Good afternoon, ladies and gentlemen. Thank you for standing by. Welcome to the CSG Systems first quarter conference call. During today's presentation, all parties will be in a listen-only mode. Following the presentation, the conference will be open for questions. (Operator Instructions) This conference is being recorded today, Tuesday April 27, 2010. I would now like to turn the conference over to Liz Bauer, Vice President of Investor Relations. Please go ahead.

Thank you, Douglas and thanks to everyone on the call for joining us. Today's discussion will contain a number of forward-looking statements. In particular, these will include statements regarding our projected financial results, our ability to meet our client's needs through our products, services and performance and our ability to successfully integrate and manage acquired businesses in order to achieve their expected strategic operating and financial goals. While these statements our best current judgment, they are subject to risks and uncertainties that could cause our actual results to differ materially. Please note that these forward-looking statements reflect our opinions only as of the date of this call and we undertake no obligation to revise or publicly release any revisions to these forward-looking statements in light of new information or future events. In addition to factors noted during this call, a comprehensive discussion of our risk factors can be found in today's press release, as well as in our most recently filed 10-K and 10-Q, which are available in the Investor Relations section of our website. Also, we will discuss certain financial information that is not prepared in accordance with GAAP. We use this non-GAAP information in our internal analysis in order to exclude significant items that may have a disproportionate effect in a particular period. Accordingly, we believe isolating the effects of such an event enables us, as well as investors to consistently analyze the critical components of our operating results and to have meaningful comparisons to prior periods. For more information regarding our use of non-GAAP financial measures, we refer you to today's earnings release and non-GAAP reconciliation tables on our website, which will also be furnished to the SEC on Form 8-K. With me today on the phone are Peter Kalan, our Chief Executive Officer and Randy Wiese, our Chief Financial Officer. I would now like to turn the call over to Peter.

Thank you, Liz, and thanks to everyone for joining us on the call today. I'm pleased to report that CSG continues to execute well, posting first quarter revenues of $130 million and non-GAAP EPS of $0.49 per share. Our revenues 5% from the first quarter of 2009 and 2% from the fourth quarter. Our revenue growth for the quarter includes the market share wins that we had last year, which resulted in adding 3 million new cable and multi-play customers on to our next-generation customer care and billing solutions. We believe that our value proposition, providing highly scalable integrated outsource solutions that maximize and monetize every customer interaction will help fuel our growth in the future as we continue to help our clients execute on their business objectives. And now, more than ever, our clients' businesses are becoming more complex. Operators today are continually investing in and expanding their network capability so that they can provide their customers with more choice in how they access their services. We continue to see more devices introduced that give the consumer the freedom to obtain their content anywhere at any time. Our clients are focused on providing an even more engaging and rewarding experience so that they are the source that consumers turn to for their communications and content needs. Consumer spending on communication services are projected to increase to $200 per month in 2015 from the current spend of $130 a month according to STRATACACHE [ph] and not surprising to us, video spending represents one-third of consumer spend. We, along with a host of others, believe enabling customers to have access to content and information on a multitude of devices will be a key contributor to that growth. Cisco expects that 9% of all Internet traffic will be video content by 2013.…

Thank you, Peter, and welcome to all of you on the call today. I'm happy to share with you the financial results for our first quarter and outlook for 2010. As Peter just mentioned, this quarter shows the benefits of many of the successes we had in 2009.We are pleased with these solid results as we begin the New Year. They reflect key characteristics of our business, strong organic revenue growth, solid margins, consistent cash flows, and an excellent balance sheet. Now, I'd like to walk you through the financial results for the quarter. Total revenues for the quarter were approximately $130 million, represented an increase of 5% year-over-year. There are a few things important to note when looking at these revenues. First, this is the first quarter that reflects the full benefit of the successful conversion of over 2 million Charter subscribers late last year, as well as the recently renewed DISH Network contract, thus providing investors the ability to see the full impact of these two important client milestones. Second, this 5% revenue growth is all organic and represents an increase from the organic growth rate of 3% that we experienced in 2009. Revenues generated from Comcast and DISH Network were 24% and 18%, respectively, for the first quarter, consistent with the fourth quarter 2009 percentages. Our non-GAAP operating income for the quarter was $24 million or 18.5% margin. This non-GAAP operating income excludes expenses related to the transition of our data center, amounting to approximately $8 million. This margin is slightly better than anticipated due to the favorable timing associated with the hiring of personnel and equipment purchases. Our GAAP operating income for the first quarter was $16 million or 13% margin. Non-GAAP EPS for the first quarter was $0.49, which compares to $0.50 for the same…

Thank you, sir. (Operator Instructions) And our first question comes from the line of Ashwin Shirvaikar with Citi. Please go ahead. Ashwin Shirvaikar – Citi: Hey guys, good quarter and guidance.

Thank you.

Thanks, Ashwin. Ashwin Shirvaikar – Citi: And also nicely reorganized earnings release. So thank you, Liz.

Thank you, Ashwin. Ashwin Shirvaikar – Citi: So one question is to what extent do you now have the data center benefit in your guidance? And then also the tax benefit, isn’t that a tax benefit from paying down the $120 million on the convert? Is that in your guidance also?

Two things, Ashwin. The guidance this time and last time already reflected the benefit of the data center in the second half of the year. So there is really no change among guidance this time or last time. It does reflect the benefit and that's why you see the increasing margins in the second half of the year. And the second thing, on your question on the tax benefit, the tax benefit really is on the balance sheet as it relates to the convertible debt, relates to the deferred tax liabilities. It does not come to the P&L; it's really just a balance sheet benefit and cash flow. Ashwin Shirvaikar – Citi: Okay, okay. So in terms of the cash flow benefit then, is that timing in 2010 or '11? Can you talk a little bit about that? Just clarify where I should attend.

What you will see is you are starting to see some of it in the first quarter, Ashwin. So you can use that as the base to look across the rest of the year. The benefit from the convertible debt that was issued in 2004 existed because we got a 9% tax deduction versus the coupon at 2.5%. And as a result of us buying back much of that debt, the deferred tax liability that existed for it is pushed out multiple years, but you will see less tax benefit coming through on the cash flow statement as a result of this. But you see – you saw most of that impact in the first quarter already. So I think if you look at the first quarter and look at the deferred tax benefit coming to the cash flow statement, you can use it as your basis of estimations for the remainder of the year and actually going into 2011 as well. The new convertible debt that we issued in March does not have the same tax benefit conventions. It's a different instrument, so you won't see the same type of tax benefits coming through cash flow going forward. Sorry, that's a long answer, but – Ashwin Shirvaikar – Citi: Trying to digest it here, but that seems to make sense. I mean, I think we have already had some of that benefit, but not all of it in our numbers here. The – so the – one other question I have more on the contract side. Universal Sport and then Pete, you talked about UFC. These kinds of contracts, how does the pricing work, how does the contract dynamics work in – because these are not your traditional kind of contracts. So could you explain that a bit and how does it change the sort of the repeatability that we come to expect from – revenues from the company?

You bet, Ashwin. This is Peter. The nature of the business is it's got similarities to what we do for other clients where we are getting paid as we deliver the service and it's transaction oriented. So we are not doing large software transactions where we are recognizing revenue upfront. It's typically directly related to the business that we are supporting on behalf on our clients, whether that's UFC or Universal Sports. As their businesses grow and getting consumers to engage and consume content through these non-traditional, nonlinear fashions and they grow those subscribers or consumers using that, we will see our revenues grow consistent with that. We are typically getting paid a transaction fee based on the service being delivered. It could be a charge per transaction or a percentage of the economic stream that comes through with the client, but it's similar in fashion to what we do on our traditional businesses that is directly related to the number of accounts or consumers that we are supporting. And so you will see a repeatable aspect to it or a recurring revenue model as our clients build sustainable business models. Ashwin Shirvaikar – Citi: So – these – and we can follow up later on this. But I don't want to hog the call, but these contracts then sort of less – give you less visibility than your traditional cable contract?

In the near term, absolutely, because these are developing business models for people like Universal Sports and UFC. They have multiple channels. Ultimate Fight Championship provides their content through cable providers and satellite providers on pay-per-view and they are getting distribution through cable channels such as Spike and, I believe, a few others. And so they have other revenue models that they are getting today for the distribution of their content and they are using this as a direct-to-consumer model, which is in its early stage of growth for consumers who want to really circumvent around their other traditional ways in getting content. So it's – it doesn't have the visibility just because our clients haven't built the revenue models up. They don't have the strength of consumer acceptance to the same level they do through their traditional distribution. But as their business models build kind of a repetition with consumers, we are going to benefit through that and we'll get that visibility as their business models mature. Ashwin Shirvaikar – Citi: Okay, got it. Thank you.

Thank you. Our next question comes from the line of Tom Roderick with Thomas Weisel Partners. Please go ahead. Chris Koh – Thomas Weisel Partners: Hey, guys. This is Chris Koh for Tom Roderick.

Hi, Chris. Chris Koh – Thomas Weisel Partners: Good afternoon. Good job on the quarter.

Thanks, Chris. Chris Koh – Thomas Weisel Partners: No problem. So as far as – you mentioned that content product or Ashwin touched on this, to piggyback on that, I don't know if I missed this, but did you guys give out percentage for your non-cable revenue this quarter?

Randy, you want to take that?

Yes.

It's approximately 16% for the quarter. Chris Koh – Thomas Weisel Partners: 16%? Okay, great. So it looks like revenue was a little bit higher than we were modeling and also the street consensus. Would say it's fair to say that a lot of that beat was due to – was it just normal timing issues on the processing side or where there actually like a noticeable pickup in demand for like whether at the Interactive Messaging or content products?

Two primary things for that, Chris. One is that this is the first quarter in which we have the full benefit of the subscribers that were converted on the second half of last year. So that's – that's primarily the largest add-in. But we also had some good demand on some of our other products, high end, some of the marketing services products. So it was a good quarter from a demand standpoint, but also the benefit of the successes we've had in converting the subscribers in the second half of the last year really came through in the first quarter.

And Chris, we've got such a broad offering, whether it's what we do on paper, electronic to workforce management solutions or Interactive Messaging as Randy mentioned. We've got a broad platform of products that are – that can really speed demand pickup or consumption. And so there is not typically one or two items in this quarter that we've seen. It's pretty broad, that's just general consumption that's been a benefit to us. Chris Koh – Thomas Weisel Partners: That's definitely good to hear. And then as far as – I was wondering on Amdocs, they've been pretty bullish on the whole cost of hardware with their new CES 8 release. Have you seen any change in the competitive environment based on CES 8 yet?

I don't know about their efforts to bring CES 8 to the marketplace. I – from a hardware perspective, I don't think that's a key piece that we look to be competing in. Probably most importantly, Chris, is that we've had some very good wins with our assets, our ACP application, our commercial services, our WiMAX offerings that are extension of our existing next-generation platforms. So from a competitive position, we continue to see wins and good foundational relationships with our clients that we continue to build from. Chris Koh – Thomas Weisel Partners: Great. And then last and most importantly, when do you think Tim Tebow [ph] makes it on the field?

I think spring training starts or the summer camp starts in July. So I think it will be at the practice facility there for you. Chris Koh – Thomas Weisel Partners: That should be an interesting – that's certainly been a hot topic in recent weeks. So let's see how that goes.

Good to know that it's a big topic in San Francisco. Chris Koh – Thomas Weisel Partners: Hey man, that's what ESPN does, right? That's what cable does, national distribution, right?

Absolutely. And congratulations on your guys' merger with Stifel Nicolaus. Chris Koh – Thomas Weisel Partners: Stifel, man. I don't know how many times we tried to correct, it's Stifel. Thanks.

Okay.

Thank you. Our next question comes from the line of Scott Sutherland with Wedbush Securities. Please go ahead. Scott Sutherland – Wedbush Securities: Great, thank you. Good afternoon and congratulations on the improved revenue growth.

Thanks, Scott.

Thank you, Scott. Scott Sutherland – Wedbush Securities: Sorry about the background noise. I'm going to try to ask a couple of questions and go on mute. First of all, can you – you've been migrating some subscribers over from other – some cable operators. Is there anymore sort of existing operators that could be migrated over anything else in the pipeline on the bargain market? And then secondly, you've got the capital structure now redone with the new debt structure. What's your thoughts on getting more active on the M&A market again?

Well, first of all, on the M&A market, we continue to keep our eyes open for opportunities on that. We were not active in 2009 and part of our decisions around what we wanted to do on our convertible debt and as Randy termed it, term out that debt early so that we had really flexibility and stability in our capital base and not have to worry about whether the markets are open next year. That was something that we felt was important to us as we plan for how we invest in the business, both from an R&D perspective, as well as an M&A perspective. So we have teams out looking for opportunities that are natural extensions and fits for what we need as businesses. The marketplace that we are supporting today is going through a significant change. The communication providers are really seeing an expansion of consumer choice that they have to prepare for, letting the customers choose both the content, the device, and the place on which they consume it. And so we are looking at how we are positioned for that to make sure that we are well positioned with our clients as their businesses evolve. From a sub perspective, there is – we are always looking to pick up more market share from our clients and from prospects, but there is not much to talk about at this point. I think that's – that would be early to kind of give any type of reference on those topics. Scott Sutherland – Wedbush Securities: Okay, great. Thank you.

You bet.

Our next question comes from the line of Sterling Auty with JP Morgan. Please go ahead. Sterling Auty – JP Morgan: Yes, thanks. Hi, guys. Just a couple of housekeeping ones. First on the tax rate, tax credits that you mentioned, is that specifically related to R&D tax credits that you are waiting to come back on?

Exactly. You got it, Sterling. Sterling Auty – JP Morgan: Okay. And I mean, so basically if we want to be on the same side, should we think about 38% and so we see some movement on getting that reestablished?

It depends how fast Congress gets at it. I think the – you should expect it to occur in the second or third quarter. Sterling Auty – JP Morgan: Okay. And in terms of the data center migration, I think we talked about the idea that you will be rolling over and some of – more and more processes will come up on the new data center as you kind of phase into the new one and off the old one. Is there actually some new – some of the processes actually up and running on the new data center and how quickly should we think about adding additional processes in each of the next couple of quarters?

I think the way you should look at it, Sterling, is that it has been a phased approach where we've moved some of the open systems prior to the mainframe migration that's scheduled for the second quarter. So we've made a lot of progress to date. When we complete the migration in the second quarter, we will be substantially done. So you will see the major benefit of the transition occurring in the first half of the year. There are some ramp-up activities that we will do on some of the smaller systems that will happen in the third quarter, but the first and second quarters will be essentially be done.

And the vast majority of our benefits will be recognized starting third quarter.

Yes, the costs for the transition are really quite heavy in the second quarter. You can see that from my guidance. So the cost to transition will be mainly done in the second quarter. And the benefits from the transition will be mainly in the second half of the year. Sterling Auty – JP Morgan: Okay. And then on the customer interaction deal, you talked about Microsoft. If you said it, I missed it, but I'm kind of curious how long was the gestation period for that deal given that it's kind of a new segment and obviously, I think for them it's a new entrée in terms of the way that they are interacting with the customer?

Sterling, you are right. It's absolutely a new way for them to think about engaging with consumers because historically they haven't been really in the forefront of acting with the consumers. It's an interesting dynamic, because we've had a business relationship with Microsoft for several years because of the platforms that we use as part of our solution set. We've worked closely with them as part of our Content Direct offering and so we've had some business offerings there and we've been able to build off of that, as well as the AT&T relationship that we have to help bring our offering to them as they've seen a broader working relationship with us. So I don't want to say this is a long sell cycle that went through it, but it's not that we walk through the door and they had to get to know us for the first time and we brought this together. Sterling Auty – JP Morgan: Okay. Last question from my end is you talked about kind of a – bit of a change in tone, not ready to say, listen, it's all behind us, but in terms of when you look at your core cable customers and look at the conversations that are going on, is that change in tone just around the fact that they are ready to increase the activity in certain projects or is it because they are feeling more comfortable on where the subscriber base? What's kind of driving that change in tone and when are you hopeful that that leads to increased signing on the dotted line for new initiatives?

I would kind of relate it to what they are seeing in their businesses, that their interactions with their customers and how they think about enhancing the customer experience in the competitive environment, how they think about new services they are going to bring, whether it's WiMAX or any type of new content offering is causing them to think about how do they manage that relationship differently. And so we are seeing an increased focus in their business operations around things that we could help them with and hence, the conversations are picking up associated with that. I'm hesitant to say I think it's a three, six, nine, 12-month period in which contract signings come up, because there still needs to be comfort on their side that the investment is going to get the immediacy of return that they typically look for in these types of economic times. Sterling Auty – JP Morgan: All right, great. Thank you.

You bet.

And our next question comes from the line of Shyam Patil with Raymond James. Please go ahead. VJ Corey – Raymond James: Hi there. This is VJ Corey [ph] filling in for Shyam.

Hey, VJ [ph]. VJ Corey – Raymond James: Hey, how are you doing? My first question is how should we think about software and services gross margins going forward?

I think you should look at the historical margin, they probably are anywhere from 25% to the low-30%, unless there is a large software transaction that incurs in the quarter, then they would pop up. But we don't foresee that. So I think if you look at it, what it's done historically and use that, I think you are pretty safe. VJ Corey – Raymond James: Okay, great. And my second question is how big do you think marketing services business would get over the next few years and are there any areas of the marketing services in which you are not currently involved in, but the opportunity?

Just to make sure from definitional perspective, when you say marketing services, can you help define what you are using as that? VJ Corey – Raymond James: Well, more on your – for your main business in cable and satellite.

Well, in our marketing services business, just to help kind of define it from our perspective, that's really a scope of capabilities that we provide to our clients to help them deliver messages traditionally through the paper forms and through their statements to put information in the statements to help them and their partners bring brand awareness and awareness of product. It's difficult to define that market because we've had great success on the paper side, but we believe there is the ability to extend that to the electronic side and the web side as well. But when we look at it, we've got a large client base in which we are doing quite a few statements and we'll just continue to look to broaden those interactions but within the paper based medium, as well as the electronic mediums where we are today. So we think it's got some growth opportunities, but there is not a way for us just to fully define how big the market is because a lot of it electronically is kind of untouched today. VJ Corey – Raymond James: Thank you.

You're welcome.

Thank you. (Operator Instructions) And our next question comes from the line of Karl Keirstead with Kaufman Brothers. Please go ahead. Shateel Alam – Kaufman Brothers: Hi, this is Shateel filling in for Karl. Thanks for taking my question. I have a question on your margins. So you increased your margin assumption from mid-18% to 19%. I was hoping you could give us a little more color on what's driving some of that margin expansion. You just kind of re-priced a big part of your book with the Comcast and DISH. I would think at some sort of price concessions, what's helping you exactly on the margin line that’s giving you that confidence there?

Sure. A couple of things, one is the benefit of the additional subscribers we converted last year. You get some scale from that and we are seeing the full scale of that happening in the first quarter. Also, on the DISH renewal, there was no price concession, if you recall, from last year. We talked about this that the expectations year-over-year is that it would not be impactful to our margins at all. So those are the two factors, I think, you touched on. The other one is that we did anticipate making some investments in the first half of the year that have been a little bit pushed out to the second half of the year. So our expectations of performance for the year – the second half of the year are very consistent with what we had before. We just performed better in the first half than we anticipated when we gave the guidance a couple of months. Shateel Alam – Kaufman Brothers: Okay.

Just to reinforce that, this is the first full quarter of the new DISH contract and the DISH revenues were 18%, pretty consistent with fourth quarter last year.

Yes. Shateel Alam – Kaufman Brothers: Okay, thanks. That's helpful.

Okay.

Thank you. Our next question comes from the line of Shaul Eyal with Oppenheimer & Company. Please go ahead. Shaul Eyal – Oppenheimer & Company: Thank you. Hi, good afternoon, guys. Good quarter, good guidance, congrats.

Thank you. Shaul Eyal – Oppenheimer & Company: Quick question – two quick questions. Next month, obviously the National Cable Show, anything new – and again, I'm not trying to front-run the event, but any new product announcements, anything big we could be expecting during that event?

Shaul, this is Liz, obviously. You will be seeing us show some of the Quaero assets that have been integrated into our ACP platform that are focused around much of our customers using their data and helping them operationalize that data and use it more effectively. So I think that will be one of the key things that you will want to look at, as well as the entire interaction management suite, how it's integrated together. But I think the most interesting thing will be how we are looking at those marketing analytics and allowing our customers to use their data in a more efficient and effective manner. Shaul Eyal – Oppenheimer & Company: Got it. And again, kind of not for the sake of front-running fiscal '11, 2011, you are sitting down with your customers on kind of long-term planning, what are they telling to you about their thinking about 2011 from a product, from a strategic perspective or is it too early at this point?

Well, I would tell you that what we see is the same thing you hear in the marketplace today. They are talking about small to medium-size businesses and how they look to take advantage of that marketplace, how they look to expand their networks through what they are doing with WiMAX and you see it happening with Wi-Fi hot spot that they are putting up. They are looking for ways to extend the accessibility of their networks and through that, that's going to give them the ability to reach their customers in different ways and then continue to layer on products that can reach out to those customers to deliver content and information. So we see that as a build from where they are today and they are – it's not a big bang new product, it's a natural extension of what they've already started with their network extensions and what they are doing with the small to medium-size businesses. Shaul Eyal – Oppenheimer & Company: Got it. Thank you very much. Good luck.

Thanks.

Thank you. (Operator Instructions)

Okay.

I show no further questions in queue. I'd like to turn the call back over to management for closing remarks.

All right. Well, thank you, Douglas. I want to thank everyone on the call for their support. We are very excited about what we were able to do in the first quarter as we continue to come through a down economy and we feel good about our outlook for 2010 and we look forward to future reporting of results as we get through the next quarter. Thanks a lot.

Thank you. Ladies and gentlemen, this concludes the CSG Systems first quarter conference call. If you like to listen to a replay of today's conference, please dial 303-590-3030 or 800-406-7325 and enter the pass – the access code 4271380. ACT would like to thank you for your participation and you may now disconnect.