This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

TV-Billing Company Takes Radical Turn

NEW YORK ( TheStreet) -- CSG Systems (CSGS - Get Report), a provider of outsourced billing and account management, has, indirectly, as many customers as the largest companies in the U.S.

The Englewood, Colo.-based company is focused largely on the cable and direct broadcast satellite (DBS) market in North America. CSG's Advanced Convergent Platform (ACP) enables its clients to handle the entire lifecycle of a customer, from account setup, order processing, invoice production, billing and cancellation. Over 45 million subscribers' services are processed through the company's systems. CSG's four largest clients account for nearly 65% of sales: Comcast (CMCSA - Get Report), DISH Network (DISH - Get Report), Time Warner (TWC - Get Report) and Charter (CHTR - Get Report).

CSG's many attractive points include:

Stable, recurring revenues: All of the company's main contracts run through at least 2012, and some farther out than that. High visibility and reliability allow the company to be more aggressive when making investments.

Very high switching costs: A client spends months to years and millions of dollars migrating on to CSG's platforms, and the cost in both time and potential business interruption makes it difficult to move off the system, unless there are significant economic reasons for doing so.

Cash-cow business: CSG has produced stable free cash flow margins right around 25% of sales over the past five years. Free cash flow has exceeded operating earnings in each of the past five years, a real rarity, and a sign of high quality earnings. Free cash yield at $20 is about 16% -- compare that to a bond yield!

Revenue growth has been stable at right about 5% to 7% a year, as the firm added subscribers on to its platform and enjoyed escalation clauses in its long-term contracts. The biggest risk in the stock has always been the heavy customer concentration, which in 2008 allowed Comcast to renegotiate its contract at lower payment rates. The threat of losing one of its "big four" customers has always kept the valuation relatively low. Additionally, a data center migration from First Data to Infocrossing has created some non-recurring costs that have held down earnings per share in 2010.

However, CSG is about to change dramatically.

In late September, CSG announced a transformational move with its $372 million bid to acquire U.K. billing provider Intec. Intec is a similar business to CSG, but focuses on the telecommunications market, servicing such multinational telecoms as Vodafone (VOD), China Mobile (CHL) and AT&T (T - Get Report). Intec brought in about $266 million in 2009 at operating margins around 16% -- similar to CSG.
1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
CMCSA $60.95 0.00%
CHTR $212.67 0.00%
DISH $47.39 0.00%
CSGS $44.27 0.00%
T $38.91 0.00%


Chart of I:DJI
DOW 17,750.91 -140.25 -0.78%
S&P 500 2,063.37 -18.06 -0.87%
NASDAQ 4,763.2240 -54.37 -1.13%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs