CSI Reports Growth in Revenues and Net Income for First Quarter

Computer Services, Inc. (CSI) (OTCQX: CSVI) today reported growth in
revenues and net income for the first quarter ended May 31, 2018.

CSI’s revenues rose 0.4% to $64.9 million for the first quarter of
fiscal 2019 compared with $64.7 million for the first quarter of fiscal
2018. First quarter net income rose 1.6% to $10.1 million compared with
$9.9 million for the first quarter of fiscal 2018. Net income per share
rose 1.4% to $0.72 compared with $0.71 for the first quarter of fiscal
2018. The results for the first quarter of fiscal 2019 included
approximately $1.3 million in early contract termination fees compared
with $5.3 million in the first quarter of fiscal 2018. Excluding the
effect of early contract termination fees, net revenues increased
approximately 7.1% in the first quarter of fiscal 2019 compared with the
first quarter of fiscal 2018. The early contract termination fees are
generated when a customer terminates its contract prior to the end of
the contracted term, a circumstance that typically arises when an
existing CSI customer is acquired by another financial institution that
is not a CSI customer. These fees can vary significantly from period to
period based on the number and size of customers that are acquired and
how early in the contract term a customer is acquired.

“CSI reported solid growth in revenues across our business lines in the
first quarter due to new business and cross-sales to existing
customers,” stated Steven A. Powless, chairman and CEO of CSI. “About
90% of our first quarter’s revenues were generated from existing CSI
customers as a result of long-term contracts and high renewal rates on
customer contracts.

“We expect our core business to benefit by continuing our focus on
geographic expansion, driving customer satisfaction and retention,
expanding our digital channels, and focusing further on employee
excellence. We are confident about our ability to drive CSI’s future
growth in earnings and returns to our shareholders,” Powless continued.

First Quarter Results

Consolidated revenues increased 0.4% to $64.9 million in the first
quarter of fiscal 2019 compared with $64.7 million in the first quarter
of fiscal 2018. The growth in revenues benefited from higher sales of
core processing, digital banking, regulatory compliance services and
managed services. Revenues included approximately $1.3 million in early
contract termination fees in the first quarter of fiscal 2019 compared
with $5.3 million in the first quarter of fiscal 2018. Excluding the
effect of the early contract termination fees, first quarter fiscal 2019
net revenues increased approximately 7.1% compared with the first
quarter of last fiscal year.

“We expect to report continued growth in second quarter revenues
compared with the prior year based on existing contracts and a strong
sales pipeline. First quarter saw lower income tax provisions versus the
prior year, and we will continue to benefit from lower tax rates as we
go forward. Our outlook for fiscal 2019 remains very positive based on
the high renewal rates from existing customers, our continued focus on
geographic expansion, growth in volume from existing customers and
projections for new business as we expand our products and services,”
continued Powless.

Operating income declined 19.8% to $13.0 million for the first quarter
of fiscal 2019 compared with $16.2 million for the first quarter of
fiscal 2018. Operating margin was 20.0% in the first quarter of fiscal
2019 compared with 25.1% for the first quarter of fiscal 2018. The
decrease in operating income and margin were due primarily to the $4.0
million decrease in early contract termination fees received in the
first quarter of fiscal 2019 compared with the first quarter of fiscal
2018. Excluding the effect of early contract termination fees, operating
income rose 7.2%, or $785,000, in the first quarter of fiscal 2019
compared with the first quarter of fiscal 2018.

The provision for income tax was $3.0 million for the first quarter of
fiscal 2019 compared with $6.3 million in the first quarter of fiscal
2018. The decrease in the provision was primarily due to a reduction in
the federal income tax rate as a result of the December 2017 passage of
the Tax Cuts and Jobs Act. The estimated consolidated effective income
tax rate for the first quarter was 23.25%, down from 39.25% one year ago.

Net income for the first quarter of fiscal 2019 was up 1.6% to $10.1
million compared with $9.9 million for the first quarter of fiscal 2018.
Net income per share increased 1.4% to $0.72 for the first quarter of
fiscal 2019 on 13.9 million weighted average shares outstanding compared
with $0.71 for the first quarter of fiscal 2018 on 14.0 million weighted
average shares outstanding. The early contract termination fees
benefited per share earnings by approximately $0.07 in the first quarter
of fiscal 2019 compared with a $0.23 per share benefit in the first
quarter of fiscal 2018.

CSI’s cash flow from operations decreased 35.8% to $14.0 million in the
first quarter of fiscal 2019 compared with $21.8 million in the first
quarter of fiscal 2018. The decrease in operating cash flow was
primarily due to the timing and magnitude of the remittances for income
taxes and a one-time employee profit sharing contribution granted in the
fourth quarter of fiscal 2018 and paid during the first quarter of
fiscal 2019. Cash and cash equivalents increased 11.3% to $45.3 million
as of May 31, 2018, from $40.7 million as of February 28, 2018.

“CSI’s financial position remained strong with growth in cash and cash
equivalents and no long-term debt for the latest quarter,” Powless
continued. “During the first quarter of fiscal 2019, we returned
approximately $6.0 million to shareholders in cash dividends and
repurchases of common stock, a 45.9% increase compared with $4.1 million
distributed during the first quarter of fiscal 2018. We also invested
another $3.2 million in hardware and software during the latest quarter.
We expect to increase our investments in CSI’s infrastructure and new
technology in fiscal 2019 to support a larger customer base, a higher
volume of transaction processing and continued product development to
meet our customers’ needs across all of our products and services.”

About Computer Services, Inc.

Computer Services, Inc. delivers core processing, managed services,
digital banking, payments processing, print and electronic distribution,
and regulatory compliance solutions to financial institutions and
corporate customers across the nation. Exceptional service, dynamic
solutions and superior results are the foundation of CSI’s reputation,
and have resulted in the company’s inclusion in such top industry-wide
rankings as the FinTech 100, Talkin’ Cloud 100 and MSPmentor Top 501
Global Managed Service Providers List. CSI’s stock is traded on OTCQX
under the symbol CSVI. For more information about CSI, visit www.csiweb.com.

Forward-Looking Statements

This news release contains “forward-looking statements” as that term
is defined in the Private Securities Litigation Reform Act of 1995. All
statements except historical statements contained herein constitute
“forward-looking statements.” Forward-looking statements are inherently
uncertain and are based only on current expectations and assumptions
that are subject to future developments that may cause results to differ
materially. Readers should carefully consider: (i) economic,
competitive, technological and governmental factors affecting CSI’s
operations, customers, markets, services, products and prices; (ii) risk
factors affecting the financial services information technology industry
generally including, but not limited to, cybersecurity risks that may
result in increased costs for us to protect against the risks, as well
as liability or reputational damage to CSI in the event of a breach of
our security; and (iii) other factors discussed in CSI’s Annual Reports,
Quarterly Reports, Information and Disclosure Statements and other
documents posted from time to time on the OTCQX website (available
either at www.otcmarkets.com
or www.otcqx.com),
including without limitation, the description of the nature of CSI’s
business and its management discussion and analysis of financial
condition and results of operations for reported periods. Except as
required by law or OTC Markets Group, Inc., CSI undertakes no obligation
to update, and is not responsible for updating, the information
contained or incorporated by reference in this report beyond the
publication date, whether as a result of new information or future
events, or to conform this document to actual results or changes in
CSI’s expectations, or for changes made to this document by wire
services or Internet services or otherwise.

Shares used in computing earnings per common and common equivalent
share

Common stock, no par; 60,000,000 shares authorized; 13,940,904
shares issued as of May 31, 2018; 13,931,722 shares issued as of
February 28, 2018; 13,988,246 shares issued as of May 31, 2017;

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