CSG Systems International Reports Record Fourth Quarter and Full Year Revenues
CSG Systems International Reports Record Fourth Quarter and Full Year Revenues
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 and full year ended December 31, 2012.
Key Financial Highlights:
Fourth quarter 2012 results:
Total revenues were $198.0 million.
Non-GAAP operating income was $33.0 million, or 16.7% of total revenues and GAAP operating income was $22.1 million, or 11.2% of total revenues.
Non-GAAP earnings per diluted share(EPS) was $0.67, which includes an unexpected benefit of $0.13 as a result of a lower than previously anticipated effective income tax rate. GAAP EPS was $0.48.
Full year 2012 results:
Total revenues were $756.9 million.
Non-GAAP operating income was $135.5 million, or 17.9% of total revenues and GAAP operating income was $96.6 million, or 12.8% of total revenues.
Non-GAAP earnings per diluted share(EPS) was $2.33, which includes an unexpected benefit of $0.13 as a result of a lower than previously anticipated effective income tax rate. GAAP EPS was $1.51.
Cash flows from operations for the quarter were $19.1 million, and $127.5 million for the year ended December 31, 2012.
"We enter 2013 in a position of strength as a result of the actions we have taken over the past several years," said Peter Kalan, chief executive officer and president of CSG Systems International, Inc. "We have a solid base of over 500 clients worldwide that depend upon us to help them execute upon their business plans. We have invested in our people, our products and our clients to ensure that they are successful. We have demonstrated our ability to manage our costs in a difficult and challenging business environment. And finally, we have a solid business model that is based on highly visible, recurring revenues, resulting in strong cash flows."
Financial Overview (unaudited)
(in thousands, except per share amounts and percentages):
Quarter Ended December 31, | Year Ended December 31, | |||||||||||||||||||||
2012 | 2011 | Percent | 2012 | 2011 | Percent | |||||||||||||||||
Revenues | $ | 198,007 | $ | 187,574 | 6 | % | $ | 756,866 | $ | 734,731 | 3 | % | ||||||||||
Non-GAAP Results: | ||||||||||||||||||||||
Operating Income | $ | 33,018 | $ | 39,987 | (17 | )% | $ | 135,535 | $ | 139,031 | (3 | )% | ||||||||||
Operating Income Margin | 16.7 | % | 21.3 | % | - | 17.9 | % | 18.9 | % | - | ||||||||||||
EPS | $ | 0.67 | $ | 0.64 | 5 | % | $ | 2.33 | $ | 2.25 | 4 | % | ||||||||||
GAAP Results: | ||||||||||||||||||||||
Operating Income | $ | 22,149 | $ | 27,043 | (18 | )% | $ | 96,574 | $ | 96,285 | 0 | % | ||||||||||
Operating Income Margin | 11.2 | % | 14.4 | % | - | 12.8 | % | 13.1 | % | - | ||||||||||||
EPS | $ | 0.48 | $ | 0.35 | 37 | % | $ | 1.51 | $ | 1.28 | 18 | % | ||||||||||
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 fourth quarter of 2012 were $198.0 million, a 6% increase when compared to revenues of $187.6 million for the fourth quarter of 2011, and a 4% increase when compared to $190.0 million for the third quarter of 2012. Total revenues for the full year 2012 were $756.9 million, a 3% increase when compared to revenues of $734.7 million for full year 2011. The year-over-year revenue increases can be primarily attributed to increased revenues from various ancillary services and software sales during the current quarter and year and from the revenues generated from the Ascade business that CSG acquired in mid-July 2012, while the sequential quarterly increase is due primarily to a strong fourth quarter of software sales.
Non-GAAP Results: Non-GAAP operating income for the fourth quarter of 2012 was $33.0 million, or 16.7%of total revenues, compared to $40.0 million, or 21.3%, for the fourth quarter of 2011. Non-GAAP operating income for the third quarter of 2012 was $31.1 million, or 16.4% of total revenues. Non-GAAP operating income for the full year 2012 was $135.5, or 17.9% of total revenues, which compares to $139.0 million, or 18.9%, for the full year 2011. The year-over-year decreases in operating income and operating income margin is mainly due to the expected increases in data processing and employee-related costs. The sequential quarterly increase in operating income and operating income margin reflects the higher sequential revenues, mainly associated with the strong software sales.
Non-GAAP EPS for the fourth quarter of 2012 was $0.67, compared to non-GAAP EPS of $0.64 for the fourth quarter of 2011, and $0.50 for the third quarter of 2012. Non-GAAP EPS for the full year 2012 was $2.33, compared to non-GAAP EPS of $2.25 for the full year 2011. Both the fourth quarter and full year of 2012 non-GAAP EPS include an unexpected benefit of $0.13 as a result of a lower than previously anticipated effective income tax rate for 2012. The year-over-year improvement in the 2012 full year non-GAAP EPS performance relates mainly to a lower effective income rate between years.
GAAP Results: GAAP operating income for the fourth quarter of 2012 was $22.1 million, or 11.2%of total revenues, compared to $27.0 million, or 14.4%, for the same period in 2011. GAAP operating income for the full year 2012 was $96.6 million, or 12.8% of total revenues, compared to $96.3 million, or 13.1%, for the full year 2011.
GAAP EPS for the fourth quarter of 2012 was $0.48, compared to $0.35 for the fourth quarter of 2011. GAAP EPS for the full year 2012 was $1.51, compared to $1.28 for the full year 2011.
Balance Sheet and Cash Flows
Balance Sheet: Certain key balance sheet items as of the indicated dates are as follows (in thousands):
December 31, | September 30, | December 31, | ||||||||||
Cash, cash equivalents, and short-term investments (1) | $ | 169,321 | $ | 184,769 | $ | 158,830 | ||||||
Net billed trade accounts receivable | 191,943 | 174,137 | 179,804 | |||||||||
Total long-term debt (1): | ||||||||||||
Par value | $ | 300,000 | $ | 318,000 | $ | 340,000 | ||||||
Unamortized OID | (25,302 | ) | (26,576 | ) | (30,256 | ) | ||||||
Net debt carrying amount | $ | 274,698 | $ | 291,424 | $ | 309,744 | ||||||
(1) | The sequential decrease in cash and short-term investments in the fourth quarter of 2012 is primarily due to an $18 million debt payment made in November 2012 in conjunction with CSG's debt refinancing. | |
Cash Flows: Certain key operating cash flow items for the indicated quarters then ended are as follows (in thousands):
Quarter Ended | Year Ended | |||||||||||||||
2012 | 2011 | 2012 | 2011 | |||||||||||||
Cash Flows from Operating Activities: | ||||||||||||||||
Operations | $ | 34,921 | $ | 34,348 | $ | 126,317 | $ | 130,337 | ||||||||
Changes in operating assets and liabilities | (15,866 | ) | (2,523 | ) | 1,160 | (69,378 | ) | |||||||||
Net cash provided by operating activities (2) | $ | 19,055 | $ | 31,825 | $ | 127,477 | $ | 60,959 | ||||||||
Cash Flows from Investing Activities: | ||||||||||||||||
Purchases of property and equipment | $ | (12,733 | ) | $ | (2,582 | ) | $ | (33,221 | ) | $ | (22,197 | ) | ||||
Cash Flows from Financing Activities: | ||||||||||||||||
Repurchase of common stock under stock repurchase program | $ | - | $ | (2,268 | ) | $ | (13,349 | ) | $ | (9,930 | ) | |||||
Net proceeds from/(payments on) long-term debt | (18,000 | ) | (2,500 | ) | (40,000 | ) | (70,149 | ) | ||||||||
(2) | Cash flows from operating activities for the year ended December 31, 2011 was negatively impacted by the unfavorable changes in working capital items, primarily related to the following items: (i) the change in the monthly invoice timing for DISH Network, which was included as part of its contract renewal terms in January 2011 and had a negative $20 million impact in the first quarter of 2011; (ii) the timing of payments for several items specific to the first quarter of 2011, including approximately $8 million of Intec acquisition-related expenses, which were accrued expenses as of December 31, 2010; and (iii) $6 million payment of deferred income tax liabilities that became due in 2011 as a result of the repurchase of our 2004 Convertible Debt Securities. | |
2013 Financial Guidance | ||
Revenues | $755 - $775 million | |
Non-GAAP EPS | $2.23 - $2.33 | |
GAAP EPS from continuing operations | $1.59 - $1.70 | |
Adjusted EBITDA | $162 - $167 million | |
CSG is currently in negotiations with one of its largest customers for a longer-term renewal of the current contract that expires at the end of February. The above current financial guidance assumes no material change in the revenue earned from this customer during 2013 pursuant to the terms of the existing agreement; as it is impossible to predict with certainty at this time what impact, if any, the terms of a longer-term contract extension will have on CSG's 2013 results of operations. When this contract is extended in the future, CSG will determine what updates may be necessary to the above guidance.
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 February 5, 2013, at 5:00 p.m. ET, to discuss CSG's fourth quarter and year end 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) | ||||||||
December 31, | December 31, | |||||||
ASSETS | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 136,473 | $ | 146,733 | ||||
Short-term investments | 32,848 | 12,097 | ||||||
Total cash, cash equivalents, and short-term investments | 169,321 | 158,830 | ||||||
Trade accounts receivable: | ||||||||
Billed, net of allowance of $3,147 and $2,421 | 191,943 | 179,804 | ||||||
Unbilled and other | 33,859 | 30,981 | ||||||
Deferred income taxes | 22,244 | 19,982 | ||||||
Income taxes receivable | 6,469 | 4,139 | ||||||
Other current assets | 17,099 | 16,224 | ||||||
Total current assets | 440,935 | 409,960 | ||||||
Non-current assets: | ||||||||
Property and equipment, net of depreciation of $120,643 and $116,125 | 39,429 | 41,154 | ||||||
Software, net of amortization of $68,513 and $56,521 | 36,729 | 29,966 | ||||||
Goodwill | 233,365 | 220,013 | ||||||
Client contracts, net of amortization of $184,763 and $159,225 | 76,388 | 98,403 | ||||||
Deferred income taxes | 2,596 | 1,008 | ||||||
Income taxes receivable | 1,292 | - | ||||||
Other assets | 16,207 | 14,393 | ||||||
Total non-current assets | 406,006 | 404,937 | ||||||
Total assets | $ | 846,941 | $ | 814,897 | ||||
LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||
Current liabilities: | ||||||||
Current maturities of long-term debt | $ | 15,000 | $ | 27,000 | ||||
Client deposits | 33,807 | 30,523 | ||||||
Trade accounts payable | 30,473 | 27,198 | ||||||
Accrued employee compensation | 61,083 | 42,005 | ||||||
Income taxes payable | 2,116 | 2,334 | ||||||
Deferred revenue | 47,691 | 44,824 | ||||||
Other current liabilities | 21,562 | 23,501 | ||||||
Total current liabilities | 211,732 | 197,385 | ||||||
Non-current liabilities: | ||||||||
Long-term debt, net of unamortized original issue discount of $25,302 and $30,256 | 259,698 | 282,744 | ||||||
Deferred revenue | 6,504 | 8,631 | ||||||
Income taxes payable | 1,168 | 4,114 | ||||||
Deferred income taxes | 21,674 | 28,188 | ||||||
Other non-current liabilities | 19,526 | 19,121 | ||||||
Total non-current liabilities | 308,570 | 342,798 | ||||||
Total liabilities | 520,302 | 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; 33,734 shares and 33,822 shares outstanding | ||||||||
