CSG Systems International Reports Results for First Quarter 2013

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CSG Systems International Reports Results for First Quarter 2013

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 March 31, 2013.

Key Financial Highlights:

  • First quarter 2013 results:
  • Total revenues were $180.6 million.
    • Non-GAAP operating income was $27.6 million, or 15.3% of total revenues and GAAP operating income was $18.0 million, or 10.0% of total revenues.
    • Non-GAAP earnings per diluted share(EPS) was $0.48. GAAP EPS was $0.46.
  • Cash flows from operations for the quarter were $22.5 million.
  • In March 2013, CSG announced that it had entered into a new multi-year customer care and billing agreement with its largest customer, Comcast, effective March 1, 2013.
  • During the quarter, CSG repurchased approximately 329,000 shares of its common stock for $6.5 million (weighted-average price of $19.80 per share) under its stock repurchase program.

"With our major contract renewals secured into 2017, we have reduced the amount of risk associated with our revenue stream well into the future and we are positioned to grow the revenues of the company by doing more with existing clients and also adding to our client base," said Peter Kalan, president and chief executive officer of CSG Systems International, Inc. "Further, we've proven that we are prudent operators with the ability to drive bottom line results and improve our operating margins. I am optimistic about what the future holds for our clients, our employees and our shareholders."

Financial Overview (unaudited)

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

  Quarter Ended March 31,

 

2013

  

 

2012

  

Percent
Change

Revenues$ 180,632$ 185,007(2)%
Non-GAAP Results:
Operating Income$ 27,648$ 38,311(28)%
Operating Income Margin15.3%20.7%-
EPS$ 0.48$ 0.60(20)%
GAAP Results:
Operating Income$ 18,035$ 28,952(38)%
Operating Income Margin10.0%15.6%-
EPS$ 0.46$ 0.3628%
 

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 first quarter of 2013 were $180.6 million, a 2% decrease when compared to revenues of $185.0 million for the first quarter of 2012, and a 9% decrease when compared to $198.0 million for the fourth quarter of 2012. Revenues for the first quarter of 2013 were negatively impacted by lower software sales during the quarter and the pricing adjustments associated with the Comcast contract extention that became effective March 1, 2013. Additionally, CSG had an exceptionally strong fourth quarter of software sales, which also contributed to the sequential quarterly decline in revenues.

Non-GAAP Results: Non-GAAP operating income for the first quarter of 2013 was $27.6 million, or 15.3%of total revenues, compared to $38.3 million, or 20.7%, for the first quarter of 2012. Non-GAAP operating income for the fourth quarter of 2012 was $33.0 million, or 16.7% of total revenues. The year-over-year decrease in operating income and operating income margin is primarily due to increased expenses resulting from continued investments made in the business, to include the impact of Ascade, acquired in July 2012. The sequential quarterly decrease can be attributed to the lower revenues generated during the first quarter of 2013 when compared to the fourth quarter of 2012, as discussed above.

Non-GAAP EPS for the first quarter of 2013 was $0.48, compared to non-GAAP EPS of $0.60 for the first quarter of 2012, and $0.67 for the fourth quarter of 2012. The decreases in non-GAAP EPS performance is reflective of the lower operating income margins discussed above.

GAAP Results: GAAP operating income for the first quarter of 2013 was $18.0 million, or 10.0%of total revenues, compared to $29.0 million, or 15.6%, for the same period in 2012.

GAAP EPS for the first quarter of 2013 was $0.46, compared to $0.36 for the first quarter of 2012. The improvement in GAAP EPS year-over-year can be primarily attributed to the income tax benefit recognized during the first quarter of 2013 related to 2012 R&D and related income tax credits, which provided a benefit to the first quarter of 2013 of $0.18 per diluted share.

Balance Sheet and Cash Flows

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

  March 31,

2013

  December 31,

2012

  March 31,

2012

Cash, cash equivalents, and short-term investments$ 172,703$ 169,321$ 188,555
Net billed trade accounts receivable179,093191,943170,909
Total long-term debt:
Par value$ 296,250$ 300,000$ 333,000
Unamortized OID(24,003)(25,302)(29,053)
Net debt carrying amount$ 272,247$ 274,698$ 303,947
 

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

  March 31,

2013

  

December 31,
2012

  March 31,

2012

Cash Flows from Operating Activities:
Operations$ 41,316$ 34,921$ 28,890
Changes in operating assets and liabilities(18,776)(15,866)19,299
Net cash provided by operating activities$ 22,540$ 19,055$ 48,189
Cash Flows from Investing Activities:
Purchases of property and equipment$ (4,492)$ (12,733)$ (2,318)
Cash Flows from Financing Activities:
Repurchase of common stock under stock repurchase program

(6,511)

$ -

(5,189)

Payments on long-term debt(3,750)(18,000)(7,000)
 

2013 Financial Guidance

A summary of CSG's financial guidance for the full year 2013 is as follows:

Revenues $

740 - $760 million

Non-GAAP EPS$2.05 - $2.15
GAAP EPS from continuing operations$1.31 - $1.41
Adjusted EBITDA$

153 - $158 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 April 30, 2013, at 5:00 p.m. ET, to discuss CSG's first 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) 941-8609 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, 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 over 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)

 
March 31,

2013

December 31,

2012

ASSETS

Current assets:
Cash and cash equivalents$ 146,158$ 136,473
Short-term investments26,54532,848
Total cash, cash equivalents, and short-term investments172,703169,321
Trade accounts receivable:
Billed, net of allowance of $3,618 and $3,147179,093191,943
Unbilled and other34,76633,859
Deferred income taxes15,82822,244
Income taxes receivable16,7796,469
Other current assets17,85517,099
Total current assets437,024440,935
Non-current assets:
Property and equipment, net of depreciation of $125,277 and $120,64337,21139,429
Software, net of amortization of $71,334 and $68,51336,96936,729
Goodwill226,309233,365
Client contracts, net of amortization of $82,743 and $184,76368,75076,388
Deferred income taxes2,5862,596
Income taxes receivable4091,292
Other assets15,75116,207
Total non-current assets387,985406,006

Total assets

$ 825,009$ 846,941

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
Current maturities of long-term debt$ 15,000$ 15,000
Client deposits32,82733,807
Trade accounts payable32,76430,473
Accrued employee compensation35,09361,083
Income taxes payable2,4362,116
Deferred revenue58,52047,691
Other current liabilities17,20421,562
Total current liabilities193,844211,732
Non-current liabilities:
Long-term debt, net of unamortized original issue discount of $24,003 and $25,302257,247259,698
Deferred revenue8,2766,504
Income taxes payable1,1681,168
Deferred income taxes21,17221,674
Other non-current liabilities16,64519,526
Total non-current liabilities304,508308,570
Total liabilities498,352520,302
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;
  33,960 shares and 33,734 shares outstanding

658

653

Additional paid-in capital461,400461,497

Treasury stock, at cost, 31,858 and 31,530 shares

(734,754)(728,243)
Accumulated other comprehensive income (loss):
Unrealized gain on short-term investments, net of tax23
Unrecognized pension plan losses and prior service costs, net of tax(1,355)(1,761)
Unrealized loss on change in fair value of interest rate swaps, net of tax(552)(658)
Cumulative foreign currency translation adjustments(6,514)2,274
Accumulated earnings607,772592,874
Total stockholders' equity326,657326,639
Total liabilities and stockholders' equity$ 825,009$ 846,941
 
  

CSG SYSTEMS INTERNATIONAL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME-UNAUDITED

(in thousands, except per share amounts)

 
Quarter Ended
March 31,

2013

  March 31,

2012

Revenues:
Processing and related services$ 134,634$ 136,314
Software, maintenance and services45,99848,693
Total revenues180,632185,007
 
Cost of revenues (exclusive of depreciation, shown separately below):
Processing and related services61,57761,960
Software, maintenance and services31,77728,009
Total cost of revenues93,35489,969
Other operating expenses:
Research and development28,54527,922
Selling, general and administrative34,79731,625
Depreciation5,0005,837
Restructuring charges901702
Total operating expenses162,597156,055
Operating income18,03528,952
Other income (expense):
Interest expense(2,929)(4,152)
Amortization of original issue discount(1,299)(1,203)
Interest and investment income, net155220
Other, net(418)(205)
Total other(4,491)(5,340)
Income before income taxes13,54423,612
Income tax benefit (provision)1,354(11,806)
Net income$ 14,898$ 11,806
 
Weighted-average shares outstanding - Basic:

Common stock

32,13332,392
Participating restricted stock-66
Total32,133 Read Full Story

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