JP Morgan Comments On CSG Systems Following Recent Earnings Release

CSG Systems CSGS reported Revenue/ Non-GAAP EPS of $183.1M/$0.54 compared to JP Morgan's estimates of $181.3M/$0.54 and consensus of $186.4M/$0.54. The quarter had two months of the new pricing for Dish. Dish was 13% of total revenue or about $23.8M down from $26.4M last quarter. JP Morgan expected a 10-15% pricing decrease impact to the year and it thinks this quarter is tracking that. CSG Systems commented on three issues that they did not foresee with Intec and hence reduced their full year guidance from $757-772M to $757-765M. The quality of the Intec pipeline in some regions was not what they had expected and may have not been mature enough to be closed. Civil unrest in the Middle East and Africa has disrupted opportunities there. CSG Systems had expected to close a couple of Intec large billing replacement deals in the 1H of the year to contribute to the back half. Company has said that Intec's operating margins are lower than CSG's and that there are minimal cost synergies. On top of this, JP Morgan believes CSGS will have to invest in sales, marketing and partnerships in some areas of Intec's business to get it to the right level. JP Morgan has a $23.50 PT and Neutral rating on CSGS CSGS closed Tuesday at $21