使用警語:中文譯文來源為 Google 翻譯,僅供參考,實際內容請以英文原文為主
Operator
Good afternoon, ladies and gentlemen.
Thank you for standing by.
Welcome to the CSG Systems second quarter conference call.
During today's presentation, all parties will be in a listen-only mode.
After the presentation, the conference will be open for questions.
(Operator Instructions).
As a reminder, this conference is being recorded today, July 28th, 2009.
I would now like to turn the conference over to our host, Ms.
Kathleen Marvin, Director of Investor Relations for CSG Systems.
Please go ahead, ma'am.
- Director of IR
Thank you, Damian, and thanks to everyone on the call for joining us.
Today's discussion will contain a number of forward-looking statements.
In particular, these will include 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 information 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 in 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 use this non GAAP information in our internal analysis in order to exclude significant items that may have a disproportionate effect in a particular period.
Accordingly, we believe isolating the effects of such an event enables us as well as our investors to consistently analyze the critical components of our operating results and to have meaningful comparisons to prior periods.
For more information regarding our use of non-GAAP financial measures, we refer you to today's earnings release 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.
I would now like to turn the call over to Peter.
- CEO
Thank you, Kathleen, and thank you for all joining us today.
I'm pleased to report that CSG continued to perform very well, posting revenues of $125 million and non-GAAP EPS of $0.40 per share for the quarter.
I have a great deal of pride in CSG as I look to our results for the first half of 2009.
Despite our country's current economic, CSG continued to execute upon our 2009 goals, generating over $60 million in cash flow with $67 million in adjusted EBITDA for the first six months of this year.
Furthermore, we expanded our market share as well as delivered leading edge solutions that allowed our clients to increase revenues, enhance customer interactions, and improve operational efficiencies.
The financial strengths of CSG have held firm during these challenging economic times, which is attributable to our sound business model, prudent expense management, cash generation, and stable capital structure.
Randy will share more details on our financial performance in a moment.
Our strong second quarter performance continued to demonstrate CSG's progress on growing revenues, profits, and cash flows as a leading provider of customer interaction management solutions.
We are focused on accomplishing this through expanding our market share with North American communication providers, growing our relationships in complementary market verticals, and improving the profitability of our business.
These goals guide our work each day and I am pleased to report that quarter after quarter CSG continues to deliver.
Our second quarter was no exception.
I'd like to share with you today some more about our achievements and where we are focused.
Let's start by discussing our business in the North American communications market.
This market has been and will continue to be a good market for CSG to serve.
The communications market is a dynamic market that has changed substantially over the last 10 years and will continue to change going forward.
Our clients face increased competition, new service offerings, and higher service demands from consumers.
But through this, our clients have been successful in managing their businesses to drive new services to consumers, deepening their relationships and generating new revenues and profits.
These new services include the convergence of video voice and data, and product upgrades like high definition and digital video recorders.
Our clients have also been focused on enhancing the efficiency of their operations and elevating the levels of customer service, which result in a better bottom line result.
All of this leads to a growing IT spend by communication providers, which has been consistent in the past and is projected to continue going forward.
The growth story continues to be written as operators look to further broaden product offerings, deliver more content to an expanded list of anywhere devices, and offer relevant intelligent advertising options.
The expansion of products brought to market, along with the growing choices that consumers have for consuming products and services, makes the communications market an attractive industry going forward.
And as CSG is at the center of helping clients manage their customer interactions and the services being offered, this is the market that we continue to be excited about.
In the first six months of this year, we have had significant success in gaining market share within the communications market.
We are in the process of working with our clients to convert over 3 million new subscribers onto our system, which is an 8% increase in subscriber accounts currently on our system.
This includes approximately 2 million subscribers from the Charter Communications enterprise deal that we announced in the first quarter as well as over 1 million subscribers from other clients.
These market share wins are strong endorsements of CSG's product, services, and support as they represent clients' decisions to expand the scope of their businesses operated with CSG, the strongest affirmation that we can receive from a client.
These affirmations are built upon helping our clients in the evolution of their products and services and also in the way they support their customers.
We provide clients with a reliable time tested solutions to meet their mission critical business needs while also bringing to market the next generation capabilities to support their business operations.
During the second quarter, we saw continued validation of this.
For example, as our clients generate success in rolling out voice services to consumers, we see that business grow for us as well.
A few months ago, I mentioned the dramatic growth in the number of voice subscribers on our platform during 2008, up 40% year over year to approximately 7 million.
During the second quarter, one of our clients converted over 250,000 additional voice subscribers to our platform, and with continued acceptance by consumers of our clients' voice offerings, we will cross over the 8 million voice subscriber mark in the third quarter, a 15% increase over the previous year.
Building on their success with consumer voice offerings, our clients have targeted small to medium sized businesses for growth.
This is a multibillion-dollar market for our clients and has strong growth expectations in the coming years.
In continuing support of our clients, we are investing in an advanced commercial services platform to market and serve these commercial customers and their unique business needs.
The enriched product capabilities in our commercial services platform will allow our clients to more easily and quickly expand their target market and offer a greater breadth of products.
As I mentioned earlier, the breadth of products and services that our clients offer to consumers has grown substantially over the years, and going forward, the number of offerings will increase and become even more complex.
To support our clients in the marketing of new services and bundles and the ongoing customer service to consumers, CSG is developing a solution that will provide a more efficient and easier way to bundle, sell, and process complex product offerings.
This new solution called Offer Management defines, packages, and prices offers and in turn facilitates a guided sales process that minimizes errors, increases efficiencies, and improves the customer experience.
The solution also assists clients in targeting and positioning those offers to the appropriate subscribers.
By offering the most relevant products to customers, sales of new products and the ongoing service to customers will improve.
Our customer intelligence assets will also be integrated, which will make this process even more personalized, relevant, and robust for our clients.
We have worked over the years to help our clients maximize the impact of their monthly statements by building upon their customer relationships with accurate, personalized, and relevant information for retention, collections, or upselling opportunities, be it in electronic or paper form.
Our eCare solution allows clients to offer their customers web based online self-care options.
Our solution currently supports over 7 million of our clients' customers and was recently enhanced with our award winning precision e-mail, allowing clients to create and send their customers personalized targeted HTML messages that provide upsale and revenue advertising opportunities.
As our clients consider it important to communicate very effectively with their customers in the marketing and support of products, CSG has been investing in SmartColor, our advanced print solution that allows clients to enhance monthly printed statements in high impact full color to improve document visibility and customer response rates.
About a year ago, we began to make investments in new color print technologies.
In the short time since, we already print one-third of our clients' monthly statement volumes using this new technology.
This is a win-win for CSG and our clients.
While our clients see greater revenue opportunities and better customer care through improved communications, we receive incremental revenue and we are quite pleased with the quick success that this new initiatives have generated.
We are working to capitalize on our success and experience as a leading provider of customer interaction management by taking a subset of our solutions to new markets which have similar characteristics to the communications market, such as high volume and recurring transaction, fragmented customer bases, and evolving customer relationships.
We believe that CSG can support new vertical markets with cost efficient ways to enhance customer interactions, improve customer satisfaction, and monetize revenue opportunities.
We can leverage or experience from the communications market by delivering our statement, eCare, and interactive messaging services.
With CSG's integrated solutions approach, companies can turn to CSG to address their customer interaction management needs with a low cost of entry utilizing our pay as you grow business model.
One market that we have been pursuing is the utility industry.
CSG currently serves approximately 400 utility clients primarily with our statement solutions.
After decades of market stability and static service delivery, utility companies are now being challenged with transformational initiatives brought on by regulatory changes and a wide variety of green initiatives.
Consumers will be faced with additional options for service and the complexities of customer service will grow.
Utility companies are tasked to meet these demands with exceptional customer satisfaction on limited budgets.
There are over 57,000 utility providers across the United States providing service to over 330 million meters in the delivery of electricity, water, and gas.
The product set that we can offer to this market has been sized in excess of $1 billion per year and we are exploring ways to best serve this market with our product suites and look forward to reporting future successes.
Another dynamic market that we are addressing is the developing market of nonlinear content distribution.
For decades, content and entertainment have been made available to consumers in a linear model, but the expansion of the broadband networks is creating an environment where consumers can have access to content as they choose.
We see traditional communication in clients along with content producers and distributors seeking to take advantage of video and content expansion over the internet by monetizing their video content, promoting and extending their brands, and engaging with consumers through increased interactivity.
Last year, we announced our content direct platform, which is designed to address this evolving market by providing for easy and effective marketing, monetization, and management of content to end customers.
This is a dynamic market that is quickly developing and we are working to be a key part of it.
Over 16% of our year-to-date 2009 revenues are derived from outside our traditional communications market and we continue to work to increase our diversity of revenues.
We closed a variety of new vertical deals in the quarter, including our first cross sale contract for interactive messaging to complement a client's existing use of our customer intelligence solutions.
And with the dynamics of some of the markets I outlined to you, we believe that we can grow our revenue in these markets at a greater pace than our historical business.
Along with growing the top line revenues, CSG has a history of being very strong in operations and delivering financial results.
We continue to seek new ways to improve margins via scale benefits and cost savings.
We have several initiatives underway and believe over the coming years we can deliver improvements to our margins.
Overall, we are quite pleased to report another successful quarter for CSG.
We continued to deliver on the commitments that we have made to our clients, shareholders, and employees in growing our business with innovative solutions and excellent customer service.
We appreciate your support of CSG and we look forward to the opportunity to share more news of our progress in the future.
With that, I would now like to turn the call over to Randy for the financial highlights from the quarter and our outlook for the remainder of the year.
- EVP & CFO
Thank you, Peter and welcome to all of you on the call today.
I'm happy to share with you the financial results for our second quarter of 2009 as well as our outlook for the remainder of the year.
Overall, we are very pleased with our performance for the quarter and our continued progress toward meeting our 2009 goals.
These results have given us more visibility and confidence in our 2009 outlook, thus resulting in our increased full-year guidance for revenues and profits, as I will detail further in a few minutes.
I would first like to review with you some highlights of our second quarter financial results.
Total revenues for the second quarter were approximately $125 million.
This represents an increase of 7% when compared to approximately $117 million for the same period last year and is up sequentially when compared to our revenues from the first quarter of 2009.
Of this 7% quarterly increase over last year, nearly half can be attributed to organic sources, with the remaining portion related to the year-over-year impact of the timing of our 2008 acquisitions.
The percentage of revenues generated outside of our core video market for the current quarter was 15% compared to 12% for the same period last year.
These results demonstrate the success we have experienced in our plan to grow our revenues and achieve market diversification as outlined by Peter in his earlier comments.
Revenues generated from Comcast for the quarter were relatively consistent with the first quarter, making up 24% of our total revenues.
DISH Network represented 19% of our total revenues for the quarter.
We finished the quarter with 45.4 million subscriber accounts in our processing system, consistent with the first quarter.
However, we expect our subscriber base to increase by over 3 million as we convert additional subscribers to our system.
This represents a significant competitive market share win for CSG.
Our non-GAAP operating income for the quarter was $22 million on an approximate 18% margin.
Our non-GAAP operating income excludes approximately $3 million of expenses related to the transition of our data center services from First Data Corporation to Infocrossing, which began earlier this year.
Our 18% non-GAAP operating income margin for the second quarter is down sequentially as we expected from the first quarter, as we continue to make additional investments in the business, but it did come in slightly better than our full-year margin guidance of mid 17% range.
Our CSG teams are delivering solid results while managing expenses prudently.
Our GAAP operating income for the second quarter was $20 million on approximately 16% margin.
Non-GAAP EPS for the second quarter was $0.40 compared to non-GAAP EPS of $0.38 for the same period last year.
Our non-GAAP EPS excludes the expense related to our data center transition efforts and the noncash interest expense related to the amortization of the original issued discount for our convertible debt securities.
GAAP EPS for the second quarter was $0.31.
Our effective income tax rate for the second quarter was 35%, consistent with our expectation.
Beginning this quarter, we will provide adjusted EBITDA as an additional measure for you to evaluate our operating performance and better understand our liquidity and debt servicing capabilities.
We define adjusted EBITDA as income before interest, taxes, depreciation, amortization, stock based compensation, and one-time recurring items such as our data center transition expenses and the gain on our debt retirements.
For the second quarter, our adjusted EBITDA was $34 million and was $67 million for the first half of 2009.
The noncash expenses related to depreciation, amortization, and stock based compensation included in this calculation total $12 million or $0.23 per share, and for the first half of 2009 was $22 million or $0.42 per share.
Turning to the balance sheet.
As of June 30th, cash and short-term investments totaled $133 million, up $13 million from the last quarter end.
The sequential increase can be attributed to our strong second quarter cash flows from operations of $44 million, driven in part by our $20 million favorable reduction in accounts receivable during the quarter.
Our year-to-date cash flows from operations are close to $60 million, well ahead of the pace needed to achieve our previous full-year expectations.
We spent $14 million on CapEx in the second quarter, which includes approximately $11 million related to our data center transition project.
Additionally, during the quarter we repurchased $15 million of our convertible debt at a cost of $13.5 million.
This represents a weighted average purchase price of 90% of par value and represents a pretax yield of 8.4%, assuming these bonds were to be retired at the first put date in June 2011.
After these debt repurchases, the remaining par value of CSG's outstanding convertible bonds as of the end of the quarter was $170 million, down from $185 million as of the end of March 31st and $230 million at the issuance in 2004.
We did not make any share repurchases in the quarter.
We will continue to buy with the best use of our capital going forward, which may or may not include additional debt and share repurchases.
Next I'd like to provide you with an update to our financial expectations of the full year 2009.
Overall our expectations have increased over the previous guidance.
For the full year 2009 we expect the following.
Revenues will range between $495 million and $500 million.
This represents an increase of $2 million to $7 million from our previous range.
The increase in our revenue guidance and the tightening of the bottom end of the range reflects the strength of our business and the revenue opportunities we see ahead of us for the remainder of the year.
This guidance reflects revenue growth of 5% to 6% over 2008, of which nearly one half is due to organic growth, with the remaining portion related to the year-over-year impact of the timing of our 2008 acquisitions.
If you recall from earlier this year, we had expected our organic revenue growth for 2009 to be relatively flat.
However, primarily as a result of greater than expected success around some of our newer products, we now anticipate some organic revenue growth for 2009.
One of the more significant new product success stories for us so far this year is the roll-out of our color print solution.
At the end of the second quarter, we had one-third of our total monthly statements produced on our color print platform.
To help you understand the significance of this accomplishments, this volume of color statements equates to organic revenue growth on a full-year run rate basis of approximately $8 million and produces margins comparable to our legacy black and white platform.
Looking at the second half of 2009, we see good momentum going into 2010, and therefore our initial planning targets for 2010 revenue growth are in line with the 5% to 6% growth we are expecting in 2009, which is also consistent with our historical organic revenue growth, up mid single digits.
This planning target includes many factors and scenarios, such as the suspected renewal impact for our key client, the benefit of over 3 million subscribers converting to our system, organic revenue growth opportunities from new products such as color print, and the continued success of growing the revenues of our recently acquired businesses and in the new markets we are targeting, which we expect to grow at a pace greater than our core business.
Next, we expect our non-GAAP EPS for 2009 to range between $1.55 and $1.60 per share.
This represents an increase to our previous guidance of $0.04 to $0.05 per share.
This non-GAAP EPS for 2009 excludes the expense related to our data center transition efforts, the noncash interest expense related to the amortization of the original issued discount for convertible debt securities, and the benefit related to the gain on the repurchase of our debt, which in total represent $0.45 to $0.47 per share negative impact.
Including the impact of these items, we expect our GAAP EPS from continuing operations for 2009 to range between $1.10 and $1.13 per share.
Continuing on, this guidance reflects non-GAAP operating income margin expectation for the mid to upper 17% range, which is a slight increase to our prior expectations.
Our non-GAAP operating income margin excludes the impact of the data center transition expenses that are estimated to be between $17 million to $18 million for the full year.
The negative impact of these costs on our operating margin is approximately 350 basis points, resulting in an expected GAAP operating income margin of approximately 14%.
The increase in our guidance for operating margin percentage and EPS reflects the strength of our second quarter results and our spending expectations for the remainder of the year.
At this time, we anticipate increased investments in our business as we continue to roll out new product capabilities and convert additional subscribers onto our system.
As a result, we anticipate that our operating margins will decline slightly from our second quarter levels through the remainder of the year, which is consistent with our previous guidance expectations.
As Peter mentioned earlier, we are focusing on several initiatives that will provide us opportunities to improve our margins in 2010, which are as follows.
First, we expect to gain operational scale benefits as we convert the additional 3 million subscribers to our system and prove our print production capabilities by expanding our color print volumes and operational efficiencies as the platform matures and increased leverage of our development and support infrastructure as we grow revenues.
Second, we are focused on improving the operating performance of our recently acquired businesses through continued revenue growth and further expense synergies from our ongoing integration efforts.
And third, we are focused on margin improvement through operational and cost savings initiatives to include such things as the transition of our data center operations to another high quality provider with an overall lower cost structure than we are currently experiencing and further improvements in key internal processes such as our software development methodologies.
The magnitude of our operating margin improvement opportunities in 2010 are dependent upon the timing and the level of success we experience on these initiatives.
We believe these initiatives will help us move towards our long-term operating margin goal of 18% to 20%.
Moving on to further 2009 expectations, we expect cash flows from operations to increase to a new range between $112 million and $117 million, assuming no significant fluctuations of working capital items for the remainder of the year.
This $12 million to $13 million increase over our prior expectations is reflective of the cash generating capabilities of our business and successful management of our working capital items.
This cash flow estimate includes a negative impact of approximately $9 million related to our data center transition efforts for 2009.
Excluding the impact of this item, our 2009 cash flows from operations would exceed those of 2008.
We are increasing our expectations for capital expenditures for 2009 to the $40 million to $45 million range.
This includes approximately $20 million related to our data center transition efforts.
This new guidance represents a $10 million to $15 million increase from our previous guidance of $30 million provided earlier this year.
This increase is related to a $5 million increase for the data center project.
with the remainder related primarily to additional color print equipment and open systems computing gear, both of which relate to new revenue opportunities.
We expect the total of our noncash items of depreciation, amortization, and stock based compensation to be approximately $45 million for the year.
This guidance reflects an effective income tax rate of 35% for the year, unchanged from our previous expectations.
We do not assume any significant changes in our guidance from our current 34.5 million diluted shares outstanding.
To summarize, we are very pleased with our results for the second quarter, which completes a strong first half of 2009.
Our business continues to operate solidly during these challenging times as evidenced by our consistent operating performance, our strong balance sheet, and 2009 market share wins.
We are excited about the gains we are making and believe we are well positioned to report on continued success in future quarters.
I will now turn it over to the moderator for questions.
Operator
(Operator Instructions).
Our first question is from the line of Ashwin Shirvaikar with Citigroup.
Please go ahead.
- Analyst
Thank you.
Congratulations on a good first quarter, guys.
- CEO
Thanks, Ashwin.
- Analyst
My first question is, can you talk a little bit about your pipeline of opportunities that your sales force is currently pursuing?
You did talk about the current print side of things, but what else is of note and does it include incremental, I guess, subscriber growth as well?
- CEO
Ashwin, this is Peter.
A few comments.
Across the variety of product offerings that we have, whether it's print capabilities, eCare, interactive messaging or content direct solutions, we are seeing pipelines expand in all of those product offerings both within the traditional communications market in North America as well as around other vertical markets as well.
We don't like to comment where we see opportunities are on market share because those are -- I would view as lumpier.
They are not the traditional sales pipeline, and I think it would be speculative at this point to give much color around those.
Though we do see that operators are looking and communication providers are looking for ways to leverage applications across the breadth of their operations and the breadth of their networks to have a more common experience and a common operating environment.
So we do believe that there are ways for us to broaden our footprints within clients overall.
But the other side of the pipeline piece, Ashwin, is though pipelines are growing, sales cycles are longer.
And I think that's a continuing message of what we have shared in the past, which is reflective of cautiousness in this economic environment where people see needs, but they're slower to pull the triggers.
- Analyst
That's fair enough.
That seems consistent with everything else we are hearing.
In terms of the dialogue that you have with existing clients and prospects, is your range of what you offer the clients, is that sufficient?
Or would you need to go out and make acquisitions to broaden out your range of product and services for them?
- CEO
Well, I think it's clear to us and I think it's reflective in what you see in the broader market is our clients' businesses are evolving fairly rapidly and dramatically with the types of products they serve, and where things are going to be not just next year, but five to 10 years down the road.
And it's reflective in some of the work that we are doing in investments of R&D which is everything from our commercial services platform, or offer management platforms to meet those future needs.
But at the same time we are always evaluating how we can broaden our capabilities, and acquisitions are an opportunity for that.
But for the immediate needs of our clients, we don't think that acquisitions are a must have, but we view acquisitions as ways to fulfill longer-term needs of our clients where it makes sense to do that versus going down in an internal development plan.
- Analyst
Got it.
One -- Randy, one of your comments was the higher CapEx.
You said there was $5 million in incremental for the data center transition.
- EVP & CFO
Right.
- Analyst
Is that incremental or is it a pull forward?
Just to clarify.
- EVP & CFO
It's -- we have spent about $12 million year to date, Ashwin, on data center transition equipment and my guidance would imply about $20 million in total.
So there's about $8 million left to be spent on the data center.
- CEO
So the total amount that we expect to spend on the data center is still consistent.
- EVP & CFO
No.
It's $5 million higher.
It was $15 million in my previous guidance.
Now it's $20 million.
- Analyst
So does that mean you're ahead of schedule on that transition?
- EVP & CFO
No, I don't -- I think we are pretty much on schedule as we had planned.
I think as we work on more of the detailed project plans, you start to identify additional gear that you need to buy.
So it's just further planning, Ashwin.
- Analyst
Okay.
And last question is what are the assumptions in your projections with regard to continuing to pay down the debt?
- EVP & CFO
I think, Ashwin, we have talked about this the last couple of quarters as to looking at use of our capital.
We continue to look at acquisitions and at the primary source of the use of our capital, and secondarily we look at opportunistic buys for both our shares and our debt.
And I think if you look at our debt, it's highly likely it will be put to us in June of 2011.
So we look at opportunities to buy at a discount as a way to reduce the refinancing risk but still provide a very good economic benefit to our shareholders.
So I think we will continue to evaluate that going forward and wouldn't be surprised if we were to buy back some more debt.
Okay?
- CEO
But your guidance does not make any assumption of debt, personal debt repurchases.
- EVP & CFO
There's nothing in my guidance that assumes that we will buy back shares or debt, Ashwin.
- Analyst
Thanks.
Hey, Pete, it's your guidance too.
Okay.
Thank you, guys.
- CEO
You bet.
Operator
Thank you.
Our next question is from the line of Shyam Patil with Raymond James.
Please go ahead.
- Analyst
Good evening.
This is [Varun Chada] filling in for Shyam.
Can you give us an update on the DISH contract?
- CEO
Sure.
We continue to dialogue and work with DISH to pursue a multiyear extension with them, and we're looking for a relationship in terms that meets the needs of them and ourselves, and we believe a multiyear deal is something that makes sense and is the offering as we come into future periods.
I'm hesitant at this point to try to predict the timing of when something could come along, but we continue to have good, healthy discussions with DISH at this point.
- Analyst
Great.
How should we think about your software services gross margins going forward?
- CEO
Say that one more time.
The software gross margins?
- Analyst
Yes, the software and services gross margins.
- CEO
I think you have to look at last several quarters.
It's somewhat lumpy and the lumpiness relates to software sales.
I think at times you'll see the margins in the high 20s going into the low 40s this quarter.
I think they were in the mid-30s.
It's difficult to predict.
I think if you use that range, that's about the best you can do, because the software sales are very lumpy and difficult to predict.
And when you have a software sale, generally a lot of that software revenue falls to the bottom line as it relates to gross margin.
- Analyst
Got it.
Thank you.
Operator
Thank you.
Our next question is from the line of Karl Keirstead with Kaufman Brothers.
Please go ahead.
- Analyst
Hi.
Good afternoon.
First question is around the uptick in the organic growth guidance from zero to it looks like about % to 3%.
Is that entirely due to the new products, the printing product you talked about?
Or, Peter, are you sensing more broadly in the client base that this level of cautiousness that you've expressed year to date is beginning to unfreeze a little bit and that's giving you comfort to guide to a higher organic growth rate?
Thanks.
- CEO
You bet, Karl.
And I'll let Randy chime in as well.
One is we have just seen some fairly nice progress in deals and roll-out of some of our products like the color print platform as well as some of our interactive messaging and some of the other capabilities we have.
The growth of voice services for our clients is contributing to revenue for that and some of these are difficult for us to size when we give our guidance.
But we continue to see interest in our products, we see the pipelines growing.
And as I mentioned on the first question, it's difficult to predict how fast some of those opportunities may come to fruition in close.
But as we look it, we feel like we have got pretty good comfort to be able to raise the guidance in the second half of the year as Randy has done.
Randy, any other points that you think are driving it?
- EVP & CFO
I think you covered it well.
Probably the biggest contributor of those is probably the color print platform.
There are many factors, but that's probably the largest of them, Karl.
- Analyst
The second question has to do with your non-GAAP EPS guidance of $1.55 to $1.60.
I'm just thinking through the likelihood of CSG coming in at that low end, $1.55.
You did $0.81 through the first half of 2009.
Hence to hit that bottom end, you'd have to do $0.74, a pretty big step down.
I'm curious -- what would the circumstances be that would cause the non-GAAP EPS to drop like that in the second half?
- EVP & CFO
Two things.
I think one is (inaudible).
Some of the investments mentioned.
There's some subscribers on our platform investing additional dollars on the print technology in the second half of the year -- we expand our production capabilities.
You can see some of that -- if you look at the depreciation, how it changed from the first quarter to the second quarter, it went up about $0.5 million.
So the CapEx amounts that we are spending do have an impact to the operating margin.
So I guess to summarize it would be lower end of the revenue guidance and higher -- and high expense amounts such as the margin comes into the lower end -- the low end of my range of the low to mid 17s for the second half of the year.
- Analyst
Okay.
And then if I could squeak in one more.
It looks like the second half 2009 planned spend on the data center transition is going to run about $13 million to $14 million.
Would you expect a roughly even split between the September and December quarters?
Thanks.
- EVP & CFO
I would think you would -- Karl, as we continue to work on some of the transition efforts, I think you might see a slightly higher percentage of those costs in the fourth quarter than the third quarter, just because of the progression that we are going to make on the project.
The first half of the year has been mainly planning to date and a lot of the conversion efforts will start in the third quarter and become more heavy in the fourth quarter.
So expect a greater percentage in the fourth quarter than the third quarter.
- Analyst
Okay.
Thanks for the color.
- EVP & CFO
Okay.
- CEO
Thanks, Karl.
Operator
Thank you.
Our next question is from the line of Tom Roderick with Thomas Weisel partners.
Please go ahead.
- Analyst
Hi, guys, thanks and good afternoon.
- CEO
Hey, Tom.
- Analyst
Wanted to see if you could help me out there with the pace of migration you might expect on the 3 million additive or incremental subscribers to your system.
Over what period do you think that we can expect those to migrate to your system?
And does the completion of that migration, does that at that point get you, do you think, to the 18% to 20% margin range that you identified as a long-term goal?
- CEO
I'll take the first part of that, Tom.
From a timing perspective, we are really looking almost say fourth quarter into first quarter next year is the timing of when we would expect to see the migrations of those subscribers onto our platform.
And those will give us scale.
They will give us the opportunity to drive more product into our clients, which are important parts of our business.
Relative to how it drives the margin, Randy, I'll let you give some commentary on that.
- EVP & CFO
Obviously, one of the factors I pointed to in our plan to increase margins, Tom, was the scale benefits we get from this.
So as we bring those on, you'll start to see some improvements in the margin, but there's also other things that will help increase that margin.
So this is not just one of the items that will get us to 18%.
It's one of many.
But it will be additive to our margin.
- CEO
And the 18% to 20% number you gave, Randy is a long-term goal, not a 2010 outlook.
20% would be pretty high range on the high end for year out.
- EVP & CFO
Correct.
- Analyst
Great.
Randy, could you maybe just help identify this incremental $5 million, the increase in the CapEx this year -- just identify where that money is being allocated towards?
What specific type of additional hardware and other features are needed?
And is that money itself tied to any projects that might actually increase the top line projections as we think longer term or even 12 to 18 months out?
Or are they just simply cost items that you didn't originally anticipate?
- EVP & CFO
Let me break it into three pieces for you.
My guidance increase was $15 million on CapEx.
Let me break into the three pieces.
$5 million of that relates to higher data center transition costs.
As I mentioned earlier, it's just additional gear both computing and network gear that we have got to buy as we continue our planning, so that one there has long-term benefits, Tom.
And if you look at the remaining $10 million, I would say you could probably split it in half.
Half of it relates to color print technologies that we are going to buy in the second half of the year and that will have -- that will be impactful from a revenue perspective in the second half of this year and into 2010 and beyond.
And the remaining portion is some additional gear that we bought to support some infrastructure services provided to another client, so that is a revenue generating project that should provide revenue in the second half of this year and into the next couple of years.
So does that help?
- Analyst
Yes, that's very helpful.
And last one for me just on Comcast, as a rough percentage of revenues, looks like it stayed pretty consistent, maybe on an absolute basis down slightly quarter to quarter.
Anything seasonal about that modest decline?
Maybe I have a rounding error here on the percentages -- if it is in fact a modest decline, anything seasonal we should note about that or any driver that would take that down sequentially?
- EVP & CFO
First thing I would say, Tom, is that the rounding is a factor -- if you look at the absolute numbers, that the dollar amount of revenue is down only a couple hundred thousand dollars from the first quarter.
The rounding of the percentages makes it look greater than it actually is, so they are very flat or very consistent quarter over quarter.
So there's nothing really to note there.
- Analyst
Okay.
Very good.
Thank you, guys.
- CEO
You got it.
Operator
Thank you.
Our next question comes from the line of Scott Sutherland with Wedbush Morgan Securities.
Please go ahead.
- Analyst
Thank you for taking the question.
This is Suhail sitting in for Scott.
Congrats on the quarter.
You mentioned that one-third of the statements are now printed using the new color print technology.
How do you see that evolving for the rest of the year?
Obviously it's probably going to plateau at a certain point.
What would that number be?
- CEO
Well, one is we believe that there is value to all our clients to shift to full color over time.
The scope and speed of which a client decides to do that is going to be somewhat driven by how much change they want to bring into their operations as well as how much they think it's critical to the near term communication and marketing to their end customers.
But we do believe it has a lot of validity and value, and hence why we've been making investments in it.
And based on the response we have seen from clients so far, it's been very well received.
And so we think there's clearly more opportunity to penetrate our clients and drive more.
But I'm not going to try to predict how much more this year versus how much in future years and whether you ever get to 100% penetration.
Randy, do you have any color to add?
- EVP & CFO
I think that's good, Peter.
We would expect to have some increased volumes at the remainder of the year, but it's difficult to predict as well as disclose the amount, because we are buying additional print capabilities for the second half of the year.
So you could assume that it is going to increase from the one-third level at the end of the quarter.
- Analyst
Thanks.
Quick follow-up.
The additional 3 million subscribers that you've been bringing onto your platform, the facing of that, second half versus first half, 2010?
- CEO
The -- we haven't given any specifics of the timing of how much is in the fourth quarter versus how much would be in first quarter.
So we are not providing any guidance on that.
- Analyst
Okay.
Sure.
Thanks a lot.
- CEO
You bet.
Operator
Thank you.
(Operator Instructions).
Our next question is from the line of Shaul Eyal with Oppenheimer and Company.
Please go ahead.
- Analyst
Thank you.
Hi, good afternoon, congratulations on a good quarter and guidance.
- CEO
Thank you.
- Analyst
Two quick questions on my end.
Apart from DISH, any other contracts that are set to get renewed within the near term, within the next six to 12 to 18 months?
- EVP & CFO
No significant client renewals that are in the next 12 to 24 months, correct.
- Analyst
That's great.
And, Peter, your comment on the move or maybe on the utility front.
Are you that as maybe a shift to another vertical or maybe to an adjacent market or that's just a natural expansion of your existing product line and the services that you could be providing those utilities?
- CEO
Well, when we look at it, we have already got close to 400 clients that we have in the utility space primarily around the statement services.
As we have worked with these clients and also with partners and done our own market evaluation, we are seeing some interest for some of our other markets, and we believe it's an area that we can expand.
We believe it could be a slow process because as I said in my comments, there's regulatory, there's consumer drive that has to facilitate the change of business and focus of some of the utility providers.
But we believe long term it's a marketplace that's going to see some change, and based on our early entry through the statement services, we think it's a natural extension for us.
- Analyst
Got it.
And is it maybe a supplemental case in which you could increase your presence to an acquisition?
Because definitely there are a number, number one interesting technologies, number two interesting companies, that operate in this market.
- CEO
Well, from an acquisition perspective, we really do -- our acquisition evaluation through multiple lenses.
One is we like to see if we can pick up new capabilities and functionality that really expand our customer interaction touchpoints and capabilities on behalf of our clients.
But we also look for opportunities to gain scale as well as to really drive opportunities to new markets.
And so that could take place around the utility space but we don't find ourselves really targeting that by itself.
We have been able to add interactive messaging, we have been able to add customer intelligence capabilities, and we are doing this that have applicability both to the communications market as well as [entrance into] new markets like utilities and others as we have talked about in the past.
Acquisitions is a part of that, but we also believe we have some assets on board today that we can drive organically into new markets.
- Analyst
That's fair enough.
Thank you very much and good luck.
- CEO
Thanks.
- EVP & CFO
Thank you.
Operator
Thank you.
Ms.
Marvin, management, I show there are no further questions at this time.
Please continue.
- CEO
Well, thank all of you for joining us on the call.
Good luck the rest of this summer for each of your own initiatives that you're taking.
And as a company we are focused on continuing to deliver and perform on behalf of all our constituents, and we look forward to reporting third quarter results.
Thanks.
Operator
Ladies and gentlemen, if you like to listen to the replay of today's conference, please dial 1-800- 406-7325, and for international participants 1-303-590-3030, and entering the access code 4100864 and the pound sign.
Replay will be available until August 4th, 2009.
This concludes the CSG Systems second quarter conference call.
ACT would like to thank you for your participation.
You may now disconnect.