China Customer Relations Centers, Inc. Announces Unaudited Financial Results for the First Half of 2019

TAI'AN,China,Nov. 23,2019 -- 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 30,2019.

First Half of 2019 Highlights (all comparisons to prior year unless noted)

Revenues increased by 11.0% to $73.3 million driven by continued expansion of business.

Gross profit decreased by 7.8% to $18.7 million. Gross margin decreased by 5.1 percentage points to 25.5%.

Operating income decreased by 57.2% to $5.3 million. Operating margin was 7.3%,compared to 18.8% for the same period of the prior year.

Net income attributable to common shareholders decreased by 54.7% to $5.0 million.

EPS attributable to common shareholders was $0.27,versus $0.60 for the same period of the prior year.

As of June 30,2019,the Company had service capacity of 21,216 seats,compared to 18,384 seats at the end of 2018.

First Half of 2019 Unaudited Financial Results

For the Six Months Ended June 30,

($ millions,except per share data)

2019

2018

% Change

Revenues

$73.3

$66.0

11.0%

Gross profit

$18.7

$20.2

-7.8%

Gross margin

25.5%

30.6%

-5.1 pp

Operating income

$5.3

$12.4

-57.2%

Operating margin

7.3%

18.8%

-11.5 pp

Net income attributable to CCRC

$5.0

$11.0

-54.7%

EPS - basic and diluted

$0.27

$0.60

-54.7%

Revenues

For the six months ended June 30,revenues increased by $7.2 million,or 11.0%,to $73.3 million from $66.0 million for the same period of the prior year. We continued to see strong demand for our business from existing BPO clients as well as new clients during the six months ended June 30,2019. As of June 30,The Company had 33 call center locations in 16 provinces,autonomous regions and municipalities in China,including Shandong,Jiangsu,Anhui,Hebei,Xinjiang,Guangxi,Jiangxi,Chongqing,Beijing,Henan,Shanghai,Sichuan,Yunnan,Guangdong,Heilongjiang and Hubei with a capacity approximately of 21,216 seats which increased by 15.4% from 18,384 seats at the end of 2018.

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 $8.8 million,or 19.3%,to $54.6 million for the six months ended June 30,2019 from $45.8 million for the same period of the prior year. As a percentage of revenues,cost of revenues was 74.5% for the six months ended June 30,compared to 69.4% for the same period of the prior year.

Gross profit and gross margin

Gross profit decreased by $1.6 million,or 7.8%,to $18.7 million for the six months ended June 30,2019 from $20.2 million for the same period of the prior year. Gross margin decreased by 5.1 percentage points to 25.5% for the six months ended June 30,2019 from 30.6% for the same period of the prior year.

Selling,general and administrative expense

Selling,general and administrative ("SG&A") expenses increased by $5.5 million,or 71.2%,to $13.3 million for the six months ended June 30,2019 from $7.8 million for the same period of the prior year. The increase in SG&A expenses was primarily related to higher payroll expenses as a result of increased headcount,as well as increased marketing and R&D expenses. As a percentage of revenues,SG&A expenses increased from 11.8% for the six months ended June 30,2018 to 18.2% for the six months ended June 30,2019.

Operating income and operating margin

Income from operations decreased by $7.1 million,or 57.2%,to $5.3 million for the six months ended June 30,2019 from $12.4 million for the same period of the prior year. The decrease in operating income was mainly due to a significant increase in SG&A expenses. Operating margin was 7.3% for the six months ended June 30,compared to 18.8% for the same period of the prior year.

Other income

We received government grants,which are discretionary and unpredictable in nature,of $0.6 million during the six months ended June 30,in line with the amount received during the same period of the prior year. Government grants as a percentage of net income were 11.0% for the six months ended June 30,compared to 5.2% for the same period of the prior year. Total other income,net of other expenses,increased by $0.2 million,or 35.0%,to $0.7 million for the six months ended June 30,2019 from $0.5 million for the same period of the prior year.

Income before provision for income taxes

Income before provision for income taxes decreased by $6.9 million,or 53.5%,to $6.0 million for the six months ended June 30,2019 from $13.0 million for the same period of the prior year. The decrease in income before provision for income taxes was mainly due to the increase in SG&A expenses and the decrease of gross profit.

Income taxes

Provision for income taxes was $1.0 million for the six months ended June 30,compared to $1.9 million for the same period of the prior year.

Net income and earnings per share

Net income decreased by $6.0 million,or 54.4%,to $5.1 million for the six months ended June 30,2019 from $11.1 million for the same period of the prior year. After deducting net income attributable to noncontrolling interest,net income attributable to common shareholders was $5.0 million,or $0.27 per basic and diluted share,for the six months ended June 30,compared to $11.0 million,or $0.60 per basic and diluted share,for the same period of the prior year.

Financial Conditions

As of June 30,the Company had cash of $21.8 million,compared to $24.4 million at December 31,2018. Total working capital was $43.8 million as of June 30,compared to $41.1 million at the end of 2018.

Net cash used in operating activities was $1.3 million for the six months ended June 30,compared to $0.1 million for the same period of the prior year. Net cash used in investing activities was $1.3 million for the six months ended June 30,compared to $1.6 million for the same period of the prior year. Net cash provided by financing activities was $31,215 for the six months ended June 30,compared to $3.9 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's service is currently delivered from call centers located in Provinces of Shandong,Hubei,the Xinjiang Uygur Autonomous Region,the Guangxi Zhuang Autonomous Region,and Chongqing City,with a capacity of approximately 21,216 seats. 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) anticipated increase in SG&A costs; and 2) continued growth 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:

Tony Tian,CFA

Weitian Group LLC

Email: ttian@weitianco.com

Phone: +1-732-910-9692

CHINA CUSTOMER RELATIONS CENTERS,INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

June 30,

December 31,

2019

2018

(Unaudited)

ASSETS

Cash and cash equivalents

$

21,752,754

$

24,419,912

Accounts receivable,net

35,526,298

30,050,506

Prepayments

2,223,098

1,689,835

Prepayment,related party

93,524

91,618

Due from related parties,net

156,612

199,994

Income taxes recoverable

323,421

527,995

Other current assets

2,058,991

1,959,923

Total current assets

62,134,698

58,939,783

Equity investments

3,497,145

3,491,653

Property and equipment,net

8,100,759

8,290,460

Deferred tax assets

486,774

486,009

Operating lease right-of-use assets (1)

6,048,124

-

Operating lease right-of-use assets - related party (1)

246,424

-

Total non-current assets

18,379,226

12,268,122

Total assets

$

80,513,924

$

71,207,905

LIABILITIES AND EQUITY

Accounts payable

$

454,489

$

610,724

Accounts payable - related parties

107,787

162,112

Accrued liabilities and other payables

3,498,630

5,673,159

Deferred revenue

248,642

361,636

Wages payable

7,500,248

7,082,138

Income taxes payable

308,838

364,157

Operating lease liabilities,current (1)

2,371,341

-

Operating lease liabilities - related party,current (1)

162,134

-

Short term loan

3,641,342

3,635,623

Total current liabilities

18,293,451

17,889,549

Operating lease liabilities,non-current (1)

3,762,816

-

Operating lease liabilities - related party,non-current (1)

84,290

-

Total non-current liabilities

3,847,106

-

Total liabilities

22,140,557

17,549

Equity

Common shares,$0.001 par value,000,000 shares authorized,18,329,600 shares issued and outstanding as of June 30,2019 and December 31,2018

18,330

18,330

Additional paid-in capital

15,074,267

11,202,396

Retained earnings

40,384,829

40,065,822

Statutory reserves

4,714,362

3,916,149

Accumulated other comprehensive loss

(2,599,026)

(2,592,289)

Total China Customer Relations Centers,Inc. shareholders' equity

57,762

52,610,408

Noncontrolling interest

780,605

707,948

Total equity

58,373,367

53,318,356

Total liabilities and equity

$

80,905

(1) On January 1,the Company adopted ASU 2016-02,"Leases (Topic 842)",using the optional transition method where no adjustments are made to the comparative periods. Adoption of the standard resulted in the recognition of operating lease right-of-use assets and operating lease liabilities for lease contracts having terms beyond 12 months period on the consolidated balance sheet as of January 1,2019.

CHINA CUSTOMER RELATIONS CENTERS,INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

(Unaudited)

For The Six Months Ended June 30,

2019

2018

Revenues,net

$

73,274,748

$

66,036,657

Cost of revenues

54,623,472

45,803,839

Gross profit

18,651,276

20,232,818

Operating expenses:

Selling,general & administrative expenses

13,194

7,787,102

Total operating expenses

13,102

Income from operations

5,322,082

12,445,716

Interest expense

(30,475)

(120,659)

Government grants

555,229

572,245

Other income

201,945

80,470

Other expense

(20,722)

(9,270)

Total other income

705,977

522,786

Income before provision for income taxes

6,028,059

12,968,502

Income tax provision

961,021

1,863,761

Net income

5,067,038

11,104,741

Less: net income attributable to noncontrolling interest

77,947

96,893

Net income attributable to China Customer Relations Centers,Inc.

$

4,989,091

$

11,007,848

Comprehensive income

Net income

$

5,038

$

11,741

Other comprehensive income (loss)

Foreign currency translation adjustment

(6,737)

(1,097,615)

Total Comprehensive income

5,060,301

10,126

Less: Comprehensive income attributable to noncontrolling interest

140,467

74,487

Comprehensive income attributable to China Customer Relations Centers,919,834

$

9,932,639

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

Basic

$

0.27

$

0.60

Diluted

$

0.27

$

0.60

Weighted average common shares outstanding

Basic

18,600

18,600

Diluted

18,600

CHINA CUSTOMER RELATIONS CENTERS,INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

For The Six Months Ended June 30,

2019

2018

$

$

Cash flows from operating activities

Net income

5,741

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

Depreciation and amortization

2,845,134

1,219,183

Loss on disposal of property and equipment

68,475

3,366

Deferred income taxes

-

(128,150)

Changes in assets and liabilities:

Accounts receivable,net

(5,493,897)

(9,911,512)

Due from related parties,net

-

(94,772)

Prepayments

(917,156)

(1,178,806)

Prepayment,related party

(1,783)

-

Operating lease liabilities

(843,053)

-

Other current assets

(97,228)

(377,832)

Accounts payable

(130,978)

624,601

Accounts payable - related parties

(55,237)

(6,414)

Wages payable

412,029

398,411

Income taxes recoverable

207,879

-

Income taxes payable

(56,564)

322,647

Deferred revenue

(114,931)

(186,486)

Accrued liabilities and other payables

(2,226,854)

(1,896,512)

Net cash used in operating activities

(1,337,126)

(107,535)

Cash flows from investing activities

Purchase of property and equipment

(1,577)

(1,720,478)

Proceeds from sale of property and equipment

28,210

71

Repayment from related parties

44,222

117,802

Net cash used in investing activities

(1,299,145)

(1,602,605)

Cash flows from financing activities

Borrowings from short term loans

3,725,560

3,891,596

Repayment of short term loans

(3,694,345)

-

Net cash provided by financing activities

31,215

3,596

Effect of exchange rate changes on cash and cash equivalents

(62,102)

(358,552)

Net change in cash and cash equivalents

(2,667,158)

1,822,904

Cash and cash equivalents,beginning of the period

24,912

18,628,365

Cash and cash equivalents,end of the period

21,754

20,451,269

Supplemental cash flow information

Interest paid

82,531

120,659

Income taxes paid

1,139,416

1,647,613

Non-cash investing and financing activities

Transfer from prepayments to property and equipment

-

176,730

Liabilities assumed in connection with purchase of property and equipment

17,792

49,318

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