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CSG Systems International Reports Results for First Quarter 2013

  CSG Systems International Reports Results for First Quarter 2013

Business Wire

ENGLEWOOD, Colo. -- April 30, 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 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,
                                                      Percent
                                                    Change
                            2013          2012
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,     December 31,     March 31,
                                                            
                                    2013          2012             2012
Cash, cash equivalents, and         $ 172,703     $ 169,321        $ 188,555
short-term investments
Net billed trade accounts           179,093       191,943          170,909
receivable
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,     December 31,     March 31,
                                              2012          
                                    2013                           2012
Cash Flows from Operating
Activities:
Operations                          $ 41,316      $ 34,921         $ 28,890
Changes in operating assets and     (18,776)      (15,866)         19,299
liabilities
Net cash provided by operating      $ 22,540      $ 19,055         $ 48,189
activities
Cash Flows from Investing
Activities:
Purchases of property and           $ (4,492)     $ (12,733)       $ (2,318)
equipment
Cash Flows from Financing
Activities:
Repurchase of common stock          (6,511)       $ -              (5,189)
under stock repurchase program
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,     December 31,

                                                  2013          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      172,703       169,321
investments
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       37,211        39,429
of $125,277 and $120,643
Software, net of amortization of $71,334 and      36,969        36,729
$68,513
Goodwill                                          226,309       233,365
Client contracts, net of amortization of          68,750        76,388
$82,743 and $184,763
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       257,247       259,698
issue discount of $24,003 and $25,302
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;                        658           653
33,960 shares and 33,734 shares outstanding
Additional paid-in capital                        461,400       461,497
Treasury stock, at cost, 31,858 and 31,530        (734,754)     (728,243)
shares
Accumulated other comprehensive income
(loss):
Unrealized gain on short-term investments,        2             3
net of tax
Unrecognized pension plan losses and prior        (1,355)       (1,761)
service costs, net of tax
Unrealized loss on change in fair value of        (552)         (658)
interest rate swaps, net of tax
Cumulative foreign currency translation           (6,514)       2,274
adjustments
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,     March 31,
                                                                
                                                     2013          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        32,458
                                                                             
Weighted-average shares outstanding – Diluted:
Common stock                                         32,527        32,561
Participating restricted stock                       -             66
Total                                                32,527        32,627
                                                                             
Earnings per common share:
Basic                                                $ 0.46        $ 0.36
Diluted                                              0.46          0.36
                                                                             

                                                  
CSG SYSTEMS INTERNATIONAL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS-UNAUDITED

(in thousands)
                                                                             
                                                     Year Ended
                                                     March 31,     March 31,
                                                                
                                                     2013          2012
Cash flows from operating activities:
Net income                                           $ 14,898      $ 11,806
Adjustments to reconcile net income to net cash
provided by operating

activities -
Depreciation                                         5,000         5,837
Amortization                                         9,736         10,302
Amortization of original issue discount              1,299         1,203
(Gain) loss on short-term investments and other      863           (8)
Deferred income taxes                                6,447         (3,111)
Excess tax benefit of stock-based compensation       (537)         (286)
awards
Stock-based employee compensation                    3,610         3,147
Subtotal                                             41,316        28,890
Changes in operating assets and liabilities:
Trade accounts and other receivables, net            10,229        13,252
Other current and non-current assets                 (808)         (1,152)
Income taxes payable/receivable                      (8,641)       14,614
Trade accounts payable and accrued liabilities       (29,450)      (14,045)
Deferred revenue                                     9,894         6,630
Net cash provided by operating activities            22,540        48,189
Cash flows from investing activities:
Purchases of property and equipment                  (4,492)       (2,318)
Purchases of short-term investments                  (23,178)      (10,142)
Proceeds from sale/maturity of short-term            29,500        12,100
investments
Acquisition of and investments in client             (407)         (1,693)
contracts
Net cash provided by (used in) investing             1,423         (2,053)
activities
Cash flows from financing activities:
Proceeds from issuance of common stock               610           556
Repurchase of common stock                           (11,343)      (8,078)
Payments on acquired equipment financing             -             (417)
Payments on long-term debt                           (3,750)       (7,000)
Excess tax benefit of stock-based compensation       537           286
awards
Net cash used in financing activities                (13,946)      (14,653)
Effect of exchange rate fluctuations on cash         (332)         192
Net increase in cash and cash equivalents            9,685         31,675
Cash and cash equivalents, beginning of period       136,473       146,733
Cash and cash equivalents, end of period             $ 146,158     $ 178,408
                                                                             
                                                                             
Supplemental disclosures of cash flow
information:
Net cash paid during the period for -
Interest                                             $ 3,378       $ 4,473
Income taxes                                         611           242
                                                                             

EXHIBIT 1

                                                        
CSG SYSTEMS INTERNATIONAL, INC.

SUPPLEMENTAL REVENUE ANALYSIS
                                                                             
Revenues by
Geography
                         Quarter Ended      Quarter Ended      Quarter Ended

                         March 31, 2013     December 31,       March 31,
                                            2012               2012
Americas                 85%                83%                86%
Europe, Middle East      11%                11%                10%
and Africa
Asia Pacific             4%                 6%                 4%
Total Revenues           100%               100%               100%
                                                                             
                                                                             

Revenues by Significant Customers: 10% or more of Revenues

                Quarter Ended      Quarter Ended         Quarter Ended
                                                  
                March 31, 2013     December 31, 2012     March 31, 2012
Comcast         20%                19%                   20%
DISH            15%                13%                   13%
Time Warner     11%                11%                   <10%
                                                                        
                                                                        

ACP Customer Accounts (in thousands, at end of period)

                                    March 31,     December 31,     March 31,
                                                            
                                    2013          2012             2012
Cable/Satellite Customer            49,151        48,870           49,228
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
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

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

                             March 31, 2013            March 31, 2012
                             Amounts    % of         Amounts    % of
                                          Revenues                  Revenues
GAAP operating income        $ 18,035     10.0%        $ 28,952     15.6%
Restructuring charges        901          0.5%         702          0.4%
Stock-based compensation     3,610        2.0%         3,147        1.7%
Amortization of acquired     5,102        2.8%         5,510        3.0%
intangible assets
Non-GAAP operating           $ 27,648     15.3%        $ 38,311     20.7%
income
                                                                             

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

                           March 31, 2013             March 31, 2012
                           Pretax                    Pretax         
                                                                
                           Amount (1)     EPS (3)     Amount (1)     EPS (3)
GAAP income before         $ 13,544       $ 0.46      $ 23,612       $ 0.36
income taxes
Restructuring charges      901                        702
Stock-based                3,610                      3,147
compensation
Amortization of
acquired intangible        5,102                      5,510
assets
Amortization of OID        1,299                      1,203
Non-GAAP income before     $ 24,456       $ 0.48      $ 34,174       $ 0.60
income taxes (2)
                                                                             

      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.
      
      Non-GAAP EPS is calculated by taking the non-GAAP income before income
      taxes and deducting from this amount non-GAAP income taxes calculated by
(2)   using the non-GAAP effective income tax rate for the period, and then
      dividing the result of this calculation by the outstanding diluted
      shares for the period.
      
      For the first quarter of 2013, the GAAP effective income rate was a
      negative ten percent, the non-GAAP effective income tax rate was
      approximately 36%, and the outstanding diluted shares were 32.5 million.
      The negative ten percent GAAP effective income tax rate is a result of
      the recognition of the 2012 R&D tax credits of approximately $6 million,
      or approximately $0.18 per diluted share, in the first quarter of 2013.
(3)   These credits were recognized for GAAP purposes in the first quarter of
      2013 since the credit legislation was passed by Congress in January
      2013. The effective income tax rate for non-GAAP purposes of
      approximately 36% for the first quarter of 2013 excludes the impact of
      these tax credits, as they were reflected in the 2012 non-GAAP effective
      income tax rate. For the first quarter of 2012, the GAAP effective
      income tax rate was 50%, the non-GAAP effective income tax rate was
      approximately 43%, and the outstanding diluted shares were 32.6 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 operating
activities are provided below for the indicated periods (in thousands):

                                                    
                                                       Quarter Ended

                                                       March 31,
                                                       2013       2012
GAAP operating income                                  $ 18,035     $ 28,952
Restructuring charges                                  901          702
Depreciation                                           5,000        5,837
Amortization of acquired intangible assets (4)         5,102        5,510
Amortization of other intangible assets (4)            4,016        4,074
Stock-based compensation                               3,610        3,147
Adjusted EBITDA                                        $ 36,664     $ 48,222
Adjusted EBITDA as a percentage of revenues            20%          26%
                                                                             
                                                                             
                                                       Quarter Ended

                                                       March 31,
                                                       2013         2012
Net income                                             $ 14,898     $ 11,806
Interest expense (5)                                   2,929        4,152
Amortization of OID                                    1,299        1,203
Interest and investment income and other, net          263          (15)
Income tax (benefit) provision                         (1,354)      11,806
Depreciation                                           5,000        5,837
Amortization of acquired intangible assets (4)         5,102        5,510
Amortization of other intangible assets (4)            4,016        4,074
Stock-based compensation                               3,610        3,147
Restructuring charges                                  901          702
Adjusted EBITDA                                        $ 36,664     $ 48,222
                                                                             
                                                                             
                                                       Quarter Ended

                                                       March 31,
                                                       2013         2012
Cash flows from operating activities                   $ 22,540     $ 48,189
Income tax (benefit) provision                         (1,354)      11,806
Changes in operating assets and liabilities, and       12,329       (16,188)
deferred taxes
Restructuring charges                                  901          702
Interest expense (5)                                   2,929        4,152
Interest and investment income and other, net          263          (15)
Other                                                  (944)        (424)
Adjusted EBITDA                                        $ 36,664     $ 48,222
                                                                             

(4) Amortization on the statement of cash flows is made up of the following
items for the indicated periods (in thousands):

                                            
                                               Quarter Ended

                                               March 31,
                                               2013      2012
Amortization of acquired intangible assets     $ 5,102     $ 5,510
Amortization of other intangible assets        4,016       4,074
Amortization of deferred financing costs       618         718
Total amortization                             $ 9,736     $ 10,302
                                                                    

(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
                                     
                                         March 31,
                                         2013       2012
Cash flows from operating activities     $ 22,540     $ 48,189
Purchases of property and equipment      (4,492)      (2,318)
Non-GAAP free cash flow                  $ 18,048     $ 45,871

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 (6)                                  0.5%
Stock-based compensation (7)                               2.0%
Amortization of acquired intangible assets (8)             2.5%
Non-GAAP operating income margin (“approximately 16%”)     16.0%
                                                           

    This represents the pretax impact of restructuring charges of an
(6) estimated $4 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
(7) an estimated $16 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
(8) assets expense of an estimated $19 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
                         Low Range                 High Range
                          Pretax                     Pretax         
                                                                
                          Amount (9)     EPS (11)     Amount (9)     EPS
                                                                     (11)
GAAP income before        $ 60,000       $ 1.31       $ 65,000       $ 1.41
income taxes
Restructuring charges     4,000                       4,000
Stock-based               16,000                      16,000
compensation
Amortization of
acquired intangible       19,000                      19,000
assets
Amortization of OID       5,000                       5,000
Non-GAAP income
before income taxes       $ 104,000      $ 2.05       $ 109,000      $ 2.15
(10)
                                                                             

     These items (on a pretax basis) are calculated in accordance with GAAP,
(9)  and will be reflected as part of the results of operations in CSG’s
     Unaudited Condensed Consolidated Statements of Income.
     
     Non-GAAP EPS is calculated by taking the non-GAAP income before income
     taxes and deducting from this amount non-GAAP income taxes calculated by
(10) using the non-GAAP effective income tax rate for the period, and then
     dividing the result of this calculation by the outstanding diluted shares
     for the period.
     
     For 2013, the GAAP effective income rate is expected to be 29% percent,
     the non-GAAP effective income tax rate is expected to be approximately
     36%, and the outstanding diluted shares are expected to be 32.6 million.
     The expected 29% percent GAAP effective income tax rate reflects the
     recognition of the 2012 R&D tax credits of approximately $6 million, or
(11) approximately $0.18 per diluted share. These credits will be recognized
     for GAAP purposes in 2013 since the credit legislation was passed by
     Congress in January 2013. The expected effective income tax rate for
     non-GAAP purposes of approximately 36% for 2013 excludes the impact of
     these tax credits, as they were reflected in the 2012 non-GAAP effective
     income tax rate.
     

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                                            $ 80,000
Restructuring charges                                            4,000
Depreciation                                                     22,000
Amortization of acquired intangible assets                       19,000
Amortization of other intangible assets                          14,000
Stock-based compensation                                         16,000
Adjusted EBITDA                                                  $ 155,000
Adjusted EBITDA as a percentage of revenues                      21%
                                                                 
                                                                 2013
Net income                                                       $ 44,000
Interest expense                                                 13,000
Amortization of OID                                              5,000
Income tax provision                                             18,000
Depreciation                                                     22,000
Amortization of acquired of intangible assets                    19,000
Amortization of other intangible assets                          14,000
Stock-based compensation                                         16,000
Restructuring charges                                            4,000
Adjusted EBITDA                                                  $ 155,000
                                                                 
                                                                 2013
Cash flows from operating activities (midpoint of guidance)      $ 115,000
Income tax provision                                             18,000
Changes in operating assets and liabilities and deferred taxes   5,000
Interest expense                                                 13,000
Restructuring charges                                            4,000
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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