CSG Systems International Reports Results For Third Quarter 2016

CSG Systems International, Inc. (Nasdaq: CSGS), the trusted global partner to launch and monetize digital services, today reported results for the quarter ended September 30, 2016.

Key Highlights:
  • Third quarter 2016 financial results:
    • Total revenues were $189.3 million.
    • GAAP operating income was $36.6 million, or 19.3% of total revenues and non-GAAP operating income was $43.9 million, or 23.2% of total revenues.
    • GAAP earnings per diluted share (EPS) was $0.55. Non-GAAP EPS was $0.75.
    • Cash flows from operations were $8.7 million.
  • CSG declared its quarterly cash dividend of $0.185 per share of common stock, or a total of approximately $6 million, to shareholders.
  • During the third quarter, CSG converted approximately one million customer accounts onto its cloud-based Advanced Convergent Platform (ACP) for a total of approximately 1.6 million conversions year-to-date. Additionally, CSG converted approximately 500,000 more customer accounts in October 2016.

"I am really pleased with how we are executing in a challenging environment," said Bret Griess, president and chief executive officer for CSG International. "We continue to move market share off of competitors' solutions and onto our cloud-based platforms. We are expanding our reach into the broadband and cable space internationally with our recent win at Cablevision Argentina, and we are strengthening and expanding our relationships with carriers around the globe with our managed services offerings. Our successful execution on our strategy drives profitable revenue growth and long-term shareholder value."

Financial Overview (unaudited)

(in thousands, except per share amounts and percentages):
    Quarters Ended September 30,     Nine Months Ended September 30,
        Percent         Percent
2016 2015 Changed 2016 2015 Changed
Revenues $ 189,311 $ 186,960   1 % $ 565,789 $ 555,232   2 %
GAAP Results:
Operating Income $ 36,598 $ 31,021 18 % $ 107,263 $ 79,070 36 %
Operating Income Margin 19.3 % 16.6 % 19.0 % 14.2 %
EPS $ 0.55 $ 0.50 10 % $ 1.52 $ 1.17 30 %
Non-GAAP Results:
Operating Income $ 43,893 $ 40,303 9 % $ 130,540 $ 106,031 23 %
Operating Income Margin 23.2 % 21.6 % 23.1 % 19.1 %
EPS $ 0.75 $ 0.72 4 % $ 2.22 $ 1.84 21 %
 

For additional information and reconciliations regarding CSG's use of non-GAAP financial measures, please refer to the attached Exhibit 2 and the Investor Relations section of CSG's website at www.csgi.com.

Results of Operations

Revenues: Total revenues for the third quarter of 2016 were $189.3 million, a 1% increase when compared to revenues of $187.0 million for the third quarter of 2015, and a slight decrease when compared to revenues of $190.3 million for the second quarter of 2016. The year-over-year increase in revenues is attributed to the growth of CSG's cloud and related solutions revenues, resulting primarily from the conversion of customer accounts onto ACP over the past year. The sequential quarterly decrease is primarily due to lower software and services revenues generated during the third quarter, which was offset to a certain degree by the continued growth in CSG's cloud and related solutions revenues.

GAAP Results: GAAP operating income for the third quarter of 2016 was $36.6 million, or 19.3% of total revenues, compared to $31.0 million, or 16.6%, for the third quarter of 2015 and $29.4 million, or 15.4% of total revenues, for the second quarter of 2016. GAAP EPS for the third quarter of 2016 was $0.55, as compared to $0.50 for the third quarter of 2015, and $0.33 for the second quarter of 2016.

The year-over-year increases in GAAP operating margin and GAAP EPS is mainly due to the scale benefits from adding more customer accounts to CSG's cloud solutions, and operational cost improvements. The sequential quarterly increase in GAAP operating margin and GAAP EPS is due mainly to the negative impact of the restructuring and reorganization changes incurred during the second quarter of 2016. In addition, in the second quarter of 2016, GAAP EPS was also negatively impacted by the loss on the repurchase of the 2010 Convertible Notes. The repurchases were done in conjunction with the refinancing of this instrument earlier this year.

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