Good day, and welcome to the CSG Systems International Third Quarter 2015 Earnings Announcement Conference Call. Today's conference is being recorded. All participants are in listen-only. A question-and-answer session will follow today's presentation, and instructions will be provided at that time. At this time, I would like to turn the conference over to Liz Bauer. Please go ahead.

Thank you, Mike, 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 client's needs through our products, services and performance and our ability to successfully convert the backlog of customer accounts onto our solutions in a timely manner. 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 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 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 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 now like to turn the call over to Peter.

Thank you, Liz, and thanks to everyone for joining us today. For the third quarter, we reported total revenues of $187 million, and non-GAAP earnings per share of $0.72. This quarter's non-GAAP EPS is a record for the company and reflects the benefits from the various actions that we've taken to improve the performance of our company over the last several quarters. When comparing the first nine months of 2015 to the first nine months of 2014, we've delivered double digit growth in non-GAAP earnings. We've accomplished these strong results through a combination of improvements in the cost structure of both our domestic and international operations, the migration of new customer accounts onto our processing solution in North America, critically evaluating where we place our investment dollars; and the scale benefits and continued maturation of our international managed services and content monetization offerings. I'd like to spend some time providing you with some additional detail surrounding the actions that have led us to these strong and improving results. First let me provide some context. Five years ago we made a significant acquisition that provided us with product capabilities that we believed our North American cable and DBS clients would need as their businesses evolved, and also in order to monetize content and digital services in new ways. In addition, this acquisition allowed us to expand our reach outside of North America, with an impressive list of communication service providers around the world, reducing our client concentration in North America, and expanding our domain expertise into the wireline and wireless telco space. While strategically this acquisition accomplished our goals, financially this acquisition has not met our expectations. We've been focusing on improving this portion of our business over the last several quarters to better align our spending levels with our revenue…

Thank you, Peter. Welcome to all of you on the call today to discuss our financial results for the third quarter and the first nine months of 2015, as well as our outlook for the remainder of the year. We are pleased with the continued improvements we have made in our business over the last several quarters, which is reflected in our strong operating results for 2015, especially in light of the challenging market environment. These improved results have allowed us to achieve our long-term targeted operating margin at a pace earlier than we previously anticipated. Now I'd like to walk you through the financial results in more detail. Total revenues for the third quarter were $187 million, up 1% from the same period last year, which includes a negative impact of $4 million from foreign currency movements. Sequentially, revenues in the quarter increased approximately 2%. Quarterly revenues on a constant currency basis were up approximately 3% year-over-year. This growth is primarily from the increase in our processing revenues since last year, which is driven in large part by the migration of new customer accounts onto our solutions. Moving on, our non-GAAP operating income for the third quarter was $40 million with a margin of 21.6%. GAAP operating income for the quarter was $31 million with a margin of 16.6%. For the second quarter in a row, we experienced a sequential improvement in our non-GAAP operating margin. As a result, our non-GAAP margin for the first nine months of the year is approximately 19%. This puts us in the middle of our long-term targeted range of 18% to 20%. We have accomplished this mainly as a result of the key levers that we've been discussing for the last several quarters, which I will summarize as follows. First, our operating business…

Thank you. [Operator instructions] And we'll go first to Tom Roderick with Stifel. Your line is open.

Yes. Hi, guys. Matt Van Vliet on for Tom. Thanks for taking my questions. I guess first off, in terms of the revenue guidance, what are the impacts from the divestiture and maybe what you are expecting from an FX impact relative to where we were last quarter?

Randy, do you want to take that?

Yeah, sure. There's really – the expectation from FX from the quarter, from the rest of the year from FX is insignificant. So there's no big change from foreign currency. From the divestiture of Invotas, think of it maybe as half of the difference that we went down.

Okay.

The other half --

And the other half would really become the visibility into the software and services transactions for the remainder of the year.

All right. And then looking at the progress you made in the quarter with Comcast, I know previously you were kind of at the mercy of their projects. Has anything changed or was that uptick in conversions expected in the quarter? And then also kind of what you're expecting over the next few quarters as you only have about a third of them converted at the moment.

Well, Matt, this is Peter. We have to work in concert with our client as we work with them for readiness to make sure that their systems migrate onto our platform effectively and they can continue to run their operations at a high level. And so that we work in concert with them to establish timing and project plans. And what you saw happen in the results that we just reported were scheduled and what we were expecting, and in line with the overall guidance that we updated to Wall Street earlier this year. We haven't given guidance into future years, but I think what we continue to – as it relates to conversions – but we continue to have a very high confidence in the quality of the work that we're doing for Comcast. We continue to invest more in technologies and processes to make sure that we can not only do things more effectively on our end, but the impacts to our clients is even less impactful to their day-to-day operations once they go through the migration effort so that they have a really streamlined process. And with that, we think that will continue to have Comcast bringing subs to us on a consistent basis, and we'll look forward to giving you more details when we get together in February of next year.

And then following up on that, what was kind of the timing of those conversions in the quarter, if you can? Were they later in the quarter to where we'd see a full run rate maybe in the fourth quarter or how should we think about kind of how the third quarter results played out?

Yeah, those conversions were very late in the quarter. Anything you'd add to that, Randy?

Late in the quarter and some of them actually spilled into the fourth quarter. So you won't have a full quarter benefit, but you'll get some quarter-on-quarter benefit.

All right. And then lastly, on a regional performance basis, was there anything specific to call out? I know we've heard a lot of headlines about weakness, especially in APAC. Was there anything that particularly affected your business or what the outlook is for the fourth quarter? And then on top of that, were any regions impacted more by FX than maybe some of the others that we should continue to think about in the fourth quarter?

Yeah, Matt, I wouldn't probably call out any one specific region as having something that stood out of the ordinary more. We still see traditional software and services transactions as being lumpy and difficult. But we did see, from an FX perspective, that Latin America probably has greater impacts because of some of the FX items down there. And if I could just go back to one item, just relative to the Comcast subscribers, the timing of those subscribers as they came on were consistent with what we always expected this year. So relative to our expectations, we are not seeing a timing benefit to our projection for this year. Just to clarify that for you as well, Matt.

All right, great. Thanks for taking my questions.

You bet.

[Operator instructions] And we'll go next to Howard Smith with First Analysis. Your line is open.

Yes, thank you. Good afternoon and nice execution on the margin side. I'm hoping to get some more clarity on the effect of the Invotas divestiture. Specifically, what line, in terms of revenue breakout, was that being recorded in? And on the expense side, maybe you can give us some idea of how R&D heavy it was or run rate expenses or something that's been removed from the organization.

Yeah, Howard, first on the revenue. The revenues have been very insignificant so you won't really see them come across any line item on the revenue side. On the expense side, it was primarily a go-to-market play [Technical Difficulty] of R&D, but if you remember, this was an asset that we were repurposing, so it was not R&D heavy at all. And since there was not much revenue, there's not much hitting cost of goods sold, so SG&A is your big line item where it would hit.

Okay. That's very helpful. And then, in terms of your adjusted operating margin, you imply to be above 20% at the midpoint in Q4, came at 21.6% as you said this quarter. You're not changing your kind of 18% to 20%, but you feel comfortable kind of in the middle of that range. What as we look out to 2017, or maybe not, is keeping you from being more optimistic maybe raising that guidance given the current performance?

Well, Howard, this is Peter. The first thing I would tell you that as we think about the business, the software business still has a certain amount of lumpiness to it, and it can have volatility and show itself in our financial results. And so as we think about making sure that we appropriately convert this to the right type of long-term revenue model, which is through our managed services and our rollout of Ascendon, we want to make sure we're investing in those at the right pace. And we are optimistic about what the opportunities are in our business. And we are proud of these healthy margins, but we also know that there will be investment needs in the business. Randy, do you want to give some specifics or add more color?

Yeah, I'd say we've always looked at 18% to 20% really as kind of the healthy range for us, Howard. It provides a very good balance between delivering solid bottom line results while still providing us meaningful investments back into the business. We've always shown in the past that we have a willingness to invest in the long-term health of the business, whether it’d be repurposing an asset for like Invotas, whether it’d be providing new product offerings such as the content monetization, we've always shown that we will invest in the business as we believe appropriate. And I think depending upon the specific facts and circumstances, we would be willing to operate on either side of that range just as we always have. But we believe that the 18% to 20% is the right healthy margin for us. Whether or not we would operate above that, as you would suggest, would be dependent upon the facts and circumstances and how the business is operating.

Okay. Thank you.

[Operator instructions] And there are no further questions at this time.

All right, Mike. Well, this is Peter. I'll give some closing comments. We continue to be very enthusiastic about what we have as a business and the business model that we operate. The markets that we serve are creating some unique opportunities for us both with how communication providers are needing to respond to consumer evolution, as well as new competition. And the pressure points that they face and how that plays to some of our strengths in managing and running large scale applications. So we think we're in a great position long term and we continue to deliver very solid and strong results quarter-by-quarter. So we look forward to our next yearend result reports that will be coming out in February. And we want to thank all our investors for their support and our employees around the globe who continue to support us and make us what we are with our clients. Until then, thanks.