CLPS, Inc. Q1 FY2021 earnings call

• Core business strategy implementation led to revenue growth (37% increase), operating income up 214%, and net income up 115%.
• Aggressive global expansion strategy contributed to a 54% increase in revenue outside Mainland China.
• Partnerships: Agreement with a China lease company, IT service agreement with the largest car associations in China, and partnership with a major Shanghai automobile manufacturer.
• Investments: Diversified into robotics technology, invested in Guangdong Zhichuang company, and acquired remaining 20% ownership stake in Ridik Singapore, setting up Singapore as Southeast Asia headquarters.
• Talent training: Focus on developing and maintaining talent supply chain, with 15 years of training thousands of IT talents distributed globally.

In the first half of fiscal year 2021, CLPS Incorporation's revenue was $58.3 million, up 37% from $42.6 million in the same period last year. Revenue from IT consulting services increased by 37.2% to $57.1 million. Revenue from customized IT solution services rose 51.1% to $1.1 million. Revenue from other services decreased by 25.3% to $0.2 million. Revenue generated outside Mainland China was $6.6 million, up 53.9% from $4.3 million, accounting for 11.4% of total revenue.

• For fiscal year 2021, total sales growth is expected in the range of approximately 30% to 35% compared to fiscal year 2020.
• Non-GAAP net income growth is adjusted to the range of approximately 60% to 65% from the previously forecasted 32% to 37%.

• Forward-looking statements involve known and unknown risks, uncertainties, and other factors beyond the company’s control that may cause actual results to differ materially from those expressed.

Q: What’s driving your revenue growth and your ability to continue to win new clients?

A: Driven by competitive advantages, strategic engagement with global clients, a world-class human capital base with bilingual/multilingual capability, operational progress on technological innovation, global presence, M&As, and investment in cutting-edge technology like IPA, big data, cloud.

Q: Do you have a target mix of where you want to be at for those different regions by the end of this fiscal year or even next fiscal year?

A: For fiscal year 2021, revenue from outside Mainland China is expected to be approximately 12% of total revenue, and for fiscal year 2022, it's expected to be 13%.

Q: Do you have any specific plans for the cash you raised to further your growth?

A: Will use it for global expansion strategies, continuing training of IT talent, penetrating Southeast Asia and U.S. markets, and leveraging the acquisition of Ridik Singapore to enter neighboring markets.

Q: How has your business been affected by the COVID-19 pandemic?

A: Mainland China quickly recovered from COVID-19, technology market was in demand, and some employees worked from home to ensure safety.

Q: Could you give more color on the economics of scale and how it improves your operating efficiency?

A: Expansion led to increased top-line revenue and more employees, but decreased expense as a percentage of total revenue due to extensive IT services experience and growing staff meeting client demand, resulting in a better bottom line.

Q: What’s the reason for the adjusted non-GAAP net income gross forecast?

A: Strong demand for IT services from growing client network and enhanced operational efficiency led to adjusting the non-GAAP net income forecast to 60%-65% from 32%-37%.

Q: How do you recognize your revenue?

A: For time and expense basis contracts, reimbursement at pre-negotiated hourly rates; for fixed price customer solution contracts, requires system design, planning, integration, customer acceptance, and post-support for 3 months to 1 year after delivery.

Q: How is your revenue outside the Mainland China trending during these periods?

A: Revenue generated outside Mainland China increased 53.9% to $6.6 million due to successful global expansion strategy, from regions like Hong Kong, Singapore, India, Japan, and Malaysia.