SOURCE: Computer Software Innovations, Inc.

Computer Software Innovations, Inc.

March 24, 2011 09:20 ET

Computer Software Innovations, Inc. Announces Fourth Quarter and Year End 2010 Results

EASLEY, SC--(Marketwire - March 24, 2011) - Computer Software Innovations, Inc. (OTCBB: CSWI), CSI Technology Outfitters™ ("CSI") today announced its financial results for the fourth quarter and full year ended December 31, 2010.

Financial Highlights:

  • Revenues of $52.7 million for the 2010 fiscal year, an increase of $0.9 million over 2009;
  • Operating Income of $1.1 million for the 2010 fiscal year, an increase of 9% over 2009;
  • Gross Profit of $10.7 million for the 2010 fiscal year, a decrease of $0.6 million or 5% below 2009;
  • Net Income of $0.5 million for the 2010 fiscal year, an increase of $0.2 million or 56% over 2009.

Financial Results -- Fourth Quarter 2010:

For the quarter ended December 31, 2010, revenues totaled approximately $11.4 million, a slight increase of 0.2% from the fourth quarter of 2009.

Gross profit for the fourth quarter of 2010 was approximately $2.3 million, a decrease of approximately $0.2 million or 7% from the fourth quarter of 2009, primarily from a decrease in the Cloud Services Segment profits with the increased investment in new product offerings and a decrease in Financial Management Applications new license and services sales, partially offset by an increase in Technology Solutions Segment profits with increased engineering services.

Operating loss for the fourth quarter of 2010 was approximately $36 thousand, a decrease of approximately $0.1 million or 147% from the fourth quarter of 2009, driven by the decrease in gross profit.

CSI posted a net loss of $62 thousand for the fourth quarter of 2010, compared to a net loss of $5 thousand for the fourth quarter of 2009, as a result of the decrease in gross profit. 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 $0.6 million for the fourth quarter of 2010, a decrease of approximately $0.1 million or 19% from the fourth quarter of 2009. (EBITDA is a non-GAAP financial measure. See reconciliation to GAAP measure Net Income which follows.)

Financial Results -- Fiscal Year 2010:

CSI posted revenues of approximately $52.7 million for the 2010 fiscal year, an increase of $0.9 million or 2% over the 2009 fiscal year. The increase was driven by a $1.2 million or 3% increase in our Technology Solutions Segment and a $0.1 million increase in our Financial Management Applications Segment, partially offset by a $0.4 million or 28% decrease in our Cloud Services Segment.

CSI's gross profit for the 2010 fiscal year was approximately $10.7 million, a decrease of $0.6 million or 5% below the 2009 fiscal year. This decrease was driven primarily by a decrease in gross profit by the Cloud Services and the Technology Solutions Segments, and partially offset by an increase in gross profit from the Financial Management Applications Segment.

CSI's operating income for the 2010 fiscal year was approximately $1.1 million, an increase of $0.1 million or 9% over the 2009 fiscal year. The increase was due to the impact of the $0.7 million decrease in operating expenses, partially offset by the $0.6 million decrease in gross profit.

Net income for the 2010 fiscal year was approximately $0.5 million or $0.07 per basic share and $0.03 per diluted share, as compared to net income of approximately $0.3 million, or $0.05 per basic share and $0.02 per diluted share for the 2009 fiscal year.

EBITDA, or earnings before interest, income taxes, depreciation and amortization for the 2010 fiscal year was approximately $3.5 million, a slight increase over the 2009 fiscal year. (EBITDA is a non-GAAP financial measure. See reconciliation to GAAP measure Net Income which follows.)

"I am pleased that CSI was able to hold our own and remain profitable during these trying economic times and that we are in an excellent position to grow our business in the years ahead," stated Nancy Hedrick, CEO. "During 2010 we launched our Cloud Services Segment, focusing on our CSI@K12 hosted email and hosted voice for the K-12 market. In 2011 we are continuing to develop these solutions for K-12 and are expanding them into higher education. Our Financial Management Applications Segment continued to do well in 2010 and we are seeing a significant uptick in new software sales in early 2011. And our Technology Solutions Segment remains focused on the 21st Century Connected Classroom while we have also expanded our offerings to include physical security, including IP-based surveillance. Operating system migrations and virtualization are growing components of this segment along with our core technologies, including on-premise IP telephony, network security, wireless technologies, and PC and laptop deployments."

Conference Call Reminder for Today

The Company will host a conference call today, Thursday, March 24, 2011 at 4:15 p.m. Eastern Time to discuss the Company's financial and operational results for year ended December 31, 2010.

Conference Call Details
Date: Thursday, March 24, 2011
Time: 4:15 p.m. (EDT)
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 3 hours after the completion of the call for 30 days, until April 23, 2011. To listen to the replay, dial 1-877-870-5176 if calling within the U.S., 1-858-384-5517 if calling internationally and enter the pass code 4421899.

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 23, 2011 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 throughout the US. The CSI@K12 Education Cloud provides the education community with enterprise class, hosted voice, hosted email and hosted web solutions.

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 four 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 INCOME
(Amounts in thousands, except per share data)   For the Quarter Ended
December 31,
    For the Years Ended
December 31,
 
    2010     2009     2010     2009  
REVENUES                                
  Financial Management Applications Segment   $ 3,180     $ 3,526     $ 13,652     $ 13,585  
  Cloud Services Segment     256       305       954       1,319  
  Technology Solutions Segment     7,946       7,531       38,067       36,913  
    Net sales and service revenue     11,382       11,362       52,673       51,817  
                                 
COST OF SALES                                
  Financial Management Applications Segment                                
  Cost of sales, excluding depreciation, amortization and capitalization     1,932       1,941      
7,566
     
7,448
 
  Depreciation     30       28       117       109  
  Amortization of capitalized software costs     341       322       1,184       1,171  
  Capitalization of software costs     (361 )     (240 )     (1,144 )     (943 )
    Total Financial Management Applications Segment cost of sales     1,942       2,051       7,723       7,785  
                                 
  Cloud Services Segment                                
  Cost of sales, excluding depreciation, amortization and capitalization     385       354      
1,802
     
1,064
 
  Depreciation     24       5       63       12  
  Amortization of capitalized software costs     82       97       324       381  
  Capitalization of software costs     (126 )     (145 )     (613 )     (145 )
    Total Cloud Services Segment cost of sales     365       311       1,576       1,312  
                                 
  Technology Solutions Segment                                
  Cost of sales, excluding depreciation     6,709       6,454       32,536       31,276  
  Depreciation     28       24       103       104  
    Total Technology Solutions Segment cost of sales     6,737       6,478       32,639       31,380  
    Total cost of sales     9,044       8,840       41,938       40,477  
    Gross profit     2,338       2,522       10,735       11,340  
                                 
OPERATING EXPENSES                                
  Research and development     44       59       166       311  
  Selling costs     1,209       1,189       4,572       4,797  
  Marketing costs     131       53       518       425  
  Stock based (non-employee wage) compensation     (1 )     28       48       165  
  Acquisition costs     --       --       --       2  
  Professional and legal compliance costs     44       127       429       505  
  Depreciation and amortization     116       159       550       642  
  Other general and administrative expenses     831       830       3,327       3,457  
    Total operating expenses     2,374       2,445       9,610       10,304  
    Operating (loss) income     (36 )     77       1,125       1,036  
                                 
OTHER EXPENSE                                
  Interest expense     (30 )     (86 )     (231 )     (388 )
  Loss on disposal of property and equipment     (6 )     --       (8 )     (4 )
    Other expense     (36 )     (86 )     (239 )     (392 )
    Income before income taxes     (72 )     (9 )     886       644  
INCOME TAX (BENEFIT) EXPENSE     (10 )     (4 )     433       354  
NET (LOSS) INCOME   $ (62 )   $ (5 )   $ 453     $ 290  
                                 
BASIC (LOSS) EARNINGS PER SHARE   $ (0.01 )   $ --     $ 0.07     $ 0.05  
                                 
DILUTED (LOSS) EARNINGS PER SHARE   $ (0.01 )   $ --     $ 0.03     $ 0.02  
                                 
WEIGHTED AVERAGE SHARES OUTSTANDING:                                
-- Basic     6,545       6,436       6,504       6,401  
                                 
-- Diluted     6,545       6,436       13,899       14,105  
COMPUTER SOFTWARE INNOVATIONS, INC.  
CONSOLIDATED BALANCE SHEETS  
   
(Amounts in thousands) December 31, 2010     December 31, 2009  
ASSETS              
  CURRENT ASSETS              
    Cash and cash equivalents $ 1,578     $ --  
    Accounts receivable, net   8,681       7,587  
    Inventories   558       2,628  
    Prepaid expenses   159       140  
    Taxes receivable   284       32  
      Total current assets   11,260       10,387  
               
  PROPERTY AND EQUIPMENT, net   1,033       732  
  COMPUTER SOFTWARE COSTS, net   2,844       2,573  
  GOODWILL   2,431       2,431  
  OTHER INTANGIBLE ASSETS, net   2,359       2,647  
      Total assets $ 19,927     $ 18,770  
               
               
LIABILITIES AND SHAREHOLDERS' EQUITY              
  CURRENT LIABILITIES              
    Accounts payable $ 2,600     $ 2,229  
    Deferred revenue   8,014       7,790  
    Deferred tax liability   693       445  
    Bank line of credit   --       --  
    Current portion of notes payable   456       505  
    Subordinated notes payable to shareholders   58       1,750  
      Total current liabilities   11,821       12,719  
               
  LONG-TERM DEFERRED TAX LIABILITY, net   226       144  
  NOTES PAYABLE, less current portion   618       --  
  SUBORDINATED NOTES PAYABLE TO SHAREHOLDERS, less current portion   783       --  
      Total liabilities   13,448       12,863  
               
  COMMITMENTS AND CONTINGENCIES              
  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; 6,558 and 6,448 shares issued and outstanding, respectively   7       6  
    Additional paid-in capital   9,249       9,075  
    Accumulated deficit   (2,700 )     (3,153 )
    Unearned stock compensation   (84 )     (28 )
      Total shareholders' equity   6,479       5,907  
        Total liabilities and shareholders' equity $ 19,927     $ 18,770  

 

COMPUTER SOFTWARE INNOVATIONS, INC.
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
 
(Amounts in Thousands)   Common Stock   Preferred Stock   Additional Paid-In Capital     Accumulated Deficit     Unearned Stock Compensation     Total
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
  Issuance of common stocks     1     --     52       --       --       53
  Issuance of stock options     --     --     129       --       (129 )     --
  Exercise of stock options     --     --     5       --       --       5
  Forfeiture of stock options     --     --     (12 )     --       12       --
  Stock based compensation     --     --     --       --       61       61
  Net income for the year ended December 31, 2010     --     --     --       453       --       453
Balances at December 31, 2010   $ 7   $ 7   $ 9,249     $ (2,700 )   $ (84 )   $ 6,479
                                           

 

COMPUTER SOFTWARE INNOVATIONS, INC.  
CONSOLIDATED STATEMENTS OF CASH FLOWS  
   
(Amounts in thousands) For the years ended
December 31,
 
  2010     2009  
OPERATING ACTIVITIES              
  Net income $ 453     $ 290  
  Adjustments to reconcile net income to net cash provided by operating activities              
    Depreciation and amortization   2,341       2,419  
    Stock compensation expense   113       218  
    Deferred income tax expense (benefit)   330       (161 )
    Loss on disposal of property and equipment   8       4  
  Changes in deferred and accrued amounts net of effects from payments for acquisitions              
    Accounts receivable   (1,094 )     6,275  
    Inventories   2,070       (1,076 )
    Prepaid expenses and other assets   (19 )     (42 )
    Accounts payable   371       (1,415 )
    Deferred revenue   224       1,094  
    Income tax receivable   (252 )     191  
      Net cash provided by operating activities   4,545       7,797  
               
INVESTING ACTIVITIES              
  Purchases of property and equipment   (854 )     (350 )
  Proceeds from disposal of property and equipment   --       --  
  Capitalization of computer software   (1,779 )     (1,124 )
  Investment in other intangible assets   --       (32 )
      Net cash used for investing activities   (2,633 )     (1,506 )
               
FINANCING ACTIVITIES              
  Net repayments under line of credit   --       (5,634 )
  Borrowings under notes payable   1,000       --  
  Repayments of notes payable   (1,339 )     (657 )
  Proceeds from exercise of stock options   5       --  
      Net cash used for financing activities   (334 )     (6,291 )
               
      Net change in cash and cash equivalents   1,578       --  
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR   --       --  
CASH AND CASH EQUIVALENTS, END OF YEAR $ 1,578     $ --  
               
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:              
  Cash paid during the year for:              
    Interest $ 243     $ 488  
    Income taxes $ 354     $ 311  

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 EBITDA is provided below:

    Quarter Ended December 31,     Year Ended
December 31,
    2010     2009     2010   2009
Reconciliation of net income per GAAP to EBITDA and Adjusted EBITDA:                            
Net (loss) income per GAAP   $ (62 )   $ (5 )   $ 453   $ 290
  Adjustments:                            
    Income tax (benefit) expense     (10 )     (4 )     433     354
    Interest expense, net     30       86       231     388
    Depreciation and amortization of property, equipment, and intangible assets (excluding software development costs)     198       216       833     867
    Amortization of software development costs     423       419       1,508     1,552
EBITDA     579       712       3,458     3,451
Adjustments to EBITDA to exclude those items excluded in loan covenant calculations:                            
  Stock based compensation (non-cash portion)     (1 )     28       48     165
Adjusted EBITDA   $ 578     $ 740     $ 3,506   $ 3,616

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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