Gang, Earnings out-a quick check looks like long-term debt is rapidly fading as an issue....with the cash buildup and June 30th prepayment of long-term debt.:
CSG Systems International, Inc. Reports Record Second
Quarter Results: Adjusted Earnings at $0.27 Per Share: Up
122 Percent; Revenues of $76.5 Million: Up 41 Percent
PR Newswire - July 21, 1999 16:20
ENGLEWOOD, Colo., July 21 /PRNewswire/ -- CSG Systems International, Inc. (Nasdaq: CSGS), a
leader in customer care and billing solutions, today reported that the continued conversion of new
business onto its processing solution and continued penetration of software products and services led to
higher performance for the quarter ended June 30, 1999.
Second Quarter 1999 Highlights(a):
-- Revenues rose to a record $76.5 million, a 41 percent increase.
-- Net income on an adjusted basis rose 122 percent to a record of $14.7
million, or $0.27 per diluted share.
-- Operating income on an adjusted basis rose 94 percent to a record of
$24.7 million, or 32% of total revenues.
-- Over 1 million new customers were added to conversion backlog, bringing
the new customer backlog total to over 2 million.
-- One of the largest quarters for software sales in the Company's
history, with over $23 million added to the Company's revenue backlog
for software licenses.
"This quarter we hit on all cylinders. We had one of our largest software quarters in our history. We
added a significant number of new customers to our backlog. We continued the conversion of the new
customers onto our system. And we expanded our international product offering." -- Neal Hansen,
Chairman and Chief Executive Officer
Financial Summary (unaudited)(a)
(in thousands, except per share amounts and percentages)
Three Months Ended Six Months Ended
June 30, June 30,
Percent Percent
1999 1998 Change 1999 1998 Change
Total revenues $76,510 $54,244 41.0% $147,597 $103,552 42.5%
Adjusted operating
income 24,742 12,760 93.9% 46,993 23,188 102.7%
Adjusted net
income 14,727 6,636 121.9% 27,528 11,928 130.8%
Adjusted net
income per
diluted share $0.27 $0.13 117.0% $0.51 $0.23 125.0%
(a) Adjusted earnings presentations exclude acquisition-related charges (as more fully discussed below
under "Note on Adjusted Results of Operations") and use an effective income tax rate of 38%.
Record Second Quarter Results
Revenues and adjusted net income both reached quarterly records. Revenues grew 41 percent to $76.5
million for the quarter ended June 30, 1999, compared with $54.2 million for the second quarter of 1998.
Net income on an adjusted basis for the second quarter of 1999 was $14.7 million, or $0.27 per diluted
share, compared to $6.6 million, or $0.13 per diluted share, in the same quarter last year, a 122 percent
increase. See "Note on Adjusted Results of Operations" below for discussion of the calculation of
adjusted earnings.
Processing revenues were $61.5 million in the second quarter of 1999, compared to $44.1 million in the
same quarter last year, a 39 percent increase. Software and related product sales and professional
consulting services generated $15.0 million of revenue in the quarter, compared to $10.1 million for the
second quarter in 1998, a 48 percent increase.
During the second quarter of 1999, the Company reported net income of $13.5 million or $0.25 per
diluted share, compared to $8.7 million, or $0.16 per diluted share for the second quarter of 1998. (See
financial statements.)
Results for the Six Months Ended June 30, 1999 and 1998
Revenues and adjusted net income both reached records for the six months ended June 30, 1999.
Revenues grew 43 percent to $147.6 million for the six months ended June 30, 1999, compared with
$103.6 million for the same period in 1998. Net income on an adjusted basis for the six months ended
June 30,1999 was $27.5 million, or $0.51 per diluted share, compared to $11.9 million, or $0.23 per
diluted share, in the same period last year, a 131 percent increase.
Processing revenues were $120.5 million for the first six months of 1999, compared to $83.9 million in
the same period last year, a 44 percent increase. Software and related product sales and professional
consulting services generated $27.1 million of revenue in the first six months of 1999, compared to $19.7
million for the same period in 1998, a 38 percent increase.
For the six months ended June 30, 1999, the Company reported net income of $25.1 million or $0.46
per diluted share, compared to $15.1 million, or $0.29 per diluted share for the same period in 1998.
Customer Accounts
Total domestic customer accounts on the Company's processing system as of June 30, 1999 were 31.2
million, compared to 25.4 million as of June 30, 1998, an increase of 23 percent. The Company
converted approximately 800,000 new customer accounts onto its processing system during the second
quarter of 1999. The annualized domestic revenue per customer account for the quarter ended June 30,
1999 was $9.49, compared to $8.25 for the same quarter last year, an increase of 15 percent.
CSG Signs Major Software Contracts
"This was one of our strongest quarters ever for signing software contracts. We added approximately
$23 million to our revenue backlog for software licenses during the quarter," Chairman and CEO Neal
Hansen said. "What is most encouraging is that these contracts covered every aspect of our business,
including selling products into our existing customer base as well as selling stand-alone products into new
markets -- both domestically and internationally."
"The flurry of activity that has occurred in our primary market -- the broadband industry, has created a
number of opportunities for a company like CSG. We have a highly scaleable solution with tremendous
flexibility and functionality built in that will enable our clients to be first to market with new products like
high speed data and telephony." -- Jack Pogge, President
Financial Condition
As of June 30, 1999, the Company had cash and equivalents of $34.1 million, compared to $26.2 million
as of June 30, 1998. This amount is after a $15.0 million optional prepayment on the Company's
long-term debt was made on June 30, 1999. The balance of the Company's long-term debt at June 30,
1999 was $91.0 million, compared to $132.8 million as of June 30, 1998, a decrease of $41.8 million.
Account receivables reflected days billings outstanding (DBOs) of 55 days for the second quarter of
1999, compared to 58 days for the same period last year. Cash flow from operations for the six months
ended June 30, 1999 was $40.5 million, compared to $13.9 million for 1998. For the second quarter of
1999, adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) was $28.9
million, or 38 percent of total revenues, compared to $15.5 million, or 29 percent of total revenues, for
the second quarter of 1998, an increase of 87 percent. For the six months ended June 30, 1999,
adjusted EBITDA was $55.2 million, or 37 percent of total revenues, compared to $28.4 million, or 27
percent of total revenues, for the same period in 1998, an increase of 94 percent.
Note on Adjusted Results of Operations
Operating income, net income, net income per diluted share, and EBITDA on an adjusted basis are
computed by (i) excluding acquisition-related charges, (ii) using an effective tax rate of 38%, and (iii)
using outstanding shares on a diluted basis. The acquisition-related charges were incurred when CSG
Systems, Inc., operating then as Cable Services Group, Inc., was purchased in a leveraged buy-out in
November 1994. The charges include amortization of acquired software, client contracts and related
intangibles, noncompete agreement, goodwill, and stock-based employee compensation. These non-cash
charges for the second quarters of 1999 and 1998 totaled $2.0 million and $2.1 million, respectively. For
the six months ended June 30, 1999 and 1998, these charges totaled $4.1 million and $4.1 million,
respectively.
Based in Denver, Colorado, CSG Systems International, Inc., is the parent company of CSG Systems,
Inc., which provides customer care and billing solutions worldwide for the converging communications
markets, including cable television, direct broadcast satellite, telephony, on-line services and others. The
Company offers its clients a full range of processing services, software and support services that automate
customer management functions, including billing, sales support and order processing, invoice calculation
and production, management reporting and customer analysis for target marketing. CSG Systems, Inc.
provides its services to over one-third of the households in the United States.
Information about CSG Systems, Inc. and its products can be found on the worldwide web at
csgsys.com.
This news release contains forward-looking statements 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 press release. These factors include, but are not limited to, the following: 1) The
Company's revenue is heavily dependent upon the continued market acceptance of Broadband Express
(formerly known as CCS) and related products and services; 2) the Company's ability to continue to
perform satisfactorily under the terms of its contract with TCI and AT&T; 3) the Company's ability to
enhance its existing product offerings and develop new technology that will retain existing customers and
capture new market share; and 4) adequate mitigation of risks associated with processing data beyond
the year 2000. This list is not exhaustive and readers are encouraged to review the additional risks and
important factors described in the Company's Report to Stockholders on Forms 10-K and 10-Q and
other filings made with the SEC.
CSG SYSTEMS INTERNATIONAL, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share amounts)
June 30, December 31,
1999 1998
ASSETS (unaudited)
Current assets:
Cash and cash equivalents $34,066 $39,593
Accounts receivable-
Trade-
Billed, net of
allowance of $2,852 and $2,051 59,047 60,529
Unbilled 8,100 2,828
Other 914 1,179
Deferred income taxes 2,070 1,803
Other current assets 2,479 2,275
Total current assets 106,676 108,207
Property and equipment, net of
depreciation of $28,505 and $23,765 24,107 24,711
Software, net of amortization
of $36,321 and $35,391 8,422 9,422
Noncompete agreements and goodwill,
net of amortization of $27,436 and $24,878 4,861 7,596
Client contracts and related intangibles,
net of amortization of $21,268 and $17,671 57,644 59,791
Deferred income taxes 54,208 59,389
Other assets 1,812 2,380
Total assets $257,730 $271,496
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt $18,710 $19,125
Customer deposits 9,892 10,018
Trade accounts payable 11,266 10,471
Accrued employee compensation 11,233 12,276
Deferred revenue 9,163 13,470
Conversion incentive payments 15,277 22,032
Accrued income taxes 8,958 6,756
Other current liabilities 8,055 7,009
Total current liabilities 92,554 101,157
Non-current liabilities:
Long-term debt, net of current maturities 72,290 109,125
Deferred revenue 714 216
Total non-current liabilities 73,004 109,341
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;
51,778,380 shares and 51,465,646 shares
outstanding 518 515
Common stock warrants; 3,000,000
warrants outstanding 26,145 26,145
Additional paid-in capital 126,629 120,599
Deferred employee compensation (182) (328)
Notes receivable from employee stockholders (216) (478)
Accumulated other comprehensive income
(loss)-cumulative translation adjustments (269) 38
Treasury stock, at cost, 66,986 shares
and 66,000 shares (132) (97)
Accumulated deficit (60,321) (85,396)
Total stockholders' equity 92,172 60,998
Total liabilities and stockholders'
equity $257,730 $271,496
CSG SYSTEMS INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME - UNAUDITED
(in thousands, except per share amounts)
Three months ended Six months ended
June 30, June 30, June 30, June 30,
1999 1998 1999 1998
Total revenues $76,510 $54,244 $147,597 $103,552
Expenses:
Cost of revenues:
Direct costs 29,839 23,916 57,935 45,998
Amortization of client
contracts 1,871 1,176 3,660 2,244
Total cost of revenues 31,710 25,092 61,595 48,242
Gross margin
(exclusive of depreciation) 44,800 29,152 86,002 55,310
Operating expenses:
Research and development 8,217 6,781 15,837 13,306
Selling and marketing 3,729 2,639 7,002 5,036
General and administrative:
General and administrative 6,252 5,616 12,534 11,218
Amortization of noncompete
agreements and goodwill 1,318 1,347 2,636 2,688
Stock-based employee
compensation 73 74 146 148
Depreciation 2,495 1,988 4,904 3,830
Total operating
expenses 22,084 18,445 43,059 36,226
Operating income 22,716 10,707 42,943 19,084
Other income (expense):
Interest expense (1,809) (2,462) (4,033) (5,008)
Interest income 816 473 1,457 1,133
Other 4 (67) (17) (74)
Total other (989) (2,056) (2,593) (3,949)
Income before income taxes 21,727 8,651 40,350 15,135
Income tax provision (8,234) -- (15,275) --
Net income $13,493 $8,651 $25,075 $15,135
Basic net income per common share:
Net income available to
common stockholders $0.26 $0.17 $ 0.49 $ 0.30
Weighted average common
shares 51,710 51,125 51,637 51,075
Diluted net income per common share:
Net income available to
common stockholders $0.25 $0.16 $ 0.46 $ 0.29
Weighted average common
shares 54,031 52,840 54,123 52,789
CSG SYSTEMS INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - UNAUDITED
(in thousands)
Six months ended
June 30, June 30,
1999 1998
Cash flows from operating activities:
Net income $ 25,075 $ 15,135
Adjustments to reconcile net income to
net cash provided by operating activities-
Depreciation 4,904 3,830
Amortization 7,764 5,897
Deferred income taxes 4,911 (5,402)
Stock-based employee compensation 146 148
Changes in operating assets and liabilities:
Trade accounts and other receivables, net (3,662) (9,685)
Other current and noncurrent assets (231) (1,180)
Accounts payable and accrued liabilities 1,546 5,194
Net cash provided by operating activities 40,453 13,937
Cash flows from investing activities:
Purchases of property and equipment, net (4,346) (6,647)
Additions to software -- (1,410)
Conversion and other incentive payments (8,205) (640)
Net cash used in investing activities (12,551) (8,697)
Cash flows from financing activities:
Proceeds from issuance of common stock 3,888 2,741
Repurchase of common stock -- (2)
Payments on notes receivable
from employee stockholders 325 --
Payments on long-term debt (37,250) (2,250)
Net cash provided by (used in)
financing activities (33,037) 489
Effect of exchange rate fluctuations on cash (392) 28
Net increase (decrease) in cash
and cash equivalents (5,527) 5,757
Cash and cash equivalents,
beginning of period 39,593 20,417
Cash and cash equivalents, end of period $34,066 $26,174
Supplemental disclosures of cash flow information:
Cash paid during the period for-
Interest $3,689 $4,534
Income taxes $6,029 $828
SOURCE CSG Systems International, Inc.
/CONTACT: Liz Bauer, Vice President Investor Relations of CSG Systems
International, Inc., 303-804-4065/
/Company News On-Call: prnewswire.com or fax,
800-758-5804, ext. 126879/
/Web site: csgsys.com
(CSGS) |
