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8-K - FORM 8-K - Computer Software Innovations, Inc.d323842d8k.htm

Exhibit 99.1

 

LOGO

COMPUTER SOFTWARE INNOVATIONS, INC. ANNOUNCES FOURTH QUARTER AND YEAR END 2011 RESULTS

Easley, SC – (MARKET WIRE) – March 26, 2012 – Computer Software Innovations, Inc. (OTCBB: CSWI.OB), CSI Technology Outfitters(TM) (“CSI”) today announced its financial results for the fourth quarter and full year ended December 31, 2011.

Financial Highlights:

 

   

Revenues of $55.1 million for the 2011 fiscal year, an increase of $2.4 million or 5% over 2010;

 

   

Gross Profit of $10.7 million for the 2011 fiscal year, flat compared to 2010;

 

   

Operating Income of $0.4 million for the 2011 fiscal year, a decrease of $0.7 million or 65% below 2010;

 

   

Net Income of $0.2 million for the 2011 fiscal year, a decrease of $0.3 million or 46% below 2010.

Financial Results – Fourth Quarter 2011:

CSI posted revenues for the fourth quarter of 2011 of approximately $14.2 million, an increase of $2.8 million or 25% over the fourth quarter of 2010. The increase was due to a $0.3 million or 10% increase in our Financial Management Applications Segment primarily from increased support revenues, a $0.1 million or 21% increase in our Cloud Services Segment from increased Cloud Email and VoIP solutions revenues, and a $2.5 million or 31% increase in our Technology Solutions Segment from increased interactive classroom and infrastructure product and related services revenues.

CSI’s gross profit for the fourth quarter of 2011 was approximately $2.6 million, an increase of $0.3 million or 13% over the fourth quarter of 2010. The increase was driven by an increase in gross profit of $0.6 million or 52% in our Technology Solutions Segment from increased sales, partially offset by a decrease of $0.1 million in our Financial Management Applications Segment from increased development costs, and a $0.2 million decrease in our Cloud Services Segment from increased costs related to the start-up of Cloud VoIP.

CSI’s operating loss for the fourth quarter of 2011 was approximately $(0.1) million, an increase in operating loss of less than $(0.1) million or 131% over the fourth quarter of 2010.

CSI posted a net loss for the fourth quarter of 2011 of approximately $(0.2) million, an increase in the net loss of $(0.1) million or 192% over the fourth quarter of 2011. Due to the seasonality of CSI’s business, the fourth and first quarters are traditionally the lowest performing quarters in its fiscal year.

EBITDA, or earnings before interest, income taxes, depreciation and amortization for the fourth quarter of 2011 was approximately $0.6 million, flat compared to the fourth quarter of 2010. (EBITDA is a non-GAAP financial measure. See reconciliation to GAAP measure Net Income which follows.)

Financial Results – Fiscal Year 2011:

CSI posted revenues of approximately $55.1 million for the 2011 fiscal year, an increase of $2.4 million or 5% over the 2010 fiscal year. The increase was driven by a $2.1 million or 6% increase in our Technology Solutions Segment from increased infrastructure product and services revenues, a $0.2 million or 23% increase in our Cloud Services Segment from increased Cloud Email and VoIP solutions revenues and a slight increase in our Financial Management Applications Segment from increased support revenues.

CSI’s gross profit for the 2011 fiscal year was approximately $10.7 million, a slight decrease (0.3%) compared to the prior year. By segment, there was a gross profit increase of $1.2 million for the Technology Solutions Segment from increased sales, offset by a decrease of $0.6 million in the Financial Management Applications Segment from increased development costs and a $0.6 million decrease in the Cloud Services Segments from Cloud VoIP start-up costs.

CSI’s operating income for the 2011 fiscal year was approximately $0.4 million, a decrease of $0.7 million or 65% below the 2010 fiscal year. The decrease was driven by a $0.7 million increase in operating expenses related to increased selling costs within the Technology Solutions Segment and increased operational compliance costs related to the Cloud Services Segment.

Net income for the 2011 fiscal year was approximately $0.2 million or $0.04 per basic share and $0.02 per diluted share, as compared to net income of approximately $0.5 million, or $0.07 per basic share and $0.03 per diluted share for the 2010 fiscal year.

 

Page 1 of 8


EBITDA, or earnings before interest, income taxes, depreciation and amortization for the 2011 fiscal year was approximately $2.7 million, a decrease of $0.7 million or 21% below the 2010 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 remain profitable in 2011 and we are in an excellent position to grow our business in 2012,” stated Nancy Hedrick, CEO. “Both our Technology Solutions and Financial Management Applications segments did well in 2011 and are off to strong starts in 2012. Our newest segment, Cloud Services, made headway in 2011 with the launch of our hosted voice in addition to hosted email and we expect continued revenue growth in this segment in 2012.”

Conference Call Reminder for Today

The Company will host a conference call today, Monday, March 26, 2012 at 4:15 pm Eastern Time to discuss the Company’s financial and operational results for year ended December 31, 2011.

Date: Monday, March 26, 2012

Time: 4:15 p.m. (EDT)

Dial-in Number: 1-877-941-1427

International Dial-in Number: 1-480-629-9664

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 April 26, 2012. 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 4524398

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 26, 2012 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 Cloud Services 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.OB) is available at www.csioutfitters.com.

Financial Tables to Follow

 

Page 2 of 8


COMPUTER SOFTWARE INNOVATIONS, INC.

CONSOLIDATED STATEMENTS OF INCOME

 

(Amounts in thousands, except per share data)    For the Three Months Ended
December 31,
    For the Years  Ended
December 31,
 
     2011     2010     2011     2010  

REVENUES

        

Financial Management Applications Segment

   $ 3,505      $ 3,180      $ 13,689      $ 13,652   

Cloud Services Segment

     310        256        1,176        954   

Technology Solutions Segment

     10,400        7,946        40,187        38,067   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net sales and service revenue

     14,215        11,382        55,052        52,673   

COST OF SALES

        

Financial Management Applications Segment

        

Cost of sales, excluding depreciation, amortization and capitalization

     2,271        1,932        8,324        7,566   

Depreciation

     34        30        120        117   

Amortization of capitalized software costs

     310        341        1,097        1,184   

Capitalization of software costs

     (293     (361     (1,207     (1,144
  

 

 

   

 

 

   

 

 

   

 

 

 

Total Financial Management Applications Segment cost of sales

     2,322        1,942        8,334        7,723   
  

 

 

   

 

 

   

 

 

   

 

 

 

Cloud Services Segment

        

Cost of sales, excluding depreciation, amortization and capitalization

     715        385        2,561        1,802   

Depreciation

     80        24        260        63   

Amortization of capitalized software costs

     115        82        367        324   

Capitalization of software costs

     (221     (126     (743     (613
  

 

 

   

 

 

   

 

 

   

 

 

 

Total Cloud Services Segment cost of sales

     689        365        2,445        1,576   
  

 

 

   

 

 

   

 

 

   

 

 

 

Technology Solutions Segment

        

Cost of sales, excluding depreciation

     8,533        6,709        33,468        32,536   

Depreciation

     26        28        97        103   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total Technology Solutions Segment cost of sales

     8,559        6,737        33,565        32,639   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total cost of sales

     11,570        9,044        44,344        41,938   
  

 

 

   

 

 

   

 

 

   

 

 

 

Gross profit

     2,645        2,338        10,708        10,735   

OPERATING EXPENSES

        

Research and development

     21        44        90        166   

Selling costs

     1,338        1,209        5,101        4,572   

Marketing costs

     116        131        556        518   

Stock based (non-employee wage) compensation

     —          (1     22        48   

Professional and legal compliance costs

     136        44        522        429   

Depreciation and amortization

     99        116        407        550   

Other general and administrative expenses

     1,018        831        3,614        3,327   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total operating expenses

     2,728        2,374        10,312        9,610   
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating income

     (83     (36     396        1,125   

OTHER EXPENSE

        

Interest expense

     (55     (30     (192     (231

Loss on disposal of property and equipment

     —          (6     —          (8
  

 

 

   

 

 

   

 

 

   

 

 

 

Total other expense

     (55     (36     (192     (239
  

 

 

   

 

 

   

 

 

   

 

 

 

Income before income taxes

     (138     (72     204        886   

INCOME TAX (BENEFIT) EXPENSE

     43        (10     (39     433   
  

 

 

   

 

 

   

 

 

   

 

 

 

NET INCOME

   $ (181   $ (62   $ 243      $ 453   
  

 

 

   

 

 

   

 

 

   

 

 

 

BASIC (LOSS) EARNINGS PER SHARE

   $ (0.03   $ (0.01   $ 0.04      $ 0.07   
  

 

 

   

 

 

   

 

 

   

 

 

 

DILUTED (LOSS) EARNINGS PER SHARE

   $ (0.03   $ (0.01   $ 0.02      $ 0.03   
  

 

 

   

 

 

   

 

 

   

 

 

 

WEIGHTED AVERAGE SHARES OUTSTANDING:

        

– Basic

     6,584        6,545        6,570        6,504   
  

 

 

   

 

 

   

 

 

   

 

 

 

– Diluted

     6,584        6,545        13,600        13,899   
  

 

 

   

 

 

   

 

 

   

 

 

 

 

Page 3 of 8


COMPUTER SOFTWARE INNOVATIONS, INC.

CONSOLIDATED BALANCE SHEETS

 

(Amounts in thousands)    December 31, 2011     December 31, 2010  

ASSETS

    

CURRENT ASSETS

    

Cash and cash equivalents

   $ —        $ 1,578   

Accounts receivable, net

     10,872        8,681   

Inventories

     1,568        558   

Prepaid expenses

     374        159   

Taxes receivable

     608        284   
  

 

 

   

 

 

 

Total current assets

     13,422        11,260   

PROPERTY AND EQUIPMENT, net

     1,529        1,033   

COMPUTER SOFTWARE COSTS, net

     3,330        2,844   

GOODWILL

     2,431        2,431   

OTHER INTANGIBLE ASSETS, net

     2,156        2,359   
  

 

 

   

 

 

 

Total assets

   $ 22,868      $ 19,927   
  

 

 

   

 

 

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

    

CURRENT LIABILITIES

    

Accounts payable

   $ 3,587      $ 2,600   

Deferred revenue

     8,558        8,014   

Deferred tax liability, net

     990        693   

Bank line of credit

     1,312        —     

Current portion of notes payable

     469        456   

Current portion of subordinated notes payable to shareholders

     67        58   
  

 

 

   

 

 

 

Total current liabilities

     14,983        11,821   

LONG-TERM DEFERRED TAX LIABILITY, net

     206        226   

NOTES PAYABLE, less current portion

     150        618   

SUBORDINATED NOTES PAYABLE TO SHAREHOLDERS, less current portion

     696        783   
  

 

 

   

 

 

 

Total liabilities

     16,035        13,448   
  

 

 

   

 

 

 

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; 6,584 and 6,558 shares issued and outstanding, respectively

     7        7   

Additional paid-in capital

     9,369        9,249   

Accumulated deficit

     (2,457     (2,700

Unearned stock compensation

     (93     (84
  

 

 

   

 

 

 

Total shareholders’ equity

     6,833        6,479   
  

 

 

   

 

 

 

Total liabilities and shareholders’ equity

   $ 22,868      $ 19,927   
  

 

 

   

 

 

 

 

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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, 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   
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

Issuance of common stocks

     —           —           22        —          —          22   

Issuance of stock options

     —           —           102        —          (102     —     

Forfeiture of stock options

     —           —           (4     —          4        —     

Stock based compensation

     —           —           —          —          89        89   

Net income for the year ended December 31, 2011

     —           —           —          243        —          243   
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

Balances at December 31, 2011

   $ 7       $ 7       $ 9,369      $ (2,457   $ (93   $ 6,833   
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

 

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COMPUTER SOFTWARE INNOVATIONS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

 

(Amounts in thousands)    For the Years Ended December 31,  
     2011     2010  

OPERATING ACTIVITIES

    

Net income

   $ 243      $ 453   

Adjustments to reconcile net income to net cash provided by operating activities

    

Depreciation and amortization

     2,348        2,341   

Stock compensation expense

     111        113   

Deferred income taxes

     277        330   

Loss on disposal of property and equipment

     —          8   

Changes in deferred and accrued amounts

    

Accounts receivable

     (2,191     (1,094

Inventories

     (1,010     2,070   

Prepaid expenses and other assets

     (215     (19

Accounts payable

     987        371   

Deferred revenue

     544        224   

Income tax receivable

     (324     (252
  

 

 

   

 

 

 

Net cash provided by operating activities

     770        4,545   
  

 

 

   

 

 

 

INVESTING ACTIVITIES

    

Purchases of property and equipment

     (1,177     (854

Capitalization of computer software

     (1,950     (1,779
  

 

 

   

 

 

 

Net cash used for investing activities

     (3,127     (2,633
  

 

 

   

 

 

 

FINANCING ACTIVITIES

    

Net borrowings under line of credit

     1,312        —     

Borrowings under notes payable

     —          1,000   

Repayments of notes payable

     (533     (1,339

Proceeds from exercise of stock options

     —          5   
  

 

 

   

 

 

 

Net cash provided by (used for) financing activities

     779        (334
  

 

 

   

 

 

 

Net change in cash and cash equivalents

     (1,578     1,578   

CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR

     1,578        —     
  

 

 

   

 

 

 

CASH AND CASH EQUIVALENTS, END OF YEAR

   $ —        $ 1,578   
  

 

 

   

 

 

 

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:

    

Cash paid during the period for:

    

Interest

   $ 195      $ 243   

Income taxes

   $ 8      $ 354   

 

Page 6 of 8


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.

 

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A reconciliation of Net Income reported under GAAP to EBITDA and Adjusted EBITDA is provided below:

 

     For the Three Months Ended
December 31,
    For the Years Ended
December 31,
 
     2011     2010     2011     2010  

Reconciliation of net income per GAAP to EBITDA and Adjusted EBITDA:

        

Net (loss) income per GAAP

   $ (181   $ (62   $ 243      $ 453   

Adjustments:

        

Income tax (benefit) expense

     43        (10     (39     433   

Interest expense, net

     55        30        192        231   

Depreciation and amortization of property, equipment, and intangible assets (excluding software development costs)

     239        198        884        833   

Amortization of software development costs

     425        423        1,464        1,508   
  

 

 

   

 

 

   

 

 

   

 

 

 

EBITDA

     581        579        2,744        3,458   
  

 

 

   

 

 

   

 

 

   

 

 

 

Adjustments to EBITDA to exclude those items excluded in loan covenant calculations:

        

Stock based compensation (non-cash portion)

     —          (1     22        48   
  

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted EBITDA

   $ 581      $ 578      $ 2,766      $ 3,506   
  

 

 

   

 

 

   

 

 

   

 

 

 

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.

Contacts:

Company Contact: David Dechant

Computer Software Innovations, Inc.

(864) 855-3900

ddechant@csioutfitters.com

 

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