Good day, and welcome to the CSG Systems International Fourth Quarter and Full Year 2015 Earnings Announcements Conference Call. Today's call 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, Ann, 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 in the Investor Relations section of our Web site. 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 Web site, which will also be furnished to the SEC on Form 8-K. With me today on the phone are Bret Griess, our Chief Executive Officer; and Randy Wiese, our Chief Financial Officer. With that, I'd now like to turn the call over to Bret.

Thank you, Liz, and thank you all for joining us today. After 19 years of serving in various roles within CSG, I am honored to be hosting my first conference call as a CEO of this great company. Today, I'm going to spend the majority of the time outlining what you can expect from me and my management team in both the short and long-term moving forward. But first, let me cover our results for both the fourth quarter and full year 2015. I'm pleased to report that we executed well in a challenging environment. Our results fell in line with our expectations. The fourth quarter revenues of $197 million, and non-GAAP earnings per share of $0.77, full year revenues were $752 million and non-GAAP earnings per share came in at the high end of our guidance at $2.62. Let me share some of the key accomplishments that helped us to drive these results. This past quarter, we helped one of the world's largest entertainment brands launching new membership base, streaming service in the United Kingdom with our award winning Ascendon cloud based platform. This service allowed consumers to watch, stream or download an expensive digital library of movies and TV episodes in up to five different languages as well as stream and download songs and apps. Our Ascendon cloud based solution provides the content management and monetization solutions, enabling the client to dynamically drive targeted offers to specific consumers. In addition to this, this past quarter we have Hutchison Macau a leading mobile services provider launch their 4G services using our highly scalable single view solution. Our solution enables Hutch Macau to take advantage of the high bandwidth capabilities of its new LTE network by providing a wide range of innovative offerings around the mobile beta and location based…

Thank you, Bret and welcome to all of you on the call today to discuss our financial results for the fourth quarter and full year of 2015, as well as our outlook for 2016. We are pleased with the continued performance improvements we have made in our business and the expanded reach of our solutions in the markets we serve which are both reflected in our strong operating results for 2015, especially in light of the challenging business environment. Now I'd like to walk you through our financial results in more detail. Total revenues for the fourth quarter were $197 million, up 2% from the same period last year, which includes a negative impact of $4 million from foreign currency movements. Sequentially, revenues for the quarter increased approximately 6%. Total revenues for 2015 were $753 million, relatively unchanged from the prior year, without the negative impact of $15 million from foreign currency movements, full year revenues on a constant currency basis were up 2%. This growth is primarily from the 3% increase in our processing revenues for the year which was driven largely by the migration of new customer accounts onto our cloud solutions and the continued growth of our international managed services offering. This strength helped offset some of the challenges we experienced this year in our software and services revenues. Moving on, our non-GAAP operating income for the fourth quarter was $44 million with a margin of 22%. And was $150 million for the full year with a margin of 20%. GAAP operating income for the quarter was $34 million or a margin of 17%. It was $113 million for the full year or a margin of 15%. Our non-GAAP operating margin for full year puts us at the top of our long-term target range of 18% to…

Thank you so much. [Operator Instructions] We will take our first question from Howard Smith from First Analysis.

Yes, good afternoon, Bret, nice first quarter, nice first conference call. I thank you for some laying some of your strategic initiatives, my first question has to do with the comment made by one of your competitors last night when they were announcing earnings regarding any uptick in interest in some of the MSOs, Charter, Time Warner, Comcast and looking at updating in earnest their BSS and other systems and I am just wondering if you're having similar conversations and any light you can shed on that?

Thanks Howard, it's great to hear from you. Yes, there is a lot excitement in this space right now. There has been for some time and we continue to remain extremely focused on it. We have been in deep conversations with many customers about their platforms and the future for years and so it is an area that we see an exciting opportunity for the future as we move forward as we continue to build upon the platform of this solid company and solid business model we have. So, yes, we're in conversations with many of our customers and -- it's hard to gauge the -- we're up this quarter, we're down this quarter, we're excited this quarter not that quarter, I'd say that we have a slow steady consistent desire to support the customers in this market and we'll continue focus on delivering it and with our new award winning Ascendon platform, we're confident, we'll be able to compete to help our customers to help with their business.

Okay, and following up on that, you mentioned a couple of times in your prepared remarks about the importance of the Ascendon platform. I don't think that's a division. It is more of a product thing, but are there any metrics you can give out or things that we can track the progress on in terms of revenues, number of customers, things like that? That we should be focused on to kind of measure your progress there?

At this point, we don't report it at that level and I would tell Randy and Liz to hit me over the head if I say anything inappropriate along those lines, we don't at this point, I can tell you we have it in production at client sites and we in addition to that what's happening as we get more and more positive feedback as it goes and not only that the areas of opportunity to improve as it progresses forward. So it is a continuation of our current platform in this technology that we got with our international acquisition and our solution acquisition years ago that are all coming together to be an incredibly robust platform for the future of this consolidating market space in the video spot, so, we'll share more as we go forward into the future with it, but right now it's in the early stages, I'd say innings two of a baseball game. We're just getting going.

Okay, one quick numbers question for Randy and then I'll leave the floor. On the maintenance revenue this quarter had a little bit of a spike. I usually think of maybe that is associated with software spikes, but it seemed particularly strong. Was there anything one-time or not sustainable in that maintenance line?

Yes Howard usually at the end of the year there are some stranglers on maintenance, of kind of the Q3-Q4 timeframe you may see some shifting between quarters and we really try to get those all nailed down before the end of the fiscal year, so what you have is a little bit of ketchup in the fourth quarter so that's not a sustainable number into Q1.

[Operator Instructions] We'll go next to Tom Roderick with Stifel.

Good afternoon, Bret. Welcome aboard full-time to your new role here, so congratulations on that.

Thanks, Tom.

You bet. I wanted to just dig a little further on some of the initiatives for growth and maybe to work backwards on that as you are kind of guiding both profitability and revenues in the same range for '16 as you were in '15. Could you give us just a little bit more directional guidance as to how you think about the puts and takes on your cable MSO processing business versus your software business? Are you thinking both are flat? Are you thinking one grows and one declines, so I would love to hear that and then I have a follow-up just thinking about profitability as well?

Yes I'll let Randy get into the specifics on it after I give a few words here. And one of them is just the fact that in each of the markets, be it the cable or the global marketplace from a telco space and the other markets that we serve, we do believe that we can grow and expand them as we move forward. Those investments that we're making in the products and then realigning the organization and refocusing the organization which will position us for many of those takes but to do that there is some puts that have to happen and all along the line which is the things that you hear about as far as a laser focus on our investments which means there are some time to do some things like you've all seen in the press about Invotas and investments we've made in the past that are now in the hands of folks that are better suited to drive those forward which allows us some time here to get those half off of our book and work through the process of focusing ourselves in our true markets that we serve and we believe that cable market has the opportunity to grow globally as does the telco interior space as we move forward. So that the numbers and puts and takes is what leads to the steady eddy for 2016 but positions us phenomenally well to take more wins and grow that top line in 2017 and beyond. Randy, anything else you’d add on that or?

Yes I think, I would add Bret, is that many of the things that we've talked about in the past as key initiatives actually we saw pretty good growth in 2015 and expect some additional in 2016 and Tom we will just point you really to the processing line of our income statement if you could see for the fourth quarter, quarter over quarter we actually grew that number almost 4% which reflects the additional accounts we've been converting on for Comcast over the last 2 years, also it shows, embedded in it all it's not a big number, there's about 50% growth in the Ascendon platform and as we heard from last caller, it's still not meaningful but it's growing substantially and it is adding to the top line to or the processing growth. But also, the managed services we've made some good progress on that that grew about 30% this year again it is a small numbers, so you don't -- the 30% doesn’t move the needle a lot but we're seeing a lot of progress on the things we've been talking about and actually did drive top line revenue on the processing side. Unfortunately, we'll see some good growth in 2016 but unfortunately you will still see some pressure points from both foreign currency and then some of the pressure points we've seen on our software and services as we continue to transform that to more of a recurring revenue model. So it is kind of a mixed bag what it is what I would say on the revenues. Some good success on many of the initiatives Bret talked about, but we still got some headwinds from a tough business environment, foreign currency and then just a continued transformation of that software service to recurring revenue model. So there is some good news bad news I guess in ’15 and ’16.

And Randy, in the context of some things that you can't control, particularly the pending merger of two major customers, when you think about the processing line for 2016, what have you done within the context of your guidance to protect or reflect what would likely be some level of a re-pricing event, should that merger goes through? Is that fully contemplated inside your guidance and is that one of the pressure points?

It is, it is contemplated in our guidance and as you know, how the way our business model works is as Charter combines with Time Warner, they’d essentially have more buying power because of just the more number of subs so they get a better price point, so that is built into our top line revenues. Also we have a little bit built in there for some foreign currency headwinds that we anticipate, so those are both reflected in the range, Tom.

And then with Invotas, I noted that they were fully acquired the other night by I guess it is FireEye. And you guys had, I guess divested that in September of ’15, but when you are giving your guidance for this year, how much sort of lost revenue year on year would you encourage us to think about being attributed to Invotas?

It's absolutely insignificant Tom, it was a pretty much in a startup phase with us and we had secured a very minimal number of contracts, so it's very-very insignificant.

But it's holistically contemplated, so what you see in our guidance is what is completely there.

And so last question from me is, if we think about revenues being flat year on year, with I mean really excellent operating performance in the last couple of quarters, you've seen operating margins in the 21.5%-22% range and that's up 500 basis points plus year on year, it would sort of reflect to get to the EPS guide I think, that the levels are going to come down from here. So I guess that kind of matches, Bret, with your commentary that there are places to invest and ways to build for growth. Where should we think about you investing in this year? And what is the right level of investment on an operational or operating expense type of basis?

Tom, that is one of those areas that really does get me out of bed in the morning in how exciting this business model is because even with the things that we talk about the headwinds, the challenges, the this that and the other things, this is a phenomenally solid business on steady ground and that solid business on steady ground and our model of believing that 18% to 20% margin is the right place to go that when we see these opportunities where you see the last quarter and the last two quarters and how well we do, what that really is doing is it just feeding the animal to better position us to go after more in the process. So that 18% to 20% margin is what we believe to be a very healthy margin and the fact that it's such a solid business on steady ground with long-term agreements and commitments in this new Ascendon product and this just really positions us well as we go into this transformational market.

[Operator Instructions] We will go back to Tom Roderick with Stifel. [Multiple Speakers]

I noted that you guys in the press release said you've converted 2 million subs in the year 2016 and I was wondering if you can just refresh us as to what that brings the aggregate total on the conversion to and how many you have left there, does that sort of match in line with your prior expectations, are you ahead of pace, the margins and processing revenues just sort of suggest that you have done maybe even a better job than expected this year, but wondering how that has matched your prior expectations and how fast you expect the remaining components to come on here?

You know the reality of it is they are talk about puts and takes, there is a lot of back and forth with the customer and with us, but it's pretty close to being online with where we intended to be and I can tell you the most probably some of the busiest folks at CSG right now are the conversions folks that are working with the customer, but there are a lot of factors that come to play in that. Randy from the specifics of the numbers can you just share where we're at along those lines, it's really a great project for us and progressing and more the commitment of the customer in the market converting onto the platform?

Yes, Bret, we've done about 4 million in the first 10 years. Tom starting in the fourth quarter of 2014, so we've done a little over 2 in the 2014 and just a little less than 2 this year, so we're at the 4 million and that’s about 40% of the subs that we expect to come on so there's still about 6 million subs out there and we were actively planning for additional subs in 2016 probably from a consumers standpoint we will get at least 1 million but it could be as high as 2 million. So another consistent year of conversions anticipated in 2016 and there we will look to finish those up over the next couple of years.

And Randy relative to warrants that they had just that -- one of those have been triggered or will be triggered as you've gone through those first four and expect to be up 5 or 6 by the end of '16?

Yes I think that right now they've earned about 1 million of those, they should earn about close to the 1.5 this year, if we complete, we get close to 6, I think the strike point is 5.5 million cumulative subs converted so they can get to essentially 75% of those and then the last tranche is really when they bring the balance of the subs to us.

Okay, good.

Tom, one thing to notice, is just as you think about modeling because that's kind of we're going with this is that similar to the last 2 years the conversions typically are quite heavy in the third and the fourth quarter so that happen in the backside of the year.

Perfect. Okay. And Bret just a quick follow up for you on that I mean I know you've been watching those conversions closely and how you guys have managed the conversions? What do you think you've learned from the process of it to the extent that there's an opportunity to do more following the Time Warner Charter merger itself? Do you think there is replicablility in what you've learned in how to convert the Comcast up and do you think that operating performance could continue to sort of roll over as that opportunity presents itself?

Absolutely, learned from every one of them as we go through it, I hate to get to a point where I ever say it's a wash rinse and repeat. But we're not too far off from that part of the process, we learned and not only did we learn how to do them but them how to automate them in a faster timeframe with higher quality as we go through that cycle. We're one of the few companies in this industry period that has had a dedicated conversions team for over 25 years and what that has done is it allowed us to understand the business not only of our technology but of the competitive technologies and to actually automate a lot of those migrations as we go through, when you asked your question about the warrants that was the first thought that hit my heart because I want them to get those warrants, because our interests are directly aligned and the quicker we can get them over the quicker we can help solve for their business issues as we move forward. And the lessons we've learned not only can we, we plan to leverage those as we move forward with ACP and more importantly our Ascendon platform moving folks on to that. It's a beautiful model of great business model that kicks off cash and the technology and we can continue to grow that.

Thanks. And with no further questions in the queue, I'd like to turn the call back over to Bret Griess with any additional or closing remarks.

Well, thank you to everybody who took the time to get on the call and listen today. As I said I'm jazzed and honored to have my first call in this situation and scenario and we continue to have a phenomenally solid business on steady ground, but it's positioned as well to drive into the future and I want to thank our employees that are on the call or happen to hear it later for all you're doing and putting into it to allow us to be successful in the marketplace. So thank you and have a good quarter everyone.