[May 01, 2012] |
|
CSG Systems International Reports Results for First Quarter 2012
ENGLEWOOD, Colo. --(Business Wire)--
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, 2012.
Key Financial Highlights:
-
First quarter 2012 results:
-
Total revenues were $185.0 million.
-
Non-GAAP operating income was $38.3 million, or 20.7%
of total revenues and GAAP operating income was $29.0 million,
or 15.6% of total revenues.
-
Non-GAAP earnings per diluted share (EPS) was $0.60.
GAAP EPS was $0.36.
-
Cash flows from operations for the quarter were $48.2 million.
-
During the quarter, CSG repurchased approximately 328,000
shares of its common stock for $5.2 million (weighted-average
price of $15.84 per share) under its stock repurchase program.
"We are making solid progress on the transformation of our company into
a global provider of business-enabling solutions throughout our
business, whether that be in sales operations or financial performance,"
Peter Kalan, president and chief executive officer of CSG Systems said.
One of our greatest strengths as a company is that our clients trust
doing business with us. By investing in our clients, whether that be in
the relationships or in our solutions, we help our customers solve more
problems and be more competitive."
Financial Overview (unaudited)
(in thousands, except per share amounts and percentages):
|
|
Quarter Ended March 31,
|
|
|
|
|
2012
|
|
|
|
|
2011
|
|
|
|
Percent Change
|
|
Revenues
|
|
$
|
185,007
|
|
|
|
$
|
183,092
|
|
|
|
1
|
%
|
|
Non-GAAP Results:
|
|
|
|
|
|
|
|
|
|
Operating Income
|
|
$
|
38,311
|
|
|
|
$
|
33,018
|
|
|
|
16
|
%
|
|
Operating Income Margin
|
|
|
20.7
|
%
|
|
|
|
18.0
|
%
|
|
|
-
|
|
|
EPS
|
|
$
|
0.60
|
|
|
|
$
|
0.54
|
|
|
|
11
|
%
|
|
GAAP Results:
|
|
|
|
|
|
|
|
|
|
Operating Income
|
|
$
|
28,952
|
|
|
|
$
|
24,104
|
|
|
|
20
|
%
|
|
Operating Income Margin
|
|
|
15.6
|
%
|
|
|
|
13.2
|
%
|
|
|
-
|
|
|
EPS
|
|
$
|
0.36
|
|
|
|
$
|
0.35
|
|
|
|
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
first quarter of 2012 were $185.0 million, relatively consistent when
compared to revenues of $183.1 million for the first quarter of 2011,
and $187.6 million for the fourth quarter of 2011.
Non-GAAP Results: Non-GAAP operating
income for the first quarter of 2012 was $38.3 million, or 20.7% of
total revenues, which compares to $33.0 million, or 18.0%, for the same
period in 2011, with the increase in operating income margin attributed
primarily to the financial benefits of the restructuring activities
undertaken during 2011. Non-GAAP operating income for the fourth quarter
of 2011 was $40.0 million, or 21.3% of total revenues. The sequential
quarterly decrease in operating income can be primarily attributed to
lower sequential revenues.
Non-GAAP EPS for the first quarter of 2012 was $0.60, compared to
non-GAAP EPS of $0.54 for the first quarter of 2011 and $0.64 for the
fourth quarter of 2011.
GAAP Results: GAAP operating income
for the first quarter of 2012 was $29.0 million, or 15.6% of
total revenues, compared to $24.1 million, or 13.2%, for the same period
in 2011.
GAAP EPS for the first quarter of 2012 was $0.36, compared to $0.35 for
the first quarter of 2011.
Balance Sheet and Cash Flows
Balance Sheet: Certain key balance
sheet items as of the end of the indicated periods are as follows (in
thousands):
|
|
March 31, 2012
|
|
|
December 31, 2011
|
|
|
March 31, 2011
|
|
Cash, cash equivalents, and short-term investments
|
|
$
|
188,555
|
|
|
|
$
|
158,830
|
|
|
|
$
|
167,370
|
|
|
Net billed trade accounts receivable (1)
|
|
|
170,909
|
|
|
|
|
179,804
|
|
|
|
|
148,634
|
|
|
Total long-term debt:
|
|
|
|
|
|
|
|
|
|
Par value
|
|
$
|
333,000
|
|
|
|
$
|
340,000
|
|
|
|
$
|
372,649
|
|
|
Unamortized OID
|
|
|
(29,053
|
)
|
|
|
|
(30,256
|
)
|
|
|
|
(34,013
|
)
|
|
Net debt carrying amount
|
|
$
|
303,947
|
|
|
|
$
|
309,744
|
|
|
|
$
|
338,636
|
|
|
|
|
|
(1)
|
|
The increase in net billed trade accounts receivable at December
31, 2011, when compared to March 31, 2011, can be primarily
attributed to the fluctuations in the timing of client payments at
quarter-end and to several billing milestones being met towards
the end of the fourth quarter of 2011.
|
|
|
|
Cash Flows: Certain key operating
cash flow items for the indicated quarters then ended are as follows (in
thousands):
|
|
March 31,
2012 (2)
|
|
|
December 31, 2011
|
|
|
March 31,
2011 (3)
|
|
Cash Flows from Operating Activities:
|
|
|
|
|
|
|
|
|
|
Operations
|
|
$
|
28,890
|
|
|
|
$
|
34,348
|
|
|
|
$
|
39,687
|
|
|
Changes in operating assets and liabilities
|
|
|
19,299
|
|
|
|
|
(2,523
|
)
|
|
|
|
(41,576
|
)
|
|
Net cash provided by (used in) operating activities
|
|
$
|
48,189
|
|
|
|
$
|
31,825
|
|
|
|
$
|
(1,889
|
)
|
|
Cash Flows from Investing Activities:
|
|
|
|
|
|
|
|
|
|
Purchases of property and equipment
|
|
$
|
(2,318
|
)
|
|
|
$
|
(2,582
|
)
|
|
|
$
|
(4,250
|
)
|
|
Cash Flows from Financing Activities:
|
|
|
|
|
|
|
|
|
|
Repurchase of common stock under stock repurchase program
|
|
|
(5,189
|
)
|
|
|
|
(2,268
|
)
|
|
|
|
-
|
|
|
Payments on long-term debt
|
|
|
(7,000
|
)
|
|
|
|
(2,500
|
)
|
|
|
|
(37,500
|
)
|
|
|
|
|
(2)
|
|
Cash flows from operating activities for the quarter ended March
31,2012 were positively impacted by the changes in working capital
primarily as a result of the timing of income tax payments.
|
(3)
|
|
Cash flows from operating activities for the quarter ended March 31,
2011 was negatively impacted by the unfavorable changes in working
capital items, primarily related to the following items: (i) the
change in the monthly invoice timing for DISH Network which was
included as part of its contract renewal terms in January 2011,
which had a negative $20 million impact; and (ii) the timing of
payments for several items specific to the first quarter of 2011,
including approximately $8 million of Intec acquisition-related
expenses and 2010 employee incentive bonuses, both of which were
accrued expenses as of December 31, 2010.
|
|
|
|
2012 Financial Guidance
A summary of CSG's financial guidance for the full year 2012 is as
follows:
Revenues
|
|
|
$715 - $740 million
|
Non-GAAP EPS
|
|
|
$1.85 - $2.00
|
GAAP EPS from continuing operations
|
|
|
$0.93 - $1.03
|
Adjusted EBITDA
|
|
|
$164 - $171 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 May 1, 2012, 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, MasterCard, Orange, T-Mobile, Telefonica, Time Warner Cable,
Vodafone, Vivo and Verizon. With over 25 years of experience and
expertise in voice, video, data and content services, CSG International
offers a broad portfolio of licensed and Software-as-a-Service
(SaaS)-based products and solutions that help clients compete more
effectively, improve business operations and deliver a more impactful
customer experience across a variety of touch points. For more
information, visit our website at www.csgi.com.
Forward-Looking Statements
This news release contains forward-looking statements as defined under
the Securities Act of 1933, as amended, that are based on assumptions
about a number of important factors and involve risks and uncertainties
that could cause actual results to differ materially from what appears
in this news release. Some of these key factors include, but are not
limited to the following items:
-
CSG derives approximately forty percent of its revenues from its three
largest clients;
-
Continued market acceptance of CSG's products and services;
-
CSG's ability to continuously develop and enhance products in a
timely, cost-effective, technically advanced and competitive manner;
-
CSG's ability to deliver its solutions in a timely fashion within
budget, particularly large and complex software implementations;
-
CSG's dependency on the global telecommunications industry, and in
particular, the North American telecommunications industry;
-
CSG's ability to meet its financial expectations as a result of
increased dependency on software sales, which are subject to greater
volatility;
-
Increasing competition in CSG's market from companies of greater size
and with broader presence in the communications sector;
-
CSG's ability to successfully integrate and manage acquired businesses
or assets to achieve expected strategic, operating and financial goals;
-
CSG's continued 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 share and per share amounts)
|
|
|
|
|
|
|
|
|
March 31,
2012
|
|
|
December 31,
2011
|
ASSETS
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
178,408
|
|
|
|
$
|
146,733
|
|
Short-term investments
|
|
|
10,147
|
|
|
|
|
12,097
|
|
Total cash, cash equivalents, and short-term investments
|
|
|
188,555
|
|
|
|
|
158,830
|
|
Trade accounts receivable-
|
|
|
|
|
|
Billed, net of allowance of $2,925 and $2,421
|
|
|
170,909
|
|
|
|
|
179,804
|
|
Unbilled and other
|
|
|
27,791
|
|
|
|
|
30,981
|
|
Deferred income taxes
|
|
|
18,654
|
|
|
|
|
19,982
|
|
Income taxes receivable
|
|
|
1,324
|
|
|
|
|
4,139
|
|
Other current assets
|
|
|
17,400
|
|
|
|
|
16,224
|
|
Total current assets
|
|
|
424,633
|
|
|
|
|
409,960
|
|
Property and equipment, net of depreciation of $120,117 and $116,125
|
|
|
37,292
|
|
|
|
|
41,154
|
|
Software, net of amortization of $59,565 and $56,521
|
|
|
28,183
|
|
|
|
|
29,966
|
|
Goodwill
|
|
|
222,124
|
|
|
|
|
220,013
|
|
Client contracts, net of amortization of $166,174 and $159,225
|
|
|
94,359
|
|
|
|
|
98,403
|
|
Deferred income taxes
|
|
|
1,681
|
|
|
|
|
1,008
|
|
Other assets
|
|
|
13,951
|
|
|
|
|
14,393
|
|
Total assets
|
|
$
|
822,223
|
|
|
|
$
|
814,897
|
|
LIABILITIES AND STOCKHOLDERS' EQUITY
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
Current maturities of long-term debt
|
|
$
|
20,500
|
|
|
|
$
|
27,000
|
|
Client deposits
|
|
|
31,768
|
|
|
|
|
30,523
|
|
Trade accounts payable
|
|
|
28,512
|
|
|
|
|
27,198
|
|
Accrued employee compensation
|
|
|
31,188
|
|
|
|
|
42,005
|
|
Income taxes payable
|
|
|
14,137
|
|
|
|
|
2,334
|
|
Deferred revenue
|
|
|
52,329
|
|
|
|
|
44,824
|
|
Other current liabilities
|
|
|
18,286
|
|
|
|
|
23,501
|
|
Total current liabilities
|
|
|
196,720
|
|
|
|
|
197,385
|
|
Non-current liabilities:
|
|
|
|
|
|
Long-term debt, net of unamortized original issue discount of
$29,053 and $30,256
|
|
|
283,447
|
|
|
|
|
282,744
|
|
Deferred revenue
|
|
|
8,486
|
|
|
|
|
8,631
|
|
Income taxes payable
|
|
|
4,226
|
|
|
|
|
4,114
|
|
Deferred income taxes
|
|
|
24,534
|
|
|
|
|
28,188
|
|
Other non-current liabilities
|
|
|
19,618
|
|
|
|
|
19,121
|
|
Total non-current liabilities
|
|
|
340,311
|
|
|
|
|
342,798
|
|
Total liabilities
|
|
|
537,031
|
|
|
|
|
540,183
|
|
Stockholders' equity:
|
|
|
|
|
|
Preferred stock, par value $.01 per share; 10,000,000 shares
authorized; zero shares issued and outstanding
|
|
|
-
|
|
|
|
|
-
|
|
Common stock, par value $.01 per share; 100,000,000 shares
authorized; 34,127,496 shares and 33,822,232 shares
outstanding
|
|
|
652
|
|
|
|
|
645
|
|
Additional paid-in capital
|
|
|
450,100
|
|
|
|
|
449,376
|
|
Treasury stock, at cost, 31,034,308 and 30,551,519 shares
|
|
|
(720,083
|
)
|
|
|
|
(714,893
|
)
|
Accumulated other comprehensive income (loss):
|
|
|
|
|
|
Unrealized gain on short-term investments, net of tax
|
|
|
1
|
|
|
|
|
1
|
|
Unrecognized pension plan losses and prior service costs, net of tax
|
|
|
(1,803
|
)
|
|
|
|
(1,794
|
)
|
Unrealized loss on change in fair value of interest rate swaps, net
of tax
|
|
|
(769
|
)
|
|
|
|
(618
|
)
|
Cumulative foreign currency translation adjustments
|
|
|
1,293
|
|
|
|
|
(1,998
|
)
|
Accumulated earnings
|
|
|
555,801
|
|
|
|
|
543,995
|
|
Total stockholders' equity
|
|
|
285,192
|
|
|
|
|
274,714
|
|
Total liabilities and stockholders' equity
|
|
$
|
822,223
|
|
|
|
$
|
814,897
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CSG SYSTEMS INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME-UNAUDITED
(in thousands, except per share amounts)
|
|
|
|
|
|
|
|
Quarter Ended
|
|
|
|
March 31,
2012
|
|
|
March 31,
2011
|
|
Revenues:
|
|
|
|
|
|
|
Processing and related services
|
|
$
|
136,314
|
|
|
|
$
|
131,378
|
|
|
Software, maintenance and services
|
|
|
48,693
|
|
|
|
|
51,714
|
|
|
Total revenues
|
|
|
185,007
|
|
|
|
|
183,092
|
|
|
|
|
|
|
|
|
|
Cost of revenues (exclusive of depreciation, shown separately below):
|
|
|
|
|
|
|
Processing and related services
|
|
|
61,960
|
|
|
|
|
61,259
|
|
|
Software, maintenance and services
|
|
|
28,009
|
|
|
|
|
29,505
|
|
|
Total cost of revenues
|
|
|
89,969
|
|
|
|
|
90,764
|
|
|
Other operating expenses:
|
|
|
|
|
|
|
Research and development
|
|
|
27,922
|
|
|
|
|
28,638
|
|
|
Selling, general and administrative
|
|
|
31,625
|
|
|
|
|
33,339
|
|
|
Depreciation
|
|
|
5,837
|
|
|
|
|
6,247
|
|
|
Restructuring charges
|
|
|
702
|
|
|
|
|
-
|
|
|
Total operating expenses
|
|
|
156,055
|
|
|
|
|
158,988
|
|
|
Operating income
|
|
|
28,952
|
|
|
|
|
24,104
|
|
|
Other income (expense):
|
|
|
|
|
|
|
Interest expense
|
|
|
(4,152
|
)
|
|
|
|
(4,341
|
)
|
|
Amortization of original issue discount
|
|
|
(1,203
|
)
|
|
|
|
(1,449
|
)
|
|
Interest and investment income, net
|
|
|
220
|
|
|
|
|
234
|
|
|
Other, net
|
|
|
(205
|
)
|
|
|
|
(303
|
)
|
|
Total other
|
|
|
(5,340
|
)
|
|
|
|
(5,859
|
)
|
|
Income before income taxes
|
|
|
23,612
|
|
|
|
|
18,245
|
|
|
Income tax provision
|
|
|
(11,806
|
)
|
|
|
|
(6,751
|
)
|
|
Net income
|
|
$
|
11,806
|
|
|
|
$
|
11,494
|
|
|
|
|
|
|
|
|
|
Weighted-average shares outstanding - Basic:
|
|
|
|
|
|
|
Common stock
|
|
|
32,392
|
|
|
|
|
32,610
|
|
|
Participating restricted stock
|
|
|
66
|
|
|
|
|
327
|
|
|
Total
|
|
|
32,458
|
|
|
|
|
32,937
|
|
|
|
|
|
|
|
|
|
Weighted-average shares outstanding - Diluted:
|
|
|
|
|
|
|
Common stock
|
|
|
32,561
|
|
|
|
|
32,852
|
|
|
Participating restricted stock
|
|
|
66
|
|
|
|
|
327
|
|
|
Total
|
|
|
32,627
|
|
|
|
|
33,179
|
|
|
|
|
|
|
|
|
|
Earnings per common share:
|
|
|
|
|
|
|
Basic
|
|
$
|
0.36
|
|
|
|
$
|
0.35
|
|
|
Diluted
|
|
|
0.36
|
|
|
|
|
0.35
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CSG SYSTEMS INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS-UNAUDITED
(in thousands)
|
|
|
|
|
|
|
|
Quarter Ended
|
|
|
|
March 31,
2012
|
|
|
March 31,
2011
|
|
Cash flows from operating activities:
|
|
|
|
|
|
|
Net income
|
|
$
|
11,806
|
|
|
|
$
|
11,494
|
|
|
Adjustments to reconcile net income to net cash provided by (used
in) operating activities -
|
|
|
|
|
|
|
Depreciation
|
|
|
5,837
|
|
|
|
|
6,247
|
|
|
Amortization
|
|
|
10,302
|
|
|
|
|
10,146
|
|
|
Amortization of original issue discount
|
|
|
1,203
|
|
|
|
|
1,449
|
|
|
Gain on short-term investments and other
|
|
|
(8
|
)
|
|
|
|
(13
|
)
|
|
Deferred income taxes
|
|
|
(3,111
|
)
|
|
|
|
7,904
|
|
|
Excess tax benefit of stock-based compensation awards
|
|
|
(286
|
)
|
|
|
|
(814
|
)
|
|
Stock-based employee compensation
|
|
|
3,147
|
|
|
|
|
3,274
|
|
|
Subtotal
|
|
|
28,890
|
|
|
|
|
39,687
|
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
Trade accounts and other receivables, net
|
|
|
13,252
|
|
|
|
|
4,085
|
|
|
Other current and non-current assets
|
|
|
(1,152
|
)
|
|
|
|
(3,229
|
)
|
|
Income taxes payable/receivable
|
|
|
14,614
|
|
|
|
|
(3,443
|
)
|
|
Trade accounts payable and accrued liabilities
|
|
|
(14,045
|
)
|
|
|
|
(24,301
|
)
|
|
Deferred revenue
|
|
|
6,630
|
|
|
|
|
(14,688
|
)
|
|
Net cash provided by (used in) operating activities
|
|
|
48,189
|
|
|
|
|
(1,889
|
)
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
Purchases of property and equipment
|
|
|
(2,318
|
)
|
|
|
|
(4,250
|
)
|
|
Purchases of short-term investments
|
|
|
(10,142
|
)
|
|
|
|
(12,680
|
)
|
|
Proceeds from sale/maturity of short-term investments
|
|
|
12,100
|
|
|
|
|
15,000
|
|
|
Acquisition of and investments in client contracts
|
|
|
(1,693
|
)
|
|
|
|
(2,383
|
)
|
|
Net cash used in investing activities
|
|
|
(2,053
|
)
|
|
|
|
(4,313
|
)
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
Proceeds from issuance of common stock
|
|
|
556
|
|
|
|
|
335
|
|
|
Repurchase of common stock
|
|
|
(8,078
|
)
|
|
|
|
(4,027
|
)
|
|
Payments on acquired equipment financing
|
|
|
(417
|
)
|
|
|
|
(427
|
)
|
|
Payments on long-term debt
|
|
|
(7,000
|
)
|
|
|
|
(37,500
|
)
|
|
Payments of deferred financing costs
|
|
|
-
|
|
|
|
|
(205
|
)
|
|
Excess tax benefit of stock-based compensation awards
|
|
|
286
|
|
|
|
|
814
|
|
|
Net cash used in financing activities
|
|
|
(14,653
|
)
|
|
|
|
(41,010
|
)
|
|
Effect of exchange rate fluctuations on cash
|
|
|
192
|
|
|
|
|
1,339
|
|
|
Net increase (decrease) in cash and cash equivalents
|
|
|
31,675
|
|
|
|
|
(45,873
|
)
|
|
Cash and cash equivalents, beginning of period
|
|
|
146,733
|
|
|
|
|
197,858
|
|
|
Cash and cash equivalents, end of period
|
|
$
|
178,408
|
|
|
|
$
|
151,985
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosures of cash flow information:
|
|
|
|
|
|
|
Net cash paid during the period for -
|
|
|
|
|
|
|
Interest
|
|
$
|
4,473
|
|
|
|
$
|
4,581
|
|
|
Income taxes
|
|
|
242
|
|
|
|
|
2,453
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EXHIBIT 1
|
|
|
|
|
|
|
|
|
|
CSG SYSTEMS INTERNATIONAL, INC.
SUPPLEMENTAL REVENUE ANALYSIS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues by Geography
|
|
|
|
|
|
|
|
|
|
|
|
Quarter Ended
|
|
Quarter Ended
|
|
Quarter Ended
|
|
|
|
|
|
|
|
March 31, 2012
|
|
December 31, 2011
|
|
March 31, 2011
|
|
|
|
|
|
Americas
|
|
86%
|
|
85%
|
|
86%
|
|
|
|
|
|
Europe, Middle East and Africa
|
|
10%
|
|
10%
|
|
10%
|
|
|
|
|
|
Asia Pacific
|
|
4%
|
|
5%
|
|
4%
|
|
|
|
|
|
Total Revenues
|
|
100%
|
|
100%
|
|
100%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues by Significant Customers: 10% or
more of Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter Ended
|
|
Quarter Ended
|
|
Quarter Ended
|
|
|
|
|
|
|
|
March 31, 2012
|
|
December 31, 2011
|
|
March 31, 2011
|
|
|
|
|
|
Comcast
|
|
20%
|
|
19%
|
|
19%
|
|
|
|
|
|
DISH
|
|
13%
|
|
13%
|
|
13%
|
|
|
|
|
|
Time Warner
|
|
<10%
|
|
10%
|
|
<10%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ACP Customer Accounts (in thousands, at
end of period)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31,
|
|
December 31,
|
|
March 31,
|
|
|
|
|
|
|
|
2012
|
|
2011
|
|
2011
|
|
|
|
|
|
Cable/Satellite Customer Accounts
|
|
49,228
|
|
48,837
|
|
49,081
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 Income
|
|
|
EPS
|
|
Restructuring charges
|
|
X
|
|
|
|
X
|
|
|
Stock-based compensation
|
|
X
|
|
|
|
X
|
|
|
Amortization of acquired intangible assets
|
|
X
|
|
|
|
X
|
|
|
Amortization of original issue discount ("OID")
|
|
-
|
|
|
|
X
|
|
|
Gain/loss on repurchase of convertible debt securities
|
|
-
|
|
|
|
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.
-
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. In addition, the stock-based compensation
expense is a non-cash expense, 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. In addition, the amortization of acquired intangible
assets is a non-cash expense, 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.
-
Gains and losses related to the repurchase of CSG's convertible debt
securities are not considered reflective of CSG's recurring core
business operating results. The exclusion of these gains and losses 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.
-
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
March 31, 2012
|
|
|
Quarter Ended
March 31, 2011
|
|
|
|
Amounts
|
|
|
% of Revenues
|
|
|
Amounts
|
|
|
% of Revenues
|
|
GAAP operating income
|
|
$
|
28,952
|
|
|
15.6%
|
|
|
$
|
24,104
|
|
|
13.2%
|
|
Restructuring charges
|
|
|
702
|
|
|
0.4%
|
|
|
|
-
|
|
|
-
|
|
Stock-based compensation
|
|
|
3,147
|
|
|
1.7%
|
|
|
|
3,274
|
|
|
1.7%
|
|
Amortization of acquired intangible assets
|
|
|
5,510
|
|
|
3.0%
|
|
|
|
5,640
|
|
|
3.1%
|
|
Non-GAAP operating income
|
|
$
|
38,311
|
|
|
20.7%
|
|
|
$
|
33,018
|
|
|
18.0%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
March 31, 2012
|
|
|
Quarter Ended
March 31, 2011
|
|
|
|
Pretax Amount (1)
|
|
|
Per Diluted Share Impact (2)
|
|
|
Pretax Amount (1)
|
|
|
Per Diluted Share Impact (2)
|
|
GAAP income before income taxes
|
|
$
|
23,612
|
|
|
$
|
0.36
|
|
|
$
|
18,245
|
|
|
$
|
0.35
|
|
Restructuring charges
|
|
|
702
|
|
|
|
0.02
|
|
|
|
-
|
|
|
|
-
|
|
Stock-based compensation
|
|
|
3,147
|
|
|
|
0.07
|
|
|
|
3,274
|
|
|
|
0.06
|
|
Amortization of acquired intangible assets
|
|
|
5,510
|
|
|
|
0.12
|
|
|
|
5,640
|
|
|
|
0.10
|
|
Amortization of OID
|
|
|
1,203
|
|
|
|
0.03
|
|
|
|
1,449
|
|
|
|
0.03
|
|
Non-GAAP income before income taxes
|
|
$
|
34,174
|
|
|
$
|
0.60
|
|
|
$
|
28,608
|
|
|
$
|
0.54
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
These items (on a pretax basis) are calculated in accordance with
GAAP, and are reflected as part of the results of operations in the
accompanying Unaudited Condensed Consolidated Statements of Income.
|
|
|
|
(2)
|
|
These items represent the estimated after-tax impact to net income
on a per diluted share basis using the following: (i) the estimated
income taxes related to these items, which includes the impact of
the difference between GAAP and non-GAAP pretax income. This
resulted in an overall estimated effective income rate for non-GAAP
purposes of approximately 43% and 37%, respectively, for the
quarters ended March 31, 2012 and 2011; and (ii) the
weighted-average diluted shares outstanding of 32.6 million and 33.2
million, respectively, for the quarters ended March 31, 2012 and
2011.
|
|
|
|
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,
|
|
|
|
|
2012
|
|
|
|
|
2011
|
|
|
GAAP operating income
|
|
$
|
28,952
|
|
|
|
$
|
24,104
|
|
|
Restructuring charges
|
|
|
702
|
|
|
|
|
-
|
|
|
Depreciation
|
|
|
5,837
|
|
|
|
|
6,247
|
|
|
Amortization of acquired intangible assets (3)
|
|
|
5,510
|
|
|
|
|
5,640
|
|
|
Amortization of other intangible assets (3)
|
|
|
4,074
|
|
|
|
|
3,732
|
|
|
Stock-based compensation
|
|
|
3,147
|
|
|
|
|
3,274
|
|
|
Adjusted EBITDA
|
|
$
|
48,222
|
|
|
|
$
|
42,997
|
|
|
Adjusted EBITDA as a percentage of revenues
|
|
|
26
|
%
|
|
|
|
23
|
%
|
|
|
|
|
|
|
|
|
|
|
|
Quarter Ended
March 31,
|
|
|
|
|
2012
|
|
|
|
|
2011
|
|
|
Net income
|
|
$
|
11,806
|
|
|
|
$
|
11,494
|
|
|
Interest expense (4)
|
|
|
4,152
|
|
|
|
|
4,341
|
|
|
Amortization of OID
|
|
|
1,203
|
|
|
|
|
1,449
|
|
|
Interest and investment income and other, net
|
|
|
(15
|
)
|
|
|
|
69
|
|
|
Income tax provision
|
|
|
11,806
|
|
|
|
|
6,751
|
|
|
Depreciation
|
|
|
5,837
|
|
|
|
|
6,247
|
|
|
Amortization of acquired intangible assets (3)
|
|
|
5,510
|
|
|
|
|
5,640
|
|
|
Amortization of other intangible assets (3)
|
|
|
4,074
|
|
|
|
|
3,732
|
|
|
Stock-based compensation
|
|
|
3,147
|
|
|
|
|
3,274
|
|
|
Restructuring charges
|
|
|
702
|
|
|
|
|
-
|
|
|
Adjusted EBITDA
|
|
$
|
48,222
|
|
|
|
$
|
42,997
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter Ended
March 31,
|
|
|
|
|
2012
|
|
|
|
|
2011
|
|
|
Cash flows from operating activities
|
|
$
|
48,189
|
|
|
|
$
|
(1,889
|
)
|
|
Income tax provision
|
|
|
11,806
|
|
|
|
|
6,751
|
|
|
Changes in operating assets and liabilities, and deferred taxes
|
|
|
(16,188
|
)
|
|
|
|
33,672
|
|
|
Interest expense (4)
|
|
|
4,152
|
|
|
|
|
4,341
|
|
|
Interest and investment income and other, net
|
|
|
(15
|
)
|
|
|
|
69
|
|
|
Other
|
|
|
278
|
|
|
|
|
53
|
|
|
Adjusted EBITDA
|
|
$
|
48,222
|
|
|
|
$
|
42,997
|
|
|
|
|
|
|
|
|
|
(3) Amortization on the cash flows statement is made up of the following
items for the indicated periods (in thousands):
|
|
|
|
|
|
Quarter Ended
March 31,
|
|
|
|
|
2012
|
|
|
|
2011
|
|
Amortization of acquired intangible assets
|
|
$
|
5,510
|
|
|
$
|
5,640
|
|
Amortization of other intangible assets
|
|
|
4,074
|
|
|
|
3,732
|
|
Amortization of deferred financing costs
|
|
|
718
|
|
|
|
774
|
|
Total amortization
|
|
$
|
10,302
|
|
|
$
|
10,146
|
|
|
|
|
|
|
|
|
|
|
(4) Interest expense includes amortization of deferred financing costs
as detailed in Note 3 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,
|
|
|
|
|
2012
|
|
|
|
|
2011 (5)
|
|
|
Cash flows from operating activities
|
|
$
|
48,189
|
|
|
|
$
|
(1,889
|
)
|
|
Purchases of property and equipment
|
|
|
(2,318
|
)
|
|
|
|
(4,250
|
)
|
|
Non-GAAP free cash flow
|
|
$
|
45,871
|
|
|
|
$
|
(6,139
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
(5)
|
|
Cash flows from operating activities for the quarter ended March 31,
2011 was negatively impacted by the unfavorable changes in working
capital items, primarily related to the following items: (i) the
change in the monthly invoice timing for DISH Network, which was
included as part of its contract renewal terms in January 2011,
which had a negative $20 million impact; and (ii) the timing of
payments for several items specific to the first quarter of 2011,
including approximately $8 million of Intec acquisition-related
expenses and 2010 employee incentive bonuses, both of which were
accrued expenses as of December 31, 2010.
|
Non-GAAP Financial Measures - 2012 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 2012 full year financial guidance,
is as follows:
|
|
2012
Guidance
|
GAAP operating income margin
|
|
12%
|
Restructuring charges (6)
|
|
-
|
Stock-based compensation (7)
|
|
2%
|
Amortization of acquired intangible assets (8)
|
|
3%
|
Non-GAAP operating income margin ("approximately 17%")
|
|
17%
|
|
|
|
(6)
|
|
This represents the pretax impact of restructuring charges of $1
million on CSG's operating income margin as a percentage of the
midpoint of 2012 revenue guidance.
|
|
|
|
(7)
|
|
This represents the pretax impact of stock-based compensation
expense of an estimated $14 million on CSG's operating income margin
as a percentage of the midpoint of 2012 revenue guidance.
|
|
|
|
(8)
|
|
This represents the pretax impact of amortization of acquired
intangible assets expense of an estimated $22 million on CSG's
operating income margin as a percentage of the midpoint of 2012
revenue guidance.
|
|
|
|
Non-GAAP EPS:
The reconciliation of GAAP EPS to non-GAAP EPS as included in CSG's 2012
full year financial guidance is as follows:
|
|
2012 Guidance Range (9)
|
|
|
|
Low Range
|
|
|
High Range
|
|
GAAP EPS
|
|
$0.93
|
|
|
$1.03
|
|
Restructuring (10)
|
|
0.03
|
|
|
0.03
|
|
Stock-based compensation (11)
|
|
0.30
|
|
|
0.32
|
|
Amortization of acquired intangible assets (12)
|
|
0.48
|
|
|
0.51
|
|
Amortization of OID (13)
|
|
0.11
|
|
|
0.11
|
|
Non-GAAP EPS
|
|
$1.85
|
|
|
$2.00
|
|
|
|
|
|
|
|
|
|
|
|
(9)
|
|
The estimated after-tax impact of these items is calculated using:
(i) the estimated income taxes related to these items, which
includes the impact of the difference between GAAP and non-GAAP
pretax income, and the anticipated approval of R&D tax credits by
the end of 2012, resulting in an estimated effective income tax rate
for non-GAAP purposes of approximately 43%; and (ii) the estimated
weighted-average diluted shares outstanding of 32.9 million.
|
|
|
|
(10)
|
|
This represents the after-tax impact on a per diluted share basis of
the full year restructuring charges of approximately $1 million.
|
|
|
|
(11)
|
|
This represents the estimated after-tax impact on a per diluted
share basis of the full year stock-based compensation expense of
approximately $14 million.
|
|
|
|
(12)
|
|
This represents the estimated after-tax impact on a per diluted
share basis of the full year amortization of acquired intangible
assets expense of approximately $22 million.
|
|
|
|
(13)
|
|
This represents the estimated after-tax impact on a per diluted
share basis of the full year expense related to the amortization
of the OID expense for CSG's convertible debt securities of
approximately $5 million.
|
|
|
|
Non-GAAP Adjusted EBITDA:
CSG's calculation of non-GAAP adjusted EBITDA and the reconciliation of
CSG's non-GAAP adjusted EBITDA measure to net income and cash flows from
operations are provided below for CSG's 2012 full year financial
guidance at the mid-point (in thousands):
|
|
|
|
|
2012
|
GAAP operating income
|
|
$88,000
|
Restructuring charges
|
|
1,000
|
Depreciation
|
|
26,000
|
Amortization of acquired intangible assets
|
|
22,000
|
Amortization of other intangible assets
|
|
16,000
|
Stock-based compensation
|
|
14,000
|
Adjusted EBITDA
|
|
$167,000
|
Adjusted EBITDA as a percentage of revenues
|
|
23%
|
|
|
|
|
|
2012
|
Net income
|
|
$32,000
|
Interest expense
|
|
16,000
|
Amortization of OID
|
|
5,000
|
Interest and investment income and other, net
|
|
(1,000)
|
Income tax provision
|
|
36,000
|
Restructuring charges
|
|
1,000
|
Depreciation
|
|
26,000
|
Amortization of acquired of intangible assets
|
|
22,000
|
Amortization of other intangible assets
|
|
16,000
|
Stock-based compensation
|
|
14,000
|
Adjusted EBITDA
|
|
$167,000
|
|
|
|
|
|
2012
|
Cash flows from operating activities
|
|
$115,000
|
Income tax provision
|
|
36,000
|
Changes in operating assets and liabilities and deferred taxes
|
|
(1,000)
|
Restructuring charges
|
|
1,000
|
Interest expense
|
|
16,000
|
Interest and investment income and other, net
|
|
-
|
Adjusted EBITDA
|
|
$167,000
|
|
|
|
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):
|
|
|
2012
|
|
Cash flows from operating activities
|
|
$
|
115,000
|
|
Purchases of property and equipment
|
|
|
(30,000
|
)
|
Non-GAAP free cash flow
|
|
$
|
85,000
|
|
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