PADUCAH, Ky. (July 7, 2016)
– Computer Services, Inc. (CSI) (OTCQX: CSVI) today reported its results for the first quarter ended May 31, 2016.
CSI’s revenues totaled $56.1 million for the first quarter of fiscal 2017 compared with $57.1 million for the first quarter of fiscal 2016. First quarter net income totaled $6.8 million, or $0.48 per share, compared with $7.6 million, or $0.54 per share, for the first quarter of fiscal 2016. The decrease in revenues and net income compared with the first quarter of last year was due to approximately $2.4 million in one-time early contract termination fees that were included in the results for the first quarter of fiscal 2016 compared with only $85,000 in the first quarter of fiscal 2017. Excluding the effect of the early contract termination fees, first quarter fiscal 2017 revenues increased approximately 2.4% compared with the first quarter of last fiscal year.
“CSI’s first quarter results reflected continued growth in revenues, earnings and margins excluding the effect of an unusually high level of early contract termination fees received in the first quarter of last year,” stated Chief Executive Officer Steven A. Powless. “Our growth, net of those fees, benefited from new contracts signed, our high contract renewal rate from existing customers, increased cross-sales and higher revenue from transaction-based services.
“We are pleased to report that we retained 100% of the core customer accounts up for renewal last year and believe this highlights our customers’ satisfaction with our solutions and their confidence in our ability to deliver the same high quality solutions and service in the future. We expect the addition of new core customers recently signed and increased sales to existing customers will contribute to our growth in revenues and net income in the second half of fiscal 2017. Our pipeline for new business remains strong, and we expect our growth in the second half to offset the effect of lower early contract termination fees in the first half of this fiscal year,” Powless continued. First Quarter Results
Consolidated revenues declined 1.8% to $56.1 million in the first quarter of fiscal 2017 compared with $57.1 million in the first quarter of fiscal 2016. Processing revenues were down 4.6% to $35.6 million compared with $37.4 million for the first quarter of fiscal 2016. The decrease in processing revenues was due to approximately $2.3 million in one-time early contract termination fees received in the first quarter of fiscal 2016 compared with $12,000 received in the first quarter of fiscal 2017. Excluding the effect of the early contract termination fees, first quarter fiscal 2017 processing revenues increased approximately 1.5% compared with the first quarter of last fiscal year.
“We expect that CSI’s results for the first half of fiscal 2017 will be affected by the comparison of the unusually high early contract termination fees from the first half of last year as previously reported,” Powless stated. “Last year, a higher level of merger and acquisition activity among community banks resulted in recognition of these fees as CSI customer banks were acquired and merged into other financial institutions that were not CSI customers.”
Other revenues increased by 3.5% to $20.5 million compared with the first quarter of fiscal 2016. Other revenues were higher primarily due to higher sales of 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 one-time early contract termination fees of $73,000 in the first quarter of fiscal 2017 compared with $171,000 in the first quarter of fiscal 2016. Excluding the effect of early contract termination fees, other revenues increased approximately 4.0% compared to the first quarter of last year.
Operating income was down 12.8% to $10.9 million for the first quarter of fiscal 2017 compared with $12.5 million for the first quarter of fiscal 2016. Operating margin was 19.5% in the first quarter of fiscal 2017 compared with 21.9% for the first quarter of fiscal 2016. The decrease in operating income and margin were due to the effects of higher one-time early contract termination fees received in the first quarter of fiscal 2016 and not repeated in the first fiscal quarter of 2017.
Net income for the first quarter of fiscal 2017 was down 10.9% to $6.7 million compared with $7.6 million for the first quarter of fiscal 2016. Net income per share decreased 11.1% to $0.48 for the first quarter of fiscal 2017 on 14.0 million weighted average shares outstanding compared with $0.54 for the first quarter of fiscal 2016 on 14.1 million weighted average shares outstanding.
“CSI’s cash flow remained strong in the first quarter and reflected growth in sales and improved operating efficiencies,” Powless said. “Cash flow from operations rose 22.1% to $18.3 million, and our total cash position is up 59.1% in the latest three months to $27.7 million. In addition, we have no long-term debt and have available lines of credit to fund future growth opportunities.
“We continue to use our cash generated from operations for investments in our business to support future growth and to return a portion to our shareholders through our cash dividend and stock repurchase programs. During the first quarter of fiscal 2017, we invested approximately $3.6 million in new property, equipment and software. We also returned about $3.8 million to our shareholders in cash dividends and stock repurchases. During the first quarter, CSI’s Board of Directors declared a cash dividend of $0.25 per share. The dividend was paid on June 27, 2016, to shareholders of record as of the close of business on June 1, 2016.” 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.