UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 6-K

 

REPORT OF FOREIGN PRIVATE ISSUER PURSUANT TO RULE 13a-16

OR 15d-16 UNDER THE SECURITIES EXCHANGE ACT OF 1934

 

For the month of April 2019

 

Commission file number: 001-37655

 

CHINA CUSTOMER RELATIONS CENTERS, INC.

(Registrant's name)

 

c/o Shandong Taiying Technology Co., Ltd.

1366 Zhongtianmen Dajie, Xinghuo Science and Technology Park, High-tech Zone, Taian City, Shandong Province,
People’s Republic of China 27100

 

(Address of principal executive office)

_____________________

 

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F. Form 20-F ☒ Form 40-F ☐

 

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): ☐

 

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): ☐

____________________

 

 

 

 

Explanatory Note:

 

On April 29, 2019, China Customer Relations Centers, Inc. issued a press release announcing its financial results for the six and twelve months ended December 31, 2018. A copy of the press release is attached hereto as Exhibit 99.1.

 

1
 

 

 

EXHIBIT INDEX

Number Description of Exhibit
   
99.1Press Release dated April 29, 2019 announcing financial results for the six and twelve months ended December 31, 2018.

 

2
 

SIGNATURES

 

Pursuant to the requirements of the Securities and Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

  CHINA CUSTOMER RELATIONS CENTERS, INC.
   
  By:  /s/ Gary Wang
    Gary Wang
Chairman and Chief Executive Officer

 

Dated: April 30, 2019

 

3

Exhibit 99.1

 

China Customer Relations Centers, Inc. Announces Second Half and Full Year 2018 Financial Results

Revenues and Net Income Attributable to Common Shareholders Grew by 59.0% and 83.4%, Respectively, for Full Year 2018

TAI'AN, China, Apr. 26, 2018 /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 and twelve months ended December 31, 2018.

Second Half of 2018 Highlights (all comparisons to prior year unless noted)

·Revenues increased by 39.0% to a Company record of $75.4 million driven by a continued expansion of business.
·Gross profit increased by 38.3% to $18.6 million. Gross margin decreased by 0.1 percentage points to 24.7%.
·Operating income decreased by 8.7% to $5.1 million. Operating margin decreased by 3.5 percentage points to 6.8%.
·Net income attributable to common shareholders increased by 7.5% to $5.1 million.
·EPS attributable to common shareholders was $0.28, compared to $0.26 for the same period of the prior year.

 

Full Year 2018 Highlights

 

·Revenues increased by 59.0% to $141.4 million driven by continued expansion of business.
·Gross profit increased by 66.0% to $38.9 million. Gross margin increased by 1.2 percentage points to 27.5%
·Operating income increased by 102.9% to $17.5 million. Operating margin increased by 2.7 percentage points to 12.4%.
·Net income attributable to common shareholders increased by 83.4% to $16.1 million.
·EPS attributable to common shareholders was $0.88, compared to $0.48 for 2017.
·As of December 31, 2018, the Company had service capacity of 18,384 seats, compared to 13,992 seats as of December 31, 2017.

 

Mr. Gary Wang, Chairman and Chief Executive Officer of CCRC, commented, "We continue to see strong momentum in our business, highlighted by growth in revenues and net income attributable to common shareholders of 39.0% and 7.5%, respectively, in the second half of 2018, as we continue to add new BPO clients while increasing sales volume at some of our key existing clients. For the full year 2018, Revenues grew by 59.0% to $141.4 million while EPS increased by 83.4% to $0.88. This capped a four-year run of both top- and bottom- line growths where revenues and net income attributable to common shareholders grew at CAGRs of 34.9% and 73.3%, respectively, an accomplishment that we are proud of”.

-1

 

Six Months Ended December 31, 2018 Financial Results (Unaudited)

 

   For the Six Months Ended December 31, 
($ millions, except per share data)  2018   2017   % Change 
Revenues  $75.4   $54.2    39.0%
Gross profit  $18.6   $13.5    38.3%
Gross margin   24.7%   24.8%   -0.1 pp 
Operating income  $5.1   $5.6    -8.7%
Operating margin   6.8%   10.3%   -3.5 pp 
Net income attributable to CCRC  $5.1   $4.7    7.5%
EPS - basic and diluted  $0.28   $0.26    7.5%

Revenues

For the six months ended December 31, 2018, revenues increased by $21.2 million, or 39%, to a company record high of $75.4 million from $54.2 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 December 31, 2018. As of December 31, 2018, The Company’s service is delivered from call centers located in Provinces of Shandong, Jiangsu, Henan, Guangdong, Yunnan, Hubei, Jiangxi, Hebei, Anhui, Sichuan, the Xinjiang Uygur Autonomous Region, the Guangxi Zhuang Autonomous Region, and Chongqing City, with a total capacity approximately of 18,384 seats which increased by 31.4% from 13,992 seats at the end of 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 $16.0 million, or 39.3%, to $56.8 million for the six months ended December 31, 2018 from $40.8 million for the same period of the prior year. As a percentage of revenues, cost of revenues was 75.3% for the six months ended December 31, 2018, compared to 75.2% for the same period of the prior year.

Gross profit and gross margin

Gross profit increased by $5.2 million, or 38.3%, to $18.6 million for the six months ended December 31, 2018 from $13.5 million for the same period of the prior year. Gross margin was 24.7% for the six months ended December 31, 2018, with no change for the same period of the prior year.

Selling, general and administrative expense

Selling, general and administrative expenses increased by $5.6 million, or 71.5%, to $13.5 million for the six months ended December 31, 2018 from $7.9 million for the same period of the prior year. The increase in selling, general and administrative expenses was a result of higher payroll and bonus expenses paid to the administrative and research personnel and the management team. As a percentage of revenues, SG&A increased from 14.6% for the six months ended December 31, 2017 to 18.0% for the six months ended December 31, 2018. The increase in SG&A percentage was mainly due to improvement in revenue contribution per seat. 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 2019 due to the continuing expansion of our business.

Operating income and operating margin

Income from operations decreased by $0.5 million, or 8.7%, to $5.1 million for the six months ended December 31, 2018 from $5.6 million for the same period of the prior year. The decrease in operating income was mainly due to a significant increase in selling, general and administrative expenses. Operating margin was 6.8% for the six months ended December 31, 2018, compared to 10.3% for the same period of the prior year.

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Other income

We received government grants, which are discretionary and unpredictable in nature, of $1.1 million during the six months ended December 31, 2018, compared to $0.6 million during the same period of the prior year. Government grants as a percentage of net income were 21.9% for the six months ended December 31, 2018, compared to 11.8% for the same period of the prior year. Total other income, net of other expenses, increased by $0.9 million, or 295.8%, to $1.2 million for the six months ended December 31, 2018 from $0.3 million for the same period of the prior year.

Income before provision for income taxes

Income before provision for income taxes increased by $0.4 million, or 7.1%, to $6.3 million for the six months ended December 31, 2018 from $5.9 million for the same period of the prior year. The increase in income before provision for income taxes was mainly due to the increase in other income and partially offset by a slight decrease in income from operations.

Income taxes

Provision for income taxes was $1.1 million for the six months ended December 31, 2018, compared to $1.0 million for the same period of the prior year.

Net income and earnings per share

Net income increased by $0.3 million, or 6.3%, to $5.2 million for the six months ended December 31, 2018 from $4.9 million for the same period of the prior year. After deducting net income attributable to noncontrolling interest, net income attributable to common shareholders was $5.1 million, or $0.28 per basic and diluted share, for the six months ended December 31, 2018, compared to $4.7 million, or $0.26 per basic and diluted share, for the same period of the prior year.

Fiscal Year 2018 Financial Results

 

   For the Twelve Months Ended December 31, 
($ millions, except per share data)  2018   2017   % Change 
Revenues  $141.4   $89.0    59.0%
Gross profit  $38.9   $23.4    66.0%
Gross margin   27.5%   26.3%   1.2 pp 
Operating income  $17.5   $8.6    102.9%
Operating margin   12.4%   9.7%   2.7 pp 
Net income attributable to CCRC  $16.1   $8.8    83.4%
EPS - basic and diluted  $0.88   $0.48    83.3%

Revenues

For the year of 2018, revenues increased by $52.5 million, or 59.0%, to $141.4 million from $89 million for 2017. We continued to see strong demand for our business from existing BPO clients as well as new clients during the twelve months ended December 31, 2018. 

Our Top 5 customers: China Mobile and its provincial subsidiaries; DiDi Chuxing; Taobao; China Merchants Bank Credit Card Center; and, Chongqing subsidiary of China Telecom, accounted for 58% of revenues in 2018, compared to 57% of revenues generated by our top 5 customers in 2017.

Cost of revenues

Cost of revenues increased by $37.0 million, or 56.4%, to $102.6 million for 2018 from $65.6 million for 2017. As a percentage of revenues, cost of revenues was 72.5% for 2018, compared to 73.7% for 2017.

Gross profit and gross margin

Gross profit increased by $15.5 million, or 66.0%, to $38.9 million for 2018 from $23.4 million for 2017. Gross margin increased by 1.2 percentage points to 27.5% for 2018 from 26.3% for 2017.

Selling, general and administrative expense

Selling, general and administrative expenses increased by $6.6 million, or 44.4%, to $21.3 million for 2018 from $14.8 million for 2017. The increase in selling, general and administrative expenses was a result of higher payroll and bonus expenses paid to the administrative and research personnel and the management team. 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 2019 due to the continuing expansion of our business.

-3

 

Operating income and operating margin

Income from operations increased by $8.9 million, or 102.9%, to $17.5 million for 2018 from $8.6 million for 2017. The increase in operating income was mainly driven by an increase in gross profit and partially offset by increases in selling, general and administrative expenses. Operating margin was 12.4% for 2018, compared to 9.7% for 2017.

Other income (expenses)

We received government grants, which are discretionary and unpredictable in nature, of $1.8 million during 2018, compared to $1.9 million during 2017. Government grants as a percentage of net income were 10.5% for 2018, compared to 20.7% for 2017. Total other income, net of other expenses was $1.7 million for 2018, essentially unchanged from 2017.

Income before provision for income taxes

Income before provision for income taxes increased by $8.9 million, or 85.8%, to $19.3 million for 2018 from $10.4 million for 2017. The increase in income before provision for income taxes was mainly due to the increase in income from operations in 2018.

Income taxes

Provision for income taxes was $3.0 million for 2018, compared to $1.3 million for 2017.

Net income and earnings per share

Net income increased by $7.2 million, or 78.8%, to $16.3 million for 2018 from $9.1 million for 2017. After deducting net income attributable to noncontrolling interest, net income attributable to common shareholders was $16.1 million, or $0.88 per basic and diluted share, for 2018, compared to $8.8 million, or $0.48 per basic and diluted share, for 2017.

Financial Conditions

As of December 31, 2018, the Company had cash of $24.4 million, compared to $18.6 million at December 31, 2017. Total working capital was $41.1 million as of December 31, 2018, compared to $30.0 million at the end of 2017.

Net cash provided by operating activities was $12.1 million for the twelve months ended December 31, 2018, compared to $3.0 million for 2017. Net cash used in investing activities was $4.7 million for the twelve months ended December 31, 2018, compared to $5.4 million for 2017. Net cash used in financing activities was $0.1 million for the twelve months ended December 31, 2018, compared to net cash provided by financing activities of $3.7 million for 2017.

Recent Development

On November 29, 2018, the Company announced that the independent committee of the Company’s board of directors (the “Board”) has retained Duff & Phelps (Duff & Phelps, LLC and Duff & Phelps Securities, LLC) as its financial advisor, Sidley Austin LLP as its international legal counsel, and Maples and Calder (Hong Kong) LLP as its British Virgin Islands legal counsel in connection with its review and evaluation of the preliminary non-binding proposal letter dated November 10, 2018 from Mr. Zhili Wang, the Company’s founder, chairman of the Board and chief executive officer and Guangzhou Cornerstone Asset Management Co., Ltd. (together with Mr. Wang, the “Buyer Group”), to acquire all of the outstanding shares of the Company not already owned by the Buyer Group in a going private transaction.

On August 11, 2018, The Company held its 2018 Annual Meeting of Stockholders at its headquarters in Tai’An City, Shandong Province.  The Company's shareholders: 1) reelected Weixin Wang and Owens Meng as Class II Directors; 2) ratified the appointment of MaloneBailey, LLP as its independent registered public accounting firm for the fiscal year of 2018; and 3) approved the 2018 Share Incentive Plan.

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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, Jiangsu, Henan, Guangdong, Yunnan, Hubei, Jiangxi, Hebei, Anhui, Sichuan, the Xinjiang Uygur Autonomous Region, the Guangxi Zhuang Autonomous Region , and Chongqing City, with a capacity of approximately 18,384 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 administrative 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

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CHINA CUSTOMER RELATIONS CENTERS, INC. AND SUBSIDIARIES

 

CONSOLIDATED BALANCE SHEETS 

 

   December 31,   December 31, 
   2018   2017 
         
ASSETS    
Cash and cash equivalents  $24,419,912   $18,628,365 
Accounts receivable, net   30,050,506    23,689,583 
Notes receivable - related party   -    968,277 
Prepayments   1,689,835    1,277,149 
Prepayment, related party   91,618    - 
Due from related parties, net   199,994    219,051 
Income taxes recoverable   527,995    - 
Other current assets   1,959,923    1,084,929 
Total current assets   58,939,783    45,867,354 
Equity investments   3,491,653    3,688,676 
Property and equipment, net   8,290,460    6,067,338 
Deferred tax assets   486,009    313,463 
Total non-current assets   12,268,122    10,069,477 
Total assets  $71,207,905   $55,936,831 
           
 LIABILITIES AND EQUITY          
Accounts payable  $610,724   $495,177 
Accounts payable - related parties   162,112    46,661 
Accrued liabilities and other payables   5,673,159    4,724,823 
Deferred revenue   361,636    607,660 
Wages payable   7,082,138    5,565,078 
Income taxes payable   364,157    541,321 
Short term loans   3,635,623    3,842,371 
Total current liabilities   17,889,549    15,823,091 
Total liabilities   17,889,549    15,823,091 
Equity          
Common shares, $0.001 par value, 100,000,000 shares authorized, 18,329,600 shares issued and outstanding as of December 31, 2018 and December 31, 2017   18,330    18,330 
Additional paid-in capital   11,202,396    11,202,396 
Retained earnings   40,065,822    25,292,402 
Statutory reserves   3,916,149    2,597,031 
Accumulated other comprehensive income (loss)   (2,592,289)   80,868 
Total China Customer Relations Centers, Inc. shareholders’ equity   52,610,408    39,191,027 
Noncontrolling interest   707,948    922,713 
Total equity   53,318,356    40,113,740 
Total liabilities and equity  $71,207,905   $55,936,831 

 

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CHINA CUSTOMER RELATIONS CENTERS, INC. AND SUBSIDIARIES

 

CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

 

   For The Years Ended December 31, 
   2018   2017   2016 
             
Revenues, net  $141,433,641   $88,971,787   $72,731,706 
Cost of revenues   102,567,896    65,562,563    53,098,552 
Gross profit   38,865,745    23,409,224    19,633,154 
Operating expenses:               
Selling, general & administrative expenses   21,329,908    14,766,524    11,082,106 
Total operating expenses   21,329,908    14,766,524    11,082,106 
Income from operations   17,535,837    8,642,700    8,551,048 
Interest expense   (404,958)   (1,609)   (50,383)
Government grants   1,709,297    1,885,340    801,125 
Other income   552,205    175,995    479,387 
Other expense   (124,370)   (331,641)   (55,003)
Total other income   1,732,174    1,728,085    1,175,126 
Income before provision for income taxes   19,268,011    10,370,785    9,726,174 
Income tax provision   2,966,880    1,255,654    1,448,923 
Net income   16,301,131    9,115,131    8,277,251 
Less: net income attributable to noncontrolling interest   208,593    341,672    - 
Net income attributable to China Customer Relations Centers, Inc.  $16,092,538   $8,773,459   $8,277,251 
                
Comprehensive income               
Net income  $16,301,131   $9,115,131   $8,277,251 
Other comprehensive income (loss)               
Foreign currency translation adjustment   (2,741,283)   2,141,796    (1,537,534)
Total Comprehensive income   13,559,848    11,256,927    6,739,717 
Less: Comprehensive income attributable to noncontrolling interest   140,467    401,324    - 
Comprehensive income attributable to China Customer Relations Centers, Inc.  $13,419,381   $10,855,603   $6,739,717 
                
Earnings per share attributable to China Customer Relations Centers, Inc.               
Basic  $0.88   $0.48   $0.45 
Diluted  $0.88   $0.48   $0.45 
Weighted average common shares outstanding               
Basic   18,329,600    18,329,600    18,329,600 
Diluted   18,329,600    18,329,600    18,329,600 

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CHINA CUSTOMER RELATIONS CENTERS, INC. AND SUBSIDIARIES

 

CONSOLIDATED STATEMENTS OF CASH FLOWS 

 

    For The Years Ended December 31,  
    2018     2017     2016  
Cash flows from operating activities                  
Net income   $ 16,301,131     $ 9,115,131     $ 8,277,251  
Adjustments to reconcile net income to net cash provided by operating activities:                        
Depreciation     2,635,242       1,852,152       1,542,352  
Allowance for doubtful accounts     952,439       429,803       805,870  
Loss on disposal of property and equipment     34,166       2,416       -  
Deferred income taxes     (196,909 )     (230,043 )     (84,067 )
Changes in assets and liabilities:                        
Accounts receivable, net     (7,937,804 )     (9,269,755 )     (5,561,722 )
Prepayments     (887,778 )     (1,313,830 )     (767,516 )
Prepayment, related party     (95,244 )     -       -  
Other current assets     (970,199 )     25,925       (63,669 )
Accounts payable     147,818       (505,372 )     193,639  
Accounts payable - related parties     122,630       (88,136 )     25,276  
Wages payable     1,884,440       2,393,214       277,335  
Income taxes recoverable     (548,893 )     -       -  
Income taxes payable     (153,896 )     (386,825 )     (67,681 )
Deferred revenue     (221,771 )     (38,813 )     634,644  
Accrued liabilities and other payables     1,077,098       1,016,373       454,572  
Net cash provided by operating activities     12,142,470       3,002,240       5,666,284  
Cash flows from investing activities                        
Purchase of property and equipment     (4,768,139 )     (2,082,719 )     (478,775 )
Proceed from disposal of property and equipment     9,197       108       -  
Repayment from third parties     -       233,596       -  
Loans on third parties     -       -       (563,896 )
Repayments from related parties     117,802       -       40,011  
Advance to related parties     (105,827 )     (7,400 )     (18,210 )
Payments for equity investments     (1,461 )     (3,509,404 )     -  
Net cash used in investing activities     (4,748,428 )     (5,365,819 )     (1,020,870 )
Cash flows from financing activities                        
Contribution from noncontrolling investor in subsidiary     -       353,581       -  
Dividend distributed to noncontrolling investor in subsidiary     (355,232 )     -       -  
Repayment to related parties     -       (473,914 )     -  
Borrowings of short term loans     3,891,596       3,780,490       -  
Repayment of short term loans     (3,625,448 )     -       (1,510,962 )
Net cash provided by (used in) financing activities     (89,084 )     3,660,157       (1,510,962 )
Effect of exchange rate changes on cash, cash equivalents and restricted cash     (1,513,411 )     884,519       (811,033 )
Net change in cash, cash equivalents and restricted cash     5,791,547       2,181,097       2,323,419  
Cash, cash equivalents and restricted cash, beginning of the year     18,628,365       16,447,268       14,123,849  
Cash, cash equivalents and restricted cash, end of the year   $ 24,419,912     $ 18,628,365     $ 16,447,268  
Supplemental cash flow information                        
Interest paid   $ 404,958     $ 1,609     $ 50,383  
Income taxes paid   $ 3,929,237     $ 1,767,983     $ 1,558,290  
Non-cash investing and financing activities                        
Transfer from prepayments to property and equipment   $ 392,637     $ 866,940     $ 932,192  
Liabilities assumed in connection with purchase of PPE   $ 88,112     $ 252,317     $ 672,715  
Property and equipment paid by related party   $ -     $ 15,539     $ -  
Short term debt reclassified to due to related party   $ -     $ -     $ 203,048  
Advance to related party settled through service provided   $ -     $ 52,215     $ -  
Settlement of notes receivable from a third party   $ -     $ 328,783     $ -  
Operating expenses paid by related party   $ -     $ -     $ 107,634  
                         
Reconciliation of cash, cash equivalents and restricted cash to the consolidated balance sheets                        
Cash and cash equivalents   $ 24,419,912     $ 18,628,365     $ 15,947,268  
Restricted cash     -       -       500,000  
Total cash, cash equivalents and restricted cash   $ 24,419,912     $ 18,628,365     $ 16,447,268  

  

 

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