Good day and welcome to the CSG Systems Second Quarter 2014 Earnings Announcement Conference Call. Today's conference is being recorded. (Operator Instructions) Now I would like to turn the conference over to Ms. Liz Bauer. Please go ahead, ma'am.

Thank you, Lynette, and thanks to everyone for joining us. Today's call is going to cover two subjects. We will first do a review of our second-quarter results for 2014 and then move right in to an overview of our expanded agreement with our largest client, Comcast Cable. During that portion of the call, we will be referring to a presentation that is posted on our website on the Investor Relations homepage at www.csgi.com. Moving on. 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, the planned migration of 2.3 million customer accounts from a competitor to CSG's platform in early 2015, the potential financial impact to CSG of any customer account migration, CSG and Comcast's abilities to efficiently and effectively migrate customer accounts from other billing platforms onto the CSG platform, Comcast's future actions related to consolidation and standardization of its customer care and billing systems on to CSG in the future, and any other statements regarding CSG's future expectations, beliefs, plans, objectives, financial projections, assumptions or future events that are not historical in nature, are forward-looking statements made within the meaning of the Securities Act of 1933 as amended. While these statements reflect our best current judgment, they are subject to risks and uncertainties that could cause our actual results to differ materially. Listeners are encouraged to see the slide in this presentation titled Safe Harbor and Forward-Looking Statements for additional important information. 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 the future. 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 concerning these and other factors, please refer to CSG's respective filings with the SEC, including our most recent Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, and current reports 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 now like to turn the call over the Peter.

Thank you, Liz, and thank you to everyone for joining us today on such short notice. We appreciate how challenging everyone's schedule is during earnings season, and for that reason, we chose to move up our earnings call and combine it with our exciting news on the expanded Comcast relationship rather than hold two separate conference calls within 4 days of each other. So thank you again for your flexibility and understanding of this schedule change. To that point, we're going to spend quite a bit of today's call talking about the new Comcast agreement. We understand its importance, and all 3,500 employees at CSG are quite proud of what we've collectively accomplished with this relationship. However, before we get to that subject, I want to provide you with an overview of our second-quarter results and share with you what we're seeing in the business. For the second quarter, we reported revenues of approximately $195 million and non-GAAP earnings per share of $0.52 after coming off a very strong first quarter. As I look at the first six months' results, we're on track with where I thought we'd be. We expected the revenues to be back-half-loaded and that's where it's playing out. So let me provide you with more insights, and I'll start with where we're seeing challenges in the business. First, we've seen a slowdown in spending by the US government. As many of you know, we've been doing work with the US government on cybersecurity, and that early work served as the foundation for our new commercial security offering that we just launched this year called Invotas. The government's fiscal year ends on September 30, so the next couple months will be important to close several opportunities that we've been working over the past several quarters. Second, decision-making…

Thank you, Peter, and welcome to all of you on the call today. Let me start by reviewing our most recent financial results announced earlier today. Overall, our second-quarter performance was in line with our expectations. Total revenues for the second quarter were $185 million, down 1% from the same quarter last year, primarily due to two business divestitures completed during the second half of 2013, which caused a year-over-year decrease of approximately $5 million in our 2014 revenues. Sequentially, revenues in the quarter decreased $3 million, coming off a strong processing revenues in the last quarter, largely driven by special project work in the first quarter. Breaking down revenues further, in the second quarter we had three clients that each individually generated revenues of 10% or more of our total revenues -- Comcast, Dish and Time Warner. Together they were 48% of our revenue for the quarter. Additionally for the quarter, we generated 85% of our revenues from the Americas region, 11% of our revenues from the Europe, Middle East and Africa region, and 4% of our revenues from the Asia-Pacific region. Moving on, our non-GAAP operating income for the second quarter was $30 million with a margin of 16%, consistent with our expectations. GAAP operating income for the quarter was $22 million, or a margin of 12%. For the second quarter, our non-GAAP adjusted EBITDA was $37 million, or 20% of our total revenues. Non-GAAP EPS for the second quarter was $0.52, which compares to $0.57 for the same period last year. Our non-GAAP effective income tax rate for the quarter was 36%, as expected. GAAP EPS for the second quarter was $0.28. Foreign currency movements did not have a material impact on our results for the quarter. And now on to the balance sheet and cash flows.…

Thank you, Randy. Now we'd like to turn our attention to our just-announced expanded and extended contract with Comcast Cable. As Liz mentioned earlier, we'll be reviewing a slide presentation that is posted on our website on the home page of our Investor Relations section, so if you'd like to follow along. As you grab that presentation, let me first start off by saying how immensely proud I am of our employees. This relationship is a perfect example of what happens when you have employees who wake up every morning and want to do the right thing by their clients. As most of you know, our contract with Comcast was to be up for renewal in March of 2017. So the fact that Comcast expanded and extended our agreement early is at testament to the type of relationship that exists between our two companies. With that, I'd like to start with Slide 3 from the presentation, as Liz covered the Safe Harbor language earlier in the call. A little over 8 months ago, we began discussing with Comcast management the benefits that could be realized by standardizing their back-office operations. This is not a new concept for Comcast or CSG. We've worked with Comcast to standardize their billing systems and processes within their various regions that we currently service, and similarly, we've deployed our workforce management solution across all of Comcast's consumer business for their management of their field technicians, standardizing how they conduct operations. So we have a proven history of working with Comcast as they evolve, standardize and simplify their business operations. The conversations continued to gain momentum within the executive and operational ranks within Comcast. These discussions led to the expanded relationship that we announced today. It includes a framework and financial incentives for Comcast to consolidate…

Thanks, Peter. As Peter stated, we are extremely pleased with our expanded and extended contract with Comcast. This agreement provides us a great opportunity to grow our revenues and profits and increases the visibility we have in our business over the next 5 years with Comcast. Our systems are highly scalable, and those scale benefits allow us to provide competitively priced solutions to our clients as they bring us more business and allows us to effectively manage our cost structure and drive increased profits. One of the most important aspects of this new contract is that it demonstrates the strength of the partnership we have established with Comcast over the last 20 years that Peter discussed earlier. To further align and strengthen our relationship under the new contract, we are providing Comcast stock warrants to purchase shares of CSG's common stock. I'll go through more details around the warrants later. With this background information, I will move on to Slide 12 and provide some additional details of the new contract. The new contract is for 5 years and runs through June 30, 2019, which adds over 2 years of additional visibility to our business relationship with Comcast. As I mentioned earlier, our expanded contract provides the structure for Comcast to consolidate both its current footprint and possible future acquisitions onto CSG's billing solution. We did not discount our existing processing business with Comcast. Instead, due to the scale and leverage that we have on our platform, we were able to give aggressively pricing on any incremental new customers that Comcast moves to our solution at the same margin as our existing business. Initially under the new contract, Comcast plans to add approximately 2.3 million residential customers onto the CSG billing solution in early 2015. We believe that over the next…

Thank you, Randy. And I know we've covered a lot today, but I'd like to share some closing comments with you that primarily are summarized on Slides 16 and 17. Over the course of my career here at CSG, we've continued to build on our success by focusing on a few key tenets. First and foremost, we deliver. When we tell a client we're going to do something, we do it. We're highly dependable and approach our relationships looking toward the long term, not what we can gain out of it in one quarter or one year. Next, we've continued to invest in our people, our solutions and our clients. In order to be a trusted partner, you need to invest and commit to what being a partner means, and we've done that. And as a result, we are the preeminent provider of customer engagement and monetization solutions for the video and content industries. In addition, in a business environment that is highly complex, constantly changing and under tremendous pressure from new entrants, large competitors and consumer demands, you have to be able to help your clients solve business problems. You need to be in the trenches with them. You need to understand their pain points. You need to understand where the industry is going and help them maximize the opportunities that are in front of them. And finally, I'm going to go back to my first point. We deliver. If you don't do what you say, you can't be a trusted partner. So I want to thank you again for joining today's call on such short notice. And most important, thanks to our employees who continue to earn the trust of our clients every day, and it shows in the type of relationships we have with them. With that, I'll turn it back over to the operator, Lynette, for questions. Howard Smith – First Analysis Securities: Yes. Good afternoon. Congratulations on the expansion.

Thank you, Howard. Howard Smith – First Analysis Securities: One quick technical question and then a broad question. The technical question -- when I think about treasury stock method for the warrants, is it just the vested ones that will be in the base at any given time or 1.9 million or 2.9 million or how should we think about that?

Two different ways to look at it, Howard. The ones that are based upon the 6-month vesting period -- those will be considered -- they can be dilutive day one if they're in the money. All the other warrants that have some type of performance condition on them will not be potentially dilutive until that performance condition is met. Howard Smith – First Analysis Securities: Okay.

Does that answer your question?

Can you give – Howard Smith – First Analysis Securities: Yes.

I'm going to ask a quick question on top of that. Can you give an example of what 475,000 shares would –

Sure.

Add to the dilution?

So let's say that the stock price was to go from today's issuance price of $26.68 up to $30. The first 475,000 warrants would probably have about 52,000 shares of dilution to it (inaudible) under the treasury stock method.

Thanks. Howard Smith – First Analysis Securities: Okay. And then the more broad strategic question is, recognizing the chess board is changing every day, there's a lot of rumors and consolidation and progress with the cable companies, the satellite, etc. Without being overly specific, as you see the chess board today, can you just comment on how you feel you're positioned and what it could mean for your business?

Well, Howard, this is Peter. I'll give some color on this. I think one is we're extremely pleased with the type of relationship that we've had with Comcast as one of the market leaders and one of the consolidators, and where this new -- the new terms of the relationship and what we're embarking on with them -- what it means for us going forward. So I think, one, it's great to be a with the market leader because it allows us not only to help them standardize and consolidate their business operations, but as they continue to invent new offerings and evolve as a business and change the way they think about business, we're going to be right in the middle of that, we believe, and helping them as they evolve, and it will extend our scope and types of services that we provide, as well as when you look at the broader consolidation that takes place, we've got a long history with people like Charter and we think that's one that we'd look to build on as they continue to evolve. But that's looking at the business from kind of the traditional cable and satellite piece. I -- one of the things that I marvel at and why we like the work that we're doing with Comcast with Content Direct is there is significant change occurring in the video and entertainment business, and I don't expect it to slow down in the coming periods. And we service the leaders, whether it's Comcast or Charter or our other clients in the US, and we also service major providers such as studios and content owners and new aggregators through our Content Direct offerings. And we look at it and think we're extremely well-positioned in the way -- to help all touch providers as the way content is packaged and consumed and monetized. As that changes, we think we're in the best position to be a part of this. We also look at -- more largely as consolidation takes place. Carriers and communication providers are going to be trying to think about how they think about adding digital services on top of their networks or, importantly, how they monetize their networks for consumption and the increased consumption of network bandwidth that drives itself from video and the video traffic that's being -- come across. We think we're incredibly well-positioned to help clients in whichever way they evolve. So in a consolidating marketplace in the traditional carriers and cable providers, we think we're very well-positioned, but most importantly, the way the market is evolving and what we've done -- we think we're positioned for that as well. Howard Smith – First Analysis Securities: Well, thank you for that color and congratulations again. Thanks.

Thank you, Howard.

We'll hear next from Tom Roderick from Stifel. Tom Roderick – Stifel Nicolaus: So I guess any day that Randy's getting choked up, you know it's probably a (inaudible) deal. So I'll start by saying congratulations to you guys. I'm sure you've worked very hard on this.

Thank you, Tom. Tom Roderick – Stifel Nicolaus: I guess the first question that sort of struck me when this came across the wire this morning is what was the catalyst? Undoubtedly, something like this you've worked a long, long time on. What was the catalyst that pushed this over the edge? And if we think bigger picture here for Comcast and Time Warner with whatever happens down the road from them as a combined entity, how could that potentially play into the scenario as well?

Well, let me talk a little bit about the catalyst and some of the things that -- what we've seen and how -- what we've been doing for the last, gosh, 8, 9 months now. And I guess I'd preface it, Tom, with saying that I think in these forums, I've talked for some time that as our clients evolve to be broader and really nationwide service providers, that they would need to think about -- and rethink about -- how they operate their businesses, especially as it's come about through the consolidation of various companies. And we believe that if you want to compete nationally against a different type of competitors, our clients would look to standardize their operations, consolidate platforms, and that's to help them really think about how they bring product to market, be more efficient, more timely, more cost-effective -- all the things that [you'd] go along with that. And roughly about 8-plus months ago, we started conversations with Comcast executives and everything we spoke with reinforced this perspective about the longer-term needs and desires -- what we saw needed to happen in the market for some of the larger providers and how they wanted to run their business. And so as we continued to build on those conversations and talked further around their business, we saw the opportunity to really combine their business needs and where they were looking to go with the scale, the leverage that we have in our business, but most importantly, the operational success that we've had in really helping them run their business, whether it's consolidating existing and standardizing existing regions in which we work, laying over platforms that really change their operational management processes across their platform. I think that success, coupled with being of a like mind, really…

Yes. I think you touched on the biggest thing, though, Peter, is that this contract has been structured such that it gives Comcast the framework and the structure to allow them to bring both their existing business and their future -- any future business they acquire to us. I think one of the things I'd touch on is something that Howard brought up in the last question, which is this consolidation. In certain cases, market consolidation can create headwinds for certain vendors serving that market. The fact of the matter is that Comcast is a much larger client than Time Warner. Therefore, they will get better pricing just by virtue of our business model. I think the situation existed before Comcast had the right to bring these Time Warner customers under their existing contract with us. I think the new contract we have improved our position as it relates to the potential Time Warner situation. I'll say that (inaudible) give you a couple examples why I think that's the case. Essentially, we now have the Time Warner business if they bring it under the contract -- under contract for 5 years versus just 2 more years under the existing Time Warner contract. So we get additional term. I think also it gives us the opportunity to get more of the Time Warner business. Right now, we have about 6 million of their accounts. They have about 14 million. They're going through some divestitures and some swapping as part of the overall transactions that have been announced such that we believe that once that is done, there's still a meaningful number of new customer accounts that we can consolidate to our platform. And we provided those 1 million warrants really as an incentive for Comcast to bring us those new customer…

Well, I think I'd start, Tom, but just telling you that the planning that goes into projects like this between us and Comcast -- it's extensive because it changes how their business is conducted and how they think about the business processes from which they founded their business. What we've done with Comcast is agree to near-term planning and implementations to standardize in certain markets, as I said earlier, that are new to CSG. We've had very clear discussions about what their long-term plans and desires are to run a nationwide business and have continued standardization and consolidation, but we have some near-term things that we need to accomplish with them because they want to make sure they perfect how they think about their business evolving. So I can't speak to the speed that things could move after the first 2.3 million subs, but I can tell you that we've got confidence that -- with our history that we will be successful, and we've got confidence that, as we are successful, it's going to bring Comcast -- it's going to cause Comcast to want to bring the rest of those subs in a second wave of consolidation because the benefits to them -- not just economically from the contract terms, but more importantly from their operational benefits -- will be too valuable to keep at a slow pace. Tom Roderick – Stifel Nicolaus: Yes. Makes sense. Alright, guys. I'll jump back in the queue. But again, many congratulations to you.

Thanks, Tom.

Thanks.

And at this time, we have one question remaining in the queue. (Operator Instructions) We'll move next to Donna Jaegers from D.A. Davidson. Donna Jaegers – D.A. Davidson & Co.: Hi, guys. Congrats on the contract extension. I just wanted to -- most of the questions have been asked, but on Charter, given the swap that's going to happen between Comcast and Charter on subs if the deal closes, what's the understanding there as far as what happens to the billing system for those subs?

I think that's a big if at this point because there's a big if what subs are going to be swapped out. We're not privy to all those informations. You've got [Spinco], you've got exchanges between Comcast and Charter. So I think it's premature because there's a lot of different billing providers in play, and we don't like to speak for clients for things that are in those stages. But what we do like is that we've got a long history with Charter. We've been very instrumental in the past to consolidating their business onto our platform, and what we'll look to do is, as they get more visibility on how their business is changing with these swapouts and [Spinco], we'll then be able to have the best discussions and the best framework for how we solve those problems for them. Donna Jaegers – D.A. Davidson & Co.: Great. And just one follow-up on that –

Sure. Donna Jaegers – D.A. Davidson & Co.: Since Charter's not a 10% customer. Can you just refresh us on -- do you have all of Charter's subscribers –

Yes. Donna Jaegers – D.A. Davidson & Co.: On your platform currently?

Yes. Donna, we've got 100% of their subscribers on our platform and we went through -- forgive my memory on this -- probably 3 or 4 years ago in 2009 to consolidate all their subscribers that weren't already on our platform and do that in a fairly effective and fairly speedy fashion to get that done. So through that, we also were able to help them go through a standardization of their business processes. That has been, we think, pretty successful when we look at it from our viewpoint. Donna Jaegers – D.A. Davidson & Co.: Okay. Great. Thanks, guys.

Yes.

At this time, we'll take a follow-up from Tom Roderick from Stifel. Tom Roderick – Stifel Nicolaus: One quick follow-up guys. Randy, you had referenced something that I thought was kind of interesting with respect to Time Warner subs. If and when they come on to the Comcast platform, they assume the pricing structure, I think is what I heard you say. That could impact a certain headwind on the business. Are there any other contracts that would sort of fall under the old most-favored nation's pricing clause that might have to be relooked at in light of this type of deal or would it just be Comcast and Time Warner under the same umbrella of that contract that is structured as such?

Yes. Let's -- let me add some comment on that, Tom. One is we don't have MFN issues that are going to create any concerns for us. We've got a very good understanding of what the implications of MFN contracts are -- or implications are. So as we look at this, this is purely the financial headwinds that Randy referenced is if Comcast was to acquire Time Warner for those subs that are already us at Time Warner, Comcast is just going to combine those under their existing contract relationship they have with us. So it's purely a function of the size of their business and that larger providers get better pricing because we have scale benefits that we bring. We've got work to do to make sure that we create the value for our shareholders, and that's everything from the -- continue to run efficient operations, but also making sure that we can add new incremental subs that aren't on our system, and we believe that with what we're doing with Comcast, that puts us in a very good position to be a consolidator of the subs that aren't on us at Time Warner, if and when that transaction goes through and closes. Tom Roderick – Stifel Nicolaus: Perfect. That's it for me. Thanks, guys.

Alright. Thanks, Tom.

And at this time, we have no further questions in the queue. I'd like to turn the conference back over to your host for any additional or closing comments.

Well, thank you, Lynette, and I'll just close with saying something I said earlier. We are extremely excited as a company, as a management team, and as employees across our business in both the trust that Comcast is giving to us, and what this is is a reflection of what type work we do. But we know that as we continue to execute on our key tenets of our business, it builds into our financial results, it builds into the business we have and we know that this continues to build long-term value for our shareholders. So we look forward to reporting on future results and making ourselves successful and Comcast successful as well. Thank you.

And that does conclude today's teleconference. We thank you all for your participation.