[July 31, 2014] |
|
CSG Systems International Reports Results for Second Quarter 2014
ENGLEWOOD, Colo. --(Business Wire)--
CSG Systems International, Inc. (Nasdaq:CSGS), a leading global provider
of interactive transaction-driven solutions and services, today reported
results for the quarter ended June 30, 2014.
Key Financial Highlights:
-
Second quarter 2014 results:
-
Total revenues were $184.6 million.
-
Non-GAAP operating income was $29.8 million, or 16.1%
of total revenues and GAAP operating income was $21.8 million,
or 11.8% of total revenues.
-
Non-GAAP earnings per diluted share (EPS) was $0.52.
GAAP EPS was $0.28.
-
Cash flows from operations for the quarter were $24.8 million.
-
CSG increased its quarterly cash dividend by five percent to $0.1575
per share of common stock, which was paid to shareholders on June 26,
2014 for a total of approximately $5 million.
-
CSG signed a multi-year agreement with MTN South Africa to provide the
end-to-end management of MTN's wholesale billing and business service
platforms.
-
CSG signed a multi-year agreement with one of the largest mobile
operators in the world to roll out the Singleview platform to 10
countries in Africa as part of a larger modernization effort.
-
After the quarter, the company expanded and extended its contract with
Comcast Cable through June 30, 2019. The expanded contract provides a
framework and financial incentives for Comcast to standardize and
streamline all of its current and future residential customer accounts
onto the CSG billing platform.
"Over the past several months, we have continued to get broader and
deeper in our clients' operations by working side-by-side with them,
understanding their pain points, helping them solve business problems
and grow their revenues and profits," said Peter Kalan, chief executive
officer and president for CSG International. "We believe that by
delivering on your promises, investing in your people, your products and
your client relationships, and focusing your development efforts on
helping your clients evolve and grow, that you create long-term value
for your employees, your clients and your shareholders."
Financial Overview (unaudited)
(in thousands, except per share amounts and percentages):
|
|
|
Quarter Ended June 30,
|
|
|
Six Months Ended June 30,
|
|
|
|
|
|
|
|
|
|
Percent
|
|
|
|
|
|
|
|
|
Percent
|
|
|
|
|
2014
|
|
|
|
2013
|
|
|
Change
|
|
|
|
2014
|
|
|
|
2013
|
|
|
Change
|
Revenues
|
|
|
$
|
184,558
|
|
|
$
|
186,107
|
|
|
(1)%
|
|
|
$
|
372,586
|
|
|
$
|
366,739
|
|
|
2%
|
Non-GAAP Results:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Income
|
|
|
$
|
29,794
|
|
|
$
|
30,362
|
|
|
(2)%
|
|
|
$
|
59,699
|
|
|
$
|
58,010
|
|
|
3%
|
Operating Income Margin
|
|
|
|
16.1%
|
|
|
|
16.3%
|
|
|
-
|
|
|
|
16.0%
|
|
|
|
15.8%
|
|
|
-
|
EPS
|
|
|
$
|
0.52
|
|
|
$
|
0.57
|
|
|
(9)%
|
|
|
$
|
1.03
|
|
|
$
|
1.05
|
|
|
(2)%
|
GAAP Results:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Income
|
|
|
$
|
21,820
|
|
|
$
|
21,681
|
|
|
1%
|
|
|
$
|
42,734
|
|
|
$
|
39,716
|
|
|
8%
|
Operating Income Margin
|
|
|
|
11.8%
|
|
|
|
11.6%
|
|
|
-
|
|
|
|
11.5%
|
|
|
|
10.8%
|
|
|
-
|
EPS
|
|
|
$
|
0.28
|
|
|
$
|
0.37
|
|
|
(24)%
|
|
|
$
|
0.57
|
|
|
$
|
0.83
|
|
|
(31)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
second quarter of 2014 were $184.6 million, a 1% decrease when compared
to revenues of $186.1 million for the second quarter of 2013, and a 2%
decrease when compared to the $188.0 million for the first quarter of
2014. The year-over-year decrease in revenues is mainly due to the two
business divestitures completed in the second half of 2013, offset to a
certain degree by strong processing revenues from continued growth in
several of our ancillary products and services. The sequential quarterly
decrease is due to a strong first quarter of processing revenues, driven
in large part by special project work.
Non-GAAP Results: Non-GAAP operating
income for the second quarter of 2014 was $29.8 million, or 16.1% of
total revenues, compared to $30.4 million, or 16.3%, for the second
quarter of 2013. Non-GAAP operating income for the first quarter of 2014
was $29.9 million, or 15.9% of total revenues.
Non-GAAP EPS for the second quarter of 2014 was $0.52, compared to
non-GAAP EPS of $0.57 for the second quarter of 2013, and $0.52 for the
first quarter of 2014.
GAAP Results: GAAP operating income
for the second quarter of 2014 was $21.8 million, or 11.8% of
total revenues, compared to $21.7 million, or 11.6%, for the same period
in 2013.
GAAP EPS for the second quarter of 2014 was $0.28, compared to $0.37 for
the second quarter of 2013. GAAP EPS for the second quarter of 2014 was
negatively impacted by a higher effective income tax rate, which
negatively impacted GAAP EPS by $0.06 per diluted share.
Balance Sheet and Cash Flows
Balance Sheet: Certain key balance
sheet items as of the indicated dates are as follows (in thousands):
|
|
|
June 30,
|
|
|
March 31,
|
|
|
December 31,
|
|
|
|
2014
|
|
|
2014
|
|
|
2013
|
Cash, cash equivalents, and short-term investments
|
|
|
$
|
189,583
|
|
|
$
|
183,012
|
|
|
$
|
210,837
|
Net billed trade accounts receivable (1)
|
|
|
|
191,615
|
|
|
|
195,736
|
|
|
|
178,511
|
Total long-term debt:
|
|
|
|
|
|
|
|
|
|
Par value
|
|
|
$
|
277,500
|
|
|
$
|
281,250
|
|
|
$
|
285,000
|
Unamortized OID
|
|
|
|
(17,116)
|
|
|
|
(18,547)
|
|
|
|
(19,950)
|
Net debt carrying amount
|
|
|
$
|
260,384
|
|
|
$
|
262,703
|
|
|
$
|
265,050
|
(1) The increases in trade accounts receivable at June 30, 2014 and
March 31, 2014, from December 31, 2013, are primarily related to the
timing around certain monthly customer payments.
Cash Flows: Certain key operating
cash flow items for the indicated quarters then ended are as follows (in
thousands):
|
|
|
June 30,
|
|
|
March 31,
|
|
|
June 30,
|
|
|
|
2014
|
|
|
2014
|
|
|
2013
|
Cash Flows from Operating Activities:
|
|
|
|
|
|
|
|
|
|
Operations
|
|
|
$
|
24,804
|
|
|
$
|
27,983
|
|
|
$
|
31,308
|
Changes in operating assets and liabilities (2)
|
|
|
|
43
|
|
|
|
(36,561)
|
|
|
|
7,494
|
Net cash provided by (used in) operating activities
|
|
|
$
|
24,847
|
|
|
$
|
(8,578)
|
|
|
$
|
38,802
|
Cash Flows from Investing Activities:
|
|
|
|
|
|
|
|
|
|
Purchases of property and equipment
|
|
|
$
|
(6,697)
|
|
|
$
|
(4,499)
|
|
|
$
|
(6,633)
|
Cash Flows from Financing Activities:
|
|
|
|
|
|
|
|
|
|
Dividend payments
|
|
|
$
|
(5,160)
|
|
|
$
|
(5,162)
|
|
|
$
|
-
|
Repurchase of common stock under stock repurchase program
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(3,490)
|
Payments on long-term debt
|
|
|
|
(3,750)
|
|
|
|
(3,750)
|
|
|
|
(3,750)
|
(2) Cash flows from operating activities for the quarter ended March 31,
2014 reflect the negative impact of the following timing items on
working capital for the quarter: (i) the increase in the accounts
receivable balance discussed above; and (ii) the payment of 2013
year-end accrued employee incentive compensation.
2014 Financial Guidance
CSG is maintaining its revenue and non-GAAP financial guidance for the
full year 2014, while revising its GAAP EPS and cash flows from
operating activities guidance primarily associated with CSG's
restructuring of its Content Direct management programs and incentives
in the third quarter of 2014 to align its investment across CSG's
offerings. CSG's financial guidance for the full year 2014 is as follows:
|
|
|
As of July 31, 2014
|
|
|
Previous
|
Revenues
|
|
|
$745 - $770 million (maintained)
|
|
|
$745 - $770 million
|
Non-GAAP EPS
|
|
|
$2.05 - $2.17 (maintained)
|
|
|
$2.05 - $2.17
|
GAAP EPS
|
|
|
$1.02 to $1.12 (revised)
|
|
|
$1.31 - $1.41
|
Non-GAAP Adjusted EBITDA
|
|
|
$152 - $158 million (maintained)
|
|
|
$152 - $158 million
|
Cash flows from operating activities
|
|
|
$100 - $110 million (revised)
|
|
|
$110 - $120 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 conference call on July 31, 2014, at 5:00 p.m. ET, to
discuss CSG's second quarter results for 2014 and the expanded Comcast
agreement. The call will be carried live and archived on the Internet. A
link to the conference call is available at http://ir.csgi.com.
In addition, to reach the conference by phone, dial 1-888-287-5563 and
ask the operator for the CSG International conference call and Liz
Bauer, chairperson. A replay of the conference call will also be
available until 6:00 p.m. ET on August 30, 2014, and can be accessed by
calling 1-888-203-1112 and access code of 6899300.
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, 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;
-
Timing and success of previously announced client customer account
migrations to CSG's billing platform;
-
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)
|
|
|
|
|
|
|
|
|
|
|
June 30,
|
|
|
December 31,
|
|
|
|
2014
|
|
|
2013
|
ASSETS
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
|
$
|
86,122
|
|
|
$
|
82,686
|
Short-term investments
|
|
|
|
103,461
|
|
|
|
128,151
|
Total cash, cash equivalents, and short-term investments
|
|
|
|
189,583
|
|
|
|
210,837
|
Trade accounts receivable:
|
|
|
|
|
|
|
Billed, net of allowance of $2,798 and $2,359
|
|
|
|
191,615
|
|
|
|
178,511
|
Unbilled
|
|
|
|
39,592
|
|
|
|
38,365
|
Deferred income taxes
|
|
|
|
11,445
|
|
|
|
15,085
|
Income taxes receivable
|
|
|
|
7,640
|
|
|
|
3,815
|
Other current assets
|
|
|
|
35,105
|
|
|
|
28,762
|
Total current assets
|
|
|
|
474,980
|
|
|
|
475,375
|
Non-current assets:
|
|
|
|
|
|
|
Property and equipment, net of depreciation of $135,345 and $129,522
|
|
|
|
35,711
|
|
|
|
35,061
|
Software, net of amortization of $83,146 and $77,504
|
|
|
|
46,434
|
|
|
|
43,565
|
Goodwill
|
|
|
|
236,788
|
|
|
|
233,599
|
Client contracts, net of amortization of $85,759 and $75,382
|
|
|
|
49,436
|
|
|
|
55,191
|
Deferred income taxes
|
|
|
|
7,950
|
|
|
|
7,447
|
Income taxes receivable
|
|
|
|
1,833
|
|
|
|
1,930
|
Other assets
|
|
|
|
17,658
|
|
|
|
16,812
|
Total non-current assets
|
|
|
|
395,810
|
|
|
|
393,605
|
Total assets
|
|
|
$
|
870,790
|
|
|
$
|
868,980
|
LIABILITIES AND STOCKHOLDERS' EQUITY
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
Current maturities of long-term debt
|
|
|
$
|
18,750
|
|
|
$
|
15,000
|
Client deposits
|
|
|
|
32,445
|
|
|
|
30,431
|
Trade accounts payable
|
|
|
|
36,306
|
|
|
|
33,376
|
Accrued employee compensation
|
|
|
|
42,974
|
|
|
|
58,434
|
Deferred revenue
|
|
|
|
50,377
|
|
|
|
47,131
|
Income taxes payable
|
|
|
|
2,273
|
|
|
|
2,814
|
Other current liabilities
|
|
|
|
21,615
|
|
|
|
19,620
|
Total current liabilities
|
|
|
|
204,740
|
|
|
|
206,806
|
Non-current liabilities:
|
|
|
|
|
|
|
Long-term debt, net of unamortized original issue discount of
$17,116 and $19,950
|
|
|
|
241,634
|
|
|
|
250,050
|
Deferred revenue
|
|
|
|
7,363
|
|
|
|
9,221
|
Income taxes payable
|
|
|
|
1,613
|
|
|
|
1,909
|
Deferred income taxes
|
|
|
|
17,653
|
|
|
|
20,274
|
Other non-current liabilities
|
|
|
|
14,957
|
|
|
|
14,616
|
Total non-current liabilities
|
|
|
|
283,220
|
|
|
|
296,070
|
Total liabilities
|
|
|
|
487,960
|
|
|
|
502,876
|
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;
34,092 shares and 33,745 shares outstanding
|
|
|
|
661
|
|
|
|
658
|
Additional paid-in capital
|
|
|
|
477,053
|
|
|
|
473,190
|
Treasury stock, at cost, 32,030 and 32,030 shares
|
|
|
|
(738,372)
|
|
|
|
(738,372)
|
Accumulated other comprehensive income (loss):
|
|
|
|
|
|
|
Unrealized gain on short-term investments, net of tax
|
|
|
|
51
|
|
|
|
41
|
Unrealized loss on change in fair value of interest rate swaps, net
of tax
|
|
|
|
-
|
|
|
|
(98)
|
Cumulative foreign currency translation adjustments
|
|
|
|
5,749
|
|
|
|
1,674
|
Accumulated earnings
|
|
|
|
637,688
|
|
|
|
629,011
|
Total stockholders' equity
|
|
|
|
382,830
|
|
|
|
366,104
|
Total liabilities and stockholders' equity
|
|
|
$
|
870,790
|
|
|
$
|
868,980
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CSG SYSTEMS INTERNATIONAL, INC.
|
CONDENSED CONSOLIDATED STATEMENTS OF INCOME-UNAUDITED
|
(in thousands, except per share amounts)
|
|
|
|
|
|
|
|
|
|
|
Quarter Ended
|
|
|
Six Months Ended
|
|
|
|
June 30,
|
|
|
June 30,
|
|
|
June 30,
|
|
|
June 30,
|
|
|
|
2014
|
|
|
2013
|
|
|
2014
|
|
|
2013
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
Processing and related services
|
|
|
$
|
136,357
|
|
|
$
|
131,184
|
|
|
$
|
278,715
|
|
|
$
|
265,818
|
Software and services
|
|
|
|
25,618
|
|
|
|
31,391
|
|
|
|
50,474
|
|
|
|
56,755
|
Maintenance
|
|
|
|
22,583
|
|
|
|
23,532
|
|
|
|
43,397
|
|
|
|
44,166
|
Total revenues
|
|
|
|
184,558
|
|
|
|
186,107
|
|
|
|
372,586
|
|
|
|
366,739
|
Cost of revenues (exclusive of depreciation, shown separately below):
|
|
|
|
|
|
|
|
|
|
|
|
|
Processing and related services
|
|
|
|
67,364
|
|
|
|
62,964
|
|
|
|
135,791
|
|
|
|
124,541
|
Software and services
|
|
|
|
17,871
|
|
|
|
22,506
|
|
|
|
43,191
|
|
|
|
43,945
|
Maintenance
|
|
|
|
8,447
|
|
|
|
9,288
|
|
|
|
16,804
|
|
|
|
19,626
|
Total cost of revenues
|
|
|
|
93,682
|
|
|
|
94,758
|
|
|
|
195,786
|
|
|
|
188,112
|
Other operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development
|
|
|
|
26,437
|
|
|
|
27,548
|
|
|
|
51,444
|
|
|
|
56,093
|
Selling, general and administrative
|
|
|
|
39,140
|
|
|
|
37,388
|
|
|
|
74,439
|
|
|
|
72,185
|
Depreciation
|
|
|
|
3,440
|
|
|
|
4,770
|
|
|
|
6,926
|
|
|
|
9,770
|
Restructuring charges
|
|
|
|
39
|
|
|
|
(38)
|
|
|
|
1,257
|
|
|
|
863
|
Total operating expenses
|
|
|
|
162,738
|
|
|
|
164,426
|
|
|
|
329,852
|
|
|
|
327,023
|
Operating income
|
|
|
|
21,820
|
|
|
|
21,681
|
|
|
|
42,734
|
|
|
|
39,716
|
Other income (expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
|
|
(2,546)
|
|
|
|
(3,180)
|
|
|
|
(5,318)
|
|
|
|
(6,109)
|
Amortization of original issue discount
|
|
|
|
(1,430)
|
|
|
|
(1,325)
|
|
|
|
(2,834)
|
|
|
|
(2,624)
|
Interest and investment income, net
|
|
|
|
225
|
|
|
|
188
|
|
|
|
438
|
|
|
|
343
|
Other, net
|
|
|
|
(328)
|
|
|
|
1,498
|
|
|
|
(277)
|
|
|
|
1,080
|
Total other
|
|
|
|
(4,079)
|
|
|
|
(2,819)
|
|
|
|
(7,991)
|
|
|
|
(7,310)
|
Income before income taxes
|
|
|
|
17,741
|
|
|
|
18,862
|
|
|
|
34,743
|
|
|
|
32,406
|
Income tax provision
|
|
|
|
(8,338)
|
|
|
|
(6,790)
|
|
|
|
(15,649)
|
|
|
|
(5,436)
|
Net income
|
|
|
$
|
9,403
|
|
|
$
|
12,072
|
|
|
$
|
19,094
|
|
|
$
|
26,970
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
|
32,619
|
|
|
|
32,125
|
|
|
|
32,469
|
|
|
|
32,129
|
Diluted
|
|
|
|
33,543
|
|
|
|
32,439
|
|
|
|
33,789
|
|
|
|
32,483
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per common share:
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
$
|
0.29
|
|
|
$
|
0.38
|
|
|
$
|
0.59
|
|
|
$
|
0.84
|
Diluted
|
|
|
|
0.28
|
|
|
|
0.37
|
|
|
|
0.57
|
|
|
|
0.83
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash dividends declared per common share
|
|
|
$
|
0.1575
|
|
|
$
|
0.1500
|
|
|
$
|
0.3075
|
|
|
$
|
0.1500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CSG SYSTEMS INTERNATIONAL, INC.
|
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS-UNAUDITED
|
(in thousands)
|
|
|
|
|
|
|
|
Six Months Ended
|
|
|
|
June 30,
|
|
|
June 30,
|
|
|
|
2014
|
|
|
2013
|
Cash flows from operating activities:
|
|
|
|
|
|
|
Net income
|
|
|
$
|
19,094
|
|
|
$
|
26,970
|
Adjustments to reconcile net income to net cash provided by
operating activities -
|
|
|
|
|
|
|
Depreciation
|
|
|
|
6,926
|
|
|
|
9,770
|
Amortization
|
|
|
|
16,924
|
|
|
|
18,757
|
Amortization of original issue discount
|
|
|
|
2,834
|
|
|
|
2,624
|
Loss on short-term investments and other
|
|
|
|
735
|
|
|
|
998
|
Gain on disposition of business operations
|
|
|
|
(222)
|
|
|
|
-
|
Deferred income taxes
|
|
|
|
766
|
|
|
|
6,533
|
Excess tax benefit of stock-based compensation awards
|
|
|
|
(1,984)
|
|
|
|
(542)
|
Stock-based employee compensation
|
|
|
|
7,714
|
|
|
|
7,518
|
Subtotal
|
|
|
|
52,787
|
|
|
|
72,628
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
Trade accounts receivable, net
|
|
|
|
(13,457)
|
|
|
|
10,382
|
Other current and non-current assets
|
|
|
|
(8,987)
|
|
|
|
(8,367)
|
Income taxes payable/receivable
|
|
|
|
(2,512)
|
|
|
|
(4,178)
|
Trade accounts payable and accrued liabilities
|
|
|
|
(12,353)
|
|
|
|
(16,763)
|
Deferred revenue
|
|
|
|
791
|
|
|
|
7,644
|
Net cash provided by operating activities
|
|
|
|
16,269
|
|
|
|
61,346
|
Cash flows from investing activities:
|
|
|
|
|
|
|
Purchases of property and equipment
|
|
|
|
(11,196)
|
|
|
|
(11,125)
|
Purchases of short-term investments
|
|
|
|
(85,014)
|
|
|
|
(98,883)
|
Proceeds from sale/maturity of short-term investments
|
|
|
|
109,138
|
|
|
|
41,361
|
Acquisition of and investments in client contracts
|
|
|
|
(3,296)
|
|
|
|
(3,808)
|
Proceeds from the disposition of business operations
|
|
|
|
630
|
|
|
|
-
|
Net cash provided by (used in) investing activities
|
|
|
|
10,262
|
|
|
|
(72,455)
|
Cash flows from financing activities:
|
|
|
|
|
|
|
Proceeds from issuance of common stock
|
|
|
|
661
|
|
|
|
921
|
Payment of cash dividends
|
|
|
|
(10,322)
|
|
|
|
-
|
Repurchase of common stock
|
|
|
|
(6,584)
|
|
|
|
(14,883)
|
Payments on acquired equipment financing
|
|
|
|
(1,097)
|
|
|
|
(1,894)
|
Payments on long-term debt
|
|
|
|
(7,500)
|
|
|
|
(7,500)
|
Excess tax benefit of stock-based compensation awards
|
|
|
|
1,984
|
|
|
|
542
|
Net cash used in financing activities
|
|
|
|
(22,858)
|
|
|
|
(22,814)
|
Effect of exchange rate fluctuations on cash
|
|
|
|
(237)
|
|
|
|
(2,975)
|
Net increase (decrease) in cash and cash equivalents
|
|
|
|
3,436
|
|
|
|
(36,898)
|
Cash and cash equivalents, beginning of period
|
|
|
|
82,686
|
|
|
|
133,747
|
Cash and cash equivalents, end of period
|
|
|
$
|
86,122
|
|
|
$
|
96,849
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosures of cash flow information:
|
|
|
|
|
|
|
Net cash paid during the period for -
|
|
|
|
|
|
|
Interest
|
|
|
$
|
4,211
|
|
|
$
|
4,770
|
Income taxes
|
|
|
|
17,075
|
|
|
|
2,306
|
|
|
|
|
|
|
|
Non-cash financing activity -
|
|
|
|
|
|
|
Cash dividend payable
|
|
|
|
-
|
|
|
|
5,069
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EXHIBIT 1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CSG SYSTEMS INTERNATIONAL, INC.
|
SUPPLEMENTAL REVENUE ANALYSIS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues by Geography
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter Ended
|
|
|
Quarter Ended
|
|
|
Quarter Ended
|
|
|
|
June 30, 2014
|
|
|
March 31, 2014
|
|
|
June 30, 2013
|
Americas
|
|
|
85%
|
|
|
86%
|
|
|
85%
|
Europe, Middle East and Africa
|
|
|
11%
|
|
|
10%
|
|
|
9%
|
Asia Pacific
|
|
|
4%
|
|
|
4%
|
|
|
6%
|
Total Revenues
|
|
|
100%
|
|
|
100%
|
|
|
100%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues by Significant Customers: 10% or
more of Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter Ended
|
|
|
Quarter Ended
|
|
|
Quarter Ended
|
|
|
|
June 30, 2014
|
|
|
March 31, 2014
|
|
|
June 30, 2013
|
Comcast
|
|
|
21%
|
|
|
21%
|
|
|
18%
|
DISH
|
|
|
16%
|
|
|
15%
|
|
|
15%
|
Time Warner
|
|
|
11%
|
|
|
11%
|
|
|
10%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ACP Customer Accounts (in thousands, at
end of period)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30,
|
|
|
March 31,
|
|
|
June 30,
|
|
|
|
2014
|
|
|
2014
|
|
|
2013
|
Cable/Satellite Customer Accounts
|
|
|
49,891
|
|
|
49,811
|
|
|
49,072
|
|
|
|
|
|
|
|
|
|
|
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:
|
|
|
|
|
|
|
|
|
|
Operating
|
|
|
|
Non-GAAP Exclusions
|
|
|
Income
|
|
|
EPS
|
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, changes in
management structure, divestitures of businesses, facility
consolidations and abandonments, and fundamental reorganizations
impacting operational focus and direction. 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
|
|
|
|
June 30, 2014
|
|
|
June 30, 2013
|
|
|
|
|
|
|
% of
|
|
|
|
|
|
% of
|
|
|
|
Amounts
|
|
|
Revenues
|
|
|
Amounts
|
|
|
Revenues
|
GAAP operating income
|
|
|
$
|
21,820
|
|
|
11.8%
|
|
|
$
|
21,681
|
|
|
11.6%
|
Restructuring charges
|
|
|
|
39
|
|
|
0.0%
|
|
|
|
(38)
|
|
|
(0.0)%
|
Stock-based compensation
|
|
|
|
3,931
|
|
|
2.1%
|
|
|
|
3,908
|
|
|
2.1%
|
Amortization of acquired intangible assets
|
|
|
|
4,004
|
|
|
2.2%
|
|
|
|
4,811
|
|
|
2.6%
|
Non-GAAP operating income
|
|
|
$
|
29,794
|
|
|
16.1%
|
|
|
$
|
30,362
|
|
|
16.3%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended
|
|
|
Six Months Ended
|
|
|
|
June 30, 2014
|
|
|
June 30, 2013
|
|
|
|
|
|
|
% of
|
|
|
|
|
|
% of
|
|
|
|
Amounts
|
|
|
Revenues
|
|
|
Amounts
|
|
|
Revenues
|
GAAP operating income
|
|
|
$
|
42,734
|
|
|
11.5%
|
|
|
$
|
39,716
|
|
|
10.8%
|
Restructuring charges
|
|
|
|
1,257
|
|
|
0.3%
|
|
|
|
863
|
|
|
0.2%
|
Stock-based compensation
|
|
|
|
7,714
|
|
|
2.1%
|
|
|
|
7,518
|
|
|
2.1%
|
Amortization of acquired intangible assets
|
|
|
|
7,994
|
|
|
2.1%
|
|
|
|
9,913
|
|
|
2.7%
|
Non-GAAP operating income
|
|
|
$
|
59,699
|
|
|
16.0%
|
|
|
$
|
58,010
|
|
|
15.8%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
|
|
|
June 30, 2014
|
|
|
June 30, 2013
|
|
|
|
Pretax
|
|
|
|
|
|
Pretax
|
|
|
|
|
|
|
Amount (1)
|
|
|
EPS (3)
|
|
|
Amount (1)
|
|
|
EPS (4)
|
GAAP income before income taxes
|
|
|
$
|
17,741
|
|
|
$
|
0.28
|
|
|
$
|
18,862
|
|
|
$
|
0.37
|
Restructuring charges
|
|
|
|
39
|
|
|
|
|
|
|
(38)
|
|
|
|
Stock-based compensation
|
|
|
|
3,931
|
|
|
|
|
|
|
3,908
|
|
|
|
Amortization of acquired intangible assets
|
|
|
|
4,004
|
|
|
|
|
|
|
4,811
|
|
|
|
Amortization of OID
|
|
|
|
1,430
|
|
|
|
|
|
|
1,325
|
|
|
|
Non-GAAP income before income taxes (2)
|
|
|
$
|
27,145
|
|
|
$
|
0.52
|
|
|
$
|
28,868
|
|
|
$
|
0.57
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended
|
|
|
Six Months Ended
|
|
|
|
June 30, 2014
|
|
|
June 30, 2013
|
|
|
|
Pretax
|
|
|
|
|
|
Pretax
|
|
|
|
|
|
|
Amount (1)
|
|
|
EPS (3)
|
|
|
Amount (1)
|
|
|
EPS (4)
|
GAAP income before income taxes
|
|
|
$
|
34,743
|
|
|
$
|
0.57
|
|
|
$
|
32,406
|
|
|
$
|
0.83
|
Restructuring charges
|
|
|
|
1,257
|
|
|
|
|
|
|
863
|
|
|
|
Stock-based compensation
|
|
|
|
7,714
|
|
|
|
|
|
|
7,518
|
|
|
|
Amortization of acquired intangible assets
|
|
|
|
7,994
|
|
|
|
|
|
|
9,913
|
|
|
|
Amortization of OID
|
|
|
|
2,834
|
|
|
|
|
|
|
2,624
|
|
|
|
Non-GAAP income before income taxes (2)
|
|
|
$
|
54,542
|
|
|
$
|
1.03
|
|
|
$
|
53,324
|
|
|
$
|
1.05
|
(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) 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 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.
(3) For the second quarter and six months ended June 30, 2014, the GAAP
effective income tax rate was 47% and 45%, respectively, the non-GAAP
effective income tax rate was approximately 36% for both periods, and
the outstanding diluted shares were 33.5 million and 33.8 million,
respectively. The difference between the GAAP and the non-GAAP effective
income tax rates relates primarily to the timing of the 2014 R&D tax
credit legislation. The anticipated quarterly benefit of the credits is
included for non-GAAP purposes, but cannot be reflected for GAAP
purposes until the legislation is actually passed.
(4) For the second quarter and six months ended June 30, 2013, the GAAP
effective income tax rate was 36% and 17%, respectively, the non-GAAP
effective income tax rate was approximately 36% for both periods, and
the outstanding diluted shares were 32.4 million and 32.5 million,
respectively. The difference between the GAAP and the non-GAAP effective
income tax rates for the six months ended June 30, 2013 is primarily due
to the recognition of the 2012 R&D tax credits of approximately $6
million, or approximately $0.18 per diluted share, in the first quarter
of 2013. These credits were recognized for GAAP purposes in the first
quarter of 2013 since the credit legislation was passed by Congress in
January 2013. The effective income tax rate for non-GAAP purposes of
approximately 36% for the six months ended June 30, 2013 excludes the
impact of these tax credits, as they were reflected in the 2012 non-GAAP
effective income tax rate.
Non-GAAP Adjusted EBITDA:
CSG's calculation of non-GAAP adjusted EBITDA and the reconciliation of
CSG's non-GAAP adjusted EBITDA measure to net income and cash flows from
operating activities are provided below for the indicated periods (in
thousands, except percentages):
|
|
|
Quarter Ended
|
|
|
Six Months Ended
|
|
|
|
June 30,
|
|
|
June 30,
|
|
|
|
2014
|
|
|
2013
|
|
|
2014
|
|
|
2013
|
GAAP operating income
|
|
|
$
|
21,820
|
|
|
$
|
21,681
|
|
|
$
|
42,734
|
|
|
$
|
39,716
|
Restructuring charges
|
|
|
|
39
|
|
|
|
(38)
|
|
|
|
1,257
|
|
|
|
863
|
Depreciation
|
|
|
|
3,440
|
|
|
|
4,770
|
|
|
|
6,926
|
|
|
|
9,770
|
Amortization of acquired intangible assets (5)
|
|
|
|
4,004
|
|
|
|
4,811
|
|
|
|
7,994
|
|
|
|
9,913
|
Amortization of other intangible assets (5)
|
|
|
|
3,745
|
|
|
|
3,598
|
|
|
|
7,752
|
|
|
|
7,614
|
Stock-based compensation
|
|
|
|
3,931
|
|
|
|
3,908
|
|
|
|
7,714
|
|
|
|
7,518
|
Adjusted EBITDA
|
|
|
$
|
36,979
|
|
|
$
|
38,730
|
|
|
$
|
74,377
|
|
|
$
|
75,394
|
Adjusted EBITDA as a percentage of revenues
|
|
|
|
20%
|
|
|
|
21%
|
|
|
|
20%
|
|
|
|
21%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter Ended
|
|
|
Six Months Ended
|
|
|
|
June 30,
|
|
|
June 30,
|
|
|
|
2014
|
|
|
2013
|
|
|
2014
|
|
|
2013
|
Net income
|
|
|
$
|
9,403
|
|
|
$
|
12,072
|
|
|
$
|
19,094
|
|
|
$
|
26,970
|
Interest expense (6)
|
|
|
|
2,546
|
|
|
|
3,180
|
|
|
|
5,318
|
|
|
|
6,109
|
Amortization of OID
|
|
|
|
1,430
|
|
|
|
1,325
|
|
|
|
2,834
|
|
|
|
2,624
|
Interest and investment income and other, net
|
|
|
|
103
|
|
|
|
(1,686)
|
|
|
|
(161)
|
|
|
|
(1,423)
|
Income tax provision
|
|
|
|
8,338
|
|
|
|
6,790
|
|
|
|
15,649
|
|
|
|
5,436
|
Depreciation
|
|
|
|
3,440
|
|
|
|
4,770
|
|
|
|
6,926
|
|
|
|
9,770
|
Amortization of acquired intangible assets (5)
|
|
|
|
4,004
|
|
|
|
4,811
|
|
|
|
7,994
|
|
|
|
9,913
|
Amortization of other intangible assets (5)
|
|
|
|
3,745
|
|
|
|
3,598
|
|
|
|
7,752
|
|
|
|
7,614
|
Stock-based compensation
|
|
|
|
3,931
|
|
|
|
3,908
|
|
|
|
7,714
|
|
|
|
7,518
|
Restructuring charges
|
|
|
|
39
|
|
|
|
(38)
|
|
|
|
1,257
|
|
|
|
863
|
Adjusted EBITDA
|
|
|
$
|
36,979
|
|
|
$
|
38,730
|
|
|
$
|
74,377
|
|
|
$
|
75,394
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter Ended
|
|
|
Six Months Ended
|
|
|
|
June 30,
|
|
|
June 30,
|
|
|
|
2014
|
|
|
2013
|
|
|
2014
|
|
|
2013
|
Cash flows from operating activities
|
|
|
$
|
24,847
|
|
|
$
|
38,802
|
|
|
$
|
16,269
|
|
|
$
|
61,346
|
Income tax provision
|
|
|
|
8,338
|
|
|
|
6,790
|
|
|
|
15,649
|
|
|
|
5,436
|
Changes in operating assets and liabilities and deferred taxes
|
|
|
|
1,963
|
|
|
|
(7,580)
|
|
|
|
35,752
|
|
|
|
4,749
|
Interest expense (6)
|
|
|
|
2,546
|
|
|
|
3,180
|
|
|
|
5,318
|
|
|
|
6,109
|
Interest and investment income and other, net
|
|
|
|
103
|
|
|
|
(1,686)
|
|
|
|
(161)
|
|
|
|
(1,423)
|
Restructuring charges
|
|
|
|
39
|
|
|
|
(38)
|
|
|
|
1,257
|
|
|
|
(19)
|
Other
|
|
|
|
(857)
|
|
|
|
(738)
|
|
|
|
293
|
|
|
|
(804)
|
Adjusted EBITDA
|
|
|
$
|
36,979
|
|
|
$
|
38,730
|
|
|
$
|
74,377
|
|
|
$
|
75,394
|
(5) Amortization on the statement of cash flows is made up of the
following items for the indicated periods (in thousands):
|
|
|
Quarter Ended
|
|
|
Six Months Ended
|
|
|
|
June 30,
|
|
|
June 30,
|
|
|
|
2014
|
|
|
2013
|
|
|
2014
|
|
|
2013
|
Amortization of acquired intangible assets
|
|
|
$
|
4,004
|
|
|
$
|
4,811
|
|
|
$
|
7,994
|
|
|
$
|
9,913
|
Amortization of other intangible assets
|
|
|
|
3,745
|
|
|
|
3,598
|
|
|
|
7,752
|
|
|
|
7,614
|
Amortization of deferred financing costs
|
|
|
|
585
|
|
|
|
612
|
|
|
|
1,178
|
|
|
|
1,230
|
Total amortization
|
|
|
$
|
8,334
|
|
|
$
|
9,021
|
|
|
$
|
16,924
|
|
|
$
|
18,757
|
(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
|
|
|
Six Months Ended
|
|
|
|
June 30,
|
|
|
June 30,
|
|
|
|
2014
|
|
|
2013
|
|
|
2014
|
|
|
2013
|
Cash flows from operating activities
|
|
|
$
|
24,847
|
|
|
$
|
38,802
|
|
|
$
|
16,269
|
|
|
$
|
61,346
|
Purchases of property and equipment
|
|
|
|
(6,697)
|
|
|
|
(6,633)
|
|
|
|
(11,196)
|
|
|
|
(11,125)
|
Non-GAAP free cash flow
|
|
|
$
|
18,150
|
|
|
$
|
32,169
|
|
|
$
|
5,073
|
|
|
$
|
50,221
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
|
|
11.0%
|
Restructuring charges (7)
|
|
|
1.0%
|
Stock-based compensation (8)
|
|
|
2.5%
|
Amortization of acquired intangible assets (9)
|
|
|
2.0%
|
Non-GAAP operating income margin ("approximately 16.5%")
|
|
|
16.5%
|
(7) This represents the pretax impact of restructuring charges of an
estimated $9 million, primarily related to CSG's restructuring of its
Content Direct management program and incentives in the third quarter of
2014 to align its investment across CSG's offerings, on CSG's operating
income margin as a percentage of the midpoint of 2014 revenue guidance.
(8) This represents the pretax impact of stock-based compensation
expense of an estimated $18 million on CSG's operating income margin as
a percentage of the midpoint of 2014 revenue guidance.
(9) This represents the pretax impact of amortization of acquired
intangible assets expense of an estimated $16 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
|
|
|
|
|
|
Pretax
|
|
|
|
|
|
|
Amount (10)
|
|
|
EPS (12)
|
|
|
Amount (10)
|
|
|
EPS (12)
|
GAAP income before income taxes
|
|
|
$
|
63,000
|
|
|
$
|
1.02
|
|
|
$
|
68,000
|
|
|
$
|
1.12
|
Restructuring charges
|
|
|
|
9,000
|
|
|
|
|
|
|
9,000
|
|
|
|
Stock-based compensation
|
|
|
|
18,000
|
|
|
|
|
|
|
18,000
|
|
|
|
Amortization of acquired intangible assets
|
|
|
|
16,000
|
|
|
|
|
|
|
16,000
|
|
|
|
Amortization of OID
|
|
|
|
6,000
|
|
|
|
|
|
|
6,000
|
|
|
|
Non-GAAP income before income taxes (11)
|
|
|
$
|
112,000
|
|
|
$
|
2.05
|
|
|
$
|
117,000
|
|
|
$
|
2.17
|
(10) These items (on a pretax basis) are calculated in accordance with
GAAP, and will be reflected as part of the results of operations in
CSG's Unaudited Condensed Consolidated Statements of Income.
(11) 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 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.
(12) For 2014, the estimated effective income tax rate for non-GAAP
purposes is expected to be approximately 36%-37%, which assumes Congress
will approve the 2014 R&D income tax credit legislation prior to the end
of 2014. The weighted-average diluted shares outstanding are expected to
be 34.1 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
|
|
|
$
|
81,000
|
Restructuring charges
|
|
|
|
9,000
|
Depreciation
|
|
|
|
16,000
|
Amortization of acquired intangible assets
|
|
|
|
16,000
|
Amortization of other intangible assets
|
|
|
|
15,000
|
Stock-based compensation
|
|
|
|
18,000
|
Non-GAAP Adjusted EBITDA
|
|
|
$
|
155,000
|
Non-GAAP Adjusted EBITDA as a percentage of revenues
|
|
|
|
21%
|
|
|
|
|
|
|
|
|
|
2014
|
Net income
|
|
|
$
|
37,000
|
Interest expense
|
|
|
|
10,000
|
Interest and investment income and other, net
|
|
|
|
(1,000)
|
Amortization of OID
|
|
|
|
6,000
|
Income tax provision
|
|
|
|
29,000
|
Depreciation
|
|
|
|
16,000
|
Amortization of acquired of intangible assets
|
|
|
|
16,000
|
Amortization of other intangible assets
|
|
|
|
15,000
|
Stock-based compensation
|
|
|
|
18,000
|
Restructuring charges
|
|
|
|
9,000
|
Non-GAAP Adjusted EBITDA
|
|
|
$
|
155,000
|
|
|
|
|
|
|
|
|
2014
|
Cash flows from operating activities (midpoint of guidance)
|
|
|
$
|
105,000
|
Income tax provision
|
|
|
|
29,000
|
Interest and investment income and other, net
|
|
|
|
-
|
Changes in operating assets and liabilities and deferred taxes
|
|
|
|
2,000
|
Interest expense
|
|
|
|
10,000
|
Restructuring charges
|
|
|
|
9,000
|
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)
|
|
|
$
|
105,000
|
Purchases of property and equipment
|
|
|
|
(30,000)
|
Non-GAAP free cash flow
|
|
|
$
|
75,000
|
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|