Exhibit 99.1
NEWS RELEASE
FOR IMMEDIATE RELEASE
For more information, contact:
Liz Bauer, Senior Vice President
(303) 804-4065
E-mail:liz_bauer@csgsystems.com
CSG SYSTEMS INTERNATIONAL, INC. REPORTS
FIRST QUARTER 2005 RESULTS
Revenues of $136.9 Million;
GAAP Net Income of $0.17 Per Diluted Share;
ENGLEWOOD, COLO. (April 26, 2005) — 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.
First Quarter 2005 Highlights:
• | GAAP results were as follows:total revenues were $136.9 million;operating income was $15.2million; andnet incomewas $8.6 million, or $0.17per 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 CGS 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.”
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CSG Systems International, Inc.
April 26, 2005
Page 2
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.
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CSG Systems International, Inc.
April 26, 2005
Page 3
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 Division | GSS 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 Division | GSS 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 | % | |||||||||
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(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. |
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CSG Systems International, Inc.
April 26, 2005
Page 4
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.
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CSG Systems International, Inc.
April 26, 2005
Page 5
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 atwww.csgsystems.com.
Additional Information
For additional information about CSG, please visit CSG’s web site atwww.csgsystems.com. Additional information can be found in the Investor Relations section of the web site.
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CSG Systems International, Inc.
April 26, 2005
Page 6
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 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.
FINANCIALS TO FOLLOW
CSG SYSTEMS INTERNATIONAL, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS-UNAUDITED
(in thousands, except share and per share amounts)
March 31, 2005 | December 31, 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 | ||||
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CSG SYSTEMS INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME-UNAUDITED
(in thousands, except per share amounts)
Three Months Ended | ||||||||
March 31, 2005 | March 31, 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 | ||||||
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CSG SYSTEMS INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS-UNAUDITED
(in thousands)
Three Months Ended | ||||||||
March 31, 2005 | March 31, 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 | ) |