CSGS

CSG Systems International, Inc. (CSGS)

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CSG Systems International Inc. (CSGS)

Q3 2009 Conference Call

October 27, 2009 5:00 PM ET

Executives

Liz Bauer - Vice President of Investor Relations

Peter Kalan - Chief Executive Officer and President

Randy Wiese - Executive Vice President and Chief Financial Officer

Analysts

Ashwin Shirvaikar - Citigroup

Sohail Chandy - Wedbush Securities

Shaul Eyal - Oppenheimer & Co.

Presentation

Operator

Ladies and gentlemen, thank you for standing by. Welcome to the CSG Systems Third Quarter Conference Call. During today's presentation, all parties will be in a listen-only mode. Following the presentation, the conference will be open for question. (Operator Instructions). This conference is being recorded today Tuesday, October, 27thof 2009.

I would now like to turn the conference over to Liz Bauer, Vice President of Investor Relations. Please go ahead ma'am.

Liz Bauer

Thank you, Dale. And thanks to everyone for joining us. Today's discussion will contain a number of forward-looking statements. In particular, these will include statements regarding our projected financial results, our ability to meet our client's 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 information or future events.

In addition to factors noted during this call, a more comprehensive discussion of our risk factors can be found in today's press release as well as in our most recently filed 10-K and 10-Q which are all available on our website. Also, we will discuss certain financial information that is not prepared in accordance with GAAP. We use this non-GAAP information in our internal analysis in order to exclude the significant items that may have a disproportionate effect in a particular period.

Accordingly, we believe isolating the effect of such events enables us as well as investors to consistently analyze the critical components of our operating results and to have meaningful comparisons to prior period. For more information regarding our use of non-GAAP financial measures, we refer you to today's earnings release on our website which will also be furnished to the SEC in Form 8-K.

With me today on the phone are Peter Kalan, our Chief Executive Officer and Randy Wiese, our Chief Financial Officer. I would now like to turn the call over to Peter.

Peter Kalan

Thank you, Liz and welcome back to CSG. Liz rejoined us just a few weeks ago and will lead our Investor Relations efforts with the help of Catherine, Randy and myself. And for those of who worked with Liz in the past, I'm sure you will agree that she brings a unique perspective and a tremendous amount of energy to our team. So welcome back.

Now let's talk about the third quarter. I'm pleased to report that CSG continues to execute very well in this difficult business environment. For the third quarter, we posted revenues of $125 million and a non-GAAP EPS of $0.43 per share. The non-GAAP EPS includes an unexpected $0.03 a share tax benefit.

For the first nine months of the year, we generated cash flows of approximately $97 million and adjusted EBITDA of approximately $101 million. We're proud of our ability to execute while continuing to invest over 14% of our revenues in research and development.

Our strong business model, prudent cost management, stable capital structure and long term relationships with our clients provide us with comfort during these difficult times. As I've shared throughout the years, CSG is committed to creating shareholder value by growing revenues, profits and cash flows. We plan to achieve this by executing on three strategies.

First, we will expand our market share as a leading provider of interaction management solutions to North American communication providers. Second, we plan on growing our relationships with providers in the vertical markets where we already have relationships. And finally, we'll improve the profitability of our business.

Let me give you an update as how we are performing on these strategies. I'm pleased to report that in the third quarter, we converted 500,000 new customers on to our ACP platform. We converted another 700,000 customers under our systems since the quarter ended. And we're confident that we will convert the remaining backlog of customer accounts on to ACP through the first half of 2010.

To put this in perspective, in the cable industry, this is the largest conversion of customer accounts since early 2000. And as you all know, this market has changed dramatically over the past 10 years.

Back in 2000, we were converting accounts with just one and two lines of business. Today our conversions include triple play and business customers.

These market share wins and subsequent conversions are strong endorsement of CSG products, services and support. They represent the clients' decision to expand the scope of their business with CSG, thereby expanding our market share and leadership position.

It also reinforces our value proposition of providing reliable time tested solutions to meet our clients' mission critical business needs, including helping them evolve their business and deepen their relationships with their customers.

I'm extremely proud of the people who worked around the clock, ensuring that our clients business was converted with minimal disruption. Any time you move customer accounts from one customer care and billing system to another is complex, time consuming and something that can't be take it for granted.

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