Breaking Down CLPS Incorporation (CLPS) Financial Health: Key Insights for Investors

You're looking at CLPS Incorporation (CLPS) and seeing a disconnect: solid top-line growth against a significant bottom-line loss, and honestly, that's where the real analysis starts. For the full fiscal year 2025, the company delivered a respectable revenue of $164.48 million, marking a 15.17% year-over-year increase, which is a good sign of their dual-engine strategy working, especially with revenue outside mainland China surging to $23.5 million in the second half alone. But here's the quick math: the reported net income was a loss of $7.05 million, a number heavily skewed by unavoidable, non-recurring employee severance expenses following a major client's restructuring; what this estimate hides is that the adjusted net income, excluding that one-time hit, was a slight profit of $78.0 thousand. The market has reacted to the headline loss, pushing the stock down 29% recently, giving it a low price-to-sales (P/S) ratio of just 0.2x-a valuation that signals deep investor skepticism. We need to break down if their strategic pivot toward high-value Artificial Intelligence (AI) and Robotic Process Automation (RPA) projects can turn that revenue growth into sustainable GAAP (Generally Accepted Accounting Principles) profitability, or if this low valuation is a defintely a value trap.

Revenue Analysis

You need a clear picture of where CLPS Incorporation (CLPS) makes its money, and the takeaway is simple: the company is a high-growth IT consulting firm, but its revenue base is currently concentrated. For the fiscal year ending June 30, 2025, CLPS Incorporation delivered total annual revenue of $164.48 million USD, representing a solid year-over-year growth rate of 15.17%.

Here's the quick math on their primary revenue streams, which are heavily weighted toward services for the financial sector. The vast majority of their sales come from one core segment, which is both a strength and a risk.

• IT Consulting Services: This is the dominant engine, accounting for 96.3% of total revenue in the second half of fiscal year 2025 (H2 FY2025), generating $78.7 million in that period alone.
• Customized IT Solution Services: This segment is much smaller, contributing only 2.2% of total revenue in H2 FY2025, with sales of $1.8 million.
• Regional Diversification: Revenue generated outside of mainland China is the key growth driver, surging by 110.4% in the first half of FY2025 to $19.0 million.

The company is defintely pushing for global expansion, and the numbers show it's working. Revenue from key international markets saw explosive growth in FY2025, with Singapore up 99.2%, Hong Kong SAR up 130.5%, and Japan leading the charge with a 253.2% increase. This is a strong validation of their dual-engine strategy-global expansion and industry diversification-but what this estimate hides is the high concentration in their core IT consulting business.

The most significant change in the revenue profile is the strategic pivot following a major client's restructuring. This challenge forced CLPS Incorporation to accelerate efforts to diversify revenue streams. The company is actively investing in new, high-value project work in Artificial Intelligence (AI) and Robotic Process Automation (RPA), like their 'Nibot' product, anticipating increased revenue from the customized IT solutions segment to reduce reliance on any single client. While the customized IT solutions segment saw a slight decrease of 4.7% in H2 FY2025, this new focus aims to reverse that trend and build a more resilient revenue framework.

To put the segment contribution into perspective, here is the breakdown for the second half of fiscal year 2025:

This heavy reliance on IT consulting means any downturn in the financial services sector-their primary customer base-could hit hard, even with the impressive international growth. You can see more details on the risks and opportunities in the full post: Breaking Down CLPS Incorporation (CLPS) Financial Health: Key Insights for Investors.

Profitability Metrics

You're looking at CLPS Incorporation (CLPS) to understand if its recent growth is translating into sustainable profit, and the numbers for fiscal year 2025 (FY2025) tell a story of two halves, complicated by a significant one-time event. The direct takeaway is that while the core operational efficiency improved, a major restructuring cost pushed the final reported profit into a loss.

CLPS Incorporation's full-year revenue for FY2025 reached approximately $164.48 million. [cite: 3 (from step 1)] This top-line growth is a positive signal, but the margins reveal the true picture of cost management and pricing power.

Here's the quick math on the key margins for FY2025:

• Gross Profit Margin: The gross profit of $36.3 million [cite: 4 (from step 1)] on $164.48 million in revenue [cite: 3 (from step 1)] translates to a Gross Profit Margin of approximately 22.07%.
• Net Profit Margin: The reported full-year net loss was -$7.05 million, [cite: 8 (from step 1)] resulting in a Net Profit Margin of roughly -4.29%. [cite: 3 (from step 1), 8 (from step 1)]

Analysis of Operational Efficiency and Margins

The gross margin trend shows an improvement in the core cost of service delivery. Gross profit increased by 10.2% to $36.3 million in FY2025. [cite: 4 (from step 1)] This suggests better resource utilization or pricing power compared to the prior year. In the first half of FY2025 alone, the Gross Margin was 23.1%, [cite: 7 (from step 1)] up from the prior year period, which is a defintely positive trend in cost management.

The operating profit (or operating income) is the most telling metric for day-to-day efficiency. In the first half of FY2025, CLPS Incorporation achieved an Operating Income of $0.2 million, resulting in a thin Operating Margin of 0.2%. [cite: 7 (from step 1)] This was a turnaround from a loss in the prior year period. That's a good sign for their core business model, but what this estimate hides is the impact of the second half.

The full-year Net Profit Margin of -4.29% is a direct result of a strategic realignment, where a one-time employee severance expense created unavoidable short-term pressure on net income. After excluding all of the layoff compensation, the adjusted net income for FY2025 was actually a small profit of $78.0 thousand. This distinction is crucial for investors: the reported GAAP loss is real, but the adjusted figure shows the underlying business was near break-even, not deeply unprofitable.

CLPS Incorporation Profitability vs. Industry Benchmarks

When you stack CLPS Incorporation's margins against the broader IT consulting sector, you see a significant gap, which is your key risk indicator.

The industry averages for IT services and consulting companies, especially those with a higher-value consulting mix, are much stronger. For FY2025, the IT services sector's operating profit margin (OPM) is projected to be around 22%. CLPS Incorporation's H1 OPM of 0.2% is dramatically lower, indicating a structural difference in cost base, service mix, or pricing power.

Compare the margins:

The low Gross Profit Margin is the biggest red flag; it means the cost of delivering the service (Cost of Goods Sold) is very high relative to revenue. This suggests CLPS Incorporation is competing on price, has a higher proportion of lower-margin staff augmentation work, or lacks the high-margin, intellectual property (IP)-driven solutions that boost margins for peers. Their stated shift toward proprietary products like their RPA solution, Nibot, and AI solutions is a clear move to address this margin issue. You can read more about their strategic direction here: Mission Statement, Vision, & Core Values of CLPS Incorporation (CLPS).

Actionable Next Step: Monitor the Gross Margin in the next two quarters. If the margin doesn't start moving toward the 30% mark, the underlying business model will remain highly sensitive to any unexpected operating expense, like the one-time severance cost that wiped out the full-year profit.

Debt vs. Equity Structure

You need to know how CLPS Incorporation (CLPS) is funding its growth, and the short answer is that the company leans more on debt than its peers, though not excessively so. As of the first half of fiscal year 2025 (ending December 31, 2024), CLPS Incorporation's debt-to-equity (D/E) ratio stood at approximately 0.93, which is higher than the industry average for IT Consulting and Other Services.

This ratio tells us that for every dollar of shareholder equity, the company has about 93 cents in total liabilities. To be fair, a D/E ratio near 1.0 isn't a red flag in many capital-intensive sectors, but for the IT consulting space, it suggests a slightly more aggressive use of financial leverage (the use of borrowed money to finance assets) than what we typically see. The industry average for 'IT Consulting & Other Services' is closer to 0.7173, so CLPS Incorporation has more debt relative to its equity base.

Overview of CLPS Incorporation's Debt Levels

The company's financing structure is heavily weighted toward short-term obligations, which is a key point for liquidity analysis. The majority of the company's debt is classified as current liabilities, primarily in the form of bank loans. This short-term focus is common for companies that rely on working capital lines to manage operational cash flow.

• Short-Term Bank Loans: $27,949,778.
• Total Current Liabilities: $49,979,403.
• Total Long-Term Obligations: $6,777,857.

Here's the quick math on the balance sheet as of December 31, 2024, which falls within the 2025 fiscal year. The total liabilities of $56,757,260 are significantly higher than the long-term obligations, meaning the company has to defintely manage its near-term cash flow tightly to service these bank loans.

Balancing Debt and Equity Funding

CLPS Incorporation has primarily used equity funding to grow its capital base, with total shareholder equity at $60,790,673. But, the company is also actively using debt, specifically short-term bank loans, to finance its operations and expansion, which is a common strategy to maximize return on equity (ROE) in a low-rate environment.

What this estimate hides is the nature of the long-term obligations, which are not traditional bonds but include items like operating lease liabilities and deferred tax liabilities, totaling only $6,777,857. This low level of long-term debt suggests the company is not currently issuing large, publicly traded debt instruments for long-term projects or major acquisitions. We haven't seen any major announcements regarding new credit ratings or large-scale debt refinancing activities in 2025, which means the focus remains on operational financing.

The company's strategy seems to be one of controlled, short-term leverage to fund the operational needs of its growing IT consulting services, which drove a 15.2% revenue increase to $164.5 million in fiscal year 2025. This is a growth-oriented approach, but it requires constant attention to the cost of borrowing and the renewal terms of those bank loans. For a deeper dive into the company's long-term vision that drives this capital allocation, you can check out their Mission Statement, Vision, & Core Values of CLPS Incorporation (CLPS).

Liquidity and Solvency

You want to know if CLPS Incorporation (CLPS) has enough short-term cash to cover its immediate bills, and honestly, the picture is mixed but manageable. The firm's liquidity position, measured by its current and quick ratios, has been trending down in fiscal year 2025 (FY2025), but they still hold a decent buffer. The key is to watch the cash flow, which tells a more concerning story.

For the full fiscal year 2025, CLPS Incorporation's estimated Current Ratio (current assets divided by current liabilities) stood at about 1.58 at the end of the fourth quarter. This means for every dollar of short-term debt, they have $1.58 in assets they can convert to cash within a year. The Quick Ratio (a stricter test that excludes less-liquid assets like inventory and prepayments) was estimated at 1.44 for the same period. Both numbers are comfortably above the cautionary 1.0 mark, but they are lower than the 1.74 and 1.65 reported for the second quarter of FY2025, respectively. This suggests a tightening of short-term financial flexibility as the year progressed.

Here's the quick math on the trend:

• Q2 FY2025 Current Ratio: 1.74
• Q4 FY2025 Current Ratio (Estimated): 1.58
• The liquidity cushion is shrinking.

The analysis of working capital (current assets minus current liabilities) shows a similar pattern. While the absolute working capital value remains positive, the declining ratio indicates that current liabilities are growing faster than current assets, or current assets are shrinking. This is a crucial metric to monitor, especially for a service-based company where accounts receivable (money owed by clients) is a major current asset. To be fair, CLPS Incorporation did report an improvement in accounts receivable turnover days, moving from 111 days in the prior fiscal year to 92 days in FY2025, which helps cash conversion.

Cash Flow Statements Overview

The cash flow statement for the full fiscal year 2025 is where the near-term risk becomes clearer. CLPS Incorporation reported a net cash used in operating activities of $2.5 million for the twelve months ended June 30, 2025. This is a red flag. A healthy, growing company should consistently generate positive cash flow from its core business operations (operating cash flow). Sustained negative operating cash flow means the business is using its cash reserves or relying on financing to fund day-to-day operations.

The other cash flow components show a firm in a growth and consolidation phase:

The negative operating cash flow, plus net cash used in investing activities of $1.8 million, means CLPS Incorporation had to draw on its cash reserves or rely on financing to cover a total cash deficit of at least $4.3 million before financing activities. This resulted in a slight drop in their cash and cash equivalents, which stood at $28.2 million at year-end, down from $29.1 million in the prior year.

Near-Term Liquidity Concerns and Action

The primary liquidity concern is the negative operating cash flow. While the current and quick ratios are still above 1.0, indicating solvency, the cash burn from operations is not sustainable long-term. This was partly driven by a significant, non-recurring increase in employee severance expenses due to a large client downsizing, which pressured net income and cash flow. If you are an investor, you defintely need to see a turnaround in this metric in the next two quarters.

The strength is the substantial cash balance of $28.2 million and the positive trend in collecting client payments faster (92 days). They have the cash to weather this short-term operational cash deficit. However, the company must quickly execute its strategic shift toward high-value projects like Artificial Intelligence (AI) and Robotic Process Automation (RPA) to reverse the operating cash flow trend. You can read more about the firm's strategic moves at Exploring CLPS Incorporation (CLPS) Investor Profile: Who's Buying and Why?

Next Step: Monitor the Q1 FY2026 earnings release for a return to positive operating cash flow, which is the most critical indicator of a healthy, self-funding business.

Valuation Analysis

You're looking at CLPS Incorporation (CLPS) and trying to figure out if the stock's low price means a bargain or a trap. Frankly, the valuation metrics suggest the market is treating CLPS as a deep-value turnaround play, not a growth story, and you need to see why.

The stock is defintely cheap on a book value basis, but the negative earnings tell a different story. As of November 2025, the stock is trading around $0.84 per share, near its 52-week low of $0.82. The stock price has dropped a painful 36.25% over the last 12 months, so this isn't a simple dip; it's a structural decline the market is pricing in.

Is CLPS Incorporation Overvalued or Undervalued?

The core valuation ratios paint a picture of a company priced for liquidation or a massive operational pivot, which is a key risk. Here's the quick math on the major multiples:

• Price-to-Book (P/B): The P/B ratio stands at a low 0.45 as of September 2025. A P/B below 1.0 suggests the market values the company's equity at less than the net value of its assets, which is a classic sign of an undervalued stock.
• Price-to-Earnings (P/E): The trailing twelve months (TTM) P/E ratio is a negative -3.34. This negative number signals that the company is currently unprofitable, which immediately makes the P/E ratio useless for comparative valuation.
• Enterprise Value-to-EBITDA (EV/EBITDA): Since the P/E is negative, the EV/EBITDA ratio-which strips out interest, taxes, depreciation, and amortization-is usually the go-to metric. However, a consensus EV/EBITDA is not readily available in public analyst reports, which is a red flag for transparency and coverage.

The low P/B ratio is your opportunity, but the negative P/E is your risk. You are buying assets cheaply, but those assets aren't generating a sustainable profit yet.

Stock Trend and Analyst Consensus

The stock's movement confirms the market's skepticism. The 52-week high was $1.88, meaning the stock has lost more than half its value from its peak. This kind of price trend-down 36.25% in a year-shows a clear lack of investor confidence.

On the analyst front, you won't find much guidance. CLPS Incorporation currently has no price target set by analysts and no formal recommendation (Buy, Hold, or Sell) from brokerage firms. This lack of coverage means you are largely on your own for due diligence, so your analysis must be meticulous.

Dividend Reality Check

CLPS Incorporation does pay a dividend, and some sources report a high dividend yield of 15.42%. To be fair, this yield is not sustainable. The company's earnings per share (EPS) for the past year was negative, around -$0.26. When a company pays a dividend while losing money, the payout ratio is negative-reported at around -50%-meaning the dividend is not covered by earnings and is paid out of cash reserves or debt. The last cash dividend was $0.13 per share in November 2024.

What this estimate hides is the one-time nature of the fiscal year 2025 results; the company reported a full-year adjusted net income of $78.0 thousand after excluding a significant non-recurring severance expense. Still, that's a tiny margin for a company that saw second-half revenue increase 15.0% to $81.7 million.

To dive deeper into who is holding the bag and what the institutional sentiment is, you should read Exploring CLPS Incorporation (CLPS) Investor Profile: Who's Buying and Why?

Risk Factors

You need to understand that CLPS Incorporation (CLPS) is navigating a significant near-term operational shock, even as its top-line revenue growth looks strong. The primary risk is a major client concentration issue that hit their bottom line hard in the fiscal year 2025, a clear example of how strategic risk becomes financial risk.

The company's total revenue for fiscal year 2025 still grew by a solid 15.2%, reaching $164.5 million. But, a long-standing and historically largest client initiated a broad downsizing of its technology workforce in China. This strategic realignment forced CLPS to dissolve most of the dedicated IT staff serving that client, which created a massive one-time expense. The quick math shows the impact: CLPS reported a net loss of $6.4 million for the full fiscal year 2025, a sharp increase from the $1.8 million net loss in the prior year. That severance cost is a real headwind.

Here is a breakdown of the key risks and their impact:

• Client Concentration Risk: The biggest internal risk materialized with the loss of a major client's dedicated workforce, leading to significant, non-recurring employee severance expenses.
• Margin Pressure: The one-time severance costs pushed the net loss to $6.4 million. While the adjusted net income (excluding layoff compensation) was a slim $78.0 thousand, the GAAP loss shows the immediate financial strain.
• Industry Competition/Technology Shift: As an IT services provider, CLPS faces constant pressure from competitors and the need to keep pace with rapid technological advancements like Artificial Intelligence (AI) and Robotic Process Automation (RPA).

To be fair, the company is not sitting still; they are actively mitigating this client concentration risk. Their strategy is a dual focus on global expansion and technology innovation. They are accelerating a shift toward a more resilient revenue framework by pioneering new, high-value project work in AI and RPA.

The global expansion strategy is already showing results. Overseas revenue grew by a massive 90.5% in fiscal year 2025, reaching $42.5 million. This strategic pivot is reducing their reliance on any single client or geographic area. You can see their long-term focus on diversification by reviewing their Mission Statement, Vision, & Core Values of CLPS Incorporation (CLPS).

For a clearer picture of the financial impact and the strategic response, look at the core numbers:

The external risks are the usual suspects for the IT sector in late 2025: managing regulatory divergence, ensuring trusted AI systems, and maintaining strong cybersecurity. But honestly, the immediate, actionable risk for an investor is the internal client concentration issue and how quickly the company's push into AI and global markets can offset the revenue gap and absorb the remaining operational costs from the restructuring.

Growth Opportunities

You're looking at CLPS Incorporation (CLPS) and wondering if their recent momentum is sustainable, and honestly, the answer is yes, but with a clear pivot. The company is actively shifting away from legacy revenue streams, which caused some short-term pressure, to focus on high-margin, next-generation financial technology (fintech) solutions.

This strategic move is already showing up in the numbers. For the first half of fiscal year 2025 (H1 FY2025), revenue was strong at $82.8 million, a 15.3% jump year-over-year, and they swung to a net income of $0.2 million from a loss the prior year. The real story is the international push: revenue outside mainland China surged by an incredible 110.4% in H1 FY2025.

The AI and Automation Pivot

CLPS's future growth is defintely tied to their five key innovation engines: Artificial Intelligence (AI), Robotic Process Automation (RPA), low-code platforms, cloud computing, and big data. They're not just talking about these; they are launching products.

A key product innovation is the new generation Nibot RPA Product, which is a powerful, cost-effective automation solution aimed squarely at the international and Hong Kong markets. Plus, their proprietary CLPS AI suite, which uses Natural Language Processing (NLP) for things like AI-Powered Code Migration, is expected to open a new revenue source by drastically reducing software testing cycles and development costs for clients.

Here's the quick math on recent performance: H1 FY2025 revenue was $82.8 million and H2 FY2025 revenue was $81.7 million, so the total fiscal year 2025 revenue is approximately $164.5 million. What this estimate hides is the one-time employee severance expenses from a major client's restructuring, which is why the adjusted net income for the full fiscal year 2025 was a modest $78.0 thousand. That's a short-term hit for a long-term gain in a more resilient revenue structure.

• FY2025 Revenue: ~$164.5 million.
• FY2025 Adjusted Net Income: $78.0 thousand.
• H1 2025 Revenue Growth: 15.3% year-over-year.

Strategic Expansion and Competitive Edge

The company's dual-engine strategy of global expansion and industry diversification is the clear roadmap. They are not relying on a single geography anymore, which is smart. They established an Indonesia subsidiary, Ridik Indonesia, in March 2025 to accelerate growth in Southeast Asia. This is a concrete action to diversify beyond their traditional strongholds.

Their competitive advantage rests on two pillars: deep industry specialization and a global footprint. CLPS Incorporation is a global IT consulting provider focused on the demanding banking, wealth management, and financial services sectors, serving large institutions across the US, Europe, Australia, and Asia. This specialization gives them high switching costs with clients. They also operate a network of 18 delivery and R&D centers across nine countries, including the USA, UK, Japan, and Singapore.

You should also keep an eye on their majority stake (60%) in JAJI Global Incorporation, which filed for a proposed IPO on the Nasdaq Capital Market. This could be a significant value-unlocking event. For a deeper dive into who is betting on this strategy, you should read Exploring CLPS Incorporation (CLPS) Investor Profile: Who's Buying and Why?

The next step for you is to monitor the quarterly revenue breakdown to see the proportional growth of the new AI/RPA solutions versus legacy IT consulting. This will confirm the success of their strategic pivot.