Revenues of $130.4 Million; GAAP Net Income of $0.21 Per Diluted Share
ENGLEWOOD, Colo., April 27 /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,
2004.
(Logo: http://www.newscom.com/cgi-bin/prnh/20020627/CSGSLOGO)
First Quarter 2004 Highlights:
* GAAP results were as follows: total revenues were $130.4 million;
operating income was $21.3 million; and net income per diluted share
was $0.21.
* Cash flows from operations for the quarter ended March 31, 2004 were
$32.0 million, which reflects the impact of the $25.2 million
arbitration payment made to Comcast and the receipt of income tax
refunds of approximately $34 million, both of which occurred during
the quarter (see CSG's Form 10-K dated March 14, 2004 for additional
discussion of the arbitration ruling and income tax refunds).
* CSG's Broadband Services Division (BSD) signed a new five-year
contract with Comcast Corporation; extended its contract with Echostar
Communications, its second largest customer; signed a five-year
statement processing agreement with Cox Communications; and after
quarter end signed a new five-year agreement with Adelphia
Communications, which includes services related to Adelphia's delivery
of Voice over IP services.
* CSG's Global Software Services Division (GSS) signed a number of
contracts during the quarter including several new customer wins in
the EMEA and North American regions and expanded relationships with
several customers including British Telecommunications, Beijing
Telecom, BSNL, Level 3, Embratel and CANTV.
* Interest in CSG's newly introduced Kenan FX business framework
continued with eight additional carriers choosing to upgrade or
implement the solution. This brings the total Kenan FX customers
to 14.
"We are starting to see signs of an improving environment, which I believe
is evident in this quarter's performance," said Neal Hansen, chairman and
chief executive officer of CSG Systems International, Inc. "Our Kenan FX
suite is being extremely well-received by the market; we solidified our
relationships with Comcast and Echostar, our two largest clients; and our
customers continued to turn to us to help them grow their revenues and run
their operations more efficiently."
Summary Results of Operations Information (unaudited)
(in thousands, except per share amounts and percentages):
Three Months Ended
March 31,
2004 2003 (2) Percent Change
Total revenues $130,364 $141,932 (8%)
Operating income 21,284 17,856 19%
Net income 10,833 8,707 24%
Net income per diluted share 0.21 0.17 24%
Certain non-cash
expenses (1):
Depreciation 3,636 4,599 (21%)
Amortization 6,321 6,591 (4%)
Stock-based employee
compensation 4,145 1,295 220%
Total $14,102 $12,485 13%
(1) These items are calculated in accordance with GAAP, and are
reflected in the accompanying Condensed Consolidated Statements of
Income and Cash Flows.
(2) During the fourth quarter of 2003, CSG adopted the fair value method
of accounting for stock-based awards in accordance with
SFAS No. 123, "Accounting for Stock-Based Compensation", using the
prospective method of transition. The adoption of SFAS No. 123 was
effective as of January 1, 2003. As a result, CSG has restated its
consolidated financial statements for the first quarter of 2003 to
reflect the inclusion of additional stock-based employee
compensation expense of approximately $0.1 million.
First Quarter 2004 Results
Processing revenues for the first quarter of 2004 were $81.1 million,
compared to $91.2 million for the same period last year and $80.8 million for
the fourth quarter of 2003. The year-over-year quarterly reduction relates
primarily to the lower revenues from Comcast as a result of the October 2003
arbitration ruling.
Software revenues decreased 25 percent year-over-year to $7.6 million and
decreased 10 percent from the fourth quarter of 2003. Maintenance revenues
generated $25.1 million of revenue in the quarter, a 12 percent increase when
compared to the same period last year and a two percent increase when compared
to the fourth quarter of 2003. Compared to the first quarter of last year,
professional services decreased nine percent to $16.5 million, however,
increased four percent compared to the fourth quarter of 2003.
Net income presented under generally accepted accounting principles
("GAAP") for the first quarter of 2004 was $10.8 million, or $0.21 per diluted
share. The first quarter results for 2004 were reduced by restructuring
charges of approximately $2.2 million, or $0.02 per diluted share. GAAP net
income for the first quarter of 2003 was $8.7 million, or $0.17 per diluted
share. The first quarter 2003 results were reduced by approximately
$3.2 million, or $0.04 per diluted share, due to restructuring charges. The
increase in net income between the first quarter of 2004 and 2003 is primarily
due to lower operating expenses resulting primarily from various cost
reduction initiatives implemented by CSG.
Divisional Results
CSG is organized into two divisions: the Broadband Services Division and
the Global Software Services Division. CSG excludes its restructuring charges
in the determination of its GAAP segment results. The results of operations
for the divisions were as follows (in thousands, except percentages):
Three Months Ended March 31, 2004
Broadband
Services GSS
Division Division Corporate Total
Processing revenues $80,444 $688 $-- $81,132
Software revenues 888 6,749 -- 7,637
Maintenance revenues 5,127 19,924 -- 25,051
Professional services
revenues 144 16,400 -- 16,544
Total revenues 86,603 43,761 -- 130,364
Segment operating
expenses (3) 49,255 42,569 15,105 106,929
Contribution margin
(loss) (3) $37,348 $1,192 $(15,105) $23,435
Contribution margin
(loss) percentage 43.1% 2.7% N/A 18.0%
Three Months Ended March 31, 2003 (4)
Broadband
Services GSS
Division Division Corporate Total
Processing revenues $90,449 $727 $-- $91,176
Software revenues 1,669 8,495 -- 10,164
Maintenance revenues 5,029 17,374 -- 22,403
Professional services
revenues 370 17,819 -- 18,189
Total revenues 97,517 44,415 -- 141,932
Segment operating
expenses (3) 51,635 51,322 17,960 120,917
Contribution margin
(loss) (3) $45,882 $(6,907) $(17,960) $21,015
Contribution margin
(loss) percentage 47.1% (15.6%) N/A 14.8%
(3) CSG's segment operating expenses and contribution margin (loss),
determined in accordance with GAAP, exclude restructuring charges of
$2.2 million and $3.2 million, respectively, for the three months
ended March 31, 2004 and 2003.
(4) The respective segment results have been restated for the first
quarter of 2003 to reflect the inclusion of additional stock-based
compensation expense of approximately $0.1 million as a result of
CSG's adoption of SFAS No. 123, as discussed above.
Broadband Services Division
Total domestic customer accounts processed on CSG's system as of March 31,
2004 were 43.5 million compared to 44.1 million as of December 31, 2003, a
one percent decrease. During the quarter, certain contracts were renewed in
which the definition of subscriber billing units were modified, having the
effect of lowering the subscriber volume counts processed. The annualized
revenue per processing unit for the first quarter of 2004 was $7.38 compared
to an annualized revenue per processing unit of $7.33 for the fourth quarter
of 2003.
In addition, this quarter BSD extended its contract with Echostar
Communications; signed a new contract with Comcast which includes financial
minimums; signed a five-year statement processing contract with Cox
Communications for its entire customer base; and signed a new five-year
agreement with Adelphia that includes services related to Adelphia's delivery
of Voice over IP services.
Global Software Services Division
The GSS Division signed several new customers in the quarter, including
several new customers in Europe and North America.
One of the new customers, a large mobile operator, serving approximately
12 million consumers, will use the CSG Total Care solution to provide the
customer self-care component of their new customer management platform. The
solution will enable the service provider to maintain a holistic view of its
entire subscriber base, resulting in better service and updated customer
information system-wide in real-time. In addition, eight service providers,
including two new customers, have signed up for the new Kenan FX framework,
bringing the total number of FX customers to 14.
CSG also expanded its relationship with a number of customers this quarter
including British Telecommunications, Britain's largest telecommunications
provider; Beijing Telcom, a wholly-owned subsidiary of China Telecom; BSNL,
India's leading wireless provider; Embratel, one of Brazil's largest
telecommunications providers; CANTV, one of Venezuela's largest
telecommunications providers; and Level 3, an international communications and
information services company.
Financial Condition
As of March 31, 2004, CSG had cash and short-term investments of
$105.7 million, compared to $105.4 million, as of December 31, 2003. Billed
net accounts receivable were $137.6 million as of March 31, 2004, compared to
$130.7 million as of December 31, 2003.
In March 2004, CSG made the $30 million mandatory payment required as part
of its amended credit agreement, using the proceeds from the income tax
refunds received in the first quarter. CSG's scheduled principal payments
within the next 12 months are $19.6 million, with the next payment due on
June 30, 2004 in the amount of $1.9 million.
Cash flows from operations for the quarter ended March 31, 2004 were
$32.0 million, compared to $22.2 million for the same period in 2003, an
increase of $9.8 million. Cash flows from operations for the first quarter
of 2004 reflects the impact of the $25.2 million arbitration payment made to
Comcast during the first quarter of 2004 and the receipt of the income tax
refunds of approximately $34 million. Absent the impact of these items, cash
flows from operations were relatively consistent between periods.
During the first quarter of 2004, CSG did not acquire any of its
outstanding common stock under its authorized stock repurchase program.
Second Quarter and Full Year 2004 Financial Guidance
"Our financial guidance for the second quarter is reflective of the
increased activity that we are seeing in the marketplace," Peter Kalan, chief
financial officer, said. "For the second quarter, we are expecting revenues
of between $127 million and $134 million and earnings per diluted share of
between 20 and 25 cents.
"Based on our tight cost controls, we are raising guidance for 2004
earnings per diluted share, while maintaining our previous revenue guidance.
In 2004, we are expecting revenues of between $515 million and $530 million,"
Kalan added. "In addition, we are increasing our earnings per diluted share
guidance to 88 cents and 96 cents.
"In addition, there are a number of non-cash items included in our
earnings per share guidance," Kalan said. "These non-cash items include
amortization of approximately $28 million or 33 cents per diluted share,
depreciation expense of approximately $16 million or 19 cents per diluted
share, and stock-based employee compensation expense of approximately
$15 million or 18 cents per diluted share. Our guidance does not include any
restructuring charges that may be incurred beyond the first quarter of 2004 as
we are not able to estimate them today."
Conference Call
CSG will host a one-hour conference call on Tuesday, April 27, 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 our 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 and Echostar Communications, which combined
represent approximately 30 percent of the Company's revenue; 2) the continued
acceptance of CSG CCS/BP, 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 that market; 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 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; 9) CSG's ability to successfully deliver on lengthy and/or
complex implementation projects, which by their nature, carry much more risk;
and 10) CSG's ability to realize the expected savings from its cost reductions
programs, while simultaneously not jeopardizing its revenue opportunities.
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,
2004 2003
ASSETS
Current assets:
Cash and cash equivalents $104,520 $105,397
Short-term investments 1,216 --
Total cash, cash equivalents and
short-term investments 105,736 105,397
Trade accounts receivable-
Billed, net of allowance of
$11,397 and $11,145 137,631 130,691
Unbilled and other 14,409 18,042
Deferred income taxes 7,673 9,134
Income taxes receivable 4,353 35,076
Other current assets 10,357 11,697
Total current assets 280,159 310,037
Property and equipment, net of
depreciation of $91,712 and $89,529 36,051 38,218
Software, net of amortization of
$66,487 and $62,957 34,527 37,780
Goodwill 219,404 219,199
Client contracts, net of amortization
of $53,205 and $50,973 55,363 57,458
Deferred income taxes 50,674 53,327
Other assets 8,770 8,756
Total assets $684,948 $724,775
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt $19,624 $45,137
Client deposits 18,963 17,175
Trade accounts payable 20,850 21,291
Accrued employee compensation 23,807 32,415
Deferred revenue 57,510 52,655
Income taxes payable 25,388 20,723
Arbitration charge payable -- 25,181
Other current liabilities 23,413 25,818
Total current liabilities 189,555 240,395
Non-current liabilities:
Long-term debt, net of current maturities 179,301 183,788
Deferred revenue 3,756 3,270
Other non-current liabilities 5,415 6,537
Total non-current liabilities 188,472 193,595
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;
53,779,261 shares and
53,788,062 shares outstanding 593 593
Additional paid-in capital 285,519 281,784
Deferred employee compensation (3,891) (4,458)
Accumulated other comprehensive income:
Unrealized gain on short-term
investments, net of tax 1 1
Cumulative translation adjustments 7,520 6,519
Treasury stock, at cost, 5,499,796 shares (171,111) (171,111)
Accumulated earnings 188,290 177,457
Total stockholders' equity 306,921 290,785
Total liabilities and stockholders' equity $684,948 $724,775
CSG SYSTEMS INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME -- UNAUDITED
(in thousands, except per share amounts)
Three Months Ended
March 31, March 31,
2004 2003
Revenues:
Processing and related services $81,132 $91,176
Software 7,637 10,164
Maintenance 25,051 22,403
Professional services 16,544 18,189
Total revenues 130,364 141,932
Cost of revenues:
Cost of processing and related services 33,806 34,119
Cost of software and maintenance 16,274 18,310
Cost of professional services 14,150 18,555
Total cost of revenues 64,230 70,984
Gross margin (exclusive of depreciation) 66,134 70,948
Operating expenses:
Research and development 15,840 15,498
Selling, general and administrative 23,223 29,836
Depreciation 3,636 4,599
Restructuring charges 2,151 3,159
Total operating expenses 44,850 53,092
Operating income 21,284 17,856
Other income (expense):
Interest expense (3,554) (3,874)
Interest and investment income, net 283 288
Other (513) 386
Total other (3,784) (3,200)
Income before income taxes 17,500 14,656
Income tax provision (6,667) (5,949)
Net income $10,833 $8,707
Basic net income per common share:
Net income available to common stockholders $0.21 $0.17
Weighted average common shares 51,682 51,306
Diluted net income per common share:
Net income available to common stockholders $0.21 $0.17
Weighted average common shares 52,255 51,485
CSG SYSTEMS INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS -- UNAUDITED
(in thousands)
Three Months Ended
March 31, March 31,
2004 2003
Cash flows from operating activities:
Net income $10,833 $8,707
Adjustments to reconcile net income to
net cash provided by operating activities --
Depreciation 3,636 4,599
Amortization 6,321 6,591
Restructuring charge for abandonment
of facilities 595 683
Deferred income taxes 4,162 (64)
Tax benefit of stock options exercised 7 2
Stock-based employee compensation 4,145 1,295
Changes in operating assets and liabilities:
Trade accounts and other receivables, net (2,079) (6,125)
Other current and non-current assets 1,344 (97)
Arbitration charge payable (25,181) --
Income taxes payable/receivable 35,192 1,599
Accounts payable and accrued liabilities (11,515) (11,990)
Deferred revenues 4,505 17,022
Net cash provided by operating activities 31,965 22,222
Cash flows from investing activities:
Purchases of property and equipment (1,406) (2,262)
Purchases of short-term investments (1,216) (6)
Acquisition of businesses and assets,
net of cash acquired (307) (835)
Acquisition of and investments in
client contracts (431) (290)
Net cash used in investing activities (3,360) (3,393)
Cash flows from financing activities:
Proceeds from issuance of common stock 357 473
Repurchase of common stock (213) --
Payments on long-term debt (30,000) (1,075)
Payments of deferred financing costs (247) (87)
Net cash used in financing activities (30,103) (689)
Effect of exchange rate fluctuations on cash 621 768
Net increase (decrease) in cash and cash
equivalents (877) 18,908
Cash and cash equivalents, beginning
of period 105,397 94,424
Cash and cash equivalents, end of period $104,520 $113,332
Supplemental disclosures of cash flow
information:
Cash paid (received) during the period for --
Interest $3,376 $3,100
Income taxes (34,114) 3,633
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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