CSG Systems International Reports Results for First Quarter 2013

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 Margin

15.3%

20.7%

-

EPS

$ 0.48

$ 0.60

(20)%

GAAP Results:

Operating Income

$ 18,035

$ 28,952

(38)%

Operating Income Margin

10.0%

15.6%

-

EPS

$ 0.46

$ 0.36

28%

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 receivable

179,093

191,943

170,909

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 investments

26,545

32,848

Total cash, cash equivalents, and short-term investments

172,703

169,321

Trade accounts receivable:

Billed, net of allowance of $3,618 and $3,147

179,093

191,943

Unbilled and other

34,766

33,859

Deferred income taxes

15,828

22,244

Income taxes receivable

16,779

6,469

Other current assets

17,855

17,099

Total current assets

437,024

440,935

Non-current assets:

Property and equipment, net of depreciation of $125,277 and $120,643

37,211

39,429

Software, net of amortization of $71,334 and $68,513

36,969

36,729

Goodwill

226,309

233,365

Client contracts, net of amortization of $82,743 and $184,763

68,750

76,388

Deferred income taxes

2,586

2,596

Income taxes receivable

409

1,292

Other assets

15,751

16,207

Total non-current assets

387,985

406,006

Total assets

$ 825,009

$ 846,941

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:

Current maturities of long-term debt

$ 15,000

$ 15,000

Client deposits

32,827

33,807

Trade accounts payable

32,764

30,473

Accrued employee compensation

35,093

61,083

Income taxes payable

2,436

2,116

Deferred revenue

58,520

47,691

Other current liabilities

17,204

21,562

Total current liabilities

193,844

211,732

Non-current liabilities:

Long-term debt, net of unamortized original issue discount of $24,003 and $25,302

257,247

259,698

Deferred revenue

8,276

6,504

Income taxes payable

1,168

1,168

Deferred income taxes

21,172

21,674

Other non-current liabilities

16,645

19,526

Total non-current liabilities

304,508

308,570

Total liabilities

498,352

520,302

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 capital

461,400

461,497

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 tax

2

3

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 earnings

607,772

592,874

Total stockholders' equity

326,657

326,639

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 services

45,998

48,693

Total revenues

180,632

185,007

Cost of revenues (exclusive of depreciation, shown separately below):

Processing and related services

61,577

61,960

Software, maintenance and services

31,777

28,009

Total cost of revenues

93,354

89,969

Other operating expenses:

Research and development

28,545

27,922

Selling, general and administrative

34,797

31,625

Depreciation

5,000

5,837

Restructuring charges

901

702

Total operating expenses

162,597

156,055

Operating income

18,035

28,952

Other income (expense):

Interest expense

(2,929)

(4,152)

Amortization of original issue discount

(1,299)

(1,203)

Interest and investment income, net

155

220

Other, net

(418)

(205)

Total other

(4,491)

(5,340)

Income before income taxes

13,544

23,612

Income tax benefit (provision)

1,354

(11,806)

Net income

$ 14,898

$ 11,806

Weighted-average shares outstanding - Basic:

Common stock

32,133

32,392

Participating restricted stock

-

66

Total

32,133