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CSI Reports Record Third Quarter Revenues and Net Income

Revenues Increase for 38th Consecutive Quarter

PADUCAH, Ky., Dec. 30, 2013 /PRNewswire/ -- Computer Services, Inc. (CSI) (OTCQX: CSVI) today reported record revenues and net income for the fiscal third quarter and nine months ended November 30, 2013.

(Logo:  http://photos.prnewswire.com/prnh/20080418/CSILOGO)

Third quarter revenues rose 7.0% to $53.1 million in fiscal 2014 compared with $49.6 million in the third quarter of fiscal 2013.  Third quarter net income increased 1.9% to $6.7 million, and diluted net income per share rose 4.4% to $0.47, compared with $6.6 million, or $0.45 per diluted share, in the third quarter of fiscal 2013.

"CSI marked its 38th consecutive quarter of revenue growth at November 30, 2013," stated Chief Executive Officer Steven A. Powless.  "We benefited from higher processing revenues generated from our core processing customers and higher other revenues due to increased demand for our mobile and Internet banking solutions as well as record transaction volume from our regulatory compliance services. 

"We expect to report continued revenue growth in the fourth quarter based on our pipeline of new business, high contract renewal rates and growth in transaction volume," Powless continued.  "We believe CSI is positioned well to drive future revenue growth through our expanded sales and marketing programs. During the first nine months of fiscal 2014, we invested $9.3 million in new hardware and software to support our continued growth in transaction volume.  We expect these investments in hardware, software, sales and marketing programs to be major drivers for our continued growth next year."

During the third quarter, CSI's Board of Directors declared a cash dividend of $0.16 per share.  The dividend was paid on December 26, 2013, to shareholders of record as of the close of business on December 2, 2013. 

Third Quarter Results

Third quarter consolidated revenues rose 7.0% to $53.1 million compared with $49.6 million for the third quarter ended November 30, 2012.  Processing revenues increased 4.5% to $33.1 million compared with $31.6 million in the third quarter of fiscal 2013.  The growth 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. Processing revenues included early contract termination fees of $957,000 for the third quarter and $2.7 million for the first nine months of fiscal 2014 compared with $131,000 for the third quarter and $236,000 for the first nine months of fiscal 2013. A substantial number of the former customers were acquired by non-customer financial institutions.

Other revenues rose 11.5% to $20.0 million in the third quarter of fiscal 2014 and accounted for 37.7% of total revenues compared with $17.9 million, or 36.2% of total revenues, in the third quarter of fiscal 2013.  The increase in other revenues was primarily due to growth in mobile and Internet banking services, growth in homeland security and fraud prevention services; higher eBusiness group revenues; and higher forms and envelope revenue.

Third quarter operating income rose 4.1% to $11.1 million compared with $10.6 million in the third quarter of fiscal 2013.  Operating margin for the third quarter was 20.9% compared with 21.5% in the third quarter of fiscal 2013.  The decrease in operating margin was due primarily to the ramp up of expenses related to our Strategic Growth Initiative launched in fiscal 2012, most of which have been incurred. In addition, expenses increased for equipment and travel related to the build out of our national sales team, increased fees related to growth in our ATM and debit card business, and higher network communications fees compared with the third quarter of last year.

Net income increased 1.9% to $6.7 million in the third quarter compared with $6.6 million in fiscal 2013.  Net income per fully diluted share rose 4.4% to $0.47 in the third quarter of fiscal 2014 compared with $0.45 in fiscal 2013.  Weighted average diluted shares outstanding were down 2.2% to 14.4 million for the third quarter of fiscal 2014 compared with the same period of fiscal 2013 due primarily to CSI shares repurchased under the Company's share repurchase program.  CSI repurchased 331,892 shares during the first nine months of fiscal 2014, including 118,116 in the third quarter.  CSI had approximately $3.9 million available under existing stock purchase authorizations outstanding as of November 30, 2013.

"CSI's balance sheet remained strong at November 30, 2013, with $3.8 million in cash and no long-term debt," Powless said.  "We used our strong cash flow to return a portion of our earnings to shareholders through cash dividends and repurchases of CSI stock.  We also continued to invest in new hardware and software to support our continued growth.  During the third quarter, we invested $2.5 million in new equipment and software, and we returned $6.1 million to shareholders in cash dividends and stock repurchases."

Nine Month Results

Consolidated revenues for the first nine months of fiscal 2014 rose 8.6% to a record $158.8 million compared with $146.2 million for the same period in fiscal 2013.  CSI's increase in revenues represented growth in both processing and other revenues categories.

Operating income rose 6.0% to $31.8 million for the first nine months of fiscal 2014 compared with $30.0 million for the same period in fiscal 2013.  Operating margin was 20.0% in the first nine months of fiscal 2014 compared with 20.5% in the same period of fiscal 2013. 

Net income for the first nine months of fiscal 2014 rose 3.8% to $19.2 million compared with $18.5 million in the first nine months of fiscal 2013.  Net income per diluted share increased 5.6% to $1.33 for the first nine months of fiscal 2014 compared with $1.26 for the same period of fiscal 2013.

About Computer Services, Inc.

Computer Services, Inc. (CSI) 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; and (ii) 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 November 30,


Nine Months Ended November 30,


2013


2012


2013


2012










Processing revenues

$           33,050


$           31,625


$         100,677


$           93,480

Other revenues

20,000


17,938


58,123


52,686


Total revenues

53,050


49,563


158,800


146,166

Operating expenses

41,973


38,924


127,013


116,188


Operating income

11,077


10,639


31,787


29,978

Interest income (expense), net

(7)


8


(30)


(2)


Income before income taxes

11,070


10,647


31,757


29,976

Provision for income taxes

4,373


4,072


12,544


11,466











Net income

$            6,697


$            6,575


$           19,213


$           18,510










Earnings per share









Basic

$              0.47


$              0.45


$              1.33


$              1.26


Diluted

$              0.47


$              0.45


$              1.33


$              1.26










Shares used in computing earnings per









common and common equivalent share









         Basic

14,365,593


14,695,388


14,498,017


14,712,969


         Diluted

14,365,593


14,722,738


14,498,017


14,744,714


 


COMPUTER SERVICES, INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

(in thousands, except share data)














11/30/2013


02/28/2013


11/30/2012





(Unaudited)


(Audited)


(Unaudited)

ASSETS








Current assets








Cash and cash equivalents

$     3,830


$        499


$    17,415



Accounts receivable

23,035


21,953


19,954



Income tax receivable

236


797


-



Prepaid expenses and other current assets

7,812


6,625


7,226




Total current assets

34,913


29,874


44,595


Property and equipment, net

35,256


34,996


35,747


Software and software licenses, net

17,270


18,952


17,346


Goodwill

60,115


60,115


60,115


Intangible assets

8,592


9,374


9,692


Other assets

10,792


8,703


8,822










Total assets

$  166,938


$  162,014


$  176,317



















LIABILITIES AND SHAREHOLDERS' EQUITY







Current liabilities








Accounts payable and accrued expenses

$    17,527


$    12,979


$    30,448



Deferred revenue

8,259


9,337


9,870



Income taxes payable

-


-


333



Notes payable

16


60


72




Total current liabilities

25,802


22,376


40,723


Long-term liabilities








Notes payable

-


7


17



Deferred income taxes

13,193


13,193


11,902



Other long-term liabilities

1,145


1,071


899




Total long-term liabilities

14,338


14,271


12,818













Total liabilities

40,140


36,647


53,541











Shareholders' equity








Preferred stock; shares authorized, 5,000,000; none issued

-


-


-



Common stock, no par; shares authorized, 20,000,000 in fiscal 2014 and









2013; shares issued and outstanding, 14,314,731 at November 30, 2013,




14,620,743 at February 28, 2013, and 14,695,344 at November 30, 2012

20,389


19,522


19,661



Retained earnings

106,409


105,845


103,115




Total shareholders' equity

126,798


125,367


122,776










Total liabilities and shareholders' equity

$  166,938


$  162,014


$  176,317

 

SOURCE Computer Services, Inc.

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