CCSC Technology International Holdings Ltd annual report, Q4 FY2024

CCSC Technology International Holdings Limited — Form 20-F Summary

Reporting period: Fiscal year ended March 31, 2024, filed July 22, 2024. The requested “2023 Q4” period does not match this annual filing; the filing provides fiscal-year data rather than a separate calendar-quarter presentation. Financial statements are prepared under U.S. GAAP.

Business context

CCSC is a Cayman Islands holding company with substantially all operations conducted through subsidiaries in Hong Kong, mainland China, the Netherlands and Serbia. The company designs, manufactures and sells customized connectors, cables and wire harnesses for industrial, automotive, robotics, medical, computer, telecommunications and consumer applications. Manufacturing is concentrated in Dongguan, China, while products are sold in more than 25 countries.

Ordinary shares trade on the Nasdaq Capital Market under “CCTG.” The company completed its initial public offering in January 2024, issuing 1,375,000 shares and selling an additional 206,250 shares through the over-allotment option. There were 11,581,250 shares outstanding at March 31, 2024.

Financial performance and key metrics

US$	FY2024	FY2023	Change
Revenue	14.75 million	24.06 million	Down 38.7%
Gross profit	3.92 million	7.87 million	Down 50.1%
Gross margin	26.6%	32.7%	Down 6.1 percentage points
Operating income/(loss)	(1.85 million)	1.79 million	Turned to loss
Net income/(loss)	(1.30 million)	2.21 million	Turned to loss
Basic and diluted EPS	$(0.13)	$0.22	Declined
Net cash from/(used in) operations	(2.53 million)	3.46 million	Declined by $5.99 million
Net cash used in investing	(3.83 million)	(0.21 million)	Higher use of cash
Net cash from/(used in) financing	4.63 million	(0.75 million)	IPO-driven increase

Revenue declined primarily because sales volume fell 44.1%, from approximately 40.93 million units to 22.86 million units, and the average selling price of cable and wire harness products fell 15.3% to $1.43 per unit. Cable and wire harness revenue represented 92.4% of total revenue; connector revenue represented 7.6%.

Europe remained the largest region, contributing $8.52 million, or 57.8% of revenue, followed by Asia at $4.84 million, or 32.8%, and the Americas at $1.38 million, or 9.4%. Two customers contributed approximately 17.4% and 12.7% of FY2024 revenue. The top ten customers represented 61.6% of revenue.

Cost of revenue fell 33.1% to $10.83 million, but declined more slowly than revenue. Inventory costs were $7.34 million and labor costs were $2.49 million. Management attributed the margin contraction primarily to higher fixed costs per unit resulting from lower production volume. Manufacturing utilization fell to 51.3% from 79.8%.

Operating expenses declined 5.1% to $5.77 million. Selling expenses decreased 5.2% and research and development expense decreased 45.2%, while general and administrative expenses increased 6.0%, partly due to travel, entertainment and public-company-related costs. Other income declined to $0.46 million, including a $0.43 million foreign-exchange gain and $7,255 of government subsidies.

Liquidity, cash flow and debt

Cash and restricted cash were $5.73 million at March 31, 2024, including $5.53 million of cash and $0.21 million of restricted cash.
Total current assets were $11.98 million and current liabilities were $4.44 million, producing working capital of approximately $7.54 million.
Accounts receivable were $2.75 million; approximately 99.1%, or $2.72 million, had been collected by the financial statement release date.
Inventory was $2.02 million, including $1.78 million of raw materials. Inventory write-down expense was $188,268.
The company had no bank loan outstanding at March 31, 2024; the $39,725 long-term loan balance at March 31, 2023 was repaid.
FY2024 financing cash inflow primarily comprised $4.67 million of net IPO proceeds. The company stated that existing cash and anticipated operating cash flows should cover working capital, capital expenditures and debt obligations for at least the next 12 months.
FY2024 investing cash outflows included $3.64 million of prepayments for long-term equipment and molds. Capital expenditures totaled approximately $3.80 million.
Contractual obligations totaled $5.19 million, comprising $1.84 million of lease obligations and $3.35 million of capital commitments. Equipment purchase agreements required payments of approximately $2.52 million and $0.82 million in November and December 2024.

Material changes versus the prior comparable period

Revenue fell 38.7%, with broad declines across Europe, Asia and the Americas. Management attributed the contraction to customers shifting from advance purchases to just-in-time procurement amid stagnant global demand.
Gross margin declined from 32.7% to 26.6% as lower volume increased fixed cost per unit and component costs per unit rose 8.5%.
The company moved from operating income of $1.79 million and net income of $2.21 million to an operating loss of $1.85 million and net loss of $1.30 million.
Operating cash flow turned negative, while investing outflows increased substantially because of equipment and mold prepayments.
Manufacturing employees declined from 166 to 136, and labor costs decreased from $2.87 million to $2.49 million.
The IPO increased shares outstanding by 1.58 million and generated approximately $3.62 million of net proceeds after offering costs. Gross IPO proceeds were $6.325 million and total offering expenses were approximately $2.71 million.
The company revised prior-period balance sheets for a $427,746 VAT-input accounting error. Management deemed the error immaterial to previously issued financial statements; the revision reduced prior-period assets, retained earnings and equity but did not affect reported income or cash flows.

Guidance, outlook, commentary and risks

The filing provides no formal revenue, earnings or margin guidance. Management’s stated strategy is to improve automation and production efficiency, expand the customer and product base, increase sales and marketing activity, continue R&D and pursue strategic acquisitions or collaborations. A May 2024 cooperation agreement contemplates exploring artificial intelligence in manufacturing, but no AI technology had been implemented as of the filing date.

Demand and concentration: Revenue depends on industrial, automotive, robotics, medical, computing and telecommunications end markets. Customer purchase orders are generally cancellable or non-binding, and two customers represented 30.1% of FY2024 revenue in aggregate.
Raw materials and supply chain: Components represented approximately 67.8% of production cost. Copper and other material prices, logistics disruptions and supplier concentration could pressure margins. One supplier represented 12.1% of FY2024 purchases.
China and regulatory exposure: The company has substantial assets and manufacturing operations in mainland China and faces risks related to government policy, foreign-exchange controls, cybersecurity and data regulations, overseas-listing rules, taxation and enforcement of judgments.
Cash transfer restrictions: The Cayman Islands parent depends on distributions from subsidiaries. PRC dividend distributions are limited by distributable profits, statutory reserves and foreign-exchange requirements; dividends may also face withholding tax of 5% or 10% depending on treaty eligibility.
Labor compliance: The PRC subsidiary had outstanding social insurance payments of approximately $167,141 and housing fund payments of approximately $116,942 at March 31, 2024, plus estimated social-insurance late fees of approximately $48,224. Authorities had not required repayment as of the filing date.
Internal controls: Management concluded disclosure controls were ineffective as of March 31, 2024 due to material weaknesses involving U.S. GAAP and SEC-reporting resources and logical-access and system-change controls. Remediation is planned, but effectiveness has not been established.
Governance and ownership: Chairman Chi Sing Chiu beneficially controlled approximately 72.58% of voting power, enabling significant control over director elections and shareholder resolutions.
Tax and incentives: The PRC subsidiary’s 15% HNTE tax rate was available for 2022–2024; loss of the status could increase future taxes. The company does not expect to pay dividends for the foreseeable future.
Other exposures: Foreign-currency translation produced a $523,250 comprehensive loss in FY2024. The company reported no material litigation, no material cybersecurity incident and no material off-balance-sheet arrangements.

Important facts investors should verify

Whether revenue volume and customer demand recover after the FY2024 contraction, particularly in Europe and for cable and wire harness products.
Whether gross margin can recover as production utilization improves and material costs stabilize.
The timing, completion and economic return of the $3.64 million equipment and mold prepayments and the additional $3.35 million capital commitments.
Whether operating cash flow returns to positive levels without additional equity or debt financing.
Remediation progress for the disclosed material weaknesses in internal control over financial reporting.
Resolution and potential penalties relating to underpaid PRC social insurance and housing fund contributions.
Renewal of the HNTE certification and the resulting tax rate for periods after 2024.
Customer and supplier concentration, accounts receivable collection and inventory obsolescence.
Future PRC regulatory requirements affecting overseas listings, cash transfers, cybersecurity, taxation and foreign-exchange conversions.
The effects of the controlling shareholder’s voting power, limited public float and potential post-lock-up share sales on governance and share-price volatility.