CLPS Incorporation Reports Financial Results for the Third Quarter of 2018

Shanghai, China, June 27, 2018 (GLOBE NEWSWIRE) -- CLPS Incorporation (the “Company”, “CLPS”, or Nasdaq: CLPS), a leading information technology (“IT”) consulting and solutions service provider focusing on the banking, insurance and financial sectors in China and globally, today announced its financial results for the third fiscal quarter ended March 31, 2018.

Mr. Raymond Lin, Chief Executive Officer of CLPS Incorporation, commented, “We are proud to report our financial results for the third quarter of 2018. Our revenue reached $12.88 million and our net income was $0.6 million for the third quarter, a year-over-year increase of 63.8% and 142.8%, respectively.”

Mr. Lin continued, “As we reflect on the financial results of the fiscal quarter before our successful initial public offering in May 2018, we are pleased with the notable revenue increase in both our IT consulting and customized solution services. We believe that we are positioned for success in the coming fiscal quarters given our solid strategic foundation, stable margins and growth in revenue and net income, and the additional boost that the net proceeds from our initial public offering offer us, as we consider new opportunities and expand existing business lines.”

Third Quarter of 2018 Financial Highlights

For the Three Months Ended March 31(USD millions, except per share data)2018 2017 ChangeRevenue 12.88 7.87 63.8%IT consulting services 12.21 7.23 68.8%Customized IT solution services 0.65 0.59 9.9%Other 0.03 0.05 -37.2%Gross Profit 3.96 2.91 36.4%Gross Margin 30.8% 36.9% -6.1 ptsOperating Profits 0.16 0.28 -41.7%Operating Margin 1.3% 3.5% -2.2 ptsNet Income Attributable to CLPS Incorporation0.38 0.24 56.7%EPS 0.03 0.02 50.0%

Revenues increased by 63.8% to $12.88 million for the three months ended March 31, 2018, from $7.87 million for the same period of last year, mainly due to an increase in revenues from both IT consulting services and customized IT solution services.

Gross profit increased by 36.4% to $3.96 million for the three months ended March 31, 2018, from $2.91 million for the same period of last year. Gross margin decreased to 30.8% from 36.9% for the same period of last year.

Net income attributable to CLPS Incorporation increased by 56.7% to $0.38 million for the three months ended March 31, 2018.

Basic and diluted earnings per share were $0.03 for the three months ended March 31, 2018, compared with $0.02 for the same period of last year.

Third Quarter of 2018 Financial Results

Revenues

For the three months ended March 31, 2018, revenue increased by $5.01 million, or 63.8%, to $12.88 million from $7.87 million for the same period of last year. The increase in revenue was mainly due to an increase in revenues from both of IT consulting services and customized IT solution services.

Revenue from IT consulting services increased by $4.98 million, or 68.8%, to $12.21 million and accounted for 94.8% of total revenue for the three months ended March 31, 2018 from $7.23 million, or 91.9% of total revenues, for the same period of last year. The increase was primarily due to the increasing demand for IT consulting service from banks and other financial institutions. For the three months ended March 31, 2018 and 2017, 47.2% and 49.5% of IT consulting service revenue were from international banks, respectively.

Revenue from customized IT solution services increased by $0.06 million, or 9.9%, to $0.65 for the three months ended March 31, 2018 from $0.59 million for the same period of last year. Revenue from other services decreased by $0.02 million, or 37.2%, to $0.03 for the three months ended March 31, 2018 from $0.05 million for the same period of last year. Historically, IT consulting services have contributed the substantial majority of our net revenues.

Gross Profit and Gross Margin

Gross profit increased by $1.05 million, or 36.4%, to $3.96 million for the three months ended March 31, 2018 from $2.91 million for the same period of last year. Gross margin decreased to 30.8% for the three months ended March 31, 2018, from 36.9% for the same period of last year. The decrease in gross margin was primarily due to the lower gross margin of the new projects.

Operating Expenses

Selling and marketing expenses increased by $0.04 million, or 10.6% to $0.47 million for the three months ended March 31, 2018 from $0.43 million for the same period of last year. The increase was primarily due to the expansion of the pre-sales and marketing teams in Shanghai and Dalian in China to support operations.

Research and development expenses increased by $1.02 million, or 83.6%, to $2.25 million for the three months ended March 31, 2018 from $1.23 million for the same period of last year. The increase was attributable to the launch of several research projects related to cloud computing and mobile internet applications in fiscal 2018.

General and administrative expenses increased by $0.10 million, or 10.6%, to $1.08 million for the three months ended March 31, 2018 from $0.98 million for the same period of last year. The increase was primarily due to growth of staff in support sectors.

Operating Income

Operating income decreased by $0.12 million, or 41.7%, to $0.16 million for the three months ended March 31, 2018 from $0.28 million for the same period of last year. Operating margin was 1.3% for the three months ended March 31, 2018, compared to 3.5% for the same period of last year.

Other Income and Expenses

Subsidies and other income increased to $0.29 million for the three months ended March 31, 2018 from $7,952 for the same period of last year. The increase was mainly due to the fact that local governments were in the process of amending the existing subsidy policy and deferred the approvals for government subsidies that were applicable to the Company.

Provision (Benefit) for Income Taxes

Income tax benefit was $0.17 million for the three months ended March 31, 2018, compared to income tax expense of $0.04 million for the same period of last year, mainly due to the Company recognized deferred tax assets as a result of the net operating losses carry forward for some of the Company’s subsidiaries.

Net Income and EPS

Net income increased by $0.35 million, or 142.8%, to $0.60 million for the three months ended March 31, 2018 from $0.25 million for the same period of last year, mainly due to the subsidies and other income as well as tax benefit derived from the net operating loss carried forwards. After the deduction of non-controlling interests, net income attributable to shareholders for the three months ended March 31, 2018 was $0.38 million, or $0.03 per basic and diluted share. This compared to net income attributable to shareholders of $0.24 million, or $0.02 per basic and diluted share for the three months ended March 31, 2017.

Nine Months Ended March 31, 2018 Financial Results

For the Nine Months Ended March 31(USD millions, except per share data)2018 2017 ChangeRevenue 35.08 22.19 58.1%IT consulting services 33.84 20.51 65.0%Customized IT solution services 1.17 1.35 -13.2%Other 0.07 0.33 -77.7%Gross Profit 12.82 8.75 46.6%Gross Margin 36.5% 39.4% -2.9 ptsOperating Profits 1.26 0.80 58.3%Operating Margin 3.6% 3.6% 0.0 ptsNet Income Attributable to CLPS Incorporation1.71 1.26 34.9%EPS 0.15 0.11 36.4%

Revenues

For the nine months ended March 31, 2018, revenue increased by $12.89 million, or 58.1%, to $35.08 million from $22.19 million for the same period of last year. The increase in revenue was mainly due to an increase in revenue from IT consulting services.

Revenue from IT consulting services increased by $13.33 million, or 65.0%, to $33.84 million and accounted for 96.5% of total revenue for the nine months ended March 31, 2018 from $20.51 million, or 92.4% of total revenue, for the same period of last year. The increase was primarily due to the increasing demands for IT consulting service from banks and other financial institutions. For the nine months ended March 31, 2018 and 2017, 46.4% and 54.0% of IT consulting service revenue were from international banks, respectively.

Revenue from customized IT solution service decreased by $0.18 million, or 13.2%, to $1.17 for the nine months ended March 31, 2018 from $1.35 million for the same period of last year. Revenue from other service decreased by $0.26 million, or 77.7%, to $0.07 for the nine months ended March 31, 2018 from $0.33 million for the same period of last year. For the nine months ended March 31, 2018, we strengthened our expertise in the financial industry to leverage our existing industry knowledge and grew our customer base of local Chinese financial institutions.

Gross Profit and Gross Margin

Gross profit increased by $4.07 million, or 46.6%, to $12.82 million for the nine months ended March 31, 2018 from $8.75 million for the same period of last year. Gross margin decreased to 36.5% for the nine months ended March 31, 2018, compared to 39.4% for the same period of last year. The decrease in gross margin was primarily due to the lower gross margin of the new projects.

Operating Expenses

Selling and marketing expenses increased by $0.89 million, or 126.3% to $1.60 million for the nine months ended March 31, 2018 from $0.71 million for the same period of last year. The increase was primarily due to the expansion of the pre-sales and marketing teams in Shanghai and Dalian in China to support operations.

Research and development expenses increased by $2.58 million, or 79.8%, to $5.81 million for the nine months ended March 31, 2018 from $3.23 million for the same period of last year. The increase was attributable to the research projects on office automation system and big data platform for decision-making, and projects related to cloud computing and mobile internet applications.

General and administrative expenses increased by $0.13 million, or 3.4%, to $4.14 million for the nine months ended March 31, 2018 from $4.01 million for the same period of last year. The increase was primarily due to growth of staff in support sectors..

Operating Income

Operating income increased by $0.46 million, or 58.3%, to $1.26 million for the nine months ended March 31, 2018 from $0.80 million for the same period of last year. Operating margin was 3.6% for the nine months ended March 31, 2018, compared to 3.6% for the same period of last year.

Other Income and Expenses

Subsidies and other income increased to $0.66 million for the nine months ended March 31, 2018, from $0.46 million for the same period of last year.

Provision (Benefit) for Income Taxes

Income tax benefit increased by $0.03 million to $0.04 million for the nine months ended March 31, 2018 from $0.01 million for the same period of last year, mainly due to the Company recognized deferred tax assets as a result of the net operating losses carry forward for some of the Company’s subsidiaries.

Net Income and EPS

Net income increased by $0.65 million, or 51.2%, to $1.92 million for the nine months ended March 31, 2018 from $1.27 million for the same period of last year, mainly due to the expansion of business and increased revenues. After the deduction of non-controlling interests, net income attributable to shareholders for the nine months ended March 31, 2018 was $1.71 million, or $0.15 per basic and diluted share. This compared to net income attributable to shareholders of $1.26 million, or $0.11 per basic and diluted share for the nine months ended March 31, 2017.

Financial Condition

As of March 31, 2018, the Company had cash and cash equivalents of $2.90 million, compared with $4.81 million as of June 30, 2017.

About CLPS Incorporation

Headquartered in Shanghai, China, CLPS Incorporation (the "Company") (Nasdaq: CLPS) is a global leading information technology (“IT”), consulting and solutions service provider focusing on the banking, insurance and financial sectors. The Company serves as an IT solutions provider to a growing network of clients in the global financial industry, including large financial institutions in the US, Europe, Australia and Hong Kong and their PRC-based IT centers. The Company maintains eleven delivery and/or research & development centers to serve different customers in various geographic locations. Mainland China centers are located in Shanghai, Beijing, Dalian, Tianjin, Chengdu, Guangzhou and Shenzhen. The remaining four global centers are located in Hong Kong, Taiwan, Singapore and Australia. For further information regarding the Company, please visit: http://ir.clpsglobal.com/.

Forward-Looking Statements

This announcement contains forward-looking statements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical fact in this announcement are forward-looking statements, including, among others. These forward-looking statements involve known and unknown risks and uncertainties and are based on current expectations and projections about future events and financial trends that the Company believes may affect its financial condition, results of operations, business strategy and financial needs, including, without limitation, the Company’s ability to achieve projected revenue growth, market and client expansion as intended, among other factors. Investors can identify these forward-looking statements by words or phrases such as “may,” “will,” “expect,” “anticipate,” “aim,” “estimate,” “intend,” “plan,” “believe,” “potential,” “continue,” “is/are likely to” or other similar expressions. The Company undertakes no obligation to update forward-looking statements to reflect subsequent occurring events or circumstances, or changes in its expectations, except as may be required by law. Although the Company believes that the expectations expressed in these forward-looking statements are reasonable, it cannot assure you that such expectations will turn out to be correct, and the Company cautions investors that actual results may differ materially from the anticipated results.

CLPS INCORPORATION
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

As of March 31,
2018 As of June 30,
2017 ASSETS Current assets Cash and cash equivalents $2,900,656 $4,814,568 Accounts receivable, net 14,832,141 6,644,774 Prepayments, deposits and other assets, net 1,219,124 578,391 Prepaid income tax 151,276 169,557 Amount due from related parties 87,098 118,006 Total Current Assets 19,190,295 12,325,296 Property and equipment, net 371,524 273,347 Intangible assets, net 288,291 305,464 Goodwill 210,838 195,080 Prepayments, deposits and other assets, net 125,928 123,783 Equity investment 95,654 - Deferred tax assets 382,745 298,953 Total Assets $20,665,275 $13,521,923 LIABILITIES AND SHAREHOLDERS’ EQUITY Current liabilities Accounts payable and other current liabilities $696,481 $239,165 Short-term bank loans 2,694,258 - Taxes payable 830,869 640,864 Deferred revenue 131,950 110,631 Customer deposits 759,341 97,740 Salaries and benefits payable 6,863,249 5,392,434 Amounts due to related parties 986,421 1,729,791 Total Current Liabilities 12,962,569 8,210,625 Commitments and Contingencies Shareholders’ Equity Common share, $0.0001 par value; 100,000,000 shares authorized; 11,290,000 shares issued and outstanding as of March 31, 2018 and June 30, 2017 * 1,129 1,129 Additional paid-in capital 7,120,943 7,120,943 Statuary reserves 908,847 680,671 Accumulated deficit (1,042,994) (2,521,285)Accumulated other comprehensive loss (22,820) (447,270) Total CLPS Incorporation’s Shareholders’ Equity 6,965,105 4,834,188 Non-controlling Interests 737,601 477,110 Total Shareholders’ Equity 7,702,706 5,311,298 Total Liabilities and Shareholders’ Equity $20,665,275 $13,521,923

* The shares and per share data are presented on a retroactive basis to reflect the nominal share issuance.

CLPS INCORPORATION
UNAUDITED CONDENSED CONSOLIDATED statements of INCOME AND COMPREHENSIVE INCOME

For the three months ended
March 31,For the nine months ended
March 31, 201820172018 2017 Revenues $12,883,298 $7,867,460 $35,083,293 $22,191,398 Less: Cost of revenues (8,919,509) (4,961,120) (22,261,487) (13,445,017)Gross profit 3,963,789 2,906,340 12,821,806 8,746,381 Operating expenses: Selling and marketing 471,064 426,093 1,603,995 708,711 Research and development 2,251,332 1,226,360 5,814,320 3,233,126 General and administrative 1,079,234 975,907 4,143,466 4,008,496 Total operating expenses 3,801,630 2,628,360 11,561,781 7,950,333 Income from operations 162,159 277,980 1,260,025 796,048 Subsidies and other income 293,076 7,952 659,874 462,961 Other expense (30,515) (301) (43,728) (2,447) Income before income tax 424,720 285,631 1,876,171 1,256,562 Provision (benefit) for income taxes (170,480) 40,535 (44,420) (13,507)Net income 595,200 245,096 1,920,591 1,270,069 Less: Net income attributable to non-controlling interests 220,062 5,671 214,124 5,196 Net income attributable to CLPS Incorporation’s shareholders$375,138$239,425$1,706,467$1,264,873 Other comprehensive income (loss) Foreign currency translation gain (loss) $239,523 $62,128 $470,747 $(171,697)Less: foreign currency translation gain (loss) attributable to Non-controlling interests 25,524 3,611 46,297 (3,438)Other comprehensive income (loss) attributable to CLPS Incorporation’s shareholders $213,999 $58,517 $424,450 $(168,259) Comprehensive income CLPS Incorporation shareholders $589,137 $297,942 $2,130,917 $1,096,614 Non-controlling interest 245,586 9,282 260,421 1,758 $834,723 $307,224 $2,391,338 $1,098,372 Basic and diluted earnings per common share * $0.03 $0.02 $0.15 $0.11 Weighted average number of share outstanding – basic and diluted 11,290,000 11,290,000 11,290,000 11,290,000

* The shares and per share data are presented on a retroactive basis to reflect the nominal share issuance.