CSG SYSTEMS INTERNATIONAL INC, 10-Q, 1998-11-16

CSG SYSTEMS INTERNATIONAL INC
10-Q, 1998-11-16
COMPUTER PROCESSING & DATA PREPARATION

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<PAGE>

FORM 10-Q
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 1998

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the transition period from _______________ to _________________

Commission file number 0-27512

CSG SYSTEMS INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)

DELAWARE 47-0783182
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)

7887 EAST BELLEVIEW, SUITE 1000
ENGLEWOOD, COLORADO 80111
(Address of principal executive offices, including zip code)

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

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days.

YES X NO
--- ---

Shares of common stock outstanding at November 10, 1998: 25,689,881
<PAGE>

CSG SYSTEMS INTERNATIONAL, INC.

FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 30, 1998

INDEX
<TABLE>
<CAPTION>

PAGE NO.
----------
<S> <C> <C>

Part I - FINANCIAL INFORMATION

Item 1. Condensed Consolidated Balance Sheets as of September 30, 1998
and December 31, 1997.............................................. 3

Condensed Consolidated Statements of Income for the Three and Nine
Months Ended September 30, 1998 and 1997........................... 4

Condensed Consolidated Statements of Cash Flows for the Nine Months
Ended September 30, 1998 and 1997.................................. 5

Notes to Condensed Consolidated Financial Statements............... 6

Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.............................................. 8

Part II - OTHER INFORMATION

Item 6. Exhibits and Reports on Form 8-K................................... 18

Signatures......................................................... 19

Index to Exhibits.................................................. 20
</TABLE>

2
<PAGE>

CSG SYSTEMS INTERNATIONAL, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share amounts)

<TABLE>
<CAPTION>
September 30, December 31,
1998 1997
-------------- -------------
ASSETS (unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents................................................................. $ 36,204 $ 20,417
Accounts receivable-
Trade-
Billed, net of allowance of $1,986 and $1,394........................................ 58,342 44,678
Unbilled............................................................................. 1,788 2,080
Other................................................................................ 1,514 1,400
Deferred income taxes..................................................................... 458 443
Other current assets...................................................................... 3,046 2,664
-------------- -------------
Total current assets..................................................................... 101,352 71,682
-------------- -------------
Property and equipment, net of depreciation of $21,929 and $16,343........................ 23,089 17,157
Software, net of amortization of $34,860 and $34,104...................................... 9,957 1,959
Noncompete agreements and goodwill, net of amortization of $23,564 and $19,490............ 8,997 13,938
Client contracts and related intangibles, net of amortization of $16,305 and $12,822...... 61,157 64,640
Deferred income taxes..................................................................... 14,182 6,909
Other assets.............................................................................. 2,651 3,064
-------------- -------------
Total assets............................................................................ $ 221,385 $ 179,349
============== =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt...................................................... $ 15,750 $ 6,750
Customer deposits......................................................................... 9,476 7,002
Trade accounts payable.................................................................... 10,203 11,795
Accrued liabilities....................................................................... 20,709 11,023
Deferred revenue.......................................................................... 18,235 10,619
Conversion incentive payments............................................................. 23,981 17,768
Accrued income taxes...................................................................... 6,522 3,207
-------------- -------------
Total current liabilities................................................................ 104,876 68,164
-------------- -------------
Non-current liabilities:
Long-term debt, net of current maturities................................................. 114,750 128,250
Deferred revenue.......................................................................... 740 7,789
Conversion incentive payments............................................................. - 8,232
-------------- -------------
Total non-current liabilities............................................................ 115,490 144,271
-------------- -------------
Stockholders' equity (deficit):
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;
25,649,968 shares and 25,479,968 shares outstanding...................................... 257 255
Common stock warrants; 1,500,000 warrants issued and outstanding......................... 26,145 26,145
Additional paid-in capital................................................................ 117,763 112,870
Deferred employee compensation............................................................ (402) (636)
Notes receivable from employee stockholders............................................... (489) (685)
Cumulative translation adjustments........................................................ 165 (1)
Treasury stock, at cost, 33,000 shares and zero shares.................................... (97) -
Accumulated deficit....................................................................... (142,323) (171,034)
-------------- -------------
Total stockholders' equity (deficit)..................................................... 1,019 (33,086)
-------------- -------------
Total liabilities and stockholders' equity (deficit)..................................... $ 221,385 $ 179,349
============== =============
</TABLE>

The accompanying notes are an integral part of these condensed consolidated
financial statements.

3
<PAGE>

CSG SYSTEMS INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME - UNAUDITED
(in thousands, except share and per share amounts)

<TABLE>
<CAPTION>
Three months ended Nine months ended
----------------------------- ---------------------------
September 30, September 30, September 30, September 30,
1998 1997 1998 1997
-------------- -------------- -------------- ------------
<S> <C> <C> <C> <C>
Total revenues....................................................... $ 63,461 $ 43,278 $ 167,013 $ 122,890
Expenses:
Cost of revenues:
Direct costs...................................................... 27,302 18,128 73,300 54,962
Amortization of acquired software................................. - 2,892 - 8,668
Amortization of client contracts and related intangibles.......... 1,402 1,023 3,646 3,069
-------------- -------------- -------------- ------------
Total cost of revenues........................................ 28,704 22,043 76,946 66,699
-------------- -------------- -------------- ------------
Gross margin........................................................ 34,757 21,235 90,067 56,191
-------------- -------------- -------------- ------------
Operating expenses:
Research and development.......................................... 6,972 5,677 20,278 16,331
Selling and marketing............................................. 3,004 2,776 8,040 7,877
General and administrative:
General and administrative....................................... 5,841 5,394 17,059 14,181
Amortization of noncompete agreements and goodwill............... 1,346 1,731 4,034 5,194
Stock-based employee compensation................................ 74 86 222 373
Depreciation...................................................... 2,064 1,831 5,894 5,051
-------------- -------------- -------------- ------------
Total operating expenses...................................... 19,301 17,495 55,527 49,007
-------------- -------------- -------------- ------------
Operating income..................................................... 15,456 3,740 34,540 7,184
-------------- -------------- -------------- ------------
Other income (expense):
Interest expense.................................................. (2,473) (938) (7,481) (2,195)
Interest income................................................... 617 290 1,750 667
Other............................................................. (24) 21 (98) 352
-------------- -------------- -------------- ------------
Total other................................................... (1,880) (627) (5,829) (1,176)
-------------- -------------- -------------- ------------
Income before income taxes, extraordinary item and
discontinued operations........................................... 13,576 3,113 28,711 6,008
Income tax (provision) benefit...................................... - - - -
-------------- -------------- -------------- ------------
Income before extraordinary item and discontinued operations......... 13,576 3,113 28,711 6,008
Extraordinary loss from early extinguishment of debt................ - (577) - (577)
-------------- -------------- -------------- ------------
Income from continuing operations.................................... 13,576 2,536 28,711 5,431
Gain from disposition of discontinued operations.................... - 7,922 - 7,922
-------------- -------------- -------------- ------------
Net income........................................................... $ 13,576 $ 10,458 $ 28,711 $ 13,353
============== ============== ============== ============

Basic net income per common share:
Income before extraordinary item and discontinued operations........ $ 0.53 $ 0.12 $ 1.12 $ 0.24
Extraordinary loss from early extinguishment of debt................ - (0.02) - (0.02)
Gain from disposition of discontinued operations.................... - 0.31 - 0.31
-------------- -------------- -------------- ------------
Net income ......................................................... $ 0.53 $ 0.41 $ 1.12 $ 0.53
============== ============== ============== ============
Weighted average common shares...................................... 25,626,249 25,509,522 25,567,054 25,497,146
============== ============== ============== ============

Diluted net income per common share:
Income before extraordinary item and discontinued operations........ $ 0.51 $ 0.12 $1.09 $ 0.23
Extraordinary loss from early extinguishment of debt................ - (0.02) - (0.02)
Gain from disposition of discontinued operations.................... - 0.30 - 0.31
-------------- -------------- -------------- ------------
Net income ......................................................... $ 0.51 $ 0.40 $ 1.09 $ 0.52
============== ============== ============== ============
Weighted average common shares...................................... 26,415,533 26,285,581 26,401,348 25,958,546
============== ============== ============== ============
</TABLE>

The accompanying notes are an integral part of these condensed consolidated
financial statements.

4
<PAGE>

CSG SYSTEMS INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - UNAUDITED
(in thousands)

<TABLE>
<CAPTION>
Nine months ended
----------------------------
September 30, September 30,
1998 1997
------------- -------------
<S> <C> <C>
Cash flows from operating activities:
Net income...................................................................... $ 28,711 $ 13,353
Adjustments to reconcile net income to net cash provided by operating activities-
Depreciation................................................................... 5,894 5,051
Amortization................................................................... 9,274 17,720
Deferred income taxes.......................................................... (4,980) (3,817)
Stock-based employee compensation.............................................. 222 373
Extraordinary loss from early extinguishment of debt........................... - 577
Gain from disposition of discontinued operations............................... - (7,922)
Changes in operating assets and liabilities:
Trade accounts and other receivables, net.................................... (13,351) (7,411)
Other current and noncurrent assets.......................................... (857) (819)
Accounts payable and other liabilities....................................... 12,934 3,501
------------- -------------
Net cash provided by operating activities.................................. 37,847 20,606
------------- -------------
Cash flows from investing activities:
Purchases of property and equipment, net......................................... (11,781) (7,892)
Acquisition of assets............................................................ (5,974) (106,226)
Additions to software............................................................ (1,410) (9,796)
Proceeds from disposition of discontinued operations............................. - 8,654
Payments of conversion incentive payments........................................ (2,019) -
------------- -------------
Net cash used in investing activities...................................... (21,184) (115,260)
------------- -------------
Cash flows from financing activities:
Proceeds from issuance of common stock........................................... 3,499 623
Repurchase of common stock....................................................... (2) (24)
Payments on notes receivable from employee stockholders.......................... 50 -
Proceeds from long-term debt..................................................... - 150,000
Payments on long-term debt....................................................... (4,500) (32,500)
Payment of deferred financing costs.............................................. - (3,181)
------------- -------------
Net cash provided by (used in) financing activities........................ (953) 114,918
------------- -------------
Effect of exchange rate fluctuations on cash...................................... 77 (450)
------------- -------------
Net increase in cash and cash equivalents......................................... 15,787 19,814

Cash and cash equivalents, beginning of period.................................... 20,417 6,134
------------- -------------
Cash and cash equivalents, end of period.......................................... $ 36,204 $ 25,948
============= =============
Supplemental disclosures of cash flow information:
Cash paid during the period for-
Interest...................................................................... $ 6,756 $ 1,878
Income taxes.................................................................. $ 1,591 $ 2,678
</TABLE>

Supplemental disclosure of noncash investing and financing activities:

During September 1997, the Company granted 1.5 million common stock warrants,
valued at $26.1 million, and recorded a liability for $26.0 million for
conversion incentive payments as part of the purchase price for the SUMMITrak
asset acquisition.

During July 1998, the Company assumed liabilities of $1.3 million as part of
the purchase price for the USTATS asset acquisition.

The accompanying notes are an integral part
of these condensed consolidated financial statements.

5
<PAGE>

CSG SYSTEMS INTERNATIONAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. GENERAL

The condensed consolidated financial statements at September 30, 1998, and for
the three and nine months then ended are unaudited and reflect all adjustments
(consisting only of normal recurring adjustments) which are, in the opinion of
management, necessary for a fair presentation of the financial position and
operating results for the interim period. The condensed consolidated financial
statements should be read in conjunction with the consolidated financial
statements and notes thereto, together with management's discussion and analysis
of financial condition and results of operations, contained in the Company's
Annual Report on Form 10-K for the year ended December 31, 1997, filed with the
Securities and Exchange Commission. The results of operations for the three and
nine months ended September 30, 1998, are not necessarily indicative of the
results for the entire year ending December 31, 1998.

2. NET INCOME PER COMMON SHARE

Basic net income per common share is computed by dividing income available to
common stockholders by the weighted average number of common shares outstanding
during the period. Diluted net income per common share is consistent with the
calculation of basic net income per common share while giving effect to dilutive
potential common shares outstanding during the period. For all periods
presented, dilutive potential common shares consisted entirely of stock options.

The dilutive potential common shares from Common Stock Warrants are excluded
from the diluted net income per common share calculation as the events necessary
to allow the exercise of the warrants had not been satisfied as of September 30,
1998 or September 30, 1997. For the three and nine month periods ended
September 30, 1998 and 1997, the weighted average diluted potential common
shares from Common Stock Warrants excluded from diluted net income per common
share are as follows:

For the Three For the Nine
Months Ended Months Ended
------------- ------------
September 30, 1998.................. 667,493 650,652
September 30, 1997.................. 38,573 12,858

3. COMPREHENSIVE INCOME

In 1998, the Company adopted Statement of Financial Accounting Standards No.
130, "Reporting Comprehensive Income", which establishes standards for reporting
and display of comprehensive income and its components in a financial statement
for the period in which they are recognized. The Company's comprehensive income
was as follows (in thousands):

Three months ended Nine months ended
September 30, September 30,
------------------- ------------------
1998 1997 1998 1997
-------- --------- -------- --------
Net income $ 13,576 $ 10,458 $ 28,711 $ 13,353
Foreign currency translation
adjustments 97 (200) 166 (704)
-------- --------- -------- --------
Comprehensive income $ 13,673 $ 10,258 $ 28,877 $ 12,649
======== ========= ======== ========

6
<PAGE>

4. LEGAL PROCEEDINGS

In October 1996, a former senior vice president of CSG Systems filed a lawsuit
against the Company and certain of its officers in the District Court of
Arapahoe County, Colorado. The suit claimed that certain amendments to stock
agreements between the plaintiff and the Company were unenforceable, and that
the plaintiff's rights were otherwise violated in connection with those
amendments. The plaintiff was seeking damages of approximately $2.0 million,
and in addition, sought to have such damages trebled under certain Colorado
statutes that the plaintiff claimed were applicable. In June 1998, the Company
settled this matter, the effect of which was not material to the Company.

5. ASSET ACQUISITION

6. RECLASSIFICATION OF PRIOR PERIOD AMOUNTS

Certain December 31, 1997 amounts have been reclassified to conform with the
September 30, 1998 presentation.

7. ACCOUNTING PRONOUNCEMENTS ISSUED BUT NOT YET EFFECTIVE

In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and for Hedging Activities" (SFAS No. 133). The Statement establishes
accounting and reporting standards requiring every derivative instrument, as
defined, to be recorded in the balance sheet as either an asset or liability
measured at its fair value. The Statement requires that changes in the
derivative's fair value be recognized currently in earnings unless specific
hedge accounting criteria are met. SFAS No. 133 is effective for fiscal
quarters for all fiscal years beginning after June 15, 1999. Adoption of the
Statement is not expected to have a significant effect on the Company's
consolidated financial statements.

<PAGE>

CSG SYSTEMS INTERNATIONAL, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS

Results of Operations
- ---------------------

The following table sets forth certain financial data and the percentage of
total revenues of the Company for the periods indicated (in thousands):

<TABLE>
<CAPTION>
Three months ended September 30, Nine months ended September 30,
---------------------------------------- -------------------------------------------
1998 1997 1998 1997
----------------- ------------------ -------------------- ------------------
% of % of % of % of
Amount Revenue Amount Revenue Amount Revenue Amount Revenue
------- ------- ------- ------- -------- ------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Total revenues......................... $63,461 100.0% $43,278 100.0% $167,013 100.0% $122,890 100.0%

Expenses:
Cost of revenues:
Direct costs........................ 27,302 43.0 18,128 41.9 73,300 43.9 54,962 44.7
Amortization of acquired software... - - 2,892 6.7 - - 8,668 7.1
Amortization of client contracts
and related intangibles............ 1,402 2.2 1,023 2.4 3,646 2.2 3,069 2.5
------- ------- ------- ------- -------- ------- -------- -------
Total cost of revenues........... 28,704 45.2 22,043 51.0 76,946 46.1 66,699 54.3
------- ------- ------- ------- -------- ------- -------- -------
Gross margin......................... 34,757 54.8 21,235 49.0 90,067 53.9 56,191 45.7
------- ------- ------- ------- -------- ------- -------- -------
Operating expenses:
Research and development............ 6,972 11.0 5,677 13.1 20,278 12.2 16,331 13.3
Selling and marketing............... 3,004 4.7 2,776 6.4 8,040 4.8 7,877 6.4
General and administrative:
General and administrative ........ 5,841 9.2 5,394 12.5 17,059 10.2 14,181 11.6
Amortization of noncompete
agreements and goodwill........... 1,346 2.1 1,731 4.0 4,034 2.4 5,194 4.2
Stock-based employee compensation.. 74 0.1 86 0.2 222 0.1 373 0.3
Depreciation........................ 2,064 3.3 1,831 4.2 5,894 3.5 5,051 4.1
------- ------- ------- ------- -------- ------- -------- -------
Total operating expenses......... 19,301 30.4 17,495 40.4 55,527 33.2 49,007 39.9
------- ------- ------- ------- -------- ------- -------- -------
Operating income....................... 15,456 24.4 3,740 8.6 34,540 20.7 7,184 5.8
------- ------- ------- ------- -------- ------- -------- -------

Other income (expense):
Interest expense.................... (2,473) (3.9) (938) (2.1) (7,481) (4.5) (2,195) (1.8)
Interest income..................... 617 0.9 290 0.7 1,750 1.0 667 0.6
Other............................... (24) - 21 - (98) - 352 0.3
------- ------- ------- ------- -------- ------- -------- -------
Total other...................... (1,880) (3.0) (627) (1.4) (5,829) (3.5) (1,176) (0.9)
------- ------- ------- ------- -------- ------- -------- -------
Income before income taxes,
extraordinary item and
discontinued operations............ 13,576 21.4 3,113 7.2 28,711 17.2 6,008 4.9
Income tax (provision) benefit...... - - - - - - - -
------- ------- ------- ------- -------- ------- -------- -------
Income before extraordinary
item and discontinued
operations......................... 13,576 21.4 3,113 7.2 28,711 17.2 6,008 4.9
Extraordinary loss from early
extinguishment of debt............. - - (577) (1.3) - - (577) (0.5)
------- ------- ------- ------- -------- ------- -------- -------
Income from continuing operations...... 13,576 21.4 2,536 5.9 28,711 17.2 5,431 4.4
Gain from disposition of
discontinued operations............ - - 7,922 18.3 - - 7,922 6.5
------- ------- ------- ------- -------- ------- -------- -------
Net income............................. $13,576 21.4% $10,458 24.2% $ 28,711 17.2% $ 13,353 10.9%
======= ======= ======= ======= ======== ======= ======== =======
</TABLE>

<PAGE>

THREE MONTHS ENDED SEPTEMBER 30, 1998 COMPARED TO THREE MONTHS ENDED
SEPTEMBER 30, 1997

Revenues. Total revenues for the three months ended September 30, 1998,
increased 46.6% to $63.5 million, from $43.3 million for the three months ended
September 30, 1997, due to increased revenues from the Company's processing and
related services, and increased revenues from software and related product sales
and professional consulting services.

Revenues from processing and related services for the three months ended
September 30, 1998, increased 51.2% to $49.6 million, from $32.8 million for the
three months ended September 30, 1997. Of the total increase in revenue,
approximately 60% resulted from an increase in the number of customers of the
Company's clients which were serviced by the Company and approximately 40% was
due to increased revenue per customer. Customers serviced as of September 30,
1998, and 1997, respectively, were 27.2 million and 20.7 million, an increase of
31.6%. The increase in the number of customers serviced was due to the
conversion of additional customers by new and existing clients to the Company's
systems, and internal customer growth experienced by existing clients. From
July 1, 1998 through September 30, 1998, the Company converted and processed
approximately 1.9 million additional customers on its systems. Revenue per
customer increased due primarily to (i) the 15-year Tele-Communications, Inc.
(TCI) processing contract (the TCI Contract) executed in September 1997, (ii)
increased usage of ancillary services by clients, and (iii) price increases
included in client contracts.

Revenues from software and related product sales and professional consulting
services for the three months ended September 30, 1998, increased 32.3% to $13.8
million, from $10.5 million for the three months ended September 30, 1997. This
increase relates primarily to the continued growth of the Company's software
products and related product sales.

Amortization of Acquired Software. Amortization of acquired software decreased
to zero for the three months ended September 30, 1998, from $2.9 million for the
three months ended September 30, 1997, due to acquired software from the
Company's leveraged buy-out of CSG Systems, Inc. (the Acquisition) in November
1994 becoming fully amortized as of November 30, 1997.

Amortization of Client Contracts and Related Intangibles. Amortization of
client contracts and related intangibles for the three months ended September
30, 1998, increased 37.0% to $1.4 million, from $1.0 million for the three
months ended September 30, 1997. The increase in expense is due primarily to
amortization of the value assigned to the TCI Contract, offset by a decrease due
to client conversion methodologies from the Acquisition becoming fully amortized
as of November 30, 1997.

Gross Margin. Gross margin for the three months ended September 30, 1998,
increased 63.7% to $34.8 million, from $21.2 million for the three months ended
September 30, 1997, due primarily to revenue growth. The gross margin
percentage increased to 54.8% for the three months ended September 30, 1998,
compared to 49.0% for the three months ended September 30, 1997. The overall
increase in the gross margin percentage is due primarily to the increase in
revenues while the combined amount of amortization of acquired software and
amortization of client contracts and related intangibles decreased.

Research and Development Expense. Research and development (R&D) expense for
the three months ended September 30, 1998, increased 22.8% to $7.0 million, from
$5.7 million for the three months ended September 30, 1997. As a percentage of
total revenues, R&D expense decreased to 11.0% for the three months ended
September 30, 1998, from 13.1% for the three months ended September 30, 1997.

During the three months ended September 30, 1997, the Company capitalized
software development costs of approximately $2.9 million, which consisted of
$2.8 million of internal development costs and $0.1 million of purchased
software. The Company did not capitalize any software development costs during
the three months ended September 30, 1998. As a result, total R&D development
expenditures (i.e., the total R&D costs expensed, plus the capitalized
development costs) for the three months ended September 30, 1998 and 1997, were
$7.0 million, or 11.0% of total revenues, and $8.5 million, or 19.6% of total
revenues, respectively. The
9

<PAGE>

overall decrease in the R&D expenditures between periods is due primarily to
effective control of development costs, primarily the reduction of third-party,
contracted programming services.

Selling and Marketing Expense. Selling and marketing (S&M) expense for the
three months ended September 30, 1998, increased 8.2% to $3.0 million, from $2.8
million for the three months ended September 30, 1997. As a percentage of total
revenues, S&M expense decreased to 4.7% for the three months ended September 30,
1998, from 6.4% for the three months ended September 30, 1997. The overall
decrease in S&M expenses as a percentage of total revenues is due primarily to
increased revenues, while controlling S&M costs.

General and Administrative Expense. General and administrative (G&A) expense
for the three months ended September 30, 1998, increased 8.3% to $5.8 million,
from $5.4 million for the three months ended September 30, 1997. As a
percentage of total revenues, G&A expense decreased to 9.2% for the three months
ended September 30, 1998, from 12.5% for the three months ended September 30,
1997. The increase in G&A expenses relates primarily to the continued expansion
of the Company's administrative staff and other administrative costs to support
the Company's overall growth. The decrease in G&A expenses as a percentage of
total revenues is due primarily to increased revenues, while controlling G&A
costs.

Amortization of Noncompete Agreements and Goodwill. Amortization of noncompete
agreements and goodwill for the three months ended September 30, 1998, decreased
22.2%, to $1.3 million, from $1.7 million for the three months ended September
30, 1997. The decrease in amortization expense is due primarily to a write-down
of certain intangible assets in the fourth quarter of 1997.

Depreciation Expense. Depreciation expense for the three months ended September
30, 1998, increased 12.7% to $2.1 million, from $1.8 million for the three
months ended September 30, 1997. The increase in expense relates to capital
expenditures made during the last six months of 1997 and the first nine months
of 1998 in support of the overall growth of the Company, consisting principally
of computer hardware and related equipment and statement processing equipment
and related facilities.

Operating Income. Operating income for the three months ended September 30,
1998, was $15.5 million or 24.4% of total revenues, compared to $3.7 million or
8.6% of total revenues for the three months ended September 30, 1997. The
increase between years relates to the factors discussed above.

The Company incurred certain one-time or acquisition-related charges
(Acquisition Charges) in connection with the Acquisition in November 1994. The
Acquisition Charges include amortization of acquired software, client contracts
and related intangibles, noncompete agreement, goodwill, and stock-based
compensation. Operating income for the three months ended September 30, 1998
and 1997, excluding Acquisition Charges of $2.1 million and $5.4 million, was
$17.5 million or 27.6% of total revenues, and $9.2 million or 21.2% of total
revenues, respectively. See the Company's "Management's Discussion and Analysis
of Financial Condition and Results of Operations" contained in the Company's
Annual Report on Form 10-K for the year ended December 31, 1997, for additional
discussion regarding the Acquisition Charges and the impact of such charges on
operations.

Interest Expense. Interest expense for the three months ended September 30,
1998, increased 163.6% to $2.5 million, from $0.9 million for the three months
ended September 30, 1997, with the increase attributable primarily to the
financing of the Company's acquisition of the SUMMITrak assets in September
1997.

Interest Income. Interest income for the three months ended September 30, 1998,
increased 112.8% to $0.6 million, from $0.3 million for the three months ended
September 30, 1997, with the increase attributable primarily to an increase in
operating funds available for investment.

Extraordinary Loss From Early Extinguishment Of Debt. In September 1997, the
Company recorded an extraordinary charge of $0.6 million for the write-off of
deferred financing costs related to retirement of it's outstanding bank
indebtedness of $27.5 million in conjunction with financing for the SUMMITrak
asset acquisition.

<PAGE>

Gain From Disposition of Discontinued Operations. The gain from disposition of
discontinued operations of $7.9 million for the three months ended September 30,
1997 relates to the Company's divestiture of it's remaining investment in
Anasazi Inc. in September 1997 for $8.6 million in cash.

NINE MONTHS ENDED SEPTEMBER 30, 1998 COMPARED TO NINE MONTHS ENDED
SEPTEMBER 30, 1997

Revenues. Total revenues for the nine months ended September 30, 1998,
increased 35.9% to $167.0 million, from $122.9 million for the nine months ended
September 30, 1997, due to increased revenues from the Company's processing and
related services, and increased revenues from software and related product sales
and professional consulting services.

Revenues from processing and related services for the nine months ended
September 30, 1998, increased 39.4% to $133.5 million, from $95.8 million for
the nine months ended September 30, 1997. Of the total increase in revenue,
approximately 62% resulted from an increase in the number of customers of the
Company's clients which were serviced by the Company and approximately 38% was
due to increased revenue per customer. The increase in the number of customers
serviced was due to the conversion of additional customers by new and existing
clients to the Company's systems, and internal customer growth experienced by
existing clients. From January 1, 1998 through September 30, 1998, the Company
converted and processed approximately 6.1 million additional customers on its
systems. Revenue per customer increased due primarily to (i) the TCI Contract
executed in September 1997, (ii) increased usage of ancillary services by
clients, and (iii) price increases included in client contracts.

Revenues from software and related product sales and professional consulting
service for the nine months ended September 30, 1998, increased 23.4% to $33.5
million, from $27.1 million for the nine months ended September 30, 1997. This
increase relates to the continued growth of the Company's software products and
related product sales and professional consulting services.

Amortization of Acquired Software. Amortization of acquired software decreased
to zero for the nine months ended September 30, 1998, from $8.7 million for the
nine months ended September 30, 1997, due to acquired software from the
Acquisition in November 1994 becoming fully amortized as of November 30, 1997.

Amortization of Client Contracts and Related Intangibles. Amortization of
client contracts and related intangibles for the nine months ended September 30,
1998, increased 18.8% to $3.6 million, from $3.1 million for the nine months
ended September 30, 1997. The increase in expense is due to amortization of the
value assigned to the TCI Contract, offset by a decrease due to client
conversion methodologies from the Acquisition becoming fully amortized as of
November 30, 1997.

Gross Margin. Gross margin for the nine months ended September 30, 1998,
increased 60.3% to $90.1 million, from $56.2 million for the nine months ended
September 30, 1997, due primarily to revenue growth. The gross margin
percentage increased to 53.9% for the nine months ended September 30, 1998,
compared to 45.7% for the nine months ended September 30, 1997. The overall
increase in the gross margin percentage is due primarily to the increase in
revenues while the amount of amortization of acquired software and amortization
of client contracts and related intangibles decreased, and to a lesser degree,
the improvement in the gross margin percentage for processing and related
services, due primarily to the increase in revenue per customer while
controlling the cost of delivering such services.

Research and Development Expense. R&D expense for the nine months ended
September 30, 1998, increased 24.2% to $20.3 million, from $16.3 million for the
nine months ended September 30, 1997. As a percentage of total revenues, R&D
expense decreased to 12.2% for the nine months ended September 30, 1998, from
13.3% for the nine months ended September 30, 1997.

During the nine months ended September 30, 1997, the Company capitalized
software development costs of approximately $9.7 million, which consisted of
$8.4 million of internal development costs and $1.3 million of purchased
software. The Company capitalized third party, contracted costs of
approximately $1.4 million during the nine months ended September 30, 1998,
related primarily to enhancements to existing products. As a result, total R&D
development expenditures (i.e., the total R&D costs expensed, plus the
capitalized development costs) for the nine months ended September 30, 1998 and
1997, were $21.7 million, or 13.0% of total revenues, and $24.7 million, or
20.1% of total revenues, respectively. The overall decrease in the R&D

<PAGE>

expenditures between periods is due primarily to effective control of
development costs, primarily the reduction of third-party, contracted
programming services.

Selling and Marketing Expense. S&M expense for the nine months ended September
30, 1998, increased 2.1% to $8.0 million, from $7.9 million for the nine months
ended September 30, 1997. As a percentage of total revenues, S&M expense
decreased to 4.8% for the nine months ended September 30, 1998, from 6.4% for
the nine months ended September 30, 1997. The overall decrease in S&M expenses
as a percentage of total revenues is due primarily to increased revenues, while
controlling S&M costs.

General and Administrative Expense. G&A expense for the nine months ended
September 30, 1998, increased 20.3% to $17.1 million, from $14.2 million for the
nine months ended September 30, 1997. As a percentage of total revenues, G&A
expense decreased to 10.2% for the nine months ended September 30, 1998, from
11.6% for the nine months ended September 30, 1997. The increase in G&A
expenses relates primarily to the continued expansion of the Company's
administrative staff and other administrative costs to support the Company's
overall growth. The decrease in G&A expenses as a percentage of total revenues
is due primarily to increased revenue, while controlling G&A costs.

Amortization of Noncompete Agreements and Goodwill. Amortization of noncompete
agreements and goodwill for the nine months ended September 30, 1998, decreased
22.3%, to $4.0 million, from $5.2 million for the nine months ended September
30, 1997. The decrease in amortization expense is due primarily to a write-down
of certain intangible assets in the fourth quarter of 1997.

Depreciation Expense. Depreciation expense for the nine months ended September
30, 1998, increased 16.7% to $5.9 million, from $5.1 million for the nine months
ended September 30, 1997. The increase in expense relates to capital
expenditures made throughout 1997 and the first nine months of 1998 in support
of the overall growth of the Company, consisting principally of computer
hardware and related equipment and statement processing equipment and related
facilities.

Operating Income. Operating income for the nine months ended September 30,
1998, was $34.5 million or 20.7% of total revenues, compared to $7.2 million or
5.8% of total revenues for the nine months ended September 30, 1997. The
increase between years relates to the factors discussed above.

Operating income for the nine months ended September 30, 1998 and 1997,
excluding Acquisition Charges of $6.2 million and $16.4 million, was $40.7
million or 24.4% of total revenues, and $23.6 million or 19.2% of total
revenues, respectively.

Interest Expense. Interest expense for the nine months ended September 30,
1998, increased 240.8% to $7.5 million, from $2.2 million for the nine months
ended September 30, 1997, with the increase attributable primarily to the
financing of the Company's acquisition of the SUMMITrak assets in September
1997.

Interest Income. Interest income for the nine months ended September 30, 1998,
increased 162.4% to $1.8 million, from $0.7 million for the nine months ended
September 30, 1997, with the increase attributable primarily to an increase in
operating funds available for investment and an increase in interest charges on
aged client accounts.

Gain From Disposition of Discontinued Operations. The gain from disposition of
discontinued operations of $7.9 million for the nine months ended September 30,
1997 relates to the Company's divestiture of it's remaining investment in
Anasazi Inc. in September 1997 for $8.6 million in cash.

<PAGE>

Major Clients
- -------------

During the nine months ended September 30, 1998 and 1997, revenues from TCI
represented approximately 36.3% and 28.0% of total revenues, and revenues from
Time Warner Cable and its affiliated companies (Time Warner) represented 16.3%
and 19.2% of total revenues, respectively. The increase in the TCI percentage
between periods relates primarily to the additional TCI customers converted to
the Company's systems as a result of the 15-year TCI Contract executed in
September 1997. The decrease in the Time Warner percentage between periods
results from a larger total revenue base for the Company, as total revenues from
Time Warner increased between periods. The Company has separate processing
agreements with multiple affiliates of Time Warner and provides products and
services to them under separately negotiated and executed contracts.

Income Taxes
- ------------

At September 30, 1998, the Company concluded that it was more likely than not
that certain of the Company's deferred tax assets would be realized.
Accordingly, the Company has recognized a net deferred tax asset of
approximately $14.6 million. The Company has recorded a valuation allowance of
approximately $48.5 million against the remaining net deferred tax assets since
realization of these future benefits is not sufficiently assured as of September
30, 1998.

The Company intends to analyze the realizability of the net deferred tax assets
at each future quarterly reporting period. The current quarterly results of
operations, as well as the Company's projected results of operations, will
determine the required valuation allowance at the end of each quarter. Based on
its current projections of operating results for 1998, the Company expects to
pay U.S. income taxes and realize additional deferred tax assets in 1998. As a
result, the Company does not expect income tax expense for 1998 to be
significant.

Liquidity and Capital Resources
- -------------------------------

As of September 30, 1998, the Company's principal sources of liquidity included
cash and cash equivalents of $36.2 million. The Company also has a revolving
credit facility in the amount of $40.0 million, of which there were no
borrowings outstanding. The Company's ability to borrow under the revolving
credit facility is subject to maintenance of certain levels of eligible
receivables. At September 30, 1998, all of the $40.0 million revolving credit
facility was available to the Company based on the current level of eligible
receivables. The revolving credit facility expires in September 2002.

As of September 30, 1998 and December 31, 1997, respectively, the Company had
$58.3 million and $44.7 million in net trade accounts receivable, an increase of
$13.6 million, with the increase primarily a result of the Company's revenue
growth. The Company's trade accounts receivable balance includes billings for
several non-revenue items, such as postage, communication lines, travel and
entertainment reimbursements, sales tax, and deferred items. As a result, the
Company evaluates its performance in collecting its accounts receivable through
its calculation of days billings outstanding (DBO) rather than a typical days
sales outstanding (DSO) calculation. DBO is calculated based on the billing for
the period (including non-revenue items) divided by the average net trade
accounts receivable balance for the period. Some of the Company's most recent
DBO calculations are as follows:

For the Month For the Quarter
Ended Ended
------------- ---------------
September 30, 1998..... 46 53
June 30, 1998.......... 54 58
March 31, 1998......... 59 59
December 31, 1997...... 58 54

During the nine months ended September 30, 1998, the Company generated $37.8
million of net cash flow from operating activities. Cash generated from these
sources and the proceeds of $3.5 million from the issuance of common stock
through the Company's stock incentive plans were used to (i) fund capital

<PAGE>

expenditures of $11.8 million, (ii) fund additions to software of $1.4 million,
(iii) fund the acquisition of assets of US Telecom Advanced Technology Systems,
Inc. for $6.0 million, (iv) pay conversion incentive payments of $2.0 million,
and (v) repay long-term debt of $4.5 million.

Earnings from continuing operations (before extraordinary item) before interest,
taxes, depreciation and amortization (EBITDA) for the nine months ended
September 30, 1998 was $49.0 million or 29.3% of total revenues, compared to
$30.3 million or 24.7% of total revenues for the nine months ended September 30,
1997. EBITDA is presented here as a measure of the Company's debt service
ability and is not intended to represent cash flows for the periods.

The Company financed the SUMMITrak asset acquisition with a $150.0 million term
credit facility in September 1997. In December 1997, the Company made an
optional principal payment on the term credit facility of $15.0 million.
Interest rates for the term and revolving credit facilities are chosen at the
option of the Company and are based on the LIBOR rate or the prime rate, plus an
additional percentage spread, with the spread dependent upon the Company's
leverage ratio. For the three months ended March 31, 1998, the spread on the
LIBOR rate and prime rate was 1.0 percent and 0 percent, respectively. Based on
the Company's leverage ratio as of March 31, 1998, the spread on the LIBOR rate
was reduced to 0.75 percent, effective April 1, 1998.

The loan agreement restricts, among other things, the payment of dividends or
other types of distributions on any class of the Company's stock unless the
Company's leverage ratio, as defined in the loan agreement, is under 1.50. As
of September 30, 1998, the leverage ratio was 1.85.

The purchase price for the SUMMITrak assets acquired in September 1997 included
up to $26.0 million in conversion incentive payments. The timing of the
conversion incentive payments is based upon the achievement of certain
milestones by TCI and the Company, as specified in the SUMMITrak asset
acquisition agreement. The milestones are based principally upon the number of
TCI's customers converted to, and the total number of TCI customers processed
on, the Company's customer care and billing system. Total payments as of
September 30, 1998 have been approximately $2.0 million. Based on the
conversions performed to date and the future conversions scheduled as of
September 30, 1998, the Company expects to pay the remaining $24.0 million to
TCI within the next 12 months.

On July 30, 1998, the Company acquired substantially all of the assets of US
Telecom Advanced Technology Systems, Inc. (USTATS) for approximately $6.0
million in cash and assumption of certain liabilities of approximately $1.3
million. USTATS, a South Carolina-based company, specializes in open systems,
client/server customer care and billing systems serving the telecommunications
markets. The Company intends to use the acquired technology and software to i)
enhance its current service-bureau telephony customer care and billing system,
and ii) provide a customer care and billing system for the domestic and
international competitive local exchange carrier (CLEC) and incumbent local
exchange carrier (ILEC) markets. The cash portion of the purchase price was
paid out of corporate funds. The total purchase price of $7.3 million has been
allocated to the technology and software acquired and will be amortized over its
expected useful life of five years.

The Company continues to make significant investments in capital equipment,
facilities, and research and development. The Company had no significant
capital commitments as of September 30, 1998. The Company believes that cash
generated from operations, together with the current cash and cash equivalents
and the amount available under the revolving credit facility, will be sufficient
to meet its anticipated cash requirements for operations, income taxes, debt
service, conversion incentive payments and capital expenditures for both its
short and long-term purposes.

14
<PAGE>

Year 2000
- ---------

The Company's business is dependent upon various computer software programs and
operating systems that utilize dates and process data beyond the year 2000. The
Company's actions to address the risks associated with the year 2000 are as
follows:

The Company's State of Readiness
- --------------------------------
The Company has established a corporate program to coordinate its year 2000
(Y2K) compliance efforts across all business functions and geographic areas. The
scope of the program includes addressing the risks associated with the Company's
i) information technology (IT) systems (including the Company's products and
services), ii) non-IT systems that include embedded technology (e.g., buildings,
plant, equipment and other infrastructure), and iii) significant vendors and
their Y2K readiness. The Company is utilizing the following steps in executing
its Y2K compliance program: 1) awareness, 2) assessment, 3) renovation
(including upgrades and enhancements to the Company's products), 4) validation
and testing, and 5) implementation. The Company has completed the awareness and
assessment steps for all areas.

IT Systems. The renovation step has been substantially completed for all mission
critical IT systems and products, and the Company now is focusing its efforts on
validation and testing. The Company's most significant renovation effort
involved its core product, CCS. CCS utilizes one subroutine for calculating
dates, with the various computer programs within CCS with date dependent
calculations accessing this subroutine. As a result, all date calculations are
performed in one location. The renovation of this subroutine and the related
interfaces to the various date dependent programs has been completed. The
Company is now testing CCS and its related software products (e.g., ACSR, ACSR
Telephony, etc.) using its standard testing methodologies, while adding date
simulation to specifically address the Y2K risk. Such date simulation considers
pre-2000, cross over, and post-2000 time frames, including year 2000 leap year
considerations. The Company believes it will be 80-90% completed with its
testing for CCS and related software products by December 31, 1998, with the
remaining testing expected to be done by the end of the first quarter of 1999.
Implementation into the production environment is expected to occur shortly
after testing is completed.

For the Company's non-CCS related software products, no renovation is believed
necessary as the products are relatively new and were designed to be Y2K
compliant. The Company plans to test these products with similar date simulation
techniques discussed above to ensure they are Y2K compliant. Such testing is
expected to be substantially completed by the end of 1998.

Non-IT Systems. The Company expects to have all of its mission critical non-IT
systems Y2K compliant by the end of the first quarter of 1999. The Company is
currently formulating its testing and implementation plans for its mission
critical non-IT systems.

Significant Vendors. As part of the Company's Y2K compliance program, the
Company has contacted its significant vendors to assess their Y2K readiness. For
all mission critical third party software embedded in or specified for use in
conjunction with the Company's IT systems and products, the Company's
communications with the vendors indicates that the vendors believe they will be
Y2K compliant by the end of 1998. Such third party software is being tested in
conjunction with the testing of the IT systems and products discussed above. All
other significant vendors (including the Company's vendor who provides data
processing services for CCS) have indicated they will be Y2K compliant by the
end of 1998, except for one of the Company's vendors which provides data lines
access for CCS. This vendor indicates that it expects to be Y2K compliant by the
end of the first quarter of 1999. There can be no assurance that i) the
Company's significant vendors will succeed in their Y2K compliance efforts, or
ii) the failure of vendors to address year 2000 compliance will not have a
material adverse effect on the Company's business or results of operations.

<PAGE>

The Costs to Address the Company's Year 2000 Issues
- ---------------------------------------------------
Since inception of its program in 1995 through September 30, 1998, the Company
has incurred and expensed costs of approximately $2.3 million related to Y2K
compliance efforts. The total estimated costs to complete the Company's Y2K
compliance effort are approximately $1.6 million. The estimated costs to
complete, which does not include any costs which may be incurred by the Company
if its significant vendors fail to timely address Y2K compliance, is based on
currently known circumstances and various assumptions regarding future events.
However, there can be no assurance that these estimates will be achieved and
actual results could differ materially from those anticipated.

The Risks of the Company's Year 2000 Issues
- -------------------------------------------
The Company's failure to timely resolve the Y2K risks could result in system
failures, the generation of erroneous information, and other significant
disruptions of business activities, including among others, access to CCS and
the use of related software products, and timely printing and delivery of
clients' customers' statements. Although the Company believes it will be
successful in its Y2K compliance efforts, there can be no assurance that the
Company's systems and products contain all necessary date code changes. In
addition, the Company's operations may be at risk if its vendors and other third
parties fail to adequately address the Y2K issue or if software conversions
result in system incompatibilities with these third parties. To the extent that
either the Company or a third-party vendor or service provider on which the
Company relies does not achieve Y2K compliance, the Company's results of
operations could be materially adversely affected. Furthermore, it has been
widely reported that a significant amount of litigation surrounding business
interruption will arise out of Y2K issues. It is uncertain whether, or to what
extent, the Company may be affected by such litigation.

As is the case with many software companies and service providers, if the
Company's current or future clients experience significant business
interruptions due to their failure to achieve Y2K compliance, the Company's
results of operations could be materially adversely affected. There can be no
assurance that the Company's current or future clients will adequately and
successfully address their Y2K risk and not experience any business
interruptions.

The Company's Contingency Plan
- ------------------------------
The Company has not yet developed a comprehensive contingency plan to address
the situation that may result if the Company or its vendors are unable to
achieve Y2K compliance for its critical operations. During the fourth quarter of
1998 and the first quarter of 1999, based upon the status of the Company's Y2K
compliance efforts at that time and the Company's perceived risks to critical
business operations, the Company plans to evaluate what areas the Company
believes a contingency plan may be necessary, and execute such contingency plan
if warranted. The i) inability to timely implement a contingency plan, if deemed
necessary, and ii) the cost to develop and implement such a plan, may have a
material adverse effect on the Company's results of operations.

Certain Factors That May Affect Future Results of Operations
- ------------------------------------------------------------
Except for statements of existing or historical facts, the foregoing discussion
of Y2K consists of forward-looking statements and assumptions relating to
forward-looking statements, including without limitation the statements relating
to future costs, the timetable for completion of Y2K compliance efforts,
potential problems relating to Y2K, the Company's state of readiness, third
party representations, and the Company's plans and objectives for addressing Y2K
problems. Certain factors could cause actual results to differ materially from
the Company's expectations, including without limitation i) the failure of
vendors and service providers (such as the vendors of data processing services
and data lines access for CCS and providers of third party software) to timely
achieve Y2K compliance, ii) system incompatibilities with third parties
resulting from software conversions, iii) the Company's systems and products not
containing all necessary date code changes, iv) the failure of existing or
future clients to achieve Y2K compliance, v) potential litigation arising out of
Y2K issues, the risk of which may be greater for information technology based
service providers such as the Company, vi) the failure of the Company's
validation and testing phase to detect operational problems internal to the

<PAGE>

Company, in the Company's products or services or in the Company's interface
with service providers, vendors or clients, whether such failure results from
the technical inadequacy of the Company's validation and testing efforts, the
technological infeasibility of testing certain non-IT systems, the perceived
cost-benefit constraints against conducting all available testing, or the
unavailability of third parties to participate in testing, or vii) the failure
to timely implement a contingency plan to the extent Y2K compliance is not
achieved.

<PAGE>

CSG SYSTEMS INTERNATIONAL, INC.
PART II. OTHER INFORMATION

Item 1-5. None.

Item 6. Exhibits and Reports on Form 8-K.

(a) Exhibits

2.19C Sixth Amendment to Restated and Amended CSG Master
Subscriber Management System Agreement Between CSG
Systems, Inc. and TCI Cable Management Corporation,
dated July 22, 1998.

2.19D* Seventh Amendment to Restated and Amended CSG Master
Subscriber Management System Agreement Between CSG
Systems, Inc. and TCI Cable Management Corporation,
dated September 8, 1998.

2.19E Eighth Amendment to Restated and Amended CSG Master
Subscriber Management System Agreement Between CSG
Systems, Inc. and TCI Cable Management Corporation,
dated September 25, 1998.

2.19F* Eleventh Amendment to Restated and Amended CSG Master
Subscriber Management System Agreement Between CSG
Systems, Inc. and TCI Cable Management Corporation,
dated September 30, 1998.

10.40C* First Amendment to Amended and Restated Services
Agreement between CSG Systems, Inc. and First Data
Technologies, Inc., dated July 8, 1998.

27.01 Financial Data Schedule (EDGAR Version only)

99.01 Safe Harbor for Forward-Looking Statements Under the
Private Securities Litigation Reform Act of 1995-
Certain Cautionary Statements and Risk Factors.

(b) Reports on Form 8-K

None

__________________
* Portions of the exhibit have been omitted pursuant to an application
for confidential treatment, and the omitted portions have been filed
separately with the Commission.

<PAGE>

SIGNATURES
- ----------

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

Dated: November 16, 1998

CSG SYSTEMS INTERNATIONAL, INC.

/s/ Neal C. Hansen
-------------------------------------------
Neal C. Hansen
Chairman and Chief Executive Officer
(Principal Executive Officer)

/s/ Greg A. Parker
-------------------------------------------
Greg A. Parker
Vice President and Chief Financial Officer
(Principal Financial Officer)

/s/ Randy R. Wiese
-------------------------------------------
Randy R. Wiese
Controller and Principal Accounting Officer
(Principal Accounting Officer)

<PAGE>

CSG SYSTEMS INTERNATIONAL, INC.

INDEX TO EXHIBITS

Exhibit
Number Description
- ------ -----------

2.19C Sixth Amendment to Restated and Amended CSG Master Subscriber
Management System Agreement between CSG Systems, Inc. and TCI
Cable Management Corporation, dated July 22, 1998.

2.19D* Seventh Amendment to Restated and Amended CSG Master Subscriber
Management System Agreement between CSG Systems, Inc. and TCI
Cable Management Corporation, dated September 8, 1998.

2.19E Eighth Amendment to Restated and Amended CSG Master Subscriber
Management System Agreement between CSG Systems, Inc. and TCI
Cable Management Corporation, dated September 25, 1998.

2.19F* Eleventh Amendment to Restated and Amended CSG Master Subscriber
Management System Agreement between CSG Systems, Inc. and TCI
Cable Management Corporation, dated September 30, 1998.

10.40C* First Amendment to Amended and Restated Services Agreement
between CSG Systems, Inc. and First Data Technologies, Inc.,
dated July 8, 1998.

27.01 Financial Data Schedule (EDGAR Version only)

99.01 Safe Harbor for Forward-Looking Statements Under the Private
Securities Litigation Reform Act of 1995-Certain Cautionary
Statements and Risk Factors.

__________________

* Portions of the exhibit have been omitted pursuant to an application for
confidential treatment, and the omitted portions have been filed separately
with the Commission.

<PAGE>

EXHIBIT 2.19C

SIXTH AMENDMENT
TO
RESTATED AND AMENDED CSG MASTER
SUBSCRIBER MANAGEMENT SYSTEM AGREEMENT
BETWEEN
CSG SYSTEMS, INC.
AND
TCI CABLE MANAGEMENT CORPORATION

This Sixth Amendment (the "Amendment") is executed this 22/nd/ day of July,
1998, and is made by and between CSG Systems, Inc., a Delaware corporation
("CSG") and TCI Cable Management Corporation ("Customer"). CSG and Customer
entered into a certain Restated and Amended CSG Master Subscriber Management
System Agreement dated August 10, 1997, a First Amendment thereto dated June 29,
1998, a Second Amendment thereto dated January 9, 1998, a Third Amendment
thereto dated ____________, a Fourth Amendment thereto dated ____________, and
a Fifth Amendment dated ____________ (collectively, the "Agreement"), and now
desire to amend the Agreement in accordance with the terms and conditions set
forth in this Amendment. If the terms and conditions set forth in this Amendment
shall be in conflict with the Agreement, the terms and conditions of this
Amendment shall control. Any terms in initial capital letters or all capital
letters used as a defined term but not defined in this Amendment, shall have the
meaning set forth in the Agreement. Upon execution of this Amendment by the
parties, any subsequent reference to the Agreement between the parties shall
mean the Agreement as amended by this Amendment. Except as amended by this
Amendment, the terms and conditions set forth in the Agreement shall continue in
full force and effect according to their terms.

CSG AND CUSTOMER AGREE AS FOLLOWS:

1. IN ADDITION TO THE SYSTEM SITES CURRENTLY USING THE CSG ON-LINE SYSTEM,
CUSTOMER DESIRES TO HAVE AN ADDITIONAL SYSTEM SITE USING SUCH SYSTEM. AS A
RESULT, THE AGREEMENT IS HEREBY AMENDED TO ADD THE FOLLOWING AS A SYSTEM
SITE USING THE CSG ON-LINE SYSTEM:

SYSTEM SITE ESTIMATED CONVERSION DATE ESTIMATED NUMBER OF
----------- ------------------------- -------------------
SUBSCRIBERS
-----------

Ellensburg, WA (existing system site owned 8,000
by another cable operator)

THIS AMENDMENT IS EXECUTED ON THE DAY AND YEAR FIRST SHOWN ABOVE.

CSG SYSTEMS, INC. ("CSG") TCI CABLE MANAGEMENT
CORPORATION ("CUSTOMER")

BY: /s/ JOSEPH T. RUBLE BY: /s/ ANN MONTGOMERY
---------------------------- ---------------------------------

NAME: JOSEPH T. RUBLE NAME: ANN MONTGOMERY
-------------------------- -------------------------------

TITLE: V.P. & GENERAL COUNSEL TITLE: SENIOR V.P. FULFILLMENT SVCS
------------------------- ------------------------------

<PAGE>

EXHIBIT 2.19D

Pages where confidential treatment has
been requested are stamped "Confidential
Treatment Requested and the Redacted Material
has been separately filed with the Commission,"
and places where information has been redacted
have been marked with (***).

SEVENTH AMENDMENT
TO
RESTATED AND AMENDED CSG MASTER
SUBSCRIBER MANAGEMENT SYSTEM AGREEMENT
BETWEEN
CSG SYSTEMS, INC.
AND
TCI CABLE MANAGEMENT CORPORATION

This Seventh Amendment (the "Amendment") is executed this 8th day of September,
1998, and is made by and between CSG Systems, Inc., a Delaware corporation
("CSG") and TCI Cable Management Corporation ("Customer"). CSG and Customer
entered into a certain Restated and Amended CSG Master Subscriber Management
System Agreement dated August 10, 1997, which has subsequently been amended
pursuant to separately executed amendments (collectively, the "Agreement"), and
now desire to amend the Agreement in accordance with the terms and conditions
set forth in this Amendment. If the terms and conditions set forth in this
Amendment shall be in conflict with the Agreement, the terms and conditions of
this Amendment shall control. Any terms in initial capital letters or all
capital letters used as a defined term but not defined in this Amendment, shall
have the meaning set forth in the Agreement. Upon execution of this Amendment
by the parties, any subsequent reference to the Agreement between the parties
shall mean the Agreement as amended by this Amendment. Except as amended by
this Amendment, the terms and conditions set forth in the Agreement shall
continue in full force and effect according to their terms.

CSG AND CUSTOMER AGREE AS FOLLOWS:

1. THE DEFINITION OF "PRODUCTS" AND ALL REFERENCES THERETO IN THE AGREEMENT
SHALL BE AMENDED TO INCLUDE CSG'S INFO EXPRESS SOFTWARE, WHICH ALLOWS END-
USER CUSTOMERS TO PERFORM CERTAIN ROUTINE FUNCTIONS WITHOUT HAVING TO SPEAK
TO ONE OF CUSTOMER'S CUSTOMER SERVICE REPRESENTATIVES.

2. SCHEDULE D SHALL BE AMENDED TO INCLUDE THE FOLLOWING FEES FOR INFO EXPRESS:

SOFTWARE LICENSE FEES:
- ----------------------
(***) Local Info Express License fee $(***) per IVR
(minimum initial purchase of 50 licenses)
. Third party hardware and software is additional

SOFTWARE LICENSE ANNUAL MAINTENANCE FEES: 20% of License fee
- -----------------------------------------

SOFTWARE LICENSE AND MAINTENANCE PAYMENT TERMS:
- -----------------------------------------------
(for initial purchase of 50 licenses and related First year maintenance Fees)
. $(***) due upon Execution of this Agreement
. $(***) due on November 1, 1998
. Subsequent annual software maintenance Fees due on anniversary date of
software license.

<PAGE>

"Confidential Treatment Requested
and the Redacted Material has been
separately filed with the Commission."

INSTALLATION SERVICES:
- ----------------------
Includes: $(***) per IVR
Installation
. Installation of application on IVR
. Configuration of application software
. Configuration of CSG intelligent router
. Configuration of EIS Gateway
. Performance Testing

ADDITIONAL CONSULTING OR TRAINING SERVICES:
- -------------------------------------------
(fees set forth in Schedule D).

INFO EXPRESS COMPONENT DELIVERY DATES:
- --------------------------------------
. The following modules will be delivered by August 1, 1998-
Account Balance
Appointment Confirmation
. The following modules will be delivered by October 1, 1998-
Set Top Box Re-authorization
Inbound Outage Notification
. The following module will be delivered by November 1, 1998-
Work Order Close Out
. The following module will be delivered by March 31, 1999-
Credit Card Payment

PRODUCT DELIVERY PENALTIES:
- ---------------------------
Should any of the following modules not be delivered as referenced above,
Customer will have the right to discontinue use of all of CSG's Local Info
Express Services and receive a full refund of license fees and prorated
maintenance fees or negotiate to use a subset of CSG's Local Info Express
Services at mutually agreed upon fee not to exceed $(***) per ARU/Info Express.

. Account Balance
. Appointment Confirmation
. Set Top Box Re-authorization
. Inbound Outage Notification
. Work Order Close Out

THIS AMENDMENT IS EXECUTED ON THE DAY AND YEAR FIRST SHOWN ABOVE.

CSG SYSTEMS, INC. ("CSG") TCI CABLE MANAGEMENT
CORPORATION ("CUSTOMER")

BY: /s/ JOSEPH T. RUBLE BY: /s/ SCOTT D. BESSELIEVRE
---------------------------- -------------------------------------

NAME: JOSEPH T. RUBLE NAME: SCOTT D. BESSELIEVRE
-------------------------- -----------------------------------

TITLE: V.P. & GENERAL COUNSEL TITLE: EXECUTIVE DIRECTOR, CUSTOMER OPS
------------------------- ----------------------------------

<PAGE>

EXHIBIT 2.19E

EIGHTH AMENDMENT
TO
RESTATED AND AMENDED CSG MASTER
SUBSCRIBER MANAGEMENT SYSTEM AGREEMENT
BETWEEN
CSG SYSTEMS, INC.
AND
TCI CABLE MANAGEMENT CORPORATION

This Eighth Amendment (the "Amendment") is executed this 25th day of September,
1998, and is made by and between CSG Systems, Inc., a Delaware corporation
("CSG") and TCI Cable Management Corporation ("Customer"). CSG and Customer
entered into a certain Restated and Amended CSG Master Subscriber Management
System Agreement dated August 10, 1997, which has subsequently been amended
pursuant to separately executed amendments (collectively, the "Agreement"), and
now desire to amend the Agreement in accordance with the terms and conditions
set forth in this Amendment. If the terms and conditions set forth in this
Amendment shall be in conflict with the Agreement, the terms and conditions of
this Amendment shall control. Any terms in initial capital letters or all
capital letters used as a defined term but not defined in this Amendment, shall
have the meaning set forth in the Agreement. Upon execution of this Amendment
by the parties, any subsequent reference to the Agreement between the parties
shall mean the Agreement as amended by this Amendment. Except as amended by
this Amendment, the terms and conditions set forth in the Agreement shall
continue in full force and effect according to their terms.

CSG AND CUSTOMER AGREE AS FOLLOWS:

1. The following shall be added to Section 7 (CSG/(R)/ Vantage Fees) of
Schedule D:

CSG will allocate Customer's Vantage CPU overage minutes such that the
allocation for all System Sites will be combined and based on Customer's
total enterprise-wide Vantage used, not on each System Site's usage and
allotment.

THIS AMENDMENT IS EXECUTED ON THE DAY AND YEAR FIRST SHOWN ABOVE.

CSG SYSTEMS, INC. ("CSG") TCI CABLE MANAGEMENT
CORPORATION ("CUSTOMER")

BY: /s/ JOSEPH T. RUBLE BY: /s/ JERRY KULIN
---------------------------- ---------------------------------------

NAME: JOSEPH T. RUBLE NAME: JERRY KULIN
-------------------------- -------------------------------------

TITLE: V.P. & GENERAL COUNSEL TITLE: EXE. DIRECTOR, CUST. BILLING SYST.
------------------------- ------------------------------------

<PAGE>

EXHIBIT 2.19F

ELEVENTH AMENDMENT
TO
RESTATED AND AMENDED CSG MASTER
SUBSCRIBER MANAGEMENT SYSTEM AGREEMENT
BETWEEN
CSG SYSTEMS, INC.
AND
TCI CABLE MANAGEMENT CORPORATION

This Eleventh Amendment (the "Amendment") is executed this 30 day of September,
1998, and is made by and between CSG Systems, Inc., a Delaware corporation
("CSG") and TCI Cable Management Corporation ("Customer"). CSG and Customer
entered into a certain Restated and Amended CSG Master Subscriber Management
System Agreement dated August 10, 1997, which has subsequently been amended
pursuant to separately executed amendments (collectively, the "Agreement"), and
now desire to amend the Agreement in accordance with the terms and conditions
set forth in this Amendment. If the terms and conditions set forth in this
Amendment shall be in conflict with the Agreement, the terms and conditions of
this Amendment shall control. Any terms in initial capital letters or all
capital letters used as a defined term but not defined in this Amendment, shall
have the meaning set forth in the Agreement. Upon execution of this Amendment
by the parties, any subsequent reference to the Agreement between the parties
shall mean the Agreement as amended by this Amendment. Except as amended by
this Amendment, the terms and conditions set forth in the Agreement shall
continue in full force and effect according to their terms.

CSG AND CUSTOMER AGREE AS FOLLOWS:

1. FOR THE FEES SET FORTH BELOW, AND IN ACCORDANCE WITH THE TERMS AND
CONDITIONS SET FORTH IN THE AGREEMENT (INCLUDING, BUT NOT LIMITED TO,
SCHEDULE C), CSG HEREBY GRANTS TO CUSTOMER ONE THOUSAND ONE HUNDRED (1,100)
- ----------
ADDITIONAL LICENSES OF ACSR, WHICH CUSTOMER MAY USE AT SYSTEM SITES THAT
ARE TO BE DETERMINED WITH DELIVERY TO FOLLOW UPON NOTIFICATION. AS A RESULT,
EXHIBIT C-1 IS HEREBY AMENDED TO INCREASE THE NUMBER OF ACSR WORKSTATIONS TO
SIX THOUSAND ONE HUNDRED (6,100).

2. ACSR PERPETUAL LICENSE FEES
---------------------------
1,100 WORKSTATIONS $(***)*
($(***) PER WORKSTATION)

*INVOICE DATE (PAYMENTS DUE NET FORTY-FIVE (45) DAYS).
SEPTEMBER 30, 1998 $(***)

ACSR ANNUAL MAINTENANCE FEES
----------------------------
TWENTY PERCENT (20%) OF LICENSE FEES

INVOICE DATE (PAYMENTS DUE NET FORTY-FIVE (45) DAYS) DAYS.
SEPTEMBER 30, 1998 $(***)
(AND ANNUALLY THEREAFTER ON THE ANNIVERSARY OF THE LICENSE GRANT)

<PAGE>

THIS AMENDMENT is executed on the day and year first shown above.

CSG SYSTEMS, INC. ("CSG") TCI CABLE MANAGEMENT
CORPORATION ("CUSTOMER")

BY: /s/ JOSEPH T. RUBLE BY: /s/ ANN MONTGOMERY
---------------------------- ---------------------------------

NAME: JOSEPH T. RUBLE NAME: ANN MONTGOMERY
-------------------------- -------------------------------

TITLE: V.P. & GENERAL COUNSEL TITLE: SENIOR V.P. FULFILLMENT SVCS
------------------------- ------------------------------

<PAGE>

EXHIBIT 10.40C

FIRST AMENDMENT
TO
AMENDED AND RESTATED SERVICES AGREEMENT
BETWEEN
CSG SYSTEMS, INC.
AND
FIRST DATA TECHNOLOGIES, INC.

THIS FIRST AMENDMENT (the "First Amendment") is executed this 8th day
of July, 1998, and is made by and between CSG Systems, Inc., a Delaware
corporation ("CSG") and First Data Technologies, Inc., a Delaware corporation
("FDT").

RECITALS

A. The Parties entered into a certain Amended and Restated Services
Agreement dated December 31, 1996 (the "Services Agreement").

B. CSG desires to increase its CPU MIPS utilization in 1998 in excess
of (***) percent ((***)%).

C. CSG desires FDT to provide CSG with Additional Services to enable
CSG to increase its CPU MIPS utilization in 1998 in excess of (***) percent
((***)%).

D. The Services Agreement requires that in the event of such an
increase, that the Parties amend the Services Agreement.

NOW THEREFORE, in consideration of the premises and the mutual
covenants, conditions and agreements hereinafter expressed, the Parties hereto
agree as follows:

1. If the terms and conditions set forth in this First Amendment
shall be in conflict with the Services Agreement, the terms and conditions of
this First Amendment shall control. Any terms in initial capitalized letters or
all capitalized letters used as a defined term but not defined in this First
Amendment, shall have the meaning set forth in the Services Agreement. Except as
amended by this First Amendment, the terms and conditions set forth in the
Services

<PAGE>

"Confidential Treatment Requested
and the Redacted Material has been
separately filed with the Commission."

Agreement shall continue in full force and effect according to their terms.

2. The assumptions listed in Note 1 of Schedule 1.27 are deleted and
-------------
replaced with the following:

1. Assumptions. All pricing assumes the volumes, numbers, dollar amounts and
-----------
levels (as applicable) of each of the FDT Services and Performance Criteria
as of the Effective Date, with the following exceptions, each of which
shall be deemed to be as follows:

Base CPU MIPS: (***)
Assigned CPU MIPS as of January 1, 1997: (***)
Assigned CPU MIPS as of January 1, 1998: (***)
Modems and Controllers as of January 1, 1997: $(***) annually; $(***)
monthly

3. The fees relating to CPU MIPS set forth on page 7 of
Schedule 1.27 are deleted and replaced with the following:
- -------------

- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
FDT Services Unit 1997 1998 1999 2000 2001 Comments
- ----------------------------------------------------------------------------------------------------
Base CPU MIPS MIP/month $(***) $(***) $(***) $(***) $(***) Notes 1,2
- ----------------------------------------------------------------------------------------------------
Assigned CPU MIPS MIP/month $(***) $(***) $(***) $(***) $(***) Notes 1,2
that Exceed the
Number of Base CPU
MIPS
- ----------------------------------------------------------------------------------------------------
CPU Incremental MIPS MIP/month $(***) $(***) $(***) $(***) $(***) Notes 1,2
- ----------------------------------------------------------------------------------------------------
</TABLE>

4. In accordance with Section 2.15 and Note 2 of Schedule 1.27,
-------------
in calendar year 1998, CSG may increase its assignment of Assigned CPU MIPS in
excess of (***) percent ((***)%). CSG shall notify FDT of any such increases at
least one hundred twenty (120) days prior to the date upon which CSG desires
such increases to be effective, it being understood that such increases shall be
effective on the first day of the month following the expiration of such notice
period. In 1998, (***) percent ((***)%) of the Assigned CPU MIPS equals (***)
((***) x (***) = (***)). In 1998 only, the monthly fee per CPU MIPS in excess
of (***) shall be $(***). In 1998 only, the monthly fee per CPU MIPS in excess
of (***) but up to and including (***) shall be $(***). In 1999 and subsequent
years, CSG shall pay the fees for CPU MIPS in accordance with Schedule 1.27,
-------------
with the following exception: CSG shall pay the fees for the number of Assigned
CPU MIPS that exceed (***) but that are less than or equal to the total

<PAGE>

"Confidential Treatment Requested
and the Redacted Material has been
separately filed with the Commission."

number of Assigned CPU MIPS as of January 1, 1999 at the monthly rate of $(***).

5. A new Section C is added to Note 2 of Schedule 1.27 to read as
-------------
follows:

C. Additional Examples.
-------------------

(1) As of January 1, 1998, the number of Assigned CPU MIPS equals
(***). On March 12, 1998, CSG notifies FDT to increase its
assignment of Assigned CPU MIPS to (***). FDT shall implement
such increase on August 1, 1998. The monthly CPU MIPS charge for
August, 1998 shall be calculated as follows:

((***) x $(***)) + (((***) - (***) x ($(***))) + (((***) - (***))
x $(***)))
$(***) + $(***) + $(***) = $(***)

(2) As of January 1, 1999 and January 1, 2000, the number of Assigned
CPU MIPS equals (***). On October 19, 1999, CSG notifies FDT to
increase its assignment of Assigned CPU MIPS to (***). FDT shall
implement such increase on March 1, 2000. The monthly CPU MIPS
charge for March, 2000 shall be calculated as follows:

((***) x $(***)) + (((***) - (***)) x $(***))) + (((***) - (***))
x $(***))) + (((***) - (***)) x $(***)))
$(***) + $(***) + (***) + $(***) = $(***)

(3) As of January 1, 1999 and January 1, 2000, the number of Assigned
CPU MIPS equals (***). On October 14, 1999, CSG notifies FDT to
decrease its assignment of Assigned CPU MIPS to (***). FDT shall
implement such decrease on March 1, 2000. The monthly CPU MIPS
charge for March, 2000 shall be calculated as follows:

((***) x $(***)) + (((***) - (***)) x $(***))) + (((***) - (***))
x $(***)))
$(***) + $(***) + $(***) = $(***)

6. In example "a" to Note 2(A)(2) of Schedule 1.27, the two
-------------
appearances of the term "(***) MIPS" shall each be replaced with the phrase
"(***) CPU MIPS".

7. In the second paragraph of Note 2(B)(2) of Schedule 1.27, the
-------------
phrase "Assigned CPU MIPS Charge" shall be replaced with the phrase "Base CPU
MIPS Charge".

8. In the first paragraph of Note 2(B)(3) of Schedule 1.27, the
-------------
phrase "CPU Base MIPS" shall be replaced with the phrase "CPU MIPS".

<PAGE>

"Confidential Treatment Requested
and the Redacted Material has been
separately filed with the Commission."

9. In the first paragraph of Note 2(B)(3) of Schedule 1.27, the
-------------
term "MIPS" shall be replaced with the term "CPU MIPS".

10. In the second paragraph of Note 2(B)(3) of Schedule 1.27, the
--------------
term "MIPS" shall be replaced with the term "CPU MIPS".

11. In the first paragraph of Note 2(B)(4) of Schedule 1.27, the
-------------
phrase "CPU Base MIPS" shall be replaced with the phrase "CPU MIPS".

12. In the second paragraph of Note 2(B)(4) of Schedule 1.27, the
-------------
phrase "Assigned CPU MIPS Charge" shall be replaced with the phrase "Base CPU
MIPS Charge".

13. In Note 4 of Schedule 1.27, each appearance of the phrase "CPU
-------------
Base MIPS" shall be replaced with the phrase "CPU MIPS".

14. The multiprocessor computer platform to be installed in 1998
initially will be physically partitioned into two (2) systems. CSG shall be
responsible for paying for only the CPU MIPS assigned to it. Upon CSG's
request, FDT will add capacity or additional engines to either system. CSG
shall notify FDT of any such request at least one hundred twenty (120) days
prior to the date upon which CSG desires such additional capacity or engines to
be effective, it being understood that such additions shall be effective on the
first day of the month following the expiration of such notice period, provided
the Parties can reach agreement pursuant to the procedures set forth in Section
-------
2.15. If FDT adds additional engines to either system or an agreement is
- ----
reached to repartition, then FDT will establish a new CPU MIPS rating for the
systems.

15. Note 11 of Schedule 1.27 is deleted and replaced with the
-------------
following:

11. FICHE
-----

A. Increases.
---------

(1) During each calendar year during the Term, CSG may increase its
volume of Fiche FDT Services in any calendar month by no more
than (***) percent ((***)%) based on the average monthly volume
of Fiche FDT Services during the prior calendar year. CSG shall
notify FDT of such increases at least sixty (60) days prior to
the date upon which CSG desires such increase to be effective, it
being understood that such increases shall be effective on the
first day of the month following the expiration of such notice
period.

(2) Except as set forth in Note 11(A)(3) of this Schedule 1.27,
-------------
during each calendar year during the Term, requests by CSG to
increase its volume of Fiche FDT Services in any calendar month
in excess of twenty (***) ((***)%), based on the average monthly
volume of Fiche FDT Services

<PAGE>

"Confidential Treatment Requested
and the Redacted Material has been
separately filed with the Commission."

during the prior calendar year, shall be addressed as an
Additional Service. CSG shall notify FDT of such increases at
least sixty (60) days prior to the date upon which CSG desires
such increase to be effective, it being understood that such
increases shall be effective on the first day of the month
following the expiration of such notice period, provided the
Parties can reach agreement pursuant to the procedures set forth
in Section 2.15.
------------

(3) Notwithstanding Note 11(A)(2) of this Schedule 1.27 or Section
------------- -------
2.15, during calendar year 1998, CSG may increase its volume of
----
Fiche FDT Services in any calendar month by more than (***)
percent ((***)%) based on the average monthly volume of Fiche FDT
Services during calendar year 1997 ((***)). CSG shall notify FDT
of such increases at least sixty (60) days prior to the date upon
which CSG desires such increase to be effective, it being
understood that such increases shall be effective on the first
day of the month following the expiration of such notice period.
Increases in CSG's Fiche FDT Services under this Note 11(A)(3)
shall not be addressed as an Additional Service.

B. Decreases.
---------

(1) Except as set forth in Note 11(B)(2) of this Schedule 1.27,
-------------
during each calendar year during the Term, CSG may decrease the
volume of Fiche FDT Services in any calendar month by no more
than (***) percent ((***)%), based on the average volume of Fiche
FDT Services during the prior calendar year. CSG shall notify
FDT of any such decreases at least sixty (60) days prior to the
date upon which CSG desires such decreases to be effective, it
being understood that such decreases shall be effective on the
first day of the month following the expiration of such notice
period.

(2) Notwithstanding Note 11(B)(1) of Schedule 1.27, during any
-------------
calendar year during the Term, CSG may decrease the volume of
Fiche FDT Services in any calendar month by more than (***)
percent ((***)%), based on the average volume of Fiche FDT
Services during the prior calendar year, provided that CSG shall
--------
pay to FDT, in addition to the fees associated with the actual
Fiche FDT Services, the following additional payment (if any):

(((***) x volume of Fiche FDT Services during the prior calendar
year) - (actual volume of Fiche FDT Services during such calendar
year)) x (Applicable Fiche FDT Services Charges x (***))

<PAGE>

"Confidential Treatment Requested
and the Redacted Material has been
separately filed with the Commission."

FDT shall invoice CSG on the tenth (10th) day of January of the
following calendar year for any amount owed for the foregoing
additional payment. Each such invoice shall be due and payable
within fourteen (14) days following receipt.

CSG shall notify FDT of any such decreases at least sixty days
prior to the date upon which CSG desires such decreases to be
effective, it being understood that such decreases shall be
effective on the first day of the month following the expiration
of such notice period.

(3) If CSG notifies FDT to decrease the volume of Fiche FDT Services,
and CSG subsequently fails to be in a position whereby FDT could
implement such decrease (either in whole or in part) without
disrupting CSG's business, in addition to any of the charges set
forth in Schedule 1.27, CSG shall pay to FDT, as applicable: (a)
-------------
if FDT has Fiche FDT Services capacity available, the costs (as
set forth herein) associated with CSG's use of Fiche FDT Services
in excess of the Fiche FDT Services level that CSG instructed FDT
to decrease CSG's volume to, and (b) FDT's costs of maintaining
or implementing CSG's volume of Fiche FDT Services in excess of
the level of Fiche FDT Services that CSG instructed FDT to
decrease CSG's volume to.

C. Examples.
--------

(1) The monthly average of Fiche FDT Services during calendar
year 1997 is (***). On March 12, 1998, CSG notifies FDT
that its average monthly volume of Fiche FDT Services will
increase to (***). FDT shall implement such increase on
June 1, 1998. On June 24, 1998, CSG notifies FDT that its
average monthly volume of Fiche FDT Services shall increase
to (***). Note 11(A)(2) of Schedule 1.27 is inapplicable.
-------------
FDT shall implement such increase on September 1, 1998.

(2) The monthly average of Fiche FDT Services during calendar
year 1998 is (***). On March 12, 1999, CSG notifies FDT
that its average monthly volume of Fiche FDT Services will
increase to (***). FDT shall implement such increase on
June 1, 1999. On June 24, 1999, CSG notifies FDT that its
average monthly volume of Fiche FDT Services shall increase
to (***). Note

<PAGE>

"Confidential Treatment Requested
and the Redacted Material has been
separately filed with the Commission."

11(A)(3) of Schedule 1.27 is inapplicable. The parties shall
-------------
proceed under Section 2.15 to determine whether FDT would
------------
provide CSG such additional Fiche FDT Services as an
Additional Service.

(3) The monthly average of Fiche FDT Services during calendar
year 1997 is (***). On March 12, 1998, CSG notifies FDT
that its average monthly volume of Fiche FDT Services will
decrease to (***). FDT shall implement such decrease on
June 1, 1998. On June 24, 1998, CSG notifies FDT that its
average monthly volume of Fiche FDT Services shall decrease
to (***). FDT shall implement such increase on September 1,
1998.

(4) The monthly average of Fiche FDT Services during calendar
year 1998 is (***). On March 12, 1999, CSG notifies FDT
that its average monthly volume of Fiche FDT Services will
decrease to (***). FDT shall implement such decrease on
June 1, 1999. Throughout calendar year 1999, the actual
volume of Fiche FDT Services is (***), which consisted of
(***) masters and (***) duplicates. On January 10, 2000,
CSG shall not pay to FDT any additional payment pursuant to
Note 11(b)(2) of this Schedule 1.27 since the value is
-------------
negative as set forth below:

(((***) x (***)) - ((***))) x ((***) x (***))
((***) - (***)) x (***) = N/A

(5) The monthly average of Fiche FDT Services during calendar
year 1998 is (***). On March 12, 1999, CSG notifies FDT
that its average monthly volume of Fiche FDT Services will
decrease to (***). FDT shall implement such decrease on
June 1, 1999.

Throughout calendar year 1999, the actual volume of Fiche
FDT Services is (***), which consisted of (***) masters and
(***) duplicates. On January 10, 2000, CSG shall pay to FDT
the following additional payment:

(((***) x (***)) - (***)) x (((***)/(***)) x (***)))
((***) - (***)) x ((***) x (***))
(***) x (***) = $(***)

<PAGE>

"Confidential Treatment Requested
and the Redacted Material has been
separately filed with the Commission."

16. The fees relating to Tape Upgrade set forth on page 7 of
Schedule 1.27 are deleted and replaced with the following:
- -------------

- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
FDT Services Unit 1997 1998 1999 2000 2001 Comments
- ---------------------------------------------------------------------------------------------------
Tape Upgrade monthly $(***) $(***) $(***) $(***) $(***) Notes 1, 4, 12
- ---------------------------------------------------------------------------------------------------
</TABLE>

17. The following additional note shall be added to the end of
Schedule 1.27:
- -------------

12. TAPE UPGRADE. Notwithstanding Note 4 of this Schedule 1.27, effective
------------ -------------
March 8, 1998, the monthly fee for Tape Upgrade shall be $(***). The increase in
price reflects the provision by FDT as an Additional Service of sixteen (16)
Timberlines for an additional $(***) per month, it being understood that if CSG
terminates this Agreement for its convenience pursuant to Section 11.4, CSG
------------
shall pay to FDT in addition to the Termination for Convenience Fee, the
additional fees incurred by FDT associated with FDT obtaining such additional
sixteen (16) Timberlines.

THIS FIRST AMENDMENT is executed as of the date and year first shown above.

CSG SYSTEMS, INC. ("CSG") FIRST DATA
TECHNOLOGIES, INC. ("FDT")

By: /s/ John Johnson By: /s/ Guy Battista
------------------- ---------------------

Title: V.P. Operations Title: Senior V.P./ CIO
----------------- ------------------

Name: John Johnson Name: Guy Battista
----------------- ------------------

<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM 10-Q AS
OF SEPTEMBER 30, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000

<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 36,204
<SECURITIES> 0
<RECEIVABLES> 60,328
<ALLOWANCES> 1,986
<INVENTORY> 0
<CURRENT-ASSETS> 101,352
<PP&E> 45,018
<DEPRECIATION> 21,929
<TOTAL-ASSETS> 221,385
<CURRENT-LIABILITIES> 104,876
<BONDS> 114,750
0
0
<COMMON> 257
<OTHER-SE> 762
<TOTAL-LIABILITY-AND-EQUITY> 221,385
<SALES> 0
<TOTAL-REVENUES> 167,013
<CGS> 0
<TOTAL-COSTS> 76,946
<OTHER-EXPENSES> 20,278
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 7,481
<INCOME-PRETAX> 28,711
<INCOME-TAX> 0
<INCOME-CONTINUING> 28,711
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 28,711
<EPS-PRIMARY> 1.12
<EPS-DILUTED> 1.09

</TABLE>

<PAGE>

EXHIBIT 99.01

SAFE HARBOR FOR FORWARD-LOOKING STATEMENTS UNDER THE PRIVATE SECURITIES
LITIGATION REFORM ACT OF 1995

CERTAIN CAUTIONARY STATEMENTS AND
RISK FACTORS

CSG Systems International, Inc. and its subsidiaries (collectively, the Company)
or their representatives from time to time may make or may have made certain
forward-looking statements, whether orally or in writing, including without
limitation, any such statements made or to be made in the Management's
Discussion and Analysis of Financial Condition and Results of Operations
contained in its various SEC filings or orally in conferences or
teleconferences. The Company wishes to ensure that such statements are
accompanied by meaningful cautionary statements, so as to ensure to the fullest
extent possible the protections of the safe harbor established in the Private
Securities Litigation Reform Act of 1995.

ACCORDINGLY, THE FORWARD-LOOKING STATEMENTS ARE QUALIFIED IN THEIR ENTIRETY BY
REFERENCE TO AND ARE ACCOMPANIED BY THE FOLLOWING MEANINGFUL CAUTIONARY
STATEMENTS IDENTIFYING CERTAIN IMPORTANT FACTORS THAT COULD CAUSE ACTUAL RESULTS
TO DIFFER MATERIALLY FROM THOSE IN SUCH FORWARD-LOOKING STATEMENTS.

This list of factors is likely not exhaustive. The Company operates in a
rapidly changing and evolving business involving the converging communications
markets, and new risk factors will likely emerge. Management cannot predict all
of the important risk factors, nor can it assess the impact, if any, of such
risk factors on the Company's business or the extent to which any factor, or
combination of factors, may cause actual results to differ materially from those
in any forward-looking statements.

ACCORDINGLY, THERE CAN BE NO ASSURANCE THAT FORWARD-LOOKING STATEMENTS WILL BE
ACCURATE INDICATORS OF FUTURE ACTUAL RESULTS, AND IT IS LIKELY THAT ACTUAL
RESULTS WILL DIFFER FROM RESULTS PROJECTED IN FORWARD-LOOKING STATEMENTS AND
THAT SUCH DIFFERENCES MAY BE MATERIAL.

NET LOSSES

Although the Company recorded net income for the three months ended June 30,
1998, March 31, 1998 and September 30, 1998, the Company has recorded annual net
losses since inception (October 17, 1994) through December 31, 1997. These net
losses have resulted from several factors, including: (i) amortization of
intangible assets (acquired software, client contracts and related intangibles,
and noncompete agreements and goodwill); (ii) charge for purchased research and
development; (iii) charge for impairment of software development costs; (iv)
charge for impairment of intangible assets; (v) interest expense; (vi) stock-
based employee compensation expense; (vii) extraordinary losses from early
extinguishment of debt; and (viii) discontinued operations. There can be no
assurance that the Company will achieve or sustain profitability in the future.

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RELIANCE ON CCS

The Company derived approximately 76.7% and 77.3% of its total revenues from its
primary product, Communications Control System (CCS), and related products and
services in the years ended December 31, 1997 and 1996, respectively. CCS and
related products and services are expected to provide the substantial majority
of the Company's total revenues in the foreseeable future. The Company's results
will depend upon continued market acceptance of CCS and related products and
services, as well as the Company's ability to continue to adapt and modify them
to meet the changing needs of its clients. Any reduction in demand for CCS
would have a material adverse effect on the financial condition and results of
operations of the Company.

DEPENDENCE ON MAJOR CLIENTS

During the nine months ended September 30, 1998 and 1997, revenues from TCI
represented approximately 36.3% and 28.0% of total revenues, and revenues from
Time Warner represented 16.3% and 19.2% of total revenues, respectively. As a
result of the TCI Contract, revenues derived from TCI are expected to increase
as a percentage of revenue. Loss of all or a significant part of the business
of either TCI or Time Warner would have a material adverse effect on the
financial condition and results of operations of the Company.

REQUIREMENTS OF THE TCI CONTRACT

The TCI Contract requires the conversion of a significant number of additional
TCI customers onto the Company's customer care and billing system. The TCI
Contract provides certain performance criteria and other obligations to be met
by the Company. The Company is subject to various remedies and penalties if it
fails to meet the performance criteria or other obligations. The Company is
also subject to an annual technical audit to determine whether the Company's
products and services include innovations in features and functions that have
become standard in the video industry. If an audit determines the Company is
not providing such an innovation and it fails to do so within the schedule
required by the contract, then TCI could be released from its exclusivity
obligation to the extent necessary to obtain the innovation from a third party.
To fulfill the TCI Contract and to remain competitive, the Company believes it
will be required to develop new and advanced features to existing products and
services, new products and services, and new technologies, all of which will
require substantial research and development. TCI also would have the right to
terminate the TCI Contract in the event of certain defaults by the Company. The
termination of the TCI Contract or of any of TCI's commitments under the
contract would have a material adverse effect on the financial condition and
results of operations of the Company.

RENEWAL OF TIME WARNER CONTRACTS

The Company provides services to Time Warner under multiple, separate contracts
with various Time Warner affiliates. These contracts are scheduled to expire at
various times. The failure of Time Warner to renew contracts representing a
significant part of its business with the Company would have a material adverse
effect on the financial condition and results of operations of the Company.

CONVERSION TO THE COMPANY'S SYSTEMS

The Company's ability to convert new client sites to its customer care and
billing systems on a timely and accurate basis is necessary to meet the
Company's contractual commitments and to achieve its business objectives.
Converting multiple sites under the schedules required by contracts or business
requirements is a difficult and complex process. One of the difficulties in
the conversion process is that competition for

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the necessary qualified personnel is intense and the Company may not be
successful in attracting and retaining the personnel necessary to complete
conversions on a timely and accurate basis. The inability of the Company to
perform the conversion process timely and accurately would have a material
adverse effect on the results of operations of the Company.

DEPENDENCE ON CABLE TELEVISION INDUSTRY

The Company's business is concentrated in the cable television industry, making
the Company susceptible to a downturn in that industry. During the years ended
December 31, 1997 and 1996, the Company derived 73% and 77%, respectively, of
its revenues from companies in the U.S. cable television industry. A decrease
in the number of customers served by the Company's clients would result in lower
revenues for the Company. In addition, cable television providers are
consolidating, decreasing the potential number of buyers for the Company's
products and services. Furthermore, there can be no assurance that cable
television providers will be successful in expanding into other segments of the
converging communications markets. There can be no assurance that new entrants
into the cable television market will become clients of the Company.

NEW PRODUCTS AND RAPID TECHNOLOGICAL CHANGE

The market for customer care and billing systems is characterized by rapid
changes in technology and is highly competitive with respect to the need for
timely product innovations and new product introductions. The Company believes
that its future success depends upon continued market acceptance of its current
products, including CCS and related products and services, and its ability to
enhance its current products and develop new products that address the
increasingly complex and evolving needs of its clients. In particular, the
Company believes that it must respond quickly to clients' needs for additional
functionality and distributed architecture for data processing. Substantial
research and development will be required to maintain the competitiveness of the
Company's products and services in the market. Development projects can be
lengthy and costly, and are subject to changing requirements, programming
difficulties, a shortage of qualified personnel, and unforeseen factors which
can result in delays. There can be no assurance of continued market acceptance
of the Company's current products or that the Company will be successful in the
timely development of product enhancements or new products that respond to
technological advances or changing client needs.

CONVERGING COMMUNICATIONS MARKETS

The Company's growth strategy is based in large part on the continuing
convergence and growth of the cable television, DBS, telecommunications, and on-
line services markets. If these markets fail to converge, grow more slowly than
anticipated, or if providers in the converging markets do not accept the
Company's products and services, there could be a material adverse effect on the
Company's growth.

COMPETITION

The market for the Company's products and services is highly competitive. The
Company directly competes with both independent providers of products and
services and in-house systems developed by existing and potential clients. Many
of the Company's current and potential competitors have significantly greater
financial, marketing, technical, and other competitive resources than the
Company, and many already have significant international operations. There can
be no assurance that the Company will be able to compete successfully with its
existing competitors or with new competitors.

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CLIENT FAILURE TO RENEW OR UTILIZE CONTRACTS

Substantially all of the Company's revenues are derived from the sale of
services or products under contracts with its clients. The Company does not
have the option to extend unilaterally the contracts upon expiration of their
terms. Many of the Company's contracts do not require clients to make any
minimum purchases, and contracts are cancelable by clients under certain
conditions.

ATTRACTION AND RETENTION OF PERSONNEL

The Company's future success depends in large part on the continued service of
its key management, sales, product development, and operational personnel. The
Company is particularly dependent on its executive officers. Only one of those
executive officers is party to an employment agreement with the Company, and
such agreement is terminable upon 30 days' notice.

The Company believes that its future success also depends on its ability to
attract and retain highly skilled technical, managerial, and marketing
personnel, including, in particular, additional personnel in the areas of
research and development and technical support. Competition for qualified
personnel skilled in these areas is intense. The Company may not be successful
in attracting and retaining the personnel it requires.

VARIABILITY OF QUARTERLY RESULTS

The Company's quarterly revenues and results, particularly relating to software
and professional services, may fluctuate depending on various factors, including
the timing of executed contracts and the delivery of contracted services or
products, the cancellation of the Company's services and products by existing or
new clients, the hiring of additional staff, new product development and other
expenses, and changes in sales commission policies. No assurance can be given
that results will not vary due to these factors. Fluctuations in quarterly
results may result in volatility in the market price of the Company's Common
Stock.

DEPENDENCE ON PROPRIETARY TECHNOLOGY

The Company relies on a combination of trade secret and copyright laws, patents,
nondisclosure agreements, and other contractual and technical measures to
protect its proprietary rights in its products. There can be no assurance that
these provisions will be adequate to protect its proprietary rights. Although
the Company believes that its intellectual property rights do not infringe upon
the proprietary rights of third parties, there can be no assurance that third
parties will not assert infringement claims against the Company or the Company's
clients.

INTERNATIONAL OPERATIONS

The Company's business strategy includes a commitment to the marketing of its
products and services internationally, and the Company has acquired and
established operations outside of the U.S. The Company is subject to certain
inherent risks associated with operating internationally. Risks include product
development to meet local requirements such as the conversion to EURO currency,
difficulties in staffing and management, reliance on independent distributors or
strategic alliance partners, fluctuations in foreign currency exchange rates,
compliance with foreign regulatory requirements, variability of foreign economic
conditions, changing restrictions imposed by U.S. export laws, and competition
from U.S.-based companies which have firmly established significant
international operations. There can be no assurance that the Company will be
able to manage successfully the risks related to selling its products and
services in international markets.

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INTEGRATION OF ACQUISITIONS

As part of its growth strategy, the Company seeks to acquire assets, technology,
and businesses that may provide the technology and technical personnel to
expedite the Company's product development efforts, provide complementary
products or services or provide access to new markets and clients. Acquisitions
involve a number of risks and difficulties, including expansion into new
geographic markets and business areas, the requirement to understand local
business practices, the diversion of management's attention to the assimilation
of acquired operations and personnel, potential adverse short-term effects on
the Company's operating results, and the amortization of acquired intangible
assets.

YEAR 2000

The Company's business is dependent upon various computer software programs and
operating systems that utilize dates and process data beyond the year 2000. If
the actions taken by the Company to mitigate its risks associated with the year
2000 are inadequate, there could be a material adverse effect on the financial
condition and results of operations of the Company. See "Year 2000" in
Management's Discussion and Analysis of Financial Condition and Results of
Operations for additional discussion of the Company's efforts concerning year
2000 compliance.

RELATIONSHIP WITH FIRST DATA CORPORATION

The Company has entered into a data processing services agreement with FDC. The
Company is dependent upon FDC to perform these services for the operation of
CCS. The inability of FDC to perform these services satisfactorily could have a
material adverse effect on the financial condition and results of operations of
the Company. The existing agreement is scheduled to expire in December 2001.