Good day, and welcome to the CSG Systems International First Quarter 2018 Earnings Announcement. All participants are in listen only, a question and answer session will follow today's presentation and instructions will be provided at that time. Today's conference is being recorded. At this time, I'd like to turn the conference over to Mr. Liz Bauer. Please go ahead.

Thank you, Stephanie, 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 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, our Chief Executive Officer; and Randy Wiese, our Chief Financial Officer. With that, I'd now like to turn this call over to Bret.

Thank you, Liz, and thank you all for joining us. I'm pleased to report that we delivered record first quarter revenues and non-GAAP earnings. For the first quarter, we grew our revenues by 5% to $202 million, and grew our non-GAAP earnings per share by 11% to $0.69. And finally, we generated cash flows from operations of $30 million and free cash flow of $18 million. Overall, we had a solid start to our year. Randy will review our financial performance in more detail later in the call. As we started this year, I outlined our four key initiatives aimed at creating long-term shareholder value. They include, first, driving revenue growth at or above the industry rate, second, getting broader and deeper in our customers' operations with our proven cloud and SaaS-based solutions, third, investing in our platforms and go-to-market strategies to power our revenue growth and enable us to enter new markets, like IoT and smart cities; and finally, relentlessly focusing on delivering an exceptional experience for our customers. When we execute on those things, good things happen for our employees, our customers and our shareholders. Let me share with you how we are doing on those initiatives. First, I'm very pleased to announce that at the end of February, we strengthened our customer communications management solution with the acquisition of Business Ink, a leading provider of multichannel business communications. This business combination allows us to leverage our operational talent, scale our technology and platforms and diversify the vertical markets we serve to now include the home security, transportation, health care, utilities and government segments. Also we bring together complementary business models, each built upon strong recurring customer relationships and a history of delivering services with well-run, state-of-the-art operations driving healthy, profitable business. And most important, we have a…

Thank you, Bret. Welcome to all of you on the call today to discuss our financial results for the first quarter as well as our outlook for the remainder of 2018. We're pleased with our solid start to the year and the progress we're making on our strategic initiatives. Now I'd like to walk you through our financial results in more detail. We reported record first quarter revenues of $202 million, an increase of 5% from the same period last year. This performance is consistent with our goal to grow at or above the industries we serve. This 5% growth is driven by a combination of solid organic growth of 2%, with the balance of the growth coming from the acquisition of Business Ink, as Bret mentioned earlier in his comments. Let me provide some additional color on our first quarter revenues. The 2% organic revenue growth can be attributed primarily to two areas. First, we continued to experience success in transitioning our software and services clients into long-term relationships via our managed services offerings. Second, this is the first full quarter in which we have realized the full year revenue benefit from the $4 million Comcast customer conversions that we completed last year. In addition, our one month of ownership of Business Ink added $5 million of revenues for the current quarter, which accounted for the remaining 3 percentage points of growth this quarter. I will provide more details around this acquisition later in my comments. You should expect us to continue to drive our future business growth through a combination of both organic and inorganic sources. Moving on to results of operations. Our first quarter non-GAAP operating income was $35 million with a margin of 17.5%, which is in line with our expectations. Our non-GAAP adjusted EBITDA was…

Thank you. [Operator Instructions] And we'll take our first question from Chris Moore with CJS Securities.

Hey, guys. Thanks for taking my questions. Yes, maybe we could start with Business Ink and may be just talk a little bit further in terms of kind of how the business models are complementary? Are there - is there kind of crossover from a selling perspective? Just kind of how the two fit together.

Chris, thank you. Appreciate you being on the call and for the question. Business Ink, as we set out of Texas, has a very similar business model as far as multichannel communications, along the lines of the digital services, the print and mail, areas that we're seeing great opportunities around our things, along the lines of workforce management where we can leverage it. We really view it as a combined CCM, or customer communications management. Any time you're touching the customers. So it's a family built and operated private company. We saw it and its culture along with the business model as a direct match for what we are doing. We got great economics around it. The teams have been working together since the close of the acquisition to do a couple of things. One is to get the synergies that we know make sense in our businesses combined that everybody is on board with and carrying out. And also on building the go-to-market strategy and executing on it, on where we can do pull-through into larger customers for things that they were doing. They can put us into other areas. And what I mean by that is a smaller percentage of their customers are in our traditional segments. So it puts us into things with greater diversity around the worlds of health care and some of the other things that we can leverage some of those customer relationship management. So beyond great economics and great culture tying it together, we just see ways that we can drive the market seriously together with each other.

Got you. Roughly, what kind of gross margins does Business Ink have?

Chris, it's a business pretty similar to CSG, so you would expect it to have very comparable margins.

Got you. And is there - so revenue was on a trailing 12 months, roughly $60 million, is that right?

On an annual basis, yes.

On an annual basis, that will be correct. Yes.

Okay. Got you. Got you. Can we just skip on that a bit? The Formula One conversation you have and the F1 TV is really interesting. Can you - kind of maybe just walk through when you talk about Ascendon as a digital commerce engine for Formula One. Can you just outline exactly kind of specifically how long that took to get positioned here? And exactly what you're doing for Formula One?

Yes. I'd have to go back to look at specific dates and times. The majority of these things take - they're not as large as the DBS's deals that take a couple of years to go through. They are usually shorter time frame than that. But our sales team around our Ascendon over the top activities has been on average, I would guess 6 months to 12 months with any given customer, understanding their business needs and then ensuring that we're the right fit and right solutions for them. How much we like recurring revenues. We really want to ensure that we're solving problems on their behalf. But this is one where Formula One what may be used to be contemplated or considered as just car racing. Like the rest of the world, they're having to deal with the concept of digital transformation, and how they get further into that digital transformation world. And so with that, they're doing a lot of different activities, as I mentioned, around driver camera viewing, interviews with drivers, interviews with crews, archived video. And then what we're doing is we're helping them without how you do the monetization, the management, all the activity around that in a fast time to market, low-cost solution, cloud-based SaaS operation that fits right into our long-term strategy.

Got it. I appreciate that. Back to kind of the Business Ink non-organic growth. You talked about potentially additional acquisitions. Is this a pretty good kind of model for what you're looking at $50 million to $100 million in revenue, recurring - recurring revenues, good gross margins that kind of fit with what you're doing? Is that a pretty good model for the types of things you're looking at?

If we can find those, we'll take those all day long every day because it's such a solid acquisition for us. However, as we said before, we truly do believe that we pride ourselves first and foremost on being good business people. And we don't take using your capital or anybody else's capital lightly. So we work really hard to be thoughtful and deliberate, not just out buying for the sake of buying, but actually making sure it's going to be a sound business. We reviewed in the last 1.5 years to 2 years over 70 companies. And we truly are working hard to find things that differentiate from a financial perspective and from a strategy perspective, and they are one of them. We have multiple different things in the pipeline that we continue to look at, so that we can deploy capital in a smart way to deliver a good return on investment for our shareholders. And also solve for our customers as we go forward.

Got you. Last question, just from a kind of EBITDA multiple standpoint. What was the purchase price on Business Ink?

From EBITDA.

Probably 4 to 5 times. Little over one times revenue, about 4 to 5 times on the EBITDA side.

All right, guys. I'll jump back in line. Thank you.

Thanks, Chris.

[Operator Instructions] We'll take our next question from Tom Roderick with Stifel. Please go ahead.

Hi. It's actually Parker Lane in for Tom. Thanks for taking my question. I was hoping if you can provide an assessment of the impact you'd expect Sprint and T-Mobile's upcoming merger will have on the conversions of pay-TV broadband and wireless? And how CSG is more broadly aligning itself from a go-to-market standpoint? It's capitalized on the emerging - the evolving market landscape.

Thanks for the question, Parker. Thanks for being on the call. It's big news in our industry whenever something like this happens. If it's the first time it's attempted or the third time it's attempted, it's always big news as we work our way through these things. It does seem like they're very well positioned to pull it off. We'll see what the government says along the lines of competition in the area, but I think the area that no one can deny is the stuff that you're talking about which is that there is consolidation happening in this space. And the lines are both smearing together in the lines where who used to be mobile, is now in the video, is now into telco. They're all starting to crossover. Companies that used to be called cable are no longer cable. They're in the telco world and in the mobile world as we get into these multiple services, as we go forward. So folks are continuing to be pressured through that consolidation, and they're continuing to have the activities where they have to find business models that work. So some companies out there are utilizing their video as nothing more - they view it as nothing more than a marketing expense that they have to put on their networks, and they make good money off of the backbone network that's out there. Both of those companies that you referenced, T-Mobile and Sprint are great wireless providers as they compete with Verizon and they compete with AT&T along those lines. Each of whom we do different levels of business with also. As Sprint and T-Mobile come together, of course, we would always be looking to satisfy somebody in this space if we can help them with that. As far as it impacting us, we see it day in and day out. As we mentioned on the call, Eastlink choosing our Ascendon platform for their mobile go-to-market activities that we go. We'll continue to compete day in and day out, listen to our customers and try to find the best way to solve for their complex business challenges in monetizing, personalizing and all the other fundizing [ph] words that we do to try to help our customers.

Got it. And I guess just a step back to Business Ink. Understanding that you've been working on the alignment of your go-to-market strategy since the acquisition was completed. Can you talk more broadly about the integration of their solutions into the broader CSG platform? Magnify that the customer crossover there? And what opportunities you see to sell their solution into your existing customer base? Thanks.

As we mentioned there, that we see great opportunities to leverage our scale, leverage our technology and get efficiencies as we go forward with it. And you combine that with the cultures that are just so in sync. The meetings really quickly went to working together. And you could see the excitement in it around sell-through activities and pull-through activities that are happening. So it's just - the cultural fit is hugely important because how quickly people get on to the idea of meritocracy of trying to solve problems for our customers. And it's too early in the game to say we think revenues going to do X, Y or Z. But we have a very healthy model of recurring revenue, long-term contracts with our customers. They have the identical model. We see the synergies that are in play. And we also have the teams working diligently together to grow the business that we all know is important. So we're very excited about the acquisition. And as we said, we take that allocation of capital incredibly seriously to do the right thing.

Got it, Congrats on the quarter.

Thanks.

Thanks.

And there are no further questions on the line. [Operator Instructions] And there are no further questions on the phone lines.