Published: November 16, 2009
Computer Software Innovations, Inc. Announces Record Revenues for Third Quarter 2009 Financial Results
Computer Software Innovations, Inc. (OTCBB: CSWI), CSI Technology Outfitters(TM) ("CSI") today announced its financial
results for the third quarter and nine months ended September 30, 2009.
Financial Highlights:
-- Software Segment Grows 20.9% in Q3 2009
-- Revenues Increased 6.5% to quarterly record $17.8 Million in Q3 2009
versus $16.7 Million in Q3 2008
-- Gross Profit Increased 13% to $3.8 Million in Q3 2009
-- Net Income Increased 62.9% to $0.7 Million in Q3 2009
"We were able to continue the momentum from second quarter and are pleased
with our third quarter results. We saw top line growth while also
improving our margins in our software segment and being profitable in our
software and technology segments," said Nancy Hedrick, CEO of CSI. "Our
team has worked hard to achieve these results under very challenging
economic conditions. And we expect fourth quarter bottom line performance
better than the prior year, as a result of our earlier cost containment
efforts effected at the end of the second quarter."
Financial Results:
Three Month Financial Results for the Period Ended September 30, 2009
CSI posted revenue of approximately $17.8 million for the third quarter
ended September 30, 2009, up approximately $1.1 million or 6.5% compared to
the third quarter of 2008. CSI experienced significant growth in its
software sector in Q3 of $0.7 million or 20.9%, due to increased new
product sales and support. Technology revenues increased $0.4 million or
3.0%, primarily from increased sales in interactive classroom solutions,
interactive classroom installations, third party warranties, and technology
support.
Gross profit for the third quarter of 2009 was approximately $3.8 million,
an increase of $0.4 million, or 13%, compared to the same period of the
prior year. The increase was due primarily from an increase in gross profit
from the software segment from increased new product sales and support, and
a slight increase in gross profit from the technology segment primarily
from increased interactive classroom solutions sales.
Operating income for the third quarter of 2009 was approximately $1.3
million, an increase of $0.5 million, or 55%, compared to the same period
of the prior year. The increase came from the increase in gross profit
coupled with a slight decrease in operating expenses primarily due to a
reduction in workforce in May of 2009.
CSI posted net income for the quarter ended September 30, 2009 of
approximately $0.7 million, or $0.11 earnings per basic share and $0.05
earnings per diluted share, compared to a net income of approximately $0.4
million or $0.08 earnings per basic share and $0.03 earnings per diluted
share for the same period last year.
Earnings before interest, taxes, depreciation and amortization ("EBITDA")
were approximately $2.0 million, an increase of $0.6 million or 39.1%. The
increase in EBITDA was primarily due to the increase in net income over the
prior year after adding back the related tax effects on the increases in
net income. (EBITDA is a non-GAAP financial measure. See reconciliation to
GAAP measure net income which follows below.)
Nine Month Financial Results for the Period Ended September 30, 2009
CSI posted revenue of approximately $40.5 million for the nine months ended
September 30, 2009, a decrease of $5.9 million or 13% compared with the
same period of the prior year. The decrease was due to a decrease in
technology revenues, partially offset by an increase in software revenues
over the same period of the prior year. The improvement in software
revenues was due primarily to increases in services and support and
increased revenues from the acquisition of Version3, offset by a decrease
in new product sales. The decrease in technology revenues was due primarily
to a decrease in interactive classroom solutions, infrastructure solutions,
and engineering, also driven by reductions in education spending in most
other hardware categories. These decreases were partially offset by
increases in third party warranties and technology support.
Gross profit for the first nine months was approximately $8.8 million, a
decrease of $2.2 million, or 19.9% compared to the prior year. The decline
was due primarily to a decline in technology segment revenues coupled with
a significant portion of personnel costs being fixed and the addition of
acquired businesses with traditionally lower margins and increased
amortization, and lower new and third-party product sales in the software
segment.
Operating income for the first nine months was approximately $1.0 million,
a decrease of $2.5 million, or 73% compared to the same period of the prior
year. The decline for the nine months was driven primarily by the decrease
in gross profit and margins coupled with increased research and development
in the Version3 acquired operations, and selling and marketing costs.
CSI posted net income in the first nine months of approximately $0.3
million, or $0.05 earnings per basic share and $0.02 earning per diluted
share, compared to a net income of $1.9 million, or $0.37 earnings per
basic share and $0.15 earnings per diluted share for the same period last
year.
EBITDA decreased 45% or $2.2 million to $2.7 million for the nine months
ended September 30, 2009 compared to EBITDA of $5.0 million reported for
the same period in 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 on the decreases in net income. (EBITDA is a non-GAAP financial
measure. See reconciliation to GAAP measure net income which follows
below.)
Conference Call Reminder for Today
The Company will host a conference call today, Monday, November 16, 2009 at
4:15 Eastern Time to discuss the Company's financial and operational
results for third quarter 2009, which ended September 30, 2009.
Conference Call Details
Date: Monday, November 16, 2009
Time: 4:15 p.m. (EST)
Dial-in Number: 1-877-941-8416
International Dial-in Number: 1-480-629-9808
It is recommended that participants phone-in approximately 5 to 10 minutes
prior to the start of the 4:15 p.m. call. A replay of the conference call
will be available approximately three hours after the completion of the
call for 30 days, until December 15, 2009. 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 4176697.
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 15, 2009 on the Company website.
About Computer Software Innovations, Inc.
CSI provides software and technology solutions to public sector markets.
CSI has more than doubled its revenue in the past two years to over $58
million by using organic growth and acquisitions. The CSI solution
portfolio encompasses proprietary accounting software specialized for the
public sector, lesson planning and identity lifecycle management software,
SharePoint development, network infrastructure and end device solutions, IP
telephony and IP convergence applications, network management solutions and
services, and interactive classroom technologies. More information about
CSI (OTCBB: CSWI) is available at www.csioutfitters.com.
COMPUTER SOFTWARE INNOVATIONS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(Amounts in thousands,
except per share data) Three Months Ended Nine Months Ended
---------------------- ----------------------
September September September September
30, 2009 30, 2008 30, 2009 30, 2008
---------- ---------- ---------- ----------
REVENUES
Software applications
segment $ 3,936 $ 3,256 $ 11,073 $ 10,120
Technology solutions
segment 13,869 13,466 29,382 36,216
---------- ---------- ---------- ----------
Net sales and service
revenue 17,805 16,722 40,455 46,336
COST OF SALES
Software applications
segment
Cost of sales, excluding
depreciation,
amortization and
capitalization 1,991 1,805 6,216 5,456
Depreciation 30 29 88 81
Amortization of
capitalized software
costs 398 346 1,133 944
Capitalization of
software costs (240) (240) (702) (740)
---------- ---------- ---------- ----------
Total Software
applications segment
cost of sales 2,179 1,940 6,735 5,741
---------- ---------- ---------- ----------
Technology solutions
segment
Cost of sales, excluding
depreciation 11,815 11,410 24,823 29,513
Depreciation 26 31 79 90
---------- ---------- ---------- ----------
Total Technology
solutions segment cost
of sales 11,841 11,441 24,902 29,603
---------- ---------- ---------- ----------
Total cost of sales 14,020 13,381 31,637 35,344
---------- ---------- ---------- ----------
Gross profit 3,785 3,341 8,818 10,992
OPERATING EXPENSES
Research and development 85 -- 252 --
Selling costs 1,164 1,140 3,608 3,144
Marketing costs 77 107 372 304
Stock based (non-employee
wage) compensation 29 5 137 14
Acquisition costs -- 13 2 46
Professional and legal
compliance costs 133 103 378 337
Depreciation and
amortization 160 141 483 369
Other general and
administrative expenses 793 967 2,627 3,273
---------- ---------- ---------- ----------
Total operating expenses 2,441 2,476 7,859 7,487
---------- ---------- ---------- ----------
Operating income 1,344 865 959 3,505
OTHER EXPENSE
Interest expense 95 144 302 407
Loss on disposal of
property and equipment -- 4 4 4
---------- ---------- ---------- ----------
Other expense 95 148 306 411
---------- ---------- ---------- ----------
Income before income
tax expense 1,249 717 653 3,094
INCOME TAX EXPENSE 519 269 358 1,207
---------- ---------- ---------- ----------
NET INCOME $ 730 $ 448 $ 295 $ 1,887
========== ========== ========== ==========
BASIC EARNINGS PER SHARE $ 0.11 $ 0.08 $ 0.05 $ 0.37
========== ========== ========== ==========
DILUTED EARNINGS PER SHARE $ 0.05 $ 0.03 $ 0.02 $ 0.15
========== ========== ========== ==========
WEIGHTED AVERAGE SHARES
OUTSTANDING:
- Basic 6,405 5,555 6,391 5,056
========== ========== ========== ==========
- Diluted 14,095 13,192 14,081 12,438
========== ========== ========== ==========
COMPUTER SOFTWARE INNOVATIONS, INC.
CONSOLIDATED BALANCE SHEETS
September 30,
2009 December 31,
(Amounts in thousands) (Unaudited) 2008
------------ ------------
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ -- $ --
Accounts receivable, net 10,556 13,862
Inventories 2,886 1,552
Prepaid expenses 186 98
Income taxes receivable -- 223
------------ ------------
Total current assets 13,628 15,735
PROPERTY AND EQUIPMENT, net 744 898
COMPUTER SOFTWARE COSTS, net 2,600 3,001
GOODWILL 2,431 2,431
OTHER INTANGIBLE ASSETS, net 2,737 2,970
------------ ------------
Total assets $ 22,140 $ 25,035
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 4,355 $ 3,644
Deferred revenue 6,174 6,696
Deferred tax liability 406 421
Income taxes payable 143 --
Bank line of credit 2,708 --
Current portion of notes payable 469 447
Subordinated notes payable to shareholders 1,750 1,950
------------ ------------
Total current liabilities 16,005 13,158
------------ ------------
LONG-TERM DEFERRED TAX LIABILITY, net 111 329
NOTES PAYABLE, less current portion 152 515
BANK LINE OF CREDIT -- 5,634
------------ ------------
Total liabilities 16,268 19,636
------------ ------------
SHAREHOLDERS' EQUITY
Preferred stock - $0.001 par value; 15,000
shares authorized; 6,740 shares issued and
outstanding 7 7
Common stock - $0.001 par value; 40,000
shares authorized; 6,422 shares issued and
outstanding 6 6
Additional paid-in capital 9,057 8,884
Accumulated deficit (3,148) (3,443)
Unearned stock compensation (50) (55)
------------ ------------
Total shareholders' equity 5,872 5,399
------------ ------------
Total liabilities and shareholders'
equity $ 22,140 $ 25,035
============ ============
COMPUTER SOFTWARE INNOVATIONS, INC.
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
(UNAUDITED)
Additional Unearned
(Amounts in Common Preferred Paid-In Accumulated Stock
thousands) Stock Stock Capital Deficit Compensation Total
------- ------- --------- -------- -------- -------
Balances at
December 31, 2008 $ 6 $ 7 $ 8,884 $ (3,443) $ (55) $ 5,399
Issuance of stock
options -- -- 51 -- (51) --
Issuance of common
stock -- -- 28 -- -- 28
Issuance of
warrants -- -- 94 -- -- 94
Stock based
compensation -- -- -- -- 56 56
Net income for the
nine months ended
September 30, 2009 -- -- -- 295 -- 295
------- ------- --------- -------- -------- -------
Balances at
September 30, 2009 $ 6 $ 7 $ 9,057 $ (3,148) $ (50) $ 5,872
======= ======= ========= ======== ======== =======
COMPUTER SOFTWARE INNOVATIONS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(Amounts in thousands) Nine Months Ended
--------------------
September September
30, 30,
2009 2008
--------- ---------
OPERATING ACTIVITIES
Net income $ 295 $ 1,887
Adjustments to reconcile net income to net cash
provided by (used for) operating activities
Depreciation and amortization 1,783 1,484
Stock compensation expense, net 178 69
Deferred income tax expense (234) (14)
Loss on disposal of fixed assets 4 4
Changes in deferred and accrued amounts
Accounts receivable 3,306 (6,316)
Inventories (1,334) (1,663)
Prepaid expenses (88) (72)
Accounts payable 711 2,368
Deferred revenue (522) (610)
Income taxes receivable/payable 366 62
--------- ---------
Net cash provided by (used for) operating
activities 4,465 (2,801)
--------- ---------
INVESTING ACTIVITIES
Purchases of property and equipment (234) (493)
Capitalization of computer software (732) (862)
Investment in other intangible assets (32) --
Payment for acquisitions -- (1,551)
--------- ---------
Net cash used for investing activities (998) (2,906)
--------- ---------
FINANCING ACTIVITIES
Net (repayments) borrowings under line of credit (2,926) 6,217
Repayments of notes payable (541) (510)
--------- ---------
Net cash (used for) provided by financing
activities (3,467) 5,707
--------- ---------
Net change in cash and cash equivalents -- --
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD -- --
--------- ---------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ -- $ --
========= =========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest $ 395 $ 477
Income Taxes $ 211 $ 1,159
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,
--------------- ---------------
2009 2008 2009 2008
------- ------- ------- -------
Reconciliation of net income per GAAP to
EBITDA and Adjusted (Financing) EBITDA:
Net income per GAAP $ 730 $ 448 $ 295 $ 1,887
Adjustments:
Income tax expense (benefit) 519 269 358 1,207
Interest expense, net 95 144 302 407
Depreciation and amortization of
property and equipment and
intangible assets (excluding
Software development) 216 201 650 540
Amortization of software development
costs 398 346 1,133 944
------- ------- ------- -------
EBITDA $ 1,958 $ 1,408 $ 2,738 $ 4,985
------- ------- ------- -------
Adjustments to EBITDA to exclude those
items excluded in loan covenant
calculations:
Stock based compensation (non-cash
portion) 29 5 137 14
------- ------- ------- -------
Adjusted (Financing) EBITDA $ 1,987 $ 1,413 $ 2,875 $ 4,999
------- ------- ------- -------
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 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.
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