CSG Systems International Revises 2013 Financial Guidance

  CSG Systems International Revises 2013 Financial Guidance

Business Wire

ENGLEWOOD, Colo. -- March 27, 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, revised its 2013 financial
guidance to reflect the execution of a multi-year customer care and billing
contract with Comcast Cable as announced today.

As a result of the financial terms associated with this extension, which are
effective as of March 1, 2013, the company is providing revised guidance for
its 2013 financial performance as follows:

                                    Revised              Previous
                                     Guidance              Guidance
Revenues                             $740 - $760 million   $755 - $775 million
Non-GAAP Operating Income Margin     Approximately 16%     Approximately 17%
Non-GAAP EPS                         $2.05 - $2.15         $2.23 - $2.33
GAAP EPS from continuing             $1.38 - $1.49         $1.59 - $1.70
operations
Adjusted EBITDA                      $153 - $158 million   $162 - $167 million
Operating Cash Flows                 $110 - $120 million   $118 - $128 million
                                                           

For additional information and reconciliations regarding CSG’s use of non-GAAP
financial measures, please refer to the attached Exhibit 1 and the Investor
Relations section of CSG’s website at www.csgi.com.

For more information regarding the contract extension with Comcast Cable,
please refer to the Form 8-K filed today with the SEC, which can be found in
the investor relations section of the company’s website.

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 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.

                                  EXHIBIT 1
                       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
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.
  *Acquisition-related charges relate to direct and incremental expenses
    related to business acquisitions, and thus, are not considered reflective
    of CSG’s recurring core business operating results. These charges
    typically 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 – 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                             11.0%
Restructuring charges (1)                                0.5%
Stock-based compensation (2)                             2.0%
Amortization of acquired intangible assets (3)           2.5%
Non-GAAP operating income margin (“approximately 16%”)   16.0%
                                                         

      This represents the pretax impact of restructuring charges of an
(1)  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
(2)   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
(3)   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 (4)
                                                 Low Range   High Range
GAAP EPS                                         $    1.38    $   1.49
Restructuring charges (5)                             0.03        0.03
Stock-based compensation (6)                          0.22        0.22
Amortization of acquired intangible assets (7)        0.33        0.32
Amortization of OID (8)                              0.09       0.09
Non-GAAP EPS                                     $    2.05    $   2.15
                                                              

      The estimated after-tax impact of these items is calculated using: (i)
      the estimated income taxes related to these items, which includes the
(4)  impact of the difference between GAAP and non-GAAP pretax income,
      resulting 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
(5)   basis of the full year restructuring charges of approximately $2
      million.
      
      This represents the estimated after-tax impact on a per diluted share
(6)   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
(7)   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
(8)   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                                            $ 83,000
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                                                  $ 155,000
Adjusted EBITDA as a percentage of revenues                       21%
                                                                 
                                                                 
                                                                 
                                                                 2013
Net income                                                       $ 47,000
Interest expense                                                   13,000
Amortization of OID                                                5,000
Interest and investment income and other, net                      (2,000)
Income tax provision                                               20,000
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                                                  $ 155,000
                                                                 
                                                                 
                                                                 
                                                                 2013
Cash flows from operating activities (midpoint of guidance)      $ 115,000
Income tax provision                                               20,000
Changes in operating assets and liabilities and deferred taxes     7,000
Interest expense                                                   13,000
Interest and investment income and other, net                      (2,000)
Restructuring charges                                             2,000
Adjusted EBITDA                                                  $ 155,000
                                                                 

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)   $ 115,000
Purchases of property and equipment                            (35,000)
Non-GAAP free cash flow                                       $ 80,000
                                                                

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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