139


Cost of revenues



53,098,552




46,891,617




35,188,331


Gross profit



19,633,154




12,459,104




7,484,808


Operating expenses:













Selling, general & administrative expenses



11,082,106




7,259,279




5,779,600


Total operating expenses



11,082,106




7,259,279




5,779,600


Income from operations



8,551,048




5,199,825




1,705,208


Other income (expenses):













Interest expense



(50,383)




(278,363)




(552,894)


Government grants



801,125




1,027,581




1,439,186


Other income



479,387




225,306




64,873


Other expense



(55,003)




(124,273)




(238,413)


Total other income



1,175,126




850,051




712,752


Income before provision for income taxes



9,726,174




6,049,876




2,417,960


Income tax provision



1,448,923




1,275,633




635,859


Net income


$

8,277,251



$

4,774,243



$

1,782,101


Comprehensive income













Net income


$

8,277,251



$

4,774,243



$

1,782,101


Other comprehensive income (loss)













Foreign currency translation adjustment



(1,537,534)




(684,590)




27,280


Total comprehensive income


$

6,739,717



$

4,089,653



$

1,809,381















Earnings per common share













Basic


$

0.45



$

0.30



$

0.11


Diluted


$

0.45



$

0.30



$

0.11


Weighted average common shares outstanding













Basic



18,329,600




16,015,079




15,586,865


Diluted



18,329,600




16,015,079




15,586,865


 

 

CHINA CUSTOMER RELATIONS CENTERS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS


For years ended December 31,


2016


2015


2014







Cash flows from operating activities






Net income

$

8,277,251


$

4,774,243


$

1,782,101

Adjustments to reconcile net income to net cash provided by operating activities:









Depreciation and amortization


1,542,352



1,340,961



1,342,258

Allowance for doubtful accounts


805,870



-



145,076

Gain on disposal of property and equipment


-



-



(11,948)

Deferred income taxes


(84,067)



(172,000)



109,657

Changes in assets and liabilities:









Accounts receivable


(5,561,722)



(2,499,956)



(3,251,749)

Accounts receivable - related party


-



-



(11,407)

Due from related parties


-



(114,670)



468,555

Due to related parties


-



(2,394)



3,493

Prepayments


(767,516)



(447,311)



(489,918)

Other current assets


(63,669)



191,536



(234,429)

Accounts payable


193,639



113,033



18,998

Accounts payable - related party


25,276



-



-

Wage payable


277,335



908,720



267,931

Income taxes payable


(67,681)



586,931



106,833

Deferred revenue


634,644



-



-

Accrued liabilities and other payables


454,572



1,277,678



250,276

Net cash provided by operating activities


5,666,284



5,956,771



495,727

Cash flows from investing activities









Purchase of property and equipment


(478,775)



(1,614,696)



(965,118)

Change of restricted cash


-



(500,000)



-

Proceeds from sale of property and equipment


-



-



14,363

Loans to third parties


(563,896)



-



(132,742)

Repayment from third parties


-



-



130,172

Advance to related parties


(18,210)



(930,536)



(1,986,421)

Repayment from related parties


40,011



1,095,087



1,633,073

Net cash used in investing activities


(1,020,870)



(1,950,145)



(1,306,673)

Cash flows from financing activities









Proceeds from issuances of common shares


-



8,497,024



1,174,380

Capital contribution from owners


-



-



3,340,396

Proceeds from related parties


-



-



32,543

Repayment to related parties


-



-



(3,749,916)

Borrowings from short term loan


-



3,800,367



7,386,830

Repayment of short term loans


(1,510,962)



(7,478,890)



(8,001,883)

Net cash provided by (used in) financing activities


(1,510,962)



4,818,501



182,350

Effect of exchange rate changes on cash and cash equivalents


(811,033)



(298,288)



11,043

Net change in cash and cash equivalents


2,323,419



8,526,839



(617,553)

Cash and cash equivalents, beginning of the year


13,623,849



5,097,010



5,714,563

Cash and cash equivalents, end of the year

$

15,947,268


$

13,623,849


$

5,097,010

Supplemental cash flow information









   Interest paid

$

50,383


$

278,363


$

552,894

   Income taxes paid

$

1,558,290


$

915,895


$

490,318

Non-cash investing and financing activities









Transfer from prepayments to property and equipment

$

932,192


$

405,924


$

289,806

Liabilities assumed in connection with purchase of property and equipment

$

672,715


$

23,900


$

68,839

Short term loan reclassified to due to related party

$

203,048







Operating expenses paid by related parties

$

107,634







 

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