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CSG Systems International Reports Results for Fourth Quarter and Full Year 2013



  CSG Systems International Reports Results for Fourth Quarter and Full Year
  2013

Business Wire

ENGLEWOOD, Colo. -- February 4, 2014

CSG Systems International, Inc. (Nasdaq: CSGS), a leading global provider of
interactive transaction-driven solutions and services, today reported results
for the quarter and full year ended December 31, 2013.

Key Financial Highlights:

  * Fourth quarter 2013 results:

       * Total revenues were $194.5 million.
       * Non-GAAP operating income was $35.8 million, or 18.4% of total
         revenues and GAAP operating income was $16.4 million, or 8.4% of
         total revenues.
       * Non-GAAP earnings per diluted share (EPS) was $0.63. GAAP EPS was
         $0.27.

  * Full year 2013 results:

       * Total revenues were $747.5 million.
       * Non-GAAP operating income was $123.2 million, or 16.5% of total
         revenues and GAAP operating income was $76.7 million, or 10.3% of
         total revenues.
       * Non-GAAP EPS was $2.21. GAAP EPS was $1.56.

  * Cash flows from operations for the quarter were $40.1 million, and $126.6
    million for the year ended December 31, 2013.
  * Free cash flow for the quarter was $29.0 million and $96.6 million for the
    year.
  * CSG paid its quarterly cash dividend of $0.15 per share of common stock,
    or a total of approximately $5 million, to shareholders on December 20,
    2013. Following the initiation of its cash dividend in June 2013, CSG paid
    a total of $0.45 per share of common stock, or approximately $14 million,
    to shareholders in 2013.
  * In December 2013, CSG acquired the key assets of Volubill, a leading
    provider of integrated real-time policy and charging solutions to mobile,
    satellite and fixed broadband providers. In addition, the company divested
    its marketing analytics business marketed under the Quaero brand on
    December 31, 2013.

“We had another solid quarter and year, generating strong revenues, earnings
and cash flows,” said Peter Kalan, president and chief executive officer of
CSG International. “These results demonstrate the strength of our business
model and our focus on execution. We have positioned ourselves to be a valued
and dependable partner who helps our clients compete and win in today’s
challenging marketplace. And, most important, we continue to strengthen our
relationships with our clients around the world by doing what we do best:
execute.”

Kalan added, “Last year, we executed on several activities that are important
to our company’s long-term growth. First, we secured long-term contracts with
two of our largest clients, Comcast and Time Warner, providing us with strong
visibility into our revenues and cash flows. Second, we saw further expansion
of our Content Direct solution into our cable and satellite clients, movie
studios and big box retailers. And third, during the year we introduced and
have secured several long-term contracts for our managed services offering
with providers around the globe.”

Financial Overview (unaudited)

(in thousands, except per share amounts and percentages):

              Quarter Ended December 31,              Year Ended December 31,
                                          Percent                                 Percent
                                          Change                                  Change
                2013          2012                      2013          2012
Revenues      $ 194,549     $ 198,007     (2)%        $ 747,468     $ 756,866     (1)%
Non-GAAP
Results:
Operating     $ 35,812      $ 33,018      8%          $ 123,187     $ 135,535     (9)%
Income
Operating
Income          18.4%         16.7%       -             16.5%         17.9%       -
Margin
EPS           $ 0.63        $ 0.67        (6)%        $ 2.21        $ 2.33        (5)%
GAAP
Results:
Operating     $ 16,435      $ 22,149      (26)%       $ 76,704      $ 96,574      (21)%
Income
Operating
Income          8.4%          11.2%       -             10.3%         12.8%       -
Margin
EPS           $ 0.27        $ 0.48        (44)%       $ 1.56        $ 1.51        3%
                                                                                           

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 2013 were $194.5 million, a
2% decrease when compared to revenues of $198.0 million for the fourth quarter
of 2012, and a 4% increase when compared to the $186.2 million reported for
the third quarter of 2013. Total revenues for the full year 2013 were $747.5
million, a 1% decrease when compared to revenues of $756.9 million for the
full year 2012. The year-over-year annual and quarterly decreases in revenues
can be primarily attributed to the impact of the Comcast and Time Warner
pricing adjustments that were effective in early 2013, and to a lesser degree,
the divestiture of a non-core print center on July 1, 2013. Sequential
quarterly revenues increased, as CSG typically experiences stronger revenues
in the fourth quarter.

Non-GAAP Results: Non-GAAP operating income for the fourth quarter of 2013 was
$35.8 million, or 18.4%  of total revenues, compared to $33.0 million, or
16.7%, for the fourth quarter of 2012. Non-GAAP operating income for the third
quarter of 2013 was $29.4 million, or 15.8% of total revenues. The
year-over-year increase in operating income and operating income margin can be
attributed primarily to lower expenses for the current quarter, while the
sequential quarterly increase reflects higher sequential revenues between
periods.

Non-GAAP operating income for the full year 2013 was $123.2 million, or 16.5%
of total revenues, which compares to $135.5 million, or 17.9% for the full
year 2012. The decrease in full year operating income and operating income
margin can be primarily attributed to the impact of the Comcast and Time
Warner pricing adjustments, as mentioned above.

Non-GAAP EPS for the fourth quarter of 2013 was $0.63, compared to non-GAAP
EPS of $0.67 for the fourth quarter of 2012, and $0.52 for the third quarter
of 2013. Non-GAAP EPS for the full year 2013 was $2.21, compared to non-GAAP
EPS of $2.33 for the full year 2012.

GAAP Results: GAAP operating income for the fourth quarter of 2013 was $16.4
million, or 8.4%  of total revenues, compared to $22.1 million, or 11.2%, for
the same period in 2012. GAAP operating income for the full year 2013 was
$76.7 million, or 10.3% of total revenues, compared to $96.6 million, or
12.8%, for the full year 2012.

GAAP EPS for the fourth quarter of 2013 was $0.27, compared to $0.48 for the
fourth quarter of 2012. GAAP EPS for the full year 2013 was $1.56, compared to
$1.51 for the full year 2012.

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,
                             2013             2013              2012
Cash, cash equivalents,
and short-term               $  210,837       $   193,898       $  169,321
investments
Net billed trade                178,511           174,757          191,943
accounts receivable
Total long-term debt:
Par value                    $  285,000       $   288,750       $  300,000
Unamortized OID                 (19,950)          (21,327)         (25,302)
Net debt carrying amount     $  265,050       $   267,423       $  274,698
                                                                              

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,
                       2013           2012           2013           2012
Cash Flows from
Operating
Activities:
Operations           $ 30,396       $ 34,886       $ 132,658      $ 126,282
Changes in
operating assets       9,656          (15,866)       (6,024)        1,160
and liabilities
Net cash
provided by          $ 40,052       $ 19,020       $ 126,634      $ 127,442
operating
activities
Cash Flows from
Investing
Activities:
Purchases of
property and         $ (11,090)     $ (12,733)     $ (30,076)     $ (33,221)
equipment
Cash Flows from
Financing
Activities:
Dividend             $ (4,824)      $ -            $ (14,454)     $ -
payments
Repurchase of
common stock
under stock            -              -              (10,129)       (13,349)
repurchase
program
Payments on            (3,750)        (18,000)       (15,000)       (40,000)
long-term debt
                                                                              

2014 Financial Guidance

The 2014 financial guidance includes a year-over-year $14 million revenue
decrease associated with the divestiture of two small businesses in the second
half of 2013. CSG’s financial guidance for the full year 2014 is as follows:

Revenues                       $745 - $770 million
Non-GAAP EPS                   $2.05 - $2.17
GAAP EPS                       $1.25 - $1.37
Non-GAAP Adjusted EBITDA       $152 - $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 February 4, 2014, at 5:00 p.m. ET,
to discuss CSG's fourth quarter and full year results for 2013. 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 website at www.csgi.com.
Additional information can be found in the Investor Relations section of the
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, Orange, Reliance,
SingTel Optus, Telecom New Zealand, Telefonica, Time Warner Cable, T-Mobile,
Verizon, Vivo and Vodafone. With over 30 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)
                                                                              
                                               December 31,     December 31,
                                               2013             2012
ASSETS
Current assets:
Cash and cash equivalents                      $ 82,686         $ 133,747
Short-term investments                         128,151          35,574
Total cash, cash equivalents, and              210,837          169,321
short-term investments
Trade accounts receivable:
Billed, net of allowance of $2,359 and         178,511          191,943
$3,147
Unbilled                                       38,365           28,463
Deferred income taxes                          15,085           22,244
Income taxes receivable                        3,815            6,469
Other current assets                           28,762           21,915
Total current assets                           475,375          440,355
Non-current assets:
Property and equipment, net of                 35,061           39,429
depreciation of $129,522 and $120,643
Software, net of amortization of $77,504       43,565           38,372
and $68,496
Goodwill                                       233,599          233,365
Client contracts, net of amortization of       55,191           75,303
$75,382 and $182,182
Deferred income taxes                          7,447            2,596
Income taxes receivable                        1,930            1,291
Other assets                                   16,812           16,230
Total non-current assets                       393,605          406,586
Total assets                                   $ 868,980        $ 846,941
                                                                              
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Current maturities of long-term debt           $ 15,000         $ 15,000
Client deposits                                30,431           33,807
Trade accounts payable                         33,376           30,473
Accrued employee compensation                  58,434           61,083
Deferred revenue                               47,131           47,691
Income taxes payable                           2,814            2,116
Other current liabilities                      19,620           21,562
Total current liabilities                      206,806          211,732
Non-current liabilities:
Long-term debt, net of unamortized
original issue discount of $19,950 and         250,050          259,698
$25,302
Deferred revenue                               9,221            6,504
Income taxes payable                           1,909            1,168
Deferred income taxes                          20,274           21,674
Other non-current liabilities                  14,616           19,526
Total non-current liabilities                  296,070          308,570
Total liabilities                              502,876          520,302
Stockholders’ equity:
Preferred stock, par value $.01 per share;
10,000 shares authorized; zero shares          -                -
issued and outstanding
Common stock, par value $.01 per share;
100,000 shares authorized; 33,745 shares       658              653
and 33,734 shares outstanding
Additional paid-in capital                     473,190          461,497
Treasury stock, at cost, 32,030 and 31,530     (738,372)        (728,243)
shares (6
Accumulated other comprehensive income
(loss):
Unrealized gain on short-term investments,     41               3
net of tax
Unrecognized pension plan losses and prior     -                (1,761)
service costs, net of tax
Unrealized loss on change in fair value of     (98)             (658)
interest rate swaps, net of tax
Cumulative foreign currency translation        1,674            2,274
adjustments
Accumulated earnings                           629,011          592,874
Total stockholders’ equity                     366,104          326,639
Total liabilities and stockholders’ equity     $ 868,980        $ 846,941
                                                                              

                                                    
CSG SYSTEMS INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME-UNAUDITED
(in thousands, except per share amounts)
                                                                              
                         Quarter Ended               Year Ended
                         December      December      December      December
                         31,           31,           31,           31,
                         2013          2012          2013          2012
Revenues:
Processing and           $ 138,341     $ 135,980     $ 537,453     $ 544,649
related services
Software,
maintenance and          56,208        62,027        210,015       212,217
services
Total revenues           194,549       198,007       747,468       756,866
                                                                              
Cost of revenues
(exclusive of
depreciation, shown
separately below):
Processing and           64,031        66,501        253,756       258,380
related services
Software,
maintenance and          30,124        34,415        123,409       125,436
services
Total cost of            94,155        100,916       377,165       383,816
revenues
Other operating
expenses:
Research and             26,315        28,696        110,008       112,938
development
Selling, general and     41,924        39,396        152,553       138,783
administrative
Depreciation             4,254         5,202         18,633        22,286
Restructuring            11,466        1,648         12,405        2,469
charges
Total operating          178,114       175,858       670,764       660,292
expenses
Operating income         16,435        22,149        76,704        96,574
Other income
(expense):
Interest expense         (2,897)       (3,647)       (11,621)      (15,983)
Amortization of
original issue           (1,377)       (1,274)       (5,352)       (4,954)
discount
Interest and
investment income,       172           220           689           855
net
Other, net               149           208           1,099         732
Total other              (3,953)       (4,493)       (15,185)      (19,350)
Income before income     12,482        17,656        61,519        77,224
taxes
Income tax provision     (3,401)       (1,866)       (10,168)      (28,345)
Net income               $ 9,081       $ 15,790      $ 51,351      $ 48,879
                                                                              
Weighted-average
shares outstanding –
Basic:
Common stock             32,124        32,002        32,117        32,142
Participating            -             -             -             17
restricted stock
Total                    32,124        32,002        32,117        32,159
                                                                              
Weighted-average
shares outstanding –
Diluted:
Common stock             33,831        32,568        32,873        32,459
Participating            -             -             -             17
restricted stock
Total                    33,831        32,568        32,873        32,476
                                                                              
Earnings per common
share:
Basic                    $ 0.28        $ 0.49        $ 1.60        $ 1.52
Diluted                  0.27          0.48          1.56          1.51
                                                                              
Cash dividends
declared per common      $ 0.15        $ -           $ 0.45        $ -
share
                                                                              

CSG SYSTEMS INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS-UNAUDITED
(in thousands)
                                                  
                                                   Year Ended
                                                   December 31,   December 31,
                                                   2013           2012
Cash flows from operating activities:
Net income                                         $ 51,351       $ 48,879
Adjustments to reconcile net income to net cash
provided by operating activities -
Depreciation                                         18,633         22,286
Amortization                                         37,819         44,178
Amortization of original issue discount              5,352          4,954
Impairment of client contract                        -              3,783
(Gain) loss on short-term investments and other      910            (107     )
Loss on disposition of business operations           3,017          -
Loss on termination of pension plan                  3,221          -
Deferred income taxes                                (1,764   )     (10,707  )
Excess tax benefit of stock-based compensation       (677     )     (415     )
awards
Stock-based employee compensation                    14,796         13,431    
Subtotal                                             132,658        126,282
Changes in operating assets and liabilities:
Trade accounts receivable, net                       (2,319   )     (9,725   )
Other current and non-current assets                 (7,163   )     (1,471   )
Income taxes payable/receivable                      4,556          (6,543   )
Trade accounts payable and accrued liabilities       (994     )     18,474
Deferred revenue                                     (104     )     425       
Net cash provided by operating activities            126,634        127,442   
Cash flows from investing activities:
Purchases of property and equipment                  (30,076  )     (33,221  )
Purchases of short-term investments                  (183,575 )     (65,355  )
Proceeds from sale/maturity of short-term            89,688         42,063
investments
Acquisition of business, net of cash acquired        (2,926   )     (19,085  )
Acquisition of and investments in client             (7,092   )     (4,629   )
contracts
Proceeds from the disposition of business            4,530          -         
operations
Net cash used in investing activities                (129,451 )     (80,227  )
Cash flows from financing activities:
Proceeds from issuance of common stock               1,591          1,896
Payment of cash dividends                            (14,454  )     -
Repurchase of common stock                           (15,478  )     (16,558  )
Payments on acquired asset financing                 (2,723   )     (1,698   )
Proceeds from long-term debt                         -              150,000
Payments on long-term debt                           (15,000  )     (190,000 )
Payments of deferred financing costs                 -              (2,450   )
Excess tax benefit of stock-based compensation       677            415       
awards
Net cash used in financing activities                (45,387  )     (58,395  )
Effect of exchange rate fluctuations on cash         (2,857   )     (1,806   )
Net decrease in cash and cash equivalents            (51,061  )     (12,986  )
Cash and cash equivalents, beginning of period       133,747        146,733   
Cash and cash equivalents, end of period           $ 82,686       $ 133,747   
                                                                   
                                                                   
Supplemental disclosures of cash flow
information:
Net cash paid during the period for -
Interest                                           $ 9,440        $ 13,124
Income taxes                                         6,149          43,379
                                                                              

EXHIBIT 1
CSG SYSTEMS INTERNATIONAL, INC.
SUPPLEMENTAL REVENUE ANALYSIS
                                                                
Revenues by Geography
                                 Quarter Ended   Quarter Ended   Quarter Ended
                                 December 31,    September 30,   December 31,
                                 2013            2013            2012
Americas                         84%             85%             83%
Europe, Middle East and Africa   12%             11%             11%
Asia Pacific                     4%              4%              6%
Total Revenues                   100%            100%            100%
                                                                  

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

Revenues by Significant Customers: 10% or more of Revenues
                                                      
              Quarter Ended       Quarter Ended        Quarter Ended
              December 31, 2013   September 30, 2013   December 31, 2012
Comcast       20%                 19%                  19%
DISH          15%                 15%                  13%
Time Warner   10%                 11%                  11%
                                                        

              Year Ended          Year Ended
              December 31, 2013   December 31, 2012
Comcast       19%                 20%
DISH          15%                 14%
Time Warner   11%                 10%
                                   

ACP Customer Accounts (in thousands, at end of period)
 
                                   December 31,   September 30,   December 31,
                                   2013           2013            2012
Cable/Satellite Customer           49,489         49,151          48,870
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;
  * 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, divestitures of
    businesses, 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 financial 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 equity awards 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 date the equity award is granted, 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 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 non-GAAP 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, pay cash dividends, 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, 2013     December 31, 2012
                                     Amounts    % of       Amounts    % of
                                                Revenues              Revenues
GAAP operating income                $ 16,435   8.4   %    $ 22,149   11.2  %
Restructuring charges                  11,466   5.9   %      1,648    0.8   %
Acquisition-related charges            62       0.0   %      -        -     %
Stock-based compensation               3,299    1.7   %      3,441    1.8   %
Amortization of acquired               4,550    2.4   %      5,780    2.9   %
intangible assets
Non-GAAP operating income            $ 35,812   18.4  %    $ 33,018   16.7  %
                                                                             

                                   Year Ended             Year Ended
                                   December 31, 2013      December 31, 2012
                                   Amounts     % of       Amounts     % of
                                               Revenues               Revenues
GAAP operating income              $ 76,704    10.3%      $ 96,574    12.8%
Restructuring charges              12,405      1.7%       2,469       0.3%
Acquisition-related charges        62          0.0%       344         0.0%
Stock-based compensation           14,796      2.0%       13,431      1.8%
Amortization of acquired           19,220      2.5%       22,717      3.0%
intangible assets
Non-GAAP operating income          $ 123,187   16.5%      $ 135,535   17.9%
                                                                       

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, 2013      December 31, 2012
                                   Pretax       EPS (3)   Pretax       EPS (4)
                                   Amount (1)             Amount (1)
GAAP income before income taxes    $ 12,482     $ 0.27    $ 17,656     $ 0.48
Restructuring charges              11,466                 1,648
Acquisition-related charges        62                     -
Stock-based compensation           3,299                  3,441
Amortization of acquired           4,550                  5,780
intangible assets
Amortization of OID                1,377                  1,274
Non-GAAP income before income      $ 33,236     $ 0.63    $ 29,799     $ 0.67
taxes (2)
                                                                        

                                   Year Ended             Year Ended
                                   December 31, 2013      December 31, 2012
                                   Pretax       EPS (3)   Pretax       EPS (4)
                                   Amount (1)             Amount (1)
GAAP income before income taxes    $ 61,519     $ 1.56    $ 77,224     $ 1.51
Restructuring charges              12,405                 2,469
Acquisition-related charges        62                     344
Stock-based compensation           14,796                 13,431
Amortization of acquired           19,220                 22,717
intangible assets
Amortization of OID                5,352                  4,954
Non-GAAP income before income      $ 113,354    $ 2.21    $ 121,139    $ 2.33
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 fourth quarter and year ended December 31, 2013, the estimated
(3)   effective income tax rate for non-GAAP purposes was approximately 36%
      for both periods, and the weighted-average diluted shares outstanding
      were 33.8 million and 32.9 million, respectively.
 
      The GAAP effective income tax rate for the quarter and year ended
      December 31, 2013 was approximately 27% and 17%, respectively, and
      benefited from the following items, which are excluded from our non-GAAP
      effective income tax rates for these same periods:
                           the reduction of certain tax allowances related to
      --                   foreign operations, which provided a benefit of
                           approximately $0.08 per diluted share for the
                           quarter and the year ended December 31, 2013;
                           incremental R&D income tax credits claimed in the
                           third quarter of 2013 for development activities
      --                   from previous years, which provided a benefit of
                           approximately $0.17 per diluted share for the year
                           ended December 31, 2013; and
                           the recognition of the 2012 R&D tax credits of
                           approximately $0.17 per diluted share for the year
      --                   ended December 31, 2013, that were recognized for
                           GAAP purposes in the first quarter of 2013 since
                           the credit legislation was passed by Congress in
                           January 2013.
                            
      For the fourth quarter and year ended December 31, 2012, the estimated
(4)   effective income rate for non-GAAP purposes was approximately 27% and
      38%, respectively, and the weighted-average diluted shares outstanding
      were 32.6 million and 32.5 million, respectively.
                            
      The GAAP effective income tax rate for the quarter and year ended
      December 31, 2012 was approximately 11% and 37%, 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, except
percentages):

                           Quarter Ended             Year Ended
                           December 31,              December 31,
                           2013         2012         2013          2012
GAAP operating income      $ 16,435     $ 22,149     $ 76,704      $ 96,574
Restructuring charges        11,466       1,648        12,405        2,469
Acquisition-related          62           -            62            344
charges
Depreciation                 4,254        5,202        18,633        22,286
Amortization of acquired     4,550        5,780        19,220        22,717
intangible assets (5)
Amortization of other        4,262        4,502        16,179        18,748
intangible assets (5)
Stock-based compensation     3,299        3,441        14,796        13,431   
Non-GAAP Adjusted EBITDA   $ 44,328     $ 42,722     $ 157,999     $ 176,569  
Non-GAAP Adjusted EBITDA
as a percentage of           23     %     22     %     21      %     23      %
revenues
                                                                    

                           Quarter Ended             Year Ended
                           December 31,              December 31,
                             2013         2012         2013          2012     
Net income                 $ 9,081      $ 15,790     $ 51,351      $ 48,879
Interest expense (6)         2,897        3,647        11,621        15,983
Amortization of OID          1,377        1,274        5,352         4,954
Interest and investment      (321   )     (428   )     (1,788  )     (1,587  )
income and other, net
Income tax provision         3,401        1,866        10,168        28,345
Depreciation                 4,254        5,202        18,633        22,286
Amortization of acquired     4,550        5,780        19,220        22,717
intangible assets (5)
Amortization of other        4,262        4,502        16,179        18,748
intangible assets (5)
Stock-based compensation     3,299        3,441        14,796        13,431
Acquisition-related          62           -            62            344
charges
Restructuring charges        11,466       1,648        12,405        2,469    
Non-GAAP Adjusted EBITDA   $ 44,328     $ 42,722     $ 157,999     $ 176,569  
                                                                              

                           Quarter Ended             Year Ended
                           December 31,              December 31,
                             2013         2012         2013          2012     
Cash flows from            $ 40,052     $ 19,020     $ 126,634     $ 127,442
operating activities
Income tax provision         3,401        1,866        10,168        28,345
Changes in operating
assets and liabilities       (6,809 )     18,784       7,788         9,547
and deferred taxes
Impairment of client         -            (1,283 )     -             (3,783  )
contract
Interest expense (6)         2,897        3,647        11,621        15,983
Interest and investment      (321   )     (428   )     (1,788  )     (1,587  )
income and other, net
Gain (loss) on
short-term investments       (528   )     61           (910    )     107
and other
Loss on disposition of       (3,017 )     -            (3,017  )     -
business operations
Acquisition-related          62           -            62            344
charges
Restructuring charges        9,127        1,648        9,184         2,469
Other                        (536   )     (593   )     (1,743  )     (2,298  )
Non-GAAP Adjusted EBITDA   $ 44,328     $ 42,722     $ 157,999     $ 176,569  
                                                                              

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

                                      Quarter Ended        Year Ended
                                      December 31,         December 31,
                                        2013      2012       2013       2012
Amortization of acquired intangible   $ 4,550   $ 5,780    $ 19,220   $ 22,717
assets
Amortization of other intangible        4,262     4,502      16,179     18,748
assets
Amortization of deferred financing      594       602        2,420      2,713
costs
Total amortization                    $ 9,406   $ 10,884   $ 37,819   $ 44,178
                                                                         

(6)   Interest expense includes amortization of deferred financing costs as
      provided in Note 5 above.
       

Non-GAAP 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,
                           2013          2012          2013          2012     
Cash flows from          $ 40,052      $ 19,020      $ 126,634     $ 127,442
operating activities
Purchases of property      (11,090 )     (12,733 )     (30,076 )     (33,221 )
and equipment
Non-GAAP free cash       $ 28,962      $ 6,287       $ 96,558      $ 94,221   
flow
                                                                              

Non-GAAP Financial Measures – 2014 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 2014 full year financial guidance, is as
follows:

                                                           2014
                                                           Guidance
GAAP operating income margin                               12.0%
Restructuring charges (7)                                  0.5%
Stock-based compensation (8)                               2.0%
Amortization of acquired intangible assets (9)             2.0%
Non-GAAP operating income margin (“approximately 16.5%”)   16.5%
                                                            

      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 2014 revenue guidance.
 
      This represents the pretax impact of stock-based compensation expense of
(8)   an estimated $17 million on CSG’s operating income margin as a
      percentage of the midpoint of 2014 revenue guidance.
 
      This represents the pretax impact of amortization of acquired intangible
(9)   assets expense of an estimated $15 million on CSG’s operating income
      margin as a percentage of the midpoint of 2014 revenue guidance.
       

Non-GAAP EPS:

The reconciliation of GAAP EPS to non-GAAP EPS as included in CSG’s 2014 full
year financial guidance is as follows (in thousands, except per share
amounts):

                               2014 Guidance Range
                               Low Range                High Range
                               Pretax        EPS (12)   Pretax        EPS (12)
                               Amount (10)              Amount (10)
GAAP income before income      $  71,000     $  1.25    $  77,000     $  1.37
taxes
Restructuring charges             2,000                    2,000
Stock-based compensation          17,000                   17,000
Amortization of acquired          15,000                   15,000
intangible assets
Amortization of OID               6,000                    6,000
Non-GAAP income before         $  111,000    $  2.05    $  117,000    $  2.17
income taxes (11)
                                                                          

       These items (on a pretax basis) are calculated in accordance with GAAP,
(10)   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
(11)   by 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 2014, the estimated effective income tax rate for non-GAAP purposes
(12)   is expected to be approximately 36%, and the weighted-average diluted
       shares outstanding are expected to be 34.8 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 2014 full year financial guidance at the
mid-point (in thousands, except percentages):

                                                       2014
GAAP operating income                                  $ 90,000
Restructuring charges                                    2,000
Depreciation                                             17,000
Amortization of acquired intangible assets               15,000
Amortization of other intangible assets                  14,000
Stock-based compensation                                 17,000   
Non-GAAP Adjusted EBITDA                               $ 155,000  
Non-GAAP Adjusted EBITDA as a percentage of revenues     21      %
                                                        

                                                2014
Net income                                      $ 45,000
Interest expense                                  11,000
Interest and investment income and other, net     (1,000  )
Amortization of OID                               6,000
Income tax provision                              29,000
Depreciation                                      17,000
Amortization of acquired of intangible assets     15,000
Amortization of other intangible assets           14,000
Stock-based compensation                          17,000
Restructuring charges                             2,000    
Non-GAAP Adjusted EBITDA                        $ 155,000  
                                                 

                                                                 2014
Cash flows from operating activities (midpoint of guidance)      $ 115,000
Income tax provision                                               29,000
Interest and investment income and other, net                      (1,000  )
Changes in operating assets and liabilities and deferred taxes     (1,000  )
Interest expense                                                   11,000
Restructuring charges                                              2,000    
Non-GAAP Adjusted EBITDA                                         $ 155,000  
                                                                  

Non-GAAP 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):

                                                              2014
Cash flows from operating activities (midpoint of guidance)   $ 115,000
Purchases of property and equipment                             (30,000 )
Non-GAAP free cash flow                                       $ 85,000   
                                                               

Contact:

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