SOURCE: Computer Software Innovations, Inc.

Computer Software Innovations, Inc.

March 30, 2010 09:00 ET

Computer Software Innovations, Inc. Announces Fourth Quarter and Year End 2009 Results

EASLEY, SC--(Marketwire - March 30, 2010) - Computer Software Innovations, Inc. (OTCBB: CSWI), CSI Technology Outfitters™ ("CSI") today announced its financial results for the fourth quarter and year ended December 31, 2009.

Financial Highlights:

--  Product mix and cost control efforts improve Q4 2009 gross profit $0.7
    million or 39%  against  single-digit decline in sales.
--  Q4 2009 operating income and net loss improved by $0.5 million over Q4
    2008.
--  Q4 2009 EBITDA increased $0.6 million or 488% over Q4 2008.
--  Improved Q4 results compared to prior year's Q4 hold 2009 in profitable
    territory.
--  Year 2009 Software Applications Segment revenues improve 10%, reducing
    the impact of challenging spending environment in 2009 on Technology
    Solutions.

Financial Results - Fourth Quarter 2009:

For the quarter ended December 31, 2009, revenues totaled approximately $11.3 million, a decrease of approximately $1.0 million or 8% from the fourth quarter of 2008, primarily from a decrease in infrastructure sales within our Technology Solutions Segment.

Gross profit for the fourth quarter of 2009 was approximately $2.5 million, an increase of approximately $0.7 million or 39% over the fourth quarter of 2008, primarily from improved product mix with increased recurring revenues in our software segment and higher margin engineering and delivery services in our technology segment.

Operating income for the fourth quarter of 2009 was approximately $0.1 million, an increase of approximately $0.5 million or 116% over the fourth quarter of 2008, driven by the improvement in gross profit.

CSI posted a net loss of approximately $7 thousand for the fourth quarter of 2009, compared to a net loss of $0.5 million for the fourth quarter of 2008. Due to the seasonality of CSI's business, the fourth and first quarters are traditionally the lowest performing quarters in its fiscal year.

CSI's EBITDA was approximately $0.7 million for the fourth quarter of 2009, an increase of approximately $0.6 million or 488% over the fourth quarter of 2008. (EBITDA is a non-GAAP financial measure. See reconciliation to GAAP measure Net Income which follows.)

Nancy Hedrick, Chief Executive Officer of CSI, stated, "We are pleased with a near break-even performance for what is traditionally one of our two lowest quarters, and compared to a significant loss in the same period of the prior year. Our performance over the last nine months is evidence of our team's ability to come back from an initial loss position and achieve profitability in a challenging economic environment."

Financial Results - Fiscal Year 2009:

For the year ended December 31, 2009, revenues totaled $51.8 million, a decrease of $6.9 million or 12% from the 2008 fiscal year. The decrease was driven by an 18% decrease in our Technology Solutions Segment, primarily from lower infrastructure solutions sales and services, partially offset by a 10% increase in our Software Applications Segment, from increasing recurring revenues and added revenues from our acquisitions in the spring and summer of 2008.

Gross profit for 2009 was approximately $11.3 million, a decrease of $1.5 million or 12% from the 2008 fiscal year, primarily from the decrease in technology solutions sales, partially offset by an improvement in software applications gross profit.

Operating income for 2009 was approximately $1.0 million: a decrease of approximately $2.0 million or 66% compared to the 2008 fiscal year, primarily from the decline in gross profit and increased research and development spending in the software segment related to new product development which management believes will benefit future periods.

Net income for 2009 was approximately $0.3 million or $0.05 per basic share and $0.02 per diluted share, as compared to net income of approximately $1.3 million, or $0.25 per basic share and $0.11 per diluted share for the 2008 fiscal year.

EBITDA, or earnings before interest, income taxes, depreciation and amortization for 2009 was approximately $3.5 million, a decrease of $1.6 million or 32% compared to the 2008 fiscal year. (EBITDA is a non-GAAP financial measure. See reconciliation to GAAP measure Net Income which follows.)

"While 2009 proved to be a challenging year, we are pleased to have ended profitably. Without any acquisitions aligning, we took the opportunity to use our improved cash flow from operations to pay down our revolving loan. This has put us in a solid financial position as we move further into 2010, with continued caution," stated Nancy Hedrick, CEO. "CSI finished the latter half of 2009 with improved profitability and EBITDA that exceeded our expectations. This performance was a demonstration of the hard work and dedication of our team to persevere through adverse economic conditions. While the timing and impact of any recovery on our marketplace and the impact on our top-line remains uncertain, we are encouraged by the continued interest we have seen in our solutions in Q1 2010, despite a challenging budget environment for our government and education customer base. Due to this and our cost reduction efforts, we believe our bottom-line results for Q1 2010 will be improved over the prior year, much as we saw for the fourth quarter for 2009 compared to the 2008 fourth quarter."

Conference Call Reminder for Today

The Company will host a conference call today, Tuesday, March 30, 2010 at 4:15 Eastern Time to discuss the Company's financial and operational results for year ended December 31, 2009.

Conference Call Details
Date: Tuesday, March 30, 2010
Time: 4:15 p.m. (EST)
Dial-in Number: 1-877-941-8418
International Dial-in Number: 1-480-629-9809

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 3 hours after the completion of the call for 30 days, until April 29, 2010. 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 4265639.

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 April 29, 2010 on the Company website.

About Computer Software Innovations, Inc.

CSI provides software and technology solutions to public sector markets. CSI software solutions have established the Company as a major software provider in the southeast education market including through its award winning financial management solutions for the education and local government market sectors. CSI's Version3 products, which include identity and access management and cloud-based communication and collaboration solutions expand CSI's presence beyond the southeast and internationally.

The CSI 21st Century Connected School solution has established the Company as a major technology provider to the southeast education market. CSI 21st Century Connected School is a seamless integration of instruction, collaboration, and network solutions. CSI financial management applications and the 21st Century Connected School solutions have been a significant factor in nearly doubling company revenue in the past three years to over $50 million and increasing education revenue contribution to approximately 90% of total revenue.

The CSI solution portfolio encompasses proprietary financial management software specialized for the public sector, lesson planning and identity and access management software, cloud-based communication and collaboration solutions, SharePoint development, network infrastructure and end device solutions, IP telephony and IP convergence applications, network management solutions and managed services, and interactive classroom technologies. More information about CSI (OTCBB: CSWI) is available at www.csioutfitters.com.

Financial Tables to Follow

                    COMPUTER SOFTWARE INNOVATIONS, INC.
                  CONSOLIDATED STATEMENTS OF OPERATIONS

(Amounts in thousands, except per    For the Quarter      For the Years
 share data)                        Ended December 31,  Ended December 31,
                                    ------------------  ------------------
                                      2009      2008      2009      2008
                                    --------  --------  --------  --------
REVENUES
  Software Applications Segment     $  4,222  $  3,440  $ 14,904  $ 13,559
  Technology Solutions Segment         7,140     8,928    36,913    45,144
                                    --------  --------  --------  --------
    Net sales and service revenue     11,362    12,368    51,817    58,703

COST OF SALES
  Software Applications Segment
  Cost of sales, excluding
   depreciation, amortization and
   capitalization                      2,595     2,016     8,512     7,473
  Depreciation                            34        30       121       110
  Amortization of capitalized
   software costs                        419       437     1,552     1,381
  Capitalization of software costs      (386)     (179)   (1,088)     (919)
                                    --------  --------  --------  --------
    Total Software Applications
     Segment cost of sales             2,662     2,304     9,097     8,045

  Technology Solutions Segment
  Cost of sales, excluding
   depreciation                        6,155     8,208    31,276    37,721
  Depreciation                            25        29       104       119
                                    --------  --------  --------  --------
    Total Technology Solutions
     Segment cost of sales             6,180     8,238    31,380    37,840
                                    --------  --------  --------  --------
    Total cost of sales                8,842    10,542    40,477    45,885
                                    --------  --------  --------  --------
    Gross profit                       2,520     1,826    11,340    12,818

OPERATING EXPENSES
  Research and development                59        --       311        --
  Selling costs                        1,188     1,163     4,797     4,693
  Marketing costs                         53       134       425       438
  Stock based (non-employee wage)
   compensation                           28         5       165        19
  Acquisition costs                       --         7         2        53
  Professional and legal compliance
   costs                                 127        96       505       434
  Depreciation and amortization          158       176       642       546
  Other general and administrative
   expenses                              831       724     3,457     3,608
                                    --------  --------  --------  --------
    Total operating expenses           2,444     2,305    10,304     9,791
                                    --------  --------  --------  --------
    Operating income (loss)               76      (479)    1,036     3,027

OTHER INCOME (EXPENSE)
  Interest income                         --        --        --         1
  Interest expense                       (86)     (166)     (388)     (574)
  Loss on disposal of property and
   equipment                              --       (72)       (4)      (76)
                                    --------  --------  --------  --------
    Net other expense                    (86)     (238)     (392)     (649)
                                    --------  --------  --------  --------
    Income before income taxes           (10)     (717)      644     2,378
INCOME TAX EXPENSE (BENEFIT)              (3)     (170)      354     1,036
                                    --------  --------  --------  --------
NET INCOME (LOSS)                   $     (7) $   (547) $    290  $  1,342
                                    ========  ========  ========  ========

BASIC EARNINGS (LOSS) PER SHARE     $     --  $  (0.03) $   0.05  $   0.25
                                    ========  ========  ========  ========

DILUTED EARNINGS (LOSS) PER SHARE   $     --  $  (0.03) $   0.02  $   0.11
                                    ========  ========  ========  ========

WEIGHTED AVERAGE SHARES
 OUTSTANDING:
-- Basic                               6,436     6,435     6,401     5,380
                                    ========  ========  ========  ========

-- Diluted                            14,139    14,029    14,105    12,661
                                    ========  ========  ========  ========







                    COMPUTER SOFTWARE INNOVATIONS, INC.
                        CONSOLIDATED BALANCE SHEETS


(Amounts in thousands)                December 31, 2009  December 31, 2008
                                      -----------------  -----------------
ASSETS
  CURRENT ASSETS
    Cash and cash equivalents         $              --  $              --
    Accounts receivable, net                      7,587             13,862
    Inventories                                   2,628              1,552
    Prepaid expenses                                140                 98
    Taxes receivable                                 32                223
                                      -----------------  -----------------
      Total current assets                       10,387             15,735

  PROPERTY AND EQUIPMENT, net                       732                898
  COMPUTER SOFTWARE COSTS, net                    2,573              3,001
  GOODWILL                                        2,431              2,431
  OTHER INTANGIBLE ASSETS, net                    2,647              2,970
                                      -----------------  -----------------
        Total assets                  $          18,770  $          25,035
                                      =================  =================


LIABILITIES AND SHAREHOLDERS' EQUITY
  CURRENT LIABILITIES
    Accounts payable                  $           2,229  $           3,644
    Deferred revenue                              7,790              6,696
    Deferred tax liability                          445                421
    Current portion of notes payable                505                447
    Subordinated notes payable to
     shareholders                                 1,750              1,950
                                      -----------------  -----------------
      Total current liabilities                  12,719             13,158

  LONG-TERM DEFERRED TAX LIABILITY,
   net                                              144                329
  NOTES PAYABLE, less current portion                --                515
  BANK LINE OF CREDIT                                --              5,634
                                      -----------------  -----------------
      Total liabilities                          12,863             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; 6,448
     and 6,381 shares issued and
     outstanding, respectively                        6                  6
    Additional paid-in capital                    9,075              8,884
    Accumulated deficit                          (3,153)            (3,443)
    Unearned stock compensation                     (28)               (55)
                                      -----------------  -----------------
      Total shareholders' equity                  5,907              5,399
                                      -----------------  -----------------
        Total liabilities and
         shareholders' equity         $          18,770  $          25,035
                                      =================  =================










                    COMPUTER SOFTWARE INNOVATIONS, INC.
        CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY


                                                        Unearned
                                   Additional            Stock
(Amounts in      Common   Preferred Paid-In  Accumulated Compens-
 thousands)       Stock     Stock   Capital   Deficit    ation      Total
                --------- --------- --------  --------  --------  ---------
Balances at
 December 31,
 2007           $       5 $       7 $  7,401  $ (4,785) $   (131) $   2,497
                --------- --------- --------  --------  --------  ---------
  Issuance of
   common
   stock, ICS
   acquisition         --        --      230        --        --        230
  Issuance of
   common
   stock,
   Version3
   acquisition          1        --    1,243        --        --      1,244
  Issuance of
   stock options       --        --       19        --       (19)        --
  Forfeiture of
   stock options       --        --       (9)       --         9         --
  Stock based
   compensation        --        --       --        --        86         86
  Net income
   for the year
   ended
   December 31,
   2008                --        --       --     1,342        --      1,342
                --------- --------- --------  --------  --------  ---------
Balances at
 December 31,
 2008                   6         7    8,884    (3,443)      (55)     5,399
                --------- --------- --------  --------  --------  ---------
  Issuance of
   common stock        --        --       46        --        --         46
  Issuance of
   stock options       --        --       51        --       (51)        --
  Issuance of
   warrants, DC
   Consulting          --        --       94        --        --         94
  Stock based
   compensation        --        --       --        --        78         78
  Net income
   for the year
   ended
   December 31,
   2009                --        --       --       290        --        290
                --------- --------- --------  --------  --------  ---------
Balances at
 December 31,
 2009           $       6 $       7 $  9,075  $ (3,153) $    (28) $   5,907
                ========= ========= ========  ========  ========  =========








                    COMPUTER SOFTWARE INNOVATIONS, INC.
                  CONSOLIDATED STATEMENTS OF CASH FLOWS


(Amounts in thousands)                    For the Years Ended December 31,
                                          --------------------------------
                                                2009             2008
                                          ---------------  ---------------
OPERATING ACTIVITIES
   Net income                             $           290  $         1,342
   Adjustments to reconcile net income to
    net cash provided by (used for)
    operating activities
      Depreciation and amortization                 2,419            2,156
      Stock compensation expense                      218               86
      Deferred income tax benefit                    (161)             (77)
      Loss on disposal of property and
       equipment                                        4               76
   Changes in deferred and accrued
    amounts net of effects from Payments
    for acquisitions
      Accounts receivable                           6,275           (5,165)
      Inventories                                  (1,076)          (1,077)
      Prepaid expenses and other assets               (42)             (55)
      Accounts payable                             (1,415)            (386)
      Deferred revenue                              1,094            1,235
      Income tax receivable                           191              (46)
                                          ---------------  ---------------
        Net cash provided by (used for)
         operating activities                       7,797           (1,911)
                                          ---------------  ---------------

INVESTING ACTIVITIES
   Purchases of property and equipment               (350)            (594)
   Proceeds from disposal of property and
    equipment                                          --              449
   Capitalization of computer software             (1,124)          (1,067)
   Purchase of computer software                      (32)              --
   Payments for acquisitions                           --           (1,551)
                                          ---------------  ---------------
        Net cash used for investing
         activities                                (1,506)          (2,763)
                                          ---------------  ---------------

FINANCING ACTIVITIES
   Net borrowings (repayments) under line
    of credit                                      (5,634)           5,059
   Borrowings under notes payable                      --              666
   Repayments of notes payable                       (657)          (1,051)
                                          ---------------  ---------------
        Net cash (used for) provided by
         financing activities                      (6,291)           4,674
                                          ---------------  ---------------

        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                            $           488  $           577
      Income taxes                        $           311  $         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:

                    Quarter Ended December 31,    Year Ended December 31,
                        2009          2008          2009          2008
                    ------------  ------------  ------------- -------------
Reconciliation of
 net income (loss)
 per GAAP to EBITDA
 and Adjusted
 (Financing)
 EBITDA:
Net income (loss)
 per GAAP           $         (5) $       (545) $         290 $       1,342
  Adjustments:
    Income tax
     expense
     (benefit)                (3)         (170)           354         1,036
    Interest expense,
     net                      86           166            388           574
    Depreciation and
     amortization of
     property,
     equipment, and
     intangible
     assets
     (excluding
     software
     development
     costs)                  216           235            867           775
    Amortization of
     software
     development
     costs                   419           437          1,552         1,381
                    ------------  ------------  ------------- -------------
EBITDA                       713           123          3,451         5,108
                    ------------  ------------  ------------- -------------
Adjustments to
 EBITDA to exclude
 those items
 excluded in loan
 covenant
 calculations:
  Stock based
   compensation
   (non-cash
   portion)                   28             5            165            19
                    ------------  ------------  ------------- -------------
Adjusted
 (Financing) EBITDA $        741  $        128  $       3,616 $       5,127
                    ------------  ------------  ------------- -------------

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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