Apr 22, 2008
Executives
Peter Kalan - Chief Executive Officer Randy Wiese - Chief Financial Officer Roger Metz - Vice President, Investor Relations
Analysts
Ashwin Shirvaikar - Citigroup Eliz Grausam - Goldman Sachs Chris - Thomas Weisel Partners Scott Sutherland - Wedbush Morgan Securities Karl Keirstead - Kaufman Donna Jaegers - Janco Partners
Operator
Good afternoon ladies and gentlemen. Thank you for standing by.
Welcome to the CSG Systems Q1 earnings conference call. (Operator Instructions) I would now like to turn the conference over to Mr.
Roger Metz. Please go ahead.
Roger Metz
Thank you Ray 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 client’s needs to 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. Well, these statements reflect our best, current judgment.
They are subject to risks and uncertainties that could cause our actual results to vary. Currently the Company does not intend to update this information during the quarter.
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 on our website. With me today on the phone are Peter Kalan Chief Executive Officer and Randy Wiese, Chief Financial Officer.
It will begin.
Peter Kalan
Thank you Roger and thanks to all of you for joining us today. The first quarter provided a solid start to 2008 for CSG which is reflected in our financial results.
Our continued execution on our organic growth and acquisition strategies and also in our sales results that we achieved. Our revenues were approximately $114 million and income from continuing operations was $0.45 per share.
Randy will share more details on our financial performance after I conclude. Last week we announced that we extended our contract with Mediacom Communications till the middle of 2014.
We are very pleased to have earning the opportunity to serve this important customers, a trusted business partner for six more years and we are also excited that they have chosen to utilize several additional CSG products during that time frame. Mediacom will begin using ACP or Advance Convergent Platform to support it’s growing base of voice subscribers giving them the same benefits of the robust pre-integrated capabilities that already support Mediacom’s existing video and high speed internet customers.
In addition Mediacom has chosen to use CSG’s statement express; an online statement image viewing system that enables customer service agents to view invoice images in the same format as customers. This makes the process of working through billing enquiries with customers faster and more accurate.
Finally Mediacom will implement CSG’s order workflow tool; a key enhancement to the desktop that allows agents to manage service calls, process new orders and serve bundles and upgrades more efficiently and accurately. This contract extension is a testament to the quality of service and innovative solutions that we deliver to our valued clients.
Along with the Mediacom extension, we had several other client successes in the first quarter. Our interactive messaging capabilities continue to generate significant interest, which has led the new contract wins both at our cable clients and in other industry verticals such as financial services and home delivery services.
In the cable industry clients are utilizing interactive messaging for appointment pre calls and appointment verification as well as for surveys to receive feedback from consumers after service calls are completed thereby providing our client the opportunity to economically provide enhanced levels of customer service. We continue to see success with our order workflow solution as you saw in the Mediacom extension press release last week.
Order workflow which streamlines the customer service agents processes has been sold and deployed at several other client sites so far this year and is being evaluated at others. We are also seeing interest in our business services platform, product catalog and offer management applications.
Our outfit solutions capabilities including our statement printing services continue to do well. During the first quarter we signed new outfit solutions clients in the financial services and utility verticals within marketing services which provides channels for our clients to utilize the statement in the envelope as the vehicle to market their products and services.
Sales were strong this quarter as well. Along with our video clients one year programming model the cable industry and other content providers are developing new distribution methods and channels that will allow consumers to access and buy content in different ways; such as directly from the studios on an on demand basis.
As these new business models evolve CSG has taken steps to address these changes. Last of all we unveiled content direct a new solution that allows video content creators, aggregators and distributors to market, monetize and manage video and digital content to end customers.
We recently signed and went live with our first content direct client and are excited to have this solution up and running. While we are very satisfied with the progress we’ve made both in integrating and moving forward with the operations of last years acquisitions, we are also excited to be furthering our strategy of growth through relevant acquisitions with our announced purchase of DataProse.
The acquisition of DataProse will build upon the strength of our existing output solution services. Along with our strength and paper based presenting services we see complementary growth in electronic presenting services.
We also believe that web solutions and self care capabilities will continue to expand as natural expansions. DataProse will enhance our already strong output solutions operations by adding additional expertise along with statement presentment technologies in software.
DataProse also gives us new expertise in directing marketing services including database management and market segmentation. This acquisition provides us with West Cost and Southern facilities guarding out our national footprint which will be the key competitive differentiator.
Finally DataProse has a broad customer base that enhances our revenue diversification efforts including the utilities, financial services and telecommunication markets as well as the non-profit sector. We are planning to close this acquisition and the keep in a few days bringing the people of DataProse their capabilities, clients and expertise into the CSG team.
During the first quarter we hosted our annual executive client conference, which focused on change in the converging communication space. The conference was well attended with representatives on hand from almost all our clients.
It was a great opportunity for CSG to showcase some of newer advanced products and functionality and provide an opportunity for the exchange of ideas and strategies between CSG and our clients and also among the clients themselves. Our clients are seeing great successes in deploying advanced video, high speed internets and now digital voice services to their customers.
They are also expanding their offerings to serve the growing number of business customers and pursuing new ways to deliver and monetize digital content. With this growth and evaluation comes a host of new challenges everything from network upgrades to customer care.
Meanwhile our customers are seeing the heightened competitive pressures from the traditional telephone companies and other new entrance in increasing number of their markets. With consumers having more options that ever before it’s easy to see why our clients need robust applications to manage their customers, bundle and sell their services and elevate the delivery of customer services.
CSG solutions enable our clients to deliver a premium experience to their end customers, while at the same time helping our clients become more efficient, reduce cost and minimize customer term. Looking ahead to the reminder of 2008 we have several distinct priorities and objectives.
We are committed to ensuring our clients have the required solutions to maximize the value of each and every interaction with their customers. With that in mind we will continue to invest in research and development and we will also continue to look externally for complementary solutions that help our clients run their business more efficient and profitably.
We are also excited about the new industry verticals in which we now have expanded relationships such as telecommunications, utilities and financial services and we look forward to deepening these relationships. We are very fortunate to have a strong balance sheet and recurring cash flows that will allow us to make proven investments in the future of our business.
As you know two of our largest client contracts; Comcast and Dish Networks are up for renewal at the end of this year. While we don’t have any news to report at this time we are working with both clients to build continued partnerships into the future and we will let you know just as soon as we have any news to report on this front.
In summary we are pleased to have started this year with strong financial results and are encouraged by the traction we are getting with their products and services. The recent deals that I have mentioned are indicative of the fact that CSG continues to deliver the solutions that our clients need and want.
We look forward to continued strong performance through the rest of the year. Finally I want to extend a warm welcome to our incoming colleagues from DataProse that may be listening to this call.
We are excited that you will soon be onboard as an important part of CSG’s future. With that I will turn it over to Randy.
Randy Wiese
Thank you Peter and welcome to all of you on the call today. I am happy to share with you the finance results for our first quarter 2008 as well as our outlook for the reminder of the year.
Overall we are please with a strong start to 2008 provided by CSG’s first quarter results. Our total revenues for the first quarter were $113.6 million.
This represents an increase of 15% when compared to $98.7 million of revenues for the same period in 2007 and as relatively consistent with the revenues reported in the fourth quarter of 2007. Increase in year-over-year revenues relates primarily to additional revenue from our recently acquired businesses with the remaining portion of the increase for it’s organic growth factors.
We finished the quarter with 45.6 million subscriber accounts on our processing system; sequentially up from the fourth quarter by approximately 500,000 subscribers. This increase was primarily due to additional subscribers.
Comcast converts to our system following the dissolution of its partnership with insight. Revenues from Comcast and Dish Networks made up approximately 27% and 19% respectively of our total revenues for the first quarter.
The sequential increase in the percentage of revenues generated from Comcast during the quarter reflects the former insight subscribers from (inaudible) system during the first quarter. Income from continuing operations for the quarter was $14.8 million or $0.45 per diluted share.
This compares the $0.35 per share for the same period last year and $0.40 per share for the fourth quarter of 2007. Earnings per share grew 29% year-over-year resulting primarily from the lower number of outstanding shares in the first quarter of 2008, following the completion of our stock repurchase program in late 2007.
These results reflect an operating margin of approximately 20% for the first quarter of 2008 which is up sequentially from the fourth quarter operating margin of 18% and was relatively consistent with same period last year. If you remember from our last call, our fourth quarter operating margin included some one-time nonrecurring charges that negatively impacted our fourth quarter operating margin by approximately 200 basis points.
Absent the impact of these matters, our operating margins between the fourth quarter and the first quarter are relatively comparable. Our effective income tax rate for the first quarter was 35.6%, slightly better than our full year expectations of 36% to 37% with the improvement primarily due to the favorable adjustment of certain income tax accruals at the end of the first quarter.
The financial results for CSG include several non-cash charges related to depreciation, amortization, and stock-based compensation. These non-cash charges for the first quarter totaled approximately $11 million or approximately $0.21 per share impact.
Turning to the balance sheet; as of March 31, cash and short-term investments totaled $147 million, up approximately $14 million from the end of the year. Our net billed trade accounts receivables totaled approximately $125 million, up approximately $10 million from last quarter primarily due to a client’s delayed payment for that amount until after quarter end.
Ordinarily, this payment would have been received prior to the cut off at quarter end, however, this quarter, it was received the first week in April. Cash flows from operations for the first quarter were approximately $21 million which were also negatively impacted by $10 million at a result of this delayed client payment.
Our cash flows from operations remained very strong. As I have indicated in the past, from time to time, we do experience fluctuations in working capital items at or near quarter end due to timing factors such as that they can distort our cash flows from operations booked positively negatively on a quarterly basis which was the case this quarter.
However, generally over a longer period of time the impact of working capital changes is not significant to our cash flows from operations. As of the end of the first quarter, we had $230 million in contingent convertible debt outstanding which matures in the year 2024.
Holders of the securities can convert it in time after CSG’s common stock trades at a price in excess of $34.80 for a set period of time. The first scheduled put or call action for redemption of these securities is in 2011.
We did not repurchase any shares through our stock repurchase program during the first quarter of 2008. Next, I would like to provide with an update to our financial expectations for the full year 2008.
However, before I get into the numbers, I would like to note that these guidance estimates include the expected impact of our acquisition DataProse on a GAAP basis which we expect to close by the end of April 2008. We expect DataProse to add approximately $15 million of revenue for the remainder of the year and expected to have a slightly dilutive impact to results of operations on a GAAP basis and be slightly accretive on an operating cash flow basis.
The expected impact of DataProse includes estimates for certain acquisition related expenses associated primarily with our planned integration efforts and estimates for the amortization of the acquired intangible assets as we have not yet completed our purchasing accounting for the acquisition. Because of the inherent uncertainties in making such estimates, the actual impact of DataProse on our financial performance for 2008 may vary from our current expectations as we work through our integration efforts and complete the purchase accounting during the remainder of the year.
We are providing the details around DataProse at this time to help you initially understand the expected financial impact to our business. However, going forward, we do not intend to provide separate standalone information on the actual or expected performance of DataProse.
Additionally, as Peter noted earlier, two of our largest client contracts are up for renewal at the end of this year. While we do not have any news to report at this time, our following guidance reflects our best estimates regarding the potential impact of these renewals at this time.
Now onto the numbers: Revenues are expected to range between $467 million and $475 million, relatively unchanged from our previous guidance except for the impact of DataProse. This revenue guidance represents an increase of 11% to 13% for 2008 when compared to 2007.
We expect our earnings for 2008 to range between $1.55 and $1.62 per diluted share. Our operating performance expectations remain relatively unchanged from our previous guidance, however, this revised guidance represents a decrease of approximately $4 million and our expected investment income for the remainder of 2008 or approximately $0.07 per share when compared to our previous expectations.
Subsequent to the establishment of our guidance in January, interest rates have dropped dramatically as a result of Federal Reserve activities. This reduction in investment income reflects our current expectation of investment returns for the remainder of the year.
This guidance reflects an operating margin expectation of approximately 18% for the full year 2008 which represents a 1 percentage point decrease compared to our previous expectations with that decrease attributed almost entirely to the dilutive effect of the DataProse acquisition on a GAAP basis. Although our first quarter operating margin of approximately 20% was slightly better than our expectation due to the timing of certain revenue items in the quarter, we anticipate that our operating margin percentage will trend down over the remainder of the year.
This trend is consistent with our prior expectations and reflects our commitment to further investment in our products and solutions to enhance R&D and other support efforts and now also includes the expected GAAP dilutive impact of DataProse as I mentioned earlier. We expect a slight improvement in our income tax rate from our previous expectations.
At this time, we expect the income tax rate for the year to be 35% to 36% which represents approximately 1 percentage point improvement from our previous guidance. We expect a slight improvement in our effective income tax rate to be offset by the slightly dilutive impact from the DataProse acquisition.
On a combined basis, these two events are essentially neutral to our previous guidance expectation. We expect cash flows from operations to range between approximately $115 million and $120 million which are unchanged from our previous guidance.
This assumes there is no significant net impact related to unexpected fluctuations in the working capital items for the year. In particular, this assumes we cannot experience a large payment cut off issue with any of our clients at year end as we did at the end of the first quarter.
Although we do expect a negative cash flow impact as a result of our lower investment income for the year that I mentioned earlier, this decrease is expected to be offset by the accretive cash impact of DataProse and a slightly better income tax rate. At this time, we expect our capital expenditure for 2008 to be approximately $20 million to $25 million.
This is up slightly from our previous expectation and is highly dependent upon certain revenue opportunities we are pursuing. Also, we are evaluating the possibility of making certain purchases in 2008 in order to maximize the tax incentives offered for capital expenditures under the most recently passed IRS Economic Stimulus Package.
We expect the total of non-cash items of depreciation, amortization, and stock-based compensation to be approximately $45 million for the year. With the completion of our stock buyback program in late 2007, we no longer have a 10b5-1 plan in place.
As a result, as we have done in past periods under similar circumstances, we do not assume any stock repurchases in our guidance. We will continually evaluate the best use of our capital throughout 2008, which may or may not include additional share repurchases.
In summary, we feel the first quarter of 2008 proved to be a strong start to the new year for CSG. We continue to provide essential products and services to our clients that fortify these business relationships.
We will continue to make the necessary investments in R&D and other support areas to further secure CSG’s business growth and meet the challenges and opportunities that lie ahead. I will now turn it over to the moderator for questions.
Operator
Ladies and gentlemen, we will now begin the question-and-answer session. (Operator Instructions) Our first question comes from the line of Ashwin Shirvaikar with Citigroup.
Please go ahead.
Ashwin Shirvaikar - Citigroup
Hey guys, congratulations on the quarter.
Peter Kalan
Thank you.
Ashwin Shirvaikar - Citigroup
I want to actually talk about the non-billing side of the business. You have made all these acquisitions over the last 12, 18 months.
Can you talk about sort of the growth characteristics, margin profile, and economic sensitivity of those acquisitions?
Peter Kalan
I will start and Randy could -- I have got a cold Ashwin, so I'm sorry if I'm a little raspy here but Randy will join in. I guess the first part is that when you look at the economic considerations of the acquisitions, they typically are reaching out to businesses that have consumer profile, businesses and therefore we believe generally they are fairly recession proof but you are never completely recession proof but overall we believe that from a market and economic perspective that they are generally well positioned.
They provide value-added services that generally decrease the cost of operations and within that, we think that they drive value for our clients and in these economic times, our clients are seeking those types of focuses to have the customer care and their customer service experience as well as how they do it at a lower cost point. Growth profile, I will start -- generally they have higher growth profiles than what the historical over the core business of what you see from what we support the cable and DBS markets are.
From a profitability Randy, I don’t know if you have any color to share on that.
Randy Wiese
I think consistent with what we said in the past Peter is that the profitability of these enterprises as we bring them on a GAAP basis have been diluted and It’s primarily because of the amortization from the acquisition. However, from an EBITDA/cash flow perspective, they have been accretive and overtime we expect, absent the amortization from the acquisition that we expect their operating performance to start to become more toward the operating performance of CSG, but that will take a period of time anywhere from 12 to 18 months for many of synergies to really kick in to get that operating performance.
Ashwin Shirvaikar - Citigroup
Are they revenue synergies or are they cost synergies that are in your control.
Randy Wiese
They include though. In certain cases there are some revenue synergies that will get from within the businesses but there also are targeted expense synergies as well.
Ashwin Shirvaikar – Citigroup
And when you say higher growth profile is there a range you could --?
Randy Wiese
I would say Ashwin with the rare characterize it is the two quick mail business that we bought are slightly greater than our historical 4% to 5% growers and the interactive messaging probably slightly greater than that.
Ashwin Shirvaikar – Citigroup
Right and then one last question on sub conduits increased first time in many quarters, was that the insight?
Randy Wiese
I mention that by comments are actually when is that it was primarily related to the former insights that came under ownership of Comcast this quarter as a result of their dissolution of their partnership.
Ashwin Shirvaikar – Citigroup
Okay thanks.
Peter Kalan
Thank you
Operator
Thank you sir. Our next question comes from the line of Eliz Grausam with Goldman Sachs.
Please go ahead.
Eliz Grausam - Goldman Sachs
Great thanks. I am hoping to understand coming into the year end now with the revised guidance on interest rates, if you can give us a sense of what your expected yield had been on your cash balance and what your expected yield is going forward because it didn’t deteriorate too much really in the first quarter, so what are your expectations going into the back half of the year?
Randy Wiese
That couple of things was the reason you didn’t see a lot of deterioration in the first quarters we had some probably some 90 to 120 day paper that really didn’t get impacted in the first quarter. It was on some old yield rates.
So you didn’t see a big impact in the first quarter. As well roll out the new instruments in the out cores you will see the lower interest rates start to kick in and rather than give you kind of a what our expected yield is I would say that probably it’s best to look at the differential from what we had in the past versus what we are expecting at and it’s anywhere from 250 to 300 basis points is the differential.
Eliz Grausam - Goldman Sachs
Great and with the interest environment where it is and where the stock is did this make buyback activity now more attractive as the accretive qualities have increased?
Randy Wiese
I think Eliz as we said last quarter, since our 10b5-1 has gone out we look at many different things in the use of our capital whether it be stock buybacks, debt buybacks, investment in the business through acquisitions R&D and we have been evaluating those on a quarterly basis and I think we will continue to do that going forward, so it’s difficult to predict what we are going to do in the out quarters. I wouldn’t say that what evidence of our capital deployment is well evident I guess from the DataProse acquisition as we looked at different things out there, we did acquire that business for above $14 million so again I think you got to look at it from a quarter-to-quarter basis and we will see what’s the opportunity for us.
Peter Kalan
An Eliz those are investments that generate long term value for share holders and as we look at those businesses and what they do for us as our overall enterprise, we believe they have a significantly better return than we could get by just repurchasing our capital or our debt and we will continue to look for those opportunities to do that.
Eliz Grausam - Goldman Sachs
Alright and then just on the kind of near term dilution tolerance of the Company, clearly looks like margins are heading towards about 17% GAAP operating margins for the next three quarters in order to get to your 18% target for the year. What is kind of the internal threshold that you are willing to take this business given that we have seen that margin compression for several years?
Randy Wiese
I think one thing is to make sure look at Eliz on that 17% that you see there, there is probably close to 300 basis points of dilution from the acquisitions that we did over the last 12 months. I think you got to take that into consideration but going forward our expectation would be the targeted improvement in operating margin going forward as oppose to a continued aggregation.
Peter Kalan
And over that 300 basis point aggregation there is a portion of that, that’s associated with non-cash charges from tangible amortization.
Randy Wiese
More probably most of the decreases related to amortization of intangible assets correct.
Eliz Grausam - Goldman Sachs
Well, then how did you think about the organic margin of CSG’s business particularly as you are moving through some major contract renewals which can have puts and takes in terms of the margin?
Peter Kalan
Well, clearly as we have seen in the business the consolidation of clients and the demands of what the market place is needing from solutions will put pressure on a business like ours as we go through renewals and so we recognize that as we have seen in the past that there are trade offs as part of doing renewals and extensions with our clients and what our job is to manage those trade off’s to get the best long term return for our share holders but we recognize that those are issues that we have to face and overcome and we will face those in the coming quarters as we have clients renew their relationships with us.
Eliz Grausam - Goldman Sachs
Alright thank you.
Operator
Thank you Maam. Our next question comes from the line of Tom Roderick with Thomas Weisel Partners.
Please go ahead.
Chris – Thomas Weisel Partners
Hi guys, this is Chris for Tom Roderick.
Peter Kalan
Hey Chris.
Chris – Thomas Weisel Partners
Hey, how are you guys doing?
Peter Kalan
Good
Chris – Thomas Weisel Partners
Good job on the quarter.
Peter Kalan
Thanks.
Chris – Thomas Weisel Partners
Just had a quick question; you guys mentioned on the Mediacom deal that you guys extended and that they are taking on several services and you had also mentioned in the past that price preserves is no longer all of that relevant given the fact that you guys are not getting any order from the mail and in you interact or messaging, I was wondering if you could may be go into the pricing dynamic, what went into the Mediacom and if the way the Mediacom deal played out is that the selective -- what we can expect with your existing conversations to customers.
Peter Kalan
Well, Chris we won’t go into specifics, they go into because it’s very difficult to look at any one piece and carve out price versus additional services. It’s clear that we saw the opportunity with Mediacom to add a lot of new types of services to their operations and lock them up for a significant amount of time and we believe that that was valuable both to our business as well as what they are trying to accomplishing and whether that will be rolling out our ACP platform to support their voice services along with what they do on video or data or they are call center customer service reps application to get them to be more efficient.
We saw an opportunity really drive a long term relationship out of this and I think we would be looking the same way with both Deck in-store and Comcast as they come up. We have a breath of services that our clients are providing and we have new services that we have been delivering to them and we will look in those to see how we can see kind of the length of commitment and visibility of the relationship as well as the commitment to products between the two renewals that we have remaining.
So, I think that will be similar from a dynamic from that perspective and we have show a strong history when we get renewals to be able to bring a lot of our capabilities to submit those relationships going forward and give visibility for our operations and for our share holders and what this business looks like.
Chris – Thomas Weisel Partners
Great, great, thank you very much and then if I may ask you mentioned -- I think on the last call you mentioned the ComTec and Prairie acquisitions. Came in on the lower end -- I was wondering if you could maybe help us with if that’s improving or are those kind of ticking up a little bit for you?
Peter Kalan
I would say on the top line and on the bottom line, they are both improving as we expected.
Chris – Thomas Weisel Partners
Great, thanks.
Operator
Thank you sir. Our next question comes from the line of Scott Sutherland with Wedbush Morgan Securities.
Please go ahead.
Scott Sutherland - Wedbush Morgan Securities
Great, thank you and good afternoon.
Randy Wiese
Hi, Scott.
Scott Sutherland - Wedbush Morgan Securities
So kind of talking on the first question from Ashwin. I mean you evolved into all these new services work flow manager, bill presentment and the order management.
Your revenues kind of flat sequentially and therefore new wins in these applications; can you guys talk about what’s happening at the core base CSG business and is that kind of shrinking modestly and are these new applications kind of new growth drivers in it? How much are these new applications and how fast are they growing?
Peter Kalan
We are seeing Scott that these applications are being supported and we are seeing good embracing of them as commented by the interactive messaging being rolled out and it’s being signed up for with our cable clients. Some of those aren’t getting the full rollout yet but we are seeing support of that into our revenues or into our client base to drive future revenues and we are seeing some of our order book flow that we are seeing people sign up for that and we have got commitments to roll those out in the coming quarters, so we have seen success in the past and we think we have visibility to future growth.
Between the sequential aspects of Q4 and Q1, I'm going to let Randy comment on that.
Randy Wiese
Yeah, I will give you a couple of data points to look at Scott is if you look sequentially revenues were about flat but if you remember the fourth quarter was a very strong quarter for us and actually Q1 is generally from a seasonality standpoint on certain of the revenues streams a bit lower than the fourth quarter. So with it coming in a little to be flat that I actually -- we think that’s a very good strong performance for the quarter.
I think also the other data point is to look at year-over-year. If you look at year-over-year, as I mentioned in my comments, we had a 15% increase in revenues.
Probably two-thirds of that is related to the acquisitions and about the other third to organic means. So we are getting some organic growth over time as well.
Scott Sutherland - Wedbush Morgan Securities
Maybe another to way to ask this. I mean I think you answered about half of my questions on that -- growth of your new application.
As you look forward, maybe whether it’s 20% of revenues through the new applications and you expected to grow at 10% or 20% year-over-year, what kind of your forecast for these new areas you are moving into?
Peter Kalan
I'm not sure if I understood that question, Randy do you understand it?
Randy Wiese
I don’t understand the question...
Peter Kalan
Can you rephrase that?
Scott Sutherland - Wedbush Morgan Securities
Yeah, what I'm just trying to look at is the view areas of the bill presented in payments, the work flow and order management. How much related is it to overall revenue at this point and what kind of growth projections within your overall guidance do you think these applications grow?
Peter Kalan
I mean one is Scott, we don’t give revenues by product line and growth by product line but I can tell you from a general commentary as we are seeing our clients in the new markets embrace interactive messaging presentment services, we are seeing our clients embrace order book flow which are going to drive future revenue for us that then drive other applications to be plugged in. Randy?
Randy Wiese
I will say then. Let me say that differently Scott is that from these new applications, if you remember from the past, as we talk about our growth profile from organic perspective is that the volume and pricing increases that we used to see over the past year has somewhat gone away.
So our revenue growth from an organic purposes is really coming from new product use. So the 4% to 6% you see from our organic growth is coming from these new products.
So is that helping answer the question?
Scott Sutherland - Wedbush Morgan Securities
Yeah, that’s sounds like it’s helping pour some additional color.
Randy Wiese
Okay.
Scott Sutherland - Wedbush Morgan Securities
Thanks a lot.
Randy Wiese
Sorry we had trouble with your question.
Scott Sutherland - Wedbush Morgan Securities
It’s okay.
Operator
Thank you sir. Our next question comes from the line of Karl Keirstead with Kaufman.
Please go ahead.
Karl Keirstead - Kaufman
Hi, good afternoon. A couple of questions; early on in your comments, you mentioned that your ’08 guidance reflects your best guess of the effect of the Comcast and Dish renewals.
I just want to be clear given that those contracts don’t terminate until your end by saying that are you implying that the new terms could take effect before year end. That’s my first question, thanks.
Peter Kalan
Karl, this is Peter. When we look at our overall business, we look at the scope of services that we provide for our clients and everything that comes up during a renewal period and what services they want to buy.
We have historically had situations where clients have agreed to new terms before the expiration date of their contract. That’s not a typical because nobody wants to be on 12/31 getting their final agreement and in cases some clients will seek to get some benefit in the current year and our expectations for this year try to account for the myriad of aspects of a renewal that could take place and so we try to estimate something to that extend.
Randy, would you add any color on that?
Randy Wiese
I would just say that it was our best estimate, not our best guess, Karl and the other thing I would say is that all keeping aside I think what I would say is that the two contract renewals are a little bit different and in that the Comcast contract has an expiration date of 12/31/08. So it would be expected that that would be renewed before the end of year.
The Edger Start contract has two one year renewals that they can exercise the discretion so that one doesn’t have the same pressure point as does the Comcast from a timing perspective.
Karl Keirstead – Kaufman
Okay and then secondly, given that that’s the recent acquisition, your revenue guidance in fact hasn’t changed from where it was on your last earnings call, can I infer that you are not expecting any significant change to the revenue stream that you derive from Comcast and DISH in ’08?
Peter Kalan
What you should read from that is our expectations for those are the same as they were in the first quarter as they are now.
Karl Keirstead - Kaufman
Okay, thank you and then second question on the organic growth rate. You mentioned on this call that at least in the first quarter it ran sort of 4% to 6% if I heard you correctly and then on your call, last quarter, when you said your top line guidance at 7% to 10%, I believe you mentioned that your assumption for ’08 is that organic growth would come in at about half that or let's call that 3% to 4%.
So it seems like you are tracking to the first quarter in terms of organic growth above your year average and I just wanted to ask if you are still comfortable with that call it 4% organic growth rate assumption for ’08.
Peter Kalan
I am. The revenue for the first quarter was probably slightly higher than my expectations were internally but my expectations of what I told you back in the fourth quarter on the acquisition versus -- the acquired versus organic growth is the same.
It is slightly different now if you remember my guidance. I did make a statement that now with the DataProse included, our growth expectation is now a little bit higher.
It’s 11% to 13% now versus the 7% to 10% and it’s mainly because of DataProse. So the profile has changed a little bit; probably two thirds of that 11% to 13% is now acquired growth with the remainder amount being organic but that also sort of equate to the 4% to 5% as well.
Karl Keirstead - Kaufman
Got it, that’s helpful. Thank you.
Peter Kalan
Okay.
Operator
Thank you Sir. (Operator Instructions).
Our next question comes from the line of Donna Jaegers with Janco Partners. Please go ahead.
Donna Jaegers - Janco Partners
Hi guys a quick question on how are you counting organic versus acquired if a period where they sold their capacities to Comcast or to an existing customer, is that organic because you are a selling a new service out of that existing customer or in that acquired?
Peter Kalan
The way I define organic Donna is that the base revenue that we got from the acquired business is what I would call the acquired and if they grow their revenues subsequent to the acquisition by CSG I consider that to be organic. Does it mean basically driven by the management at CSG.
Donna Jaegers - Janco Partners
Okay great thanks. That’s helpful
Operator
Thank you Maam. (Operator Instructions) and gentleman we do not have any further questions.
Please continue with any closing remarks.
Peter Kalan
I would like to thank all our share holders for their support during the first quarter which was a rocky, turmoil time in the investment markets. I also want to thank our employees for their continued efforts of everything they do every month and every day for a clients as well as what they do for each other, so we look forward to moving into the second quarter and as we already have started and look forward to delivering results to you coming July.
Talk to you then.
Operator
Ladies and gentleman this concludes the CSG Systems Q1 earnings conference call. You may now disconnect.
Thank you for using AT&T teleconferencing and have a pleasant day.