CSI Reports Growth in Revenues and Net Income for Fourth Quarter and Fiscal Year 2022

Rhea-AI Summary

Computer Services, Inc. (CSI) (OTCQX: CSVI) reported robust financial growth for fiscal 2022, concluding with revenues of $316.6 million, an 8.7% increase from $291.3 million in fiscal 2021. Net income reached $61.9 million, up 11.6% from $55.4 million, translating to earnings per share of $2.25. The fourth quarter also showed promising results with revenues climbing 7.2% to $81.0 million and net income rising 23.7% to $16.7 million. CSI plans to invest further in fiscal 2023, expecting a tapering in earnings growth due to higher investments and staffing.

Positive

• 22nd consecutive year of revenue growth.
• 8.7% revenue growth in fiscal 2022.
• 11.6% increase in net income for fiscal 2022.
• Strong fourth quarter revenues up 7.2%.
• Operating income rose 18.6% in Q4.

Negative

• Higher operating expenses rose 8.4% to $237.2 million in fiscal 2022.
• Earnings growth momentum expected to taper in the second half of fiscal 2023.

PADUCAH, Ky.--(BUSINESS WIRE)-- Computer Services, Inc. (CSI) (OTCQX: CSVI) today reported growth in revenues and net income for the fourth quarter and fiscal year, which ended Feb. 28, 2022. CSI’s results for fiscal 2022 marked the Company’s 22^nd consecutive year of revenue growth and 25^th consecutive year of growth in net income.

CSI’s revenues rose 8.7% to $316.6 million in fiscal 2022 compared with $291.3 million for fiscal 2021. Net income for fiscal 2022 was $61.9 million, an 11.6% increase compared with fiscal 2021’s net income of $55.4 million. Net income per share increased 11.9% to $2.25 compared with $2.01 in the prior fiscal year.

Fourth quarter revenues rose 7.2% to $81.0 million in fiscal 2022 compared with $75.5 million in the fourth quarter of fiscal 2021. Net income rose 23.7% to $16.7 million in the fourth quarter of fiscal 2022 compared with $13.5 million in the fourth quarter of fiscal 2021. Net income per share increased 24.5% to $0.61 compared with $0.49 in the prior fiscal year’s fourth quarter.

“We are pleased to report another successful year of growth for CSI,” stated David Culbertson, CSI’s president and CEO. “Our excellent results benefited from increased demand from both our Enterprise Banking and Business Solutions groups.

“Our revenue growth in fiscal 2022 was driven by new accounts coming online, continued demand for digital banking services, increased volume from payments processing and higher demand for our regulatory compliance and managed information technology and cybersecurity services.

“Our industry continues to evolve at a rapid pace, and we plan to accelerate our investments in fiscal 2023 to meet the changing competitive landscape and position CSI for future growth. As a result, we expect earnings growth momentum to taper during the second half of this year based on our planned increase in new investments, higher staffing levels and a return to pre-pandemic travel levels. We remain focused on achieving our strategic objectives of developing a future-ready workforce, making every customer interaction exceptional, accelerating transformational opportunities and raising the visibility of CSI as an innovative fintech organization,” continued Culbertson.

Fiscal 2022 Results

Consolidated revenues rose 8.7% to $316.6 million for fiscal 2022 compared with $291.3 million for fiscal 2021. 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 partially offset by lower contract termination fees and departed business in fiscal 2022 compared with fiscal 2021. Enterprise Banking Group revenues rose 9.9% to $196.6 million in fiscal 2022 compared with fiscal 2021 and accounted for 62.1% of total revenues for fiscal 2022. Business Solutions Group revenues rose 6.8% to $120.1 million compared with the prior fiscal year. Early contract termination fees were $4.7 million for fiscal 2022 compared with $5.8 million for fiscal 2021. 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, consolidated fiscal 2022 revenues increased approximately 9.2% compared with the prior fiscal year.

Operating expenses increased 8.4% to $237.2 million for fiscal 2022 compared with $218.8 million for fiscal 2021. The fiscal 2022 increase in operating expenses was due to higher cost of goods sold on higher related payments processing, digital banking and managed services revenues; increased employee-related expenses due to higher staffing, annual salary adjustments, health insurance expense, profit-sharing plan contributions due to higher earnings growth, and special COVID-19 pandemic-related employee incentives; higher professional fees; and higher travel expenses in comparison to the prior fiscal year due to COVID-19 restrictions.

Operating income rose 9.5% to $79.4 million for fiscal 2022 compared with $72.5 million for fiscal 2021. Operating margin increased to 25.1% for fiscal 2022 compared with 24.9% for fiscal 2021.

Income before income taxes increased 9.1% to $79.6 million for fiscal 2022 compared with $73.0 million for fiscal 2021. The provision for income tax was $17.8 million for fiscal 2022 compared with $17.6 million for fiscal 2021. The increase was due to higher taxable income, partially offset by a lower effective tax rate in fiscal 2022 compared to fiscal 2021.

Net income for fiscal 2022 rose 11.6% to $61.9 million compared with $55.4 million for fiscal 2021. Net income per share increased 11.9% to $2.25 for fiscal 2022 compared with $2.01 for fiscal 2021. The growth rate in earnings per share exceeded the growth rate in net income due to earnings per share rounding and 0.5% net fewer weighted average shares outstanding for fiscal 2022 as a result of shares purchased during fiscal years 2022 and 2021 under the Company’s share repurchase programs.

CSI’s cash flow from operations rose 8.1% to $70.1 million in fiscal 2022 compared with $64.8 million in fiscal 2021. Cash and cash equivalents increased $15.6 million to $61.0 million as of Feb. 28, 2022, compared with $45.4 million at Feb. 28, 2021. The increase in cash was due primarily to higher net income.

Fourth Quarter Results

Consolidated revenues increased 7.2% to $81.0 million in the fourth quarter of fiscal 2022 compared with $75.5 million in the fourth quarter of fiscal 2021. The growth in revenues benefited from higher sales in both the Enterprise Banking and Business Solutions groups, including growth in digital banking, document delivery, regulatory compliance and managed services revenues. Revenue growth also benefited from increased transaction volumes in payments processing in the fourth quarter of fiscal 2022 compared with the fourth quarter of fiscal 2021. The results for the fourth quarter of fiscal 2022 included $1.6 million in early contract termination fees compared with $0.9 million in the fourth quarter of fiscal 2021. Excluding the effect of early contract termination fees in both periods, net revenues increased 6.3% in the fourth quarter of fiscal 2022 compared with the fourth quarter of fiscal 2021. 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 their respective contract terms the customers are acquired.

Operating expenses rose 3.8% to $59.9 million for the fourth quarter of fiscal 2022 compared with $57.8 million for the fourth quarter of fiscal 2021. The increase in operating expenses was related to higher cost of goods from growth in payments processing, document delivery and third-party hardware and software revenues as well as higher profit-sharing plan contributions and professional fees.

Operating income increased 18.6% to $21.0 million for the fourth quarter of fiscal 2022 compared with $17.7 million for the fourth quarter of fiscal 2021. The increase in operating income was primarily due to increased revenues and improved operating margin. Operating margins rose to 26.0% in the fourth quarter of fiscal 2022 compared with 23.5% for the fourth quarter of fiscal 2021. Excluding the effect of early contract termination fees, operating income rose 15.1%, or $2.5 million, in the fourth quarter of fiscal 2022 compared with the fourth quarter of fiscal 2021.

The provision for income tax was $4.2 million for the fourth quarter of fiscal 2022 compared with $4.3 million in the fourth quarter of fiscal 2021. The decline was due to lower effective tax rate for the fourth quarter of fiscal 2022 compared with fiscal 2021.

Net income for the fourth quarter of fiscal 2022 rose 23.7% to $16.7 million compared with $13.5 million for the fourth quarter of fiscal 2021. Net income per share increased 24.5% to $0.61 for the fourth quarter of fiscal 2022 on 27.5 million weighted average shares outstanding compared with $0.49 for the fourth quarter of fiscal 2021 on 27.6 million weighted average shares outstanding.

About Computer Services, Inc.

Computer Services, Inc. (CSI) delivers core processing, digital banking, managed services, payments processing, print and electronic document distribution, and regulatory 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 February 28,							Twelve Months Ended February 28,
	2022				2021			2022			2021
Revenues	$	80,951			$	75,487		$	316,648		$	291,337
Operating expenses		59,937				57,770			237,222			218,825
Operating income		21,014				17,717			79,426			72,512
Non-operating income		(141	)			-			21			37
Interest income, net		45				44			163			443
Income before income taxes		20,916				17,761			79,610			72,992
Provision for income taxes		4,206				4,255			17,754			17,588
Net income	$	16,710			$	13,506		$	61,856		$	55,404
Earnings per common share	$	0.61			$	0.49		$	2.25		$	2.01
Shares used in computing earnings per common share		27,457,554				27,577,758			27,478,117			27,625,040

COMPUTER SERVICES, INC.
Condensed Consolidated Balance Sheets
(in thousands, except share data)
		2/28/2022			2/28/2021
		(Unaudited)			(Audited)
ASSETS
Current assets
Cash		$	60,996		$	45,398
Funds held on behalf of clients			12,263			8,566
Accounts receivable, net			52,991			42,223
Income tax receivable			1,694			932
Deferred contract costs			22,763			18,718
Prepaid expenses and other current assets			12,498			10,917
Total current assets			163,205			126,754
Property and equipment, net			41,412			43,755
Software and software licenses, net			26,438			29,583
Deferred contract costs			129,390			106,936
Goodwill			60,115			60,115
Intangible assets, net			2,682			3,396
Right of use assets			4,931			6,734
Other assets			6,730			7,076
Total assets		$	434,903		$	384,349
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable and accrued expenses		$	24,757		$	20,096
Deferred contract liabilities			62,695			48,763
Deferred revenue			12,690			12,830
Client funding obligation - settlement liabilities			12,263			8,566
Current portion of operating lease liabilities			2,138			2,563
Total current liabilities			114,543			92,818
Long-term liabilities
Deferred income taxes, net			31,546			29,314
Deferred contract liabilities			13,389			11,448
Operating lease liabilities			2,964			4,357
Other liabilities			1,704			1,721
Total long-term liabilities			49,603			46,840
Total liabilities			164,146			139,658
Shareholders' equity
Preferred stock; shares authorized, 5,000,000; none issued
Common stock, no par; 60,000,000 shares authorized; 27,460,955 shares issued at February 28, 2022; 27,565,001 shares issued at February 28, 2021			35,303			32,546
Retained earnings			235,454			211,852
Accumulated other comprehensive income, net			-			293
Total shareholders' equity			270,757			244,691
Total liabilities and shareholders' equity		$	434,903		$	384,349

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20220504005168/en/

Brian K. Brown, CFO

800-545-4274, ext. 10689 or brian.brown@csiweb.com

Source: Computer Services, Inc.

FAQ

What was Computer Services Inc.'s revenue for fiscal 2022?

Computer Services Inc. reported revenues of $316.6 million for fiscal 2022.

How much did net income increase for CSVI in fiscal 2022?

Net income for CSVI increased by 11.6% to $61.9 million in fiscal 2022.

What were the earnings per share for CSVI for fiscal 2022?

Earnings per share for CSVI in fiscal 2022 were $2.25.

What was the revenue growth in Q4 of fiscal 2022 for CSVI?

CSVI experienced a revenue growth of 7.2% in the fourth quarter of fiscal 2022.

What challenges does CSVI anticipate for fiscal 2023?

CSVI expects earnings growth momentum to taper due to planned investments and increased staffing in fiscal 2023.