CSGS

CSG Systems International, Inc. (CSGS)

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CSG Systems International Inc. (CSGS)

Q3 2010 Earnings Call

October 26, 2010 5:00 pm ET

Executives

Liz Bauer - VP, IR

Peter Kalan - CEO

Randy Wiese - CFO

Analysts

Chris Cohen - Stifel Nicolaus

Scott Sutherland - Wedbush Securities

Howard Smith - First Analysis Securities

Shaul Eyal - Oppenheimer & Company

Lauren Ye - JPMorgan

Presentation

Operator

Welcome to the CSG Systems Q3 Conference Call. During today’s presentation, all parties will be in a listen-only mode. Following the presentation, conference will be open for question. (Operator Instructions). This conference is being recorded today, October 26, 2010.

I would now like to turn the conference over to Ms. Liz Bauer. Please go ahead, ma’am.

Liz Bauer

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; our ability to successfully integrate and manage acquired businesses in order to achieve their expected strategic, operating and financial goals and our proposed acquisition of Intec Telecom, which we announced on September 24th of this year.

All these statements reflect our best current judgments they are subject to risks and uncertainties that could cause our actual results to differ materially. Please note that these 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 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 our most recently filed 10-K and 10-Q, which are available on the Investor Relations section of our website.

Also, we may 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 significant items that may have a disproportionate effect in a particular period. We believe that isolating the effects 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 periods.

For more information regarding our use of non-GAAP financial measures we refer you to today’s earnings release and non-GAAP reconciliation tables on our website, which will also be furnished to the SEC on Form 8-K.

With me today on the phone are Peter Kalan, our Chief Executive Officer and Randy Wiese, our Chief Financial Officer.

Finally, before I turn it over to Peter, I would like to remind everyone that our announced acquisition of Intec Telecom is being governed by UK law and regulation; therefore we will be limited in our remarks outside of the details under the rule 2.5 announcement, which is posted on our website.

With that, I’d now like to turn the call over to Peter.

Peter Kalan

I am pleased to report that CSG continues to execute well, posting third quarter revenues of $134 million and non-GAAP earnings per share of $0.59. Our revenues increased 7% and our non-GAAP EPS increased 13% over the same period last year and we have demonstrated a steady quarter-over-quarter growth this year.

In addition to executing well on the revenue side of the business, we continued our strong heritage of operational excellence and performance. This quarter, we expanded on our non-GAAP operating margin to approximately 20%, as a result of our focus on running our operations well and our success in helping our clients grow their businesses.

Today, I am going to provide you with an update on our operations, what we are seeing with our clients and our announced acquisition of Intec Telecom.

First, we reached a significant operational milestone this quarter. We completed our two-plus-year data center migration without any major disruption. Thanks to our employees and our clients. The primary purpose for moving from our provider to Infocrossing was to ensure that we are providing the highest quality operations to our clients.

The secondary purpose was to ensure that we continue to identify ways to optimize our operations. We are pleased with the partnership that we have established with Infocrossing, we can believe this will help us implement several new initiatives aimed at taking our solutions to the next level.

I want to provide you with an ideas to the scope of this project. During the migration, we setup redundant data network, moved over 800 open system servers and switched our high volume transaction processing engine over to Infocrossing. This was a highly complex project and entailed moving almost 50 million subscriber accounts, many of which were double and triple play customers. I can’t say enough about the work that our teams did during this transition. Their work is a testament to our ability to execute well. I’d like to thank our employees, our clients and our partner Infocrossing for the hard work during this migration.

Next I would like to review with you what we are seeing with our clients. Simply stated, I believe our results over the past year demonstrate the types of activity that we are seeing in the communications market. Communications service providers continue to pursue projects that have a quick return on investment. We’ve had success in primarily two areas. Helping our clients generate new or additional revenues and helping our clients streamline processes and workload improve operational efficiencies.

Over the past several quarters, we’ve discussed our successes in positioning our client throughout new products like WiMAX in commercial services aimed at the small-to-medium business market. However, our solutions provide other revenue for our clients to generate new revenues through greater targeting and up-selling opportunities. For example, recently, one of our clients shared with us the results of a trial they conducted, utilizing one of our advanced solutions aimed at marketing the right product to the right customers. Their results speak the value of this solution and help provider to measure the return on investment of our products.

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