Revenues of $136.9 Million;
GAAP Net Income of $0.17 Per Diluted Share
ENGLEWOOD, Colo., April 26 /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,
2005.
(Logo: http://www.newscom.com/cgi-bin/prnh/20020627/CSGSLOGO)
First Quarter 2005 Highlights:
* GAAP results were as follows: total revenues were $136.9 million;
operating income was $15.2 million; and net income was $8.6 million,
or $0.17 per diluted share. Net income was reduced by approximately
$4.2 million, or $0.05 per diluted share, for the accrual of benefits
related to Neal Hansen's upcoming retirement, and approximately
$0.7 million, or $0.01 per diluted share, for restructuring charges.
* Cash flows from operations for the quarter ended March 31, 2005 were
$18.9 million, which were negatively impacted by approximately
$9 million due to a key client delaying payment of an invoice until
after quarterend.
* For the quarter, CSG repurchased 1,285,000 shares of its common stock
for approximately $23 million (weighted-average price of $17.88 per
share) under its stock repurchase program.
* During the quarter, CSG completed the reorganization of its executive
management team, which included naming Ed Nafus as CEO effective
April 1, 2005.
* The Broadband Division experienced strong sales of its ancillary
products, including its workforce automation and call center
solutions. The GSS Division saw strong upgrades to the Kenan FX
platform, with 10 providers, including one new client, signing up for
the next generation solution.
"I'm pleased with our performance this quarter, from both a revenue and an
expense standpoint," said Ed Nafus, chief executive officer of CSG Systems
International, Inc. "Communications providers are turning to us for our
industry-leading solutions and our operational expertise to help them roll out
new products like digital telephony, improve their customers' experiences and
maximize their operations. As a result, we are in a strong position to help
our clients be successful and grow with them."
Summary Results of Operations Information (unaudited)
(in thousands, except per share amounts):
Three Months Ended March 31,
2005 2004 Percent
Change
Total revenues, net $136,906 $130,364 5%
Operating income 15,237 21,284 (28%)
Net income 8,581 10,833 (21%)
Net income per diluted share 0.17 0.21 (19%)
Certain non-cash expenses (1):
Depreciation 3,767 3,636 4%
Amortization 7,143 6,321 13%
Stock-based employee compensation 4,337 4,145 5%
Total $15,247 $14,102 8%
(1) These items are calculated in accordance with GAAP, and are
reflected in the accompanying Condensed Consolidated Statements of
Income and Cash Flows.
First Quarter 2005 Results
Processing revenues for the first quarter of 2005 were $83.4 million, up
three percent when compared to $81.1 million for the same period last year,
and relatively flat when compared to $84.3 million for the fourth quarter of
2004. Software revenues were $11.1 million for the current quarter, a
45 percent year-over-year increase, and a 17 percent increase from
$9.5 million for the fourth quarter of 2004. Maintenance revenues remained
relatively consistent for the first quarter of 2005 at $24.5 million, compared
to $25.1 million for the same period last year and $24.3 million for the
fourth quarter of 2004. Professional services revenues increased eight
percent year-over-year to $17.9 million, however, decreased three percent when
compared to $18.5 million for the fourth quarter of 2004.
Net income presented under generally accepted accounting principles
("GAAP") for the first quarter of 2005 was $8.6 million, or $0.17 per diluted
share. Net income was reduced by approximately $4.2 million, or $0.05 per
diluted share, for the accrual of benefits related to Neal Hansen's upcoming
retirement, and approximately $0.7 million, or $0.01 per diluted share, for
restructuring charges. GAAP net income for the first quarter of 2004 was
$10.8 million, or $0.21 per diluted share. The first quarter 2004 results
were reduced by restructuring charges of approximately $2.2 million, or
$0.02 per diluted share.
Divisional Results
CSG is organized into two operating segments: the Broadband Division and
the GSS Division. CSG excludes restructuring charges in the determination of
its GAAP segment results.
During the quarter, CSG reorganized certain components of its operating
segments. The reorganization consisted primarily of moving CSG's plaNet
Consulting division (which includes the ICMS assets acquired from IBM in 2002)
from the GSS Division to the Broadband Division. The results of operations
reflecting this reorganization for the two divisions are shown below (in
thousands, except percentages). Segment financial information for 2004 has
been restated, as required by GAAP, in order to conform to the new reporting
structure:
Three Months Ended March 31, 2005
Broadband GSS
Division Division Corporate Total
Processing revenues $83,366 $-- $-- $83,366
Software revenues 4,579 6,523 -- 11,102
Maintenance revenues 6,411 18,135 -- 24,546
Professional services
revenues 4,263 13,629 -- 17,892
Total revenues 98,619 38,287 -- 136,906
Segment operating
expenses (2) 65,028 35,951 19,975 120,954
Contribution margin
(loss) (2) $33,591 $2,336 $(19,975) $15,952
Contribution margin
percentage 34.1% 6.1% N/A 11.7%
Three Months Ended March 31, 2004
Broadband GSS
Division Division Corporate Total
Processing revenues $81,132 $-- $-- $81,132
Software revenues 950 6,687 -- 7,637
Maintenance revenues 6,891 18,160 -- 25,051
Professional services
revenues 3,016 13,528 -- 16,544
Total revenues 91,989 38,375 -- 130,364
Segment operating
expenses (2) 57,156 34,450 15,323 106,929
Contribution margin
(loss) (2) $34,833 $3,925 $ (15,323) $23,435
Contribution margin
percentage 37.9% 10.2% N/A 18.0%
(2) CSG's segment operating expenses and contribution margin (loss),
determined in accordance with GAAP, exclude restructuring charges of
$0.7 million and $2.2 million, respectively, for the three months
ended March 31, 2005 and 2004.
For the first quarter of 2005, the reorganization mentioned above resulted
in approximately $6.6 million of revenue and $9.2 million of segment operating
expenses moving from the GSS Division to the Broadband Division. For the
first quarter of 2004, this reorganization resulted in approximately
$5.4 million of revenue and $8.1 million of segment operating expenses moving
from the GSS Division to the Broadband Division.
Broadband Division
Total domestic customer accounts processed on CSG's system as of March 31,
2005 were 43.9 million, compared to 43.5 million as of December 31, 2004. The
annualized revenue per processing unit for the first quarter of 2005 was
$7.63 compared to annualized revenue per processing unit of $7.67 for the
fourth quarter of 2004.
By the end of the first quarter, we successfully migrated over 25 percent
of the customer accounts processed on our system to CSG's next generation
solution, Advanced Convergent Platform (ACP). In addition, demand for
solutions that automate many of the customer experiences continued, with
increased sales of the workforce automation and call center applications.
GSS Division
During the quarter, the GSS Division continued to be contribution margin
positive. This quarter was exceptionally strong relative to the number of
providers signing up for the next generation solution, Kenan FX. Ten
providers, including one new client, signed up for Kenan FX.
Management Reorganization
Effective April 1, 2005, Ed Nafus, former president of the Broadband
Division, assumed the position of CSG's Chief Executive Officer and President.
Neal Hansen will continue in his role as Chairman of the Board through
June 30, 2005, and then remain on the board through his term, which ends in
2006. During the quarter, Hank Bonde was appointed President of the GSS
Division and Mike Scott was appointed Executive Vice President and General
Manager of the Broadband Division.
Financial Condition
As of March 31, 2005, CSG had cash and short-term investments of
$146.8 million, compared to $157.5 million as of December 31, 2004. Net
billed accounts receivable were $143.3 million as of March 31, 2005, compared
to $142.1 million as of December 31, 2004.
Cash flows from operations for the quarter ended March 31, 2005 were
$18.9 million, compared to $32.0 million for the same period in 2004, a
decrease of $13.1 million. Cash flows from operations for the first quarter
of 2005 were negatively impacted by approximately $9 million due to a domestic
client delaying payment of an invoice until after quarterend. This amount was
subsequently paid in April 2005. Cash flows from operations for the first
quarter of 2004 reflect approximately $10 million of favorable changes in
working capital related to the Comcast arbitration.
Stock Repurchase Program
During the first quarter of 2005, CSG repurchased 1,285,000 shares of its
common stock at a total purchase price of $23.0 million (a weighted-average
price of $17.88 per share). Including these shares, the total shares
repurchased under CSG's stock repurchase program since its inception in August
1999 is 10.6 million shares, at a total repurchase price of $275.6 million (a
weighted-average price of $25.98 per share.) As of March 31, 2005, the
remaining number of shares authorized for repurchase under the program is
4.4 million shares.
Second Quarter 2005 Financial Guidance
"For the second quarter of 2005, we are expecting revenues of between
$132 million and $139 million and GAAP earnings per diluted share of between
9 and 15 cents," Peter Kalan, chief financial officer, said. "Our second
quarter earnings per share guidance is negatively impacted by 5 cents per
diluted share related to the remaining accrual of retirement benefits for Mr.
Hansen, and 5 cents per diluted share related to expected restructuring
charges associated with a known facilities abandonment.
"In addition, there are over $15 million of non-cash items included in our
second quarter earnings per share guidance, or approximately 19 cents per
diluted share," Kalan said. "These non-cash items include amortization of
approximately $7 million, depreciation expense of approximately $4 million,
and stock-based employee compensation expense of approximately $4 million."
Conference Call
CSG will host a one-hour conference call on Tuesday, April 26, 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 leader in next-generation billing and customer care
solutions for the cable television, direct broadcast satellite, advanced IP
services, next generation mobile, and fixed wireline markets. CSG's unique
combination of proven and future-ready solutions, delivered in both outsourced
and licensed formats, empowers its clients to deliver unparalleled customer
service, improve operational efficiencies and rapidly bring new revenue-
generating products to market. CSG is an S&P Midcap 400 company. For more
information, visit CSG's Web site 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 two largest customers, Comcast Corporation and Echostar Communications,
which combined represent approximately one-third of CSG's revenue; 2) the
continued acceptance of CSG ACP, CSG Kenan FX and their 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 broadband, wireline and wireless 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 expand and effectively operate its business internationally, which
is much more complex and carries a higher collections and currency risk;
8) CSG's ability to renew software maintenance contracts and sell additional
software products and services to existing and new clients, both domestically
and internationally; and 9) CSG's ability to successfully deliver on lengthy
and/or complex implementation projects, which by their nature, carry much more
risk. 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,
2005 2004
ASSETS
Current assets:
Cash and cash equivalents $111,620 $133,551
Short-term investments 35,191 23,927
Total cash, cash equivalents and
short-term investments 146,811 157,478
Trade accounts receivable-
Billed, net of allowance of
$4,690 and $4,818 143,337 142,056
Unbilled and other 13,847 14,030
Deferred income taxes 7,238 5,336
Income taxes receivable 32 4,064
Other current assets 12,914 11,723
Total current assets 324,179 334,687
Property and equipment, net of
depreciation of $90,436 and $87,068 34,425 34,476
Software, net of amortization of
$80,607 and $77,086 21,152 24,695
Goodwill 218,139 218,346
Client contracts, net of amortization
of $66,073 and $62,898 49,276 50,197
Deferred income taxes 36,498 39,478
Other assets 8,144 8,528
Total assets $691,813 $710,407
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Client deposits $19,427 $19,497
Trade accounts payable 20,308 22,412
Accrued employee compensation 26,793 31,859
Deferred revenue 50,515 53,250
Income taxes payable 15,678 15,085
Other current liabilities 21,365 19,909
Total current liabilities 154,086 162,012
Non-current liabilities:
Long-term debt 230,000 230,000
Deferred revenue 7,649 6,844
Other non-current liabilities 2,621 3,481
Total non-current liabilities 240,270 240,325
Total liabilities 394,356 402,337
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;
50,425,744 shares and 51,016,326
shares outstanding 602 595
Additional paid-in capital 302,433 298,767
Deferred employee compensation (385) (1,320)
Treasury stock, at cost, 9,767,496 shares
and 8,482,496 shares (246,981) (224,008)
Accumulated other comprehensive
income (loss):
Unrealized loss on short-term
investments, net of tax (13) (5)
Cumulative translation adjustments 8,579 9,400
Accumulated earnings 233,222 224,641
Total stockholders' equity 297,457 308,070
Total liabilities and stockholders'
equity $691,813 $710,407
CSG SYSTEMS INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME-UNAUDITED
(in thousands, except per share amounts)
Three Months Ended
March 31, March 31,
2005 2004
Revenues:
Processing and related services $83,366 $81,132
Software 11,102 7,637
Maintenance 24,546 25,051
Professional services 17,892 16,544
Total revenues 136,906 130,364
Cost of revenues:
Cost of processing and related services 42,458 33,806
Cost of software and maintenance 15,605 16,274
Cost of professional services 15,437 14,150
Total cost of revenues 73,500 64,230
Gross margin (exclusive of depreciation) 63,406 66,134
Operating expenses:
Research and development 15,449 15,840
Selling, general and administrative 28,238 23,223
Depreciation 3,767 3,636
Restructuring charges 715 2,151
Total operating expenses 48,169 44,850
Operating income 15,237 21,284
Other income (expense):
Interest expense (1,915) (3,554)
Interest and investment income, net 969 283
Other, net (224) (513)
Total other (1,170) (3,784)
Income before income taxes 14,067 17,500
Income tax provision (5,486) (6,667)
Net income $8,581 $10,833
Basic net income per common share:
Net income available to common stockholders $0.17 $0.21
Weighted average common shares 49,045 51,682
Diluted net income per common share:
Net income available to common stockholders $0.17 $0.21
Weighted average common shares 49,584 52,255
CSG SYSTEMS INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS-UNAUDITED
(in thousands)
Three Months Ended
March 31, March 31,
2005 2004
Cash flows from operating activities:
Net income $8,581 $10,833
Adjustments to reconcile net income to
net cash provided by operating activities -
Depreciation 3,767 3,636
Amortization 7,143 6,321
Restructuring charge for abandonment
of facilities -- 595
Gain on short-term investments (84) --
Deferred income taxes 1,004 4,162
Tax benefit of stock-based compensation
awards 399 7
Stock-based employee compensation 4,337 4,145
Changes in operating assets and
liabilities:
Trade accounts and other receivables,
net (2,203) (2,079)
Other current and non-current assets (1,457) 1,344
Arbitration charge payable -- (25,181)
Income taxes payable/receivable 4,808 35,192
Accounts payable and accrued
liabilities (6,274) (11,515)
Deferred revenue (1,156) 4,505
Net cash provided by operating
activities 18,865 31,965
Cash flows from investing activities:
Purchases of property and equipment (3,874) (1,406)
Purchases of short-term investments (18,088) (3,716)
Proceeds from sale of short-term
investments 6,900 1,900
Acquisition of and investments in assets (82) (307)
Acquisition of and investments in client
contracts (1,926) (431)
Net cash used in investing activities (17,070) (3,960)
Cash flows from financing activities:
Proceeds from issuance of common stock 706 357
Repurchase of common stock (23,807) (213)
Payments on long-term debt -- (30,000)
Payments of deferred financing costs (35) (247)
Net cash used in financing activities (23,136) (30,103)
Effect of exchange rate fluctuations on cash (590) 621
Net decrease in cash and cash equivalents (21,931) (1,477)
Cash and cash equivalents, beginning of
period 133,551 100,397
Cash and cash equivalents, end of period $111,620 $98,920
Supplemental disclosures of cash flow
information:
Cash paid (received) during the period for -
Interest $111 $3,376
Income taxes (672) (34,114)
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
Company News On-Call:
http://www.prnewswire.com/comp/126879.html
CONTACT:
Liz Bauer, Senior Vice President of CSG
Systems International, Inc., +1-303-804-4065,
liz_bauer@csgsystems.com
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