Cass Information Systems (CASS) Q4 2004 earnings summary

Executive summary

• FY 2004 net income rose to $8.005M from $7.902M; diluted EPS was $2.15 vs. $2.13. Fourth-quarter net income was $2.485M vs. $2.123M, with diluted EPS of $0.67 vs. $0.57.

• Payment processing expanded, while government software sales weakened; acquisitions added telecom processing capability and a California banking presence.

Financial highlights

• Fee revenue and other income declined to $39.204M from $40.067M, as payment processing growth was offset primarily by lower software revenue.

• Information services payment and processing revenue increased 8% to $30.695M; transactions processed rose 3% to 28.724M.

• Net interest income after loan-loss provision increased 3% to $27.088M; operating expense was nearly flat at $55.025M, up less than 1%.

• FY net income was $8.005M vs. $7.902M; basic EPS was $2.18 vs. $2.15 and diluted EPS was $2.15 vs. $2.13.

• Q4 fee revenue and other income was $10.469M vs. $9.760M; net income was $2.485M vs. $2.123M YoY.

Outlook and guidance

• Management expected continued expansion of payment and information-processing offerings and customer base in 2005, supported by technology and bank processing controls.

• If short-term interest rates continued rising, management expected a further positive effect on net interest income and earnings; higher rates had helped in H2 2004.

• Management anticipated improved GEMS results in 2005 after investing in system and product enhancements; 2004 new-system sales had fallen sharply in a sluggish market.

• Cash, maturing investments and operating cash flow were expected to be sufficient for 2005 operations and capital expenditures.