Please standby. Hello, everyone. Welcome to the Second Half and Full Year Fiscal 2021 Earnings Conference Call for the CLPS Incorporation. Please note that today’s conference is being recorded. At this time, I would like to turn the call over to Mr. Rhon Galicha from CLPS Investor Relations 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 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 discussions 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 our discussion are forward-looking statements within the meaning and protections of Section 27A of the Securities Act of 1933 as amended and Section 20E 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 with 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 discussion, 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 days on which any such statements otherwise are made.

All information provided today is of the date of this call, and CLPS does not undertake any obligation to update any forward-looking statements, except as required under the 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 earlier today. Now allow me to introduce the management team present on the call today. Mr.

Raymond Lin, Chief Executive Officer and Director of CLPS, will start off the call with a review of recent company developments and operating results; followed by Ms. Rui Yang, 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 management’s prepared remarks, we’ll open up the call for a Q&A session. Mr. Henry Li, 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..

Okay Rhon. Thank you, Rhon. 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 fiscal year 2021 performance, both in financial and business strategy, including our strategic pipeline with we are competent will further drive CLPS sustainable growth.

The financial performance going on, fiscal year 2021 both us [ph] and other profitable years as it reflect in our financial results both our top line and bottom line. Our revenue increased by 41% to US$126.1 million and our net income increased by 127% to $7 million year-over-year. Further detail my CFO, Rita, will share with you later.

Now, let me say about our strategies that contributed to our financial costs this fiscal year. First of all, I'd like to say my thank you to our more than 3,000 staff, the backbone of the company's continued success. We greatly appreciate your dedication and I'm more than happy that our CLPS family is consistently golfing every year.

We also hire more with very talent acquisition manpower so meet the demand for IT professionals and ensure efficient IT services delivery to our existing and new clients. On positive prospective, we achieved number of progress with the fulfillment of our company initiative in fiscal 2021.

We continued to execute our dual-engine development strategy through the improvement of our technology and product capabilities while maintaining the organic growth of our business.

In February this year we raised $16 million through registered direct offering, which we partly utilized in various investments, M&A, joint venture, financial and operation rich in the domestic and overseas markets this on top of our existing working capital. CLPS have been committed to contributing in the digital trend of global finance.

Let me reveal initiative we have done. The one is we acquired a stake in 53.33% of MSCT Investment Holdings Limited. That is a subsidiary of Minshang Creative Technology Holdings Limited. This is a Hong Kong listing company. They have a lot of banking system products. Our first project is to upgrade the loan system.

For me overseas banks need a governments MSA regulation. Maybe in future, we will integrate with our credit card system. Also, we were upgrading more and more bank products in the future.

But truly we at CLPS finance holding limited with joint venture company with Columbus Century Development Company Private Limited, that is blockchain technology solutions provider. This aims to develop and upgrade blockchain-based digital asset solutions for financial institutions such as custody, exchange, payment and NFT distribution platforms.

Business solution every category [ph] in finance, both wealth management and various investments transaction among others. In order to further expand our Southeast Asia business, the first we put advantage of our high strategy delivery team in Southeast Asia and our at work research and development team in China.

So that we can comprehensively reveal the IT service demand on our clients in Southeast Asia. And the secondly, we set out CLPS technology facility of our operation, which allow us to reach a wider business coverage in this region. CLPS facility and others will be operational and generate revenues.

So I'd like to say MSCT 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 well position in this location. But 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 and support all kinds of the issuers from small to large and global financial institutions, banks, and credit companies.

The system has full multi-core, multi-product, multi-institution and multi-language capabilities and managed portfolios across different country and for different issuers. This scenario phase engine allows the mobilization of financial institutions account structure, [indiscernible] structure, limited structure and authorization based management.

The system architecture is powered by distributed microservices and unitized concepts, which provides cost effective infrastructure reach high to the ability. [Indiscernible] architecture enable the improvement on account [ph] so far or on primary physical server.

This API is online portal backed by more than 1,200 pots and APIs allow any third party system who trigger services all data for flexible integration. And now on its pilot phase, the commercial version is expected to be launched early next year -- early year.

With a high rental rates in Hong Kong and Singapore, we have purchased office properties in business locations, which is in turn can become a promising 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 it comes down to by data connection, data analytics, and decision-making. It will help our clients to improve the sales and marketing efficiencies and to be beneficial for a systemization data and pots.

We plan to launch our big data products by next year, which then our brand insurance company and automobile sector.

We will continually conduct research in RPA with more input and resources in tech for financial industry, such as [indiscernible] reconnaissance, because it’s too high, it’s very important for utilization effect and we were going on the [indiscernible]. And we hope our client base. During this recent 2021 we gained IT services contracts in the U.S.

with majority in the e-commerce industry. We provide IT services, including big data management, data analysts 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.

Within service IT service consulting and solution services with the leading automotive companies we work intelligent manufacturing, navigation system, machine learning, vehicle central console system and new Interlink vehicle project. Furthermore, we also underlined [indiscernible] in order to increase our business efficiency.

In the past year we feel the increase in the competition. So we reorganized the company's organizational structure and [indiscernible] sales function and improve the efficiency of the company's operation.

At the same time, we hire senior management with extension on the top tier financial executives [ph] to guide and streamline our current and business trajectory.

Us to be moving forward, we remind dedicated and focused for leverage our top business [indiscernible] as well as our investment and R&D efforts in advanced technology, such as big data, cloud and blockchain to enable our client with digital transformation generally.

We are also in process of innovation and streamlining our next generation bank loan system. We will study reforming the bank, our old system. However, [indiscernible] configurable what role is high degree of automation and central control function. As a result, we will make the bank more centralized, easier interest and easier the risk control.

We will industry trend to drive our -- what is present by [indiscernible] business potential in other parts of the Southeast Asia and the U.S. to further push our overseas revenue in upward trend. Lastly, on behalf CLPS family, I [indiscernible] continue trust and support of our honor and shareholder. Thank you.

Now I would like to turn the call over to our CFO, Rita Yang, to discuss the second half year and full year of fiscal 2021 financial results. Okay, Rita go ahead, please..

Okay. Thank you, Raymond. I will now provide an update on our financial performance for the second half followed by our full year results for fiscal 2021. Please note that all numbers provided are in U.S. dollar terms and that all 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%, so $67.7 million from $46.8 million. The 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 by 139.5% to $0.5 million from $0.2 million. The increase was primarily due to the increased demand for other services, including headhunting service. Gross profit increased 37.8% to $21.7 million from $15.7.

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' demand.

As a percentage of total revenues, selling and marketing expenses decreased to 2.9% from to 3.5%. The decrease was primarily due to the increased in operational efficiency as a result of economies of scale. Research and development expenses increased 32.5% to $7.2 million from $5.4 million.

The increase primarily resulted from the establishment of new research projects and the company's continued R&D efforts in big data, cloud computing, blockchain, robotic process automation, the RPA, and artificial intelligence. As a percentage of total revenues, research and development expenses decreased to 10.6% from 11.6%.

The decrease was primarily due to the increase in operational efficiency as a result of economies of scale. General and administrative expenses 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 expenses and general and administrative personnel related expenses.

After excluding the non-cash share-based compensation expenses, non-GAAP general and administrative expenses increased 15.3% to $6.6 million from $5.7 million. As a percentage of total revenues, general and administrative expenses decreased to 15% from 18%.

The decrease was primarily due to the increase in operational efficiency as result of economies of scale and refined 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 expenses in the prior 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 expenses, non-GAAP net income increased 53.7% to $5.7 million from $3.7 million.

After excluding the impact of non-controlling interests, net income attributable to CLPS Incorporation's shareholders in the second half of fiscal 2021 was $2.0 million or $0.11 basic and $0.1 diluted earnings per share.

After excluding the impact of non-cash share-based compensation expenses, non-GAAP net income attributable to CLPS Incorporation's shareholders in the second half of fiscal 2021 was $5.6 million or $0.3 basic and $0.29 diluted earnings per share, which is compared to a non-GAAP net income attributable to CLPS Incorporation's shareholders of $3.5 million or $0.23 basic and diluted earnings per share.

Now I will provide an overview of full year fiscal 2021 results. For the year ended June 30, 2021, revenues increased 41% to $126.1 million from $89.4 million. The 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 for other services, including headhunting service.

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 expenses as new staff were hired to improve the company's capability of service delivery to meet clients' demand.

As a percentage of total revenues, selling and marketing expenses decreased to 3% from 3.4%. The decrease reflects an increase in operational efficiency as a result of economies of scale. Research and development expenses increased 27.8% to $13.3 million from $10.4 million.

The increase primarily resulted 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 expenses decreased to 10.6% from 11.7%.

The decrease reflects an increase in operational efficiency as a result of economies of scale. General and administrative expenses 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 expenses.

After excluding the non-cash share-based compensation expenses, non-GAAP general and administrative expenses decreased 6.2% to $11.8 million from $12.6 million. As a percentage of total revenues, general and administrative expenses decreased to 13.3% from 18.3%.

The decrease reflects an increase in operational efficiency as result of economies 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 expenses 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 year period.

After excluding non-cash share-based compensation expenses, non-GAAP net income increased by $5 million or 71.5% to $12.1 million from $7.1 million.

After excluding non-controlling interests, net income attributable to CLPS Incorporation's shareholders for the year ended June 30, 2021, was $6.8 million or $0.39 basic and diluted earnings per share compared to net income attributable to CLPS Incorporation's shareholders of $2.9 million or $0.20 basic and diluted earnings per share.

After excluding the impact of non-cash share-based compensation expenses, non-GAAP net income attributable to CLPS Incorporation's shareholders for the year ended June 30, 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 attributable to CLPS Incorporation's shareholders of $6.9 million or $0.47 basic and diluted earnings per share in the prior year period. As of June 30, 2021, we had cash and cash equivalents of $24.7 million compared to $12.7 million as of June 30, 2020.

As of June 30, 2020, we had total numbers of employees of 3,352, up 22% year-over-year. Revenue per employee up by 15.5% to $37,600 [ph] per person, net income per employee 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..

Thank you. [Operator Instructions] We'll take our first question from Jaden Wing [ph]..

Okay. Congratulations for the remarkable financial results. I have three questions.

The first question is what is the reason tech company monopoly Creckta [ph] 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 CLPS seen significant -- the most pick up since the last tech company Creckta?.

Hello. This is Henry Li, the company's COO. First of all, thanks for your question. Now let me answer these questions. Our strong financial numbers for the second half and the full year of fiscal 2021 shows the consistent growth of all clients demand for IT services, specifically in mainland China.

Though, we have always pointed out that's all global extension strategy has been very effective of which revenue generated from outside China increased by 28.1% year-over-year. It is undeniable that's our revenue from mainland China significantly contributes, so our aggregate revenue.

And so, we believe that it's not a measure of taking advantage on the large tech Creckta. It is the competitive advantage. That's we always hold on.

In addition, the effective of our dual-engine growth strategy to diversify our IT product improve our delivery capabilities in domestic and international markets and enhance client royalty vendors to increase our income. Thus, bringing more benefits to our investors and to improve our overall valuation.

As you have mentioned, given our position as professional IT service provider, we explore this business opportunity as well. Thank you. And I hope I answered your questions..

Okay. Okay. My last question is, the company got global contract in February 2021.

Even though the company name was not released, can you provide an update on the cloud global contract? After working with this cloud for years, I'm wondering if they would consider using CLPS for their IT services, particularly their China cross-border transaction services and your crypto transaction platform.

So companies set up link crypto with Columbia earlier this year, would you please provide an update? Do CLPS continue exploiting the opportunities are digital currency management for the financial institutions outside of China?.

Hi. Thank you for the questions. This is Wilson. I would like to reiterate that due to the confidentiality agreement, we cannot disclose the name of the client. However -- so we will live it that way to ensure our long-term and stable relationship with this client. We hope for your understanding our standpoint.

However, we are very pleased that our global expansion specifically 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 possibilities of providing IT solutions services for this client..

Yeah. Hello. This is Rita. And let me also add that this client contributes to the RiDiK 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 depend our collaboration with clients. Yes. Thank you for your question..

And we'll take our next question from Jacob Kurtz with Greenridge Global..

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?.

Hello. This is Rita.

Sorry, can you repeat your question?.

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?.

Rita, do you want me to answer the question. So, yeah ….

Yeah. Hello..

Yeah. Let me take the questions. Some of the top stock price, so volatile. And generally that is because of the market behavior and material has been disclosed. So in some of our strategy, as mentioned by Mr. Raymond, we will continue to implement our dual-engine strategies. We will deliver our results and that'll to our shareholders.

I hope I answer your questions..

Yes. That is all. Thank you..

[Operator Instructions] 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..

Raymond, please go to your closing remarks.

Raymond, would you like to do your closing remarks?.

Yeah. 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..

And that does conclude today's conference. We thank you for your participation. You may now disconnect..