Computer Services, Inc. (CSI) (OTCQX: CSVI) today reported record revenues and net income for the fiscal third quarter and nine months ended November 30, 2013.
Third quarter revenues rose 7.0% to $53.1 million in fiscal 2014 compared with $49.6 million in the third quarter of fiscal 2013. Third quarter net income increased 1.9% to $6.7 million, and diluted net income per share rose 4.4% to $0.47, compared with $6.6 million, or $0.45 per diluted share, in the third quarter of fiscal 2013.
“CSI marked its 38th consecutive quarter of revenue growth at November 30, 2013,” stated Chief Executive Officer Steven A. Powless. “We benefited from higher processing revenues generated from our core processing customers and higher other revenues due to increased demand for our mobile and Internet banking solutions as well as record transaction volume from our regulatory compliance services.
“We expect to report continued revenue growth in the fourth quarter based on our pipeline of new business, high contract renewal rates and growth in transaction volume,” Powless continued. “We believe CSI is positioned well to drive future revenue growth through our expanded sales and marketing programs. During the first nine months of fiscal 2014, we invested $9.3 million in new hardware and software to support our continued growth in transaction volume. We expect these investments in hardware, software, sales and marketing programs to be major drivers for our continued growth next year.”
During the third quarter, CSI’s Board of Directors declared a cash dividend of $0.16 per share. The dividend was paid on December 26, 2013, to shareholders of record as of the close of business on December 2, 2013.
Third Quarter Results
Third quarter consolidated revenues rose 7.0% to $53.1 million compared with $49.6 million for the third quarter ended November 30, 2012. Processing revenues increased 4.5% to $33.1 million compared with $31.6 million in the third quarter of fiscal 2013. The growth was primarily driven by the addition of new customers, cross-sales to existing customers and increases in transaction volumes from existing customers, partially offset by the effect of lost business. Processing revenues included early contract termination fees of $957,000 for the third quarter and $2.7 million for the first nine months of fiscal 2014 compared with $131,000 for the third quarter and $236,000 for the first nine months of fiscal 2013. A substantial number of the former customers were acquired by non-customer financial institutions.
Other revenues rose 11.5% to $20.0 million in the third quarter of fiscal 2014 and accounted for 37.7% of total revenues compared with $17.9 million, or 36.2% of total revenues, in the third quarter of fiscal 2013. The increase in other revenues was primarily due to growth in mobile and Internet banking services, growth in homeland security and fraud prevention services; higher eBusiness group revenues; and higher forms and envelope revenue.
Third quarter operating income rose 4.1% to $11.1 million compared with $10.6 million in the third quarter of fiscal 2013. Operating margin for the third quarter was 20.9% compared with 21.5% in the third quarter of fiscal 2013. The decrease in operating margin was due primarily to the ramp up of expenses related to our Strategic Growth Initiative launched in fiscal 2012, most of which have been incurred. In addition, expenses increased for equipment and travel related to the build out of our national sales team, increased fees related to growth in our ATM and debit card business, and higher network communications fees compared with the third quarter of last year.
Net income increased 1.9% to $6.7 million in the third quarter compared with $6.6 million in fiscal 2013. Net income per fully diluted share rose 4.4% to $0.47 in the third quarter of fiscal 2014 compared with $0.45 in fiscal 2013. Weighted average diluted shares outstanding were down 2.2% to 14.4 million for the third quarter of fiscal 2014 compared with the same period of fiscal 2013 due primarily to CSI shares repurchased under the Company’s share repurchase program. CSI repurchased 331,892 shares during the first nine months of fiscal 2014, including 118,116 in the third quarter. CSI had approximately $3.9 million available under existing stock purchase authorizations outstanding as of November 30, 2013.
“CSI’s balance sheet remained strong at November 30, 2013, with $3.8 million in cash and no long-term debt,” Powless said. “We used our strong cash flow to return a portion of our earnings to shareholders through cash dividends and repurchases of CSI stock. We also continued to invest in new hardware and software to support our continued growth. During the third quarter, we invested $2.5 million in new equipment and software, and we returned $6.1 million to shareholders in cash dividends and stock repurchases.”
Nine Month Results
Consolidated revenues for the first nine months of fiscal 2014 rose 8.6% to a record $158.8 million compared with $146.2 million for the same period in fiscal 2013. CSI’s increase in revenues represented growth in both processing and other revenues categories.
Operating income rose 6.0% to $31.8 million for the first nine months of fiscal 2014 compared with $30.0 million for the same period in fiscal 2013. Operating margin was 20.0% in the first nine months of fiscal 2014 compared with 20.5% in the same period of fiscal 2013.
Net income for the first nine months of fiscal 2014 rose 3.8% to $19.2 million compared with $18.5 million in the first nine months of fiscal 2013. Net income per diluted share increased 5.6% to $1.33 for the first nine months of fiscal 2014 compared with $1.26 for the same period of fiscal 2013.
About Computer Services, Inc.
Computer Services, Inc. (CSI) 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.