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Greetings, and welcome to the Blue Hat Interactive 2020 Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentations. [Operator Instructions] As a reminder this conference call is being recorded.
It is now my pleasure to introduce Adam Prior, a representative of the Company. Thank you, Adam. You may begin.
Thank you, operator, and hello everyone. Thank you so much for joining us. The press release announcing Blue Hat results for the year ended December 31, 2020 is available at the IR section of the Company's website at ir.bluehatgroup.com. Following the conclusion of this call, a replay of this broadcast and transcript will be made at Blue Hat's websites for the next 90 days.
Before we get started, I'd like to remind everyone that this conference call may have the Company information discussed therein may contain certain forward-looking statements within the meaning of the Safe Harbor provision of the Private Security Securities Litigation Reform Act of 1995. These forward-looking statements can be identified by terms such as anticipate, believe, expect, future, plan, outlook and will and include, among other things statements regarding Blue Hat's future growth and results of operations.
Although the Company believes that the expectations reflected in these forward-looking statements are reasonable as of today, those statements are subject to risks and uncertainties that could cause the actual results to differ dramatically, from those projected. There can be no assurances that those expectations will prove to be correct.
Information about the risks associated in investing in Blue Hat is included in his filings with the Securities and Exchange Commission, which we all encourage you to review before making an investment decision. The Company does not assume any obligation to update any forward-looking statements as a result of new information, future events or changes in market conditions or otherwise, except as required by law.
With that, I'd now like to take a moment to discuss the format of today's call. The Company's Chief Executive Officer, Mr. Xiaodong (Sean) Chen will provide an overview of operating and financial highlights in Mandarin. Blue Hat's Chief Financial Officer Mr. Caifan He will provide a brief summary of our financial results for fiscal year 2020 in Mandarin as well. And then Mr. Chen will return to discuss outlook and growth strategy.
We will follow each portion within English translation at certain points throughout this presentation, so that is hopefully easy and convenient to follow along. We will then open the floor for questions. We will take your questions and translate into Mandarin at which point Mr. Chen will reply, and we'll also address a few questions sent to us from outside of the call overnight by investors that management can respond to as well.
With that, I'll turn the call over to Chairman and CEO, Mr. Xiaodong Chen. Please go ahead Mr. Chen. Sean?
Thank you, Mr. Chen. Welcome everyone. Over the course of 2020, we took several important steps to strengthen the value proposition of Blue Hat's business, which is on a foundation of four pillars, interactive toys and games, interactive education, mobile games, and the newly developed information services and communication services business, which includes our Internet Data Center or IDC business.
Despite the significant impact the global pandemic had on our business in the first half of the year, we achieved a 26.7% top-line growth to U.S. 30.2 million, which compares to 23.8 million in 2019. The bulk of our 2020 revenues were booked in the fourth quarter. During the period, we saw revenues of approximately 20 million or more than 70% increase from the U.S. 11.8 million in the prior year period. This was primarily driven by the Company's new information services and IDC business line.
We saw significant growth following the strategic acquisition of Xunpusen Technology in the second half of 2020. Since the closing of the Xunpusen Technology, we have announced several partnerships with reputable companies like China Mobile and Kingsoft Cloud, which will enable us to grow the IDC business and expand our sales channels for other lines of business.
We've enhanced our mobile game business with the acquisition 51% of Fuzhou Csfctech Co. and its two subsidiaries, which closed in January of this year and is a major first step forward in our plans to grow this business through both geographic and product expansion. Csfctech is a developer and distributor of mobile games in China, boosting a portfolio of more than 100 games available on various platforms with an international user base across Mainland China, Japan, Taiwan to the United Arab Emirates, and Africa.
We are excited about the opportunities in our interactive education systems, having announced several agreements with preschools and kindergartens for the implementation of our Augmented Reality Immersive Classes or ARIC and STEAM-focused curriculum and technology platforms. Our ARIC and proprietary curriculum and platform are currently being used in over 500 classrooms throughout China.
This past February, we signed an agreement with Zhong Ya International Education Company and are working with their 680 kindergartens located in Guangdong province to train teachers and implement our technology driven education program. We continue focusing on our interactive education expansion in the Guangdong, Hong Kong, Macau, Greater Bay Area anticipate increased contributions from this business in 2021.
With that, I'll turn it over to Mr. He for an overview of the financial results for fiscal year 2020. Mr. He.
Thank you. Here's a quick summary of our financial results for the year. As I noted earlier, total revenues increased 26.7% to 30.2 million for fiscal year 2020 from 23.8 million in the prior fiscal year, which was primarily due to increase sales and our interactive educational business and contributions from the new information services and communication services businesses or IDC.
Gross profit was 14 million for fiscal year 2020 compared to 16.3 million in the prior fiscal year. Gross profit margin was 46.3% in fiscal year 2020 compared to 68.4% of the prior fiscal year. Due to the adverse impact the COVID-19 pandemic had on Blue Hat sale and higher initial costs associated with establishing these new these new businesses.
As a result of decreased operating expenses of U.S. 4.4 million for fiscal year 2020 compared to 6.8 million in the prior fiscal year, income from operations remained steady at 9.6 million in 2020 compared to 9.5 billion in 2018.
And finally, net income was 8.3 million for the fiscal year 2020 compared to 9.1 million in the prior fiscal year. This decrease was primarily due to a 1.3 million increase in income tax expense following the expiration of a preferential tax rate granted by the local government, which was in effect through the end of 2019.
I'll now turn it back to Mr. Chen for his concluding remarks. Sean?
Thank you. For the past year, we remain profitable despite the challenges presented by the global pandemic and feel that Blue Hat has better positioned to take advantage of the growth opportunities before us in 2020. While the establishment and expansion of our new business did impact our bottom line in 2020, we expect that they will support the sales and marketing efforts or the other pillars of Blue Hat's business, augmented reality or AR, education and mobile game offerings.
We remain in the early stages of executing on this growth strategy but have begun to see tangible results from these efforts. We anticipate a gradual improvement in our operating margin over time, as we continue to sign new agreements for our AR and mobile game offerings and increase sales of our retail products and interactive education initiatives.
To conclude, Blue Hat optimistic about the opportunities ahead. We remain in a solid financial position with 15.8 million in cash and cash equivalents on the balance sheet at the end of 2020. Subject to year-end, we did complete a registered direct offering the two institutional shareholders that resulted in total gross proceeds of 7.6 million, which we intend to put towards growing our business.
I'd like to take a moment to thank our employees and investors as well as our associates, families and friends for their ongoing support. Everyone please stay safe and healthy.
With that operator, we're going to open it up for questions. For those of you on the line we would ask that you begin your question in English if possible and then be patient as we translate and we'll moderate throughout the process. Operator, please go ahead.
Thank you. We will now be conducting a question-and-answer session. [Operator Instructions] Our first question comes from line of Mr. William Chan. Please proceed with your question.
Hello everyone. I have one question. So how much the contribution of the operations between the Company and the Kingsoft Cloud will be expected to bring this Kingsoft company income? And what is the growth margin? And then, are there any plans to cooperate with other companies in the future?
Thank you, William. I just want to make sure I understand your question clearly. The contribution of the Kingsoft Cloud, a relationship to the business in total and then the margin profile on that business, is that correct?
Yes.
Okay, terrific. Lucy, if you could please translate for Mr. Chen and then we'll respond in line, go ahead.
[Foreign Language]
Okay. So, the contribution between the Company and Kingsoft Cloud as well after several months' operation, we think the brand new contribution of this sector in 2021 is good. Actually, our IDC business has very good development such as we have collaboration with Tencent, KD [indiscernible] [Kingdom] and Kingsoft, and this also pay attention to our future announcements and [indiscernible] press release.
Thank you. Our next question comes from the line of Mr. Paul Chen. Please proceed with your questions.
I would like to ask, the Company has signed many cooperation agreements of the interactive education in 2020. How these agreements are being implemented? What is the biggest difficult and the problem encounter in the proceed capitalization?
Okay. Paul, just want to make sure, I get your question, and I'm going to repeat it if that's okay. The Company over the last year has signed as part of the ARIC program, a number of cooperation agreements in the interactive education space. And your question is what kind of challenges that the Company may encounter as it goes further with these cooperation agreements? Does that sound about accurate? Or is that clear?
Yes. That's it. Yes.
Lucy, do you mind translating for the management team and we'll get back with the response.
[Foreign Language]
So, it's the two factors, the Company operation in the interactive application was seriously affected by the COVID-19 in 2020. Even though, we do have open local markets in Sichuan Province. In 2021, we are planning to have more programs or co-operations in five provinces. So, in 2020, we still develop the English courses. And from now on, we are going to investment more in the education sector to have more resources in a financial investments and operations.
[Operator Instructions]
Thank you, operator. I think this might be an appropriate time where overnight we received a number of questions from investors after the Company issued its financial results. And I'll read those in the form that they came in and post them to the management team and then let them respond.
So, the first question is that the IDC is came from an investor, which is at the IDC business contributed a little over 4 million in revenue, but the margin impact was negative as a percentage of gross cost of sales. Going forward, what is the target in gross margin for the IDC business? And at what level of sales would this be achieved? Lucy, if you could translate that that would be great.
[Foreign Language]
The IDC is the retailer of company businesses and even there is negative impacts of IDC to the gross margin as a whole, but the Company will further increase the overall level or margin of IDC and the IDC has the integration with other business sectors such as toys, the education and so on. So, the Company will improve profitability through a number of ways such as cooperation with Tencent, Kingsoft Cloud and [Kingdom] [indiscernible]. The Company will improve their revenue of sector according to the Company 2021 trend and the Company that there will be large growth of this sector.
Great, thank you, Lucy. Operator, do we have any further questions or follow-up questions?
We do. Thank you. Now, rejoining the queue is Mr. Paul Chen. Please proceed with your question.
Okay. What is the contribution of the interactive educational sector to revenue in 2020? What is the growth prospect for 2021? What is the management strategy of interactive education?
Okay, great. Contributions from the interactive education business in 2020, the growth plans for 2021 and the interactive education business, fair assessment of your question, and then Lucy, if you'd be kind enough to translate and will respond to it.
[Foreign Language]
So, the contribution of interactive education is very large of the total revenues in 2020 [indiscernible]. In 2021, at the moment, we are going to have cooperation with new state of provinces and we plan to have run out in kindergartens in 2021 [indiscernible] interactive education program in 1,000 kindergartens and we are planning to have the program implementation also in the preschools.
Thank you, Lucy. Paul is that sufficient.
Yes.
Great. Any follow-up from you?
That's all. Thank you.
I did receive a question for the management team from overnight. It was a question relating to foreign currency translation. The Company had a loss in 2020 as the U.S. dollar depreciated against the renminbi during the year. We're following the end of the year to now that relationship is reversed, and the Chinese Yuan is now worth more than the U.S. dollar versus the beginning of the year. So the question for the management team is. Should we expect a currency gain as all Blue Hat revenue is reported in RMB from 2021? And I'll leave it there.
[Foreign Language]
It's true that in 2020, we have higher fluctuation between RMB and U.S. dollar. So from the beginning of the year, RMB is appreciated a little bit. But because we own our business that is in RMB and we recorded the average value of the exchange rate in the statement of balance sheet, and then we also use the exchange rate of the reporting date. So, we use the average value and reporting date value as a way to avoid a day or try to reduce the impact of the currency fluctuation.
Operator, do we have any other questions in the queue?
There are no further questions at this time.
Then I'll conclude with a question that I received from multiple parties overnight, which is in relation to specific growth strategy and guidance for 2021 and in the first half of the year. We as Blue Hat do not provide specific top or bottom line guidance and has not. However, I think it's fair to pose the question to the management team of growth strategy and revenue growth over the course of the next year. So Lucy, if you could translate that question we received it in multiple different -- from multiple different parties throughout the day?
[Foreign Language]
Yes, the Company has two businesses, the two main business sectors including IDC and education. So, in 2021, the Company anticipates there will be growth -- there will be a high growth in these two sectors compared to the same period of the prior year. And also in terms of the growth strategy besides the Company strengths and advantages in toys and other older sectors, the Company will also focus more on the IDC education sector just mentioned. We will share more information about the Company's growth strategy and the revenue contribution of the sectors through our quarterly report. Thank you.
Great, I think that concludes our call. I think we don't have any further questions. We'd like to thank everyone for joining us. If anyone has any questions for Blue Hat or the management team, please feel free to reach out directly to the Company or its Investor Relations firm, and we're always available to speak to investors and look forward to seeing with all of you during our next financial results conference call.
Thank you everyone.
Thank you for your participation. This does conclude today's teleconference. You may disconnect your lines at this time, wishing you a great day.