8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

PURSUANT TO SECTION 13 or 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of earliest event reported): July 25, 2006

CSG SYSTEMS INTERNATIONAL, INC.

(Exact name of registrant as specified in its charter)

Delaware	0-27512	47-0783182
(State or other jurisdiction of incorporation)	(Commission File Number)	(IRS Employer Identification No.)

9555 Maroon Circle, Englewood, CO	80112
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (303) 796-2850

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 2.02. Results of Operations and Financial Condition.

The following information is furnished pursuant to Item 2.02 (Results of Operations and Financial Condition). This information shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or incorporated in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.

On July 25, 2006, CSG Systems International, Inc. issued a press release relating to the results of its operations for the three months ended June 30, 2006. A copy of such press release is attached to this Form 8-K as Exhibit 99.1 and hereby incorporated by reference.

Item 9.01. Financial Statements and Exhibits.

(d) Exhibits

99.1 Press release of CSG Systems International, Inc. dated July 25, 2006

2

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

Date: July 25, 2006	CSG SYSTEMS INTERNATIONAL, INC.
	By:	/s/ Randy R. Wiese
		Randy R. Wiese,
		Chief Financial Officer and Principal Accounting Officer

3

CSG Systems International, Inc.

Form 8-K

Exhibit Index

99.1 Press release of CSG Systems International, Inc. dated July 25, 2006

4

EX-99.1

Exhibit 99.1

NEWS RELEASE

FOR IMMEDIATE RELEASE

For more information, contact:

Liz Bauer, Senior Vice President

(303) 804-4065

E-mail: liz_bauer@csgsystems.com

CSG SYSTEMS INTERNATIONAL, INC. REPORTS

SECOND QUARTER 2006 RESULTS

CSG Exceeds Expectations: Revenues of $95.0 million;

GAAP EPS of $0.33 per share.

ENGLEWOOD, COLO. (July 25, 2006) — CSG Systems International, Inc. (Nasdaq: CSGS), a leading provider of customer care and billing solutions, today reported results for the quarter ended June 30, 2006.

Second Quarter 2006 Highlights:

• CSG exceeded its financial expectations for the second quarter of 2006, primarily as a result of its strong operating performance for the quarter. GAAP results were as follows: total revenues were $95.0 million; operating income was $21.8 million; and net income was $15.6 million, or $0.33 per diluted share.

• Cash flows from operations for the quarter were $38.7 million, which were higher than expectations primarily as a result of favorable changes in working capital.

• For the quarter, CSG repurchased approximately 241,000 shares of its common stock for $5.9 million (weighted-average price of $24.41 per share) under its stock repurchase program.

• In July, CSG’s Board of Directors authorized the repurchase of up to $350 million of the company’s outstanding common stock through a Rule 10b5-1 stock repurchase plan.

• To date, the company has 24 million cable customer accounts on its Advanced Convergent Platform (ACP), including the nation’s largest cable site, Time Warner New York City, which successfully migrated its customer base to ACP.

• In July, Mike Scott was named Chief Operating Officer. He will continue as an Executive Vice President for the company.

“We continue to execute on the objectives that we outlined a year ago,” Ed Nafus, chief executive officer and president of CSG Systems International, Inc., said. “These objectives include: focusing on our core strengths and maximizing the opportunities that are in front of us; helping our clients be successful; and driving shareholder value by creating a long-term sustainable and profitable business. We continue to migrate customer accounts to our Advanced Convergent Platform and help our clients rollout new advanced service offerings. This, in turn, allows our clients to introduce new services and drive revenues. In addition, we recently announced a stock buyback program which allows us to return value to our shareholders. We are in a strong position because we have a business model that generates strong cash flows. This provides us with the confidence that we have enough financial resources to pursue acquisitions and execute on our organic growth opportunities going forward.”

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-more-

Summary GAAP Results of Operations Information (unaudited)

(in thousands, except per share amounts and percentages):

	Three Months Ended June 30,							Six Months Ended June 30,
	2006		2005			Percent Change		2006		2005			Percent Change
Continuing operations:
Total revenues	$	95,053	$	96,850		(2	%)	$	188,013	$	190,026		(1	%)
Operating income		21,792		24,750		(12	%)		43,993		45,700		(4	%)
Income from continuing operations		15,605		15,244		2	%		31,071		27,646		12	%
Discontinued operations, net of tax		—		(6,697	)	NM			—		(10,518	)	NM
Net income		15,605		8,547		83	%		31,071		17,128		81	%
Diluted earnings (loss) per share:
Income from continuing operations	$	0.33	$	0.31		6	%	$	0.66	$	0.56		18	%
Discontinued operations, net of tax		—		(0.14	)	NM			—		(0.21	)	NM
Net income	$	0.33	$	0.17		94	%	$	0.66	$	0.35		89	%

Second Quarter 2006 Results

Total revenues for the second quarter of 2006 were $95.0 million, down two percent when compared to $96.8 million for the same period in 2005, and up two percent when compared to $93.0 million for the first quarter of 2006. The components of total revenues are as follows: (i) processing revenues for the second quarter of 2006 were $87.7 million, down one percent when compared to $88.6 million for the same period last year, and up two percent when compared to $86.4 million for the first quarter of 2006; and (ii) software, maintenance and services revenues were $7.3 million for the current quarter, an eleven percent decrease when compared to $8.2 million for the same period last year, however, a increase of twelve percent when compared to $6.6 million for the first quarter of 2006.

Income from continuing operations presented in accordance with generally accepted accounting principles (“GAAP”) for the second quarter of 2006 was $15.6 million, or $0.33 per diluted share, compared to $15.2 million, or $0.31 per diluted share, for the same period last year, and $15.5 million, or $0.33 per diluted share, for the first quarter of 2006. Income from continuing operations for the second quarter of 2006 included $1.1 million, or $0.02 per diluted share, of restructuring expenses, with no comparable amounts in the second quarter of 2005. Income from continuing operations for the second quarter of 2005 was reduced by $4.3 million, or $0.05 per diluted share, of retirement benefits for our former CEO, with no comparable amount in the current quarter.

Total customer accounts processed on CSG’s systems as of June 30, 2006 were 44.9 million, compared to 45.0 million as of March 31, 2006. To date, approximately 75% of CSG’s cable customer accounts have migrated to CSG’s Advanced Convergent Platform, or ACP. The annualized revenue per processing unit (“ARPU”) for the second quarter of 2006 was $7.79 compared to $7.66 for the first quarter of 2006. The sequential quarterly

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increase in ARPU relates primarily to the continued high usage of marketing services and customer care solutions by CSG’s clients.

Supplemental Data

The following information is provided to assist readers in further evaluating CSG’s performance (in thousands, except per share amounts):

	Three Months Ended June 30, 2006				Three Months Ended June 30, 2005
	Amount (1)		Per Diluted Share Impact (2)		Amount (1)		Per Diluted Share Impact (2)
Certain key operating income items:
Former CEO retirement benefits	$	78	$	0.00	$	4,268	$	0.05
Restructuring charges		1,141		0.02		3		0.00
Total	$	1,219	$	0.02	$	4,271	$	0.05
Certain non-cash expenses:
Depreciation	$	2,699	$	0.04	$	2,501	$	0.03
Amortization of intangible assets		3,796		0.05		3,399		0.04
Stock-based employee compensation		3,195		0.04		3,473		0.05
Total	$	9,690	$	0.13	$	9,373	$	0.12

	Six Months Ended June 30, 2006				Six Months Ended June 30, 2005
	Amount (1)		Per Diluted Share Impact (2)		Amount (1)		Per Diluted Share Impact (2)
Certain key operating income items:
Former CEO retirement benefits	$	155	$	0.00	$	8,489	$	0.11
Restructuring charges		2,290		0.03		6		0.00
Total	$	2,445	$	0.03	$	8,495	$	0.11
Certain non-cash expenses:
Depreciation	$	5,051	$	0.07	$	5,092	$	0.07
Amortization of intangible assets		7,531		0.10		6,708		0.09
Stock-based employee compensation		6,029		0.08		6,724		0.09
Total	$	18,611	$	0.25	$	18,524	$	0.25

(1) These items (on a pretax basis) are calculated in accordance with GAAP, and are reflected as part of continuing operations in the accompanying Unaudited Condensed Consolidated Statements of Income.

(2) This represents the after tax impact to income from continuing operations on a per diluted share basis using CSG’s effective income tax rates from continuing operations of 38% for the three and six months ended June 30, 2006 and 36% for the three and six months ended June 30, 2005.

Financial Condition

As of June 30, 2006, CSG had cash, cash equivalents and short-term investments of $414.3 million, compared to $384.6 million as of March 31, 2006, and $392.2 million as of December 31, 2005. Net billed accounts receivable were $96.3 million as of June 30, 2006, compared to $109.4 million as of March 31, 2006, and $104.8 million as of December 31, 2005. The sequential quarterly decrease of approximately $13 million relates to normal fluctuations in the timing of invoicing and payments between quarters. Cash flows from operations for the quarter ended June 30, 2006 were $38.7 million, compared to $22.0 million for the quarter ended March 31, 2006, and $43.3 million for

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the quarter ended June 30, 2005. The second quarter of 2006 cash flows from operations were higher than expectations as a result of favorable changes in working capital balances during the quarter, primarily related to the reduction in the accounts receivable balance mentioned above.

Stock Repurchase Program

During the second quarter of 2006, CSG repurchased approximately 241,000 shares of its common stock at a total purchase price of $5.9 million (a weighted-average price of $24.41 per share). Including these shares, the total shares repurchased under CSG’s stock repurchase program since its inception in August 1999 is 14.0 million shares, at a total repurchase price of $346.5 million (a weighted-average price of $24.68 per share).

In July, CSG announced that its Board of Directors authorized the repurchase of up to $350 million of the company’s outstanding common stock through a new Rule 10b5-1 stock repurchase plan. In conjunction with this action, the Board approved a 10 million share increase in the number of shares authorized for repurchase under CSG’s stock repurchase program, bringing the total number of authorized shares under the program to 30 million. As a result, the remaining number of shares authorized for repurchase under the stock repurchase program is 16.0 million shares. CSG expects to begin repurchasing shares under its new Rule 10b5-1 plan in early August 2006, and expects to complete the $350 million of stock repurchases within 12 to 15 months.

Remaining 2006 Financial Guidance

“The company continues to execute on its financial objectives,” Randy Wiese, chief financial officer, said. “Based on our performance during the first six months of the year, we are raising the lower end of our full-year revenue guidance from $371 million to $377 million. In addition, based on our expected operating performance for the year, and considering the impact of our recently announced $350 million stock repurchase plan, we believe our full year income from continuing operations will now range between $1.34 and $1.38 per diluted share.”

CSG’s financial guidance for continuing operations for the third and fourth quarter 2006, and for the full year 2006 is as follows (in millions, except for per share amounts and percentages):

	Third Quarter		Fourth Quarter		Full Year
Revenues	$95 - $97		$94 - $96		$377 - $381
Operating Margins	23	%	23	%	23	%
Earnings per Diluted Share	$0.34 - $0.36		$0.34 -$0.36		$1.34 - $1.38
Income Tax Rate	34% - 35%		34% - 35%		36% - 37%
Average Diluted Shares Outstanding	46.6		43.9		46.3
Cash Flows from Operations	$25 - $27		$24 - $26		$110 -$114
Capital Expenditures	$2 - $3		$2 - $3		$8 - $10

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There are certain non-cash items included in CSG’s third and fourth quarter 2006 and full year 2006 GAAP earnings per diluted share guidance noted above. The following table outlines the expected impact of these items, and is provided to assist readers in further evaluating CSG’s expected financial performance for these periods (in thousands, except per share amounts):

	Third Quarter		Fourth Quarter		Full Year
Certain non-cash expenses (3):
Depreciation	$	2,500	$	2,400	$	10,000
Amortization of intangible assets		4,100		4,200		15,800
Stock-based employee compensation		3,000		2,900		11,900
Total	$	9,600	$	9,500	$	37,700
Per diluted share impact (4)	$	0.13	$	0.14	$	0.52

(3) These items (on a pretax basis) are calculated in accordance with GAAP.

(4) This represents the after tax impact to income from continuing operations on a per diluted share basis using CSG’s estimated effective income tax rates from continuing operations as noted above.

Conference Call

CSG will host a one-hour conference call on Tuesday, July 25, at 5 p.m. EDT, to discuss CSG’s second quarter results. The call will be carried live and archived on the Internet. A link to the conference call is available at www.csgsystems.com.

Additional Information

For additional information about CSG, please visit CSG’s web site at www.csgsystems.com. Additional information can be found in the Investor Relations section of the web site.

About CSG Systems International

Headquartered in Englewood, Colorado, CSG Systems International (Nasdaq: CSGS) is a leading provider of outsourced billing, customer care and print and mail solutions and services supporting the North American cable and direct broadcast satellite markets. CSG’s solutions support some of the world’s largest and most innovative providers of bundled multi-channel video, Internet, voice and IP-based services. CSG’s unique combination of solutions, services and expertise ensure that cable and satellite operators can continue to rapidly launch new service offerings, improve operational efficiencies and deliver a high-quality customer experience in a competitive and ever-changing marketplace. CSG is a S&P Midcap 400 company. For more information, visit our website at www.csgsystems.com.

Safe-Harbor Statement

This news release contains forward-looking statements as defined under the Securities Act of 1933, as amended, that are based on assumptions about a number of important factors and involve risks and uncertainties that could cause actual results to differ materially from what appears in this news release. These factors include, but are not limited to: 1) CSG’s ability to continue to perform satisfactorily and maintain good customer relations with its five largest clients, Comcast Corporation, Echostar Communications, Time Warner, Inc., Charter Communications and Adelphia Communications, which combined make up approximately 70% of CSG’s revenues; 2) the continued acceptance of CSG Advanced Convergent Platform and its related products and services; 3) CSG’s ability to enhance current products and develop new technology that will retain existing clients and capture new market share; 4) significant forays into new markets, which may prove costly and unprofitable; 5) the degree to which CSG’s expectations of market penetration and consumer acceptance of advanced IP services prove true — and even if realized, CSG’s ability to meet the billing and customer care needs of those markets; 6) client consolidation, which has decreased the number of potential buyers for many of CSG’s products and services; 7) CSG’s ability to renew contracts and sell additional products and services to existing and new clients; 8) CSG’s ability to successfully deliver on lengthy and/or complex implementation projects, which by their nature, carry much

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more risk, and 9) CSG’s ability to successfully integrate and manage acquired businesses or assets in order to achieve the expected strategic, operating and financial goals established for such acquisitions. This list is not exhaustive and readers are encouraged to review the additional risks and important factors described in CSG’s reports on Forms 10-K and 10-Q and other filings made with the SEC.

FINANCIALS TO FOLLOW

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CSG SYSTEMS INTERNATIONAL, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS-UNAUDITED

(in thousands, except share and per share amounts)

	June 30, 2006			December 31, 2005
ASSETS
Current assets:
Cash and cash equivalents	$	343,957		$	346,113
Short-term investments		70,296			46,111
Total cash, cash equivalents and short-term investments		414,253			392,224
Trade accounts receivable-
Billed, net of allowance of $1,059 and $1,324		96,345			104,812
Unbilled and other		5,854			6,660
Deferred income taxes		8,994			9,565
Income taxes receivable		—			5,032
Other current assets		6,471			17,145
Total current assets		531,917			535,438
Property and equipment, net of depreciation of $65,232 and $61,333		19,941			21,143
Software, net of amortization of $32,363 and $31,945		8,351			—
Goodwill		9,228			623
Client contracts, net of amortization of $75,565 and $68,634		36,402			41,661
Deferred income taxes		28,865			33,275
Other assets		7,957			6,236
Total assets	$	642,661		$	638,376
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Client deposits	$	24,034		$	19,651
Trade accounts payable		12,420			17,306
Accrued employee compensation		16,788			32,447
Deferred revenue		13,523			9,575
Income taxes payable		5,549			—
Other current liabilities		11,807			15,783
Total current liabilities		84,121			94,762
Non-current liabilities:
Long-term debt		230,000			230,000
Deferred revenue		8,545			8,943
Other non-current liabilities		2,646			6,341
Total non-current liabilities		241,191			245,284
Total liabilities		325,312			340,046
Stockholders’ equity:
Preferred stock, par value $.01 per share; 10,000,000 shares authorized; zero shares issued and outstanding		—			—
Common stock, par value $.01 per share; 100,000,000 shares authorized; 47,751,055 shares and 47,886,480 shares outstanding		609			601
Additional paid-in capital		325,624			316,764
Treasury stock, at cost, 13,199,996 shares and 12,290,485 shares		(317,860	)		(296,976	)
Accumulated other comprehensive income:
Unrealized gain on short-term investments, net of tax		35			71
Accumulated earnings		308,941			277,870
Total stockholders’ equity		317,349			298,330
Total liabilities and stockholders’ equity	$	642,661		$	638,376

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CSG SYSTEMS INTERNATIONAL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME-UNAUDITED

(in thousands, except per share amounts)

	Three Months Ended						Six Months Ended
	June 30, 2006			June 30, 2005			June 30, 2006			June 30, 2005
Revenues:
Processing and related services	$	87,715		$	88,631		$	174,136		$	171,912
Software, maintenance and services		7,338			8,219			13,877			18,114
Total revenues		95,053			96,850			188,013			190,026
Cost of revenues:
Processing and related services		41,686			41,691			84,590			83,674
Software, maintenance and services		5,210			5,003			9,726			10,046
Total cost of revenues		46,896			46,694			94,316			93,720
Gross margin (exclusive of depreciation)		48,157			50,156			93,697			96,306
Operating expenses:
Research and development		10,874			7,857			20,775			15,856
Selling, general and administrative		11,651			15,045			21,588			29,652
Depreciation		2,699			2,501			5,051			5,092
Restructuring charges		1,141			3			2,290			6
Total operating expenses		26,365			25,406			49,704			50,606
Operating income		21,792			24,750			43,993			45,700
Other income (expense):
Interest expense		(1,903	)		(1,759	)		(3,788	)		(3,879	)
Interest and investment income, net		5,277			822			9,947			1,371
Other, net		3			5			(52	)		3
Total other		3,377			(932	)		6,107			(2,505	)
Income from continuing operations before income taxes		25,169			23,818			50,100			43,195
Income tax provision		(9,564	)		(8,574	)		(19,029	)		(15,549	)
Income from continuing operations		15,605			15,244			31,071			27,646
Discontinued operations:
Loss from discontinued operations		—			(9,806	)		—			(15,117	)
Income tax benefit		—			3,109			—			4,599
Discontinued operations, net of tax		—			(6,697	)		—			(10,518	)
Net income	$	15,605		$	8,547		$	31,071		$	17,128
Basic earnings (loss) per common share:
Income from continuing operations	$	0.34		$	0.32		$	0.67		$	0.57
Discontinued operations, net of tax		—			(0.14	)		—			(0.22	)
Net income	$	0.34		$	0.18		$	0.67		$	0.35
Diluted earnings (loss) per common share:
Income from continuing operations	$	0.33		$	0.31		$	0.66		$	0.56
Discontinued operations, net of tax		—			(0.14	)		—			(0.21	)
Net income	$	0.33		$	0.17		$	0.66		$	0.35
Weighted-average shares outstanding:
Basic		46,527			48,151			46,714			48,598
Diluted		47,121			48,881			47,265			49,233

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CSG SYSTEMS INTERNATIONAL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS-UNAUDITED

(in thousands)

	Six Months Ended
	June 30, 2006			June 30, 2005
Cash flows from operating activities:
Net income	$	31,071		$	17,128
Adjustments to reconcile net income to net cash provided by operating activities -
Depreciation		5,051			7,518
Amortization		8,126			14,372
Restructuring charge for abandonment of facilities and impairment of assets		401			3,492
Gain on short-term investments		(209	)		(170	)
Deferred income taxes		5,849			3,788
Excess tax benefits from stock-based compensation awards		(1,088	)		1,073
Stock-based employee compensation		6,029			8,650
Changes in operating assets and liabilities:
Trade accounts and other receivables, net		11,081			5,787
Other current and non-current assets		(2,699	)		(2,692	)
Income taxes payable/receivable		11,666			(398	)
Accounts payable and accrued liabilities		(17,164	)		2,916
Deferred revenue		2,615			684
Net cash provided by operating activities		60,729			62,148
Cash flows from investing activities:
Net proceeds (payments) from the disposition of discontinued operations		(436	)		—
Purchases of property and equipment		(3,525	)		(6,458	)
Proceeds from sale of aircraft held for sale		7,376			—
Purchases of short-term investments		(97,695	)		(31,535	)
Proceeds from sale/maturity of short-term investments		73,700			21,538
Acquisition of business, net of cash acquired		(20,777	)		(297	)
Acquisition of and investments in client contracts		(3,002	)		(3,964	)
Net cash used in investing activities		(44,359	)		(20,716	)
Cash flows from financing activities:
Proceeds from issuance of common stock		3,154			1,683
Repurchase of common stock		(22,287	)		(43,816	)
Payments on acquired equipment financing		(481	)		—
Excess tax benefits from stock-based compensation awards		1,088			—
Payments of deferred financing costs		—			(87	)
Net cash used in financing activities		(18,526	)		(42,220	)
Effect of exchange rate fluctuations on cash		—			(1,976	)
Net decrease in cash and cash equivalents		(2,156	)		(2,764	)
Cash and cash equivalents, beginning of period		346,113			133,551
Cash and cash equivalents, end of period	$	343,957		$	130,787
Supplemental disclosures of cash flow information:
Cash paid during the period for -
Interest	$	3,067		$	3,063
Income taxes		1,518			9,405