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Second quarter revenues rose 2.2% to $37.2 million in fiscal 2010 compared with $36.4 million in the second quarter of fiscal 2009. Net income rose 17.0% to $5.2 million, and net income per diluted share increased 25.5% to $0.69 compared with the prior year's second quarter.
"This was CSI's 22nd consecutive quarter of improved revenues and net income," stated President and Chief Executive Officer Steven A. Powless. "Our continued growth in revenue and net income is primarily due to growth in electronic payments transactions, cross-sales across the company's broadened suite of products and services to the financial services industry, and good expense controls."
Second Quarter Results
Second quarter consolidated revenues rose 2.2% to $37.2 million compared with $36.4 million in the second quarter ended August 31, 2008. Processing revenues increased to $26.9 million and accounted for approximately 72.3% of total revenues compared with $26.4 million, or 72.6% of total revenues, in the second quarter of last year. The growth is processing revenues benefitted from higher transaction revenue, including card services, offset partially by revenue lost from customers that were acquired and moved off the CSI platform and lower fees from check imaging services as customers migrated to remote check image capture, including those sold by CSI. Other revenues rose 3.2% to $10.3 million in the second quarter of fiscal 2010 compared with $10.0 million in the second quarter of fiscal 2009. Other revenue increased in the second quarter due to higher telecommunications revenues and network monitoring and eBusiness services.
"CSI's revenue base has benefitted from the long-term nature of our contracts and the high retention rates of our accounts," continued Mr. Powless. "These factors have insulated CSI somewhat from the soft economy over the past year.
"The soft economy has had a more direct impact on IT spending, particularly in the financial services sector. Although our core bank customers have been less affected by the problems reported by the larger money center banks, they have cut back on capital purchases and signing new contracts for services while their industry remains under pressure. Our outlook for the remainder of fiscal 2010 is cautious, but we expect our sales to improve as the economy strengthens."
Second quarter operating income rose 16.5% to $8.6 million compared with $7.4 million in the second quarter of the prior year. Operating margin for the second quarter increased to 23.0% compared with 20.2% in the second quarter of fiscal 2009. The growth in CSI's operating margin was due to higher sales, improved product mix and lower operating expenses. Total operating expenses declined 1.4% to $28.7 million, or 77.0% of revenues, compared with $29.1 million, or 79.8% of revenues in the second quarter of last year.
"Our reduced operating expenses highlight our continued focus on cost controls throughout CSI. In particular, we have been able to trim expenses by consolidating data center operations as our customers migrate to branch and remote capture technology. We have also experienced lower cost of goods sold due to lower equipment and maintenance sales during the second quarter."
Net income rose 17.0% to a record $5.2 million compared with $4.4 million in the prior-year period. Net income per fully diluted share was up 25.5% to $0.69 compared with $0.55 in the same quarter last year. Weighted average shares outstanding were down 5.8% to 7.6 million since last year primarily due to shares repurchased through CSI's stock repurchase program.
"CSI's financial condition remains strong due to our excellent cash flow and balance sheet management," reported Mr. Powless. "In the first two quarters of this fiscal year, our cash position has grown by $4.7 million, we paid down debt of $2 million, and we repurchased $1.8 million of CSI stock," concluded Mr. Powless.
Six Month Results
Consolidated revenues for the first six months of fiscal 2010 rose 2.7% to a record $74.0 million compared with $72.1 million for the same period in fiscal 2009. CSI's growth in revenues benefited from higher processing revenues and higher other revenues.
Operating income rose 13.6% to $16.8 million for the first six months of fiscal 2010 compared with $14.8 million for the same period last year. Operating margin rose to 22.7% in the first six months of fiscal 2010 compared with 20.5% in the same period of fiscal 2009 due to higher sales, improved product mix and lower operating expenses. Total operating expenses were down slightly from last year to $57.3 million due to good expense controls.
Net income for the first six months of fiscal 2010 rose 14.1% to $10.2 million compared with $8.9 million in the first six months of fiscal 2009. Net income per diluted share increased 22.7% to $1.35 for the latest six month period compared with $1.10 for the same period last year. The fiscal 2009 results include a minority interest of $12,000 related to a net loss in Heartland. There was no comparable minority interest in fiscal 2010 since the remaining minority interest in Heartland was purchased by CSI effective June 1, 2008.
About Computer Services, Inc.
Computer Services, Inc. (CSI) delivers core banking, payments processing, Internet, card services, risk assessment, fraud prevention, network management, and regulatory compliance solutions to over 4,600 financial institutions and corporate entities. Technology planning, local account managers and world-class customer service explain why CSI has come to be known as one of the nation's premier providers of banking solutions. CSI's stock is traded on the 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 Information and Disclosure Statements and other documents posted from time to time on the OTCQX website, 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. CSI undertakes no obligation to update, and is not responsible for updating, the information contained in this release 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.
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(in thousands, except per share data)
Three Months Ended Six Months Ended
Aug. 31, Aug. 31, Aug. 31, Aug. 31,
2009 2008 2009 2008
------- ------- ------- -------
Revenues $37,207 $36,411 $74,036 $72,109
Expenses 28,633 29,051 57,265 57,348
------- ------- ------- -------
Income before other income
(expense) 8,574 7,360 16,771 14,761
Other income (expense), net (39) (65) (80) (159)
------- ------- ------- -------
Income before taxes and minority
interest 8,535 7,295 16,691 14,602
Provision for income taxes 3,329 2,845 6,510 5,694
------- ------- ------- -------
Net income before minority
interest 5,206 4,450 10,181 8,908
Minority interest - - - 12
------- ------- ------- -------
Net income $5,206 $4,450 $10,181 $8,920
======= ======= ======= =======
Earnings per share, assuming
dilution $0.69 $0.55 $1.35 $1.10
======= ======= ======= =======
Weighted average common shares
outstanding, assuming dilution 7,558 8,020 7,566 8,106
CONSOLIDATED BALANCE SHEETS
(in thousands)
8/31/2009 2/28/2009
Unaudited Audited
--------- ---------
ASSETS
Cash and cash equivalents $5,983 $1,320
Other current assets 21,465 23,206
Property and equipment, net 28,080 28,357
Software and software licenses, net 14,369 14,905
Goodwill and other intangible assets 37,792 38,002
Other assets 2,774 2,895
--------- ---------
Total assets $110,463 $108,685
========= =========
LIABILITIES & SHAREHOLDERS' EQUITY
Current liabilities $15,648 $15,365
Other liabilities 4,021 4,087
Notes payable, long-term 3,000 5,000
--------- ---------
Total liabilities 22,669 24,452
Shareholders' equity 87,794 84,233
--------- ---------
Total liabilities and shareholders' equity $110,463 $108,685
========= =========
SOURCE Computer Services, Inc.
http://www.csiweb.com
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