CSG Systems International Inc (CSGS) 2006 Q1 法說會逐字稿

Good afternoon, ladies and gentlemen, and welcome to the CSG Systems Q1 earnings conference call. [OPERATOR INSTRUCTIONS] I would now like to turn the conference over to Ms. Liz Bauer, Head of IR for CSG Systems.

Please go ahead.

Thank you.

Today's discussion will contain a number of forward-looking statements, in particular around any financial projections, our ability to meet our clients' needs through our products, services and performance, our ability to maintain good customer relations, and our ability to successfully integrate and manage acquired businesses or assets in order to achieve their expected strategic operating and financial goals.

While these statements reflect our best current judgment, they are subject to certain risks and uncertainties that could cause actual results to vary.

In addition to factors noted during our presentation, these risk factors are discussed in more detail in our most recently filed 10-Q and 10-K.

Currently, the Company has no intention to update this information during the quarter.

If you did not receive a copy of our press release, you can obtain a copy from our website.

Today, we have with us Ed Nafus, Chief Executive Officer and President;

Randy Wiese, our newly named Chief Financial Officer; and Peter Kalan, our newly named EVP of Business and Corporate Development who will be passing the CFO baton to Randy on this call.

Ed will begin.

Thank you, Liz, and thank you all for joining us today.

Today we will be going through our results for the first quarter of 2006 and sharing with you what we are seeing in the cable and DBS industry, as well as a couple of changes that we are making organizationally to drive additional growth opportunities for the Company.

Our first quarter 2006 revenues came in at approximately 93 million, slightly higher than our guidance.

Earnings per diluted share were $0.33, compared to our guidance of $0.30 to $0.31 per share.

Our results were better than expected due to higher interest income than was reflected in our guidance last quarter.

Peter will review the financial results for the quarter in more detail.

For the past year, we have been intensifying our focus on the North American cable and direct broadcast satellite industries.

So far in 2006, we have continued to demonstrate this through a number of activities and events.

In March, we announced the acquisition of Telution, an operations support system supplier to the telecommunications industry.

With this acquisition, we expand our ability to support operators as they deliver complex, advance, and IT-based services.

Specifically, the addition of Telution's COMX product suite to our advanced convergent platform will accelerate our delivery of a world-class product catalog, advanced order management and business services capabilities.

This will enable our clients to more easily bundle and deploy an increasing number of products and services, including wireless, personalized content and business services.

This past quarter we held our Executive Client Conference.

We had an excellent turnout with 16 client delegates attending the event.

Discussions centered around the various opportunities that our customer are pursuing, what challenges they are facing when rolling out more complex offerings, consumer acceptance of new products, as well as where CSG is going with our solution, especially in light of our most recent acquisition.

We were extremely pleased with the participation from our clients, the good dialogue and idea sharing as well as the opportunity the conference provided for us to continue to strengthen our client relationships.

In April, the NCTA Show took place in Atlanta where the energy and enthusiasm exhibited by operators was at a higher level than what we have seen in past years.

One topic that was discussed at length was the entry of telcos into the video space.

Clearly, our customers understand that the $100 billion investment that they have made in upgrading our plants provides them with a short term differentiator.

There appears to be a sense of urgency in gaining market share and new products like voice-over-IP and wireless services, as is evident by their rollout schedules and recently announced joint ventures.

Operators are seeing a decrease in their churn as they bundle more products and services together.

This has resulted in stronger operating margins and cash flows.

We are pleased that our ACP platform is enabling our customers to support the triple-play.

In addition, we are working with our customers on the quad-play and will be enabling one of our customers to rollout wireless in their first two locations at the end of the summer.

Providers also discussed the customer experience as being more than just the content that each operator provides.

It includes everything from the interaction that a consumer has with a customer service rep or a technician to their experience with a provider's website, to how they receive, view and pay their bill.

Our investment in our ACP solution and our ancillary products, like our self-care applications and workforce automation tools, continue to improve the overall quality of a customer's experience as well as drive operational efficiencies.

We will continue to look for ways to help our clients enhance the overall consumer experience.

An area that the cable industry is expecting to be one of their growth opportunities in the future is providing services to the small and medium-sized businesses in which their upgraded plant already passes.

This specific niche generates revenues today of approximately $30 billion in the U.S. alone.

We are working closely with one of our customers to develop an Advanced Business Services offering by the end of the year.

I share all of this to reinforce the fact that we are confident with our decision to focus on this industry.

In the short term, high-speed data and rollout of VoIP services will drive the industry's growth.

Longer-term, new initiatives like wireless services, business services and personalized content will drive the industry's growth.

We feel that the decisions that we have made over the past year have put us in a great position to help our customers be successful, and consequently, benefit from their growth as well.

That being said, we also believe that there are additional growth opportunities for CSG where we can take our technology and our expertise and apply them to new markets, distribution, or sales channels.

In addition, the strength of our balance sheet provides us with the flexibility to look at acquisitions, partnerships, and joint ventures in an additive or accretive manner to our existing business.

Because we believe there are additional opportunities for CSG, we have asked Peter Kalan to lead our growth initiatives as Executive Vice President of Business and Corporate development.

Peter has extensive experience in all facets of the Company, beginning with his original entry into the business of working with our sales people on new deals and contract extensions.

He has extensive knowledge of our products, our customers, and understands the opportunities for increased value creation.

His experience as CFO has enabled him to look at the opportunity costs associated with not doing something as well as the costs associated with taking action on various initiatives.

I'd like to say thanks to Peter for his contributions to the financial management of the Company, and also, I look forward to working with them as we move forward to expand the business.

Randy Wiese, who has been with the Company since 1995, and is our Chief Accounting Officer, will be our new CFO.

Randy has been instrumental in setting up the processes and the infrastructure that has been critical to our success as a public company.

Many of you have talked to Randy through the years, and I'm sure you agree he fits our mold of being well-versed, not only on the financials but also on the entire business.

Between Peter and Randy, we have almost 20 years of financial management at the Company and this will not be going away.

This transition is a natural progression of what we set out to do one year ago.

First, we wanted to get back to what we do well.

Second, we needed to eliminate distractions and turn our focus on our customers and provide them with unmatched products and services.

And next, we needed to turn our attention toward growing our business in logical and profitable ways.

We are just entering the beginning of this third phase, and expect that Peter will put a team in place with clear and tangible objectives aimed at driving additional growth down the road.

Before I turn it over, we don't want to ignore the fact that we continue to have considerable cash on our balance sheet, as well as the fact that we generate substantial amounts of cash each year from our business.

We have stayed true to what we have told you in the past.

We continue to buyback shares at a pace that is accretive to shareholders.

We have made an acquisition that is complementary to our solution, and we are focused on using our balance sheet to help meet our growth objectives.

Let me assure you, management and the Board are very mindful of the importance of continuing to create long-term shareholder value.

And finally, I would like to extend a warm welcome to the Telution employees who have joined CSG during the past quarter.

We are excited to have them as part of our Company.

I would also like to thank all of our employees who have continued to work very hard to move CSG's value to our clients in an upward path.

With that, I'd like to introduce Randy to test his voice here for the first time before we turn it over to Peter.

Thanks, Ed.

I'm looking forward to my expanded role within CSG.

I've talked with many of you before either on the phone or at conferences, and I'm committed to continuing the strong, healthy, open and honest dialogue that Peter and Liz have created over the years.

Now let's turn it to Peter for his review of the financial performance of the Company to the first quarter of 2006.

Thank you, Randy, and welcome to all of you on the call today.

I'm pleased to share with you today the financial results for our first quarter of 2006, as well as our outlook for the second quarter and full year 2006.

Total revenues for the first quarter of 2006 were $93 million, relatively consistent with the fourth quarter of 2005, and also consistent with the first quarter of 2005.

Looking at the components for total revenues, processing revenues for the first quarter were $86.4 million, up 4% when compared to $83.3 million for the same period last year.

The first quarter processing revenues included the full quarter impact of the lower pricing of the EchoStar contact which went into effect on November 1, 2005.

Software, maintenance and services revenues were $6.6 million for the current quarter which compares to $9.9 million in the first quarter of 2005.

The first quarter of 2005 included several large software transactions with no comparable amounts in the first quarter of 2006.

Comcast continued as our largest client, comprising approximately 24% of the company's total revenues for the first quarter.

EchoStar represented approximately 19% of the company's total revenues for the quarter.

The first quarter 2006 gross margin was 49% compared to the prior year's gross margin of 50%.

The operating margin for the first quarter of 2006 was approximately 24%, which compares to the same period last year of 22%.

The operating expenses for the first quarter of 2006 included $1.1 million in restructuring expenses, while the comparable quarter in 2005 included $4.2 million in retirement benefits expenses related to our former CEO.

The financial results of CSG include several recurring non-cash items.

For the first quarter, stock-based compensation expense was $2.8 million, depreciation expense totaled $2.4 million, and amortization of intangible assets was $3.7 million.

These non-cash charges totaled $8.9 million for the first quarter or $0.12 per diluted share.

Income from continuing operations, net of tax, for the first quarter of 2006 was $15.5 million or $0.33 per diluted share, and was above the high end of our guidance.

The stronger financial performance was primarily related to higher interest and investment income which contributed $0.02 more per diluted share than was reflected in the company's guidance.

We finished the first quarter with 45 million subscriber accounts on our processing system.

The average annualized revenue per subscriber or ARPU for the first quarter was $7.66.

This compares to the fourth quarter 2005 ARPU of $7.72.

The quarterly sequential reduction in the first quarter 2006 ARPU is primarily related to the new EchoStar contract which went into effect in November of 2005.

Turning to the balance sheet as of March 31, our net billed trade accounts receivable totaled approximately $109 million.

This is a sequential quarterly increase, the result of increased postage billings in the first quarter and timing of payments between quarters.

The billed trade accounts receivable reflected days billed outstanding or DBOs, of approximately 60 days for the first quarter.

Respectively, we expect that our DBOs will be in the range at 55 to 65 days.

As of March 31, cash and short-term investments totaled approximately $385 million compared to $392 million from the previous quarter.

The change in cash balances includes the impact of the purchase of the Telution business, which totaled approximately $20 million net of cash acquired.

As of the end of the first quarter, the company had $230 million in contingent convertible debt outstanding, which matures in the year 2024.

Holders of the securities can convert at any time after CSG's common stock trades at a price in excess of $34.80 for a set period of time.

The first put or call option for redemption of these securities is in 2011.

Consolidated cash flows from operations for the first quarter were approximately $22 million.

This is stronger than we anticipated due to some working capital benefits in the quarter.

Last quarter, I noted in my comments that cash flows from operations were negatively impacted during the fourth quarter by approximately $10 million due to a client delaying payment of an invoice until after the end of the year.

The first quarter results reflected three payments from this client.

During the first quarter, we repurchased approximately 669,000 shares of the company's stock at a total purchase price of approximately $15 million or approximately $22.44 per share.

The remaining number of shares authorized for repurchase under the repurchase program totaled 6.2 million shares at March 31, 2006.

Next, I'd like to provide you with an overview of our financial expectations for the second quarter and full year of 2006.

For the second quarter of 2006, we are expecting that revenues will range between $91 million and $93 million.

For the second quarter of 2006, we expect that the average revenue per subscriber will range between $7.50 and $7.65.

This reflects a lower level of certain discretionary ancillary services that we provide to our clients which are cyclical in the second quarter.

We expect that the operating margin in the business for the second quarter will be approximately 22%.

The sequential decrease in operating margin reflects the full quarter impact of Telution acquisition, which includes the amortization of the acquired intangible assets.

We anticipate that income per diluted share from continuing operations for the second quarter will range between $0.30 and $0.31.

Included in the projected results from continuing operations are amortization charges of approximately $4.4 million, depreciation expense of approximately $2.6 million, and stock-based compensation charges of approximately $2.8 million.

Non-cash charges are projected to total probably $9.8 million or approximately $0.13 per diluted share.

We expect that the second quarter effective income tax rate will be approximately 38%.

We are projecting diluted shares outstanding of approximately 47 million shares for the second quarter, which includes the impact of projected stock repurchases in the quarter.

We expect that cash flows from operations for the first quarter will range between 23 and $24 million.

We expect that capital expenditures will range between 2 and $3 million for the quarter.

For the full year 2006, we're raising our revenue projections by $6 million to reflect the impact of the Telution acquisition.

We now expect that full-year revenues will range between 371 million and $381 million.

For 2006, we have no major contracts up for renewal.

As a result of the highly visible and recurring nature of our business model, we have visibility into over 90% of our revenues for the year.

We expect that the operating margin in the business for the full year to be between 22 to 23% which reflects the impact of the Telution acquisition.

With the increase in interest in investment income that we achieved in the first quarter, we expect increased interest income for the remainder of the year.

And we are, therefore, raising the lower end of our expected full year's earnings per diluted share guidance from a range of -- to a range now of $1.28 to $1.35.

Our guidance assumes that for the full year, we repurchase stock of approximately $60 million.

We expect that we will average approximately 46.5 million diluted shares outstanding for the full year.

Included in the projected results from continuing operations are amortization charges of approximately $17 million, depreciation expense of approximately $10 million, and stock-based compensation charges of approximately $11 million.

Non-cash charges are projected to total approximately $38 million or approximately $0.52 per diluted share.

We expect that the full year 2006 effective income tax rate for continuing operations will range between 36 and 37%, as we anticipate some tax benefits being realized in the second half of the year.

For the full year 2006, we expect that cash flow from operations will be between $90 million and $100 million and that capital expenditures will be approximately $12 million for the year.

Our business continues to perform very solidly, and we are well-positioned to support our clients as they expand their business.

As we help our clients be successful, it creates the opportunity for us to generate greater financial results, and we look forward to reporting continued successes in the coming quarters.

On a personal note, I want to thank all our investors and our employees who I have worked within my role as CFO and for the support that I've received over the past years.

I'm very excited to assume the leadership of business and corporate development as the strength of our business coupled with the exciting activities underway within our markets creates opportunities for CSG to grow.

I'm also equally excited for Randy, as he assumes the financial leadership of the company.

Randy is fully qualified for the role of CFO and, more importantly, he understands the business of CSG extensively.

CSG will be well served with Randy as the CFO.

With that, I will now turn it over to the moderator for questions.

[OPERATOR INSTRUCTIONS] And our first question is coming from Ashwin Shirvaikar from Citigroup.

Please go ahead.

Hi.

Thanks.

I guess, first of all, congratulations, Randy, on the promotion.

Thank you.

Although, I have to say, I'm confused.

It seems like Peter is still in-charge of spending all that cash you're sitting on.

Pete's no dummy, Ashwin.

He gives me the checkbook at the end of the day.

So, Peter, what's your budget roughly for all these growth initiatives -- $384 million?

No, Ashwin.

I wouldn't say that, Ashwin.

As Ed said, the Board and management are both equally attuned and recognize the importance of creating shareholder value, and we know we can do that in several ways.

But we are focused on looking at opportunities within the business to grow it organically as well as to add to it through corporate development activities.

And as we've said in the past, we will be focused on things that are very complementary to what we do today, and we'll look to the opportunities that we can add to the business that will drive financial results for the Company and for the shareholder.

Is it possible to put some kind of timing on these growth initiatives, market share gains, new partnerships?

And what's a good overall growth rate -- organic -- I guess, overall total growth rate over the next one to two years after you anniversary EchoStar?

After you normalize the EchoStar contract, the organic growth rate that we see in the business, based on organic things that we do today, which is sub-growth, contractual terms, as well as being providing services of the products and services that we have today to our clients, should drive mid single-digit growth.

You would -- you could say, somewhere in the 5% range.

But we believe there are things that we should investigate and explore that will help us drive market share as well as opportunities to add more functionality to our suite that we don't have today to drive that growth rate higher.

But we are not in a position to comment on what those can be today, because I am pretty fresh in the saddle.

Okay.

And in terms of the Comcast revenues, was there anything particularly onetime or seasonal in those revenues?

Is your question why they increased to 24%?

Yes, because the run-rate seems to be, in contrary to Street expectations, that that's not a big contract for you guys.

You've maintained flat and now up revenues from Comcast.

And so that is the reason I'm asking is there anything onetime in nature.

No.

There is not anything unique or onetime in the numbers.

Typically, there would be certain contractual terms that take place at the change over the year, as you get into the New Year.

But we continue to do more for them overall through the voice-over-IP services that we provide and such, and so it's the natural growth of the services that we do, taking step by step with their clients, as their businesses grow everyday.

Okay.

Obviously a positive for that relationship.

We think so.

Last question, which is sort of a clarification, on the restructuring.

Was that primarily this quarter, was that primarily dilution?

And without that, would the EPS have been $0.35?

Ashwin, this is Randy.

Actually, the components of the restructuring are -- if you remember last year we announced that we were getting out of the FairPoint contract.

About half of the restructuring relates to that arrangement.

And we also had -- if you remember last quarter, we had some restructuring around the disposal of the airplane and there was some stuff that came through on the airplane as well.

So it's primarily those two things, which is why that $1.1 million does equate to about $0.02 per share, which we had considered most of that in our guidance, when we went to $0.30 to $0.31.

That was in our financial guidance for last quarter, Ashwin, and in our press release from last quarter.

On Telution, there was no substantive restructuring charge associated with that.

Is that because it's moved into the second quarter or I mean just a clarification for the Telution thrust to these that may be a charge?

There won't be a charge in the second quarter related to Telution.

Any type of restructuring charge that would have taken place, it was considered as part of the purchase accounting.

So you won't see it hit the P&L.

Okay.

Great.

Thank you.

All right.

Thank you.

Elizabeth Grausam of Goldman Sachs has our next question.

Please go ahead.

Hi.

Building on Ashwin's comment on your margin and your cost structure, it looks like SG&A keep coming and as a percentage of revenue.

Can you explain what's going on in that line item and how we should be thinking about modeling that going forward?

This is Randy.

I think the first quarter SG&A is a pretty good indication of how it's going to be for the remainder of the year.

I think the decrease over both the fourth quarter and the first quarter, obviously the first quarter of last year had the retirement benefits in there for our former CEO.

But we did go through some various restructuring as part of the GSS disposition and I think you're start to seeing some of that benefit start to come through in the Q1.

Okay.

Just looking at, kind of, your guidance relative to my model, you're guiding to better revenues, a lower SG&A line, higher investment income than I had modeled, a pretty average share count relative to my model and a lower tax rate.

All those combined would suggest that your earnings guidance is probably still a little conservative relative to your margin structure.

What are some of the levers that you have to pull in the year?

Is there more R&D spending that we should expect?

Is there something that's going to happen to the cost of good sold relative to the Telution acquisition?

I think there's a couple of things that are causing pressure on that downside from what you had mentioned.

One is that you've got to keep in mind that we do have a full year expense and there for Telution now it and it was slightly dilative to our number, so you have that downward pressure.

And also, I think you're going to see that we're going to continue to spend on R&D, so that the R&D spent will probably offset some of the benefit we're getting on the SG&A side.

Okay.

And then just back to the capital structure, any decisions there.

You have a board meeting upcoming in May, is a potential larger buyback, one-time dividend still on the table as a consideration for the board at that time?

Yes.

This is Ed.

Absolutely anything will be on the table.

I think you can see a fairly consistent pattern with what we've been doing and we certainly wanted to get some of the adjustments to not only our organization, but to some of the structural things that we needed to do as a result of the disposition of GSS and plaNet.

So we are certainly aware of the question.

Obviously, it comes from everyone and we are certainly open to anything that will seem appropriate at the time and we'll continue to work it on a daily basis.

Okay.

Thank you.

All right.

Thank you.

Tom Roderick of Thomas Weisel Partners, please go ahead with your question.

Hi guys.

Thank you.

I wanted to ask a little bit more about the pricing.

I apologize, I jumped on the call few minutes late.

But if you could first of all just repeat what the pricing for subs look like this quarter?

And then -- and second part of my question at one point, you had talked about voice-over-IP driving substantial pricing improvement.

And now that you have a pretty sizeable base on which you've upgraded the ACP platform and installed voice-over-IP billing for number of customers, can you give us a sense for how those pricing trends are progressing in those customers?

Tom, this is Peter.

First of all on the ARPU for Q1 it was $7.66 on an annualized basis.

And that is you have all the comparables, I think, for other periods in which to look at.

Yes.

On the impact of the voice-over-IP services, we are starting to see that come through.

It is coming through in different ways for different clients.

We are still in the process of doing conversions -- not conversions, migrations of customers onto our ICP platform and some of our clients are still in that process.

So not all of them are getting -- and we're not getting the benefit of a voice-over-IP services in all markets yet.

But overall we are starting to see some additions to that.

It is being offset by the impacts of the EchoStar contract coming in, the full quarter impact from that.

And then as we move forward in the year you're going to see pressure as the Adelphia subscribers convert over under to the Comcast and Time Warner contracts, which will also mask some of the benefits that we're getting.

Okay, good.

And then just building on the concept of additional up sold sort of modules here for services, you've done a nice job also selling workforce management and self service to your customers, what else are you hearing from your customers that they would like to see that you could potentially host new applications or new customer service apps that your customers are calling for that you might see in terms of building out the road map here?

Sure.

I'll take this first on that again Tom.

I guess the first thing that you see happening with our clients is that their near-term focus of what they have us looking at is commercial business services -- the small business services that Ed commented on in his opening remarks as well as their wireless partnerships they've done with Sprint.

And those are two areas where they're focused on delivering incremental services and we're focused to make sure that we can support them, because that typically generate revenues for us.

But we are looking at the other parts of their business operations and that's part of what my new role will be is to say what other type of applications can they use, whether it's applications that go into the call centers, whether it's commissioning systems.

There are lots of different things that we know that they are operating or needing at least advancements to.

And those are things that we're going to investigate by working internally with advisers as well as our clients to make sure that we can identify those and bring those into our scope of services that we can provide.

Okay.

Good.

I'll turn it over to others for questions.

Peter, congratulations on your new role there.

Thanks Tom.

Thank you.

Scott Sutherland, Wedbush Morgan Securities has the next question.

Please go ahead.

Great.

Thank you and good afternoon.

Hi Scott.

Hi Scott.

Peter, congratulations as well on the new role.

Also, I had the first question for you.

As you look at the cash balance that you have out there, are you looking to add value within the broadband vertical?

Are you looking at some other verticals as IPTV and the video broadband or other type verticals, to acquisitions?

Yes.

We always looked to do the -- our growth from our position of strength, both from a business model as well from the markets we serve.

But we hope to, as time goes by, get exposure to other verticals, but it's not our first focus outside of the gate.

As it has to do with IPTV, we are providing services to Verizon and some of our other clients, such as Qwest and so we are already in that space and as new entrants come into the marketplace, we'll be looking to evolve what we can provide to support their needs as well.

Okay.

And on Telution a couple of questions.

First of all, was there any revenue in the -- for the last month of this quarter?

And as you look forward, I know you raised guidance by $6 million, that sounds like with the run rate Telution was 2 million a quarter.

What is your goal there, are you already opportunities to possibly get more than 2 million or are you just looking to get the margin more to your corporate margins?

Why don't I take the second one and Randy will comment on the inclusion in the quarter.

I think the important thing to consider for Telution is is that we are integrating this application into what we do and look to offer it as part of our consolidated suite.

And so the business model as it was constructed as Telution as an independent company is not -- we don't look to continue it in that same model.

We are focused on using these assets for business services and the advanced services that Ed talked about.

And it's part of our core solution set as we go to our key clients in key markets to meet their needs.

Relative to the specifics of the financials, how much Telution was in the quarter, I'll turn that to Randy.

It wasn't terribly significant, it was about 300,000.

But that's not indicative of the full year, obviously.

It's the first month of our ownership, so we still think that the $6 million target for the year is good.

Okay.

And my last question is on your wireless opportunities.

I know it's pretty early there.

Try and think about how this would increase the revenue for subscribers.

Is it something that could be a couple of dollars or is it closer to what other data processors get in the wireless market?

This is Ed.

We're at the, I would call it, very early stages.

We're still working with the clients in terms of outlining the requirements, from the requirements and the -- if you will, the level of work that we will be asked to do will come -- obviously the pricing that we will be able to extract.

And at this stage, it's just too early.

At this point in time, really it's more of a development product, development exercised more than anything else.

Okay.

Great.

Thank you.

Thank you.

All right, thank you.

Donna Jaegers from Janco Partners, please go ahead with your questions.

Hi, just let me add my congratulations to Randy and Peter on your promotions.

Thank you, Donna.

Thank you.

On -- you mentioned Adelphia and the swaps that will go on there once that merger -- once that acquisition is finalized.

But I sort of got the feeling that you're looking at sort of negative offset.

Can you sort of outline that a little more?

My comments, Donna, were not so much -- they didn't address whether there'd be any swaps.

It was a function of Adelphia.

Their pricings -- or the pricing for the Adelphia subs switching to the contracts of Time Warner and Comcast that because of their scale have better pricing than what we were receiving from Adelphia.

From a swap perspective, we have always maintained that we thought that that would be neutral to us.

And we still have that stance that we believe we will not have an overall sub-impact from a number of subs we process related to this acquisition.

Okay.

Thanks.

All right.

Thank you.

Ben Abramovitz, Icap Equity Research, please go ahead with your question.

Thank you.

Good afternoon.

Just following up on Adelphia and some of its timing, are your current projections in terms of -- in guidance still for Adelphia to close at the end of the second quarter in terms of some of the numbers you've put out?

And at this point, does that expectation still hold?

We're hearing it easily could bleed into the end third quarter at this point.

This is Randy.

I think our expectations now are kind of what's in the public market is that it looks like it's going to close in July, which is kind of what our expectations are.

Okay.

Thank you guys.

[OPERATOR INSTRUCTIONS] Melindi Davies with Susquehanna is next.

Please go ahead.

Hi.

I had a question about the number of subscribers you have on the ACP platform.

I thought that it was 60% of the 45 million subs in last quarter.

And then you said 22 million, so if you could clarify there.

And also, could you explain the premiums that average ARPU that voice-over-IP customers have got, please?

Just a clarification, on the 60% in the 22 million subs that we say that are on the platform we've just got to clarify that those are cable subscribers.

So it doesn't include our DBS platform.

I think that hopefully will reconcile the numbers for you.

Thanks.

And then, on the voice-over-IP, we don't get into the specifics of what we're receiving on that because it's difficult because what we do for every client is different and the scope of services translates then to a different price for those clients.

And so there is -- it's impossible to say what -- to give you just an average because it's not reflected in the scope of services that we get.

Okay, thanks.

All right Thank you.

We have a follow-up from Donna Jaegers.

Please go ahead.

Yes.

Peter, I know you're new in this job, but it's just not like this is Day-one looking for acquisitions and growth opportunities.

So rather than talk about the things that you're going to look for, because of course you don't want us to bid those up, what's definitely is off the table?

Are you guys still -- software doesn't fit?

It is very important that we are complementary to our core business model.

For everybody on the call, they've seen us get into a pure software business that was not complementary and you should not expect us to do that again.

We will look for complementary assets that we can plug in that we can make part of our service solution but not standalone business models like we did before.

Okay, thanks.

All right.

Thank you.

And Shaul Eyal of CIBC World Markets, please go ahead.

Thank you.

Peter, congratulations.

Again, let me try and maybe address the M&A strategy from a different angle.

As we have all seen recently [Andolph] going after, a mobile service delivery platform company, [inaudible] also doing something in that that is very fine.

Is that an area that you could potentially be looking into?

I think it could be but I don't want to send the message that that's where our focuses initially that we have set that our as an area to target.

But we are going to be investigating a lot of things that are complementary to our client base and to what their business needs are.

And to the extent that something fits for that, we're going to look very hard at it.

Thank you very much.

Good luck.

Thank you.

All right.

Thank you. [OPERATOR INSTRUCTIONS] Damon Guirdham, Generation Investment Management, you have next question, please go ahead.

Damon you line is open, please state your question.

And we'll perhaps move on.

Damon, if you can re-queue.

Ashwin Shirvaikar of Citigroup, as a follow-up.

Please go ahead.

Hi.

I just wanted to know, have you given thought to a larger 10b5-1, and then, sort of, adjunct to that question is in this first quarter there wasn't any open market purchase, was there?

No.

There wasn't, Ashwin.

And to answer the first part, as we said we will consider all options.

Okay.

I was waiting for more.

Okay.

Something fell off of the shelf here.

Okay.

Any reason why there wasn't an open market with the stock trading down to the low 20s?

No.

No reason?

No.

I mean, is there -- I mean are you try to send some kind of signal here or how should investors lead to this?

No.

No signal intended.

We obviously were busy with some other things and we're still in, like I say, all options will be considered.

Okay, thanks.

Thank you.

And Damon Guirdham has re-queued, please go ahead with your question, Generation Investment Management.

Sorry about that.

Apologies for the naivete of the question - I'm quite used to the story -- but I just wanted to understand the repricing of the EchoStar contract.

Is that something that's structurally as providers get larger the terms get better for them so it's a sort of structural deflation rate as contracts expand or is that a more one-off situation with the re-negotiation of the terms?

This is Peter.

The natural nature of our client relationships are is that the larger our clients are, they have the scale to get better pricing, but they also give us the opportunity to manage our business in a way that allows our cost structure to match that and -- as we do our business planning.

So there are benefits to us of scale as there are benefits to our clients of scale.

And EchoStar has continued to be a very good growth client for us and that was reflected in our latest pricing that we re-negotiated with them in the fourth quarter of last year.

Very clear.

Thanks.

All right.

Thank you.[OPERATOR INSTRUCTIONS] And management, there do not appear to be any further questions at this time.

Please continue with any closing comments.

Okay.

Thank you, very much all for your support and attendance.

We look forward to talking with you next quarter.

Okay, great.

Well, thank you, ladies and gentlemen.

This does conclude the CSG Systems Q1 earnings conference call.

You may now disconnect.

Thank you very much for using the ACT teleconferencing.

Have a very pleasant day.