AP NEWS

CSI Reports Growth in Revenues and Net Income for Second Quarter

October 4, 2018

PADUCAH, Ky.--(BUSINESS WIRE)--Oct 4, 2018--Computer Services, Inc. (CSI) (OTCQX: CSVI) today reported growth in revenues and net income for the six months and second quarter ended August 31, 2018.

CSI’s revenues rose 9.6% to $67.1 million for the second quarter of fiscal 2019 compared with $61.2 million for the second quarter of fiscal 2018. Second quarter net income rose 70.9% to $13.0 million compared with $7.6 million for the second quarter of fiscal 2018. Net income per share rose 70.9% to $0.94 compared with $0.55 for the second quarter of fiscal 2018. The results for the second quarter of fiscal 2019 included approximately $3.9 million in non-operating income from a gain on a sale of an investment, and $4.3 million in early contract termination fees; offset partially by $1.2 million in a one-time operating charge related to payments processing business transaction accounts, and $2.6 million primarily from one-time expenses related to the gain on the sale of an investment and the planned retirement of company executives. Excluding the effect of early contract termination fees, net revenues increased approximately 4.1% in the second quarter of fiscal 2019 compared with the second quarter of fiscal 2018. Excluding the one-time costs mentioned above, operating expenses increased approximately 3.8% in the second quarter of fiscal 2019 compared with the second quarter of fiscal 2018.

“CSI reported solid growth in revenues across all of our business lines in the second quarter due to new business and cross-sales to existing customers,” stated Steven A. Powless, Chairman and CEO of CSI. “We remain very positive about our continued growth in fiscal 2019. Sales for our regulatory compliance services continue to show double-digit growth generated from existing customers and sales to new customers. Our core service revenue also showed solid growth, with about 90% of our second quarter’s revenues composed of recurring revenues generated from CSI customers with long-term contracts.

“We just completed our annual customer conference and had strong attendance from existing customers while hosting many prospects for new sales across our business units. We believe the high renewal rates from existing customers and new sales prospects will drive CSI’s future growth in sales and earnings,” Powless continued.

Second Quarter Results

Consolidated revenues increased 9.6% to $67.1 million in the second quarter of fiscal 2019 compared with $61.2 million in the second quarter of fiscal 2018. The growth in revenues benefited from higher sales of core processing, digital banking, regulatory compliance solutions and managed services. Revenues included approximately $4.3 million in early contract termination fees in the second quarter of fiscal 2019 compared with $839,000 in the second quarter of fiscal 2018. Excluding the effect of the early contract termination fees, net revenues increased approximately 4.1% in the second quarter of fiscal 2019 compared with the second quarter of last fiscal year. The early contract termination fees are generated by a customer terminating its service agreement 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 timing, number and size of customers that are acquired, as well as how early in the contract term a customer is acquired.

Operating income increased 1.6% to $12.7 million for the second quarter of fiscal 2019 compared with $12.5 million for the second quarter of fiscal 2018. Operating margin was 18.9% in the second quarter of fiscal 2019 compared with 20.4% for the second quarter of fiscal 2018. The $3.5 million increase in early contract termination fees received in the second quarter of fiscal 2019 compared with the second quarter of fiscal 2018 was partially offset by a $1.2 million one-time operating charge related to payments processing business transaction accounts and $2.6 million primarily from one-time expenses related to the gain on the sale of an investment and the planned retirement of company executives. Excluding the effects of early contract termination fees and the one-time operating expense items, operating income was up 5.2%, or $601,000, in the second quarter of fiscal 2019 compared with the second quarter of fiscal 2018.

CSI generated $3.9 million in non-operating income in the second quarter of fiscal 2019. The non-operating income was due to the sale of an investment that generated approximately $5.4 million in initial consideration in the second quarter of fiscal 2019. There was no comparable non-operating income generated in the second quarter of fiscal 2018.

“We expect third quarter revenues to be higher than the prior year’s third quarter due to growth in revenue generated from existing contracts and a strong sales pipeline. Growth in net income for the third quarter will also benefit from lower tax rates versus one year ago. Our sales team remains focused on our geographic expansion and growing volume from existing customers with cross-sales of new products and services. We remain on track for fiscal 2019 to be another record year for sales and earnings,” Powless said.

The provision for income tax was $3.7 million for the second quarter of fiscal 2019 compared with $4.9 million in the second 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 second quarter was 22.75%, down from 39.25% in the second quarter of fiscal 2018. Excluding the tax effects of the early contract termination fees, the gain on the sale of an investment, and the one-time operating expense items, the provision for income tax for the second quarter of fiscal 2019 would have been $2.8 million compared with $4.6 million for the second quarter of fiscal 2018.

Net income for the second quarter of fiscal 2019 rose 70.9% to $13.0 million compared with $7.6 million for the second quarter of fiscal 2018. Net income per share increased 70.9% to $0.94 for the second quarter of fiscal 2019 on 13.9 million weighted average shares outstanding compared with $0.55 for the second quarter of fiscal 2018 on 14.0 million weighted average shares outstanding. Excluding the effects of early contract termination fees on both periods, as well as the gain on the sale of an investment and the one-time operating expense items during the second quarter of fiscal 2019, net income increased 36.4%, or $2.6 million, in the second quarter of fiscal 2019 compared with the second quarter of fiscal 2018. Adjusted earnings per share increased 37.3% to $0.70 for the second quarter of fiscal 2019 compared with $0.51 for the second quarter of fiscal 2018.

CSI’s cash flow from operations increased 211.2% to $15.5 million in the second quarter of fiscal 2019 compared with $5.0 million in the second quarter of fiscal 2018. The increase in operating cash flow was due primarily to higher contract termination fees and lower cash tax expense. Cash and cash equivalents increased 31.9% to $53.6 million as of August 31, 2018, from $40.7 million as of February 28, 2018.

“CSI’s financial position remains strong with growth in cash and cash equivalents and no long-term debt at the end of the second quarter,” Powless continued. “We plan to use our strong cash flow to fund increased investments in CSI’s infrastructure and new technology in fiscal 2019. These investments are targeted 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,” Powless stated.

Six Months Results

Consolidated revenues for the first six months of fiscal 2019 rose 4.8% to $132.0 million compared with $125.9 million for the first six months of fiscal 2018. CSI’s increase in revenues benefited from growth across all major product lines compared with the first six months of fiscal 2018. Fiscal year-to-date revenues also included $5.6 million in early contract termination fees compared with $6.1 million in the first six months of fiscal 2018. Excluding the effect of the early contract termination fees from both periods, fiscal year-to-date revenues increased approximately 5.6% compared with the first half of fiscal year 2018.

Operating income declined 10.5% to $25.7 million for the first six months of fiscal 2019 compared with $28.7 million for the first six months of fiscal 2018. Operating margin declined to 19.5% in the first six months of fiscal 2019 compared with 22.8% in the first six months of fiscal 2018. Excluding the effects of early contract termination fees and the one-time operating expense items that impacted the second quarter, operating income was up 6.1%, or $1.4 million, in the first six months of fiscal 2019 compared with the first six months of fiscal 2018.

Net income for the first six months of fiscal 2019 increased by 31.6% to $23.1 million compared with $17.5 million in the first six months of fiscal 2018. Net income per share rose 31.7% to $1.66 per share for the first six months of fiscal 2019 compared with $1.26 for the first six months of fiscal 2018. Excluding the effects of early contract termination fees on both periods, as well as the gain on the sale of an investment and the one-time operating expense items during the second quarter of fiscal 2019, net income increased 35.8%, or $5.0 million, for the first six months of fiscal 2019 compared with the first six months of fiscal 2018. Adjusted earnings per share increased 36.4% to $1.35 for the first six months of fiscal 2019 compared with $0.99 for the first six months of fiscal 2018.

“We also increased our returns to shareholders during the first six months of fiscal 2019 compared with the same period last year. We returned approximately $11.0 million to shareholders in cash dividends and repurchases of common stock during the first six months of fiscal 2019, a 20.8% increase compared with $9.1 million distributed during the same period last year. We also invested another $9.5 million in hardware and software during the first six months of fiscal 2019,” Powless concluded.

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 at ), 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.

Reconciliation of Generally Accepted Accounting Principles (GAAP)

This article has been truncated. You can see the rest of this article by visiting http://www.businesswire.com/news/home/20181004005116/en.

AP RADIO
Update hourly