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Computer Software Innovations, Inc. Announces Second Quarter 2008 Financial Results


Computer Software Innovations, Inc.

2008-08-13 07:30:00

EASLEY, SC–(EMWNews – August 13, 2008) – Computer Software Innovations, Inc. (OTCBB: CSWI)

--  Software Segment Revenues Increase 36.2% for the Second Quarter 2008

--  Revenues of $29.6 Million for Six Months, up 3.0% versus $28.8 Million in


--  Second Quarter Revenues Increase 2.6% to $17.6 Million in Q2 2008 versus

    $17.1 Million in Q2 2007

--  Second Quarter Net Income Increased 12% to $1.0 Million in Q2 2008,

    versus $0.9 Million for Q2 2007


Computer Software Innovations, Inc. (OTCBB: CSWI), CSI Technology

Outfitters™ (“CSI”), today announced its financial results for the

second quarter and six months ended June 30, 2008.

Financial Results:

Second Quarter 2008 Results

CSI posted revenue of approximately $17.6 million for the second quarter

ended June 30, 2008, an increase of approximately $0.4 million or 2.6%

compared to the second quarter of 2007. CSI experienced significant growth

in its software sector in the second quarter with an increase of $1.0

million or 36.2% to $3.8 million versus $2.8 million for the same period in

2007, due to increased sales in all major areas for the software segment:

software product sales, services and support. Of the increase, the

acquisition of the CSI-Greensboro operations added $0.2 million, with the

remaining $0.8 million generated from organic growth. Technology revenues

decreased from second quarter 2007 by $0.6 million or 3.9% to $13.7 million

for the second quarter of 2008. The decrease in new hardware sales was

attributed to an increase in the number of smaller-dollar sales of

interactive whiteboard systems being insufficient to surpass the impact of

a large-dollar district-wide implementation in the prior year’s same


Gross profit for the second quarter of 2008 was approximately $4.6 million,

an increase of $0.6 million or 15.0% in comparison with the second quarter

of 2007. The increase in gross margin was driven by increased sales in the

software segment, partially offset by a decline in hardware gross profits

primarily from decreased sales of interactive whiteboard solutions.

Increased margin in the software segment added to the improvement from

sales volume while increased margin in the technology segment partially

offset the reduction from the impact of reduced technology sales volume.

Operating income for the quarter was approximately $1.81 million, a slight

decrease compared to operating income of $1.83 million for the same period

in the prior year.

CSI posted net income for the quarter ended June 30, 2008 of approximately

$1.0 million or $0.21 earnings per basic share and $0.08 earnings per

diluted share, compared to net income of approximately $0.9 million and

$0.25 earnings per basic share and $0.07 earnings per diluted share for the

same period last year.

Six Months Results

CSI posted revenue of approximately $29.6 million, an increase of $0.9

million or 3.0% in comparison with the first six months of 2007. This net

increase included a $1.3 million increase in software sales and services,

partially offset by a $0.4 million decline in technology solutions segment

sales. Technology solutions sales decreased primarily from reduced sales of

interactive whiteboard solutions, partially offset by increased sales of

other products including infrastructure solutions and increased engineering

services. The increase in the software solutions segment was primarily due

to increases in all areas including software product sales, services and

support. The acquisition of the CSI-Greensboro operations in the second

quarter of 2008 added $0.2 million of software revenues, with the remaining

$1.1 million increase from organic growth.

Gross profit for the first six months was approximately $7.7 million, an

increase of $1.1 million or 16.7% compared to 2007. The gross margin

increased from 22.8% in 2007, to 25.8% in 2008 due to the higher volume of

software product sales and shift in product mix in technology to higher

margin infrastructure products and engineering services. Operating income

for the first six months was approximately $2.6 million compared to $2.4

million for the same period in 2007. Net income was $1.4 million or

earnings of $0.30 per basic share and $0.12 per diluted share as compared

to a net income of $1.2 million or $0.34 per basic share and $0.09 per

diluted share for the same period in 2007.

Earnings before interest, taxes, depreciation and amortization (“EBITDA”)

increased $0.1 million to $2.3 million for the quarter ended June 30, 2008,

and increased $0.4 million to $3.6 million for the six months ended June

30, 2008. The increase in EBITDA was primarily due to the increase in net

income over the prior year after adding back the related tax effects of

those increases in net income. (EBITDA is a non-GAAP financial measure. See

reconciliation to GAAP measure net income (loss) which follows below.)

Nancy Hedrick, CEO of CSI, stated, “We continue to be pleased with current

year results. Once again we faced the challenge of a prior year quarter

benefited by a district-wide solutions implementation, and without a

similar deal in the current year’s quarter we grew our top and bottom

lines. We exceeded the prior year’s results by achieving greater account

penetration and customer diversification in both segments, while increasing

our gross margin from 22.8% to 25.8%. This is a tribute to the continued

hard work of all our teams, and we believe the expanded customer

relationships will aid future growth.”

Conference Call Reminder for Today

The Company will host a conference call today, Wednesday, August 13, 2008

at 11:00 a.m. Eastern Time to discuss the Company’s financial and

operational results for second quarter 2008.

Conference Call Details

Date: Wednesday, August 13, 2008

Time: 11:00 a.m. (EDT)

Dial-in Number: 1-800-762-8795

International Dial-in Number: 1-480-629-9041

It is recommended that participants phone-in approximately 5 to 10 minutes

prior to the start of the 11:00 a.m. call. A replay of the conference call

will be available approximately 3 hours after the completion of the call

for 7 days, until August 20, 2008. To listen to the replay, dial

1-800-406-7325 if calling within the U.S., 1-303-590-3030 if calling

internationally and enter the pass code 3909185.

The call is also being webcast and may be accessed at CSI’s website at The webcast will be archived and accessible until

September 13, 2008 on the Company website.

About Computer Software Innovations, Inc.

CSI provides software and technology solutions primarily to public sector

markets. CSI has more than doubled its revenue in the past two years to

over $55 million by using organic growth and acquisitions. Over 600 school,

government, and non-profit organizations have CSI solutions that encompass

financial management software specialized for the public sector, IT

infrastructure, IP telephony, IP video surveillance, printing/imaging, and

interactive classroom technologies. More information about CSI (OTCBB: CSWI) is available at

Forward-Looking and Cautionary Statements

This release contains “forward-looking statements” within the meaning of

Section 27A of the Securities Act of 1933 and Section 21E of the Securities

Exchange Act of 1934. Among other things, these statements relate to our

financial condition, results of operations and future business plans,

operations, opportunities and prospects. In addition, we and our

representatives may from time to time make written or oral forward-looking

statements, including statements contained in other filings with the

Securities and Exchange Commission and in our reports to stockholders.

These forward-looking statements are generally identified by the words or

phrases “may,” “could,” “should,” “expect,” “anticipate,” “plan,”

“believe,” “seek,” “estimate,” “predict,” “project” or words of similar

import. These forward-looking statements are based upon our current

knowledge and assumptions about future events and involve risks and

uncertainties that could cause our actual results, performance or

achievements to be materially different from any anticipated results,

prospects, performance or achievements expressed or implied by such

forward-looking statements. These forward-looking statements are not

guarantees of future performance. Many factors are beyond our ability to

control or predict. You are accordingly cautioned not to place undue

reliance on such forward-looking statements, which speak only as of the

date that we make them. We do not undertake to update any forward-looking

statement that may be made from time to time by or on our behalf.

In our most recent Form 10-K, we have included risk factors and

uncertainties that might cause differences between anticipated and actual

future results. We have attempted to identify, in context, some of the

factors that we currently believe may cause actual future experience and

results to differ from our current expectations regarding the relevant

matter or subject area. The operations and results of our software and

systems integration businesses also may be subject to the effects of other

risks and uncertainties, including, but not limited to:

--  a reduction in anticipated sales;

    an inability to perform customer contracts at anticipated cost levels;

--  our ability to otherwise meet the operating goals established by our

    business plan;

--  market acceptance of our new software, technology and services offerings;

--  an economic downturn; and

--  changes in the competitive marketplace and/or customer requirements.





                           Three Months Ended         Six Months Ended

                        ------------------------  ------------------------

                          June 30,     June 30,     June 30,     June 30,

                            2008         2007         2008         2007

                        -----------  -----------  -----------  -----------




     segment            $ 3,806,286  $ 2,794,725  $ 6,863,900  $ 5,534,161


     solutions segment   13,744,230   14,306,570   22,749,610   23,218,866

                        -----------  -----------  -----------  -----------

    Net sales and

     service revenue     17,550,516   17,101,295   29,613,510   28,753,027





    Cost of sales,



     amortization and

     capitalization       1,984,887    1,661,868    3,651,105    3,080,595

    Depreciation             27,385       16,608       51,672       30,918

    Amortization of


     software costs         314,190      259,125      598,002      498,322

    Capitalization of

     software costs        (203,892)    (208,880)    (499,522)    (435,853)

                        -----------  -----------  -----------  -----------

    Total software


     segment cost of

     sales                2,122,570    1,728,721    3,801,257    3,173,982

                        -----------  -----------  -----------  -----------


     solutions segment

    Cost of sales,


     depreciation        10,770,911   11,327,634   18,102,643   18,979,240

    Depreciation             30,292       22,270       58,940       43,734

                        -----------  -----------  -----------  -----------

    Total technology

     solutions segment

     cost of sales       10,801,203   11,349,904   18,161,583   19,022,974

                        -----------  -----------  -----------  -----------

    Total cost of sales  12,923,773   13,078,625   21,962,840   22,196,956

                        -----------  -----------  -----------  -----------

    Gross profit          4,626,743    4,022,670    7,650,670    6,556,071


    Salaries, wages and

     benefits             1,804,972    1,390,359    3,123,316    2,457,563

    Stock based

     compensation             4,691        5,027        9,383       90,813


     expenses                 9,345        4,076       32,844        8,546

    Compliance related

     costs                  137,654      201,178      234,153      380,756

    Sales consulting

     fees                    55,625       48,000      118,502       96,000

    Marketing costs         106,075       75,537      115,039       73,312

    Travel and mobile

     costs                  180,073      137,128      350,924      290,609

    Depreciation and

     amortization           122,159       90,502      228,420      180,749

   Other selling,

    general and


    expenses                390,362      240,209      797,671      567,261

                        -----------  -----------  -----------  -----------

   Total operating

    expenses              2,810,956    2,192,016    5,010,252    4,145,609

                        -----------  -----------  -----------  -----------

    Operating income      1,815,787    1,830,654    2,640,418    2,410,462


    Interest income              35           58          100        2,763

    Interest expense       (130,697)    (152,036)    (263,022)    (286,055)

    Loss on disposal of

     property and

     equipment                    -            -            -       (1,218)

                        -----------  -----------  -----------  -----------

  Net other income

   (expense)               (130,662)    (151,978)    (262,922)    (284,510)

                        -----------  -----------  -----------  -----------

    Income before

     income taxes         1,685,125    1,678,676    2,377,496    2,125,952

INCOME TAX EXPENSE          673,507      775,499      938,115      937,989

                        -----------  -----------  -----------  -----------

NET INCOME              $ 1,011,618  $   903,177  $ 1,439,381  $ 1,187,963

                        ===========  ===========  ===========  ===========


 SHARE                  $      0.21  $      0.25  $      0.30  $      0.34

                        ===========  ===========  ===========  ===========


 SHARE                  $      0.08  $      0.07  $      0.12  $      0.09

                        ===========  ===========  ===========  ===========



     Basic                4,908,061    3,544,385    4,803,516    3,516,853

                        ===========  ===========  ===========  ===========

     Diluted             12,366,568   13,255,883   12,262,023   13,248,383

                        ===========  ===========  ===========  ===========

                         COMPUTER SOFTWARE INNOVATIONS, INC.

                             CONSOLIDATED BALANCE SHEETS

                                                  June 30,

                                                    2008      December 31,

                                                (Unaudited)       2007

                                                ------------  ------------



    Cash                                        $         --  $         --

    Accounts receivable, net                      13,420,118     8,697,036

    Inventories                                    2,549,374       470,485

    Prepaid expenses                                 152,008        42,832

    Taxes receivable                                      --       177,147

                                                ------------  ------------

      Total current assets                        16,121,500     9,387,500

PROPERTY AND EQUIPMENT, net                        1,424,187     1,316,713

COMPUTER SOFTWARE COSTS, net                       2,303,453     2,162,717

DEFERRED TAX ASSET                                   291,535       263,324

GOODWILL                                           2,430,437     1,480,587

OTHER ASSETS                                       1,970,132     1,574,809

                                                ------------  ------------

                                                $ 24,541,244  $ 16,185,650

                                                ============  ============



    Accounts payable                            $  6,553,141  $  4,023,936

    Taxes payable                                    340,418            --

    Deferred revenue                               6,565,440     5,323,889

    Deferred tax liability                           478,232       469,046

    Current portion of notes payable                 294,485       283,187

    Subordinated notes payable to shareholders     1,950,400     2,250,400

                                                ------------  ------------

      Total current liabilities                   16,182,116    12,350,458

                                                ------------  ------------

NOTES PAYABLE, less current portion                  614,025       763,717

BANK LINE OF CREDIT, less current portion          3,533,000       575,000

                                                ------------  ------------

      Total liabilities                           20,329,141    13,689,175

                                                ------------  ------------


    Preferred stock - $0.001 par value;

     15,000,000 shares authorized; 6,859,736

     shares issued and outstanding                     6,860         6,860

    Common stock - $0.001 par value; 40,000,000

     shares authorized; 4,908,061 and 4,698,970

     shares issued and outstanding,

     respectively                                      4,908         4,699

    Additional paid-in capital                     7,649,583     7,400,939

    Accumulated deficit                           (3,345,338)   (4,784,719)

    Unearned stock compensation                     (103,910)     (131,304)

                                                ------------  ------------

      Total shareholders' equity                   4,212,103     2,496,475

                                                ------------  ------------

                                                $ 24,541,244  $ 16,185,650

                                                ============  ============

Non-GAAP Financial Measure: Explanation and Reconciliation of EBITDA and

Adjusted EBITDA

EBITDA is a non-GAAP financial measure used by management, lenders and

certain investors as a supplemental measure in the evaluation of some

aspects of a corporation’s financial position and core operating

performance. Investors sometimes use EBITDA as it allows for some level of

comparability of profitability trends between those businesses differing as

to capital structure and capital intensity by removing the impacts of

depreciation and amortization. EBITDA also does not include changes in

major working capital items such as receivables, inventory and payables,

which can also indicate a significant need for, or source of, cash. Since

decisions regarding capital investment and financing and changes in working

capital components can have a significant impact on cash flow, EBITDA is

not a good indicator of a business’s cash flows. We use EBITDA for

evaluating the relative underlying performance of the Company’s core

operations and for planning purposes, including a review of this indicator

and discussion of potential targets in the preparation of annual operating

budgets. We calculate EBITDA by adjusting net income or loss to exclude net

interest expense, income tax expense or benefit, depreciation and

amortization, thus the term “Earnings Before Interest, Taxes, Depreciation

and Amortization” and the acronym “EBITDA.”

EBITDA is presented as additional information because management believes

it to be a useful supplemental analytic measure of financial performance of

our core business, and as it is frequently requested by sophisticated

investors. However, management recognizes it is no substitute for GAAP

measures and should not be relied upon as an indicator of financial

performance separate from GAAP measures (as discussed further below).

“Adjusted EBITDA or “Financing EBITDA” is a non-GAAP financial measure used

in our calculation and determination of compliance with debt covenants

related to our bank credit facilities. Adjusted EBITDA is also used as a

representation as to how EBITDA might be adjusted by potential lenders for

financing decisions and our ability to service debt. However, such

decisions would not exclude those other items impacting cash flow which are

excluded from EBITDA, as noted above. Adjusted EBITDA is defined as net

income or loss adjusted for net interest expense, income tax expense or

benefit, depreciation, amortization, and also certain additional items

allowed to be excluded from our debt covenant calculation including other

non-cash items such as operating non-cash compensation expense (such as

stock-based compensation), and the Company’s initial reorganization or

restructuring related costs, unrealized gain or loss on financial

instrument (non-cash related) and gain or loss on the disposal of fixed

assets. While we evaluate the Company’s performance against debt covenants

on this basis, investors should not presume the excluded items to be one-

time costs. If the Company were to enter into additional capital

transactions, for example, in connection with a significant acquisition or

merger, similar costs could reoccur. In addition, the ongoing impact of

those costs would be considered in, and potential financings based on,

projections of future operating performance which would include the impact

of financing such costs.

We believe the presentation of Adjusted EBITDA is important as an indicator

of our ability to obtain additional financing for the business, not only

for working capital purposes, but particularly as acquisitions are

anticipated as a part of our growth strategy. Accordingly, a significant

part of our success may rely on our ability to finance acquisitions.

When evaluating EBITDA and Adjusted EBITDA, investors should consider,

among other things, increasing and decreasing trends in both measures and

how they compare to levels of debt and interest expense, ongoing investing

activities, other financing activities and changes in working capital

needs. Moreover, these measures should not be construed as alternatives to

net income (as an indicator of operating performance) or cash flows (as a

measure of liquidity) as determined in accordance with GAAP.

While some investors use EBITDA to compare between companies with different

investment and capital structures, all companies do not calculate EBITDA or

Adjusted EBITDA in the same manner. Accordingly, the EBITDA and Adjusted

EBITDA measures presented below may not be comparable to similarly titled

measures of other companies.

A reconciliation of Net Income reported under GAAP to EBITDA and Adjusted

(Financing) EBITDA is provided below:

                                             Three Months     Six Months

                                                Ended           Ended

                                               June 30,        June 30,

                                            --------------- ---------------

Amounts in thousands                         2008    2007    2008    2007

                                            ------- ------- ------- -------

Reconciliation of Net income (loss) per

 GAAP to EBITDA and Adjusted (Financing)


Net income (loss) per GAAP                  $ 1,012 $   903 $ 1,439 $ 1,188


    Income tax expense (benefit)                674     775     938     938

    Interest expense, net                       131     152     263     283

    Depreciation and amortization of fixed

     assets and trademarks                      180     129     339     255

    Amortization of software development

     costs                                      314     259     598     498

                                            ------- ------- ------- -------

EBITDA                                      $ 2,311 $ 2,218 $ 3,577 $ 3,162

                                            ------- ------- ------- -------

  Adjustments to EBITDA to exclude those

   items in loan covenant calculations:

    Stock based compensation (non-cash

     portion)                                     5       5       9      91

                                            ------- ------- ------- -------

Adjusted (Financing) EBITDA                 $ 2,316 $ 2,223 $ 3,586 $ 3,253

                                            ======= ======= ======= =======


Company Contact:
Computer Software Innovations, Inc.
David Dechant
[email protected]

Investor Contact:
Alliance Advisors, LLC
Mark McPartland
[email protected]

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