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CSI Reports Record Revenues and Net Income for First Quarter

Revenues Increase 5.7% to $81.0 Million

Net Income Per Share Rises 3.8% to $0.54

Computer Services, Inc. (CSI) (OTCQX: CSVI) today reported record revenues and net income for the first quarter of fiscal 2023, which ended May 31, 2022.

CSI’s revenues rose 5.7% to a record $81.0 million for the first quarter of fiscal 2023 compared with $76.7 million for the first quarter of fiscal 2022. First quarter net income rose 2.3% to a record $14.7 million compared with $14.4 million for the first quarter of fiscal 2022. Net income per share rose 3.8% to $0.54 compared with $0.52 for the first quarter of fiscal 2022.

“CSI’s record first quarter results highlight the continued demand across the board for our product and service lines from our Enterprise Banking and Business Solutions groups,” stated David Culbertson, CSI’s president and CEO. “Our excellent results benefited from new onboarded business, high contract renewals and incremental product sales to existing customers. Additionally, our new business sales momentum and pipeline activity remain strong. We also received excellent customer feedback from our recent in-person customer conference, CX22, where we previewed the next generation of products and services for our Enterprise Banking and Business Solutions customers.

“We remain very positive about CSI’s future. We expect continued growth in revenues and earnings in fiscal 2023 based on current demand from existing customers, added sales from new products and services and new accounts coming online,” continued Culbertson.

First Quarter Results

Consolidated revenues increased 5.7% to $81.0 million in the first quarter of fiscal 2023 compared with $76.7 million in the first quarter of fiscal 2022. The growth in revenues benefited from higher sales in both the Enterprise Banking and Business Solutions groups, including growth in digital banking, payments processing, managed cybersecurity and document delivery revenues. The results for the first quarter of fiscal 2023 included $0.4 million in early contract termination fees compared with $0.6 million in the first quarter of fiscal 2022. Excluding the effect of early contract termination fees, net revenues increased 6.1% in the first quarter of fiscal 2023 compared with the first quarter of fiscal 2022. 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.

Operating expenses were up 6.4% to $61.6 million for the first quarter of fiscal 2023 compared with $57.9 million for the first quarter of fiscal 2022. The increase in operating expenses was related to higher marketing and travel expenses for CX22, held in the first quarter of fiscal 2023; higher cost of goods sold on higher related payments processing, digital banking, document delivery, and managed cybersecurity revenues; and increased software and equipment expenses that were partially offset by lower personnel expenses due to higher capitalized salaries and lower profit-sharing plan contribution expenses.

Operating income increased 3.7% to $19.5 million for the first quarter of fiscal 2023 compared with $18.8 million for the first quarter of fiscal 2022. The increase in operating income was due to increased payments processing and digital banking revenues that were partially offset by an increase in operating expenses from CX22 and higher cost of goods sold on higher related revenues. Operating margins were 24.0% in the first quarter of fiscal 2023 compared with 24.5% for the first quarter of fiscal 2022.

The provision for income tax was $4.8 million for the first quarter of fiscal 2023 compared with $4.4 million in the first quarter of fiscal 2022. The increase was due to a higher effective tax rate in the first quarter of fiscal 2023 compared with the first quarter of fiscal 2022.

Net income for the first quarter of fiscal 2023 rose 2.3% to $14.7 million compared with $14.4 million for the first quarter of fiscal 2022. Net income per share increased 3.8% to $0.54 for the first quarter of fiscal 2023 on 27.5 million weighted average shares outstanding compared with $0.52 for the first quarter of fiscal 2022 on 27.5 million weighted average shares outstanding.

CSI’s cash flow from operations increased 12.8% to $27.5 million in the first quarter of fiscal 2023 compared with $24.4 million in the first quarter of fiscal 2022. Cash and cash equivalents rose 24.6% to $76.0 million as of May 31, 2022, from $61.0 million as of Feb. 28, 2022.

“CSI’s financial position remains very strong with our increased cash reserves and no long-term debt,” continued Culbertson. “We intend to leverage our strong financial position by investing in new product development, software and hardware to support our future growth. We are also focused on investments in new technologies and acquisitions as opportunities arise. We also expect these investments to strengthen our position as a fintech player with market leading services and scalability on demand.”

About Computer Services, Inc.

Computer Services, Inc. (CSI) delivers core processing, digital banking, managed cybersecurity, information technology services, payments processing, document delivery, and regulatory and cybersecurity compliance solutions to financial institutions and corporate customers, both foreign and domestic. Management believes 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 IDC Financial Insights FinTech 100, Talkin’ Cloud 100 and MSP 501 Top Global Managed Service Providers, for which it ranked second in 2021. CSI has also been recognized by Aite Group, a leading industry research firm, as providing the “best user experience” in its AIM Evaluation: The Leading Providers of U.S. Core Banking Systems. CSI’s stock is traded on OTCQX under the symbol CSVI. For more information, visit 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; (iii) risk factors affecting the United States economy generally including without limitation acts of terrorism, military actions including war, and viral epidemics and pandemics that alter human behaviors, including the COVID-19 pandemic and its effect on our business operations and financial results; (iv) increasing domestic and international regulation imposing burdensome requirements regarding the privacy of consumer data especially consumer financial transaction data of which CSI possesses substantial quantities; and (v) other factors discussed in CSI's Annual Reports, Quarterly Reports, news releases and other documents posted from time to time on the OTCQX website (www.otcmarkets.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.

COMPUTER SERVICES, INC.
Condensed Consolidated Statements of Income
(Unaudited)
(in thousands, except share and per share data)
 
Three Months Ended May 31,

2022

 

2021

 
Revenues $

81,047

 

$

76,656

Operating expenses

61,559

 

57,856

Operating income

19,488

 

18,800

Non-operating income (loss)

(9

)

-

Interest income, net

48

 

40

Income before income taxes

 

19,527

 

18,841

Provision for income taxes

4,784

 

4,427

 
Net income $

14,743

 

$

14,414

 
Earnings per common share $

0.54

 

$

0.52

 
 
Shares used in computing earnings per
common share

27,476,022

 

27,512,055

 
COMPUTER SERVICES, INC.
Condensed Consolidated Balance Sheets
(in thousands, except share data)
 

 

5/31/2022 2/28/2022 5/31/2021
(Unaudited) (Audited) (Unaudited)
ASSETS
Current assets
Cash

$

76,003

$

60,996

$

53,779

 

Funds held on behalf of clients

 

13,131

 

12,263

 

10,692

 

Accounts receivable, net

 

46,460

 

52,991

 

36,319

 

Income tax receivable

 

-

 

1,694

 

-

 

Deferred contract costs

 

24,085

 

22,763

 

19,873

 

Prepaid expenses and other current assets

 

11,562

 

12,498

 

10,584

 

Total current assets

 

171,241

 

163,205

 

131,246

 

Property and equipment, net

 

40,556

 

41,412

 

42,522

 

Software and software licenses, net

 

27,354

 

26,438

 

29,244

 

Deferred contract costs

 

136,788

 

129,390

 

114,296

 

Goodwill

 

60,115

 

60,115

 

60,115

 

Intangible assets, net

 

2,536

 

2,682

 

3,245

 

Right of use assets

 

4,311

 

4,931

 

6,095

 

Other assets

 

6,626

 

6,730

 

6,822

 

 

 

 

Total assets

$

449,527

$

434,903

$

393,585

 

 

 

 

LIABILITIES AND SHAREHOLDERS' EQUITY

 

 

 

Current liabilities

 

 

 

Accounts payable and accrued expenses

$

25,507

$

24,757

$

24,644

 

Deferred contract liabilities

 

69,089

 

62,695

 

54,308

 

Deferred revenue

 

12,929

 

12,690

 

11,324

 

Client funding obligation - settlement liabilities

 

13,131

 

12,263

 

10,692

 

Current portion of operating lease liabilities

 

1,884

 

2,138

 

2,510

 

Income tax payable

 

3,089

 

-

 

3,527

 

Total current liabilities

 

125,629

 

114,543

 

107,005

 

Long-term liabilities

 

 

 

Deferred income taxes, net

 

31,546

 

31,546

 

29,313

 

Deferred contract liabilities

 

13,938

 

13,389

 

11,406

 

Operating lease liabilities

 

2,587

 

2,964

 

3,767

 

Other liabilities

 

1,692

 

1,704

 

1,691

 

Total long-term liabilities

 

49,763

 

49,603

 

46,176

 

 

 

 

Total liabilities

 

175,392

 

164,146

 

153,182

 

 

 

 

Shareholders' equity

 

 

 

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

 

-

 

-

 

-

 

Common stock, no par; 60,000,000 shares authorized;

 

 

 

27,512,873 shares issued at May 31, 2022;

 

 

 

27,460,955 shares issued at February 28, 2022;

 

 

 

27,502,375 shares issued at May 31, 2021

 

37,700

 

35,303

 

34,562

 

Additional Paid in Capital

 

1,230

 

-

 

-

 

Retained earnings

 

235,205

 

235,454

 

205,963

 

Accumulated other comprehensive income, net

 

-

 

-

 

(122

)

Total shareholders' equity

 

274,135

 

270,757

 

240,403

 

 

 

 

Total liabilities and shareholders' equity

$

449,527

$

434,903

$

393,585

 

 
 

 

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