CSG Systems International Reports Record Fourth Quarter and Full Year Revenues

  CSG Systems International Reports Record Fourth Quarter and Full Year
  Revenues

Business Wire

ENGLEWOOD, Colo. -- February 5, 2013

CSG Systems International, Inc. (Nasdaq: 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,
                                      Percent                             Percent
                                      Change                              Change
            2012          2011                    2012          2011
Revenues    $ 198,007     $ 187,574     6    %    $ 756,866     $ 734,731     3   %
Non-GAAP
Results:
Operating   $ 33,018      $ 39,987      (17  )%   $ 135,535     $ 139,031     (3  )%
Income
Operating
Income        16.7    %     21.3    %   -           17.9    %     18.9    %   -
Margin
EPS         $ 0.67        $ 0.64        5    %    $ 2.33        $ 2.25        4   %
GAAP
Results:
Operating   $ 22,149      $ 27,043      (18  )%   $ 96,574      $ 96,285      0   %
Income
Operating
Income        11.2    %     14.4    %   -           12.8    %     13.1    %   -
Margin
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,
                                   2012           2012            2011
Cash, cash equivalents, and        $  169,321     $  184,769      $  158,830
short-term investments (1)
Net billed trade accounts             191,943        174,137         179,804
receivable
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 

           The sequential decrease in cash and short-term investments in the
(1)  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
                          December 31,               December 31,
                          2012         2011         2012         2011
Cash Flows from
Operating Activities:
Operations                $ 34,921      $ 34,348     $ 126,317     $ 130,337
Changes in operating       (15,866 )    (2,523 )    1,160       (69,378 )
assets and liabilities
Net cash provided by
operating activities      $ 19,055     $ 31,825    $ 127,477    $ 60,959  
(2)
Cash Flows from
Investing Activities:
Purchases of property     $ (12,733 )   $ (2,582 )   $ (33,221 )   $ (22,197 )
and equipment
Cash Flows from
Financing Activities:
Repurchase of common
stock under stock         $ -           $ (2,268 )   $ (13,349 )   $ (9,930  )
repurchase program
Net proceeds
from/(payments on)          (18,000 )     (2,500 )     (40,000 )     (70,149 )
long-term debt

          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
(2)  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,
                                                   2012           2011
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         169,321        158,830
investments
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       39,429         41,154
$120,643 and $116,125
Software, net of amortization of $68,513 and         36,729         29,966
$56,521
Goodwill                                             233,365        220,013
Client contracts, net of amortization of             76,388         98,403
$184,763 and $159,225
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          259,698        282,744
issue discount of $25,302 and $30,256
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          653            645
shares outstanding
Additional paid-in capital                           461,497        449,376
Treasury stock, at cost, 31,530 and 30,707           (728,243 )     (714,893 )
shares
Accumulated other comprehensive income (loss):
Unrealized gain on short-term investments, net       3              1
of tax
Unrecognized pension plan losses and prior           (1,761   )     (1,794   )
service costs, net of tax
Unrealized loss on change in fair value of           (658     )     (618     )
interest rate swaps, net of tax
Cumulative foreign currency translation              2,274          (1,998   )
adjustments
Accumulated earnings                                592,874      543,995  
Total stockholders’ equity                          326,639      274,714  
Total liabilities and stockholders’ equity         $ 846,941     $ 814,897  
                                                                             


CSG SYSTEMS INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME-UNAUDITED
(in thousands, except per share amounts)

                    Quarter Ended                Year Ended
                     December 31,  December 31,   December 31,  December 31,
                     2012           2011           2012           2011
Revenues:
Processing and       $  135,980     $  133,076     $  544,649     $  524,666
related services
Software,
maintenance and        62,027       54,498       212,217      210,065 
services
Total revenues         198,007      187,574      756,866      734,731 
                                                                  
Cost of revenues
(exclusive of
depreciation,
shown separately
below):
Processing and          66,501         60,548         258,380        244,776
related services
Software,
maintenance and        34,415       30,474       125,436      120,874 
services
Total cost of           100,916        91,022         383,816        365,650
revenues
Other operating
expenses:
Research and            28,696         26,663         112,938        111,142
development
Selling, general        39,396         31,470         138,783        128,346
and administrative
Depreciation            5,202          6,511          22,286         25,435
Restructuring          1,648        4,865        2,469        7,873   
charges
Total operating        175,858      160,531      660,292      638,446 
expenses
Operating income       22,149       27,043       96,574       96,285  
Other income
(expense):
Interest expense        (3,647  )      (4,185  )      (15,983 )      (17,026 )
Amortization of
original issue          (1,274  )      (1,179  )      (4,954  )      (5,206  )
discount
Interest and
investment income,      220            169            855            764
net
Other, net             208          292          732          1,155   
Total other            (4,493  )     (4,903  )     (19,350 )     (20,313 )
Income before           17,656         22,140         77,224         75,972
income taxes
Income tax             (1,866  )     (10,846 )     (28,345 )     (33,690 )
provision
Net income           $  15,790     $  11,294     $  48,879     $  42,282  
                                                                  
Weighted-average
shares outstanding
– Basic:
Common stock            32,002         32,257         32,142         32,624
Participating          -            127          17           189     
restricted stock
Total                  32,002       32,384       32,159       32,813  
                                                                  
Weighted-average
shares outstanding
– Diluted:
Common stock            32,568         32,520         32,459         32,833
Participating          -            127          17           189     
restricted stock
Total                  32,568       32,647       32,476       33,022  
                                                                  
Earnings per
common share:
Basic                $  0.49        $  0.35        $  1.52        $  1.29
Diluted                 0.48           0.35           1.51           1.28
                                                                             


CSG SYSTEMS INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS-UNAUDITED
(in thousands)

                                                  Year Ended
                                                   December 31,  December 31,
                                                   2012           2011
Cash flows from operating activities:
Net income                                         $ 48,879       $  42,282
Adjustments to reconcile net income to net cash
provided by operating activities -
Depreciation                                         22,286          25,435
Amortization                                         44,178          42,173
Amortization of original issue discount              4,954           5,206
Impairment of client contract                        3,783           -
Gain on short-term investments and other             (72      )      (60     )
Deferred income taxes                                (10,707  )      3,977
Excess tax benefit of stock-based compensation       (415     )      (828    )
awards
Stock-based employee compensation                   13,431        12,152  
Subtotal                                             126,317         130,337
Changes in operating assets and liabilities:
Trade accounts and other receivables, net            (9,481   )      (31,552 )
Other current and non-current assets                 (1,715   )      3,210
Income taxes payable/receivable                      (6,543   )      7,573
Trade accounts payable and accrued liabilities       18,474          (20,074 )
Deferred revenue                                    425           (28,535 )
Net cash provided by operating activities           127,477       60,959  
Cash flows from investing activities:
Purchases of property and equipment                  (33,221  )      (22,197 )
Purchases of short-term investments                  (62,742  )      (37,798 )
Proceeds from sale/maturity of short-term            42,063          43,450
investments
Acquisition of business, net of cash acquired        (19,085  )      -
Acquisition of and investments in client            (4,629   )     (9,133  )
contracts
Net cash used in investing activities               (77,614  )     (25,678 )
Cash flows from financing activities:
Proceeds from issuance of common stock               1,896           1,486
Repurchase of common stock                           (16,558  )      (14,365 )
Payments on acquired equipment financing             (1,698   )      (1,587  )
Proceeds from long-term debt                         150,000         -
Payments on long-term debt                           (190,000 )      (70,149 )
Payments of deferred financing costs                 (2,450   )      (205    )
Excess tax benefit of stock-based compensation      415           828     
awards
Net cash used in financing activities               (58,395  )     (83,992 )
Effect of exchange rate fluctuations on cash        (1,728   )     (2,414  )
Net decrease in cash and cash equivalents            (10,260  )      (51,125 )
Cash and cash equivalents, beginning of period      146,733       197,858 
Cash and cash equivalents, end of period           $ 136,473     $  146,733 
                                                                  
                                                                  
Supplemental disclosures of cash flow
information:
Net cash paid during the period for -
Interest                                           $ 13,124       $  13,921
Income taxes                                         43,379          22,836
                                                                             

EXHIBIT 1

CSG SYSTEMS INTERNATIONAL, INC.
SUPPLEMENTAL REVENUE ANALYSIS

Revenues by Geography

                                 Quarter Ended   Quarter Ended   Quarter Ended
                                December 31,   September 30,  December 31,
                                 2012            2012            2011
Americas                         83        %     87        %     85        %
Europe, Middle East and Africa   11        %     9         %     10        %
Asia Pacific                     6         %     4         %     5         %
Total Revenues                   100       %     100       %     100       %
                                                                 
Revenues by Significant Customers: 10% or more of Revenues

                                 Quarter Ended   Quarter Ended   Quarter Ended
                                 December 31,    September 30,   December 31,
                                 2012            2012            2011
Comcast                          19        %     21        %     19        %
DISH                             13        %     13        %     13        %
Time Warner                      11        %     10        %     10        %
                                                                 
ACP Customer Accounts (in thousands, at end of period)

                                 December 31,    September 30,   December 31,
                                 2012            2012            2011
Cable/Satellite Customer         48,870          49,224          48,837
Accounts
                                                                           

                                  EXHIBIT 2
                       CSG SYSTEMS INTERNATIONAL, INC.
                 DISCLOSURES FOR NON-GAAP FINANCIAL MEASURES

Use of Non-GAAP Financial Measures and Limitations

To supplement its condensed consolidated financial statements presented in
accordance with generally accepted accounting principles (GAAP), CSG uses
non-GAAP operating income, non-GAAP EPS, non-GAAP adjusted EBITDA, and
non-GAAP free cash flow. CSG believes that these non-GAAP financial measures,
when reviewed in conjunction with its GAAP financial measures, provide
investors with greater transparency to the information used by CSG’s
management in its financial and operational decision making. CSG uses these
non-GAAP financial measures for the following purposes:

  *Certain internal financial planning, reporting, and analysis;
  *Forecasting and budgeting purposes;
  *Certain management compensation incentives; and
  *Communications with CSG’s Board of Directors, stockholders, financial
    analysts, and investors.

These non-GAAP financial measures are provided with the intent of providing
investors with the following information:

  *A more complete understanding of CSG’s underlying operational results,
    trends, and cash generating capabilities;
  *Consistency and comparability with CSG’s historical financial results; and
  *Comparability to similar companies, many of which present similar non-GAAP
    financial measures to investors.

Non-GAAP financial measures are not measures of performance under GAAP, and
therefore should not be considered in isolation or as a substitute for GAAP
financial information. Limitations with the use of non-GAAP financial measures
include the following items:

  *Non-GAAP financial measures are not based on any comprehensive set of
    accounting rules or principles;
  *The way in which CSG calculates non-GAAP financial measures may differ
    from the way in which other companies calculate similar non-GAAP financial
    measures;
  *Non-GAAP financial measures do not include all items of income and expense
    that affect CSG’s operations and that are required by GAAP to be included
    in financial statements;
  *Certain adjustments to CSG’s non-GAAP financial measures result in the
    exclusion of items that are recurring and will be reflected in CSG’s
    financial statements in future periods; and
  *Certain charges excluded from CSG’s non-GAAP financial measures are cash
    expenses, and therefore do impact CSG’s cash position.

CSG compensates for these limitations by relying primarily on its GAAP results
and using non-GAAP financial measures as a supplement only. Additionally, CSG
provides specific information regarding the treatment of GAAP amounts
considered in preparing the non-GAAP financial measures and reconciles each
non-GAAP financial measure to the most directly comparable GAAP measure.

Non-GAAP Financial Measures: Basis of Presentation

The table below outlines the exclusions from CSG’s non-GAAP financial
measures:

Non-GAAP Exclusions                              Operating  EPS
                                                  Income
Restructuring charges                             X           X
Ascade acquisition-related charges                X           X
Stock-based compensation                          X           X
Amortization of acquired intangible assets        X           X
Amortization of original issue discount (“OID”)   -           X
Unusual income tax matters                        -           X
                                                              

CSG believes that excluding certain items in calculating its non-GAAP
financial measures provides meaningful supplemental information regarding
CSG’s performance and these items are excluded for the following reasons:

  *Restructuring charges are infrequent expenses that result from cost
    reduction initiatives and/or significant changes to CSG’s business, to
    include such things as involuntary employee terminations, and facility
    consolidations and abandonments. These charges are not considered
    reflective of CSG’s recurring core business operating results. The
    exclusion of these items in calculating CSG’s non-GAAP financial measures
    allows management and investors an additional means to compare CSG’s
    current operating results with historical and future periods.
  *The Ascade acquisition-related charges relate to certain direct and
    incremental expenses related to the acquisition of Ascade, and thus, are
    not considered reflective of CSG’s recurring core business operating
    results. These charges include expenses related to legal, accounting, and
    other professional services. The exclusion of these charges in calculating
    CSG’s non-GAAP financial measures allows management and investors an
    additional means to compare CSG’s current financial results with
    historical and future periods.
  *Stock-based compensation results from CSG’s issuance of its common stock
    to its employees under incentive compensation programs. The amount of this
    incentive compensation in any period is not generally linked to the level
    of performance by employees or CSG, but instead is more dependent on CSG’s
    stock price at the stock grant date, and the employee service period over
    which the equity awards vest. The exclusion of these expenses in
    calculating CSG’s non-GAAP financial measures allows management and
    investors an additional means to evaluate the non-cash expense related to
    compensation included in CSG’s results of operations, and therefore, the
    exclusion of this item allows investors to further evaluate the cash
    generating capabilities of CSG’s business.
  *Amortization of acquired intangible assets is the result of business
    acquisitions. A portion of the purchase price in an acquisition is
    allocated to acquired intangible assets (e.g., software, client
    relationships, etc.), which are then amortized to expense over their
    estimated useful lives. This annual amortization expense is generally
    unchanged from the initial estimates, regardless of performance of the
    acquired business in any one period. Also, the value assigned to acquired
    intangible assets in a business combination is based on various estimates
    and valuation techniques, and does not necessarily represent the costs CSG
    would incur to develop such capabilities internally. Additionally,
    amortization of acquired intangible assets can be inconsistent in amount
    and frequency, and can be significantly affected by the timing and size of
    an acquisition. The exclusion of these expenses in calculating CSG’s
    non-GAAP financial measures allows management and investors an additional
    means to evaluate the non-cash expense related to acquisitions included in
    CSG’s subsequent results of operations, and therefore, the exclusion of
    this item allows investors to further evaluate the cash generating
    capabilities of CSG’s business.
  *The convertible debt securities OID is the result of allocating a portion
    of the principal balance of the debt at issuance to the equity component
    of the instrument, as required under current accounting rules. This OID is
    then amortized to interest expense over the life of the respective
    convertible debt instrument. The interest expense related to the
    amortization of the OID is a non-cash expense, and therefore, the
    exclusion of this item allows investors to further evaluate the cash
    interest costs of CSG’s convertible debt securities for cash flow,
    liquidity, and debt service purposes.
  *Unusual items within CSG’s quarterly and/or annual income tax expense can
    occur from such things as income tax accounting timing matters, income
    taxes related to unusual events, or as a result of different treatment of
    certain items for book accounting and income tax purposes. Consideration
    of such items in calculating CSG’s non-GAAP financial measures allows
    management and investors an additional means to compare CSG’s current
    financial results with historical and future periods.

CSG also reports non-GAAP adjusted EBITDA and non-GAAP free cash flow.
Management believes non-GAAP adjusted EBITDA is a useful measure to investors
in evaluating CSG’s operating performance, liquidity, debt servicing
capabilities, and enterprise valuation. CSG defines adjusted EBITDA as income
before interest, income taxes, depreciation, amortization, stock-based
compensation, foreign currency transaction adjustments, and unusual items,
such as restructuring charges, as discussed above. Additionally, management
uses non-GAAP free cash flow, among other measures, to assess its financial
performance and cash generating capabilities, and believes that it is useful
to investors because it shows CSG’s cash available to service debt, make
strategic acquisitions and investments, repurchase its common stock, and fund
ongoing operations. CSG defines non-GAAP free cash flow as net cash flows from
operating activities less the purchases of property and equipment.

Non-GAAP Financial Measures

Non-GAAP Operating Income:

The reconciliations of GAAP operating income to non-GAAP operating income for
the indicated periods are as follows (in thousands, except percentages):

                                  Quarter Ended         Quarter Ended
                                   December 31, 2012      December 31, 2011
                                   Amounts    % of       Amounts    % of
                                               Revenues               Revenues
GAAP operating income              $ 22,149    11.2  %    $ 27,043    14.4  %
Restructuring charges                1,648     0.8   %      4,865     2.6   %
Stock-based compensation             3,441     1.8   %      2,468     1.3   %
Amortization of acquired            5,780     2.9   %     5,611     3.0   %
intangible assets
Non-GAAP operating income          $ 33,018    16.7  %    $ 39,987    21.3  %
                                                          
                                   Year Ended             Year Ended
                                   December 31, 2012      December 31, 2011
                                   Amounts     % of       Amounts     % of
                                               Revenues               Revenues
GAAP operating income              $ 96,574    12.8  %    $ 96,285    13.1  %
Restructuring charges                2,469     0.3   %      7,873     1.1   %
Ascade acquisition-related           344       0.0   %      -         -
charges
Stock-based compensation             13,431    1.8   %      12,152    1.6   %
Amortization of acquired            22,717    3.0   %     22,721    3.1   %
intangible assets
Non-GAAP operating income          $ 135,535   17.9  %    $ 139,031   18.9  %
                                                                            

Non-GAAP EPS:

The reconciliations of GAAP EPS to non-GAAP EPS for the indicated periods are
as follows (in thousands, except per share amounts):

                          Quarter Ended             Quarter Ended
                            December 31, 2012          December 31, 2011
                                         Per Diluted                Per
                            Pretax      Share         Pretax      Diluted
                            Amount (1)   Impact (2)    Amount (1)   Share
                                                                    Impact (3)
GAAP income before income   $  17,656    $    0.48     $  22,140    $   0.35
taxes
Restructuring charges          1,648          0.03        4,865         0.10
Stock-based compensation       3,441          0.05        2,468         0.05
Amortization of acquired       5,780          0.09        5,611         0.12
intangible assets
Amortization of OID           1,274         0.02       1,179        0.02
Non-GAAP income before      $  29,799    $    0.67     $  36,263    $   0.64
income taxes
                                                       
                           Year Ended                 Year Ended
                            December 31, 2012          December 31, 2011
                                         Per Diluted                Per
                            Pretax       Share         Pretax       Diluted
                            Amount (1)   Impact (2)    Amount (1)   Share
                                                                    Impact (3)
GAAP income before income   $  77,224    $    1.51     $  75,972    $   1.28
taxes
Restructuring charges          2,469          0.04        7,873         0.16
Ascade
acquisition-related            344            0.01        -             -
charges
Stock-based compensation       13,431         0.25        12,152        0.25
Amortization of acquired       22,717         0.43        22,721        0.46
intangible assets
Amortization of OID           4,954         0.09       5,206        0.10
Non-GAAP income before      $  121,139   $    2.33     $  123,924   $   2.25
income taxes

      These items (on a pretax basis) are calculated in accordance with GAAP,
(1)  and are reflected as part of the results of operations in the
      accompanying Unaudited Condensed Consolidated Statements of Income.
      These items represent the estimated after-tax impact to net income on a
      per diluted share basis using the following: (i) the estimated income
      taxes related to these items, which includes the impact of the
      difference between GAAP and non-GAAP pretax income, and includes the
(2)   benefit from the R&D and related income tax credits related to 2012
      operations. This resulted in estimated effective income rates for
      non-GAAP purposes for the quarter and year ended December 31, 2012 of
      approximately 27% and 38%, respectively; and (ii) the weighted-average
      diluted shares outstanding for the quarter and year ended December 31,
      2012 of 32.6 million and 32.5 million, respectively.
      These items represent the estimated after-tax impact to net income on a
      per diluted share basis using the following: (i) the estimated income
      taxes related to these items, which includes the impact of the
      difference between GAAP and non-GAAP pretax income. This resulted in
(3)   estimated effective income rates for non-GAAP purposes for the quarter
      and year ended December 31, 2011 of approximately 42% and 40%,
      respectively; and (ii) the weighted-average diluted shares outstanding
      for the quarter and year ended December 31, 2011 of 32.6 million and
      33.0 million, respectively.
      

Non-GAAP Adjusted EBITDA:

CSG’s calculation of non-GAAP adjusted EBITDA and the reconciliation of CSG’s
non-GAAP adjusted EBITDA measure to net income and cash flows from operating
activities are provided below for the indicated periods (in thousands):

                       Quarter Ended              Year Ended
                         December 31,                December 31,
                         2012          2011         2012         2011
GAAP operating income    $  22,149      $ 27,043     $ 96,574      $ 96,285
Restructuring charges       1,648         4,865        2,469         7,873
Ascade
acquisition-related         -             -            344           -
charges
Depreciation                5,202         6,511        22,286        25,435
Amortization of
acquired intangible         5,780         5,611        22,717        22,721
assets (4)
Amortization of other       4,502         4,236        18,748        16,454
intangible assets (4)
Stock-based                3,441       2,468      13,431      12,152  
compensation
Adjusted EBITDA          $  42,722     $ 50,734    $ 176,569    $ 180,920 
Adjusted EBITDA as a
percentage of              22      %    27     %    23      %    25      %
revenues
                                                     
                        Quarter Ended               Year Ended
                         December 31,                December 31,
                         2012           2011         2012          2011
Net income               $  15,790      $ 11,294     $ 48,879      $ 42,282
Interest expense (5)        3,647         4,185        15,983        17,026
Amortization of OID         1,274         1,179        4,954         5,206
Interest and
investment income and       (428    )     (461   )     (1,587  )     (1,919  )
other, net
Income tax provision        1,866         10,846       28,345        33,690
Depreciation                5,202         6,511        22,286        25,435
Amortization of
acquired intangible         5,780         5,611        22,717        22,721
assets (4)
Amortization of other       4,502         4,236        18,748        16,454
intangible assets (4)
Stock-based                 3,441         2,468        13,431        12,152
compensation
Ascade
acquisition-related         -             -            344           -
charges
Restructuring charges      1,648       4,865      2,469       7,873   
Adjusted EBITDA          $  42,722     $ 50,734    $ 176,569    $ 180,920 
                                                     
                        Quarter Ended               Year Ended
                         December 31,                December 31,
                         2012           2011         2012          2011
Cash flows from          $  19,055      $ 31,825     $ 127,477     $ 60,959
operating activities
Income tax provision        1,866         10,846       28,345        33,690
Changes in operating
assets and                  18,784        183          9,547         65,401
liabilities and
deferred taxes
Impairment of client        (1,283  )     -            (3,783  )     -
contract
Interest expense (5)        3,647         4,185        15,983        17,026
Interest and
investment income and       (428    )     (461   )     (1,587  )     (1,919  )
other, net
Ascade
acquisition-related         -             -            344           -
charges
Restructuring charges       1,648         4,865        2,469         7,873
Other                      (567    )    (709   )    (2,226  )    (2,110  )
Adjusted EBITDA          $  42,722     $ 50,734    $ 176,569    $ 180,920 
                                                     
(4) Amortization on the cash flows statement is made up of the following items
for the indicated periods (in thousands):

                        Quarter Ended               Year Ended
                         December 31,                December 31,
                         2012           2011         2012          2011
Amortization of
acquired intangible      $  5,780       $ 5,611      $ 22,717      $ 22,721
assets
Amortization of other       4,502         4,236        18,748        16,454
intangible assets
Amortization of
deferred financing         602         727        2,713       2,998   
costs
Total amortization       $  10,884     $ 10,574    $ 44,178     $ 42,173  
                                                                   
(5) Interest expense includes amortization of deferred financing costs as
provided in Note 4 above.


Free Cash Flow:

CSG’s calculation of non-GAAP free cash flow and the reconciliation of CSG’s
non-GAAP free cash flow measure to cash flows from operating activities are
provided below for the indicated periods (in thousands):

                        Quarter Ended             Year Ended
                          December 31,               December 31,
                          2012         2011         2012         2011 (6)
Cash flows from           $ 19,055      $ 31,825     $ 127,477     $ 60,959
operating activities
Purchases of property      (12,733 )    (2,582 )    (33,221 )    (22,197 )
and equipment
Non-GAAP free cash flow   $ 6,322      $ 29,243    $ 94,256     $ 38,762  

      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
(6)  $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.
      

Non-GAAP Financial Measures – 2013 Financial Guidance

Non-GAAP Operating Income Margin:

The reconciliation of GAAP operating income margin to non-GAAP operating
income margin, as included in CSG’s 2013 full year financial guidance, is as
follows:

                                                        2013
                                                         Guidance
GAAP operating income margin                             12.0  %
Restructuring charges (7)                                0.5   %
Stock-based compensation (8)                             2.0   %
Amortization of acquired intangible assets (9)           2.5   %
Non-GAAP operating income margin (“approximately 17%”)   17.0  %

      This represents the pretax impact of restructuring charges of an
(7)  estimated $2 million on CSG’s operating income margin as a percentage of
      the midpoint of 2013 revenue guidance.

      This represents the pretax impact of stock-based compensation expense of
(8)   an estimated $14 million on CSG’s operating income margin as a
      percentage of the midpoint of 2013 revenue guidance.

      This represents the pretax impact of amortization of acquired intangible
(9)   assets expense of an estimated $20 million on CSG’s operating income
      margin as a percentage of the midpoint of 2013 revenue guidance.
      

Non-GAAP EPS:

The reconciliation of GAAP EPS to non-GAAP EPS as included in CSG’s 2013 full
year financial guidance is as follows:

                                                 2013 Guidance Range (10)
                                                  Low Range    High Range
GAAP EPS                                          $    1.59     $   1.70
Restructuring charges (11)                             0.03         0.03
Stock-based compensation (12)                          0.22         0.22
Amortization of acquired intangible assets (13)        0.31         0.30
Amortization of OID (14)                              0.08        0.08
Non-GAAP EPS                                      $    2.23     $   2.33

       The estimated after-tax impact of these items is calculated using: (i)
       the estimated income taxes related to these items, which includes the
       impact of the difference between GAAP and non-GAAP pretax income, and
       excludes the benefit of R&D and related income tax credits related to
(10)  2012 operations, as these credits are reflected in our 2012 effective
       income rate for non-GAAP purposes (see Note 2 above). This resulted in
       an estimated effective income tax rate for non-GAAP purposes of
       approximately 36%; and (ii) the estimated weighted-average diluted
       shares outstanding of 32.8 million.

       This represents the estimated after-tax impact on a per diluted share
(11)   basis of the full year restructuring charges of approximately $2
       million.

       This represents the estimated after-tax impact on a per diluted share
(12)   basis of the full year stock-based compensation expense of
       approximately $14 million.

       This represents the estimated after-tax impact on a per diluted share
(13)   basis of the full year amortization of acquired intangible assets
       expense of approximately $20 million.

       This represents the estimated after-tax impact on a per diluted share
(14)   basis of the full year expense related to the amortization of the OID
       expense for CSG’s convertible debt securities of approximately $5
       million.
       

Non-GAAP Adjusted EBITDA:

CSG’s calculation of non-GAAP adjusted EBITDA and the reconciliation of CSG’s
non-GAAP adjusted EBITDA measure to net income and cash flows from operations
are provided below for CSG’s 2013 full year financial guidance at the
mid-point (in thousands):

                                                                2013
GAAP operating income                                            $ 92,000
Restructuring charges                                              2,000
Depreciation                                                       23,000
Amortization of acquired intangible assets                         20,000
Amortization of other intangible assets                            13,000
Stock-based compensation                                          14,000  
Adjusted EBITDA                                                  $ 164,000 
Adjusted EBITDA as a percentage of revenues                       21      %
                                                                 
                                                                 2013
Net income                                                       $ 54,000
Interest expense                                                   13,000
Amortization of OID                                                5,000
Interest and investment income and other, net                      (2,000  )
Income tax provision                                               22,000
Depreciation                                                       23,000
Amortization of acquired of intangible assets                      20,000
Amortization of other intangible assets                            13,000
Stock-based compensation                                           14,000
Restructuring charges                                             2,000   
Adjusted EBITDA                                                  $ 164,000 
                                                                 
                                                                 2013
Cash flows from operating activities (midpoint of guidance)      $ 123,000
Income tax provision                                               22,000
Changes in operating assets and liabilities and deferred taxes     6,000
Interest expense                                                   13,000
Interest and investment income and other, net                      (2,000  )
Restructuring charges                                             2,000   
Adjusted EBITDA                                                  $ 164,000 
                                                                           

Free Cash Flow:

CSG’s calculation of non-GAAP free cash flow and the reconciliation of CSG’s
non-GAAP free cash flow measure to cash flows from operating activities is
provided below for the indicated period (in thousands):

                                                             2013
Cash flows from operating activities (midpoint of guidance)   $ 123,000
Purchases of property and equipment                            (35,000 )
Non-GAAP free cash flow                                       $ 88,000  

Contact:

CSG Systems International, Inc.
Liz Bauer, 303-804-4065
Senior Vice President of Investor Relations & Strategic Communications
liz.bauer@csgi.com
 
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