PADUCAH, Ky. (May 4, 2022) – 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 22nd consecutive year of revenue growth and 25th 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.