PR Newswire | Oct 15, 2021 08:15AM EDT

of Fiscal 2021

10/15 07:14 CDT

CLPS Incorporation Reports Financial Results for the Second Half and Full Year of Fiscal 2021 HONG KONG, Oct. 15, 2021

HONG KONG, Oct. 15, 2021 /PRNewswire/ -- CLPS Incorporation (the "Company" or "CLPS") (Nasdaq: CLPS), today announced its financial results for the six months ended June 30, 2021 and full year of fiscal year 2021.

Unaudited Second Half of Fiscal 2021 Highlights (all results compared to the six months ended June 30, 2020)

* Revenues increased by 44.6% to $67.7 million from $46.8 million. * Revenue from IT consulting services increased by 43.2% to $65.2 million from $45.5 million. * Revenue from e-Commerce area increased by 101.2% to $11.5 million from $5.7 million. * Revenue from automotive area increased by 204.5% to $5.0 million from $1.6 million. * Operating income increased by 417.9% to $3.4 million from $0.7 million. * Net income increased by 166.0% to $2.1 million from $0.8 million. * Net income attributable to CLPS Incorporation's shareholders increased by 243.7% to $2.0 million, or $0.11 basic and $0.10 diluted earnings per share, compared to net income attributable to CLPS Incorporation's shareholders of $0.6 million, or $0.04 basic and diluted earnings per share. * Non-GAAP net income attributable to CLPS Incorporation's shareholders1 increased by 59.4% to $5.6 million, or $0.30 basic and $0.29 diluted earnings per share, compared to $3.5 million, or $0.23 basic and diluted earnings per share. Please refer to "Use of Non-GAAP Financial Measures" section for the discussion of such measures used in this press release.

Audited Fiscal Year 2021 Highlights (all results compared to the twelve months ended June 30, 2020)

* Revenues increased by 41.0% to $126.1 million from $89.4 million. * Revenue from IT consulting services increased by 40.3% to $122.3 million from $87.1 million. * Revenue from e-Commerce area increased by 72.5% to $19.2 million from $11.1 million. * Revenue from automotive area increased by 132.0% to $8.5 million from $3.6 million. * Operating income increased by 161.2% to $8.4 million from $3.2 million. * Net income increased by 127.9% to $7.0 million from $3.1 million. * Net income attributable to CLPS Incorporation's shareholders increased by 132.0% to $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. * Non-GAAP net income attributable to CLPS Incorporation's shareholders1 increased by 72.1% to $11.9 million, or $0.69 basic and $0.68 diluted earnings per share, compared to $6.9 million, or $0.47 basic and diluted earnings per share. Please refer to "Use of Non-GAAP Financial Measures" section for the discussion of such measures used in this press release. * Number of clients increased by 10.6% to 251 from 227. * Revenues from top five clients accounted for 45.7% of total revenue, from 47.3% over the previous year period, which reflects decreased in revenue dependence from major clients.

Mr. Raymond Lin, Co-Founder and Chief Executive Officer of CLPS, commented, "Our second half and full year of fiscal 2021 results affirm the unquestionable value proposition we deliver to our clients and the success of our pipelined strategies. 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."

"We entered into several investments in our commitment to contribute in the digital trend of global finance and to further improve our product roadmap for banking and other financial institutions. Our controlling interest in CLPS - Beefinance, allowed us to navigate into blockchain-based solutions with focused on digital asset for financial institutions such as custody, exchange, payment, and non-fungible token (NFT) distribution platforms."

"In pursuit of supporting our clients' digital transformation journey, our i-Lab, the Company's R&D arm, has been rendering positive results on its research efforts in advanced technologies such as big data, robotic process automation, and artificial intelligence. We also developed a new generation of credit card system, which is powered by distributed microservices and unitized concepts; and can be deployed to cloud native. Now on its pilot phase, the enterprise edition is expected to be launched early next year."

"As we previously highlighted, CLPS has been aggressive on its global expansion strategy. We gained IT services contracts in the U.S. from major players in e-commerce industry, jumpstarting our U.S. revenue during the fiscal year 2021. Meanwhile, the recent establishment of CLPS Philippines enabled us to further expand our footprint in international market. Furthermore, we underwent corporate restructuring in order to increase our business efficiency. We implemented corporate consolidation and hired senior advisors with extensive experience from top tier financial institutions to guide and streamline our current and business trajectory."

"Moving into the fiscal year 2022, we remain committed to delivering professional IT services and innovative products by leveraging our current and prospect resources. We are confident that our strategies will further mobilize our growth, thus providing long-term values to our shareholders," concluded Mr. Lin.

Ms. Rui Yang, Chief Financial Officer of CLPS, commented, "Our strong IT service delivery capabilities sustained our top-line growth, resulting in a 44.6% and 41.0% revenue growth in the second half and full year of fiscal 2021, respectively. In addition, our continuous improved operational efficiency delivered a robust growth in our bottom-line. Our net income significantly increased by triple digits of 166.0% and 127.9% in the second half and full year of fiscal 2021, respectively. Going forward, we will pursue more IT consulting and solution services investments that we can synergize into our core business and develop innovative products and services. We believe that our diversified services and advanced IT products will strengthen our long-term competitive advantage and edge over our competitors."

Unaudited Second Half of Fiscal Year 2021 Financial Results

Revenues

In the second half of fiscal 2021, revenues increased by $20.9 million, or 44.6%, to $67.7 million from $46.8 million in the prior year period. The increase in revenue was mainly due to the increase in IT consulting services revenue.

Revenues by Service

* Revenue from IT consulting services increased by $19.7 million, or 43.2%, to $65.2 million in the second half of fiscal year 2021 from $45.5 million in the prior year period. Revenue from IT consulting services accounted for 96.3% of total revenue, compared to 97.2% in the prior year period. 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 by $1.0 million, or 81.0%, to $2.1 million and accounted for 3.1% of total revenue in the second half of fiscal year 2021, up from $1.1 million, or 2.4% of total revenue in the prior year period. The increase was primarily due to the increased demand from existing clients. * Revenue from other services increased by $0.3 million, or 179.5%, to $0.5 million and accounted for 0.7% of total revenue in the second half of fiscal year 2021, up from $0.2 million, or 0.3% of total revenue in the prior year period. The increase was primarily due to the increased demand for other services, including headhunting service.

Revenues by Operational Areas

* Revenue from banking area increased by $8.3 million, or 36.3% to $31.2 million in the second half of fiscal 2021 from $22.9 million in the prior year period. Revenue from banking area accounted for 46.1% and 48.9% of total revenues in the second half of fiscal 2021 and 2020, respectively. * Revenue from wealth management area increased by $4.0 million, or 40.1% to $13.8 million in the second half of fiscal 2021 from $9.8 million in the prior year period. Revenue from wealth management area accounted for 20.3% and 21.0% of total revenues in the second half of fiscal 2021 and 2020, respectively. * Revenue from e-Commerce area increased by $5.8 million, or 101.2% to $11.5 million in the second half of fiscal 2021 from $5.7 million in the prior year period. Revenue from e-Commerce area accounted for 17.0% and 12.2% of total revenues in the second half of fiscal 2021 and 2020, respectively. * Revenue from automotive area increased by $3.4 million, or 204.5% to $5.0 million in the second half of fiscal 2021 from $1.6 million in the prior year period. Revenue from automotive area accounted for 7.4% and 3.5% of total revenues in the second half of fiscal 2021 and 2020, respectively.

Revenues by Geography

* Revenue generated outside of mainland China increased by 10.4% to $6.9 million in the second half of fiscal year 2021 from $6.3 million in the prior year period. The increase in revenue generated outside mainland China reflects the Company's successful and continuous global expansion strategy.

Gross Profit

Gross profit increased by $6.0 million, or 37.8%, to $21.7 million in the second half of fiscal year 2021 from $15.7 million in the prior year period.

Operating Expenses

Selling and marketing expenses increased by $0.3 million, or 18.3%, to $2.0 million in the second half of fiscal 2021 from $1.7 million in the prior year period. 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% in the second half of fiscal 2021 compared to 3.5% in the prior year period. The decrease was primarily due to the increased in operational efficiency as a result of economies of scale.

Research and development expenses increased by $1.8 million, or 32.5%, to $7.2 million in the second half of fiscal 2021 from $5.4 million in the prior year period. 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 (RPA) and artificial intelligence (AI). As a percentage of total revenues, research and development expenses decreased to 10.6% in the second half of fiscal 2021 compared to 11.6% in the prior year period. The decrease was primarily due to the increase in operational efficiency as a result of economies of scale.

General and administrative expenses increased by $1.8 million, or 20.2%, to $10.2 million in the second half of fiscal 2021 from $8.4 million in the prior year period. 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 expenses2 increased by $0.9 million, or 15.3%, to $6.6 million in the second half of fiscal 2021 from $5.7 million in the prior year period. As a percentage of total revenues, general and administrative expenses decreased to 15.0% in the second half of fiscal 2021 compared to 18.0% in the prior year period. The decrease was primarily due to the increase in operational efficiency as result of economies of scale and refined management.

Operating Income

Operating income increased by $2.7 million, or 417.9%, to $3.4 million in the second half of fiscal year 2021 from $0.7 million in the same period of the previous year. Operating margin was 5.1% in the second half of fiscal 2021, compared to 1.4% in the prior year period.

Other Income and Expenses

Total other expenses, net of other income was $0.2 million in the second half of fiscal 2021, compared to $0.5 million total other income, net of other expenses in the prior year period.

Provision for Income Taxes

Provision for income taxes increased by $0.8 million to $1.2 million in the second half of fiscal 2021 from $0.4 million in the same period of the previous year, mainly due to recognition of deferred tax liability related to the dividend of the Company's subsidiary.

Net Income and EPS

Net income for the second half of fiscal 2021 increased by $1.3 million, or 166.0%, to $2.1 million from $0.8 million in the prior year period. After excluding the impact of non-cash share-based compensation expenses, non-GAAP net income3 increased by $2.0 million, or 53.7%, to $5.7 million in the second half of fiscal 2021 from $3.7 million in the same period of the previous year.

After excluding the impact of noncontrolling 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 $0.10 diluted earnings per share, compared to net income attributable to CLPS Incorporation's shareholders of $0.6 million, or $0.04 basic and diluted earnings per share, in the second half of fiscal 2020. After excluding the impact of non-cash share-based compensation expenses, non-GAAP net income attributable to CLPS Incorporation's shareholders1 in the second half of fiscal 2021 was $5.6 million, or $0.30 basic and $0.29 diluted earnings per share, compared to non-GAAP net income attributable to CLPS Incorporation's shareholders of $3.5 million, or $0.23 basic and diluted earnings per share, in the second half of fiscal 2020.

Audited Fiscal Year 2021 Financial Results

Revenues

In the fiscal year 2021, revenues increased by $36.7 million, or 41.0%, to $126.1 million from $89.4 million in the prior year period. The increase in revenue was mainly due to the increase in IT consulting services revenue.

Revenues by Service

* Revenue from IT consulting services increased by $35.2 million, or 40.3%, to $122.3 million in the fiscal year 2021 from $87.1 million in the prior year period. Revenue from IT consulting services accounted for 97.0% of total revenue, compared to 97.5% in the prior year period. 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 by $1.3 million, or 69.7%, to $3.1 million and accounted for 2.5% of total revenue in the fiscal year 2021, up from $1.8 million, or 2.1% of total revenue in the prior year period. The increase was primarily due to the increased demand from existing clients. * Revenue from other services increased by $0.3 million, or 51.5%, to $0.7 million and accounted for 0.5% of total revenue in the fiscal year 2021, up from $0.4 million, or 0.5% of total revenue in the prior year period. The increase was primarily due to the increased demand for other services, including headhunting service.

Revenues by Operational Areas

* Revenue from banking area increased by $15.5 million, or 34.8% to $60.0 million in the fiscal year 2021 from $44.5 million in the prior year period. Revenue from banking area accounted for 47.6% and 49.8% of total revenues in the fiscal year 2021 and 2020, respectively. * Revenue from wealth management area increased by $6.0 million, or 31.2% to $25.2 million in the fiscal year 2021 from $19.2 million in the prior year period. Revenue from wealth management area accounted for 20.0% and 21.5% of total revenues in the fiscal year 2021 and 2020, respectively. * Revenue from e-Commerce area increased by $8.1 million, or 72.5% to $19.2 million in the fiscal year 2021 from $11.1 million in the prior year period. Revenue from e-Commerce area accounted for 15.2% and 12.4% of total revenues in the fiscal year 2021 and 2020, respectively. * Revenue from automotive area increased by $4.9 million, or 132.0% to $8.5 million in the fiscal year 2021 from $3.6 million in the prior year period. Revenue from automotive area accounted for 6.7% and 4.1% of total revenues in the fiscal year 2021 and 2020, respectively.

Revenues by Geography

* Revenue generated outside of mainland China increased by 28.1% to $13.6 million in the fiscal year 2021 from $10.6 million in the prior year period. The increase in revenue generated outside of mainland China reflects the Company's successful and continuous global expansion strategy.

Gross Profit

Gross profit increased by $9.1 million, or 29.1%, to $40.2 million in the fiscal year 2021 from $31.1 million in the prior year period.

Operating Expenses

Selling and marketing expenses increased by $0.7 million, or 22.7%, to $3.8 million in the fiscal year 2021 from $3.1 million in the prior year period. The increase was primarily due to the increase of salary expenses as new staff were hired in order 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 3.0% in the fiscal year 2021 compared to 3.4% in the prior year period. The decrease reflects an increase in operational efficiency as a result of economies of scale.

Research and development expenses increased by $2.9 million, or 27.8%, to $13.3 million in the fiscal year 2021 from $10.4 million in the prior year period. 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 (RPA) and artificial intelligence (AI). As a percentage of total revenues, research and development expenses decreased to 10.6% in the fiscal year 2021 compared to 11.7% in the prior year period. The decrease reflects an increase in operational efficiency as a result of economies of scale.

General and administrative expenses increased by $0.5 million, or 2.7%, to $16.8 million in the fiscal year 2021 from $16.3 million in the prior year period. 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 expenses2 decreased by $0.8 million, or 6.2%, to $11.8 million in fiscal year 2021 from $12.6 million in the prior year period. As a percentage of total revenues, general and administrative expenses decreased to 13.3% in the fiscal year 2021 compared to 18.3% in the prior year period. The decrease reflects an increase in operational efficiency as result of economies of scale and refined management.

Operating Income

Operating income increased by $5.2 million, or 161.2%, to $8.4 million in the fiscal year 2021 from $3.2 million in the same period of the previous year. Operating margin was 6.6% in the fiscal year 2021, compared to 3.6% in the prior year period.

Other Income and Expenses

Total other expenses, net of other income was $0.1 million in the fiscal year 2021, compared to $0.5 million total other income, net of other expenses in the prior year period.

Provision for Income Taxes

Provision for income taxes increased by $0.5 million to $1.3 million in the fiscal year 2021 from $0.8 million in the same period of the previous year, mainly due to recognition of deferred tax liability related to the dividend of the Company's subsidiary.

Net Income and EPS

Net income for the fiscal year 2021 increased by $3.9 million, or 127.9%, to $7.0 million from $3.1 million in the prior year period. After excluding the impact of non-cash share-based compensation expenses, non-GAAP net income3 increased by $5.0 million, or 71.5%, to $12.1 million in the fiscal year 2021 from $7.1 million in the same period of the previous year.

After excluding the impact of noncontrolling interests, net income attributable to CLPS Incorporation's shareholders in the fiscal year 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 in fiscal year 2020. After excluding the impact of non-cash share-based compensation expenses, non-GAAP net income attributable to CLPS Incorporation's shareholders1 in the fiscal year 2021 was $11.9 million, or $0.69 basic and $0.68 diluted earnings per share, 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 fiscal year 2020.

Cash Flow

As of June 30, 2021, the Company had cash and cash equivalents of $24.7 million compared to $12.7 million as of June 30, 2020.

Net cash used in operating activities was $2.6 million for the twelve months ended June 30, 2021. Net cash used in investing activities was $5.6 million. Net cash provided by financing activities was approximately $19.3 million. The effect of exchange rate change on cash was approximately positive $1.0 million. The Company believes that its current cash position and cash flow from operations are sufficient to meet its anticipated cash needs for at least the next 12 months.

Financial Outlook

For fiscal year 2022, the Company expects, absent material acquisitions or non-recurring transactions, total sales growth in the range of approximately 30% to 35%, non-GAAP net income growth in the range of approximately 32% to 37% compared to fiscal year 2021 financial results.

This forecast reflects the Company's current and preliminary views, which are subject to change and are subject to risks and uncertainties, including, but not limited to various risks and uncertainties facing the Company's business and operations as identified in its public filings.

Exchange Rate

The balance sheet amounts with the exception of equity as of June 30, 2021, were translated at 6.4566 RMB to 1.00 USD compared to 7.0651 RMB to 1.00 USD as of June 30, 2020. The equity accounts were stated at their historical rate. The average translation rates applied to the income statements accounts for the periods ended June 30, 2021 and 2020 were 6.6212 RMB to 1.00 USD and 7.0309 RMB to 1.00 USD, respectively. The change in the value of the RMB relative to the U.S. dollar may affect our financial results reported in the U.S, dollar terms without giving effect to any underlying change in our business or results of operation.

Conference Call Information

The Company will hold a conference call at 8:30 am ET on October 15, 2021 to discuss second half and full year of fiscal 2021 results. Listeners may access the call by dialing:

U.S. Toll-Free: +1-888-204-4368

U.S. Local/International: +1-323-994-2093

Mainland China: 400 120 9101

Hong Kong: 800 961 384

To access the live webcast of the conference call, please visit this link. The live and archived webcast will also be available through the Company's investor relations website at https://ir.clpsglobal.com/.

A replay of the call will be available through October 29, 2021 by dialing:

U.S. Toll-Free: +1-844-512-2921

U.S. Local/International: +1-412-317-6671

Passcode: 6765992

About CLPS Incorporation

Headquartered in Hong Kong, 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, Southeast Asia and Hong Kong, and their PRC-based IT centers. The Company maintains 19 delivery and/or research & development centers to serve different customers in various geographic locations. Mainland China centers are located in Shanghai, Beijing, Dalian, Tianjin, Baoding, Xi'an, Chengdu, Guangzhou, Shenzhen, Hangzhou, and Hainan. The remaining eight global centers are located in Hong Kong SAR, USA, Japan, Singapore, Malaysia, Australia, India, and the Philippines. For further information regarding the Company, please visit: https://ir.clpsglobal.com/, or follow CLPS on Facebook, LinkedIn, and Twitter.

Forward-Looking Statements

Certain of the statements made in this press release are "forward-looking statements" within the meaning and protections of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act 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 by 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, its 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 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 http://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 dates on which any such statements otherwise are made.

Use of Non-GAAP Financial Measures

The consolidated financial information is prepared in conformity with accounting principles generally accepted in the United States of America ("U.S. GAAP"), except that the consolidated statement of changes in shareholders' equity, consolidated statements of cash flows, and the detailed notes have not been presented. The Company uses non-GAAP operating income, non-GAAP general and administrative expenses, non-GAAP operating margin, non-GAAP net income attributable to CLPS Incorporation's shareholders, and basic and diluted non-GAAP net income per share, which are non-GAAP financial measures. Non-GAAP operating income is operating income excluding share-based compensation expenses. Non-GAAP general and administrative expenses is a non-GAAP financial measure, which is defined as general and administrative expenses excluding share-based compensation expenses. Non-GAAP operating margin is non-GAAP operating income as a percentage of revenues. Non-GAAP net income attributable to CLPS Incorporation's shareholders is net income attributable to CLPS Incorporation's shareholders excluding share-based compensation expenses. Basic and diluted non-GAAP net income per share is non-GAAP net income attributable to common shareholders divided by weighted average number of shares used in the calculation of basic and diluted net income per share. The Company believes that separate analysis and exclusion of the non-cash impact of share-based compensation expenses clarity to the constituent parts of its performance. The Company reviews these non-GAAP financial measures together with GAAP financial measures to obtain a better understanding of its operating performance. It uses the non-GAAP financial measure for planning, forecasting and measuring results against the forecast. The Company believes that non-GAAP financial measure is useful supplemental information for investors and analysts to assess its operating performance without the effect of non-cash share-based compensation expenses, which have been and will continue to be significant recurring expenses in its business. However, the use of non-GAAP financial measures has material limitations as an analytical tool. One of the limitations of using non-GAAP financial measures is that they do not include all items that impact the Company's net income for the period. In addition, because non-GAAP financial measures are not measured in the same manner by all companies, they may not be comparable to other similar titled measures used by other companies. In light of the foregoing limitations, you should not consider non-GAAP financial measure in isolation from or as an alternative to the financial measure prepared in accordance with U.S. GAAP.

The presentation of these non-GAAP financial measures is not intended to be considered in isolation from, or as a substitute for, the financial information prepared and presented in accordance with U.S. GAAP. The Company encourages investors to carefully consider its results under GAAP, as well as its supplemental non-GAAP information and the reconciliation between these presentations, to more fully understand its business. For more information on these non-GAAP financial measures, please see the table captioned "Reconciliations of Non-GAAP and GAAP Results" near the end of this release.

Contact:

CLPS IncorporationRhon GalichaInvestor Relations Office Phone: +86-182-2192-5378Email: ir@clpsglobal.com

^1 Non-GAAP net income attributable to CLPS Incorporation's shareholders is anon-GAAP financial measure, which is defined as net income attributable to CLPSIncorporation's shareholders excluding share-based compensation expenses.Please refer to the section titled "Reconciliation of Non-GAAP and GAAPResults" for details.

^2 Non-GAAP general and administrative expenses is a non-GAAP financialmeasure, which is defined as general and administrative expenses excludingshare-based compensation expenses. Please refer to the section titled"Reconciliation of Non-GAAP and GAAP Results" for details.

^3 Non-GAAP net income is a non-GAAP financial measure, which is defined asnet income excluding share-based compensation expenses. Please refer to thesection titled "Reconciliation of Non-GAAP and GAAP Results" for details

CLPS INCORPORATION

CONSOLIDATED BALANCE SHEETS

(Amounts in U.S. dollars ("$"), except for number of shares)

As of June As of December 30, 31,

2021 2020

(Audited) (Unaudited)

ASSETS

Current assets:

Cash and cash equivalents $ 24,739,382 $ 25,981,167

Short-term investments 4,158,535 -

Accounts receivable, net 44,138,997 31,205,299

Prepayments, deposits and other assets, net 2,530,458 1,545,239

Prepaid income tax - 884,720

Amounts due from related parties 546,128 -

Total Current Assets 76,113,500 59,616,425

Non-Current assets:

Property and equipment, net 600,791 585,079

Intangible assets, net 1,050,499 1,202,449

Goodwill 2,444,950 2,234,615

Long-term investments 1,014,784 900,091

Prepayments, deposits and other assets, net 896,145 537,063

Deferred tax assets, net 607,773 448,154

Total Assets $ 82,728,442 $ 65,523,876

LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:

Bank loans $ 7,536,839 $ 5,005,402

Accounts payable 559,450 535,055

Accrued expenses and other current liabilities 245,408 238,456

Tax payables 1,715,009 1,626,017

Contract liabilities 326,912 868,222

Salaries and benefits payable 12,466,921 19,472,224

Amounts due to related party 183,148 67,918

Total Current Liabilities 23,033,687 27,813,294

Non-Current liabilities:

Bank loans 9,644 16,925

Deferred tax liabilities 155,033 143,846

Other non-current liabilities 1,799,383 311,923

TOTAL LIABILITIES 24,997,747 28,285,988

Commitments and Contingencies

Shareholders' Equity

Common stock, $0.0001 par value, 100,000,000shares authorized; 20,293,552 shares issued and outstanding as 2,029 1,635of June 30, 2021; 16,345,053 shares issued and outstanding asof December 31,2020

Additional paid-in capital 48,516,695 30,081,334

Statutory reserves 4,214,075 2,954,993

Retained earnings 2,726,165 2,028,791

Accumulated other comprehensive income 1,230,083 770,144

Total CLPS Incorporation Shareholders' Equity 56,689,047 35,836,897

Noncontrolling Interests 1,041,648 1,400,991

Total Shareholders' Equity 57,730,695 37,237,888

Total Liabilities and Shareholders' Equity $ 82,728,442 $ 65,523,876

CLPS INCORPORATION

UNAUDITED CONSOLIDATED statements of INCOME AND COMPREHENSIVE INCOME

(Amounts in U.S. dollars ("$"), except for number of shares)

For the six months ended

June 30,

2021 2020

Revenues $ 67,743,485 $ 46,847,534

Less: Cost of revenues (note 1) (46,050,474) (31,104,457)

Gross profit 21,693,011 15,743,077

Operating income (expenses):

Selling and marketing expenses (note 1) (1,959,429) (1,655,650)

Research and development expenses (7,176,725) (5,416,455)

General and administrative expenses (note 1) (10,155,688) (8,446,840)

Subsidies and other operating income 1,041,167 440,533

Total operating expenses (18,250,675) (15,078,412)

Income from operations 3,442,336 664,665

Other income 149,323 535,927

Other expenses (301,821) (77,229)

Income before income tax and share of income(loss) in 3,289,838 1,123,363 equity investees

Provision for income taxes 1,164,910 446,601

Income before share of income (loss) in equity 2,124,928 676,762investees

Share of (loss) income in equity investees, (37,994) 107,895net of tax

Net income 2,086,934 784,657

Less: Net income attributable to 130,478 215,359noncontrolling interests

Net income attributable to CLPSIncorporation's $ 1,956,456 $ 569,298 shareholders

Other comprehensive income (loss)

Foreign currency translation income (loss) $ 468,792 $ (432,198)

Less: foreign currency translation income(loss) attributable 8,853 (30,277) to noncontrolling interest

Other comprehensive income (loss) attributable to CLPS $ $ Incorporation's shareholders 459,939 (401,921)

Comprehensive income attributable to

CLPS Incorporation's shareholders $ 2,416,395 $ 167,377

Comprehensive income attributable to 139,331 184,562noncontrolling interests

Comprehensive income $ 2,555,726 $ 351,939

Basic earnings per common share $ 0.11 $ 0.04

Weighted average number of share outstanding - 18,514,807 15,169,655basic

Diluted earnings per common share $ 0.10 $ 0.04

Weighted average number of share outstanding - 19,097,170 15,212,010diluted

Note:

(1) Includes share-based compensationexpenses as follows: 4,221 9,042 Cost of revenues

Selling and marketing expenses 42,556 181,257

General and administrative expenses 3,586,593 2,747,132

CLPS INCORPORATION

RECONCILIATION OF NON-GAAP AND GAAP RESULTS

(Amounts in U.S. dollars ("$"), except for number of shares)



For the six months ended

June 30,

2021 2020

(Unaudited) (Unaudited)

Cost of revenues $ (46,050,474) $ (31,104,457)

Less: share-based compensation expenses (4,221) (9,042)

Non-GAAP cost of revenues $ (46,046,253) $ (31,095,415)

Selling and marketing expenses $ (1,959,429) $ (1,655,650)

Less: share-based compensation expenses (42,556) (181,257)

Non-GAAP selling and marketing expenses $ (1,916,873) $ (1,474,393)

General and administrative expenses $ (10,155,688) $ (8,446,840)

Less: share-based compensation expenses (3,586,593) (2,747,132)

Non-GAAP general and administrative expenses $ (6,569,095) $ (5,699,708)

Operating income $ 3,442,336 $ 664,665

Add: share-based compensation expenses 3,633,370 2,937,431

Non-GAAP operating income $ 7,075,706 $ 3,602,096

Operating margin 5.1% 1.4%

Add: share-based compensation expenses 5.3% 6.3%

Non-GAAP operating margin 10.4% 7.7%

Net income $ 2,086,934 $ 784,657

Add: share-based compensation expenses 3,633,370 2,937,431

Non-GAAP net income $ 5,720,304 $ 3,722,088

Net income attributable to CLPSIncorporation's $ 1,956,456 $ 569,298shareholders

Add: share-based compensation expenses 3,633,370 2,937,431

Non-GAAP net income attributable to CLPS 5,589,826 3,506,729Incorporation's shareholders $ $

Weighted average number of share outstandingused 18,514,807 15,169,655in computing GAAP and non-GAAP basic earnings

GAAP basic earnings per common share $ 0.11 $ 0.04

Add: share-based compensation expenses 0.19 0.19

Non-GAAP basic earnings per common share $ 0.30 $ 0.23

Weighted average number of share outstandingused 19,097,170 15,212,010in computing GAAP diluted earnings

Weighted average number of share outstandingused 19,097,170 15,212,010in computing non-GAAP diluted earnings

GAAP diluted earnings per common share $ 0.10 $ 0.04

Add: share-based compensation expenses 0.19 0.19

Non-GAAP diluted earnings per common share $ 0.29 $ 0.23

CLPS INCORPORATION

AUDITED CONSOLIDATED BALANCE SHEETS

(Amounts in U.S. dollars ("$"), except for number of shares)

As of June 30,

2021 2020

ASSETS

Current assets:

Cash and cash equivalents $ 24,739,382 $ 12,652,120

Short-term investments 4,158,535 636,934

Accounts receivable, net 44,138,997 25,753,856

Prepayments, deposits and other assets, net 2,530,458 1,280,967

Prepaid income tax - 15,780

Amounts due from related parties 546,128 169,185

Total Current Assets 76,113,500 40,508,842

Non-current assets:

Property and equipment, net 600,791 452,472

Intangible assets, net 1,050,499 1,144,579

Goodwill 2,444,950 2,118,700

Long-term investments 1,014,784 680,131

Prepayments, deposits and other assets, net 896,145 244,387

Deferred tax assets, net 607,773 203,247

Total Assets $ 82,728,442 $ 45,352,358

LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities

Bank loans $ 7,536,839 $ 2,161,239

Accounts payable 559,450 268,661

Accrued expenses and other current liabilities 245,408 220,382

Tax payables 1,715,009 1,426,614

Contract liabilities 326,912 755,178

Salaries and benefits payable 12,466,921 11,522,268

Amounts due to related party 183,148 -

Total Current Liabilities 23,033,687 16,354,342

Non-current liabilities

Bank loans 9,644 22,554

Deferred tax liabilities 155,033 163,163

Other non-current liabilities 1,799,383 194,939

TOTAL LIABILITIES 24,997,747 16,734,998

Commitments and Contingencies

Shareholders' Equity

Common stock, $0.0001 par value, 100,000,000shares authorized;

20,293,552 shares issued and outstanding as of 2,029 1,593June 30, 2021; 15,930,330 shares issued and outstanding as ofJune 30, 2020

Additional paid-in capital 48,516,695 28,586,048

Statutory reserves 4,214,075 2,803,811

Retained earnings (Accumulated deficits) 2,726,165 ? 2,680,143)

Accumulated other comprehensive income (loss) 1,230,083 ? 1,362,665)

Total CLPS Incorporation's Shareholders' Equity 56,689,047 27,348,644

Noncontrolling Interests 1,041,648 1,268,716

Total Shareholders' Equity 57,730,695 28,617,360

Total Liabilities and Shareholders' Equity $ 82,728,442 $ 45,352,358

CLPS INCORPORATION

AUDITED CONSOLIDATED statements of INCOME AND COMPREHENSIVE INCOME

(Amounts in U.S. dollars ("$"), except for number of shares)

For the years ended

June 30,

2021 2020

Revenues $ 126,061,693 $ 89,415,798

Less: Cost of revenues (note 1) (85,890,757) (58,296,097)

Gross profit 40,170,936 31,119,701

Operating income (expenses):

Selling and marketing expenses (note 1) (3,753,236) (3,059,877)

Research and development expenses (13,337,913) (10,436,975)

General and administrative expenses (note 1) (16,784,688) (16,343,936)

Subsidies and other operating income 2,080,087 1,927,230

Total operating expenses (31,795,750) (27,913,558)

Income from operations 8,375,186 3,206,143

Other income 296,319 608,638

Other expenses (351,045) (107,322)

Income before income tax and share of income (loss) in equity 3,707,459 investees 8,320,460

Provision for income taxes 1,257,124 835,444

Income before share of income (loss) in equity 7,063,336 2,872,015investees

Share of (loss) income in equity investees, (44,121) 207,363net of tax

Net income 7,019,215 3,079,378

Less: Net income attributable to 202,643 141,139noncontrolling interests

Net income attributable to CLPS Incorporation's $ $ 2,938,239 shareholders 6,816,572

Other comprehensive income (loss)

Foreign currency translation income (loss) $ 2,695,223 $ (571,943)

Less: foreign currency translation income (loss) attributable (22,928) to noncontrolling interests 102,475

Other comprehensive income (loss) attributable to CLPS $ $ (549,015) Incorporation's shareholders 2,592,748

Comprehensive income attributable to

CLPS Incorporation's shareholders $ 9,409,320 $ 2,389,224

Comprehensive income attributable to 305,118 118,211noncontrolling interests

Comprehensive income $ 9,714,438 $ 2,507,435

Basic earnings per common share $ 0.39 $ 0.20

Weighted average number of share outstanding - 17,279,443 14,689,224basic

Diluted earnings per common share $ 0.39 $ 0.20

Weighted average number of share outstanding - 17,569,440 14,692,299diluted

Note:

(1) Includes share-based compensationexpenses as follows: 8,403 14,110 Cost of revenues

Selling and marketing expenses 122,087 211,573

General and administrative expenses 4,998,206 3,778,397

CLPS INCORPORATION

RECONCILIATION OF NON-GAAP AND GAAP RESULTS

(Amounts in U.S. dollars ("$"), except for number of shares)



For the years ended

June 30,

2021 2020

Cost of revenues $ (85,890,757) $ (58,296,097)

Less: share-based compensation expenses (8,403) (14,110)

Non-GAAP cost of revenues $ (85,882,354) $ (58,281,987)

Selling and marketing expenses $ (3,753,236) $ (3,059,877)

Less: share-based compensation expenses (122,087) (211,573)

Non-GAAP selling and marketing expenses $ (3,631,149) $ (2,848,304)

General and administrative expenses $ (16,784,688) $ (16,343,936)

Less: share-based compensation expenses (4,998,206) (3,778,397)

Non-GAAP general and administrative expenses $ (11,786,482) $ (12,565,539)

Operating income $ 8,375,186 $ 3,206,143

Add: share-based compensation expenses 5,128,696 4,004,080

Non-GAAP operating income $ 13,503,882 $ 7,210,223

Operating Margin 6.6% 3.6%

Add: share-based compensation expenses 4.1% 4.5%

Non-GAAP operating margin 10.7% 8.1%

Net income $ 7,019,215 $ 3,079,378

Add: share-based compensation expenses 5,128,696 4,004,080

Non-GAAP net income $ 12,147,911 $ 7,083,458

Net income attributable to CLPS Incorporation's $ 6,816,572 $shareholders 2,938,239

Add: share-based compensation expenses 5,128,696 4,004,080

Non-GAAP net income attributable to CLPS $ 11,945,268 $ 6,942,319Incorporation's shareholders

Weighted average number of share outstandingused 17,279,443 14,689,224in computing GAAP and non-GAAP basic earnings

GAAP basic earnings per common share $ 0.39 $ 0.20

Add: share-based compensation expenses 0.30 0.27

Non-GAAP basic earnings per common share $ 0.69 $ 0.47

Weighted average number of share outstanding used 17,569,440in computing GAAP diluted earnings 14,692,299

Weighted average number of share outstandingused 17,569,440 14,692,299in computing non-GAAP diluted earnings

GAAP diluted earnings per common share $ 0.39 $ 0.20

Add: share-based compensation expenses 0.29 0.27

Non-GAAP diluted earnings per common share $ 0.68 $ 0.47

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SOURCE CLPS