Feb 7, 2012
Operator
Good day, ladies and gentlemen. Thank you for standing by.
Welcome to the CSG Systems Fourth Quarter Conference Call. [Operator Instructions] This conference is being recorded today, February 7, 2012.
It is now my pleasure to introduce our host for today, Ms. Liz Bauer.
Please go ahead.
Liz Bauer
Thank you, Diana, and thanks to everyone for joining us. Today's discussion will contain a number of forward-looking statements.
These will include, but are not limited to, statements regarding our projected financial results; our ability to meet our clients’ needs through our products, services and performance; and our ability to successfully integrate and manage acquired businesses in order to achieve their expected strategic, operating and financial goals.
Liz Bauer
While these statements reflect our best current judgments, they are subject to risks and uncertainties that could cause our actual results to differ materially. Please note that these forward-looking statements reflect our opinions only as of the date of this call, and we undertake no obligation to revise or publicly release any revision to these forward-looking statements in light of new or future events.
In addition to factors noted during this call, a more comprehensive discussion of our risk factors can be found in today’s press release, as well as our most recently filed 10-K and 10-Q, which are all available on 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. We believe that isolating the effects of such events enable us, as well as investors, to consistently analyze the critical components of our operating results and to have meaningful comparisons to prior periods.
Liz Bauer
For more information regarding our use of non-GAAP financial measures, we refer you to today’s earnings release and non-GAAP reconciliation tables on our website, which will also be furnished to the SEC on Form 8-K.
Liz Bauer
With me today on the phone are Peter Kalan, our Chief Executive Officer; and Randy Wiese, our Chief Financial Officer.
Liz Bauer
With that, I'd like to now turn the call over to Peter.
Peter Kalan
Thank you, Liz, and thanks to everyone for joining us on the call. For the fourth quarter of 2011, we generated revenues of $188 million and non-GAAP earnings per share of $0.64, both of which were an improvement over our third quarter results.
Peter Kalan
For 2011, we generated revenues of $735 million and non-GAAP earnings per share of $2.25, which reflects the first full year of the financial performance of the Intec Telecom acquisition, which closed in November of 2010.
Peter Kalan
During 2011, we undertook a major transformation of our company to become a global leader of business-enabling solutions. And while not everything has gone as perfectly and as quickly as I would have liked, I'm pleased with how the 2 companies have come together to help make our clients successful.
The cooperation and teamwork exhibited between employees who did not know each other a year ago is very gratifying to see. The knowledge sharing and transfer between various departments and functions is occurring naturally and freely.
The leveraging of the organization's strengths to help our clients be successful is gaining momentum.
Peter Kalan
I think we're through the integration phase of the Intec acquisition, and are now moving into the execution phase of this multi-year transformation of our company.
Peter Kalan
Importantly in 2011, we continued to strengthen our position with the leaders in the communications industry, ranging from our 7-year renewal with DISH Network to our recently signed agreements with MTN South Africa for a multi-year services engagement and our enterprise license and services agreement for our Mediation solution with America Movil.
Peter Kalan
Our largest clients, Comcast and Time Warner, increased their spending with us by over 5% and 10%, respectively. And DISH, who we anticipated seeing a 10% to 15% reduction in spending in 2011 as a result of their contract expansion, continued to turn to us to help them solve more business problems and introduce more new products, resulting in only a 6% decrease in spending for the year.
Peter Kalan
These results are a testament to the value of working closely with our clients to help them be more successful.
Peter Kalan
Continuing on, we added a significant number of new logos as a result of key wins for our Mediation, Wholesale Billing and stand-alone billing solutions. We pursued the new emerging market of content and over-the-top providers with our Content Direct solution and are now working with 3 major studios and several major sports and entertainment providers.
And we continued to enable our cable and satellite clients to offer new and enhanced products like Home Security, WiFi and high-speed data services to our new product enablement solutions.
Peter Kalan
In December, our Singl.eView and Mediation solutions were selected for a large transformational billing project by a top 10 North American cable operator. We will be replacing their existing systems, which are currently provided by a competitor.
As the leading provider of customer care and billing solutions to the North American cable and satellite industry, this win validates the importance that rich domain expertise and strong technological solutions play in helping operators compete successfully in this evolving industry.
Peter Kalan
As you all know, CSG is the undisputed leader in serving the North American cable and satellite market, with over 49 million subscribers on our outsourced Advanced Convergent Platform. Now with out stand-alone Singl.eView solution, the market that currently uses stand-alone software solutions is now available for us to serve.
That opens up a whole new market for CSG to pursue with over 30 years of domain expertise and proven solutions.
Peter Kalan
From a product standpoint, we met with clients and listened to their challenges, which ranged from how to better monetize and optimize the explosive consumption of data that is occurring on their networks to how to more effectively and efficiently roll out new products and services without having to do a total replacement of existing systems.
Peter Kalan
We worked side-by-side with our clients as they looked for creative ways to provide a more personalized and intentional experience with their customers and we worked with our clients as they sought to automate and streamline operations to drive down costs.
Peter Kalan
Rather than rely solely in large multi-year transformational projects to enable our clients to be successful, we provided point solutions to help them continue to grow and evolve their businesses in the short term. These point solutions range from internally developed solutions like our next-generation product catalog, which is allowing providers like Mediacom to more effectively and efficiently package and price various products, to our Home Security solution, which enables providers like Comcast to introduce new revenue-generating products to its customers.
Peter Kalan
And they also include acquired solutions like our Interactivate solution. Just one year after our acquisition of Intec, we introduced, sold and implemented this solution into our 2 largest North American cable and satellite clients, Comcast and DISH Network.
Peter Kalan
As the above examples demonstrate, being able to serve such large and dynamic communication service providers is dependent upon relationships that are built on trust and based on delivering on commitments.
Peter Kalan
Let me provide a little bit more color on more recent wins this quarter that demonstrate that trust.
Peter Kalan
For those of you not familiar with America Movil, they're one of the largest integrated telcos in the world and the third largest wireless operator with operations in 18 countries.
Peter Kalan
America Movil was an existing Mediation customer; however, they were using a competitor's solution in several of their largest properties. With this new contract, we'll help America Movil implement our Mediation solution throughout their Caribbean and Latin American properties.
Peter Kalan
MTN South Africa is part of the MTN Group, a multinational telecommunications conglomerate that has over 152 million subscribers with operations in 21 countries in Africa and the Middle East. They're a Singl.eView and InterconnecT client who demands a highly flexible and configurable environment for their business customers, composed of resellers and distributors.
Peter Kalan
In order to help MTN focus on growing their wholesale business, they asked us to provide operational support and services on their business-critical applications, which resulted in a 3-year services engagement.
Peter Kalan
These types of relationships are not built overnight. They're built after years of proving yourself and delivering on your promises.
This is a cornerstone of our business.
Peter Kalan
Now looking ahead to 2012, we continue to see a fairly challenging environment, similar to what we experienced in 2011.
Peter Kalan
Europe continues to present its own set of macro economic challenges due to the financial situation, operators are still interested in solutions that produce a 9- to 12-month return on investment. However, the appetite for large pre-informational building projects continues to remain low.
This is presenting a significant challenge to operators as data consumption continues to explode and their existing legacy systems are not equipped to help them change their business models to capitalize on the massive amount of transactions and consumption that is occurring over their networks.
Peter Kalan
The Middle East and Northern Africa have seen some political stability. However, there is cautiousness amongst operators in making significant decisions due to the unrest that still exists in some countries.
Peter Kalan
The Americas are served by large mature operators who are trying to transform their companies while competition is increasing from all directions and IT budgets are being held flat. Investments are focused on network and content expansion.
Spending on discretionary projects continues to lag the spending on must-have projects that streamline operations or maximize current systems.
Peter Kalan
And while the APAC region is one area of the world where spending on business support systems is growing, we're playing catch-up as a result of the decision we made in the first half of last year to rebuild the sales organization from the top down.
Peter Kalan
By not having a strong sales organization, we missed out on several opportunities that will impact us in the near term. However, we believe that we're now well positioned for 2012 and beyond as a result of putting the right leadership and sales professionals in place to service this growing market.
Peter Kalan
Many of these factors that contributed to a challenging business climate are out of our control. However, there is much that is within our control.
As I look ahead to 2012, I'm optimistic that we've made the right decisions to drive long-term shareholder value.
Peter Kalan
Today, we're the #1 provider of business-enabling solutions to the North American cable and satellite industry. Our Advanced Convergent Platform is the most deployed and comprehensive solution serving this industry.
Today, with over 150 clients, we have one of the most deployed mediation solutions in the world. Our clients have massive amounts of data going across their networks and they're looking for creative and intelligent ways to analyze that data and develop new business models that will enable them to monetize that traffic.
Peter Kalan
We're in a very good position to help them succeed with new business models. With over 260 clients and the majority of the top 100 telcos in the world as clients, we have one of the most deployed interconnect billing solutions in the world.
As our clients look for new ways to optimize the traffic that's going across their networks and provide more options for their partners to provide services to the end user, we're right in the middle of helping them.
Peter Kalan
Our Singl.eView solution has proven its strength with clients like MTN, Virgin Mobile, Reliance, Hutchison 3G, Verizon, Best Buy and MasterCard. Its proven scalability and flexibility appeals to those providers who are looking for a flexible architecture that is robust and proven.
With our win last quarter with a North American cable operator and a targeted pipeline of opportunities, we believe that we're in a good position to win our share of transformational billing opportunities when the decisions are finally made.
Peter Kalan
And we continue to focus on those things that have made us successful in the past. We continue to invest in relationships with our clients so that we become an even more integral part of their operations and teams.
Our clients trust us and look to us to help them solve problems and become more competitive.
Peter Kalan
We continue to add to our deep domain expertise and product sense.. Historically, we've invested 14% to 15% of our revenues in research and development to bring new products to bear for our clients.
This continuous and proven history of adding to our capabilities enables us to get broader and deeper in our clients' operations.
Peter Kalan
We believe that this investment creates an enviable relationship and position within our clients that makes it very difficult for competitors to disrupt.
Peter Kalan
We continue to leverage our strong operational expertise to the benefit of our clients. We're constantly looking for new ways to improve the efficiency and effectiveness of our own solutions and our clients' operations, positively impacting the bottom line for both our clients and us.
We're having good conversations with operators around the world regarding how they can benefit in different delivery models from our operational expertise, whether that be in the of managed services or having our employees embedded in their operations.
Peter Kalan
And finally, we continue to invest in our people so that we can continue to differentiate ourselves through our combination of people and products. We believe that people solve problems.
People identify new opportunities and people drive success, and our clients continue to tell us that our people make a difference. They help drive our clients' successes.
That is tough to replicate and something we're not willing to compromise on. We will continue to invest in our people, which we view as an investment in our clients' successes.
Peter Kalan
Our transformation as a company is not complete, and in this ever-changing world, I don't believe that a successful company that plans to compete and go to the distance ever stands still.
Peter Kalan
We will continue to make decisions that we believe are in the best long-term interest of our clients, our employees and our shareholders. I want to thank our employees for their hard work and commitment to our united cause and thank our shareholders for their interest and understanding what we are accomplishing here at CSG.
Peter Kalan
Now I'd like to turn it over to Randy to go through the financial performance of the quarter and year, as well as our financial performance for 2012.
Randy Wiese
Thank you, Peter, and welcome to all of you on the call today to discuss our financial results for the fourth quarter and full year of 2011, as well as our outlook for 2012. Overall, from a financial perspective, we did not achieve what we originally sought out to accomplish a year ago.
We've set our financial goals high. And due to a variety of reasons, some of that were within our control and some of that were not, we fell short of our original goals.
We realize that the transformation of this company will take longer than we originally anticipated, but we remain very excited about the opportunities we see before us.
Randy Wiese
As I walk you through our financial results, I want to remind you that when you compare our year-over-year performance, the fourth quarter and full year of 2010 include only one month of Intec's financial results, December of 2010, since the acquisition closed on November 30, 2010, whereas, our financial results for 2011 reflect a full 12 months of Intec operations.
Randy Wiese
Now on to the results. Total revenues for the quarter were $188 million, up 22% over the same quarter last year.
Full year revenues were $735 million, up 34% over the prior year. Sequentially, fourth quarter revenues were up $5 million or 3% from the third quarter, with the strength of the quarter driven primarily by several year-end software license upgrades and special project work on the processing side of our business.
Our 2011 performance reflects the progress we have made in diversifying and expanding our customer base, geographical markets and delivery capabilities illustrated as follows. First, in 2011, we had 3 material clients that each individually have generated revenues over 10% of our total revenues
Comcast, DISH Network and Time Warner. Together, they were 42% of revenues for the year as compared to our having 4 material clients accounting for 64% of our full year revenues in 2010.
Second, for the full year 2011, we generated 10% of our revenues from the Europe, Middle East and Africa region and 5% of our revenues from the Asia-Pacific region compared to a nominal amount for these regions in 2010 full year results.
Our 2011 performance reflects the progress we have made in diversifying and expanding our customer base, geographical markets and delivery capabilities illustrated as follows. First, in 2011, we had 3 material clients that each individually have generated revenues over 10% of our total revenues
And finally, we generated 29% of our revenues from software and related services in the full year of 2011 as compared to only 9% during the prior year.
Our 2011 performance reflects the progress we have made in diversifying and expanding our customer base, geographical markets and delivery capabilities illustrated as follows. First, in 2011, we had 3 material clients that each individually have generated revenues over 10% of our total revenues
While our more diversified revenue base has introduced greater risk and variability in our business, we believe this added diversification provides us with greater opportunities for future growth with a broader customer base and expanded product portfolio as a leading global software and services provider.
Our 2011 performance reflects the progress we have made in diversifying and expanding our customer base, geographical markets and delivery capabilities illustrated as follows. First, in 2011, we had 3 material clients that each individually have generated revenues over 10% of our total revenues
Moving on, our non-GAAP operating income for the fourth quarter was $40 million, which compares to $36 million in the same period last year or an increase of 10%. The non-GAAP operating margin was 21% for the quarter compared to 24% for the fourth quarter 2010.
Our 2011 performance reflects the progress we have made in diversifying and expanding our customer base, geographical markets and delivery capabilities illustrated as follows. First, in 2011, we had 3 material clients that each individually have generated revenues over 10% of our total revenues
Our fourth quarter non-GAAP operating income and margin were up from the third quarter, primarily attributed to the sequential increase in revenues to include a greater percentage of higher margin software-related revenues and special project work when compared to the previous quarter. As with the impact of these items, our fourth quarter margins would have been more in line with our third quarter performance.
Our 2011 performance reflects the progress we have made in diversifying and expanding our customer base, geographical markets and delivery capabilities illustrated as follows. First, in 2011, we had 3 material clients that each individually have generated revenues over 10% of our total revenues
For the full year, our non-GAAP operating income in 2011 was $139 million or a margin of 19% compared to $126 million or a 23% margin for the prior year. The 2011 margin percentage is within our long-range target of 18% to 20%.
The 19% margin performance for 2011 is better than our expectations of 18% that we set earlier this year. This outperformance relates to our ability to control our costs in line with revenue fluctuations and also reflects lower employee incentive compensation as a result of us not meeting the financial goals we established at the beginning of the year.
Our 2011 performance reflects the progress we have made in diversifying and expanding our customer base, geographical markets and delivery capabilities illustrated as follows. First, in 2011, we had 3 material clients that each individually have generated revenues over 10% of our total revenues
The lower costs related to employee-incentive compensation realized in 2011 are not sustainable into 2012, as our 2012 incentive plans assume we will successfully achieve our 2012 financial targets. I will touch on this a bit later when I provide our 2012 outlook.
Our 2011 performance reflects the progress we have made in diversifying and expanding our customer base, geographical markets and delivery capabilities illustrated as follows. First, in 2011, we had 3 material clients that each individually have generated revenues over 10% of our total revenues
GAAP operating income for the quarter was $27 million or a margin of 14% and $96 million and a margin of 13% for the full year. For the fourth quarter, our adjusted EBITDA was $51 million or 27% of total revenues.
For the full year, our adjusted EBITDA increased by 14% from last year to $181 million or 25% of our total revenues.
Our 2011 performance reflects the progress we have made in diversifying and expanding our customer base, geographical markets and delivery capabilities illustrated as follows. First, in 2011, we had 3 material clients that each individually have generated revenues over 10% of our total revenues
Non-GAAP EPS for the fourth quarter was $0.64, which compares to $0.69 for the fourth quarter of the prior year. Non-GAAP EPS for the full year was $2.25, which compares to $2.30 for the prior year.
Our 2011 performance reflects the progress we have made in diversifying and expanding our customer base, geographical markets and delivery capabilities illustrated as follows. First, in 2011, we had 3 material clients that each individually have generated revenues over 10% of our total revenues
Foreign currency movements did not have a material impact on the current quarter or for the full year 2011.
Our 2011 performance reflects the progress we have made in diversifying and expanding our customer base, geographical markets and delivery capabilities illustrated as follows. First, in 2011, we had 3 material clients that each individually have generated revenues over 10% of our total revenues
Our estimated non-GAAP effective tax rate was 42% for the quarter and 40% for the full year 2011, slightly higher than our previous expectation with the increase related to a change in the mix of our pretax income between our domestic and foreign operations. GAAP EPS for the fourth quarter was $0.35 and $1.28 for 2011.
Our 2011 performance reflects the progress we have made in diversifying and expanding our customer base, geographical markets and delivery capabilities illustrated as follows. First, in 2011, we had 3 material clients that each individually have generated revenues over 10% of our total revenues
And now on to the cash flows and balance sheet. Our cash flows from operations for the quarter were $32 million.
For the year, we reported cash flows from operations of $61 million. Our annual cash flow performance is lower than our historical run rate as a result of several unusual and unique items we experienced in the first half of 2011.
However, our second half of the year results are consistent with our expectations for operating cash flows to return to more normalized level.
Our 2011 performance reflects the progress we have made in diversifying and expanding our customer base, geographical markets and delivery capabilities illustrated as follows. First, in 2011, we had 3 material clients that each individually have generated revenues over 10% of our total revenues
We view our cash generation capability continuing as a very strong metric for our business model going forward. We ended the quarter with a cash balance of $159 million, which was up $20 million from the ending balance last quarter.
Our 2011 performance reflects the progress we have made in diversifying and expanding our customer base, geographical markets and delivery capabilities illustrated as follows. First, in 2011, we had 3 material clients that each individually have generated revenues over 10% of our total revenues
During the quarter, we purchased 172,000 shares of our common stock for $2 million or a weighted average price of $13.20 per share. For all of 2011, we repurchased 750,000 shares of our common stock for $10 million or a weighted average price of $13.24 per share.
Our 2011 performance reflects the progress we have made in diversifying and expanding our customer base, geographical markets and delivery capabilities illustrated as follows. First, in 2011, we had 3 material clients that each individually have generated revenues over 10% of our total revenues
For the full year 2011, we lowered our debt position by $70 million and directed over $22 million to capital expenditures. We ended the year with $340 million in par value debt on our balance sheet.
Our 2011 performance reflects the progress we have made in diversifying and expanding our customer base, geographical markets and delivery capabilities illustrated as follows. First, in 2011, we had 3 material clients that each individually have generated revenues over 10% of our total revenues
Based on our solid financial position and our history of being strong operators, we are very comfortable with the level of debt that we have on our balance sheet and the flexibility our capital structure provides us to manage and grow the business going forward.
Our 2011 performance reflects the progress we have made in diversifying and expanding our customer base, geographical markets and delivery capabilities illustrated as follows. First, in 2011, we had 3 material clients that each individually have generated revenues over 10% of our total revenues
Now let's move on to our outlook for 2012. Our 2012 revenue guidance is $715 million to $740 million.
Let me provide some additional color around these expectations. First, this guidance reflects the consolidation of one remaining Comcast market that is currently in an Amdocs billing market off of our solution and on to the Amdocs solution.
By and large, in the past, this sort of consolidation has gone in our favor, yet sometimes they don't, such as in this case. As a result, we expect year-over-year decline in processing revenues of approximately $5 million related to this item.
Our 2011 performance reflects the progress we have made in diversifying and expanding our customer base, geographical markets and delivery capabilities illustrated as follows. First, in 2011, we had 3 material clients that each individually have generated revenues over 10% of our total revenues
Our overall relationship with Comcast remains very strong, evidenced by the fact that we increased our revenues from Comcast during 2011 by 5% or $7 million over the previous year.
Our 2011 performance reflects the progress we have made in diversifying and expanding our customer base, geographical markets and delivery capabilities illustrated as follows. First, in 2011, we had 3 material clients that each individually have generated revenues over 10% of our total revenues
Other than this reduction in revenue from Comcast, our current guidance does not assume any other material changes in revenues from Comcast for 2012 or any other material clients.
Our 2011 performance reflects the progress we have made in diversifying and expanding our customer base, geographical markets and delivery capabilities illustrated as follows. First, in 2011, we had 3 material clients that each individually have generated revenues over 10% of our total revenues
Second, after considering the impact of this $5 million reduction, the high side of our guidance represents nominal growth over the prior year and further stabilization of the business.
Our 2011 performance reflects the progress we have made in diversifying and expanding our customer base, geographical markets and delivery capabilities illustrated as follows. First, in 2011, we had 3 material clients that each individually have generated revenues over 10% of our total revenues
And third, the lower end of the guidance represents the risk and volatility that is now inherent in our business since we now generate close to 30% of our revenues from software and services and 15% of revenues from outside the Americas region.
Our 2011 performance reflects the progress we have made in diversifying and expanding our customer base, geographical markets and delivery capabilities illustrated as follows. First, in 2011, we had 3 material clients that each individually have generated revenues over 10% of our total revenues
This lower end of our range reflects the uncertainty in the global economic environment and continued lengthening of sales cycles and the normal challenges in delivering on complex projects. If we close opportunities early in the year, we believe we're in a stronger position to achieve the higher end of our guidance.
If deals slip beyond our current expectation more towards the second half of the year, that will put greater pressure on our 2012 revenues due to the fact that we recognize our software and services revenues generally on our percentage of completion method of accounting.
Our 2011 performance reflects the progress we have made in diversifying and expanding our customer base, geographical markets and delivery capabilities illustrated as follows. First, in 2011, we had 3 material clients that each individually have generated revenues over 10% of our total revenues
We had a strong finish in our sales activities in the fourth quarter of 2011 and have had a good start to 2012 so far such that we have visibility into approximately 85% of our expected 2012 revenues at this time. However, timely execution on our sales and delivery expectations throughout the year is necessary for us to be successful in achieving our overall revenue guidance for the year.
Our 2011 performance reflects the progress we have made in diversifying and expanding our customer base, geographical markets and delivery capabilities illustrated as follows. First, in 2011, we had 3 material clients that each individually have generated revenues over 10% of our total revenues
We expect our non-GAAP operating margin to be in the 17% range for the full year 2012. This margin guidance reflects a relatively flat to slightly down revenues and a continued investment in the company, resulting in an increase in expenses over 2011.
These expense increases are coming primarily from 2 areas that are essentially equal in their impact to 2012. First, we anticipate higher employee wages related -- we anticipate higher employee wage-related cost in 2012, driven mainly by expected annual merit increases and higher incentive compensation as our programs assume achievement of our 2012 financial targets.
Our 2011 performance reflects the progress we have made in diversifying and expanding our customer base, geographical markets and delivery capabilities illustrated as follows. First, in 2011, we had 3 material clients that each individually have generated revenues over 10% of our total revenues
And second, we anticipate an increase in our data processing costs over 2011, reflecting the additional processing capacity needed as our clients' businesses grow and become more complex.
Our 2011 performance reflects the progress we have made in diversifying and expanding our customer base, geographical markets and delivery capabilities illustrated as follows. First, in 2011, we had 3 material clients that each individually have generated revenues over 10% of our total revenues
Although this margin reflects a decline from a comparable operating margin we reported in 2011 and is below our long-range target of 18% to 20%, it is still best in class amongst our peers.
Our 2011 performance reflects the progress we have made in diversifying and expanding our customer base, geographical markets and delivery capabilities illustrated as follows. First, in 2011, we had 3 material clients that each individually have generated revenues over 10% of our total revenues
I have said in the past we would be willing to invest in areas of our business that cause our margin to fall below our long-term target level for a period of time in pursuit of longer-term opportunities. We believe the investments we are making in our employees in 2012 and in our data processing environment are the right investments for this company longer term and will help us grow revenues and return to our long-term target range of 18% to 20%.
Our 2011 performance reflects the progress we have made in diversifying and expanding our customer base, geographical markets and delivery capabilities illustrated as follows. First, in 2011, we had 3 material clients that each individually have generated revenues over 10% of our total revenues
We anticipate adjusted EBITDA will be within the range of $164 million to $171 million or 23% of our expected total revenues. Our guidance for 2012 non-GAAP EPS is expected to fall between $1.85 and $2.
This non-GAAP EPS guidance reflects an estimated effective income tax rate of approximately 43% for the full year 2012, an increase over 2011's rate due to an increase in our estimated losses in certain foreign jurisdictions that we cannot tax effect at this time.
Our 2011 performance reflects the progress we have made in diversifying and expanding our customer base, geographical markets and delivery capabilities illustrated as follows. First, in 2011, we had 3 material clients that each individually have generated revenues over 10% of our total revenues
We continue to evaluate different options to stabilize and improve our income tax rate going forward. About 2/3 of this decrease in EPS performance over 2011 relates to our expected decrease in operating performance for the year and the remainder relates to this higher tax rate.
Our 2011 performance reflects the progress we have made in diversifying and expanding our customer base, geographical markets and delivery capabilities illustrated as follows. First, in 2011, we had 3 material clients that each individually have generated revenues over 10% of our total revenues
We expect that we will generate between $110 million to $120 million in operating cash flows for 2012, which assumes no unusual fluctuations in working capital like we experienced in 2011.
Our 2011 performance reflects the progress we have made in diversifying and expanding our customer base, geographical markets and delivery capabilities illustrated as follows. First, in 2011, we had 3 material clients that each individually have generated revenues over 10% of our total revenues
At this time, we anticipate our capital expenditures for 2012 will be in the $30 million range, slightly higher than our normal $25 million range as we had some 2011 capital expenditures flow into 2012.
Our 2011 performance reflects the progress we have made in diversifying and expanding our customer base, geographical markets and delivery capabilities illustrated as follows. First, in 2011, we had 3 material clients that each individually have generated revenues over 10% of our total revenues
Our guidance reinforces our solid cash generating business model and strong capital structure. Please note that our 2012 guidance does not anticipate any significant impact from foreign currency fluctuations since we generate a large percentage of our revenues in U.S.
dollars and because of the difficulty in predicting foreign currency rates for the remainder of our business. We do have a portion of our foreign revenues and expenses in a natural hedge position, but we are still subject to currency foreign fluctuations in certain areas.
Our 2011 performance reflects the progress we have made in diversifying and expanding our customer base, geographical markets and delivery capabilities illustrated as follows. First, in 2011, we had 3 material clients that each individually have generated revenues over 10% of our total revenues
And finally, consistent with our past practices, our guidance does not assume any share buybacks under our repurchase program during the year. As we have done in the past, we will evaluate the best use of our available cash during the year, which may or may not include any share buybacks.
Our 2011 performance reflects the progress we have made in diversifying and expanding our customer base, geographical markets and delivery capabilities illustrated as follows. First, in 2011, we had 3 material clients that each individually have generated revenues over 10% of our total revenues
To summarize, in 2012, we will continue to make strides to transition our company to a leading global software and services business. We remain committed to delivering our world-class product offerings to service providers around the world who depend upon our mission-critical solutions to operate their businesses and deliver a superior customer experience.
Our 2011 performance reflects the progress we have made in diversifying and expanding our customer base, geographical markets and delivery capabilities illustrated as follows. First, in 2011, we had 3 material clients that each individually have generated revenues over 10% of our total revenues
While there are still some headwinds that we are facing, we believe that the efforts that we have undertaken will create long-term shareholder value. We remain excited about our business and the opportunities ahead and look forward to sharing our successes with you as the year progresses.
Our 2011 performance reflects the progress we have made in diversifying and expanding our customer base, geographical markets and delivery capabilities illustrated as follows. First, in 2011, we had 3 material clients that each individually have generated revenues over 10% of our total revenues
With that, I'll open it up to the operator so that we can take any questions.
Operator
[Operator Instructions] Our first question comes from the line of Suhail Chandy with Wedbush.
Suhail Chandy
This is Suhail for Scott. Three questions, if I may.
One, is it possible for you to kind of give us a break -- slight breakup, percent of revenue of software license versus maintenance and professional services because, obviously, these things are now kind of sizable, right? Any ballpark numbers would be very helpful.
Peter Kalan
So your question is to break out maintenance versus software license revenue because we can...
Suhail Chandy
Yes, right.
Peter Kalan
Yes, versus services.
Liz Bauer
If there are anything directionally, you can...
Peter Kalan
Yes, I think you can -- yes, I think what you can probably do is -- we don't break it out separately, but if you look at some of our past communications on this, I think the way I'd look at this is that if you look at the Intec business prior to acquisition, they were doing about $20 million to $25 million in software on an annual basis and CSG software is relatively insignificant. In their professional services, we're probably in the $85 million to $95 million range.
In CSG, we're about $10 million. So again, if we use those directionally, I think that gets you there and the balance would be the maintenance.
Suhail Chandy
Got it. Now that's helpful.
Second question if I may, again, a small housekeeping item. Can you remind us how much remains in authorized stock repurchase?
Randy Wiese
How much remains in our authorized stock repurchase?
Suhail Chandy
Yes.
Peter Kalan
Yes, approximately 4 million shares.
Suhail Chandy
Okay, great. And last question, trying to understand the puts and takes into the guidance here.
So correct me if I'm wrong, but the range is completely a reflection of the Comcast market consolidation that you've seen. But other than that, everything remains intact as far as the agreement goes with [indiscernible] And the agreement is probably going to get -- goes in for renewal some time in 2012, right?
Peter Kalan
What was the last part about what happens in 2012?
Suhail Chandy
Right, the Comcast agreement.
Peter Kalan
The Comcast agreement, yes. The Comcast agreement is, we're expecting to renew that during 2012 and so your question is, the only thing that is identified as a change in our guidance from a business perspective is those subscribers that are migrating off of our system has an impact of about $5 million.
So that's, I think, that's a fair statement that, that's the only change in the underlying business.
Liz Bauer
Yes.
Operator
And our next question comes from the line of Daniel Meron with RBC Capital Markets.
Daniel Meron
Good to see that you're executing on the targets for this quarter. A quick question on the outlook.
Peter, I think you mentioned that you won a major cable operator in North America. Can you just provide a bit more color on the side of this operator and what's the operational impact on revenue and the OpEx this year?
Peter Kalan
So for our business, Daniel, it is one of the top 10 cable providers in North America, we won't name them at this point as we work through the project with them. They are a client that has been evaluating how they get off of a legacy system and move to a new solution.
From a revenue perspective, this is a license and services engagement that we'll recognize over the life of the services implementation, the implementation period, so you're probably looking at somewhere about roughly around the 18 months for the project. From an OpEx perspective, it doesn't really have any step-up in OpEx.
It will be use by our existing services staff to do the deployment of the solution on behalf of our client.
Daniel Meron
Okay. That's very helpful up here.
And another question, you guys seem to be a little bit more conservative than a couple of other vendors in this space. Is it just the segments that you guys are operating in?
And then related to that, what kind of growth, maybe I missed it during the opening remarks, what kind of growth do you expect from cable this year versus the Mediation business on an apples-to-apples basis?
Peter Kalan
Daniel, we didn't give actually breakouts between growth, between cable and the other pieces. I guess if we were to give you some more color in our outlook, one is, we believe that our broad business between our cable and our internationals business has stabilized versus some of the early stages of what we saw of our expectations back in 2011.
But we're cautious as we look at 2012 on several facets. One is, we continue to be cautious about the worldwide economic climate, whether it's the challenges in Europe, still some of the activities in the Middle East and Northern Africa, the challenges in our own U.S.
economy that seem to be improving a little bit, but we're still cautious. We also recognize that for this business, the timing of deals when they're signed as well as the timing and speed of which we implement a project for a client could have an impact to the revenues, and so we're cautious around those aspects because we think there's a lot of behavior by clients that we can't always control but we look to try to drive.
And so those are aspects that cause us to be concerned about being overly aggressive and so we have provided a range that we feel comfortable based on the markets and the dynamics of clients as we understand them today.
Operator
[Operator Instructions] Our next question comes from the line of Sterling Auty with JPMorgan.
Sterling Auty
I just wanted to continue on that line of questioning. So even if we add back the $5 million of Comcast revenue that you lost and you're barely above flat in terms of the outlook, so is there anything -- I just want to clarify, it sounds this way, but is there anything in kind of your recurring services business that you're expecting to decline because of either the pricing or volumes or other factors?
Or is simply the flat-to-down revenue, the $5 million-plus an assumption, maybe you don’t close as much software and services revenue for 2012?
Peter Kalan
We are not expecting any other significant change to our processing business. We believe that we have stability.
But as I mentioned before, Sterling, on Daniel's question, we're cautious about how some of the spending by clients may be and new logos may be for us in 2012 and whether that has any downward pressure on our business that we experienced in 2011.
Sterling Auty
And when you look at that part of the business, if you were to split it between legacy, CSG and Intec, which of the areas that you're more concerned or you're baking in more prudence in terms of the outlook for 2012?
Peter Kalan
Clearly, a lot of the macroeconomic items we talked about have to do with software and services, whether it be the challenges in Europe, the challenges in the Middle East and Northern Africa, as well as our APAC challenges of rebuilding the sales organization and not having the speed out of the gate that we would have liked to have in that market. So we are cautious and prudent for 2012 as we look at our outlook, but we still believe that what we have is a business that's going to grow as we build out of 2012, whether it be continuing to win new clients, whether it's expanding our footprint with existing clients by bringing more products to them as we've had some early success of selling new products to them or building recurring relationships around our services engagements.
We've-- as we did with MTN South Africa and then now as we -- we are showing that we're starting to build in clients around the world, the type of business relationships that we've built in the United States in our cable and satellite markets. It just takes a while to build that.
Sterling Auty
Okay. And then Randy, looking at the quarter, if we look at kind of the overage relative to consensus, is it fair to characterize -- you had a big lift in gross margin that looks like it provided about $0.09 of the upside, is it fair to characterize almost all of that coming from the mix because of the software renewals and maybe one-time services and then maybe the remaining $0.03 coming from the lower growth for incentive comp?
Or how would you look at the upside distribution?
Randy Wiese
I think you summarized it very well. There was about $3 million.
You can look at it right on the income statement that software and services were about $3 million up over the last quarter and processing was up about $2 million. That's your $5 million that was a very, very high margin.
So I think you're summation is pretty good.
Sterling Auty
Okay, okay. And then looking at the 2012 cash flow, you mentioned kind of the return to a more normalized level, but just to walk people from kind of the walk from 2011 to 2012, what is it in the working capital that's getting back to normal?
Is it deferred revenue? What are the items that we're looking at to get back to a "normalized level"?
Randy Wiese
I think I'd say all of them are -- certainly it was several different unique items during the year. There was some AR, there was some deferred revenue, there was some payables, they all had some degree of uniqueness to them.
The way I'd look at it, for people to really get a grasp on it is look at the second half of the year performance for us, we did about $69 million of cash flow from operations and there was about a $7 million drag on working capital to get you down to the $62 million. If you multiply those by 2, that gets you pretty close to my guidance, if you also consider that the cash flow will be slightly lighter next year because of the lower operations.
So, I would say that it's just going to be normalized back to all the working capital items, Sterling.
Sterling Auty
Okay. And last question, outside of Comcast which has the renewal in 2012, are there any other major customer renewals in 2012?
And while I'm sure it's too early to tell, looking at what Amdocs did in terms of their renewal, it seemed to be pretty solid relative to some of the other discounts that they had given with like Vulcan, et cetera. Does that give you any insight as to what the thoughts might be around pricing and services, et cetera?
Peter Kalan
Well, we don't -- well, one, first to answer your first question, Sterling. We don't have any other major clients in 2012 that are up for renewal.
Comcast is our significant one. We are in discussions with Comcast about how we renew that contract going forward.
We have high confidence of the strength of the relationship we have and what that is going to bode for us for the long term of the business. I don't really look at what competitors are doing from a guidance or from their outlook of how they negotiate their contracts because we really solve problems in different ways with different solution sets.
So we'll do our best to build a long-term contract set of terms and conditions that really help facilitate Comcast's growth and their business needs and match up with what we need to do long term in driving this business.
Operator
And our next question comes from the line of Howard Smith with First Analysis.
Howard Smith
My question deals with the pro forma operating margin and directionally, where it goes in the medium term. You talked about having some additional data center expenses this year.
I'm thinking about 2013, who knows what the terms will be, around Comcast. But given history, it's unlikely that the pricing goes up in the early part or the margins go up in the early part of that contract.
So what gives you optimism or maybe you can reconcile for me, how operating margin, as we look out a couple of years, returns kind of to the 18% to 20% level?
Randy Wiese
Let's say a couple of things. First, just to remind, we're at 17%, that's still best-in-class margins, that's good.
Our aspirations are clearly to increase that going forward. We have a proven history of managing the bottom line, so we're very good at managing the business.
I've said it in the past, and I think it's still true, the way in which we achieved the increased margin is through revenue scale, growing the revenues and increasing the mix of software revenues back into our revenue base because software has a good margin on it compared to the remainder of the business. So it's really growing the business, and we plan to grow the business by -- many of the things that Peter talked about is that getting close to our clients, creating long-term recurring relationships with our clients, expanding our product portfolio and also adding new clients and new logos.
So as we can grow revenues, I think that's our best basis to really increase the margins going forward.
Peter Kalan
And Howard, just to add to Randy's comments is, when you look at what's happening with our clients, their businesses are becoming more complex. We were successful in 2011 with Comcast consuming more of our products and growing those revenues, and so we're building a good relationship where they continue to turn for us for solutions.
And we think that provides us a great position to not only create great value in the near term, but really create value for our business long term.
Operator
[Operator Instructions] We have a question from Julio Quinteros with Goldman Sachs.
Geo John
This is Geo sitting in for Julio. I just had a quick clarification on your guidance for revenues.
In your guidance range, you said you had about 85% visibility for 2012 revenue. I'm just wondering whether this guidance range includes any large transformational deals that got delayed late last year or early this year.
Peter Kalan
Well, we would expect that we will not only generate revenues from the contracts that we signed with a large cable operator in North America, but we continue to have expectations that we can win some business as we go through the year and that it will generate revenue for us. So to the extent that we have difficulties in achieving that, then that could have an impact towards the lower range of our guidance, but we have pipeline that shows deals that we believe have probability and we are looking forward to getting some of those deals signed, similar to what we signed in December with the cable operator.
Operator
[Operator Instructions] And we do not have any questions. You may continue.
Peter Kalan
All right, Diana, well for those on the call, we appreciate your support and we look forward to performing as we enter 2012 and continuing to drive bottom line results for the business, our shareholders and all stakeholders. Thank you.
Operator
Thank you. Ladies and gentlemen, that does conclude CSG Systems Fourth Quarter Conference Call.
Thank you for your participation. You may now disconnect.