EXHIBIT 99.01
SAFE HARBOR FOR FORWARD-LOOKING STATEMENTS UNDER THE PRIVATE SECURITIES
LITIGATION REFORM ACT OF 1995
CERTAIN CAUTIONARY STATEMENTS AND
RISK FACTORS
CSG Systems International, Inc. and its subsidiaries (collectively, the Company)
or their representatives from time to time may make or may have made certain
forward-looking statements, whether orally or in writing, including without
limitation, any such statements made or to be made in the Management's
Discussion and Analysis of Financial Condition and Results of Operations
contained in its various SEC filings or orally in conferences or
teleconferences. The Company wishes to ensure that such statements are
accompanied by meaningful cautionary statements, so as to ensure to the fullest
extent possible the protections of the safe harbor established in the Private
Securities Litigation Reform Act of 1995.
Accordingly, the forward-looking statements are qualified in their entirety by
reference to and are accompanied by the following meaningful cautionary
statements identifying certain important factors that could cause actual results
to differ materially from those in such forward-looking statements.
This list of factors is likely not exhaustive. The Company operates in a
rapidly changing and evolving business involving the converging communications
markets, and new risk factors will likely emerge. Management cannot predict all
of the important risk factors, nor can it assess the impact, if any, of such
risk factors on the Company's business or the extent to which any factor, or
combination of factors, may cause actual results to differ materially from those
in any forward-looking statements.
Accordingly, there can be no assurance that forward-looking statements will be
accurate indicators of future actual results, and it is likely that actual
results will differ from results projected in forward-looking statements and
that such differences may be material.
The Company has recorded net losses since inception (October 17, 1994) through
December 31, 1996. These net losses have resulted from several factors,
including amortization of intangible assets (acquired software, client contracts
and related intangibles, and noncompete agreements and goodwill), interest
expense, stock-based employee compensation expense, and loss from discontinued
operations. Certain of these factors will continue to affect the Company's
results of operations in the future. While the Company recently reported net
income for the third and fourth quarters of 1996, and the first quarter of 1997,
there can be no assurance that the Company will sustain profitability in the
future.
CCS and related services are expected to provide the substantial majority of the
Company's revenues in the foreseeable future. The market for customer
management systems is characterized by rapid changes in technology and is highly
competitive with respect to the need for timely product innovations and new
product introductions. The Company believes that its future success depends
upon continued market acceptance of its current products, including CCS and
related services, and its ability to enhance its current products and develop
new products that address the increasingly complex and evolving needs of its
clients. In particular, the Company believes that it must respond quickly to
clients' needs for additional functionality and distributed architecture for
data processing. Development projects can be lengthy and are subject to
changing requirements, programming difficulties, and unforeseen factors which
can result in delays. There can be no assurance of continued market acceptance
of the Company's current products or that the Company will be successful in the
timely development of product enhancements or new products that respond to
technological advances or changing client needs.
CSG Phoenix is the Company's next generation customer care and billing system
for the converging communications markets. The Company is using technologies
and development tools that are new to the Company in CSG Phoenix. In addition,
CSG Phoenix will contain functionality that is new to the Company and will be
offered in a variety of configurations in addition to the Company's existing
service bureau operations. The Company delivered Version 1.1 of CSG Phoenix on
March 31, 1997, for testing and integration at customer sites. The Company
presently expects a beta site to be installed in the third quarter of 1997,
utilizing Version 1.2 of CSG Phoenix, which is scheduled to be released to a
beta customer in the second quarter of 1997. There can be no assurance that
Version 1.2 of CSG Phoenix will be released or installed at a beta site on time,
or that CSG Phoenix will operate in an acceptable manner. The actual timing of
delivery and implementation is subject to delay due to the variety of factors
inherent in the development and initial implementation of a new, complex
software system, which in the case of CSG Phoenix, employs technologies and
development tools which are new to the Company. Implementation is also subject
to factors relating to the integration of the new system with the client's
existing systems. Sales and support of CSG Phoenix will require the Company to
develop new capabilities. The failure of the Company to deliver and support the
CSG Phoenix product successfully and on time could have a material adverse
effect on the financial condition and results of operations of the Company.
Revenues from Time Warner Cable and its affiliated companies (Time Warner) and
revenues from Tele-Communications, Inc. (TCI) each represent a substantial
percentage of the Company's total revenues. The Company's existing contract
with TCI for its cable television operations, which was scheduled to expire
December 31, 1996, has been extended automatically by its terms for one year.
TCI has announced it is developing an in-house billing system for use in its
cable television operations, and the Company expects TCI's in-house system to
replace the Company's system in the future. The Company cannot estimate when
TCI's in-house billing solution will be available or the timing of significant
conversions from the Company's system to TCI's in-house billing solution. Loss
of all or a significant part of the business of either Time Warner or TCI would
have a material adverse effect on the financial condition and results of
operations of the Company.
The Company's quarterly revenues and operating results may fluctuate depending
on various factors, including the timing of executed contracts and the delivery
of contracted services or products, the timing of conversions to the Company's
systems by new and existing clients, the cancellation of the Company's services
and products by existing or new clients and related conversions to other
systems, the hiring of additional staff, new product development and other
expenses, and changes in sales commission policies. No assurance can be given
that operating results will not vary due to these factors. Fluctuations in
quarterly operating results may result in volatility in the market price of the
Company's Common Stock.
The Company's business is concentrated in the cable television industry, making
the Company susceptible to a downturn in that industry. A decrease in the
number of customers served by the Company's clients would result in lower
revenues for the Company. In addition, cable television providers are
consolidating, decreasing the potential number of buyers for the Company's
products and services. Furthermore, there can be no assurance that cable
television providers will be successful in expanding into other segments of the
converging communications markets. There can be no assurance that new entrants
into the cable television market will become clients of the Company. Any
adverse development in the cable television industry could have a material
adverse effect on the financial condition and results of operations of the
Company.
The Company's growth strategy is based in large part on the continuing
convergence and growth of the cable television, Direct Broadcast Satellite
(DBS), telecommunications, and on-line services markets. If these markets fail
to converge, grow more slowly than anticipated, or if providers in the
converging markets do not accept the Company's products and services, there
could be a material adverse effect on the financial condition and results of
operations of the Company.
The market for the Company's products and services is highly competitive. The
Company directly competes with both independent providers of products and
services and in-house systems developed by existing and potential clients. Many
of the Company's current and potential competitors have significantly greater
financial, marketing, technical, and other competitive resources than the
Company, and many are already operating internationally. There can be no
assurance that the Company will be able to compete successfully with its
existing competitors or with new competitors.
The Company is expanding into new products, services, and markets, which is
placing demands on its managerial and operational resources. The inability to
manage growth could have a material adverse effect on the financial condition
and results of operations of the Company.
Substantially all of the Company's revenues are derived from the sale of
services or products under contracts with its clients. The Company does not
have the option to extend unilaterally the contracts upon expiration of their
terms. The Company's contracts typically do not require clients to make any
minimum purchases, and contracts are cancelable by clients under certain
conditions. The failure of clients to renew or to fully use any contracts, or
the cancellation of contracts, could have a material adverse effect on the
Company's financial condition and results of operations.
The Company's future success depends in large part on the continued service of
its key management, sales, product development, and operational personnel. The
Company is particularly dependent on its executive officers. Only two of those
executive officers are parties to employment agreements with the Company, and
those agreements are terminable by them upon 30 days' notice. The Company
believes that its future success also depends on its ability to attract and
retain highly skilled technical, managerial, and marketing personnel, including,
in particular, additional personnel in the areas of research and development and
technical support. Competition for qualified personnel is intense. The Company
may not be successful in attracting and retaining the personnel it requires,
which could have a material adverse effect on the financial condition and
results of operations of the Company.
The Company relies on a combination of trade secret and copyright laws,
nondisclosure agreements, and other contractual and technical measures to
protect its proprietary rights in its products. There can be no assurance that
these provisions will be adequate to protect its proprietary rights. Although
the Company believes that its intellectual property rights do not infringe upon
the proprietary rights of third parties, there can be no assurance that third
parties will not assert infringement claims against the Company or the Company's
clients.
The Company's business strategy includes a significant commitment to the
marketing of its products and services internationally, and the Company has
begun to acquire and establish operations outside of the U.S. The Company is
subject to certain inherent risks associated with operating internationally.
Risks include product development to meet local requirements, difficulties in
staffing and management, reliance on independent distributors or strategic
alliance partners, fluctuations in foreign currency exchange rates, compliance
with foreign regulatory requirements, variability of foreign economic
conditions, changing restrictions imposed by U.S. export laws, and competition
from U.S.-based companies which have established international operations.
There can be no assurance that the Company will be able to manage successfully
the risks related to selling its products and services in international markets.
The inability to manage these risks successfully would have a material adverse
effect on the financial condition and results of operations of the Company.