Computer Services, Inc. (CSI) (OTCQX: CSVI) today reported higher revenues and net income for the second quarter ended August 31, 2016, compared with the second quarter of the prior fiscal year.
CSI’s revenues grew 3.1% to $57.9 million for the second quarter of fiscal 2017 compared with $56.2 million for the second quarter of fiscal 2016. Net income increased by 8.6% to $8.2 million for the second quarter of fiscal 2017 compared with $7.5 million in the second quarter of fiscal 2016. Net income per share increased by 11.3% to $0.59 for the second quarter of fiscal 2017 compared with $0.53 for the prior year’s second quarter.
“CSI’s growth in revenues, earnings and margins benefitted from increased business from existing customers and new customers added since the second quarter of last year,” stated Chief Executive Officer Steven A. Powless. “We also continue to benefit from our high contract renewal rate from existing customers, increased cross-sales and higher revenue from transaction-based services. Our outlook for the second half of fiscal 2017 is positive based on new core customers signed and increased sales to existing customers. Our pipeline for new business remains strong, and we expect our growth in the second half to offset the effect of lower early contract termination fees in the first half of this fiscal year.”
Second Quarter Results
Consolidated revenues increased 3.1% to $57.9 million in the second quarter of fiscal 2017 compared with $56.2 million in the second quarter of fiscal 2016. Processing revenues rose 3.1% to $37.2 million compared with $36.0 million for the second quarter of fiscal 2016. The growth in processing revenues was primarily driven by the addition of new customers, cross-sales to existing customers and increases in transaction volumes from existing customers, partially offset by the effect of lost business and a decrease in early contract termination fees. Processing revenues included early contract termination fees of $932,000 in the second quarter of fiscal 2017 compared with $1.8 million in the second quarter of 2016. These fees can be generated when an existing customer is acquired by another financial institution and 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.
Other revenues increased by 3.1% to $20.8 million compared with the second quarter of fiscal 2016. Other revenues were higher due primarily to growth in mobile and Internet banking services, growth in homeland security and fraud prevention services, and growth in infrastructure network and security management services, partially offset by lower transaction item capture revenue and lower non-recurring revenues from third-party equipment, software, and maintenance agreement resale arrangements. Other revenues included one-time early contract termination fees of $2,000 in the second quarter of fiscal 2017 compared with $48,000 in the second quarter of fiscal 2016.
Operating income increased 6.3% to $13.2 million for the second quarter of fiscal 2017 compared with $12.5 million for the second quarter of fiscal 2016. Operating margin rose to 22.9% in the second quarter of fiscal 2017 compared with 22.2% for the second quarter of fiscal 2016.
Net income for the second quarter of fiscal 2017 was up 8.6% to $8.2 million compared with $7.5 million for the second quarter of fiscal 2016. Net income per share increased 11.3% to $0.59 for the second quarter of fiscal 2017 on 14.0 million weighted average shares outstanding compared with $0.53 for the second quarter of fiscal 2016 on 14.1 million weighted average shares outstanding.
“CSI’s cash flow remained strong in the first six months of fiscal 2017 with cash flow from operations rising 13.8% to $32.2 million,” Powless said. “This contributed to our total cash position rising 104% to $34.3 million at August 31, 2016, compared with the same date last year. At the end of the quarter, we had no long-term debt and had available lines of credit to fund future growth opportunities.
“We continue to use our cash generated from operations to invest in our business and return a portion of our earnings to shareholders. During the second quarter of fiscal 2017, we invested approximately $3.8 million in new property, equipment and software. We also returned $3.5 million to shareholders in cash dividends. During the second quarter, CSI’s Board of Directors declared a cash dividend of $0.28 per share. The dividend was paid on September 26, 2016, to shareholders of record as of the close of business on September 1, 2016.”
Six Months Results
Consolidated revenues for the first six months of fiscal 2017 rose 0.7% to $114.1 million compared with $113.3 million for the first six months of fiscal 2016. CSI’s increase in revenues benefited from growth in other revenues categories offset partially by a decrease in processing revenues. Processing revenues declined primarily due to lower early contract termination fees of $944,000 in the first six months of fiscal 2017 compared with $4.1 million in the first six months of fiscal 2016.
“CSI’s results for the first half of fiscal 2017 were affected by the comparison of unusually high early contract termination fees in the first half of last year,” Powless stated. “Last year, we experienced a higher level of merger and acquisition activity among community banks that resulted in recognition of these fees as CSI customer banks were acquired and merged into other financial institutions that were not CSI customers.”
Operating income declined 3.3% to $24.2 million for the first six months of fiscal 2017 compared with $25.0 million for the first six months of fiscal 2016. Operating margin was 21.2% in the first six months of fiscal 2017 compared with 22.0% in the first six months of fiscal 2016.
Net income for the first six months of fiscal 2017 declined 1.2% to $14.9 million compared with $15.1 million in the first six months of fiscal 2016. Net income per share was $1.07 for both the first six months of fiscal 2017 and the first six months of fiscal 2016.
About Computer Services, Inc.
Computer Services, Inc. delivers core processing, managed services, mobile and Internet solutions, 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 to CSI 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 Report, Quarterly Reports, Information and Disclosure Statements and other documents posted from time to time on the OTCQX website (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. Unless required by law, CSI undertakes no obligation to update, and is not responsible for updating, the information contained in this report beyond the publication date, whether as a result of new information or future events, or to conform the statement to actual results or changes in CSI’s expectations, or otherwise or for changes made to this document by wire services or Internet services.
| COMPUTER SERVICES, INC. AND SUBSIDIARIES | ||||||||||||||||||
| Condensed Consolidated Statements of Income | ||||||||||||||||||
| (Unaudited) | ||||||||||||||||||
| (in thousands, except share and per share data) | ||||||||||||||||||
| Three Months Ended August 31, | Six Months Ended August 31, | |||||||||||||||||
| 2016 | 2015 | 2016 | 2015 | |||||||||||||||
| Processing revenues | $ | 37,177 | $ | 36,042 | $ | 72,826 | $ | 73,405 | ||||||||||
| Other revenues | 20,752 | 20,123 | 41,226 | 39,908 | ||||||||||||||
| Total revenues | 57,929 | 56,165 | 114,052 | 113,313 | ||||||||||||||
| Operating expenses | 44,691 | 43,710 | 89,889 | 88,330 | ||||||||||||||
| Operating income | 13,238 | 12,455 | 24,163 | 24,983 | ||||||||||||||
| Interest income | 20 | 9 | 39 | 20 | ||||||||||||||
| Income before income taxes | 13,258 | 12,464 | 24,202 | 25,003 | ||||||||||||||
| Provision for income taxes | 5,071 | 4,923 | 9,257 | 9,876 | ||||||||||||||
| Net income | $ | 8,187 | $ | 7,541 | $ | 14,945 | $ | 15,127 | ||||||||||
| Earnings per share | $ | 0.59 | $ | 0.53 | $ | 1.07 | $ | 1.07 | ||||||||||
Shares used in computing earnings per common share | 14,025,285 | 14,144,707 | 14,010,253 | 14,132,556 | ||||||||||||||
| COMPUTER SERVICES, INC. AND SUBSIDIARIES | |||||||||||||
| Condensed Consolidated Balance Sheets | |||||||||||||
| (in thousands, except share data) | |||||||||||||
| 08/31/2016 | 02/29/2016 | 08/31/2015 | |||||||||||
| (Unaudited) | (Audited) | (Unaudited) | |||||||||||
| ASSETS | |||||||||||||
| Current assets | |||||||||||||
| Cash and cash equivalents | $ 34,327 | $ 17,397 | $ 16,832 | ||||||||||
| Accounts receivable | 23,151 | 28,045 | 22,254 | ||||||||||
| Income tax receivable | - | 78 | - | ||||||||||
| Prepaid expenses and other current assets | 11,610 | 11,978 | 12,194 | ||||||||||
| Total current assets | 69,088 | 57,498 | 51,280 | ||||||||||
| Property and equipment, net of accumulated depreciation | 35,049 | 34,655 | 36,045 | ||||||||||
| Software and software licenses, net of accumulated amortization | 21,437 | 21,683 | 23,963 | ||||||||||
| Goodwill | 60,115 | 60,115 | 60,115 | ||||||||||
| Intangible assets | 6,433 | 6,390 | 6,715 | ||||||||||
| Other assets | 21,561 | 22,874 | 21,091 | ||||||||||
| Total assets | $ 213,683 | $ 203,215 | $ 199,209 | ||||||||||
| LIABILITIES AND SHAREHOLDERS' EQUITY | |||||||||||||
| Current liabilities | |||||||||||||
| Accounts payable and accrued expenses | $ 24,071 | $ 18,709 | $ 24,014 | ||||||||||
| Deferred revenue | 7,585 | 8,402 | 7,332 | ||||||||||
| Income tax payable | 901 | - | 374 | ||||||||||
| Total current liabilities | 32,557 | 27,111 | 31,720 | ||||||||||
| Long-term liabilities | |||||||||||||
| Deferred income taxes | 18,964 | 18,964 | 15,547 | ||||||||||
| Other long-term liabilities | 1,544 | 1,166 | 954 | ||||||||||
| Total long-term liabilities | 20,508 | 20,130 | 16,501 | ||||||||||
| Total liabilities | 53,065 | 47,241 | 48,221 | ||||||||||
| Shareholders' equity | |||||||||||||
| Preferred stock; shares authorized, 5,000,000; none issued | - | - | - | ||||||||||
Common stock, no par; shares authorized, 60,000,000 in fiscal 2017 and 2016; shares issued and outstanding, 14,027,304 at August 31, 2016, 13,992,981 at February 29, 2016 and 14,142,972 at August 31, 2015 | 24,401 | 23,118 | 23,082 | ||||||||||
| Retained earnings | 136,217 | 132,856 | 127,906 | ||||||||||
| Total shareholders' equity | 160,618 | 155,974 | 150,988 | ||||||||||
| Total liabilities and shareholders' equity | $ 213,683 | $ 203,215 | $ 199,209 | ||||||||||
View source version on businesswire.com: http://www.businesswire.com/news/home/20161004005307/en/
Contacts:
David L. Simon, Treasurer & CFO,
800-545-4274, ext. 10126
dsimon@csiweb.com
