CSI Reports Record Fiscal Year 2016 Results

PADUCAH, Ky., May 3, 2016 /PRNewswire/ -- Computer Services, Inc. (CSI) (OTCQX: CSVI) today reported record revenues and net income for the fiscal year ended February 29, 2016. CSI's record results for fiscal 2016 marked the company's 16^th consecutive year of revenue growth and 19^th consecutive year of growth in net income.

CSI's revenues for fiscal 2016 were a record $224.7 million and rose 1.5% compared with $221.4 million for fiscal 2015. Net income for fiscal 2016 was a record $29.1 million, a 4.7% increase compared with fiscal 2015 income of $27.8 million. Net income per fully diluted share increased 5.1% to $2.07 compared with $1.97 in the prior fiscal year. 

Fourth quarter revenues rose 3.7% to a record $57.3 million in fiscal 2016 compared with $55.3 million in the fourth quarter of fiscal 2015. Net income increased 16.5% to $7.8 million, or $0.56 per fully diluted share, in the fourth quarter of fiscal 2016 compared with $6.7 million, or $0.48 per fully diluted share, in the fourth quarter of fiscal 2015. 

"We closed out fiscal 2016 with growth in revenues, net income and cash dividends paid to shareholders," stated Steven A. Powless, CEO of CSI. "Our excellent results benefited from new account sales, cross-sales to existing customers and a 100% retention rate on core processing contracts up for renewal in fiscal 2016. We did not lose a single core processing account to a competitor, excluding bank acquisitions, and our new business activity demonstrates that we are winning customers from our competitors. We are very pleased with our strong renewals and believe they highlight our customers' high satisfaction with CSI and their confidence in our ability to deliver innovative services that support their future growth."

Fiscal 2016 Results

Consolidated revenues rose 1.5% to $224.7 million for fiscal 2016 compared with $221.4 million for fiscal 2015. CSI's growth in revenues reflects new customers added since last year, cross-sales to existing customers, and increased transaction volume. Processing revenues rose 1.6% to $142.8 million for fiscal 2016 compared with $140.5 million for fiscal 2015. The growth in processing revenues included record sales to new customers, cross-sales to existing customers and increases in transaction volumes from existing customers, partially offset by the lost revenue from CSI customers that were acquired by non-CSI customers. Processing revenues included early contract termination fees of $5.4 million in fiscal 2016 compared to $3.0 million in fiscal 2015. Termination fees do not fully offset the lost revenue from customers acquired by non-customers. Other revenues increased 1.3% to $81.9 million for fiscal 2016 compared with $80.9 million for fiscal 2015. The increase in other revenues was due primarily to growth in homeland security, anti-money laundering, and fraud prevention services, print and mail, electronic delivery services, mobile and Internet banking, and cloud-based managed services.

"We expect continued growth in fiscal 2017 based on new contracts signed, the high renewal rate from existing customers and growth in cross sales," Powless stated. "We also expect our progress in the first half of fiscal 2017 to be offset by the trailing effect of lost revenue from certain CSI customers that were acquired by non-CSI customers. Last year's revenues and net income benefited from one-time early contract termination fees of $4.3 million in the first half of 2016 that we do not expect to repeat in the first half of 2017. Despite these headwinds, we expect revenue and earnings growth in the second half of fiscal 2017 to result in modest growth for the whole year."

Operating expenses rose 0.6% to $176.6 million in fiscal 2016 compared with fiscal 2015. The increase in operating expenses was due primarily to higher depreciation, amortization and maintenance expenses on equipment, software and software licenses, as well as slightly higher employee-related expenses in fiscal 2016 compared to fiscal 2015. Operating expenses were offset partially by lower cost of goods sold on lower related software, hardware and maintenance revenue, as well as savings realized from expense management initiatives that reduced data communication, travel and general expenses compared to fiscal 2015.

Operating income rose 5.0% to $48.1 million in fiscal 2016 compared with $45.8 million in fiscal 2015. Operating margin increased to 21.4% in fiscal 2016 compared with 20.7% fiscal 2015. 

Net income for fiscal 2016 rose 4.7% to $29.1 million compared with $27.8 million for fiscal 2015. Net income per fully diluted share increased 5.1% to $2.07 for fiscal 2016 compared with $1.97 for fiscal 2015. CSI's higher growth rate in per-share earnings benefited from shares repurchased since the prior year. Weighted average fully diluted shares outstanding declined 0.4% from fiscal year 2015 due to CSI shares repurchased under the company's stock repurchase program. CSI repurchased 159,574 shares of its stock in fiscal 2016.

CSI's cash flow from operations rose to $45.1 million in fiscal 2016. Cash and cash equivalents increased to $17.4 million at February 29, 2016.

"CSI's financial position remains strong as highlighted by our growth in cash flow from operations that allowed us to increase our investments in hardware, software and new product development compared with the prior year.  We also increased our cash dividends paid to shareholders in fiscal 2016, our 44^th consecutive year of increasing our cash dividends," Powless said. "During fiscal 2016, we returned $13.3 million to shareholders in cash dividends and $6.3 million in stock repurchases. We also invested $19.9 million in new property, equipment, hardware and software during fiscal 2016 to support our continued growth."

Fourth Quarter Results

Fourth quarter consolidated revenues rose 3.7% to a record $57.3 million compared with $55.3 million for the fourth quarter ended February 28, 2015. The growth in revenues benefited from new customers added since last year, higher cross-sales of Internet and mobile banking products and increased transaction volume, partially offset by the effect of CSI customers that were acquired. Processing revenues increased 2.2% to $36.1 million in the fourth quarter of fiscal 2016 compared with $35.4 million in the fourth quarter of fiscal 2015. Processing revenues included early contract termination fees of $1.3 million for the fourth quarter of fiscal 2016 compared with $0.9 million for the fourth quarter of fiscal 2015. Other revenues were up 6.5% to $21.2 million in the fourth quarter of fiscal 2016 compared with $19.9 million in the fourth quarter of fiscal 2015.

Fourth quarter 2016 operating expenses decreased 0.2% to $44.4 million compared with $44.5 million in the fourth quarter of 2015. The decrease in operating expenses was due partly to retirements and lower medical plan expenses. 

Operating income for the fourth quarter rose 19.9% to $12.9 million in fiscal 2016 compared with $10.8 million in fiscal 2015. Operating margins increased to 22.5% in the fourth quarter of fiscal 2016 compared with 19.5% in the fourth quarter of fiscal 2015. The increase in CSI's operating margin was due primarily to higher revenue and lower expenses compared with the prior year.

Income before taxes increased 20.1% to $12.9 million in the fourth quarter of fiscal 2016 compared with $10.8 million in the same quarter of fiscal 2015. Provision for income taxes increased to $5.1 million in the fourth quarter of fiscal 2016 compared with $4.0 million in the fourth quarter of fiscal 2015. The effective income tax rate was 39.5% in the fourth quarter of fiscal 2016 compared with 37.6% in the fourth quarter of fiscal 2015.

Net income for the fourth quarter of fiscal 2016 was $7.8 million, or $0.56 per fully diluted share, compared with $6.7 million, or $0.48 per fully diluted share, for the fourth quarter of fiscal 2015. The increase in net income benefited from higher revenue and lower expenses compared with the prior year.

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 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; and (iii) other factors discussed in CSI's Annual Reports, Quarterly Reports, Information and Disclosure Statements and other documents posted from time to time on the OTCQX website (available either at www.otcmarkets.com or 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. 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.

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SOURCE Computer Services, Inc.

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