CLPS Reinforces Global Presence; Next Up - San Francisco, CEO Says

In an interview, CEO Raymond Lin said the Sino-U.S. tensions have not hindered the company's cross-border business and its expansion plans in San Francisco.

Author: Anthony Russo   

(Updated to reflect the audited results for the full fiscal year 2019)

CLPS Inc. (Nasdaq: CLPS), a supplier of IT services to Citibank among other clients, has expanded outside China and is soon planning to operate from San Francisco.

"The financial market in the U.S is very strong. It's a very good market for our IT services," Raymond Lin, the co-founder and chief executive officer of CLPS, told CapitalWatch in an interview last week.

CLPS provides outsourced IT solutions to banking, insurance and financial sectors. Its multinational client base also includes AIA, eBay, Standard Chartered, China Life, Australia and New Zealand Banking Group (ANZ), First Data, Experian, Commonwealth Bank, Haitong Securities, AGFA and Bank of Communications.

It's been a year and a half since CLPS became publicly traded in New York. In May 2018, the company raised $12.08 million for 2.3 million of its shares sold in the initial public offering and the concurrent purchase by underwriters for over-allotments.

At the time of IPO, CLPS already had seven centers in mainland China's largest cities, as well as offices in Hong Kong, Australia and Singapore, and was planning to pump the new funds into global expansion, among other things, according to the company's filing.

And the company has been set on its expansion strategy. Within the past year, CLPS increased its stake in Lihong Financial Information Services Co. Ltd., an online lending platform in China, and made a strategic investment in Economic Modeling Information Technology Co. Ltd., a financial modeling and big data analysis services provider.

In addition, CLPS landed the acquisitions of InfoGain Solutions Pte. Ltd. and RiDik Pte. Ltd., two providers of IT consulting and services in Singapore, in an aim to boost its brand in Southeast Asia. RiDik also began operating from its India location in September, Lin said.

"RiDik has very good operations in Singapore, with a back-office in India. Operative costs are very competitive, so we acquired the two companies and we can now combine into one. The Indian office can support the companies in Singapore," Lin told CapitalWatch.

He added that the company also intends to extend the services from the India office to Hong Kong and San Francisco. And while the Singapore location will house 300 employees, San Francisco will start smaller – with 10 people – as soon as December, Lin said.

Lin said that he does not know how fast the U.S. business will grow, but said that there is "huge demand in America" and he hopes to cater to the needs of its international clients. He said the services CLPS provides are cost-effective compared to local Singapore or U.S. providers.

Asked whether the Sino-U.S. tensions have affected or may affect its cross-border business, Lin tersely said CLPS has not seen much effect.

"Our U.S based clients are still with us," he said.

Eventually, Lin said, CLPS also plans to set up a training system in the U.S., Hong Kong and Singapore through a program similar to the one it has set up in mainland China, though at a smaller scale.

Through its CLPS College platform, the company recruits and trains employees in collaboration with universities to promote educational efforts in areas including financial and technical skills, programming languages and blockchain solutions. CLPS hires hundreds of graduates from its China programs annually, according to Lin.

Asked for a financial outlook, Lin said, "Financially, we expect our total sales growth to be in the range of 30% to 35% and non-GAAP net income results to grow in the range of 32% to 37%. We will remain focused on investing in our long-term growth and delivering on our strategies of horizontal and vertical expansion. We will also continue to pursue growth in our global market share and talent developments."

In October, CLPS posted its latest financial results. For the fiscal year ended June 30, CLPS reported revenue of $64.9 million, up nearly 33% year-over-year. Net loss for the 12 months through June was $3.4 million, or 24 cents per share, in contrast to income of $2.7 million for the fiscal year 2018. CLPS attributed the decline to increased share-based compensation expenses. Non-GAAP income, which excludes share-based expenses, grew 32% year-over-year to $3.6 million, the company said.

Raymond Lin and his team launched CLPS in 2005, with Citibank among its first clients. It has remained its largest client since.

Talking about his company, Lin sounds like a proud father. "CLPS is a wonderful company," he said. "I pushed the company going up. I will do my best in the future."

In 10 years, Lin hopes to see CLPS grow to maintain a market cap of more than $1 billion. He said, "This is our dream."

(Co-authored by Anthony Russo and Anna Vodopyanova)