News

CSI Reports Second Quarter Results

 Revenues Increase for 45th Consecutive Quarter 

PADUCAH, Ky. (October 5, 2015) – Computer Services, Inc. (CSI) (OTCQX: CSVI) today reported its results for the second quarter and six months ended August 31, 2015. 

CSI’s revenues grew 1.0% to $56.2 million for the second quarter of fiscal 2016 compared with $55.6 million for the second quarter of fiscal 2015. Net income decreased by 1.0% to $7.5 million for the second quarter of fiscal 2016 compared with $7.6 million in the second quarter of fiscal 2015. Net income per share decreased by 1.9% to $0.53 for the second quarter of fiscal 2016 compared with $0.54 for the prior year’s second quarter. 

“CSI’s second quarter processing revenue benefitted from the addition of new customers, cross-sales to existing customers and higher early contract termination fees that relate to the increased level of merger and acquisition activity in the community bank market,” stated Chief Executive Officer Steven A. Powless. “Our outlook for fiscal 2016 remains positive based on our existing pipeline of new business and the success of our recently completed customer conference in Nashville. We hosted a record number of customers and prospects at the conference and were pleased with the high level of interest in our new Customer Relationship Management products, digital and mobile banking platforms. We believe that CSI is positioned well to attract new customers with our market leading solutions for the community bank market. 

“We expect future revenue growth to benefit from high rates of contract renewals from existing customers and new and existing customers signing long-term agreements. We remain focused on customer retention and satisfaction to protect our base of business and provide a solid foundation for expansion,” Powless continued. 

Second Quarter Results 

Consolidated revenues rose 1.0% to $56.2 million for the second quarter of fiscal 2016 compared with $55.6 million in the second quarter of fiscal 2015. Processing revenues rose 1.7% to $36.0 million compared with $35.4 million for the second quarter of fiscal 2015. The growth in processing revenues was driven primarily by sales to new customers, cross-sales to existing customers, increases in transaction volume from existing customers, and an increase in early contract termination fees, offset partially by the effect of lost business. Processing revenues included early contract termination fees of $1.8 million in the second quarter of fiscal 2016 compared with $1.1 million in the second quarter of fiscal 2015. These fees can be generated when an existing customer is acquired by another financial institution that is not a CSI customer 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.

“We expect the current level of merger and acquisition transactions at least to continue in the coming year based on the improving economy and increased profitability of banks,” stated Powless. “We expect this will result in further bank consolidation that may result in higher early contract termination fees when CSI customers are acquired by non-CSI customer banks, or increased processing fees generated by our customers when they acquire non-CSI customer banks.” 

Other revenues decreased by 0.3% to $20.1 million compared $20.2 million in the second quarter of fiscal 2015. Other revenues were down primarily due to lower non-recurring sales of third-party equipment, resale software and maintenance agreements and the effect of lost business; partially offset by higher sales from Internet and mobile banking services, growth in homeland security products and fraud prevention services, and increased demand for CSI’s document services. Other revenues included early contract termination fees of $48,000 in the second quarter of fiscal 2016 compared with $8,000 in the second quarter of fiscal 2015. 

Operating income decreased by 1.4% to $12.5 million for the second quarter of fiscal 2016 compared with $12.6 million for the second quarter of fiscal 2015. Operating margin was 22.2% in the second quarter of fiscal 2016 compared with 22.7% for the second quarter of fiscal 2015. 

Net income for the second quarter of fiscal 2016 decreased 1.0% to $7.5 million compared with $7.6 million for the second quarter of fiscal 2015. Net income per diluted share decreased 1.9% to $0.53 for the second quarter of fiscal 2016 on 14.1 million weighted average diluted shares outstanding compared with $0.54 for the second quarter of fiscal 2015 on 14.2 million weighted average diluted shares outstanding. 

“Our Board of Directors also increased our cash dividend during the second quarter. In July, the Board authorized a 13.6% increase in the cash dividend to $0.25 per share. This marked our 44th consecutive annual increase in CSI’s cash dividend. We believe the recent increase in our cash dividend highlights CSI’s strong financial position and our Board’s confidence in the future of our company,” concluded Powless. 

Six Month Results 

Consolidated revenues for the first six months of fiscal 2016 rose 2.8% to $113.3 million compared with $110.2 million for the first six months of fiscal 2015. CSI’s increase in revenues represented growth in both processing and other revenues categories. Processing revenues also included early contract termination fees of $4.1 million in the first six months of fiscal 2016 compared with $1.7 million in the first six months of fiscal 2015. 

Operating income rose 8.0% to $25.0 million for the first six months of fiscal 2016 compared with $23.1 million for the first six months of fiscal 2015. Operating margin increased to 22.0% in the first six months of fiscal 2016 compared with 21.0% in the first six months of fiscal 2015. 

Net income for the first six months of fiscal 2016 rose 8.5% to $15.1 million compared with $13.9 million in the first six months of fiscal 2015. Net income per share increased 9.2% to $1.07 for the first six months of fiscal 2016 compared with $0.98 for the first six months of fiscal 2015. 

“CSI’s financial condition remains very strong based on our cash flow from operations, cash on hand and no long-term debt,” Powless said. “At August 31, 2015, our cash position more than doubled to $16.8 million from last year and our cash flow from operations increased 22% to $28.7 million for the first six months of fiscal 2016 compared with the same period last year. 

“We remain focused on investing in CSI to support our continued growth, new product development and customer care and retention programs. During the first six months of fiscal 2016, we invested $16.6 million in new equipment and software, including a major investment in our main frame computers and disk arrays. These investments are focused on improving the delivery of existing services, supporting the expansion of new services and handling increased transaction volumes.” 

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.

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