CLPS, Inc. Q4 FY2020 earnings call

• The company surpassed revenue guidance with a 37.7% increase in full year fiscal 2020, driven by global expansion strategy including acquisition of Singapore-based A. service company Riddick and establishment of OF in California.
• Committed to research and development of innovation technologies like tau migration, robotic process automation, and data analytics for digital transformation.
• Focused on talent training, including cooperation with Technological and Higher Education Institute of Hong Kong to boost IT grade programs.
• Achieved profitable net income in full year fiscal 2020, with overseas revenue growing significantly due to successful global expansion.

In the second half of fiscal 2020, revenue from I.T. Consulting Services increased by 13.5 million to 14.5 million, accounting for 97.3% of total revenue. Customized I.T. Solution Services revenue decreased to 1.1 million from 1.4 million. Other Services revenue increased to 0.2 million from 0.04 million. Revenue generated outside of China in the second half increased to 6.3 million from 3 million. For full year fiscal 2020, I.T. Consulting Services revenue increased by 25.3 million to 71.1 million, accounting for 67.5% of total revenue. Customized I.T. Solution Services revenue decreased to 1.8 million from 2.8 million. Other Services revenue increased to 0.4 million from 0.1 million. Overseas revenue (China) for full year increased to 10.6 million from 4.5 million.

• For fiscal year 2021, total sales growth is expected in the range of 13% to 35%.
• Fiscal year 2021 net income growth is expected in the range of approximately 15% to 20%.

• Increase in operational costs during the COVID-19 outbreak led to a decrease in gross margin.
• Potential need to raise capital in the future to fund global expansion strategy.

Q: What about the company's strategy going forward and its comparative advantage?

A: CLB's strategy includes horizontal and global expansion, enhancing IT solutions, investing in cutting-edge technologies, and leveraging its human capital base with a large pool of professionals proficient in multiple languages and experience in banking, wealth management, and e-commerce.

Q: Reason for gross margin decrease in the second half and full year of fiscal 2020?

A: The decrease in gross margin was primarily due to the increase in operational costs during the COVID-19 outbreak to ensure health and safety of employees, customers, and business partners.

Q: Need to raise cash in the near future?

A: As of June 30, 2020, the company had cash and cash equivalents of 12.7 million, which is sufficient for operations, but global expansion may require raising capital in the future.