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spk04: Hello, everyone. Welcome to the second half and full year fiscal 2021 earnings conference call for CLPS Incorporation. Please note that today's conference is being recorded. At this time, I would like to turn the call over to Mr. Ron Galicia from CLPS Investor Relations for opening remarks and introductions. Please go ahead.
spk03: Thank you, Operator. Hello, everyone, and thank you for joining us on today's call. CLPS Incorporation announced its second half and full year fiscal 2021 financial results this morning. The earnings release is now available on the company's IR website at www.ir.clpsglobal.com. Before we continue, please note that our discussion today may include forward-looking statements made under the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. forward-looking statements involve a number of risks and uncertainties. As such, our results may be materially different from the views expressed today. Further information regarding these risks, uncertainties, assumptions, and other factors that could affect our financial results is included in our Form 20-F filed with the U.S. Securities and Exchange Commission and other documents filed with the U.S. SEC. In that respect, I would like to read the following disclaimer applicable to such statements. Certain of the statements made in this discussion are forward-looking statements. Within the meaning and protections of Section 27A of the Securities Act of 1933, as amended in Section 21E of the Securities Exchange of 1934, as amended, forward-looking statements include statements with respect to the company's beliefs, plans, objectives, goals, expectations, anticipations, assumptions, estimates, intentions, and future performance, and involve known and unknown risks. uncertainties, and other factors which may be beyond the company's control and which may cause the actual results, performance, capital ownership, or achievements of the company to be materially different from future results, performance, or achievements expressed or implied by such forward-looking statements. All such statements attributable to us are expressly qualified in their entirety by this cautionary notice, including, without limitation, those risks and uncertainties related to the company's financial and operational performance in the second half and full year of fiscal 2021, and its expectations of the company's future performance, its preliminary outlook and guidance offered in this presentation, as well as the risks and uncertainties described in the company's most recently filed SEC reports and filings. Such reports are available upon request from the company or from the Securities and Exchange Commission, including through the SEC's internet website at www.sec.gov. We have no obligation and do not undertake to update, revise, or correct any of the forward-looking statements after the date hereof or after the respective dates on which any such statements otherwise are made. All information provided today It is of the date of this call and CLPS does not undertake any obligation to update any forward-looking statement except as required under applicable law. With respect to any non-GAAP measures discussed during today's call, the company reconciliation information related to those measures can be found in the earnings release issued early this morning. Now, allow me to introduce the management team on the call today. Mr. Raymond Lin, Chief Executive Officer and Director of CLPS, We'll start off the call with a review of recent company developments and operating results, followed by Ms. Rae Young, Chief Financial Officer of CLPS, who will discuss financial results in more detail. Please note that all lines have been placed on mute to prevent background noise. Following the management's prepared remarks, we will open up the call for a Q&A session. Mr. Henry Lee, the company's chief operating officer, and Mr. Wilson Wong, executive vice president of CLPS, will also join the Q&A session. With that said, I would now like to turn the call over to Raymond. Raymond, please go ahead.
spk10: Okay, Ron. Thank you, Ron. Hello, everyone, and thanks for joining today's call. I hope each of you and your family are safe and well. In today's call, I'm excited to tell you our Facial Year 2021 performance, both in financial and business perspectives. Including our strategic pipeline, we are confident we further drive CLPS suitable growth. In financial performance standpoint, Facial Year 2021 Both us and other possible years reflect in our financial results, both our top line and bottom line. Our revenue increased by 41% to $126 million, and our net income increased by 127%. to $7 million year-over-year. For the details, my CFO, Rita, will share with you later. Now, let me think about our strategies that contributed to our financial growth this fiscal year. First of all, I would like to say my thank you to our more than 3,000 staff. the backbone of the company's continuous success. We quickly appreciate your dedication, and I'm more than happy that our CLPS family is consistently golfing every year. We also hire more experienced talent acquisition manpower. Those meet the demand for IT professionals. and ensure efficient IT services delivery to our existing and new clients. On a business perspective, we achieved numerous progress with the fulfillment of our company initiative in fiscal 2021. We continued to execute our deal engine development strategy to the improvement of our technology and product capability while maintaining the organic growth of our business. On February this year, we raised approximately $16 million to registered direct offering which we partly utilize in various investments, M&A, joint venture, partnership, and operation reach in the domestic and overseas market. Yes, I'm on top of our existing working capital. GLPS has been committed to contributing in the digital trade of global finance. Let me reveal the initiative we have done. The one is we acquired a stake in 53.33% of MSCP investment holding limit. That is a subsidiary of Mingsheng Creative Technology holding limit. This is a Hong Kong listing company. They have a lot of banking system products. Our first project is to upgrade the loan system to meet overseas bank needs and government MSA regulations. Maybe in future, we will integrate with our credit card system. Also, we will upgrade more and more bank products in the future. The truth is we set up CLPSB Finance Holding Limited as a joint venture company with Columbus Central Development Company Private Limited. That is a blockchain technology solutions provider. It's armed to develop and upgrade blockchain-based digital asset solutions for financial institutions. such as custody, exchange, payment, and NFT distribution platform. These solutions are particularly designed for wealth management and various investment transactions, among others. The three is in order to further expand our Southeast Azure business. First, we took full advantage of our high efficiency delivery team in Southeast Asia and our expert research and development team in China so that we can comprehensively fulfill the IT service demand on our clients in Southeast Asia.
spk11: And secondly,
spk10: We set up CLPS Technology Philippines Cooperation, which allows us to reach a wider business coverage in this region. CLPS Philippines has started to be operational and generate revenues. So, I will present some business activities in the key market in Southeast Asia and Asia Pacific, such as in Singapore, Malaysia, India, Japan, Australia, and Philippines, will be more active, allowing us to lay out our value proposition in this location. The fourth is that based on our experience We invest to develop a new credit card system. This is a new generation of credit card system. It is a development to provide complete service for credit card issuance and life circle management. It has been developed to support all kinds of the issuers from small to large and global financial institutions, banks, and credit companies. The system has full multi-currency, multi-products, multi-institutions, and multi-language capabilities. A managed card portfolio accords different countries and for different issuers. Its scenario space engine allow the modernization of financial institutions' account structure, pricing structure, limited structure, and authorization-based management. The system architecture is powered by distributed microservices and utilized concepts, which provide cost-effective infrastructure. which has scalability. Cloud-based, cloud-native architecture enables deployment on Firmware's Cloud Server or on primary physical servers. Its API is an online portal that provides more than 1,200 ports. An API allows any third-party system to trigger services or data for flexible integration. And now on its pilot phase, the commercial version is expected to be launched early next year, early year. The fact is, With a high rental rate in Hong Kong and Singapore, we have purchased office properties in this location, which in turn can become a primacy real estate investment asset, and to supporting our IT services delivery more efficiently. In terms of R&D, We continue to research in big data area, especially in data engine integrated with AI technology. And conducted by data collection, data analysis, and decision making, it will help our clients to improve the sales and marketing efficiency, and can be beneficial for our systemization data reporting. We plan to launch our big data product by next year, which is then for bank, insurance company, and automobile sector. The tool will continually conduct research in RPA with more input and resources in terms for financial industry. such as handwriting, orbital character reconnaissance, and image reconnaissance, because these two parts are very important for usage effects.
spk02: And we were going on to study on it. And in terms of our client base, during the frame show,
spk10: 2021, we changed IT services contracts in the U.S. with major players in the e-commerce industry. We provide IT services, including data management, data analytics, and payment risk measurement for their international business. During the second half of fiscal 2021, our revenue from e-commerce area increased by 100%. In addition, our revenue in automotive industry jumped by 20% to $5 million during the remaining period of fiscal 2021. We trained service IT consulting and solution services with the leading automotive companies. which involves intelligent manufacturing, navigation system, machine learning, ventricle central control system, and new engineering ventricle project. Furthermore, we also underwent corporate restructuring in order to increase our business efficiency. In the past year, we feel the increasing competition, so we reorganized the company's organization structure and into it, several regions in the stream dam to regional cells function and improve the efficiency of the company's operation. At the same time, we hire senior advisor with extension experience from top tier financial institutions to guide and streamline our current and business trajectory.
spk02: First to me, moving forward.
spk10: We remain dedicated and focused to leverage our core business for our goal. as well as our investment and R&D efforts in advanced technology, such as big data, cloud, and blockchain, to enable our clients' digital transformation generally. We are also in process of innovation and streamlining our next-generation band-a-long system. we will study to reforming the bank's core loan system powered by a complete configurable workflow and high degree of automation and central control function. As a result, you will make the bank more centralized, easier interest rating, and easier risk control.
spk02: We will
spk10: plan to drive our overseas presence by exploring business potential in other parts of Southeast Asia and the U.S. to further push our overseas revenue in upward trend. Lastly, on behalf of CRPS family, I deeply appreciate the continued trust and support of our partners and shareholders.
spk02: Thank you.
spk10: Now, I would like to turn the call over to our CFO, Rita Yang, to discuss the second half year and full year of the FACO 2021 financial results. Okay, Rita, go ahead, please.
spk05: Okay. Thank you, Raymond. I will now provide an update on our financial performance for the second half, followed by our four-year results for fiscal 2021. Please note that our numbers provided are in U.S. dollar terms, and that our comparisons are made on a year-over-year basis. In the second half of fiscal 2021, our revenues increased by 20.9 million, or 44.6%. to 67.7 million from 46.8 million. This increase in revenue was mainly due to an increase in revenue from IT consulting services. In particular, revenue from IT consulting services increased 43.2% to 65.2 million from 45.5 million. The increase was due to increased demand for the company's IT consulting services from existing and new clients and our improved capability of service delivery. Revenue from customized IT solution services increased 81% to $2.1 million from $1.1 million. The increase was primarily due to the increased demand from existing clients. Revenue from other services increased 139.5% to 0.5 million from 0.2 million. The increase was primarily due to the increased demand for other services, including hunting services. Gross profit increased 37.8% to 21.7 million. from 15.7 million. As for operating expenses, selling and marketing expenses increased 18.3% to 2.0 million from 1.7 million. The increase was primarily due to the increase of salary expenses as new staff were hired to improve the company's capability of service delivery to meet clients' demands. As a percentage of total revenues, feelings and marketing expense decreased to 2.9% from 3.5%. The decrease was primarily due to the increase in operational efficiency as a result of economics of scale. Research and development expense increased 32.5% to 7.2 million from 5.4 million. The increase primarily results from the establishment of new research projects and the company's continued R&D efforts in big data, cloud computing, blockchain, robot process automation with RPA, and artificial intelligence. As a percentage of total revenues, research and development expense decreased to 10.6% from 11.6%. The decrease was primarily due to the increase in operational efficiency as a result of economics of scale. General and administrative expense increased 20.2% to $10.2 million from $8.4 million. The increase was primarily due to the increase of non-cash share-based compensation expense and general and administrative personnel-related expenses. After excluding the non-cash share-based compensation expense, non-GAAP general and administrative expense increased 15.3% to $6.6 million from $5.7 million. As a percentage of total revenues, general and administrative expense decreased to 15% from 18%. The decrease was primarily due to the increase in operational efficiency as a result of economics of scale and refund management. Operating income increased by 417.9% to $3.4 million from $0.7 million. Operating margin was 5.1% compared to 1.4% in the prior year period. Total other expenses net of other income was $0.2 million compared to $0.5 million total other income net of other expense in the per year period. Provision for income taxes increased by $0.8 million to $1.2 million from $0.4 million. Net income up 166% to $2.1 million from $0.8 million over the same period of last year. After excluding the impact of non-cash share-based compensation expense, non-GAAP net income increased 53.7% to $5.7 million from $3.7 million after excluding the impact of non-controlling increase. Net income attributed to CRPS incorporation shareholders In the second half of fiscal 2021 was 2.0 million or 0.11 basis and 0.1 diluted earnings per share. After excluding the impact of non-cash share-based compensation expense, non-GAAP net income attributed to CRPS incorporation shareholders in the second half of fiscal 2021 was 5.6 million or 0.3 basis and 0.29 deloted earnings per share. This is compared to a non-GAAP net income attributed to CRPS incorporation shareholders of 3.5 million or 0.23 basic and deloted earnings per share. Now, I will provide an overview of four-year fiscal 2021 results. For the year under June 13, 2021, revenues increased 41% to 126.1 million from 89.4 million. This increase in revenue was mainly due to an increase in revenue from IT consulting services. In particular, revenue from IT consulting services increased 40.3% to 122.3 million from 87.1 million. The increase was due to the increased demand from existing and new clients and our improved capability of service delivery. Revenue from customized IT solution services increased 69.7% to 3.1 million from 1.8 million. The increase was primarily due to the increased demand from existing clients. Revenue from other services increased 51.5% to 0.7 million from 0.4 million. The increase was primarily due to the increased demand from other services, including headhunting services. Revenue generated outside mainland China increased 28.1% to 13.6 million from 10.6 million. The increase in revenue generated outside of mainland China reflects the company's successful and continuous global expansion strategy. Gross profit increased 29.1% to $40.2 million from $31.1 million. As for operating expenses, selling and marketing expenses increased 22.7%. to 3.8 million from 3.1 million. The increase was primarily due to the increase of salary expense as new staff was hired to improve the company's capability of service delivery to meet clients' demands. As a percentage of total revenues, selling and marketing expense decreased to 3% from 3.4%. The decrease reflects an increase in operational efficiency as a result of economics of scale. Research and development expense increased 27.8% to 13.3 million from 10.4 million. The increase primarily results from the establishment of new research projects and the company's continued R&D efforts in big data, cloud computing, blockchain, RPA, and artificial intelligence. As a percentage of total revenues, research and development expense decreased to 10.6% from 11.7%. The decrease reflects an increase in operational efficiency as a result of economics of scale. General and administrative expense increased 2.7%, to 16.8 million from 16.3 million. The increase was primarily due to the increase of non-cash share-based compensation expense. After excluding the non-cash share-based compensation expense, non-GAAP general and administrative expense decreased 6.2% to 11.8 million from 12.6 million. As a percentage of total revenues, general and administrative expense decreased to 13.3% from 18.3%. The decrease reflects an increase in operational efficiency as a result of economics of scale and refined management. Operating income increased by 161.2% to $8.4 million. from 3.2 million. Operating margin was 6.6% compared to 3.6%. The total other expenses net of other income was 0.1 million compared to 0.5 million total other income net of other expense in the prior year period. Provision for income taxes increased by $0.5 million to $1.3 million from $0.8 million. Net income up 127.9% to $7 million from $3.1 million in the prior period. After excluding non-cash share-based compensation expenses, non-GAAP net income increased by $5 million. or 31.5%, to 12.1 million from 7.1 million. After excluding non-controlling interest, net income attributed to CLPS Incorporation shareholders for the year end of June 13, 2021 was 6.8 million, or 0.39 basic and diluted earnings per share, compared to net income attributed to CRPS incorporation shareholders of 2.9 million or 0.2 basic and diluted earnings per share. After excluding the impact of non-cash share-based compensation expense, non-debt net income attributed to CRPS incorporation shareholders for the year under June 13, 2021 was 11.9 million or 0.69 basic earnings per share and 0.68% diluted earnings per share. This is compared to non-GAAP net income attributed to CRPS Incorporation shareholders of 6.9 million or 0.47% basic and diluted earnings per share in the prior year period. As of June 13, 2021, we had cash and cash equivalents of 24.7 million compared to 12.7 million as of June 13, 2020. As of June 13, 2021, we had total numbers of employees of 3,352, up 22% year-over-year. Revenue per employee up by 15.5% to $37.6 thousand per person. Net income per employees up by 86.7% to $2,100 per person. Looking forward, the fiscal year 2022, we expect total sales growth in the range of approximately 30% to 35% and non-GAAP net income growth in the range of approximately 32% to 37%. compared to fiscal year 2021 financial results. This concludes our prepared remarks. Operator, we are now ready for questions.
spk04: Thank you. If you would like to ask a question, please signal by pressing star 1 on your telephone keypad. If you are using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. Please limit yourself to one question to allow everyone the opportunity to ask a question. And cue again if you have any additional follow-ups. Again, that is star one to ask a question. We'll pause for just a moment to allow everyone an opportunity to signal.
spk02: We'll take our first question from Jayden Wang.
spk06: Okay, congratulations for the remarkable financial results. I have three questions. The first question is, with the recent tech company monopoly crashdown in China, there will be a lot more opportunities for new and smaller players in China. Given your competitive advantage in providing IT services to overseas clients, for their services in China. Has CEO getting significant demand pick up since the last tech company breakdown?
spk02: Hello.
spk07: This is Henry Li, the company's COO. First of all, thanks for your question. Now let me answer this question. Our strong financial numbers for the second half and the full year of fiscal 2021 shows the consistent growth of our clients' demand for IT services, specifically in mainland China. Although we have always pointed out that our global expansion strategy has been very effective, of which revenue generated from outside China increased by 28.1% year over year. It is undeniable that our revenue from mainland China significantly contributes to our aggregate revenue. And so we believe that it's not a matter of taking advantage of the large tech crackdown, but it is the competitive advantage that we always hold on. In addition, the effective of our dual-engine growth strategy to diversify our IT products, improve our delivery capabilities in domestic and international markets. And the enhanced credibility renders an increase in our income, thus bringing more benefits to our investors and could improve our overall valuation. As you have mentioned, Given our position as professional IT service provider, we will explore this business opportunity as well. Thank you, and I hope I answered your question.
spk06: Okay, okay, guys. My last question is, the company got a global contract in February 2021. Even though the company name was not released, can you provide provide an update on the client's global contract. After working with this client for years, I'm wondering if they would consider using CLPS more for their IT services, particularly their China cross-border transaction services and their crypto transaction platform. The company set up a link The company set up Link Crypto with Columbia earlier this year. Would you please provide an update? Will CRPIs continue exploring the opportunities of cryptocurrency management for the financial institutions outside of China?
spk09: Hi, thank you for the questions. This is Wilson.
spk08: I would like to reiterate that due to the confidentiality agreement, we cannot disclose the name of the client. However, so we will leave it that way to ensure our long-term and stable relationship with this client. We hope for your understanding in our standpoint. However, we are very pleased that our global expansion, particularly in the U.S. market, has already paid off because of the client we came there. Going back to your questions, our business with this client is progressively going well. In addition to the current IT consulting services we provide, we are also exploring the possibility of providing IT solution services for this client.
spk05: Hello, this is Rita. And let me also add that this client contributes to the aggregate e-commerce revenue in terms of operational area. In the second half of fiscal year 2021, revenue from e-commerce area increased by more than 100%. We believe that our strong delivery capabilities and advanced IT products will further deepen our cooperation with clients. Yes, thank you for your question.
spk04: And we'll take our next question from Jacob Kurtz with Green Ridge Global.
spk01: Hi. So you guys have released a series of positive announcements this year, but the stock has continued to fall. Why do you think that is and how do you guys think you're going to turn it around?
spk02: Hello, this is Rita. Sorry, can you repeat your question?
spk01: So you guys have released a series of positive announcements this year, but the stock has continued to fall. Why do you think that is, and how will you turn it around?
spk02: Rita, you want me to answer the question for you?
spk08: Hello. Let me take the questions. In terms of the top stock price of Volat, it's also volatile, and generally that is because of the market behavior, and material has been disclosed. So in terms of our strategies, as mentioned by Mr. Raymond, we will continue to implement our newer engine strategies. We will deliver our results and value to our shareholders.
spk09: That will answer your questions.
spk02: Yep, that is all. Thank you. And once again, that is Star 1 to ask a question.
spk04: It appears we have no further questions at this time. I'd like to turn the conference back to management for any additional or closing remarks.
spk02: Raymond, please go to your closing remarks. Hello, Raymond. Would you like to do your closing remarks?
spk10: Okay. No questions, right? Okay. Okay. Thank you again for joining us on today's call, and we appreciate your ongoing support. We look forward to updating you on our progress in this week and months ahead. Have a good day, everybody. Thank you.
spk04: And that does conclude today's conference. We thank you for your participation. You may now disconnect.
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