CSG Systems International Reports Results for Third Quarter 2012

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CSG Systems International Reports Results for Third Quarter 2012

ENGLEWOOD, Colo.--(BUSINESS WIRE)-- CSG Systems International, Inc. (NAS: CSGS) , a global provider of software- and services-based business support solutions that help clients generate revenue and maximize customer relationships, today reported results for the quarter ended September 30, 2012.

Key Financial Highlights:

  • Third quarter 2012 results:
    • Total revenues were $190.0 million.
    • Non-GAAP operating income was $31.1 million, or 16.4% of total revenues and GAAP operating income was $21.7 million, or 11.4% of total revenues.
    • Non-GAAP earnings per diluted share(EPS) was $0.50. GAAP EPS was $0.29.
  • Cash flows from operations for the quarter were $23.7 million.
  • During the quarter, CSG repurchased 150,000 shares of its common stock for $2.7 million (weighted-average price of $18.14 per share) under its stock repurchase program.

"We continue to remain confident in our ability to achieve the high end of our 2012 financial guidance for both revenues and non-GAAP EPS," Peter Kalan, chief executive officer and president of CSG Systems, said. "This confidence comes from our ability to find new ways to help our clients be successful in generating revenues, improving their customers' experiences and becoming more efficient in their operations. In spite of the challenging economic environment facing communications service providers worldwide, we continue to see decisions being made on projects that have a clear objective and quantifiable return on investment. "

Financial Overview (unaudited)

(in thousands, except per share amounts and percentages):

 Quarter Ended September 30, Nine Months Ended September 30,

 

2012

 

 

2011

 

Percent
Change

 

2012

 

 

2011

 

Percent
Change

Revenues

$190,001$182,7534%$558,859$547,1572%
Non-GAAP Results:
Operating Income$31,071$33,315(7)%$102,517$99,0444%
Operating Income Margin16.4%18.2%-18.3%18.1%-
EPS$0.50$0.58(14)%$1.66$1.613%
GAAP Results:
Operating Income$21,728$22,767(5)%$74,425$69,2427%
Operating Income Margin11.4%12.5%-13.3%12.7%-
EPS$0.29$0.32(9)%$1.02$0.9310%
 

For additional information and reconciliations regarding CSG's use of non-GAAP financial measures, please refer to the attached Exhibit 2 and the Investor Relations section of CSG's website at www.csgi.com.

Results of Operations

Revenues: Total revenues for the third quarter of 2012 were $190.0 million, a 4% increase when compared to revenues of $182.8 million for the third quarter of 2011, and a 3% increase when compared to $183.9 million for the second quarter of 2012. These revenue increases can be primarily attributed to the additional revenues generated from the Ascade business that CSG acquired in mid-July along with increased revenues from various ancillary services during the current quarter.

Non-GAAP Results: Non-GAAP operating income for the third quarter of 2012 was $31.1 million, or 16.4%of total revenues, compared to $33.3 million, or 18.2%, for the third quarter of 2011. Non-GAAP operating income for the second quarter of 2012 was $33.1 million, or 18.0% of total revenues. The year-over-year decrease in operating income and operating income margin is mainly due to the expected increases in data processing and employee-related costs, as well as the dilutive impact of the acquired Ascade business. The sequential decrease in operating income and operating income margin reflects an increase in employee-related costs and the dilutive impact of the acquired Ascade business.

Non-GAAP EPS for the third quarter of 2012 was $0.50, compared to non-GAAP EPS of $0.58 for the third quarter of 2011, and $0.56 for the second quarter of 2012, with these decreases reflective of the lower operating income for the third quarter of 2012 as discussed above.

GAAP Results: GAAP operating income for the third quarter of 2012 was $21.7 million, or 11.4%of total revenues, compared to $22.8 million, or 12.5%, for the same period in 2011.

GAAP EPS for the third quarter of 2012 was $0.29 compared to $0.32 for the third quarter of 2011.

Balance Sheet and Cash Flows

Balance Sheet: Certain key balance sheet items as of the indicated dates are as follows (in thousands):

 

September 30,
2012

 

June 30,
2012

 

December 31,
2011

Cash, cash equivalents, and short-term investments (1)$184,769$196,062$158,830
Net billed trade accounts receivable174,137163,392179,804
Total long-term debt:
Par value$318,000$323,000$340,000
Unamortized OID (26,576) (27,827) (30,256)
Net debt carrying amount$291,424 $295,173 $309,744 
(1) The sequential quarterly decrease in cash, cash equivalents and short-term investments as of September 30, 2012 can be mainly attributed to the purchase of the Ascade business in July 2012 for approximately $19 million.

Cash Flows: Certain key operating cash flow items for the indicated quarters then ended are as follows (in thousands):

 

September 30,
2012

 

June 30,
2012

 

September 30,
2011

Cash Flows from Operating Activities:
Operations$30,108$29,898$34,549
Changes in operating assets and liabilities (6,454) 6,681  (4,239)
Net cash provided by operating activities$23,654 $36,579 $30,310 
Cash Flows from Investing Activities:
Purchases of property and equipment$(6,938)$(11,232)$(8,554)
Cash Flows from Financing Activities:
Repurchase of common stock under stock repurchase program

$

(2,722

)

$

(5,438

)

$

(7,662

)

Payments on long-term debt(5,000)(10,000)(3,500)
 

2012 Financial Guidance

CSG is maintaining its financial guidance for the full year 2012 as follows:

Revenues $722 - $747 million
Non-GAAP EPS$2.00 - $2.15
GAAP EPS from continuing operations$1.10 - $1.21
Adjusted EBITDA$166 - $173 million
 

For additional information and reconciliations regarding CSG's use of non-GAAP financial measures,please refer to the attached Exhibit 2 and the Investor Relations section of CSG's website at www.csgi.com.

Conference Call

CSG will host a one-hour conference call on October 30, 2012, at 5:00 p.m. ET, to discuss CSG's third quarter results. The call will be carried live and archived on the Internet. A link to the conference call is available at www.csgi.com. In addition, to reach the conference by phone, dial (877) 941-0844 and ask the operator for the CSG International conference call and Liz Bauer, chairperson.

Additional Information

For information about CSG, please visit CSG's web site at www.csgi.com. Additional information can be found in the Investor Relations section of the web site.

About CSG International

CSG Systems International, Inc. (NASDAQ: CSGS) is a market-leading business support solutions and services company serving the majority of the top 100 global communications service providers, including leaders in fixed, mobile and next-generation networks such as AT&T, Comcast, DISH Network, France Telecom, MasterCard, Orange, T-Mobile, Telefonica, Time Warner Cable, Vodafone, Vivo and Verizon. With over 25 years of experience and expertise in voice, video, data and content services, CSG International offers a broad portfolio of licensed and Software-as-a-Service (SaaS)-based products and solutions that help clients compete more effectively, improve business operations and deliver a more impactful customer experience across a variety of touch points. For more information, visit our website at www.csgi.com.

Forward-Looking Statements

This news release contains forward-looking statements as defined under the Securities Act of 1933, as amended, that are based on assumptions about a number of important factors and involve risks and uncertainties that could cause actual results to differ materially from what appears in this news release. Some of these key factors include, but are not limited to the following items:

  • CSG derives approximately forty percent of its revenues from its three largest clients;
  • Continued market acceptance of CSG's products and services;
  • CSG's ability to continuously develop and enhance products in a timely, cost-effective, technically advanced and competitive manner;
  • CSG's ability to deliver its solutions in a timely fashion within budget, particularly large and complex software implementations;
  • CSG's dependency on the global telecommunications industry, and in particular, the North American telecommunications industry;
  • CSG's ability to meet its financial expectations as a result of increased dependency on software sales, which are subject to greater volatility;
  • Increasing competition in CSG's market from companies of greater size and with broader presence in the communications sector;
  • CSG's ability to successfully integrate and manage acquired businesses or assets to achieve expected strategic, operating and financial goals;
  • CSG's ability to protect its intellectual property rights;
  • CSG's ability to maintain a reliable, secure computing environment;
  • CSG's ability to conduct business in the international marketplace;
  • CSG's ability to comply with applicable U.S. and International laws and regulations; and
  • Fluctuations in credit market conditions, general global economic and political conditions, and foreign currency exchange rates.

This list is not exhaustive and readers are encouraged to review the additional risks and important factors described in CSG's reports on Forms 10-K and 10-Q and other filings made with the SEC.

CSG SYSTEMS INTERNATIONAL, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS-UNAUDITED

(in thousands, except per share amounts)

 
 

September 30,
2012

 

December 31,
2011

ASSETS

Current assets:
Cash and cash equivalents$160,308$146,733
Short-term investments 24,461  12,097 
Total cash, cash equivalents, and short-term investments184,769158,830
Trade accounts receivable:
Billed, net of allowance of $2,918 and $2,421174,137179,804
Unbilled and other28,84730,981
Deferred income taxes19,75819,982
Income taxes receivable5,2614,139
Other current assets 18,095  16,224 
Total current assets430,867409,960
Property and equipment, net of depreciation of $120,159 and $116,12538,24341,154
Software, net of amortization of $65,959 and $56,52131,72729,966
Goodwill233,803220,013
Client contracts, net of amortization of $178,338 and $159,22585,77798,403
Deferred income taxes1,9981,008
Other assets 13,433  14,393 

Total assets

$835,848 $814,897 
 

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
Current maturities of long-term debt$20,500$27,000
Client deposits30,59630,523
Trade accounts payable33,14527,198
Accrued employee compensation45,39742,005
Income taxes payable3,4732,334
Deferred revenue54,62744,824
Other current liabilities 18,822  23,501 
Total current liabilities 206,560  197,385 
Non-current liabilities:
Long-term debt, net of unamortized original issue discount of $26,576 and $30,256270,924282,744
Deferred revenue7,4528,631
Income taxes payable3,7834,114
Deferred income taxes21,37428,188
Other non-current liabilities 18,225  19,121 
Total non-current liabilities 321,758  342,798 
Total liabilities 528,318  540,183 
Stockholders' equity:
Preferred stock, par value $.01 per share; 10,000 shares authorized; zero shares issued and outstanding

-

-

Common stock, par value $.01 per share; 100,000 shares authorized; 33,711 shares and 33,822 shares outstanding

652

645

Additional paid-in capital457,962449,376

Treasury stock, at cost, 31,530 and 30,707 shares

(728,243)(714,893)
Accumulated other comprehensive income (loss):

Unrealized gain on short-term investments, net of tax

31
Unrecognized pension plan losses and prior service costs, net of tax(1,803)(1,794)
Unrealized loss on change in fair value of interest rate swaps, net of tax(736)(618)
Cumulative foreign currency translation adjustments2,611(1,998)
Accumulated earnings 577,084  543,995 
Total stockholders' equity 307,530  274,714 
Total liabilities and stockholders' equity$835,848 $814,897 
 
 

CSG SYSTEMS INTERNATIONAL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME-UNAUDITED

(in thousands, except per share amounts)

 
 Quarter Ended
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