Good day, ladies and gentlemen. Thank you for standing by. Welcome to the CSG Systems Fourth Quarter Conference Call. [Operator Instructions] This conference is being recorded today, February 7, 2012. It is now my pleasure to introduce our host for today, Ms. Liz Bauer. Please go ahead.

Thank you, Diana, and thanks to everyone for joining us. Today's discussion will contain a number of forward-looking statements. These will include, but are not limited to, statements regarding our projected financial results; our ability to meet our clients’ 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 reflect our best current judgments, 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 revision to these forward-looking statements in light of new or future events. In addition to factors noted during this call, a more comprehensive discussion of our risk factors can be found in today’s press release, as well as our most recently filed 10-K and 10-Q, which are all available on 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. We believe that isolating the effects of such events enable 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. With that, I'd like to now turn the call over to Peter.

Thank you, Liz, and thanks to everyone for joining us on the call. For the fourth quarter of 2011, we generated revenues of $188 million and non-GAAP earnings per share of $0.64, both of which were an improvement over our third quarter results. For 2011, we generated revenues of $735 million and non-GAAP earnings per share of $2.25, which reflects the first full year of the financial performance of the Intec Telecom acquisition, which closed in November of 2010. During 2011, we undertook a major transformation of our company to become a global leader of business-enabling solutions. And while not everything has gone as perfectly and as quickly as I would have liked, I'm pleased with how the 2 companies have come together to help make our clients successful. The cooperation and teamwork exhibited between employees who did not know each other a year ago is very gratifying to see. The knowledge sharing and transfer between various departments and functions is occurring naturally and freely. The leveraging of the organization's strengths to help our clients be successful is gaining momentum. I think we're through the integration phase of the Intec acquisition, and are now moving into the execution phase of this multi-year transformation of our company. Importantly in 2011, we continued to strengthen our position with the leaders in the communications industry, ranging from our 7-year renewal with DISH Network to our recently signed agreements with MTN South Africa for a multi-year services engagement and our enterprise license and services agreement for our Mediation solution with America Movil. Our largest clients, Comcast and Time Warner, increased their spending with us by over 5% and 10%, respectively. And DISH, who we anticipated seeing a 10% to 15% reduction in spending in 2011 as a result of their contract expansion, continued to…

Thank you, Peter, and welcome to all of you on the call today to discuss our financial results for the fourth quarter and full year of 2011, as well as our outlook for 2012. Overall, from a financial perspective, we did not achieve what we originally sought out to accomplish a year ago. We've set our financial goals high. And due to a variety of reasons, some of that were within our control and some of that were not, we fell short of our original goals. We realize that the transformation of this company will take longer than we originally anticipated, but we remain very excited about the opportunities we see before us. As I walk you through our financial results, I want to remind you that when you compare our year-over-year performance, the fourth quarter and full year of 2010 include only one month of Intec's financial results, December of 2010, since the acquisition closed on November 30, 2010, whereas, our financial results for 2011 reflect a full 12 months of Intec operations. Now on to the results. Total revenues for the quarter were $188 million, up 22% over the same quarter last year. Full year revenues were $735 million, up 34% over the prior year. Sequentially, fourth quarter revenues were up $5 million or 3% from the third quarter, with the strength of the quarter driven primarily by several year-end software license upgrades and special project work on the processing side of our business. Our 2011 performance reflects the progress we have made in diversifying and expanding our customer base, geographical markets and delivery capabilities illustrated as follows. First, in 2011, we had 3 material clients that each individually have generated revenues over 10% of our total revenues: Comcast, DISH Network and Time Warner. Together, they were 42%…

[Operator Instructions] Our first question comes from the line of Suhail Chandy with Wedbush.

This is Suhail for Scott. Three questions, if I may. One, is it possible for you to kind of give us a break -- slight breakup, percent of revenue of software license versus maintenance and professional services because, obviously, these things are now kind of sizable, right? Any ballpark numbers would be very helpful.

So your question is to break out maintenance versus software license revenue because we can...

Yes, right.

Yes, versus services.

If there are anything directionally, you can...

Yes, I think you can -- yes, I think what you can probably do is -- we don't break it out separately, but if you look at some of our past communications on this, I think the way I'd look at this is that if you look at the Intec business prior to acquisition, they were doing about $20 million to $25 million in software on an annual basis and CSG software is relatively insignificant. In their professional services, we're probably in the $85 million to $95 million range. In CSG, we're about $10 million. So again, if we use those directionally, I think that gets you there and the balance would be the maintenance.

Got it. Now that's helpful. Second question if I may, again, a small housekeeping item. Can you remind us how much remains in authorized stock repurchase?

How much remains in our authorized stock repurchase?

Yes.

Yes, approximately 4 million shares.

Okay, great. And last question, trying to understand the puts and takes into the guidance here. So correct me if I'm wrong, but the range is completely a reflection of the Comcast market consolidation that you've seen. But other than that, everything remains intact as far as the agreement goes with [indiscernible] And the agreement is probably going to get -- goes in for renewal some time in 2012, right?

What was the last part about what happens in 2012?

Right, the Comcast agreement.

The Comcast agreement, yes. The Comcast agreement is, we're expecting to renew that during 2012 and so your question is, the only thing that is identified as a change in our guidance from a business perspective is those subscribers that are migrating off of our system has an impact of about $5 million. So that's, I think, that's a fair statement that, that's the only change in the underlying business.

Yes.

And our next question comes from the line of Daniel Meron with RBC Capital Markets.

Good to see that you're executing on the targets for this quarter. A quick question on the outlook. Peter, I think you mentioned that you won a major cable operator in North America. Can you just provide a bit more color on the side of this operator and what's the operational impact on revenue and the OpEx this year?

So for our business, Daniel, it is one of the top 10 cable providers in North America, we won't name them at this point as we work through the project with them. They are a client that has been evaluating how they get off of a legacy system and move to a new solution. From a revenue perspective, this is a license and services engagement that we'll recognize over the life of the services implementation, the implementation period, so you're probably looking at somewhere about roughly around the 18 months for the project. From an OpEx perspective, it doesn't really have any step-up in OpEx. It will be use by our existing services staff to do the deployment of the solution on behalf of our client.

Okay. That's very helpful up here. And another question, you guys seem to be a little bit more conservative than a couple of other vendors in this space. Is it just the segments that you guys are operating in? And then related to that, what kind of growth, maybe I missed it during the opening remarks, what kind of growth do you expect from cable this year versus the Mediation business on an apples-to-apples basis?

Daniel, we didn't give actually breakouts between growth, between cable and the other pieces. I guess if we were to give you some more color in our outlook, one is, we believe that our broad business between our cable and our internationals business has stabilized versus some of the early stages of what we saw of our expectations back in 2011. But we're cautious as we look at 2012 on several facets. One is, we continue to be cautious about the worldwide economic climate, whether it's the challenges in Europe, still some of the activities in the Middle East and Northern Africa, the challenges in our own U.S. economy that seem to be improving a little bit, but we're still cautious. We also recognize that for this business, the timing of deals when they're signed as well as the timing and speed of which we implement a project for a client could have an impact to the revenues, and so we're cautious around those aspects because we think there's a lot of behavior by clients that we can't always control but we look to try to drive. And so those are aspects that cause us to be concerned about being overly aggressive and so we have provided a range that we feel comfortable based on the markets and the dynamics of clients as we understand them today.

[Operator Instructions] Our next question comes from the line of Sterling Auty with JPMorgan.

I just wanted to continue on that line of questioning. So even if we add back the $5 million of Comcast revenue that you lost and you're barely above flat in terms of the outlook, so is there anything -- I just want to clarify, it sounds this way, but is there anything in kind of your recurring services business that you're expecting to decline because of either the pricing or volumes or other factors? Or is simply the flat-to-down revenue, the $5 million-plus an assumption, maybe you don’t close as much software and services revenue for 2012?

We are not expecting any other significant change to our processing business. We believe that we have stability. But as I mentioned before, Sterling, on Daniel's question, we're cautious about how some of the spending by clients may be and new logos may be for us in 2012 and whether that has any downward pressure on our business that we experienced in 2011.

And when you look at that part of the business, if you were to split it between legacy, CSG and Intec, which of the areas that you're more concerned or you're baking in more prudence in terms of the outlook for 2012?

Clearly, a lot of the macroeconomic items we talked about have to do with software and services, whether it be the challenges in Europe, the challenges in the Middle East and Northern Africa, as well as our APAC challenges of rebuilding the sales organization and not having the speed out of the gate that we would have liked to have in that market. So we are cautious and prudent for 2012 as we look at our outlook, but we still believe that what we have is a business that's going to grow as we build out of 2012, whether it be continuing to win new clients, whether it's expanding our footprint with existing clients by bringing more products to them as we've had some early success of selling new products to them or building recurring relationships around our services engagements. We've-- as we did with MTN South Africa and then now as we -- we are showing that we're starting to build in clients around the world, the type of business relationships that we've built in the United States in our cable and satellite markets. It just takes a while to build that.

Okay. And then Randy, looking at the quarter, if we look at kind of the overage relative to consensus, is it fair to characterize -- you had a big lift in gross margin that looks like it provided about $0.09 of the upside, is it fair to characterize almost all of that coming from the mix because of the software renewals and maybe one-time services and then maybe the remaining $0.03 coming from the lower growth for incentive comp? Or how would you look at the upside distribution?

I think you summarized it very well. There was about $3 million. You can look at it right on the income statement that software and services were about $3 million up over the last quarter and processing was up about $2 million. That's your $5 million that was a very, very high margin. So I think you're summation is pretty good.

Okay, okay. And then looking at the 2012 cash flow, you mentioned kind of the return to a more normalized level, but just to walk people from kind of the walk from 2011 to 2012, what is it in the working capital that's getting back to normal? Is it deferred revenue? What are the items that we're looking at to get back to a "normalized level"?

I think I'd say all of them are -- certainly it was several different unique items during the year. There was some AR, there was some deferred revenue, there was some payables, they all had some degree of uniqueness to them. The way I'd look at it, for people to really get a grasp on it is look at the second half of the year performance for us, we did about $69 million of cash flow from operations and there was about a $7 million drag on working capital to get you down to the $62 million. If you multiply those by 2, that gets you pretty close to my guidance, if you also consider that the cash flow will be slightly lighter next year because of the lower operations. So, I would say that it's just going to be normalized back to all the working capital items, Sterling.

Okay. And last question, outside of Comcast which has the renewal in 2012, are there any other major customer renewals in 2012? And while I'm sure it's too early to tell, looking at what Amdocs did in terms of their renewal, it seemed to be pretty solid relative to some of the other discounts that they had given with like Vulcan, et cetera. Does that give you any insight as to what the thoughts might be around pricing and services, et cetera?

Well, we don't -- well, one, first to answer your first question, Sterling. We don't have any other major clients in 2012 that are up for renewal. Comcast is our significant one. We are in discussions with Comcast about how we renew that contract going forward. We have high confidence of the strength of the relationship we have and what that is going to bode for us for the long term of the business. I don't really look at what competitors are doing from a guidance or from their outlook of how they negotiate their contracts because we really solve problems in different ways with different solution sets. So we'll do our best to build a long-term contract set of terms and conditions that really help facilitate Comcast's growth and their business needs and match up with what we need to do long term in driving this business.

And our next question comes from the line of Howard Smith with First Analysis.

My question deals with the pro forma operating margin and directionally, where it goes in the medium term. You talked about having some additional data center expenses this year. I'm thinking about 2013, who knows what the terms will be, around Comcast. But given history, it's unlikely that the pricing goes up in the early part or the margins go up in the early part of that contract. So what gives you optimism or maybe you can reconcile for me, how operating margin, as we look out a couple of years, returns kind of to the 18% to 20% level?

Let's say a couple of things. First, just to remind, we're at 17%, that's still best-in-class margins, that's good. Our aspirations are clearly to increase that going forward. We have a proven history of managing the bottom line, so we're very good at managing the business. I've said it in the past, and I think it's still true, the way in which we achieved the increased margin is through revenue scale, growing the revenues and increasing the mix of software revenues back into our revenue base because software has a good margin on it compared to the remainder of the business. So it's really growing the business, and we plan to grow the business by -- many of the things that Peter talked about is that getting close to our clients, creating long-term recurring relationships with our clients, expanding our product portfolio and also adding new clients and new logos. So as we can grow revenues, I think that's our best basis to really increase the margins going forward.

And Howard, just to add to Randy's comments is, when you look at what's happening with our clients, their businesses are becoming more complex. We were successful in 2011 with Comcast consuming more of our products and growing those revenues, and so we're building a good relationship where they continue to turn for us for solutions. And we think that provides us a great position to not only create great value in the near term, but really create value for our business long term.

[Operator Instructions] We have a question from Julio Quinteros with Goldman Sachs.

This is Geo sitting in for Julio. I just had a quick clarification on your guidance for revenues. In your guidance range, you said you had about 85% visibility for 2012 revenue. I'm just wondering whether this guidance range includes any large transformational deals that got delayed late last year or early this year.

Well, we would expect that we will not only generate revenues from the contracts that we signed with a large cable operator in North America, but we continue to have expectations that we can win some business as we go through the year and that it will generate revenue for us. So to the extent that we have difficulties in achieving that, then that could have an impact towards the lower range of our guidance, but we have pipeline that shows deals that we believe have probability and we are looking forward to getting some of those deals signed, similar to what we signed in December with the cable operator.

[Operator Instructions] And we do not have any questions. You may continue.

All right, Diana, well for those on the call, we appreciate your support and we look forward to performing as we enter 2012 and continuing to drive bottom line results for the business, our shareholders and all stakeholders. Thank you.

Thank you. Ladies and gentlemen, that does conclude CSG Systems Fourth Quarter Conference Call. Thank you for your participation. You may now disconnect.