PADUCAH, Ky. (May 6, 2021) – Computer Services, Inc. (CSI) (OTCQX: CSVI) today reported record revenues and net income for the fiscal year ended February 28, 2021. CSI’s record results for fiscal 2021 marked the company’s 21st consecutive year of revenue growth and 24th consecutive year of growth in net income. CSI also achieved its 49th consecutive year of paying increased cash dividends to shareholders in fiscal 2021.
CSI’s revenues rose 2.5% to a record $291.3 million in fiscal 2021 compared with $284.2 million for fiscal 2020. Net income for fiscal 2021 was a record $55.4 million, a 4.8% increase compared with fiscal 2020 net income of $52.8 million. Net income per share increased 5.2% to $2.01 compared with $1.91 in the prior fiscal year.
Fourth quarter revenues rose 3.8% to a record $75.5 million in fiscal 2021 compared with $72.7 million in the fourth quarter of fiscal 2020. Net income was $13.5 million in the fourth quarter of fiscal 2021 compared with $15.2 million in the fourth quarter of fiscal 2020. Net income per share was $0.49 compared with $0.56 in the prior fiscal year’s fourth quarter. Net income was higher in the fourth quarter of the previous fiscal year due to significantly higher income generated from early contract termination fees and the impacts of ASC adoptions that were not repeated during the fourth quarter of fiscal 2021. Excluding the effects of the prior year ASC adoptions and the year-over-year reduction in early contract termination fees, fourth quarter net income and earnings per share were up substantially in fiscal 2021 compared to the fourth quarter of fiscal 2020. – See fourth quarter information for more detail.
“We are pleased to report record sales and net income for fiscal 2021 even with the challenges of operating in the pandemic environment over the past year,” stated Steven A. Powless, chairman and CEO of CSI. “Despite transitioning to remote work and limited business travel early in the COVID-19 pandemic, our team achieved record new sales and maintained our pace of bank conversions during fiscal 2021.
“Our record results for fiscal 2021 benefited from higher revenues in both our Enterprise Banking and Business Solutions Groups, and high renewal rates on contracts from existing customers. CSI celebrated its 56th year in business during fiscal 2021 and added a record number of new core processing agreements. We expect these new bank contracts to be transitioned to CSI’s platform in future quarters and contribute to our recurring revenue base. We also believe our high percentage of contract renewals and long-term contracts highlight our customers’ satisfaction with our service, technology and ability to support their future operations and growth plans.
“We remain very positive about CSI’s continued growth during fiscal 2022,” continued Powless. “The new contracts we signed during fiscal 2021 will add to our recurring revenue base, and we have planned investments in new staff, technology and infrastructure that will support future growth. We expect the higher level of investments to increase operating expenses and result in flat income during the first half of fiscal 2022. We expect improved operating results in the second half of the year as we anticipate demand for CSI’s products and services to increase as the pandemic subsides. We also believe that we are in a stronger position going into fiscal 2022 than we were in the past to provide new and prospective customers with market-leading products and services.”
Fiscal 2021 Results
Consolidated revenues rose 2.5% to $291.3 million for fiscal 2021 compared with $284.2 million for fiscal 2020. The growth in revenues resulted primarily from the addition of new customers, cross sales to existing customers, increased transaction volumes from existing customers, growth in digital banking, and growth in regulatory compliance services. Enterprise Banking Group revenues rose 4.1% to $178.9 million in fiscal 2021 compared with fiscal 2020 and accounted for 61.4% of total revenues for fiscal 2021. Business Solutions Group revenues rose 0.1% to $112.4 million compared with the prior fiscal year. Early contract termination fees were $5.8 million for fiscal 2021 compared with $8.5 million for fiscal 2020. These 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. Excluding the effect of the early contract termination fees in both periods, fiscal 2021 revenues increased approximately 3.6% compared with the prior fiscal year.
Operating expenses declined 0.1% to $218.8 million for fiscal 2021 compared with $218.9 million for fiscal 2020. The fiscal 2021 decrease in operating expenses was due to lower travel and marketing expenses due to COVID-19 restrictions; lower profit-sharing plan contribution expenses; and lower cost of goods sold from decreased sales of third-party hardware and software sales. These reductions were partially offset by higher software amortization and higher software and hardware maintenance expenses from new capital investments; higher cost of goods sold on higher digital banking revenues; and increased employee-related expenses due to higher staffing, annual salary adjustments, sales commissions, health insurance expense, and special COVID-19 pandemic related employee incentives. CSI did not reduce staff due to COVID-19, but increased hiring of new personnel throughout fiscal 2021 to expand customer support and product development in key areas.
Operating income rose 11.1% to $72.5 million for fiscal 2021 compared with $65.3 million for fiscal 2020. Operating margin increased to 24.9% for fiscal 2021 compared with 23.0% for fiscal 2020.
Income before income taxes increased 9.5% to $73.0 million for fiscal 2021 compared with $66.7 million for fiscal 2020. The provision for income tax was $17.6 million for fiscal 2021 compared with $13.8 million for fiscal 2020. The increase was due to higher taxable income and a higher effective tax rate in fiscal 2021 compared to fiscal 2020.
Net income for fiscal 2021 rose 4.8% to $55.4 million compared with $52.9 million for fiscal 2020. Net income per share increased 5.2% to $2.01 for fiscal 2021 compared with $1.91 for fiscal 2020. The growth rate in earnings per share exceeded the growth rate in net income due to earnings per share rounding and 0.2% net fewer weighted average shares outstanding for fiscal 2021 as a result of shares purchased during fiscal 2021 under the Company’s share repurchase programs.
CSI’s cash flow from operations rose 4.2% to $61.9 million in fiscal 2021 compared with $59.4 million in fiscal 2020. Cash and cash equivalents declined $24.7 million to $45.4 million as of February 28, 2021 compared with $70.1 million at February 29, 2020. The decrease in cash was due primarily to higher investments in software and software licenses in fiscal 2021 compared with the prior fiscal year, an increase in cash dividends paid to shareholders, and higher stock repurchases in fiscal 2021 compared with the prior year.
“CSI’s financial position remained very strong at fiscal year-end due to growth in earnings, operating cash flow and no long-term debt. We continued our focused investments in new services and technology to support our future growth. We increased our investments to $24.9 million in fiscal 2021. We also increased our cash returned to shareholders by 137% in fiscal 2021 compared to the prior year. We returned $61.6 million to shareholders in cash dividends and repurchases of common stock during fiscal 2021, including a $1.00 special cash dividend paid to shareholders in December 2020 and a 19.1% increase in our quarterly cash dividend to $0.25 per share,” Powless concluded.
Fourth Quarter Results
For the fourth quarter of fiscal 2021, total revenues rose 3.8% to a record $75.5 million compared with $72.7 million for the fourth quarter of fiscal 2020. Enterprise Banking Group revenues rose 5.2% to $45.5 million for the fourth quarter of fiscal 2021 compared with the fourth quarter of fiscal 2020 and accounted for 60.3% of total revenues for the fourth quarter of fiscal 2021. Business Solutions Group revenues rose 1.7% to $30.0 million compared with the fourth quarter of the prior fiscal year. The growth in revenues benefited from higher sales of core processing, digital banking, payments processing and regulatory compliance services. Early contract termination fees were $0.9 million in the fourth quarter of fiscal 2021 compared with $4.6 million in the fourth quarter of fiscal 2020. Excluding the effect of the early contract termination fees in both periods, fourth quarter revenues increased 9.6% compared with the same quarter of the prior fiscal year.
Operating expenses increased 7.3% to $57.8 million for the fourth quarter of fiscal 2021 compared with $53.8 million for the fourth quarter of fiscal 2020. The increase in operating expenses was due to the impact on the Company’s financial results in the fourth quarter of fiscal 2020 to account for the capitalization of certain costs related to the Company’s adoption of ASC 350-40, Internal-Use Software, and ASC 340-40, Contracts with Customers. The impact of these adoptions reduced operating expenses by approximately $1.2 million for the fourth quarter of fiscal 2021 compared with a $7.2 million reduction for the fourth quarter of fiscal 2020. Excluding the effect of the ASC adoptions on both periods, fourth quarter 2021 operating expenses declined by approximately 3.3% compared with the fourth quarter of fiscal 2020.
Operating income was down 6.3% to $17.7 million for the fourth quarter of fiscal 2021 compared with $18.9 million for the fourth quarter of fiscal 2020. Operating margin was 23.5% for the fourth quarter of fiscal 2021 compared with 26.0% for the fourth quarter of fiscal 2020. The decrease in operating income was attributable to the impact of the ASC adoptions described above in the fourth quarter of fiscal 2020 combined with lower early contract termination fees in the fourth quarter of fiscal 2021 compared with the fourth quarter of fiscal 2020. Excluding those effects, fourth quarter operating income was up substantially in fiscal 2021 compared to the fourth quarter of fiscal 2020.
Income before income taxes declined 7.7% to $17.8 million for the fourth quarter of fiscal 2021 compared with $19.2 million in the fourth quarter of fiscal 2020. Provision for income taxes was $4.3 million in the fourth quarter of 2021 compared with $4.0 million in the fourth quarter of fiscal 2020.
Net income for the fourth quarter of fiscal 2021 declined 11.2% to $13.5 million compared with $15.2 million for the fourth quarter of fiscal 2020. Net income per share decreased 12.5% to $0.49 per share for the fourth quarter of fiscal 2021 compared with $0.56 for the fourth quarter of fiscal 2020. Excluding the effects of the prior year ASC adoptions described above and the year-over-year reduction in early contract termination fees, fourth quarter net income and earnings per share were up substantially in fiscal 2021 compared with the fourth quarter of fiscal 2020.
About Computer Services, Inc.
Computer Services, Inc. (CSI) delivers innovative financial technology and regulatory compliance solutions to financial institutions and corporate customers across the nation. Through a combination of expert service, cutting-edge technology and a customer-first mentality, CSI excels at driving businesses forward in a rapidly changing industry. CSI’s expertise and commitment to authentic alliances has resulted in the company’s inclusion in such top industry-wide rankings as the FinTech 100, American Banker’s Best Fintechs to Work For 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; (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.