CSG Systems International Reports Results for Second Quarter 2013
CSG Systems International Reports Results for Second Quarter 2013
ENGLEWOOD, Colo.--(BUSINESS WIRE)-- CSG Systems International, Inc. (NAS: CSGS) , a leading global provider of interactive transaction-driven solutions and services, today reported results for the quarter ended June 30, 2013.
Key Financial Highlights:
- Second quarter 2013 results:
- Total revenues were $186.1 million.
- Non-GAAP operating income was $30.4 million, or 16.3% of total revenues and GAAP operating income was $21.7 million, or 11.6% of total revenues.
- Non-GAAP earnings per diluted share(EPS) was $0.57. GAAP EPS was $0.37.
- Cash flows from operations for the quarter were $38.8 million.
- CSG signed its first significant multi-year managed services agreement with a tier one communications provider in Asia Pacific.
- During the quarter, CSG announced that it would be paying a quarterly cash dividend for the first time in its history. The initial quarterly cash dividend of $0.15 per share of common stock was paid to stockholders on July 25, 2013.
- During the quarter, CSG repurchased approximately 166,000 shares of its common stock for $3.5 million (weighted-average price of $21.01 per share) under its stock repurchase program.
"This quarter we continued to make solid progress in extending our role in our clients' operations and helping various providers monetize content and strengthen their relationships with their customers," said Peter Kalan, president and chief executive officer for CSG International. "I believe that we have set this company up to deliver revenue growth and operating margin improvements in subsequent years as we successfully execute on the numerous opportunities that this dynamic and evolving market presents."
Financial Overview (unaudited)
(in thousands, except per share amounts and percentages):
| Quarter Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||
2013 |
2012 | Percent |
2013 |
2012 | Percent | ||||||||||||||
| Revenues | $ 186,107 | $ 183,851 | 1% | $ 366,739 | $ 368,858 | (1)% | |||||||||||||
| Non-GAAP Results: | |||||||||||||||||||
| Operating Income | $ 30,362 | $ 33,135 | (8)% | $ 58,010 | $ 71,446 | (19)% | |||||||||||||
| Operating Income Margin | 16.3% | 18.0% | - | 15.8% | 19.4% | - | |||||||||||||
| EPS | $ 0.57 | $ 0.56 | 2% | $ 1.05 | $ 1.16 | (9)% | |||||||||||||
| GAAP Results: | |||||||||||||||||||
| Operating Income | $ 21,681 | $ 23,745 | (9)% | $ 39,716 | $ 52,697 | (25)% | |||||||||||||
| Operating Income Margin | 11.6% | 12.9% | - | 10.8% | 14.3% | - | |||||||||||||
| EPS | $ 0.37 | $ 0.37 | 0% | $ 0.83 | $ 0.73 | 14% | |||||||||||||
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 second quarter of 2013 were $186.1 million, a 1% increase when compared to revenues of $183.9 million for the second quarter of 2012, and a 3% increase when compared to $180.6 million for the first quarter of 2013. Revenues for the second quarter of 2013 reflect the first full quarter impact of the pricing adjustments associated with both the Comcast and Time Warner contract extensions. This was offset by increased software and services revenues, which contributed to the increases in overall total revenues.
Non-GAAP Results: Non-GAAP operating income for the second quarter of 2013 was $30.4 million, or 16.3%of total revenues, compared to $33.1 million, or 18.0%, for the second quarter of 2012. Non-GAAP operating income for the first quarter of 2013 was $27.6 million, or 15.3% of total revenues. The year-over-year decrease in operating income and operating income margin reflects the impact of the Comcast and Time Warner pricing adjustments. The sequential quarterly increase can be attributed to the increased software and services revenues generated during the second quarter of 2013 when compared to the first quarter of 2013, as mentioned above.
Non-GAAP EPS for the second quarter of 2013 was $0.57, relatively consistent when compared to non-GAAP EPS of $0.56 for the second quarter of 2012. Non-GAAP EPS for the first quarter of 2013 was $0.48, with the sequential improvement a result of higher software and services revenues in the second quarter of 2013.
GAAP Results: GAAP operating income for the second quarter of 2013 was $21.7 million, or 11.6%of total revenues, compared to $23.7 million, or 12.9%, for the same period in 2012.
GAAP EPS for the second quarter of 2013 was $0.37, consistent with that of the second quarter of 2012.
Balance Sheet and Cash Flows
Balance Sheet: Certain key balance sheet items as of the indicated dates are as follows (in thousands):
| June 30, 2013 | March 31, 2013 | December 31, 2012 | ||||||||
| Cash, cash equivalents, and short-term investments | $ 189,294 | $ 172,703 | $ 169,321 | |||||||
| Net billed trade accounts receivable | 172,521 | 179,093 | 191,943 | |||||||
| Total long-term debt: | ||||||||||
| Par value | $ 292,500 | $ 296,250 | $ 300,000 | |||||||
| Unamortized OID | (22,678) | (24,003) | (25,302) | |||||||
| Net debt carrying amount | $ 269,822 | $ 272,247 | $ 274,698 |
Cash Flows: Certain key operating cash flow items for the indicated quarters then ended are as follows (in thousands):
| June 30, 2013 | March 31, 2013 | June 30, 2012 | ||||||||
| Cash Flows from Operating Activities: | ||||||||||
| Operations | $ 31,308 | $ 41,320 | $ 29,898 | |||||||
| Changes in operating assets and liabilities | 7,494 | (18,776) | 6,681 | |||||||
| Net cash provided by operating activities | $ 38,802 | $ 22,544 | $ 36,579 | |||||||
| Cash Flows from Investing Activities: | ||||||||||
| Purchases of property and equipment | $ (6,633) | $ (4,492) | $ (11,232) | |||||||
| Cash Flows from Financing Activities: | ||||||||||
| Repurchase of common stock under stock repurchase program | (3,490) | (6,511) | $ (5,438) | |||||||
| Payments on long-term debt | (3,750) | (3,750) | (10,000) | |||||||
During the second quarter of 2013, CSG initiated a quarterly cash dividend in the amount of $0.15 per share of common stock. A total of approximately $5 million was paid to shareholders on July 25, 2013, and therefore will be reported with CSG's cash flow results for the third quarter of 2013. Going forward, CSG expects to pay cash dividends each year in September, December, March, and June, with the amount and timing subject to the Board of Directors' approval.
2013 Financial Guidance
CSG is maintaining its financial guidance for the full year 2013 as follows:
| Revenues | $740 - $760 million | |||
| Non-GAAP EPS | $2.05 - $2.15 | |||
| GAAP EPS | $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 August 6, 2013, at 5:00 p.m. ET, to discuss CSG's second 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 (800) 762-8779 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, 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) | ||||||
| June 30, 2013 | December 31, 2012 | |||||
ASSETS | ||||||
| Current assets: | ||||||
| Cash and cash equivalents | $ 96,849 | $ 133,747 | ||||
| Short-term investments | 92,445 | 35,574 | ||||
| Total cash, cash equivalents, and short-term investments | 189,294 | 169,321 | ||||
| Trade accounts receivable: | ||||||
| Billed, net of allowance of $3,750 and $3,147 | 172,521 | 191,943 | ||||
| Unbilled and other | 43,367 | 33,859 | ||||
| Deferred income taxes | 16,116 | 22,244 | ||||
| Income taxes receivable | 12,441 | 6,469 | ||||
| Other current assets | 22,476 | 17,099 | ||||
| Total current assets | 456,215 | 440,935 | ||||
| Non-current assets: | ||||||
| Property and equipment, net of depreciation of $129,990 and $120,643 | 35,173 | 39,429 | ||||
| Software, net of amortization of $73,941 and $68,513 | 39,036 | 36,729 | ||||
| Goodwill | 227,546 | 233,365 | ||||
| Client contracts, net of amortization of $71,026 and $184,763 | 67,467 | 76,388 | ||||
| Deferred income taxes | 3,312 | 2,596 | ||||
| Income taxes receivable | 169 | 1,292 | ||||
| Other assets | 15,508 | 16,207 | ||||
| Total non-current assets | 388,211 | 406,006 | ||||
Total assets | $ 844,426 | $ 846,941 | ||||
LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||
| Current liabilities: | ||||||
| Current maturities of long-term debt | $ 15,000 | $ 15,000 | ||||
| Client deposits | 32,622 | 33,807 | ||||
| Trade accounts payable | 35,623 | 30,473 | ||||
| Accrued employee compensation | 44,536 | 61,083 | ||||
| Deferred revenue | 56,195 | 47,691 | ||||
| Income taxes payable | 2,282 | 2,116 | ||||
| Other current liabilities | 22,428 | 21,562 | ||||
| Total current liabilities | 208,686 | 211,732 | ||||
| Non-current liabilities: | ||||||
| Long-term debt, net of unamortized original issue discount of $22,678 and $25,302 | 254,822 | 259,698 | ||||
| Deferred revenue | 8,192 | 6,504 | ||||
| Income taxes payable | 1,168 | 1,168 | ||||
| Deferred income taxes | 22,973 | 21,674 | ||||
| Other non-current liabilities | 15,033 | 19,526 | ||||
| Total non-current liabilities | 302,188 | 308,570 | ||||
| Total liabilities | 510,874 | 520,302 | ||||
| Stockholders' equity: | ||||||
Preferred stock, par value $.01 per share; 10,000 shares authorized; | - | - | ||||
Common stock, par value $.01 per share; 100,000 shares authorized; | 658 | 653 | ||||
| Additional paid-in capital | 465,574 | 461,497 | ||||
| Treasury stock, at cost, 32,024 and 31,530 shares (6 | (738,244) | (728,243) | ||||
| Accumulated other comprehensive income (loss): | ||||||
| Unrealized gain on short-term investments, net of tax | (53) | 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 | (388) | (658) | ||||
| Cumulative foreign currency translation adjustments | (7,415) | 2,274 | ||||
| Accumulated earnings | 614,775 | 592,874 | ||||
| Total stockholders' equity | 333,552 | 326,639 | ||||
| Total liabilities and stockholders' equity | $ 844,426 | $ 846,941 | ||||
CSG SYSTEMS INTERNATIONAL, INC. CONDENSED CONSOLIDATED STATEMENTS OF INCOME-UNAUDITED (in thousands, except per share amounts) | |||||||||||||
| Quarter Ended | Six Months Ended | ||||||||||||
| June 30, 2013 | June 30, 2012 | June 30, 2013 | June 30, 2012 | ||||||||||
| Revenues: | |||||||||||||
| Processing and related services | $ 131,184 | $ 133,362 | $ 265,818 | $ 269,676 | |||||||||
| Software, maintenance and services | 54,923 | 50,489 | 100,921 | 99,182 | |||||||||
| Total revenues | 186,107 | 183,851 | 366,739 | 368,858 | |||||||||
Cost of revenues (exclusive of depreciation, shown separately below): | |||||||||||||
| Processing and related services | 62,964 | 62,334 | 124,541 | 124,294 | |||||||||
| Software, maintenance and services | 31,794 | 30,186 | 63,571 | 58,195 | |||||||||
| Total cost of revenues | 94,758 | 92,520 | 188,112 | 182,489 | |||||||||
| Other operating expenses: | |||||||||||||
| Research and development | 27,548 | 27,794 | 56,093 | 55,716 | |||||||||
| Selling, general and administrative | 37,388 | 33,799 | 72,185 | 65,424 | |||||||||
| Depreciation | 4,770 | 5,874 | 9,770 | 11,711 | |||||||||
| Restructuring charges | (38) |
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