CSI Reports Growth in Revenues and Net Income for First Quarter
PADUCAH, Ky.--(BUSINESS WIRE)--Jul 12, 2018--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.
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 or ), 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.
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CONTACT: Computer Services, Inc.
Andras Q. Bende, CFO, 800-545-4274, ext. 10115
KEYWORD: UNITED STATES NORTH AMERICA KENTUCKY
INDUSTRY KEYWORD: TECHNOLOGY DATA MANAGEMENT SOFTWARE PROFESSIONAL SERVICES BANKING FINANCE
SOURCE: Computer Services, Inc.
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PUB: 07/12/2018 08:00 AM/DISC: 07/12/2018 08:01 AM