Good afternoon, ladies and gentlemen, thank you for standing by. Welcome to the CSG Systems International First Quarter 2012 Conference Call. [Operator Instructions] This conference is being recorded today, Tuesday, May 1, 2012. I would now like to turn the conference over to Ms. Liz Bauer, Investor Relations. Please go ahead, ma'am.

Thank you, Lily, 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 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 obligations 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 believe that these non-GAAP financial measures, when reviewed in conjunction with our GAAP financial measures, provide investors with greater transparency to the information used by our management team in our financial and operational decision-making. For more information regarding our use of non-GAAP financial measure, we refer you to today's earning release and non-GAAP reconciliation tables on our website, which will also be furnished to the SEC in our Form 8-K. With me on -- today on the phone are Peter Kalan, our Chief Executive Officer; and Randy Wiese, our Chief Financial Officer. With that, I'd now like to turn the call over to Peter.

Thank you, Liz, and thanks to everyone joining us on the call today. Last year, I spoke about our transformation as a company into a global provider of business-enabling solutions, building on the acquisition of the Intec Telecom business. In February this year, I shared that we'd move from the integration phase of this transformation into the execution phase. Today, I believe that we're making solid progress on this transformation and are beginning to see positive signs of these throughout our business whether that be in sales, operations or our financial performance. Speaking of our financial performance, we executed very well this quarter. We generated revenues of $185 million and non-GAAP earnings per share of $0.60, both of which were positive to our expectations for the quarter. 4 months into the year, I believe that we're in a good position to achieve the mid to high end of our 2012 financial guidance. This confidence comes from a number of positive signs that we're beginning to see throughout the business, ranging from client feedback and validation of our product and services roadmap, sales successes, our continued strength in helping clients reduce their overall operating costs and our prudent management of our resources. One of our greatest strengths as a company is that our clients trust doing business with us. By investing in our clients, whether that be in the relationships or in our solutions, we help our clients solve more problems and be more competitive. That creates an enviable position for us in these challenging times. And one of the key reasons our clients want us to do more for them is that we do what we say we're going to do. For example, one way that we help our clients succeed is in the fundamental blocking and tackling of converting…

Thank you, Peter, and welcome to all of you on the call today to discuss our financial results for the first quarter of 2012 and the gains for the remainder of the year. Overall, we executed very well in the quarter and we are pleased with our start to the year. I will now walk you through our financial results in more detail. Total revenues for the quarter were $185 million, up 1% over the same quarter last year. Sequentially, first quarter revenues were down $3 million or 1% from the fourth quarter, mainly due to normal seasonality and the softer services revenues experienced at year end. Breaking down revenues further, during the quarter, we had 2 material clients that each individually generated revenues over 10% of our total revenues, Comcast and DISH Network. Together, they were 33% of our revenues for the fourth. Additionally, in the first quarter, we generated 10% of our revenues from the Europe, Middle East and Africa region and 4% of our revenues from the Asia Pacific Region generally consistent with previous quarters in 2011. We expected our operating results for the first quarter to be our strongest quarter for the year. Our non-GAAP operating income for the first quarter was $38 million, which compares to $33 million in the same period last year or an increase of 16%. The non-GAAP operating margin was 21% for the quarter compared to an 18% margin for the first quarter of 2011. This increase is attributed primarily to the financial benefits of our restructuring activities undertaken during 2011. GAAP operating income for the quarter was $29 million or a margin of 16%. For the first quarter, our adjusted EBITDA was $48 million or 26% of total revenues. Non-GAAP EPS for the first quarter was $0.60, which compares to…

[Operator Instructions] Our first question is from the line of Suhail Chandy from Wedbush Securities.

2 questions. Looking at the margin guidance and the non-GAAP EPS guidance, would it be fair to say that we see a change in Q2 and then that kind of holds through the rest of the year or will there be some more dynamic going into the second half?

We're going to need to have you repeat the beginning of that, Suhail, because the line cut in and out.

So the question was, given the non-GAAP operating margin, 13% and the non-GAAP EPS $1.85 to $2 that you're maintaining, I'm just trying to understand if the Q2 margin is going to, kind of, dip and then maybe stay steady through Q3 and Q4 or is there some more dynamic that we should see into the second half in terms of margin?

Yes. I think you should expect what you just said, you should see a dip down in Q2 and stay relatively consistent across Q3 and Q4.

Great. And a couple of big picture questions. Number one, what's the demand that you're seeing for your policy in charging product from your carrier customers?

It's dependent upon where our clients are and the way that they're trying to go to market. It's -- in some geographic markets, there's starting to be interest in that and we're responding to those increase. In others, the market isn't advanced so I'd say in parts of Europe, we're seeing interest, in parts of Asia Pacific and a little bit in North America, but probably not in the near-term as much in the Americas as we're seeing in EMEA and APAC.

Okay. And last question, you've obviously been posting good cash flow numbers, what are your thoughts on potential M&A and what areas would you be looking at?

Well, from an M&A perspective, it is one of our potential uses of cash. We do believe that as we built the business and have relationships and business around the world that we have a leverage-able platform. What we look to do is recognizing that the world of service providers is going to continue the way -- to change how they evolve their offerings and the way they market the experience to their customers, that's going to bring more complexity. And through that, they're going to need more intelligence, smart solutions, whether that be in charging, whether that be in policy, be -- in those areas. So as we think about our areas of M&A, we look for tuck-ins that allow us to bring some capabilities that may be deployable across our large client base and effectively, add product and some potential scale.

Our next question comes from the line of Tom Roderick with Stifel, Nicolaus.

This is Chris Koh in for Tom. So just a quick question on the transformation of deals, you mentioned a couple of deals, I think the EarthLink deal and then the North American communications provider, upgraded, sounded like, would you consider either of those a closure of a transformational deal as you defined earlier? And in terms of when you say you kind of still need to close some of those in order to continue solid execution, are there -- can you give us a sense of how many are in the pipeline if you've actually closed any of them and how many -- how well you did in that regard in the first quarter?

Well I'll give you a couple points. Both those that we announced -- that I announced in my comments, both EarthLink and the enterprise communication provider in North America are transformational deals of providing a baseline of consolidating their systems, their legacy systems onto a new system. And so those were big wins for us and ones that we've been pursuing for some time. We do have more in the pipeline, Chris, I'm not going to give specifics but in that, our pipeline has actually -- some new opportunities come in but they're their longer-term before we'll see them but we have others that we think are more near-term viable for kind of the -- this year and we think it's important that we successfully close those so that we bring visibility to the higher end of our numbers, as well as some visibility and strength into 2013. Importantly on the pipeline, we're seeing opportunities to replace legacy systems or really drive operational efficiency by consolidating platforms in all regions of the world. We see opportunities in Asia-Pacific, in some parts of EMEA and continue to see some good opportunities in the Americas.

Great. Sounds great. So just as a follow-up, kind of, on that, you spent a fair amount of time talking about how you're kind of delivering on your client commitments. Has there been any feedback from your clients that indicates to you that some of your competitors or other vendors may not be doing that right now?

We'd like to focus on what we do and to the extent that other clients or prospects may be having challenges, it's not appropriate for me to talk about that on this.

Okay. I had to try there. Okay. So -- and then in terms of, just kind of a point that you've mentioned in past calls is there were kind of 4 legs that caused you guys to have a little bit of execution issues last year, discretionary spend, EMEA, APAC and the transformational deals? Sounds like the transformational deals maybe you're picking up a little bit, but can you kind of give us a sense of in terms of the revenue beat, which was roughly $4 million on our number, how much of that was due to each of that buckets? And how would you characterize the status of each of those situations?

Let me give a little color first and then Randy can think about how to describe or best give you color on how the revenues came from. We definitely saw progress as a company in the first quarter on the larger deals for transformational deals but those don't really generate that much revenue in the quarter. From discretionary spending, we've seen a little bit of improvement in that but nothing that's going to make us feel like there's an absolute return, and then when you look at EMEA and the Middle East, for us, those are still challenged markets. The Middle East still has some disruption in it and then in Europe we're -- just don't have the same strength that we'd like to there from handling the kind of recession issues they're facing. Randy, any chance to give some color about how the quarter came out?

I'd say that you've summarized it very well. The transformational deals we've already touched on, EMEA, we've touched on that wasn't as strong as we like it to be, you can see it in the numbers, it's relatively consistent with Q4 but seeing the return of some growth in EMEA that's just not coming forth. In APAC we thought that was the second half of the year, you can see our first quarter revenues from APAC were down a little bit as we anticipated. And on the discretionary side, we did see a little bit of strength on some discretionary spending in the first quarter but it's -- doesn't appear to be recurring into the second quarter so there's some strength in the first quarter. Across the year, I think, Peter, again touched on it, we see some bright spots once in a while but the consistent sustained recovery of that still is out a ways yet, I think.

Got it. Great. And then so just to make sure I'm not missing anything obvious. When you look at your customer accounts, I think you had a pretty nice uptick. Was that related to a migration or is that something you've mentioned in the past?

Are you talking...

No. Chris, I think if you look at the increase, if you look at how the cable and satellite providers have been providing their performance in the first quarter, they have seen some pretty solid improvement in their business.

Our next question comes from the line of Ashwin Shirvaikar with Citi.

This is actually Phil Stiller on for Ashwin. I wanted to follow-up on the margin guidance. It seems like the guidance for the full year implied that you'll be roughly around 16% for the remainder of the year. You guys are coming off 2 quarters where you are around 21%, you were 19% for the full year. So as we think about this on a longer-term basis, should we think about 16% as a new level, or can you eventually get higher to where you were last year or we're you've been in the past 2 quarters?

I think, again, if you look at the first quarter, it was expected to be our strongest quarter, we did expect the margin to go down a bit into the second, third and fourth quarters this year. You modeled 16%, you referenced, I think we've got an opportunity to, like I said, to maybe outperform the full year, 17% if we have a couple of good quarters. So I think that the 16% may be something better if we can pull off a couple of very good quarters. I think long term, 16%, 17% is not our long-term goal. It's always been to return back to an 18% to 20% range and that we haven't taken our eye off on that, right. We've got some work to do as we transform the company. We said that we'd make some investments as we transform the company but we still have expectations of delivering better margins in the long term.

Okay. And then I guess shifting to Comcast, the percent of revenue was up on a year-over-year basis, an implied growth there. Can you comment on the timing of the market shift to Amdocs on that contract? And what you guys are seeing in terms of spending from Comcast outside of that one market?

Phil, I'll take the first piece. We originally were expecting those subscribers, those customer accounts would be converted off of us by the end of the first quarter but there has been some delays but we're projecting and expecting that in the coming months those we'll migrate off. From where we saw spending from a Comcast to lift, some of it's around discretionary. Randy, if you want to add any color of what you saw from Comcast from a year-over-year.

2 things, one is that their annual CPI index takes effect the first of January, so you have that built into there, Phil. And then also, I mentioned before, about some discretionary spending on some communications items for the quarter and Comcast participating in some of that. So you'll see a little bit of fluctuation there.

Does your guidance assume any contract renewals based on your largest customers?

No, we have no expectations of a renewal impact in our current guidance.

Okay. And then just lastly, on DISH. I know you guys were optimistic about selling them your services once they got over to a new platform, I just wanted to follow up on that, what we could expect on that front in terms of the timing and then size?

Well, I think it's safe, Phil, to say that the selling effort started almost from the point that they announced that they were going to migrate over, but their willingness to really think about new platforms are going to be based on a successful migration, which is what we had as of March 31. We did see, as we announced at the end of our 2011 results, that they did buy some of our solutions that we picked up from the Intec acquisition, the Inter-mediatE, Interactive solutions. And now that we've got them on the new platform, we think there'll be opportunities to support them as they continue to evolve their business. It's clear that between spectrum and other businesses that they have, they're trying to rethink about how they go to market with offerings and what they have to bring to the consumer and they now have the foundational platform from which to be able to drive that going forward and that should benefit us well as we go into future quarters.

Our next question comes from the line of Julio Quinteros with Goldman Sachs.

This is actually Geo for Julio Quinteros. Just a couple of questions. Can you talk about your stock buyback plans and how you expect that to go forward for the rest of the year?

Well, right now, we still have 3 million shares authorized under that program. So after the 328,000, we bought this quarter, we still have some of that authorized. You can see in our most recent history, what we've been doing is really buying back the shares at a level we issue under our incentive programs to the employees. As we continue to transform this company, make progress in the company, it's going to give us more opportunities to take a longer-term view and a shorter-term view of use of our capital. But I think in the near-term, I think our past, last couple of quarters, probably gave you a good indication of what to expect.

Okay. And on the operating margins, for fourth quarter I believe you had some benefit year-over-year from the restructuring that was done. Do you expect that benefit to stay on for the next 3 quarters to offset some of the headwinds on the operating margins from the loss of the contracts?

Yes. That was already built into our guidance expectations. When we established our guidance back in February we had that, clearly had visibility into that so it's built in the guidance. I mentioned this a little bit in February and a little bit last year, some of those restructuring programs were done to really kind of redirect some of the investment in the company and that's really what you're seeing going forward in Q2 and Q3 and Q4 is reinvesting some of that benefit that we achieved. You saw it come through in Q1 but now you see us reinvesting back in the Q2, Q3 and Q4.

Could you also remind us when the Comcast contract comes to put renewal and when the negotiations start?

The contract -- term of the contract expires at the end of this year, 12/31/2012.

Okay. And the negotiations usually start on the year [ph]?

Well we're having discussions with Comcast. I don't think it's appropriate for me to talk about any expectations or what we expect to come out of that but the conversations have started and we have confidence that there's a long relationship that will go forward on based on the long history we've had going back.

Our next question comes from the line of Dov Rosenberg [ph] with RBC.

We sort of touched this a little, but I just want to know, on the geographical, can you give a little bit more color just on if any of the areas were specifically more towards transformational deals, are there certain areas where you see big deals versus discretionary?

Dov [ph], are you talking about in the pipeline or that we actually closed?

No, in the pipeline, I'm sorry. [indiscernible]

Okay. Thanks for that clarification.

Well we do see transformational deals in the pipeline and we see them across all geographies. With the presence that we have in the Americas, that gives us some of the biggest footprint from which to work from but we see it in the EMEA region and we see it in APAC, although APAC is probably longer in the development of the pipeline, just because of what we've had to do to rebuild. But the key is clients are starting to address the needs to move off of legacy platforms and move on to platforms that will allow them to drive standardization and kind of operational efficiency through their business. And that's one of the things that we think we're well-positioned to win our share.

Okay. And so also in APAC and also in Europe and also in Africa, or in [indiscernible]?

Yes.

And during guidance, you mentioned that you see closer to mid to high end of the guidance. I was wondering if that's dependent on any, without giving information, any one specific deal, one transformational deal, or those are more long term and it's just ongoing execution?

Well, one of the things is, based on what we achieved coming out of the first quarter both on sales and our actual operational performance, that gives us confidence that the midpoint and above is something that we can achieve. It doesn't mean that we're completely away from risk in the business but it gives us great visibilities. One of the things we talked about at the end of 2011 when we resulted our -- rather 2011 results is that a good start to 2012 from a sales performance and then from a delivery perspective, would allow us to get more comfortable with our guidance. We've done that starting out. To hit the higher end of our guidance, we need to have some more success in wins and delivery and that's something that with the pipeline, it gives us optimism but we still have to performance on those.

Okay. And -- but it's not dependent on any one customer or any one deal?

No.

Okay. Also you talked about in other words that you want to return to the operating margin, obviously you have 18%, 20%. When do you expect that 2013 goal? Is that further out or...

I think it really depends upon the progress and the base in which we make more progress on the transformation as a company. I think, it was our expectations that 2012 clearly would be a transitional year for us and expectations of going forward. I think 2013 and 2014 is kind of the new view of where I'd look to the 18% to 20%.

Okay. That's helpful. Last question for me. Just on the -- I was wondering on the overall view of the market, do you still -- do you see any changes in the market? In other words, you guys had some really nice wins this quarter and then you guys had a healthy pipeline and a good start to the year, do you see any changes in the market or you still sort of see the mild 3% of trade growth for the market?

I would say is that we definitely come out of Q1 feeling better about what we've seen on our ability to execute on a sell side. But the market is still difficult. I shouldn't send any other message except to say that there's still cautiousness about how people think about spending, the competitive environments that they're facing and whether or not they want to bring risk into their business operations, through going through changes. But in some cases, clients don't have a choice and they're decided they have to move forward. But it's not an overall shift confidence that people are spending dollars and incorporating risk into their business.

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

This is Hemant Jodha in place of Sterling. I have -- few of them were answered already. So only one. Were you able to cross sell any of Intec's set into your existing base this quarter?

So I think your question was, were we able to sell any of the Intec solutions into our existing base this quarter, is that correct?

Yes. Yes.

I don't think we had any specific wins that we're ready to call out at this point.

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

I guess I would have thought, with T-Mobile being completed so quickly that the cost of kind of carrying them on 2 platforms and the expense of migrating them would let up as you go into Q2 and maybe help a little bit on the margin side, so obviously, your -- maybe you could comment on whether that's happening? And then maybe get a little more granular on some of the increased cost of processing you're expecting as you ramp throughout this year and where that pressure is coming from.

Well, Howard, first of all, we wish T-Mobile was our client but they're not.

I'm sorry. I got too many companies going -- my apologies.

So on DISH Network, I think your question was whether we should see more improvement in our margin by the elimination of kind of duplicate processing. We really didn't have a duplicate operating environment where it was costing us twice as much because they were only live on one system. We incorporated some savings last year as we went through our business management to take out some of the redundant cost when we were in the fourth quarter and from an operating environment going forward, it is a -- we think we had a solid base as we ended the year. The ACP platform is a more expensive platform to run going forward as well because of the complexity and the operations that our client can use on it. So that's something that would have offset any near-term kind of small gains. Randy?

I think you summarized it very well.

You trained me well.

Mr. Kalan, there are no further questions at this time.

Well Lily, I'll close with this for the group. We started this year with guidance and an expectation on the business that was cautious and as we finished the first quarter, we felt like we've made good strides and I hope you can see that. We believe that our business is starting to execute, but we do work in a broad worldly economy that is -- that still has a lot of uncertainty and so we think we're well positioned. We look forward to continue to report strong results as we move forward. And we're excited about this as a business. And so we thank you for your support. And we thank you for the support of our clients, as well as our employee base around the world. Thank you.

Ladies and gentlemen, this concludes the CSG Systems International first quarter 2012 conference call. You may now disconnect. Thank you for using AT&T Conferencing.