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.
RELIANCE ON CCS
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The Company derived approximately 78% and 77% of its total revenues from its
primary product, Communications Control System (CCS), and related products and
services in the years ended December 31, 1998 and 1997, respectively. CCS and
related products and services are expected to provide the substantial majority
of the Company's total revenues in the foreseeable future. The Company's results
will depend upon continued market acceptance of CCS and related products and
services, as well as the Company's ability to continue to adapt and modify them
to meet the changing needs of its clients. Any reduction in demand for CCS would
have a material adverse effect on the financial condition and results of
operations of the Company.
REQUIREMENTS OF THE AT&T CONTRACT
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The AT&T Contract requires the conversion of additional AT&T customers onto the
Company's customer care and billing system. The AT&T Contract provides certain
performance criteria and other obligations to be met by the Company. The Company
is subject to various remedies and penalties if it fails to meet the
performance criteria or other obligations. The Company is also subject to an
annual technical audit to determine whether the Company's products and services
include innovations in features and functions that have become standard in the
wireline video industry. If an audit determines the Company is not providing
such an innovation and it fails to do so in the manner and time period dictated
by the contract, then AT&T would be released from its exclusivity obligation to
the extent necessary to obtain the innovation from a third party. To fulfill the
AT&T Contract and to remain competitive, the Company believes it will be
required to develop new and advanced features to existing products and services,
as well as new products and services, all of which will require substantial
research and development. AT&T also would have the right to terminate the AT&T
Contract in the event of certain defaults by the Company. The termination of the
AT&T Contract or of any of AT&T's commitments under the contract would have a
material adverse effect on the financial condition and results of operations of
the Company.
AT&T CONTRACT AND MERGER
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AT&T completed its merger with TCI in March 1999 and has consolidated the TCI
operations into AT&T Broadband and Internet Services (BIS). During the six
months ended June 30, 1999 and 1998, revenues from AT&T and affiliated companies
represented approximately 43.0% and 38.5% of total revenues, respectively. The
AT&T Contract has minimum financial commitments over the 15-year life of the
contract and includes exclusive rights to provide customer care and billing
products and services for AT&T's offerings of wireline video, all Internet/high
speed data services, residential wireline telephony services, and print and mail
services. As discussed above, the AT&T Contract provides certain performance
criteria and other obligations to be met by the Company. To date, the Company
believes it has complied with the terms of the contract. Since execution of the
AT&T Contract in September 1997 through June 30, 1999, the Company has
successfully converted approximately 9.2 million AT&T cable television customers
onto its system.
At this time, it is too early to determine the near- and long-term impact, if
any, the AT&T and TCI merger will have on the Company's relationship with the
combined entity. AT&T has announced its planned efforts to provide convergent
communications services in several United States cities during 1999.
The Company is participating in those convergent trials and is working closely
with AT&T to provide customer care and billing services to customers in those
cities. The Company expects to continue performing successfully under the AT&T
Contract, but its failure to do so would have a material adverse effect on the
financial condition and results of operations of the Company.
CONVERSION TO THE COMPANY'S SYSTEMS
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The Company's ability to convert new client sites to its customer care and
billing systems on a timely and accurate basis is necessary to meet the
Company's contractual commitments and to achieve its business objectives.
Converting multiple sites under the schedules required by contracts or business
requirements is a difficult and complex process. One of the difficulties in the
conversion process is that competition for the necessary qualified personnel is
intense and the Company may not be successful in attracting and retaining the
personnel necessary to complete conversions on a timely and accurate basis. The
inability of the Company to perform the conversion process timely and accurately
would have a material adverse effect on the results of operations of the
Company.
DEPENDENCE ON CABLE TELEVISION AND DBS INDUSTRIES
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The Company's business is concentrated in the cable television and Direct
Broadcast Satellite (DBS) industries, making the Company susceptible to a
downturn in those industries. During the years ended December 31, 1998 and 1997,
the Company derived 78% and 73%, and 13% and 11% of its total revenues from
companies in the U.S. cable television and U.S. DBS industries, respectively. A
decrease in the number of customers served by the Company's clients, loss of
business due to non-renewal of client contracts, industry consolidation, and/or
changing consumer demand for services would adversely effect the results of
operations of the Company.
There can be no assurance that new entrants into the cable television market
will become clients of the Company. Also, there can be no assurance that cable
television providers will be successful in expanding into other segments of the
converging communications markets. Even if major forays into new markets are
successful, the Company may be unable to meet the special billing and customer
care needs of that market. The cable television industry is undergoing
significant ownership changes at an accelerated pace. In addition, cable
television providers are consolidating, decreasing the potential number of
buyers for the Company's products and services. Consolidation in the industry
may put at risk the Company's ability to leverage its existing relationships.
Should this consolidation result in a concentration of cable television customer
accounts being owned by companies with whom the Company does not have a
relationship, or with whom competitors are entrenched, it could negatively
effect the Company's ability to maintain or expand its market share, thereby
adversely effecting the results of operations.
NEW PRODUCTS AND RAPID TECHNOLOGICAL CHANGE
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The market for customer care and billing 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 in sustaining and growing the annual revenue per
customer account depends upon continued market acceptance of its current
products, including CCS and related products and services, and its ability to
enhance its current products and develop new products that address the
increasingly complex and evolving needs of its clients. Substantial research and
development will be required to maintain the competitiveness of the Company's
products and services in the market. Development projects can be lengthy and
costly, and are subject to changing requirements, programming difficulties, a
shortage of qualified personnel, 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. Also, the introduction and
consumer acceptance of billing statements that are presented and paid
electronically over the Internet may happen more rapidly than the Company
anticipates. If electronic bill presentation and payment proliferates and the
Company is unable to respond with a solution quickly, such failure could have a
material adverse effect on the Company's results of operations.
CONVERGING COMMUNICATIONS MARKETS
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The Company's growth strategy is based in large part on the continuing
convergence and growth of the cable television, 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 solution for presenting multiple communications services on a single
bill, there could be a material adverse effect on the Company's growth.
COMPETITION
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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 already have significant international operations. There
can be no assurance that the Company will be able to compete successfully with
its existing competitors or with new competitors.
ATTRACTION AND RETENTION OF PERSONNEL
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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. 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, particularly
in the areas of research and development and technical support. The Company may
not be successful in attracting and retaining the personnel it requires, which
would adversely effect the Company's ability to meet its commitments and new
product delivery objectives.
VARIABILITY OF QUARTERLY RESULTS
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The Company's quarterly revenues and results, particularly relating to software
and professional services, may fluctuate depending on various factors, including
the timing of executed contracts and the delivery of contracted services or
products, the cancellation of the Company's services and products by existing or
new clients, the hiring of additional staff, new product development and other
expenses, and changes in sales commission policies. No assurance can be given
that results will not vary due to these factors. Fluctuations in quarterly
results may result in volatility in the market price of the Company's Common
Stock.
DEPENDENCE ON PROPRIETARY TECHNOLOGY
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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. The Company also holds a limited
number of patents on some of its newer products, and does not rely upon patents
as a primary means of protecting its rights in its intellectual property. 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.
INTERNATIONAL OPERATIONS
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The Company's business strategy includes a commitment to the marketing of its
products and services internationally, and the Company has acquired and
established 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 such as the conversion to EURO currency,
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 firmly established significant
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.
INTEGRATION OF ACQUISITIONS
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As part of its growth strategy, the Company seeks to acquire assets, technology,
and businesses which would provide the technology and technical personnel to
expedite the Company's product development efforts, provide complementary
products or services or provide access to new markets and clients. Acquisitions
involve a number of risks and difficulties, including expansion into new
geographic markets and business areas, the requirement to understand local
business practices, the diversion of management's attention to the assimilation
of acquired operations and personnel, potential adverse short-term effects on
the Company's operating results, and the amortization of acquired intangible
assets.
YEAR 2000
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The Company's business is dependent upon various computer software programs and
operating systems that utilize dates and process data beyond the year 2000. If
the actions taken by the Company to mitigate its risks associated with the year
2000 are inadequate, there could be a material adverse effect on the financial
condition and results of operations of the Company. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations" for
additional discussion of the Company's efforts to address the year 2000 risks.
RELATIONSHIP WITH FIRST DATA CORPORATION
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The Company has entered into a data processing services agreement with FDC. The
Company is dependent upon FDC to perform these services for the operation of
CCS. The inability of FDC to perform these services satisfactorily could have a
material adverse effect on the financial condition and results of operations of
the Company. The existing agreement is scheduled to expire in December 2001.