Hello, everyone. And welcome to the First Half of Fiscal Year 2019 Earnings Conference Call for CLPS Incorporation. Today's conference is being recorded. At this time, I would like to turn the call over to Ms. Rose Zu from ICR for opening remarks and introductions. Please go ahead..
Thank you, Operator. Hello, everyone. And thank you for joining us on today's call. CLPS Incorporation announced its first half of fiscal year 2019 financial results earlier this morning. An earnings release is now available on the company's IR website at ir.clpsglobal.com. Today, we will hear from CLPS' CEO Mr.
Raymond Lin, who will start off the call with a review of recent company developments and operating results, followed by the company's CFO, Ms. Tian van Acken, who will address financial results in more detail. Following management's prepared remarks, we will conduct a Q&A session.
Please remember that discussions today may include forward-looking statements that involve a number of risks, uncertainties and other factors that could cause actual results to differ materially from those forward-looking statements. In that respect, I would like to read the following disclaimer applicable to such statements.
Certain of the statements made in this press release are forward-looking statements within the meaning and [indiscernible] of Section 27A of the Securities Act of 1933 as amended and Section 21E of the Securities Exchange Act of 1994 as amended.
Forward-looking statements included statements with respect to the company's beliefs, plans, objectives, goals, expectations, anticipation, assumptions, estimate, intentions and future performance and will involve known and unknown risks and 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 followed in their entirety by this cautionary notice including without limitations those risks and uncertainties related to the company's financial and operational performance in the first half of 2019 is 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 mostly recently filed SEC reports and filings.
Such reports are available on the website of the company or from the Securities and Exchange Commission including due SEC's 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 day hereof or after the respective days on which any such statements otherwise are made. It is now my pleasure to introduce CLPS Incorporation's CEO, Mr. Raymond Lin. Please go ahead..
Thank you. Hello everyone and welcome to CLPS first half of the fiscal year 2019 earnings call. During the first six months of the 2019 fiscal year which ended December 31, 2018. We continue to grow our revenue from expecting clients and growing or clients base.
Our client retention rate was 100% during the period which is the testament to the quality of the services that we provide for our clients. This is reinforced by our fact that our biggest clients have been with us for over 10 years. During the last six months we also began new clinical booking.
In China, we will become the leading international online travel and peripheral services provider and Fortune Global 500 Chinese Automotive Design and Manufacturing Company. We also complete the acquisition of InfoGain, our Singapore based subsidiary that we acquired in August.
InfoGain is already facilitating our strengthen into the broader South Asian region. For example in December we signed a memorandum of understanding with InfoGain and [indiscernible] to develop IT talent. The partnership also gives us a [indiscernible] 100 alliance, allowing us to reach Top 10 [indiscernible] in the broader South Asia region.
Internally we spent our talent creation program and talent development program by opening additional training centers over this to meet employee demand. We also launched CLPS academic which will become center of excellence. It's designed to fulfil the quality and professional IT training needs of our staff, business partners and potential clients.
We also signed a contract with leading university of finance and economics in Shanghai for our blockchain project. Under the contracts we will provide blockchain training and incentive blockchain management system. As we announced a few weeks ago the project path, the universities had.
We are on track for delivering the project for the universities requirement. We will continue to focus on developing industry leading technologies such as the blockchain to fulfil our kind, revised need. In fact our efforts are not only been recognized by our clients but also by our industry.
In November we received the 2018 FinTech Brand leadership award from the China Finance Summit. This award is a testament to the strengthen of our brand and mostly importantly our technological capabilities, our CLPS Research institute remains dedicated in supporting the advocators of the new and emerging technology.
This is included in big data solution, blockchain, distributor financial application, and automation which we have been piloting internally. We are the ones in technology covering consumer demand for digital customer enquiries. Margins pressure are creating global demand for our services between the financial services and banking industry.
We have approved our ability to fulfil this demand by providing IT solution applications of cutting edge technology and technology talent with a deep technical knowledge. For the remainder of the future year or beyond we intend to remain focused on capturing business opportunities by growing horizontally and vertically.
We intend to expand physically and further expand our reach to other higher potential regions. We expect to continue delivering thousands of training hours to our employees and pan us through our co-brand and partnerships.
We also intend to drive our products and services offering by supplementing our existing solutions with commercial application of emerging technologies.
As we continue to maintain long term to support our continued goal we remain optimistic about our future as we grow horizontally and vertically, expand our global footprint and market shares and create value for our shareholders. This concludes my prepared remarks. I will now turn the call to Ms.
Tian van Acken, our CFO to reveal our first half of fiscal year 2019 financial results. Ms. Tian, please go ahead..
Thank you, Raymond and hello everyone. I will review our first half of fiscal 2019 results, just know that unless stated otherwise our numbers are presented in U.S. dollar terms. Revenue was 30.8 million, an increase of 8.6 million or 38.7% from 22.2 million in the first half of fiscal 2018.
The growth of revenue in the first half of fiscal 2019 was mainly due to the increase in revenue from IT consulting services. Revenue from IT consulting services increased by 8.2 million or 38% to 29.8 million, and accounted for $0.0968 of total revenue compared with 21.6 million or 57.4% of total revenue in the first half of fiscal 2018.
The increase was primarily due to the increasing demand of IT consulting services from banks and other financial institutions. For the six months ended December 31, 2018 and 2017 68.3% and 46.8% of our IT consulting service revenue was from international banks respectively.
In the first half of fiscal 2019 we strengthened our expertise in the financial industry and leveraged our existing industry knowledge to grow our customer base of local Chinese financial institutions.
Revenue from customer IT solution services increased by 0.4 million or 80% to 0.9 million in the first half of fiscal 2019 from 0.5 million in the same period of the previous year. The increase was also primarily due to growth from existing and new clients.
Revenue from other services was 0.1 million in the first half of fiscal 2019 from 0.5 million in the same period of the previous year.
Cost of revenues was 19.6 million in the first half of fiscal 2019, an increase of 6.3 million or 47.4% from 13.3 million in the same period of the previous year which is generally in-line with our growth of our revenues. As a percentage revenue our cost of revenue was 63.6% and 60.1% for the six months ended December 31, 2018 and 2017 respectively.
Gross profit increased by 2.3 million or 25.8% to 11.2 million from 8.9 million in the first half of fiscal 2018. Gross margin decreased to 36.4% from 39.9 million, the decrease was mainly due to the lower gross margin of the new project.
Selling and marketing expenses in the first half of 2019 decreased by 0.1 million or 9.1% to 1 million, the decrease was primarily attributable to the decrease of salary expenses caused by employees resignation. Research and development expenses in the first half of fiscal 2019 decreased by 0.6 million or 16.7% to 3 million.
The decrease was attributable to the decrease of salary expenses. Salary expenses of the same R&D employees was supported improvement of the management system of the company were recorded as general and administrative expenses.
G&A expenses in the first half of 2019 were 9.2 million, an increase of 6.1 million or 196.8%, the increase was primarily due to an addition of 4 million non-cash share based compensation expenses related to the grants under the 2017 equity extension plan.
After deduction of non-cash share based compensation expenses non-GAAP general and administrative expenses increased by 2.1 million or 67.7% to 5.2 million in the first half of fiscal 2019 from 3.1 million in the same period of the previous year.
The increase in non-GAAP [indiscernible] expenses was primarily due to the routine expenses incurred after going public and due to year-over-year increase salary and compensation expenses.
Operating loss in the first half of fiscal 2019 was 2 million, a decrease of 3.1 million from an income of 1.1 million in the same period of previous year, operating margin was negative 6.5% for the six months ended December 31, 2018 compared to 4.9 prior year period.
After the deduction of non-cash share based compensation expenses non-GAAP operating income increased by 0.9 million or 81.8% to 2 million in the first half of fiscal 2019 from 1.1 million in same period of the prior year. Non-GAAP operating margin increased to 6.5% in the first half of fiscal 2019 from 4.9% in the prior year period.
Net income decreased by 3 million to a loss of 1.7 million in the first half of fiscal 2019 from an income of 1.3 million in the prior year period.
The decrease in that income was due to the increase in non-cash share based compensation expenses after the deduction of non-cash share based compensation expenses, non-GAAP net income increased by 1 million or 76.9% to 2.3 million in the first half of fiscal 2019 from 1.3 million in the same period of the previous year.
Net loss attributable to CLPS Incorporation shareholders in the first half of 2019 was 1.4 million or negative $0.10 per basic and diluted share compared with net income attributable to CLPS Incorporation shareholder of 1.3 million or $0.12 per basic and diluted share in the first half of fiscal 2018.
After excluding the impact of non-cash share based compensation expenses non-GAAP net income attributable to CLPS Incorporation shareholder in the first half of fiscal 2019 was 2.6 million or $0.19 per basic share and $0.18 per diluted share.
For the six months ended December 31, 2018 and 2017 our weighted average number of ordinary shares was used in computing basic earnings per ordinary share was 13,799,224 at 11,290,00 respectively.
For the six months ended December 31, 2018 our weighted average number of ordinary shares used in computing diluted ordinary share was 13,799,224 and our average number of share outstanding used in computing GAAP and non-GAAP diluted earnings was 30,957,798.
Our earnings release detailing this presentation includes non-GAAP financial measure preference above and provides explanations and reconciliations to the comparable GAAP measure. Let's turn to our balance sheet, as of December 31, 2018 our cash and cash equivalents was 5.8 million compared with 9.7 million as of June 30, 2018.
Guidance and business outlook for 2019, for fiscal 2019 we expect [indiscernible] material acquisitions on non-recurring transactions, a total sales growth in the range of approximately 30% to 35% and a non-GAAP net income growth in the range of approximately 30% to 35% and compared with the 2018 financial results.
Before going to guidance include estimated 2019 financial results of the InfoGain acquisition and equity in which we acquired an 80% equity stake in August 2018. In addition this guidance necessary assumes no significant adverse price change during the fiscal 2019.
This forecast reflect our current and preliminary use which are subject to change and are subject to risks and uncertainties including but not limited to potential accounting adjustments attributable to income to InfoGain acquisition as well as various risks and uncertainties facing our business and operation as identified in our public filings.
This concludes our prepared remarks for today. Operator we are now ready to take some questions..
[Operator Instructions]. We will take our first question from Brian Kinstlinger from Alliance Global Partners. Please go ahead..
Just the one question I've is on M&A, what are your plans to command into the United States and what does the pipeline look like? Thanks..
Our M&A activities are not only we are expanding into the U.S. but currently we are also looking for opportunities in Hong Kong, Singapore, and Australia. For U.S. certainly we do have cards [ph] in the U.S. so we are actively looking for pipelines in North America including U.S. and Canada as well..
[Operator Instructions]. And with no further questions at this time I would like to turn the call back over to management for any closing remarks..
Okay, this is Raymond. This concludes our first half of the fiscal year 2019 earnings call. Thank you for your participation. We look forward to updating you on the progress of our business in the weeks and months ahead. Thank you and have a good day for those who are based in U.S.
and have a good night for those who are based in Hong Kong and Mainland China. Thank you..
This concludes today's conference. Thank you for your participation and you may now disconnect..