CSG Systems International, Inc. Reports Second Quarter 2008 Results

Revenues of $116.9 Million;
Net Income of $0.40 Per Share
ENGLEWOOD, Colo.--(Business Wire)--
CSG Systems International, Inc. (Nasdaq: CSGS), a leading provider
of customer care and billing solutions, today reported results for the
quarter ended June 30, 2008.

Second Quarter 2008 Highlights:

-- Results from operations were as follows: total revenues were
$116.9 million; operating income was $21.9 million; and net
income was $13.3 million, or $0.40 per diluted share.

-- Cash flows from operations for the quarter were approximately
$47 million, and were positively impacted by favorable changes
in working capital, primarily as a result of the reduction in
the accounts receivable balance.

-- On April 30, 2008, CSG closed on its acquisition of DataProse,
Inc., a privately-held provider of statement presentment and
direct mail services headquartered in Oxnard, California.

-- On July 14, 2008, CSG announced that it had entered into a
restated and amended multi-year Master Subscriber Management
System Agreement with Comcast, CSG's largest client, which
extends CSG's contractual relationship with Comcast through
December 31, 2012.

-- CSG recently signed a contract with Brink's Home Security,
which will bring 670,000 new customer statements and letters
to our print and mail platform, and further industry
diversification to CSG's revenue base.

"Today's marketplace is more competitive than ever. As consumers
have increasing choices of where to buy, superior customer service has
become a requirement," said Peter Kalan, Chief Executive Officer and
President of CSG Systems International, Inc. "We continue to deliver
innovative solutions that enable our clients to build strong customer
relationships, provide compelling products and services, and allow
them to more effectively engage and transact with their customers in
intelligent ways."

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Summary GAAP Results of Operations Information (unaudited)
----------------------------------------------------------------------
(in thousands, except per share amounts and percentages):

Quarter Ended June 30, Six Months Ended June 30,
------------------------ -------------------------
Percent Percent
2008 2007 Change 2008 2007 Change
-------- ------- ------- -------- -------- -------
Continuing
operations:
Total revenues $116,870 $99,504 17% $230,466 $198,248 16%
Operating
income 21,893 21,161 3% 45,150 41,615 8%
Income from
continuing
operations 13,321 15,622 (15)% 28,160 31,397 (10)%
Discontinued
operations, net of
tax - - - - 269 NM
Net income 13,321 15,622 (15)% 28,160 31,666 (11)%
Diluted earnings per
share:
Income from
continuing
operations $ 0.40 $ 0.37 8% $ 0.85 $ 0.72 18%
Discontinued
operations, net
of tax - - - - 0.01 NM
-------- ------- ------- -------- -------- -------
Net income $ 0.40 $ 0.37 8% $ 0.85 $ 0.73 16%
======== ======= ======= ======== ======== =======
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Second Quarter 2008 Results From Operations

Revenues. Total revenues for the second quarter of 2008 were
$116.9 million, which represents an increase of 17 percent when
compared to $99.5 million for the same period in 2007, and an increase
of three percent when compared to $113.6 million for the first quarter
of 2008.

-- The increase in year-over-year revenues relates primarily to
the additional revenues generated from the businesses CSG has
acquired over the past twelve months, with the remaining
portion of the increase related to organic growth factors.

-- The sequential quarterly increase relates primarily to the
acquisition of DataProse on April 30, 2008.

Results of Operations. Net income presented in accordance with
generally accepted accounting principles ("GAAP") for the second
quarter of 2008 was $13.3 million ($0.40 per diluted share), compared
to $15.6 million ($0.37 per diluted share) for the same period last
year, and $14.8 million ($0.45 per diluted share) for the first
quarter of 2008. The increase in year-over-year earnings per diluted
share is primarily the result of a lower number of outstanding shares
in the second quarter of 2008, due to the completion of CSG's stock
repurchase program in late 2007.

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Supplemental Data
----------------------------------------------------------------------
The following information is provided to assist readers in further
evaluating CSG's performance (in thousands, except per share
amounts):

Quarter Ended Quarter Ended
June 30, 2008 June 30, 2007
---------------- ----------------
Per Per
Diluted Diluted
Share Share
Amount Impact Amount Impact
(1) (2) (1) (2)
------- -------- ------- --------
Certain non-cash expenses:
Depreciation $ 4,007 $0.08 $ 3,038 $0.05
Amortization of intangible assets 5,253 0.10 4,285 0.06
Stock-based employee compensation 2,982 0.06 2,877 0.04
------- -------- ------- --------
Total $12,242 $0.24 $10,200 $0.15
======= ======== ======= ========
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Six Months Ended Six Months Ended
June 30, 2008 June 30, 2007
---------------- ----------------
Per Per
Diluted Diluted
Share Share
Amount Impact Amount Impact
(1) (2) (1) (2)
------- -------- ------- --------
Certain non-cash expenses:
Depreciation $ 7,644 $0.15 $ 5,906 $0.09
Amortization of intangible assets 10,016 0.19 8,524 0.13
Stock-based employee compensation 5,568 0.11 4,852 0.07
------- -------- ------- --------
Total $23,228 $0.45 $19,282 $0.29
======= ======== ======= ========

(1) These items (on a pretax basis) are calculated in accordance with
GAAP, and are reflected as part of continuing operations in the
accompanying Unaudited Condensed Consolidated Statements of Income.
(2) This represents the after tax impact to income from continuing
operations on a per diluted share basis using CSG's effective income
tax rates from continuing operations of approximately 37% and 36%,
respectively, for the quarter and six months ended June 30, 2008, and
36% for the quarter and six months ended June 30, 2007.

Total customer accounts processed on CSG's systems as of June 30,
2008, were 45.4 million, compared to 45.6 million as of March 31,
2008.
*T

Comcast Renewal

On July 14, 2008, CSG announced that it had entered into a
restated and amended multi-year Master Subscriber Management System
Agreement with Comcast that extends CSG's contractual relationship
with Comcast through December 31, 2012. CSG's previous contract with
Comcast was scheduled to expire on December 31, 2008. The new
agreement is effective July 1, 2008, and the expected scope of the
customer care and billing products and services to be utilized by
Comcast under the new agreement is consistent with the previous
contract. See CSG's Form 8-K filed on July 14, 2008, for additional
details and key terms of the new agreement.

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Financial Condition and Cash Flows
----------------------------------------------------------------------
Certain key balance sheet items as of the end of the indicated periods
are as follows (in thousands):

June 30, March 31, December 31,
2008 2008 2007
-------- --------- ------------
Cash, cash equivalents and short-term
investments $148,199 $146,606 $132,832
Net trade accounts receivable (3) 105,669 124,586 114,132
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Certain key operating cash flow items for the indicated quarters then
ended are as follows (in thousands):

June 30, March 31, December 31,
2008 2008 2007
-------- --------- ------------
Cash Flows from Operating Activities:
Operations $28,225 $ 31,538 $ 30,355
Changes in operating assets and
liabilities (3) 19,052 (10,686) (10,807)
-------- --------- ------------
Net cash provided by operating
activities $47,277 $ 20,852 $ 19,548
======== ========= ============

(3) The sequential decrease in net trade accounts receivable in the
second quarter of 2008 is primarily due to the following: (i) the
receipt of a delayed first quarter client payment of approximately
$10 million in April, which resulted in the payment of four monthly
invoices by this client in the second quarter; and (ii) normal
fluctuations in the timing of payments from other clients. These
items also positively impacted the changes in operating assets and
liabilities for the second quarter of 2008.
*T

Full Year 2008 Financial Guidance

A summary of CSG's financial guidance for the full year 2008 is as
follows. Overall, CSG's current expectations are consistent with, or
slightly better than its previous guidance.

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2008 Full Year
---------------------------------------
Revenues $470-$475 million
Earnings per Diluted Share $1.58-$1.64
Cash flows from Operations $115-$120 million
*T

We expect the total of our non-cash items related to depreciation,
amortization of intangible assets, and stock-based compensation for
2008 to be approximately $45 million.

Conference Call

CSG will host a one-hour conference call on Tuesday, July 22, at 5
p.m. EDT, to discuss CSG's second quarter results. The call will be
carried live and archived on the Internet. A link to the conference
call is available at www.csgsystems.com.

Additional Information

For additional information about CSG, please visit CSG's web site
at www.csgsystems.com. Additional information can be found in the
Investor Relations section of the web site.

About CSG Systems

Headquartered in Englewood, Colorado, CSG is a leading provider of
outsourced solutions that facilitate customer interaction management
on the behalf of our clients, generating a large percentage of
revenues from the North American cable and Direct Broadcast satellite
("DBS") communications markets. Our solutions also support an
increasing number of other industries such as financial services,
utilities, telecommunications, and home security. Our solutions manage
key customer interactions such as set-up and activation of customer
accounts, sales support and marketing, order processing, invoice
calculation (i.e., customer billing), production and mailing of
monthly customer invoices, management reporting, electronic
presentment and payment of invoices, automated and interactive
messaging, and deployment and management of the client's field
technicians to the customer's home. Our unique combination of
solutions, services, and expertise ensure that our clients can rapidly
launch new service offerings, improve operational efficiencies, and
deliver a high-quality customer experience in a competitive and
ever-changing marketplace. For more information, visit our website at
www.csgsystems.com.

Forward-Looking Statements

This news release contains forward-looking statements as defined
under the Securities Act of 1933, as amended, 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 news release. These factors include, but are
not limited to: 1) the concentration of approximately two-thirds of
CSG's revenues with four clients; as a result, the loss of business
from any one of those clients could potentially have a material
adverse impact to CSG's financial results; 2) continued market
acceptance of CSG's Advanced Convergent Platform (ACP) and related
products and services; 3) CSG's ability to continuously develop and
enhance products in a timely, cost-effective, technically advanced and
competitive manner; 4) CSG's dependency on the North American
communications industry; as a result, key market factors such as
further industry consolidation, new market entrants that may not be
clients of CSG, economic conditions, and/or the financial status of
CSG clients may affect CSG's ability to maintain and expand market
share; 5) increasing competition in our market from companies of
greater size and with broader presence in the communications sector,
thus exerting greater influence over client buying decisions; 6) CSG's
ability to successfully integrate and manage acquired businesses,
technology or assets to achieve the expected strategic, operating and
financial goals established for such acquisitions; 7) CSG's continued
ability to protect its intellectual property rights; and 8) CSG's
dependency on a variety of computing environments and communications
networks, thus subjecting CSG to the risks of extended interruptions,
outages, unauthorized access and corruption of data. This list is not
exhaustive and readers are encouraged to review the additional risks
and important factors described in CSG's reports on Forms 10-K and
10-Q and other filings made with the SEC.

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CSG SYSTEMS INTERNATIONAL, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS-UNAUDITED
(in thousands, except share and per share amounts)

June 30, December 31,
2008 2007
---------- ------------
ASSETS
---------------------------------------------------------
Current assets:
Cash and cash equivalents $ 128,890 $ 123,416
Short-term investments 19,309 9,416
---------- ------------
Total cash, cash equivalents and short-term
investments 148,199 132,832
Trade accounts receivable-
Billed, net of allowance of $1,557 and
$1,487 105,669 114,132
Unbilled and other 7,319 6,038
Deferred income taxes 10,387 10,657
Income taxes receivable - 2,128
Other current assets 6,217 6,399
---------- ------------
Total current assets 277,791 272,186
Property and equipment, net of depreciation of
$76,883 and $69,565 40,571 32,656
Software, net of amortization of $35,322 and
$34,445 8,157 8,649
Goodwill 91,595 60,745
Client contracts, net of amortization of
$107,998 and $98,822 33,390 31,526
Deferred income taxes 1,055 9,453
Other assets 8,017 7,173
---------- ------------
Total assets $ 460,576 $ 422,388
========== ============
LIABILITIES AND STOCKHOLDERS' EQUITY
-----------------------------------------------
Current liabilities:
Client deposits $ 28,747 $ 26,657
Trade accounts payable 20,470 18,429
Accrued employee compensation 16,281 21,042
Deferred revenue 16,837 17,480
Income taxes payable 2,113 -
Other current liabilities 11,469 7,595
---------- ------------
Total current liabilities 95,917 91,203
---------- ------------
Non-current liabilities:
Long-term debt 230,000 230,000
Deferred revenue 8,650 9,790
Income taxes payable 5,203 4,918
Other non-current liabilities 6,553 3,953
---------- ------------
Total non-current liabilities 250,406 248,661
---------- ------------
Total liabilities 346,323 339,864
---------- ------------
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; 34,937,041
shares and 34,275,280 shares outstanding 629 622
Additional paid-in capital 353,850 350,272
Treasury stock, at cost, 27,956,808 shares
and 27,956,808 shares (667,858) (667,858)
Accumulated other comprehensive income
(loss):
Unrealized gain (loss) on short-term
investments, net of tax (1) 15
Unrecognized pension plan losses and prior
service costs, net of tax (435) (435)
Accumulated earnings 428,068 399,908
---------- ------------
Total stockholders' equity 114,253 82,524
---------- ------------
Total liabilities and stockholders' equity $ 460,576 $ 422,388
========== ============
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CSG SYSTEMS INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME-UNAUDITED
(in thousands, except per share amounts)

Quarter Ended Six Months Ended
------------------ -------------------
June 30, June 30, June 30, June 30,
2008 2007 2008 2007
--------- -------- --------- ---------
Revenues:
Processing and related
services $109,305 $90,313 $213,474 $179,922
Software, maintenance and
services 7,565 9,191 16,992 18,326
--------- -------- --------- ---------
Total revenues 116,870 99,504 230,466 198,248
--------- -------- --------- ---------

Cost of revenues:
Processing and related
services 55,887 43,339 109,024 87,964
Software, maintenance and
services 4,775 6,648 9,990 12,599
--------- -------- --------- ---------
Total cost of revenues 60,662 49,987 119,014 100,563
--------- -------- --------- ---------
Gross margin (exclusive of
depreciation) 56,208 49,517 111,452 97,685
--------- -------- --------- ---------
Operating expenses:
Research and development 17,053 14,127 32,925 27,839
Selling, general and
administrative 13,247 10,719 25,669 21,747
Depreciation 4,007 3,038 7,644 5,906
Restructuring charges 8 472 64 578
--------- -------- --------- ---------
Total operating expenses 34,315 28,356 66,302 56,070
--------- -------- --------- ---------
Operating income 21,893 21,161 45,150 41,615
--------- -------- --------- ---------
Other income (expense):
Interest expense (1,874) (1,895) (3,682) (3,681)
Interest and investment
income, net 1,124 5,071 2,703 10,610
Other, net 1 73 15 135
--------- -------- --------- ---------
Total other (749) 3,249 (964) 7,064
--------- -------- --------- ---------
Income from continuing
operations before income taxes 21,144 24,410 44,186 48,679
Income tax provision (7,823) (8,788) (16,026) (17,282)
--------- -------- --------- ---------
Income from continuing
operations 13,321 15,622 28,160 31,397
--------- -------- --------- ---------
Discontinued operations:
Income from discontinued
operations - - - -
Income tax benefit - - - 269
--------- -------- --------- ---------
Discontinued operations, net
of tax - - - 269
--------- -------- --------- ---------
Net income $ 13,321 $15,622 $ 28,160 $ 31,666
========= ======== ========= =========

Basic earnings per common share:
Income from continuing
operations $ 0.40 $ 0.37 $ 0.85 $ 0.72
Discontinued operations, net
of tax - - - 0.01
--------- -------- --------- ---------
Net income $ 0.40 $ 0.37 $ 0.85 $ 0.73
========= ======== ========= =========

Diluted earnings per common
share:
Income from continuing
operations $ 0.40 $ 0.37 $ 0.85 $ 0.72
Discontinued operations, net
of tax - - - 0.01
--------- -------- --------- ---------
Net income $ 0.40 $ 0.37 $ 0.85 $ 0.73
========= ======== ========= =========

Weighted-average shares
outstanding:
Basic 33,209 41,928 33,147 43,156
Diluted 33,345 42,312 33,267 43,514
*T

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CSG SYSTEMS INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS-UNAUDITED
(in thousands)

Six Months Ended
--------------------
June 30, June 30,
2008 2007
--------- ----------
Cash flows from operating activities:
Net income $ 28,160 $ 31,666
Adjustments to reconcile net income to net cash
provided by operating activities -
Depreciation 7,644 5,906
Amortization 10,606 9,115
Restructuring charge for abandonment of
facilities - 308
Gain on short-term investments (152) (2,355)
Deferred income taxes 8,080 6,574
Excess tax benefit of stock-based compensation
awards (143) (650)
Stock-based employee compensation 5,568 4,852
Changes in operating assets and liabilities:
Trade accounts and other receivables, net 12,533 7,303
Other current and non-current assets 294 (70)
Income taxes payable/receivable 3,369 3,053
Trade accounts payable and accrued
liabilities (5,678) (6,598)
Deferred revenue (2,152) 1,057
--------- ----------
Net cash provided by operating activities 68,129 60,161
--------- ----------
Cash flows from investing activities:
Purchases of property and equipment (9,853) (8,424)
Purchases of short-term investments (19,102) (139,258)
Proceeds from sale/maturity of short-term
investments 9,345 157,300
Acquisition of businesses, net of cash acquired (39,982) (1,400)
Acquisition of and investments in client
contracts (2,346) (5,868)
--------- ----------
Net cash provided by (used in) investing
activities (61,938) 2,350
--------- ----------
Cash flows from financing activities:
Proceeds from issuance of common stock 536 1,435
Repurchase of common stock (1,362) (125,905)
Payments on acquired equipment financing (34) -
Excess tax benefit of stock-based compensation
awards 143 650
--------- ----------
Net cash used in financing activities (717) (123,820)
--------- ----------
Net increase (decrease) in cash and cash
equivalents 5,474 (61,309)
Cash and cash equivalents, beginning of period 123,416 240,687
--------- ----------
Cash and cash equivalents, end of period $128,890 $ 179,378
========= ==========

Supplemental disclosures of cash flow information:
Net cash paid during the period for -
Interest $ 2,979 $ 2,970
Income taxes 4,565 7,244
*T

CSG Systems International, Inc.
Roger Metz, 303-804-4082
Vice President
roger_metz@csgsystems.com

Copyright Business Wire 2008