CSG Exceeds Expectations: Revenues of $93.0 Million and GAAP EPS of $0.33
per Share
ENGLEWOOD, Colo., April 25 /PRNewswire-FirstCall/ -- CSG Systems
International, Inc. (Nasdaq: CSGS), a leading provider of customer care and
billing solutions, today reported results for the quarter ended March 31,
2006.
(Logo: http://www.newscom.com/cgi-bin/prnh/20020627/CSGSLOGO)
First Quarter 2006 Highlights:
* GAAP results were as follows: total revenues were $93.0 million;
operating income was $22.2 million; and net income was $15.5 million,
or $0.33 per diluted share, with $0.02 per diluted share of this amount
related to higher interest and investment income in the quarter than
was reflected in the company's guidance.
* Cash flows from operations for the quarter were $22.0 million.
* For the quarter, CSG repurchased approximately 669,000 shares of its
common stock for $15.0 million (weighted-average price of $22.44 per
share) under its stock repurchase program.
* On March 1, 2006, CSG acquired Telution, Inc., a private,
Chicago-based provider of operations support system software, to
extend current and future product offerings.
* After the quarter, Peter Kalan was named Executive Vice President of
Business and Corporate Development and Randy Wiese, a 10-plus year
CSG veteran, was named Chief Financial Officer for the company.
"We continue to execute on our strategy of focusing on our core video
processing business," Ed Nafus, chief executive officer and president of
CSG Systems International, Inc., said. "During the first quarter we
expanded our solution set and our professional services capabilities with
the acquisition of Telution. With this acquisition, we will enable our
clients to more easily bundle and deploy an increasing number of products
and services, including wireless, personalized content and business
services. In addition, we have asked two CSG-veterans to take on different
responsibilities to further enhance our ability to create long-term value
for our shareholders, customers and employees. Peter Kalan, will lead our
Business and Corporate Development Organization, focusing on driving new
revenue growth through a number of avenues, including market share gains,
new partnerships, acquisitions and distribution and sales channels. Randy
Wiese, our Chief Accounting Officer and a 10-plus year veteran of the
company, has been named Executive Vice President and Chief Financial
Officer. These moves reflect our belief that there are additional growth
opportunities where we can take our technology and expertise and leverage
them to create additional value."
Summary GAAP Results of Operations Information (unaudited)
(in thousands, except per share amounts and percentages):
Three Months Ended
March 31,
2006 2005 Percent
Change
Continuing operations:
Total revenues $92,960 $93,176 NC
Operating income 22,201 20,950 6%
Income from continuing operations 15,466 12,402 25%
Discontinued operations, net of tax -- (3,821) NM
Net income 15,466 8,581 80%
Diluted earnings (loss) per share:
Income from continuing operations $0.33 $0.25 32%
Discontinued operations, net of tax -- (0.08) NM
Net income $0.33 $0.17 94%
First Quarter 2006 Results
Total revenues for the first quarter of 2006 were $93.0 million,
relatively consistent when compared to $93.2 million for the same period in
2005, and $93.2 million for the fourth quarter of 2005. The components of
total revenues are as follows: (i) processing revenues for the first
quarter of 2006 were $86.4 million, up four percent when compared to $83.3
million for the same period last year, and down one percent when compared
to $87.1 million for the fourth quarter of 2005; and (ii) software,
maintenance and services revenues were $6.6 million for the current
quarter, a 34 percent decrease when compared to $9.9 million for the same
period last year, and an increase of seven percent when compared to $6.1
million for the fourth quarter of 2005, with the year-over-year decrease
related primarily to several large software transactions in the first
quarter of 2005 for our workforce automation and call center products, with
no comparable amounts in the first quarter of 2006.
Income from continuing operations presented in accordance with
generally accepted accounting principles ("GAAP") for the first quarter of
2006 was $15.5 million, or $0.33 per diluted share, with $0.02 per diluted
share of this amount related to higher than projected investment returns in
the first quarter of 2006. This compares to income from continuing
operations of $12.4 million, or $0.25 per diluted share, for the same
period last year, and $4.3 million, or $0.09 per diluted share, for the
fourth quarter of 2005. The increase in income from continuing operations
for the first quarter of 2006 when compared to the first quarter of 2005 is
due primarily to: (i) the inclusion of $4.2 million, or $0.05 per diluted
share, of retirement benefits for our former CEO in the first quarter of
2005 results of operations, with no comparable amounts in the current
quarter; and (ii) an increase between periods of approximately $4 million,
or approximately $0.05 per diluted share, associated with interest and
investment income. The increase in income from continuing operations
between sequential quarters is due primarily to: (i) the inclusion of $14.5
million of restructuring charges, or $0.20 per dilutive share, in the
fourth quarter of 2005 results of operations, compared to $1.1 million, or
$0.02 per diluted share, for the current quarter; and (ii) an increase in
interest and investment income of $2.8 million between periods, or
approximately $0.04 per diluted share. The year-over-year and sequential
quarterly increases in interest and investment income are primarily a
result of a significant increase in our cash and short-term investment
balances between periods, which is primarily a result of the cash proceeds
received from the sale of the GSS Business in December 2005.
Total domestic customer accounts processed on CSG's systems as of March
31, 2006 were 45.0 million, compared to 45.2 million as of December 31,
2005. To date, over 22 million cable subscribers have migrated to CSG's
Advanced Convergent Platform, or ACP. The annualized revenue per processing
unit ("ARPU") for the first quarter of 2006 was $7.66 compared to $7.72 for
the fourth quarter of 2005. The decrease in ARPU between periods is
primarily the result of the first quarter of 2006 including a full three
months of revised pricing for Echostar, compared to only two months of
revised pricing for the fourth quarter of 2005, as the new contract pricing
for Echostar was effective November 1, 2005.
Supplemental Data
The following information is provided to assist readers in further
evaluating CSG's performance (in thousands, except per share amounts):
Three Months Ended Three Months Ended
March 31, 2006 March 31, 2005
Per Diluted Per Diluted
Share Share
Amount (1) Impact (2) Amount (1) Impact (2)
Certain key operating
income items:
Former CEO retirement
benefits $77 $0.00 $4,221 $0.05
Restructuring charges 1,149 0.02 3 0.00
Total $1,226 $0.02 $4,224 $0.05
Certain non-cash expenses:
Depreciation $2,352 $0.03 $2,591 $0.03
Amortization of
intangible assets 3,735 0.05 3,309 0.04
Stock-based employee
compensation 2,834 0.04 3,251 0.04
Total $8,921 $0.12 $9,151 $0.11
(1) These items (on a pretax basis) are calculated in accordance with
GAAP, and are reflected as part of continuing operations in the
accompanying Unaudited Condensed Consolidated Statements of Income.
(2) This represents the after tax impact to income from continuing
operations on a per diluted share basis using CSG's effective
income tax rates from continuing operations of 38% and 36%,
respectively, for the quarters ended March 31, 2006 and 2005.
Telution Acquisition
On March 1, 2006, CSG acquired Telution, Inc. for $20.5 million in cash
(net of $1.6 million in acquired cash). Telution is a Chicago-based
provider of operations support system technologies that enable
communications companies to bring bundled, advanced services to market
quickly and effectively. CSG acquired Telution and its COMX solution to
expand CSG's ability to support cable and satellite operators as they
deliver advanced and IP-based services, designed to attract and retain
consumers who have begun to expect the availability of video, voice and
data services over nearly any device at the time and location they choose.
As a result of this acquisition, CSG will extend its ability to support its
clients' sales, ordering, partnering and service provisioning processes as
well as delivering enhanced customer care capabilities through all customer
touch points -- the Web, interactive television, field service, statement,
the call center and more. CSG will integrate COMX into the ACP product,
accelerating CSG's product roadmap to quickly enable operators to more
easily bundle and deploy wireless, content, business services and IPTV
offerings. The one-time charges related to this acquisition in the first
quarter of 2006 were not significant.
Financial Condition
As of March 31, 2006, CSG had cash, cash equivalents and short-term
investments of $384.6 million, compared to $392.2 million as of December
31, 2005, with the decrease between periods reflective of the cash paid for
the Telution acquisition in the first quarter of 2006. Net billed accounts
receivable were $109.4 million as of March 31, 2006, compared to $104.8
million as of December 31, 2005. Cash flows from operations for the quarter
ended March 31, 2006 were $22.0 million, compared to $15.7 million for the
quarter ended December 31, 2005, and $18.9 million for the quarter ended
March 31, 2005.
Stock Repurchase Program
During the first quarter of 2006, CSG repurchased approximately 669,000
shares of its common stock at a total purchase price of $15.0 million (a
weighted-average price of $22.44 per share). Including these shares, the
total shares repurchased under CSG's stock repurchase program since its
inception in August 1999 is 13.8 million shares, at a total repurchase
price of $340.6 million (a weighted-average price of $24.68 per share). As
of March 31, 2006, the remaining number of shares authorized for repurchase
under the stock repurchase program is 6.2 million shares.
Executive Management Changes
CSG announced two organizational changes to its executive management
team. Peter Kalan, former Chief Financial Officer, will assume the
responsibility of Executive Vice President of Business and Corporate
Development and Randy Wiese, Chief Accounting Officer, has been named
Executive Vice President and Chief Financial Officer. Between the two CSG
veterans, they have approximately 20 years of financial management of the
company. Kalan will utilize his experience in working with customers, the
sales and product management organizations and the financial community to
identify new avenues to drive revenue growth, leveraging the company's
technology and expertise. Wiese, who has been instrumental in setting up
the processes and infrastructure to support CSG as a public company, will
take on the additional responsibility of Chief Financial Officer in
addition to retaining his role as Chief Accounting Officer.
Second Quarter 2006 and Full-Year 2006 Financial Guidance
"For the second quarter of 2006, we are expecting revenues of between
$91 million and $93 million and GAAP earnings per diluted share of between
30 and 31 cents," Randy Wiese, chief financial officer, said.
"In addition, there are approximately $9.8 million of non-cash items
included in our second quarter earnings per share guidance, or
approximately 13 cents per diluted share," Wiese said. "These non-cash
items include intangible asset amortization of approximately $4.4 million,
depreciation expense of approximately $2.6 million, and stock-based
employee compensation expense of approximately $2.8 million."
Wiese added that for the full-year 2006, revenues are expected to be
between $371 million and $381 million, and GAAP earnings per diluted share
of between $1.28 and $1.35. The revised numbers take into account the
Telution acquisition and the higher than expected interest and investment
income than was originally expected in the company's January guidance.
Conference Call
CSG will host a one-hour conference call on Tuesday, April 25, at 5
p.m. EDT, 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 http://www.csgsystems.com.
Additional Information
For additional information about CSG, please visit CSG's web site at
http://www.csgsystems.com. Additional information can be found in the Investor
Relations section of the web site.
About CSG Systems International
Headquartered in Englewood, Colorado, CSG Systems International
(Nasdaq: CSGS) is a leading provider of outsourced billing, customer care
and print and mail solutions and services supporting the North American
cable and direct broadcast satellite markets. CSG's solutions support some
of the world's largest and most innovative providers of bundled
multi-channel video, Internet, voice and IP-based services. CSG's unique
combination of solutions, services and expertise ensure that cable and
satellite operators can continue to rapidly launch new service offerings,
improve operational efficiencies and deliver a high-quality customer
experience in a competitive and ever-changing marketplace. CSG is a S&P
Midcap 400 company. For more information, visit our website at
http://www.csgsystems.com.
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. These factors include, but are not limited to: 1) CSG's
ability to continue to perform satisfactorily and maintain good customer
relations with its five largest clients, Comcast Corporation, Echostar
Communications, Time Warner, Inc., Charter Communications and Adelphia
Communications, which combined make up approximately 70% of CSG's revenues;
2) the continued acceptance of CSG Advanced Convergent Platform and its
related products and services; 3) CSG's ability to enhance current products
and develop new technology that will retain existing clients and capture
new market share; 4) significant forays into new markets, which may prove
costly and unprofitable; 5) the degree to which CSG's expectations of
market penetration and consumer acceptance of advanced IP services prove
true -- and even if realized, CSG's ability to meet the billing and
customer care needs of those markets; 6) client consolidation, which has
decreased the number of potential buyers for many of CSG's products and
services; 7) CSG's ability to renew contracts and sell additional products
and services to existing and new clients; 8) CSG's ability to successfully
deliver on lengthy and/or complex implementation projects, which by their
nature, carry much more risk, and 9) CSG's ability to successfully
integrate and manage acquired businesses or assets in order to achieve the
expected strategic, operating and financial goals established for such
acquisitions. 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, December 31,
2006 2005
ASSETS
Current assets:
Cash and cash equivalents $353,482 $346,113
Short-term investments 31,150 46,111
Total cash, cash equivalents and
short-term investments 384,632 392,224
Trade accounts receivable -
Billed, net of allowance
of $1,008 and $1,324 109,407 104,812
Unbilled and other 6,134 6,660
Deferred income taxes 10,508 9,565
Income taxes receivable -- 5,032
Other current assets 6,749 17,145
Total current assets 517,430 535,438
Property and equipment, net of
depreciation of $63,580 and $61,333 21,307 21,143
Software, net of amortization of $104 and zero 8,602 --
Goodwill 10,460 623
Client contracts, net of amortization
of $72,113 and $68,634 39,009 41,661
Deferred income taxes 30,091 33,275
Other assets 5,929 6,236
Total assets $632,828 $638,376
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Client deposits $24,076 $19,651
Trade accounts payable 12,404 17,306
Accrued employee compensation 19,406 32,447
Deferred revenue 13,938 9,575
Income taxes payable 1,698 --
Other current liabilities 15,214 15,783
Total current liabilities 86,736 94,762
Non-current liabilities:
Long-term debt 230,000 230,000
Deferred revenue 8,938 8,943
Other non-current liabilities 3,149 6,341
Total non-current liabilities 242,087 245,284
Total liabilities 328,823 340,046
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;
47,953,157 shares and 47,886,480 shares
outstanding 609 601
Additional paid-in capital 322,008 316,764
Treasury stock, at cost, 12,958,985 shares
and 12,290,485 shares (311,976) (296,976)
Accumulated other comprehensive income:
Unrealized gain on short-term investments,
net of tax 28 71
Accumulated earnings 293,336 277,870
Total stockholders' equity 304,005 298,330
Total liabilities and stockholders' equity $632,828 $638,376
CSG SYSTEMS INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME - UNAUDITED
(in thousands, except per share amounts)
Three Months Ended
March 31, March 31,
2006 2005
Revenues:
Processing and related services $86,421 $83,281
Software, maintenance and services 6,539 9,895
Total revenues 92,960 93,176
Cost of revenues:
Processing and related services 42,904 41,983
Software, maintenance and services 4,516 5,043
Total cost of revenues 47,420 47,026
Gross margin (exclusive of depreciation) 45,540 46,150
Operating expenses:
Research and development 9,901 7,999
Selling, general and administrative 9,937 14,607
Depreciation 2,352 2,591
Restructuring charges 1,149 3
Total operating expenses 23,339 25,200
Operating income 22,201 20,950
Other income (expense):
Interest expense (1,885) (2,120)
Interest and investment income, net 4,670 549
Other, net (55) (2)
Total other 2,730 (1,573)
Income from continuing operations
before income taxes 24,931 19,377
Income tax provision (9,465) (6,975)
Income from continuing operations 15,466 12,402
Discontinued operations:
Loss from discontinued operations -- (5,311)
Income tax benefit -- 1,490
Discontinued operations, net of tax -- (3,821)
Net income $15,466 $8,581
Basic earnings (loss) per common share:
Income from continuing operations $0.33 $0.25
Discontinued operations, net of tax -- (0.08)
Net income $0.33 $0.17
Diluted earnings (loss) per common share:
Income from continuing operations $0.33 $0.25
Discontinued operations, net of tax -- (0.08)
Net income $0.33 $0.17
Weighted-average common shares outstanding:
Basic 46,901 49,045
Diluted 47,409 49,584
CSG SYSTEMS INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - UNAUDITED
(in thousands)
Three Months Ended
March 31, March 31,
2006 2005
Cash flows from operating activities:
Net income $15,466 $8,581
Adjustments to reconcile net income to
net cash provided by operating activities -
Depreciation 2,352 3,767
Amortization 4,031 7,143
Restructuring charge for abandonment of
facilities and impairment of assets 107 --
Gain on short-term investments (65) (84)
Deferred income taxes 2,088 1,004
Excess tax benefits from stock-based
compensation awards (941) 399
Stock-based employee compensation 2,834 4,337
Changes in operating assets and liabilities:
Trade accounts and other receivables, net (2,285) (2,203)
Other current and non-current assets (649) (1,457)
Income taxes payable/receivable 7,668 4,808
Accounts payable and accrued liabilities (12,051) (6,274)
Deferred revenue 3,423 (1,156)
Net cash provided by operating activities 21,978 18,865
Cash flows from investing activities:
Net proceeds (payments) from the disposition
of discontinued operations (209) --
Purchases of property and equipment (1,974) (3,874)
Proceeds from sale of aircraft held for sale 7,376 --
Purchases of short-term investments (39,650) (18,088)
Proceeds from sale/maturity of
short-term investments 54,650 6,900
Acquisition of business, net of cash acquired (20,478) (82)
Acquisition of and investments in
client contracts (1,552) (1,926)
Net cash used in investing activities (1,837) (17,070)
Cash flows from financing activities:
Proceeds from issuance of common stock 2,676 706
Repurchase of common stock (16,199) (23,807)
Payments on acquired equipment financing (190) --
Excess tax benefits from stock-based
compensation awards 941 --
Payments of deferred financing costs -- (35)
Net cash used in financing activities (12,772) (23,136)
Effect of exchange rate fluctuations on cash -- (590)
Net increase (decrease) in
cash and cash equivalents 7,369 (21,931)
Cash and cash equivalents, beginning of period 346,113 133,551
Cash and cash equivalents, end of period $353,482 $111,620
Supplemental disclosures of
cash flow information:
Cash paid (received) during the period for -
Interest $97 $111
Income taxes 10 (672)
SOURCE CSG Systems International, Inc.
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Related links:
http://www.csgsystems.com
Photo Notes:
NewsCom: http://www.newscom.com/cgi-bin/prnh/20020627/CSGSLOGO
AP Archive: http://photoarchive.ap.org
PRN Photo Desk, photodesk@prnewswire.com
CONTACT:
Liz Bauer, Senior Vice President of CSG
Systems International, Inc., +1-303-804-4065,
liz_bauer@csgsystems.com
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