SOURCE: Computer Software Innovations, Inc.
Computer Software Innovations, Inc. Announces Third Quarter 2008 Financial Results
EASLEY, SC--(Marketwire - November 12, 2008) -
-- Software Segment Grows 23.6%
-- Revenues Increase 8.9% to $16.7 Million in Q3 2008 versus $15.4
Million in Q3 2007
-- Revenues of $46.3 Million for Nine Months, up 5.1% Versus $44.1
Million in 2007
-- Nine Months Net Income Steady at $1.9 Million for Q3 2008 and 2007,
with Increased Investment Toward Future Geographic Penetration
-- Shareholders' Equity Improves to $5.9 Million from $2.5 Million at YE
2007
Computer Software Innovations, Inc. (
"We continue to be pleased with current year results. Our top line and margins continued to grow and we are experiencing increased penetration and bolstering our already strong market presence," said Nancy Hedrick, CEO of CSI. "The company is excited that our net income has held steady for the nine months, year over year and we have remained profitable in these challenging economic times."
Financial Results:
Three Month Financial Results for the Period Ended September 30, 2008
CSI posted revenue of approximately $16.7 million for the third quarter ended September 30, 2008, up approximately $1.4 million or 8.9% compared to the third quarter of 2007. CSI experienced significant growth in its software sector in Q3 of $0.6 million or 23.6%, due to increased sales in software services and support. Of the increase, the acquisition of the CSI-Greensboro operations added $0.2 million, while the acquisition of Version3 added $0.1 million, with the remaining $0.3 million from organic growth. Technology revenues increased $0.7 million or 5.9%, primarily from increased sales of infrastructure solutions.
Gross profit for the third quarter of 2008 was approximately $3.3 million, an increase of $0.3 million or 9.7% in comparison with the third quarter of 2007. The increase in gross profit was driven by increased sales in the software segment and increased revenue in the technology segment from increased sales of infrastructure solutions. Increased margin in the technology segment added to the improvement from sales volume. This improvement was partially offset by decreased margins in the software segment from reduced new product sales, primarily of third-party solutions sold. Operating income for the quarter was approximately $0.9 million, a decrease of 17.1% compared to operating income of $1.0 million for the same period in the prior year, from increased investment in a larger, acquired geographic footprint.
CSI posted net income for the quarter ended September 30, 2008 of approximately $0.4 million or $0.08 earnings per basic share and $0.03 earnings per diluted share, compared to net income of approximately $0.7 million and $0.19 earnings per basic share and $0.05 earnings per diluted share for the same period last year.
Earnings before interest, taxes, depreciation and amortization ("EBITDA") decreased $0.1 million to $1.4 million for the quarter ended September 30, 2008. The decrease in EBITDA was primarily due to the decrease in net income over the prior year after adding back the related tax effects of those increases in net income. (EBITDA is a non-GAAP financial measure. See reconciliation to GAAP measure net income (loss) which follows below.)
Nine Month Financial Results for the Period Ended September 30, 2008
CSI posted revenue of approximately $46.3 million, an increase of $2.2 million or 5.1% in comparison with the first nine months of 2007. This net increase included a $2.0 million increase in software applications segment sales, and a $0.3 million increase in technology solutions segment sales. Technology solutions sales increased primarily from increased infrastructure solutions sales, and related engineering services and support, partially offset by reduced sales of interactive whiteboard solutions. The increase in the software applications segment was primarily due to increases in all areas including a small increase in software product sales and larger increases in services, and support. The acquisition of the CSI-Greensboro operations in the second quarter of 2008 added $0.5 million, and the acquisition of Version3 in the third quarter of 2008 added $0.1 million of software revenues, with the remaining $1.4 million increase from organic growth.
Gross profit for the first nine months was approximately $11.0 million, an increase of $1.4 million or 14.5% compared to 2007. The gross margin increased from 21.8% in 2007, to 23.7% in 2008 due to the higher volume of software product sales and shift in product mix in technology to higher margin infrastructure products and engineering services. Operating income for the first nine months was approximately $3.5 million, up slightly compared to the same period in 2007. Net income was $1.9 million or earnings of $0.34 per basic share and $0.15 per diluted share as compared to a net income of $1.9 million or $0.53 per basic share and $0.14 per diluted share for the same period in 2007.
EBITDA increased $0.4 million to $5.0 million for the nine months ended September 30, 2008. The increase in EBITDA was primarily due to the increase in net income over the prior year after adding back the related tax effects of those increases in net income. (EBITDA is a non-GAAP financial measure. See reconciliation to GAAP measure net income (loss) which follows below.)
2008 Key Highlights
-- Completed Acquisition of Version3, Inc. - Developer, provider, and
consultant with respect to solutions that facilitate single sign-on,
application access management, and provisioning based on Microsoft's
Identity Lifecycle Management and Microsoft SharePoint deployments.
-- Completed Acquisition of ICS Systems, Inc. - Developer of fund
accounting software with valuable market experience and increased
penetration into local government market space.
-- CRN's Fast Growth 100 Award - Honor for solution providers that have
seen the most revenue growth in their technology segment in the past two
years. CSI appeared 38th on the list.
-- CRN Fast Growth Education Specialist Award - Honor for fastest growing
technology partner in the education market category.
-- VARBusiness 500 - List of North America's top 500 technology solution
providers according to VAR Business Magazine. CSI vaulted 85 positions to
number 385 based on prior year revenue.
"Once again we increased upon the prior year's revenues by achieving greater account penetration and customer diversification in both segments," continued Ms. Hedrick. "We believe this positions us well to take advantage of an economic recovery and achieve our overall goal of improving shareholder value."
Conference Call Reminder for Today
The Company will host a conference call today, Wednesday, November 12, 2008 at 11:00 a.m. Eastern Standard Time to discuss the Company's financial and operational results for the third quarter 2008, which ended September 30, 2008.
Conference Call Details: Date: Wednesday, November 12, 2008 Time: 11:00 a.m. (EST) Dial-in Number: 1-800-762-8932 International Dial-in Number: 1-480-629-9031
It is recommended that participants phone-in approximately 5 to 10 minutes prior to the start of the 11:00 a.m. call. A replay of the conference call will be available approximately 3 hours after the completion of the call for 7 days, until November 19, 2008. To listen to the replay, dial 1-800-406-7325 if calling within the U.S., 1-303-590-3030 if calling internationally and enter the pass code 3939842.
The call is also being webcast and may be accessed at CSI's website at www.csioutfitters.com. The webcast will be archived and accessible until December 12, 2008 on the Company website.
About Computer Software Innovations, Inc.
CSI provides software and technology solutions primarily to public sector
markets. CSI has more than doubled its revenue in the past two years to
over $55 million in 2007 by using organic growth and acquisitions. Over 600
school, government, and non-profit organizations have CSI solutions that
encompass financial management software specialized for the public sector,
IT infrastructure, IP telephony, IP video surveillance, printing/imaging,
and interactive classroom technologies. More information about CSI (
Forward-Looking and Cautionary Statements
This release contains "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Among other things, these statements relate to our financial condition, results of operations and future business plans, operations, opportunities and prospects. In addition, we and our representatives may from time to time make written or oral forward-looking statements, including statements contained in other filings with the Securities and Exchange Commission and in our reports to stockholders. These forward-looking statements are generally identified by the words or phrases "may," "could," "should," "expect," "anticipate," "plan," "believe," "seek," "estimate," "predict," "project" or words of similar import. These forward-looking statements are based upon our current knowledge and assumptions about future events and involve risks and uncertainties that could cause our actual results, performance or achievements to be materially different from any anticipated results, prospects, performance or achievements expressed or implied by such forward-looking statements. These forward-looking statements are not guarantees of future performance. Many factors are beyond our ability to control or predict. You are accordingly cautioned not to place undue reliance on such forward-looking statements, which speak only as of the date that we make them. We do not undertake to update any forward-looking statement that may be made from time to time by or on our behalf.
In our most recent Form 10-K, we have included risk factors and uncertainties that might cause differences between anticipated and actual future results. We have attempted to identify, in context, some of the factors that we currently believe may cause actual future experience and results to differ from our current expectations regarding the relevant matter or subject area. The operations and results of our software and systems integration businesses also may be subject to the effects of other risks and uncertainties, including, but not limited to:
-- a reduction in anticipated sales;
-- an inability to perform customer contracts at anticipated cost levels;
-- our ability to otherwise meet the operating goals established by our
business plan;
-- market acceptance of our new software, technology and services
offerings;
-- an economic downturn; and
-- changes in the competitive marketplace and/or customer requirements.
COMPUTER SOFTWARE INNOVATIONS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Three Months Ended Nine Months Ended
---------------------- -----------------------
September September September September
30, 2008 30, 2007 30, 2008 30, 2007
---------- ---------- ----------- ----------
REVENUES
Software applications
segment $3,255,588 $2,633,513 $10,119,487 $8,167,675
Technology solutions
segment 13,466,559 12,718,474 36,216,169 35,937,339
---------- ---------- ----------- ----------
Net sales and
service revenue 16,722,147 15,351,987 46,335,656 44,105,014
COST OF SALES
Software applications
segment
Cost of sales,
excluding
depreciation,
amortization and
capitalization 1,805,212 1,391,169 5,456,316 4,471,764
Depreciation 29,365 15,121 81,037 46,040
Amortization of
capitalized software
costs 345,589 287,238 943,591 785,560
Capitalization of
software costs (240,848) (278,137) (740,369) (713,991)
---------- ---------- ----------- ----------
Total Software
applications segment
cost of sales 1,939,318 1,415,391 5,740,575 4,589,373
---------- ---------- ----------- ----------
Technology solutions
segment
Cost of sales, excluding
depreciation 11,410,289 10,867,366 29,512,931 29,846,606
Depreciation 31,164 22,682 90,104 66,416
---------- ---------- ----------- ----------
Total Technology
solutions segment
cost of sales 11,441,453 10,890,048 29,603,035 29,913,022
---------- ---------- ----------- ----------
Total cost of sales 13,380,771 12,305,439 35,343,610 34,502,395
---------- ---------- ----------- ----------
Gross profit 3,341,376 3,046,548 10,992,046 9,602,619
OPERATING EXPENSES
Salaries, wages and
benefits 1,499,274 1,318,941 4,622,588 3,776,507
Stock based compensation 4,691 1,496 14,074 92,308
Acquisition expenses 13,428 89 46,272 8,636
Compliance related costs 102,683 42,053 336,837 422,809
Sales consulting fees 48,000 68,054 166,502 164,054
Marketing costs 43,386 28,242 158,425 101,554
Travel and mobile costs 227,564 157,014 578,488 447,623
Depreciation and
amortization 141,015 94,195 369,435 274,943
Other selling, general
and administrative
expenses 396,508 293,454 1,194,180 860,712
---------- ---------- ----------- ----------
Total operating
expenses 2,476,549 2,003,538 7,486,801 6,149,146
---------- ---------- ----------- ----------
Operating income 864,827 1,043,010 3,505,245 3,453,473
OTHER INCOME (EXPENSE)
Interest income -- 9,850 100 12,613
Interest expense (144,182) (133,298) (407,204) (419,353)
Loss on disposal of
property and equipment (4,125) -- (4,125) (1,218)
---------- ---------- ----------- ----------
Net other income
(expense) (148,307) (123,448) (411,229) (407,958)
---------- ---------- ----------- ----------
Income before income
taxes 716,520 919,562 3,094,016 3,045,515
INCOME TAX EXPENSE 268,803 228,780 1,206,918 1,166,769
---------- ---------- ----------- ----------
NET INCOME $ 447,717 $ 690,782 $ 1,887,098 $1,878,746
========== ========== =========== ==========
BASIC EARNINGS PER SHARE $ 0.08 $ 0.19 $ 0.34 $ 0.53
========== ========== =========== ==========
DILUTED EARNINGS PER SHARE $ 0.03 $ 0.05 $ 0.15 $ 0.14
========== ========== =========== ==========
WEIGHTED AVERAGE SHARES
OUTSTANDING:
Basic 5,555,216 3,572,503 5,055,911 3,535,607
========== ========== =========== ==========
Diluted 13,191,846 13,257,601 12,438,400 13,251,489
========== ========== =========== ==========
COMPUTER SOFTWARE INNOVATIONS, INC.
CONSOLIDATED BALANCE SHEETS
September 30,
2008 December 31,
(Unaudited) 2007
------------ ------------
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ -- $ --
Accounts receivable, net 15,012,692 8,697,036
Inventories 2,138,337 470,485
Prepaid expenses 115,267 42,832
Taxes receivable 115,242 177,147
------------ ------------
Total current assets 17,381,538 9,387,500
PROPERTY AND EQUIPMENT, net 1,458,323 1,316,713
COMPUTER SOFTWARE COSTS, net 2,945,366 2,162,717
DEFERRED TAX ASSET 283,016 263,324
GOODWILL 2,430,437 1,480,587
OTHER INTANGIBLE ASSETS, net 2,730,632 1,574,809
------------ ------------
Total assets $ 27,229,312 $ 16,185,650
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 6,397,146 $ 4,023,936
Taxes payable -- --
Deferred revenue 4,850,007 5,323,889
Deferred tax liability 475,094 469,046
Current portion of notes payable 300,303 283,187
Subordinated notes payable to shareholders 1,950,400 2,250,400
------------ ------------
Total current liabilities 13,972,950 12,350,458
------------ ------------
NOTES PAYABLE, less current portion 537,007 763,717
BANK LINE OF CREDIT 6,792,000 575,000
------------ ------------
Total liabilities 21,301,957 13,689,175
------------ ------------
SHAREHOLDERS' EQUITY (DEFICIT)
Preferred stock - $0.001 par value;
15,000,000 shares authorized; 6,859,736
shares issued and outstanding 6,860 6,860
Common stock - $0.001 par value; 40,000,000
shares authorized; 6,261,204 and 4,698,970
shares issued and outstanding, respectively 6,261 4,699
Additional paid-in capital 8,893,122 7,400,939
Accumulated deficit (2,897,621) (4,784,719)
Unearned stock compensation (81,267) (131,304)
------------ ------------
Total shareholders' equity 5,927,355 2,496,475
------------ ------------
Total liabilities and shareholders'
equity $ 27,229,312 $ 16,185,650
============ ============
Non-GAAP Financial Measure: Explanation and Reconciliation of EBITDA and Adjusted EBITDA
EBITDA is a non-GAAP financial measure used by management, lenders and certain investors as a supplemental measure in the evaluation of some aspects of a corporation's financial position and core operating performance. Investors sometimes use EBITDA as it allows for some level of comparability of profitability trends between those businesses differing as to capital structure and capital intensity by removing the impacts of depreciation and amortization. EBITDA also does not include changes in major working capital items such as receivables, inventory and payables, which can also indicate a significant need for, or source of, cash. Since decisions regarding capital investment and financing and changes in working capital components can have a significant impact on cash flow, EBITDA is not a good indicator of a business's cash flows. We use EBITDA for evaluating the relative underlying performance of the Company's core operations and for planning purposes, including a review of this indicator and discussion of potential targets in the preparation of annual operating budgets. We calculate EBITDA by adjusting net income or loss to exclude net interest expense, income tax expense or benefit, depreciation and amortization, thus the term "Earnings Before Interest, Taxes, Depreciation and Amortization" and the acronym "EBITDA."
EBITDA is presented as additional information because management believes it to be a useful supplemental analytic measure of financial performance of our core business, and as it is frequently requested by sophisticated investors. However, management recognizes it is no substitute for GAAP measures and should not be relied upon as an indicator of financial performance separate from GAAP measures (as discussed further below).
"Adjusted EBITDA" or "Financing EBITDA" is a non-GAAP financial measure used in our calculation and determination of compliance with debt covenants related to our bank credit facilities. Adjusted EBITDA is also used as a representation as to how EBITDA might be adjusted by potential lenders for financing decisions and our ability to service debt. However, such decisions would not exclude those other items impacting cash flow which are excluded from EBITDA, as noted above. Adjusted EBITDA is defined as net income or loss adjusted for net interest expense, income tax expense or benefit, depreciation, amortization, and also certain additional items allowed to be excluded from our debt covenant calculation including other non-cash items such as operating non-cash compensation expense (such as stock-based compensation), and the Company's initial reorganization or restructuring related costs, unrealized gain or loss on financial instrument (non-cash related) and gain or loss on the disposal of fixed assets. While we evaluate the Company's performance against debt covenants on this basis, investors should not presume the excluded items to be one-time costs. If the Company were to enter into additional capital transactions, for example, in connection with a significant acquisition or merger, similar costs could reoccur. In addition, the ongoing impact of those costs would be considered in, and potential financings based on, projections of future operating performance which would include the impact of financing such costs.
We believe the presentation of Adjusted EBITDA is important as an indicator of our ability to obtain additional financing for the business, not only for working capital purposes, but particularly as acquisitions are anticipated as a part of our growth strategy. Accordingly, a significant part of our success may rely on our ability to finance acquisitions.
When evaluating EBITDA and Adjusted EBITDA, investors should consider, among other things, increasing and decreasing trends in both measures and how they compare to levels of debt and interest expense, ongoing investing activities, other financing activities and changes in working capital needs. Moreover, these measures should not be construed as alternatives to net income (as an indicator of operating performance) or cash flows (as a measure of liquidity) as determined in accordance with GAAP.
While some investors use EBITDA to compare between companies with different investment and capital structures, all companies do not calculate EBITDA or Adjusted EBITDA in the same manner. Accordingly, the EBITDA and Adjusted EBITDA measures presented below may not be comparable to similarly titled measures of other companies.
A reconciliation of Net Income reported under GAAP to EBITDA and Adjusted (Financing) EBITDA is provided below:
Three Months Nine Months
Ended Ended
September 30, September 30,
--------------- ---------------
Amounts in thousands 2008 2007 2008 2007
------- ------- ------- -------
Reconciliation of Net income (loss) per
GAAP to EBITDA and Adjusted (Financing)
EBITDA:
Net income (loss) per GAAP $ 447 $ 691 $ 1,887 $ 1,879
Adjustments:
Income tax expense (benefit) 269 229 1,206 1,167
Interest expense, net 144 123 407 407
Depreciation and amortization of fixed
assets and trademarks 202 132 541 387
Amortization of software development costs 346 287 944 786
------- ------- ------- -------
EBITDA $ 1,408 $ 1,462 $ 4,985 $ 4,626
------- ------- ------- -------
Adjustments to EBITDA to exclude
those items in loan covenant
calculations:
Stock based compensation
(non-cash portion) 5 2 14 92
------- ------- ------- -------
Adjusted (Financing) EBITDA $ 1,413 $ 1,464 $ 4,999 $ 4,718
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