CSI Reports Record Revenues and Net Income for First Quarter

Revenues Increase 8.5% to $76.7 Million

Net Income Per Share Rises 2.0% to $0.52

Computer Services, Inc. (CSI) (OTCQX: CSVI) today reported growth in revenues and net income for the first quarter of fiscal 2022, which ended May 31, 2021.

CSI’s revenues rose 8.5% to a record $76.7 million for the first quarter of fiscal 2022 compared with $70.6 million for the first quarter of fiscal 2021. First quarter net income rose 1.8% to a record $14.4 million compared with $14.2 million for the first quarter of fiscal 2021. Net income per share rose 2.0% to $0.52 compared with $0.51 for the first quarter of fiscal 2021.

“CSI’s first quarter reflected continued growth from our Enterprise Banking and Business Solutions Groups,” stated Steven A. Powless, chairman and CEO of CSI. “We benefited from increased demand for digital banking services, increased volume from payments processing due to relaxed COVID-19 restrictions, and higher demand for our regulatory compliance and network services. Our revenue base is enhanced by the high percentage of recurring revenues from long-term contracts and the high renewal rates from existing customers.

“We expect our second quarter’s results to be similar to those in the first quarter and to pick up momentum in the second half of fiscal 2022. We expect higher sales and net income in the second half due to new banks coming online for our core services in our Enterprise Banking Group, and increased demand for our products and services from our Business Solutions Group.

“CSI had record new account sales in fiscal 2021 for core customers and demand remains strong as we enter fiscal 2022. We expect the new core customers to strengthen our recurring revenue base as they are brought online. We remain very positive about CSI’s continued growth based on our sales momentum and stronger demand in a post pandemic economy. We also expect to benefit from our strategic initiative program that is focused on developing a future-ready workforce, making every customer interaction exceptional, accelerating transformational opportunities, and raising the visibility of CSI as an innovative fintech organization. We believe we have excellent opportunities to diversify and expand our revenue base through these initiatives,” continued Powless.

First Quarter Results

Consolidated revenues increased 8.5% to $76.7 million in the first quarter of fiscal 2022 compared with $70.6 million in the first 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 and regulatory compliance services. Revenue growth also benefited from increased transaction volumes in payments processing due to the recovery in the first quarter of fiscal 2022 of the suppression of transaction volumes attributable to the COVID-19 pandemic economic environment in the first quarter of fiscal 2021. The results for the first quarter of fiscal 2022 included $601,000 in early contract termination fees compared with $2.9 million in the first quarter of fiscal 2021. Excluding the effect of early contract termination fees, net revenues increased 12.2% in the first quarter of fiscal 2022 compared with the first quarter of fiscal 2021. The 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 the contract term a customer is acquired.

Operating expenses were up 11.4% to $57.9 million for the first quarter of fiscal 2022 compared with $51.9 million for the first quarter of fiscal 2021. The increase in operating expenses was related to higher personnel expenses associated with staffing to meet growing demand and typical annual salary adjustments, higher health insurance expenses and special COVID-19 pandemic-related employee incentives. Expenses were also up due to higher profit-sharing plan contributions related to anticipated growth in the second half of fiscal 2022, higher cost of goods on higher related payments processing and digital banking revenues, higher software amortization expense due to new capital investments and higher professional fees, partially offset by lower travel expenses. During the quarter, CSI also invested in an engagement with a top tier strategy consulting firm to provide an outside perspective on strategic opportunities and in-depth market, competitor and customer insights.

Operating income increased 0.5% to $18.8 million for the first quarter of fiscal 2022 compared with $18.7 million for the first quarter of fiscal 2021. The increase in operating income was due to increased payments processing and digital banking revenues that were partially offset by a decrease in early contract termination fees and higher personnel expenses. Operating margins were 24.5% in the first quarter of fiscal 2022 compared with 26.5% for the first quarter of fiscal 2021.

The provision for income tax was $4.4 million for the first quarter of fiscal 2022 compared with $4.7 million in the first quarter of fiscal 2021. The decrease was due to a lower effective tax rate in the first quarter of fiscal 2022 compared with the first quarter of fiscal 2021.

Net income for the first quarter of fiscal 2022 rose 1.8% to $14.4 million compared with $14.2 million for the first quarter of fiscal 2021. Net income per share increased 2.0% to $0.52 for the first quarter of fiscal 2022 on 27.5 million weighted average shares outstanding compared with $0.51 for the first quarter of fiscal 2021 on 27.7 million weighted average shares outstanding.

CSI’s cash flow from operations increased 6.6% to $23.9 million in the first quarter of fiscal 2022 compared with $22.4 million in the first quarter of fiscal 2021. Cash and cash equivalents rose 18.5% to $53.8 million as of May 31, 2021, from $45.4 million as of February 28, 2021.

“CSI’s balance sheet remains strong with increased cash and no long-term debt,” Powless commented. “We continue to invest our strong cash flow in new product development, our infrastructure and long-term shareholder value through our cash dividend program and stock repurchases. We invested approximately $2.0 million in property and software during the first quarter of fiscal 2022 following significant investments we made over the past year to support our continued growth.

“We returned $12.5 million to shareholders in the first quarter of fiscal 2022, up 75.6% from $7.1 million in the first quarter of last fiscal year. Cash dividend payments rose 18.4% to $6.9 million compared with the first quarter of fiscal 2021 and marked our 49th consecutive year of increased dividends paid to CSI shareholders. We also increased our stock repurchases in the first quarter of fiscal 2022 to $5.7 million, a 325% increase from the prior year’s first quarter,” concluded Powless.

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 MSPmentor Top 501 Global Managed Service Providers lists. CSI has also been recognized by Aite Group, a leading industry research firm, as providing the “best user experience” in its 2019 AIM Evaluation: The Leading Providers of U.S. Core Banking Systems. In addition, CSI's record of increasing its dividend each year for 49 years has earned it a designation as one of the financial media’s “Dividend Aristocrats.”

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.

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