CSGS

CSG Systems International, Inc. (CSGS)

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CSG Systems International (CSGS)

Q1 2013 Earnings Call

April 30, 2013 5:00 pm ET

Executives

Liz Bauer - Senior Vice President of Investor Relations and Strategic Communications

Peter E. Kalan - Chief Executive officer, President and Director

Randy R. Wiese - Chief Financial Officer, Chief Accounting Officer and Executive Vice President

Analysts

Mark Sue - RBC Capital Markets, LLC, Research Division

Lauren Choi - JP Morgan Chase & Co, Research Division

Presentation

Operator

Good afternoon, ladies and gentlemen, thank you for standing by. Welcome to the CSG Systems' first quarter 2013 conference call. [Operator Instructions] This conference is being recorded today, Tuesday, the 30th of April 2013. I would now like to turn the conference over to Liz Bauer. Please go ahead, ma'am.

Liz Bauer

Thank you, Lorenzo, and thanks to everyone for joining us. Today's discussion will contain a number of forward-looking statements. These will include, but are not limited to, statements regarding our projected financial results; our ability to meet our clients' needs through our products, services and performance; and our ability to successfully integrate and manage acquired businesses in order to achieve their expected strategic, operating and financial goals. While these statements reflect our best current judgment, they are subject to risks and uncertainties that could cause our actual results to differ materially.

Please note that these forward-looking statements reflect our opinions only as of the date of this call, and we undertake no obligation to revise or publicly release any revision to these forward-looking statements in light of new or future events. In addition, the factors noted during this call, a more comprehensive discussion of our risk factors can be found in today's press release, as well as our most recently filed 10-K and 10-Q, which are all available in the Investor Relations section of our website.

Also, we will discuss certain financial information that is not prepared in accordance with GAAP. We believe that these non-GAAP financial measures, when reviewed in conjunction with our GAAP financial measures, provide investors with greater transparency to the information used by our management team in our financial and operational decision-making. For more information regarding our use of non-GAAP financial measures, we refer you to today's earning release and non-GAAP reconciliation tables on our website, which will also be furnished to the SEC on Form 8-K.

With me today are Peter Kalan, our Chief Executive Officer; and Randy Wiese, our Chief Financial Officer. With that, I'd like to now turn the call over to Peter.

Peter E. Kalan

Thank you, Liz, and thanks to everyone for joining us on today's call. For the first quarter of 2013, we generated revenues of $181 million and non-GAAP earnings per share of $0.48. While revenues were lighter than previous quarters due to some deals not signing in the current quarter and the beginning impacts of the new contract pricing for Comcast, I remain confident in our business outlook. Some of the deals that we anticipated to sign in the first quarter subsequently signed in April and the remainder are still expected. I'm quite pleased with several of the activities that have put us in a much stronger position to take advantage of the opportunities we see. Let me elaborate.

In March, we announced our new long-term agreement with Comcast Cable to provide them with customer care and billing solutions through February 2017. Comcast has been a client of ours for over 20 years. They're innovating the way in which consumers interact with their devices, whether that be with their television, their PCs or tablets or even their phones. They're bringing new services to market like Home Security and business services and aiming to create an interactive and engaging customer experience by providing content anywhere on any event device. We're pleased to have been a part of Comcast's transformation over the years and look forward to continuing to help them successfully execute on their objectives in the future. We expect that our relationship will continue to grow as we develop new ways to help Comcast streamline their operations, roll out new products and services and provide an engaging customer experience.

With a customer -- with the contract for Comcast now signed, for the first time since I've been with the company, which is over 15 years, we have contracts in place with our 3 largest clients for the next 4 years. These clients represent approximately 45% of our revenues. And when we look at this over a period of time, we've grown revenues with these clients in the mid-single digits, inclusive of those years where we've signed extensions with pricing discounts.

In addition, we've demonstrated over time that with the increased visibility into our revenues, we're able to better manage our cost structure and increase our operating margins. When you combine these long-term contracts with our maintenance revenues and regular ongoing implementation and services work for our worldwide clients, we have tremendous visibility into our revenues. This is an enviable position to be in and allows us to have even greater control of managing and investing in our business to ensure that we get even broader and deeper in our clients' operations.

In addition, by having a significant amount of our revenues under contract for several years, we have strong visibility into our cash generation. This allows us to continue to expand our product portfolio but enabling us to sell more into our existing clients, as well as expand our geographic reach and add new clients. As we've said before, our clients' worlds are changing dramatically, and we're committed to investing into our solutions and our people to ensure that they can compete successfully.

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