Good day, and welcome to the CSG Systems International Third Quarter 2016 Earnings Announcement Conference Call. All participants are in a listen-only mode. 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, IR. Please go ahead.

Thank you, Bethany, 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 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 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 Bret Griess, Chief Executive Officer, and Randy Wiese, our Chief Financial Officer. With that, I would now like to turn the call over to Bret.

Thank you, Liz, and thank you all for joining us today. Today I'll review our third quarter results and provide you with an update on how we are executing to our plan to drive top-line revenue growth in the future. For the third quarter of 2016, we grew revenues to $189 million, a 1% increase over last year's third quarter results and we grew our non-GAAP earnings per share 4% to $0.75 per share versus the same quarter in 2015. We're very proud of the great execution and the strength of our business model to deliver such a sound quarter. We remain committed to making smart, short-term and long-term investments to fuel our strategy of serving communication service providers globally. Over the past several quarters, we have stated that we will be increasing our investments in our people, our products, and our clients all aimed at generating long-term future revenue growth and earnings. And as a result, our long-term, non-GAAP operating margin remains unchanged at our historic target of 18% to 20%. Now moving onto the business. I'm really pleased with how we're executing in a challenging environment. We're continuing to move market share. We're expanding our reach into the broadband and cable space globally, and we are strengthening and lengthening our revenues with global Tier 1 operators. Over the past nine months, we are seeing a sharper focus, increased accountability, and a greater sense of urgency around driving the right type of revenue growth as a result of our realignment and additions to our leadership team. In our broadband, cable, and satellite markets, we continue to take market share from our competitors. Since our last earnings call, Comcast has converted more residential customers on to ACP platform away from the competitor’s legacy platform. We completed two more conversions over…

Thank you, Bret, and welcome to all of you on the call today to discuss our financial results for the third quarter as well as our outlook for the remainder of 2016. We are pleased with our continued solid results for this year as well as the progress we are making to strengthen our business for the long-term. Now I would like to walk you through the financial results in more detail. Total revenues for the third quarter were $189 million, an increase of 1% from the same period last year. Sequentially revenues were down slightly from the second quarter. Our cloud and related solutions grew 5% from last year's third quarter, which was driven largely by the continued conversions of customer counts onto our cloud solutions and increased revenue from recurring managed services arrangements. This strength helped to offset the softness, we continue to experience in our software services revenues as we continue to transition this portion of our business into a more recurring revenue model. Moving on, our non-GAAP operating income for the third quarter was $44 million with the margin of approximately 23%. This stronger than expected performance for the quarter reflects the solid fundamentals of our business and a much slower than anticipated start to certain strategic investments planned for the second half of 2016 which I will talk about more later when I provide our outlook for the remainder of the year. GAAP operating income for the quarter was $37 million or a margin of 19%. For the third quarter, our non-GAAP adjusted EBITDA was $51 million or 27% of total revenues. Our stronger than expected operating performance helped us deliver non-GAAP EPS for the third quarter of $0.75 which compares to $0.72 for the same period last year which represents a 4% increase. Our…

[Operator Instructions]. We will take our first question from Tom Roderick from Stifel. Please go ahead.

Hi guys, thanks, Matt Van Vliet on for Tom this afternoon. I guess first question, great to hear you that you expanded the Telstra contract. I was wondering if you could give us a little bit more detail in terms of what the expansion means, is it geographic based, is it more functionality or is it just an extension of the terms, any color there would be great?

Yes, Tom this is Bret. I appreciate you being on the call, Matt, but what it means is there is additional feature functionality or additional services that we're providing in that space and it's really one of those things that's tied to our core competencies that we talk about is getting in, understanding the clients business, and helping them to do it over time. And like any partnership, when you build that trust, it can help to extend that partnership. So it's more feature functionality of services we're delivering, but it also extends the term and it extends the amount of the revenue in a very healthy fashion along those lines. So the reality is it’s right in line with our stated strategy that we're looking to take globally, which is to strengthen and relay and lengthen those relationships with our clients.

All right, great. And then on the gross margin front, I guess we saw less deterioration there than I think we're expecting and even the processing went up. I was curious what the impact in the quarter specifically was to the expected re-pricing on the Time Warner subs and what we should think about for the fourth quarter?

Yes, I will take that one, Matt. We had stated last quarter and it's still current. For the year, it is about $5 million revenue and margin hit, for the last six months of the year, so half that would have hit this quarter. For the expectations for the remainder of the year, as I stated in my comments that we had a very solid quarter of execution, we got a slower start to some of the investments that we anticipated; I think we will gain some momentum on those heading into the fourth quarter. So I think you should look first to may be start falling more in line with our long-term target margin range in the fourth quarter.

All right, great. And then looking at the geographic performance, it seems pretty much in line with the last few quarters. I was wondering if you have any additional color in terms of maybe how Europe was performing. We've heard some weakness from some companies and not so much from others, so I was curious what you guys are seeing there and then how some of the macro issues are impacting the APAC business in particular?

Yes, the macro issues of course are all out there and we all see those and here about them in the big new sources as we go through there. But it's performing, we've got folks on the ground with customers, and so we've got a pretty good understanding of how it's going to perform. I wouldn't say that there is great growth anywhere on the planet there. We are seeing the continual pressures from a macroeconomic perspective in being an unchartered territory from a monetary policy basis, but those same types of headwinds are also creating some tailwinds where we get some good opportunities from it. So in APAC, you heard it was a good quarter with us from Telstra, but that really isn't about the quarter, that's about the years of investment and time to understand their business and work with them. We're working to do the same thing with other customers in the APAC market and the same thing goes from EMEA. We understand there are a lot of those larger pressures, but our teams are on the ground working closely with them. So I wouldn't say there is any great tailwind that moved us along in the European marketplace or a great headwind that slowed us down. We stay extremely focused on solving customer problems with our great employees.

And we will go next to Howard Smith from First Analysis. Please go ahead.

Yes, thank you for taking my questions. First, in regards to the kind of the carrier business, you’ve kind of declared victory on the turnaround and now can you kind of focus on just growing the business, is it the Telstra wins and a couple of wins or the reorganization or a combination of things, may be a little more detail on kind of what you saw in the last quarter or a few months that have you making that statement that kind of the turnaround is complete?

You bet Howard and by the way thanks for being on the call, we appreciate you being here especially with all the great things happening in Chicago at the night, but the overall I wouldn't tie it directly to the quarter, I would say that the timing just happened to fall in this quarter. A phenomenal effort has been underway from the last 18 to 24 months to make sure that we were executing in a very solid fashion to make it a healthy business. So along the course of that 18 to 24 months, the teams have focused diligently on the cost and also on the client arrangements that we had, that we don't want to do business, it doesn't make sense for our customers or for our business. And so that great focus over that time period helped us to bring it into the point where we're ready to declare it a success from a turnaround and get back to focusing on growing the business.

Great, appreciate that. And then as you have had some success in converting some of these previously may be software oriented deals to cloud and related services, these long-term managed services, does this -- the way we think about the seasonality software and services and related on maintenance change significantly, I usually think of that having a nice spike at year-end in Q4, but should we think of that as more muted going forward because of this kind of change in business model?

I think to a certain degree Howard. I think you know as long as we're still selling software and services you always have that natural end of year buying pattern around capacity upgrades and things of that nature. So I think you will see a little bit but it may get muted from the standpoint of the degree of magnitude between quarters but I think we're still in the software business and we will still have that to a certain degree.

[Operator Instructions]. And it appears there are no further questions at this time.

Well then we will take one last opportunity to say thank you to everybody for being on the call especially in the clients that happen to be there or great employee base, we are extremely excited about the strength of the business model and the future and what we got in place and thanks to those customers and those employees and thank you to everybody else on the call for taking their time to be here, we appreciate your interest.

And this does conclude your teleconference for today. Thank you for your participation. You may disconnect at any time.