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Share Name | Share Symbol | Market | Type |
---|---|---|---|
CSG Systems International Inc | NASDAQ:CSGS | NASDAQ | Common Stock |
Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|---|---|
-0.22 | -0.54% | 40.48 | 40.13 | 40.81 | 40.625 | 39.69 | 40.17 | 198,485 | 01:00:00 |
Confirming All 2024 Financial Guidance Targets
Revenue Coming from Industry Verticals Outside of CSPs Exceeds 30% for the First Time
Returned Over $160 Million to Shareholders in the Last Twelve Months, including $19 Million in Q1
Continued Strong Sales Performance with Many Key Wins in Q1, including MTN and Banglalink
CSG (NASDAQ: CSGS) today reported results for the quarter ended March 31, 2024.
Financial Results:
First quarter 2024 financial results:
Shareholder Returns:
“Team CSG got off to a good start in the first quarter. For the first time in CSG’s history, 30% of our revenue is coming from industry verticals outside of the Communication Service Providers (“CSPs”) space. For context, we generated only 7% of our revenue from these other industry verticals in 2017,” said Brian Shepherd, President and Chief Executive Officer of CSG. “From a financial perspective, we are pleased to confirm all 2024 financial guidance targets. Plus, we continue to return capital to shareholders in the form of buybacks and dividends, having delivered over $160 million in shareholder remuneration over the last twelve months.”
Financial Overview (unaudited)
(in thousands, except per share amounts and percentages):
Quarter Ended March 31,
Percent
2024
2023
Changed
GAAP Results:
Revenue
$
295,135
$
298,739
(1.2
%)
Operating Income
31,797
38,193
(16.7
%)
Operating Margin Percentage
10.8
%
12.8
%
EPS
$
0.68
$
0.68
-
Non-GAAP Results:
Operating Income
$
44,868
$
53,511
(16.2
%)
Adjusted Operating Margin Percentage
16.6
%
19.3
%
EPS
$
1.01
$
1.04
(2.9
%)
For additional information and reconciliations regarding CSG’s use of non-GAAP financial measures, please refer to the attached Exhibit 2 and the Investor Relations section of CSG’s website at csgi.com.
Results of Operations
GAAP Results: Total revenue for the first quarter of 2024 was $295.1 million, a 1.2% decrease when compared to revenue of $298.7 million for the first quarter of 2023. The decrease in revenue is primarily attributed to lower software and services revenue, resulting from the closure of approximately $10 million of software license upgrades in the first quarter of 2023. This was offset to a certain degree by the continued growth of CSG’s cloud revenue, to include its payments solutions.
GAAP operating income for the first quarter of 2024 was $31.8 million, or 10.8% of total revenue, compared to $38.2 million, or 12.8% of total revenue, for the first quarter of 2023. The decrease in operating income is mainly attributed to the higher software and services revenue recognized in the first quarter of 2023, discussed above, as the costs associated with this revenue is not generally dependent upon on the timing of the deal closure, offset to a certain degree by lower restructuring and reorganization charges.
GAAP EPS for the first quarter of 2024 was $0.68, consistent with the first quarter of 2023, with the first quarter of 2024 benefiting primarily from foreign currency movements and a lower share count.
Non-GAAP Results: Non-GAAP operating income for the first quarter of 2024 was $44.9 million, or a non-GAAP adjusted operating margin of 16.6%, compared to $53.5 million, or a non-GAAP adjusted operating margin of 19.3% for the first quarter of 2023. The decrease in non-GAAP operating income and non-GAAP adjusted operating margin is mainly attributed to the higher software and services revenue recognized in the first quarter of 2023, discussed above.
Non-GAAP EPS for the first quarter of 2024 was $1.01 compared to $1.04 for the first quarter of 2023. The decrease in non-GAAP EPS is mainly due to the lower non-GAAP operating income, partially offset by foreign currency movements and a lower share count.
Balance Sheet and Cash Flows
Cash and cash equivalents as of March 31, 2024 were $120.8 million compared to $186.3 million as of December 31, 2023. CSG had net cash flows provided by (used in) operations for the first quarters ended March 31, 2024 and 2023 of ($29.4) million and $15.4 million, respectively, and had non-GAAP free cash flow (deficit) of ($34.1) million and $6.7 million, respectively. Cash flows for the first quarter of 2024 were negatively impacted by unfavorable working capital changes, to include the payment of 2023 accrued employee incentive compensation.
Summary of Financial Guidance
CSG is reaffirming its financial guidance for the full year 2024, as follows:
As of May 1, 2024
GAAP Measures:
Revenue
$1,200 - $1,240 million
Non-GAAP Measures:
Adjusted Operating Margin Percentage
17.0% - 17.4%
EPS
$3.85 - $4.15
Adjusted EBITDA
$245 - $255 million
Free Cash Flow
$95 - $135 million
For additional information and reconciliations regarding CSG’s use of non-GAAP financial measures, please refer to the attached Exhibit 2 and the Investor Relations section of CSG’s website at csgi.com.
Conference Call
CSG will host a conference call on Wednesday, May 1, 2024 at 5:00 p.m. ET, to discuss CSG’s first quarter of 2024 earnings results. The call will be carried live and archived on the Internet. A link to the conference call is available at http://ir.csgi.com. In addition, to reach the conference by phone, call 1-888-412-4131 and use the passcode 2327393.
Additional Information
For information about CSG, please visit CSG’s web site at csgi.com. Additional information can be found in the Investor Relations section of the website.
About CSG
CSG empowers companies to build unforgettable experiences, making it easier for people and businesses to connect with, use and pay for the services they value most. Our customer experience, billing and payments solutions help companies of any size make money and make a difference. With our SaaS solutions, company leaders can take control of their future and tap into guidance along the way from our fiercely committed and forward-thinking CSGers around the world.
Want to be future-ready and a change-maker like the global brands that trust CSG? Visit csgi.com to learn more.
Forward-Looking Statements
This news release contains forward-looking statements as defined under the Securities Act of 1933, as amended, that are based on assumptions about a number of important factors and involve risks and uncertainties that could cause actual results to differ materially from what appears in this news release. Some of these key factors include, but are not limited to the following items:
This list is not exhaustive, and readers are encouraged to review the additional risks and important factors described in CSG’s reports on Forms 10-K and 10-Q and other filings made with the SEC.
CSG SYSTEMS INTERNATIONAL, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS-UNAUDITED
(in thousands)
March 31,
2024
December 31,
2023
ASSETS
Current assets:
Cash and cash equivalents
$
120,810
$
186,264
Settlement and merchant reserve assets
192,962
274,699
Trade accounts receivable:
Billed, net of allowance of $5,692 and $5,432
275,359
267,680
Unbilled
84,347
82,163
Income taxes receivable
2,364
1,345
Other current assets
57,960
50,075
Total current assets
733,802
862,226
Non-current assets:
Property and equipment, net of depreciation of $126,435 and $121,816
60,834
65,545
Operating lease right-of-use assets
31,472
34,283
Software, net of amortization of $160,580 and $157,601
13,406
14,224
Goodwill
306,581
308,596
Acquired customer contracts, net of amortization of $127,773 and $126,469
33,477
35,879
Customer contract costs, net of amortization of $39,539 and $42,094
54,535
54,421
Deferred income taxes
49,552
57,855
Other assets
9,293
10,017
Total non-current assets
559,150
580,820
Total assets
$
1,292,952
$
1,443,046
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Current portion of long-term debt
$
7,500
$
7,500
Operating lease liabilities
15,400
15,946
Customer deposits
36,967
41,035
Trade accounts payable
43,768
46,406
Accrued employee compensation
44,006
84,380
Settlement and merchant reserve liabilities
191,498
273,817
Deferred revenue
56,404
54,199
Income taxes payable
1,886
4,104
Other current liabilities
23,738
33,449
Total current liabilities
421,167
560,836
Non-current liabilities:
Long-term debt, net of unamortized discounts of $14,764 and $15,628
533,986
534,997
Operating lease liabilities
31,099
34,360
Deferred revenue
23,382
23,447
Income taxes payable
3,117
3,041
Deferred income taxes
124
123
Other non-current liabilities
10,737
12,916
Total non-current liabilities
602,445
608,884
Total liabilities
1,023,612
1,169,720
Stockholders’ equity:
Preferred stock, par value $.01 per share; 10,000 shares authorized; zero shares issued and
outstanding
-
-
Common stock, par value $.01 per share; 100,000 shares authorized; 29,779 and 29,541 shares outstanding
717
713
Additional paid-in capital
491,005
490,947
Treasury stock, at cost; 40,583 and 40,398 shares
(1,145,738
)
(1,136,055
)
Accumulated other comprehensive income (loss):
Unrealized gain on short-term investments, net of tax
-
1
Cumulative foreign currency translation adjustments
(55,388
)
(50,414
)
Accumulated earnings
978,744
968,134
Total stockholders' equity
269,340
273,326
Total liabilities and stockholders' equity
$
1,292,952
$
1,443,046
CSG SYSTEMS INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME-UNAUDITED
(in thousands, except per share amounts)
Quarter Ended
March 31, 2024
March 31, 2023
Revenue
$
295,135
$
298,739
Cost of revenue (exclusive of depreciation, shown separately below)
157,887
155,021
Other operating expenses:
Research and development
36,095
35,464
Selling, general and administrative
61,722
59,147
Depreciation
5,636
5,720
Restructuring and reorganization charges
1,998
5,194
Total operating expenses
263,338
260,546
Operating income
31,797
38,193
Other income (expense):
Interest expense
(7,506
)
(7,219
)
Interest income
2,616
569
Other, net
558
(2,432
)
Total other
(4,332
)
(9,082
)
Income before income taxes
27,465
29,111
Income tax provision
(7,998
)
(8,183
)
Net income
$
19,467
$
20,928
Weighted-average shares outstanding:
Basic
28,516
30,418
Diluted
28,797
30,609
Earnings per common share:
Basic
$
0.68
$
0.69
Diluted
0.68
0.68
CSG SYSTEMS INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS-UNAUDITED
(in thousands)
Quarter Ended
March 31, 2024
March 31, 2023
Cash flows from operating activities:
Net income
$
19,467
$
20,928
Adjustments to reconcile net income to net cash provided by (used in) operating activities-
Depreciation
5,636
5,757
Amortization
11,309
11,471
Asset impairment
-
1,595
Gain on lease modifications
-
(125
)
Unrealized foreign currency transaction (gain) loss, net
(352
)
41
Deferred income taxes
7,859
4,079
Stock-based compensation
7,736
6,412
Subtotal
51,655
50,158
Changes in operating assets and liabilities, net of acquired amounts:
Trade accounts receivable, net
(10,959
)
(1,825
)
Other current and non-current assets and liabilities
(9,827
)
(6,871
)
Income taxes payable/receivable
(3,158
)
1,647
Trade accounts payable and accrued liabilities
(59,581
)
(36,071
)
Deferred revenue
2,519
8,359
Net cash provided by (used in) operating activities
(29,351
)
15,397
Cash flows from investing activities:
Purchases of software, property, and equipment
(4,774
)
(8,700
)
Proceeds from sale/maturity of short-term investments
-
71
Net cash used in investing activities
(4,774
)
(8,629
)
Cash flows from financing activities:
Proceeds from issuance of common stock
866
893
Payment of cash dividends
(9,463
)
(9,088
)
Repurchase of common stock
(17,973
)
(9,306
)
Deferred acquisition payments
(488
)
(274
)
Proceeds from long-term debt
-
30,000
Payments on long-term debt
(1,875
)
(1,875
)
Settlement and merchant reserve activity
(82,212
)
(61,482
)
Net cash used in financing activities
(111,145
)
(51,132
)
Effect of exchange rate fluctuations on cash, cash equivalents, and restricted cash
(1,962
)
327
Net decrease in cash, cash equivalents, and restricted cash
(147,232
)
(44,037
)
Cash, cash equivalents, and restricted cash, beginning of period
463,876
389,018
Cash, cash equivalents, and restricted cash, end of period
$
316,644
$
344,981
Supplemental disclosures of cash flow information:
Cash paid during the period for-
Interest
$
10,898
$
7,005
Income taxes
3,288
2,211
Reconciliation of cash, cash equivalents, and restricted cash:
Cash and cash equivalents
$
120,810
$
167,681
Settlement and merchant reserve assets
192,962
177,300
Restricted cash included in current and non-current assets
2,872
-
Total cash, cash equivalents, and restricted cash
$
316,644
$
344,981
EXHIBIT 1
CSG SYSTEMS INTERNATIONAL, INC.
SUPPLEMENTAL REVENUE ANALYSIS
Revenue by Significant Customers: 10% or more of Revenue
Quarter Ended
Quarter Ended
Quarter Ended
March 31, 2024
December 31, 2023
March 31, 2023
Amount
% of Revenue
Amount
% of Revenue
Amount
% of Revenue
Charter
$
60,849
21
%
$
60,128
20
%
$
61,532
21
%
Comcast
52,804
18
%
54,651
18
%
53,415
18
%
Revenue by Vertical
Quarter Ended
Quarter Ended
Quarter Ended
March 31, 2024
December 31, 2023
March 31, 2023
Broadband/Cable/Satellite
51
%
51
%
52
%
Telecommunications
19
%
21
%
20
%
All other
30
%
28
%
28
%
Total revenue
100
%
100
%
100
%
Revenue by Geography
Quarter Ended
Quarter Ended
Quarter Ended
March 31, 2024
December 31, 2023
March 31, 2023
Americas
86
%
85
%
84
%
Europe, Middle East and Africa
9
%
10
%
12
%
Asia Pacific
5
%
5
%
4
%
Total revenue
100
%
100
%
100
%
EXHIBIT 2 CSG SYSTEMS INTERNATIONAL, INC. DISCLOSURES FOR NON-GAAP FINANCIAL MEASURES
Use of Non-GAAP Financial Measures and Limitations
To supplement its condensed consolidated financial statements presented in accordance with generally accepted accounting principles (GAAP), CSG uses non-GAAP operating income, non-GAAP adjusted operating margin percentage, non-GAAP EPS, non-GAAP adjusted EBITDA, and non-GAAP free cash flow. CSG believes that these non-GAAP financial measures, when reviewed in conjunction with its GAAP financial measures, provide investors with greater transparency to the information used by CSG’s management in its financial and operational decision making. CSG uses these non-GAAP financial measures for the following purposes:
These non-GAAP financial measures are provided with the intent of providing investors with the following information:
Non-GAAP financial measures are not measures of performance under GAAP, and therefore should not be considered in isolation or as a substitute for GAAP financial information. Limitations with the use of non-GAAP financial measures include the following items:
CSG compensates for these limitations by relying primarily on its GAAP results and using non-GAAP financial measures as a supplement only. Additionally, CSG provides specific information regarding the treatment of GAAP amounts considered in preparing the non-GAAP financial measures and reconciles each n on-GAAP financial measure to the most directly comparable GAAP measure.
Non-GAAP Financial Measures: Basis of Presentation
The table below outlines the exclusions from CSG’s non-GAAP financial measures:
Non-GAAP Exclusions
Operating Income
Adjusted Operating Margin Percentage
EPS
Transaction fees
—
X
—
Restructuring and reorganization charges
X
X
X
Executive transition costs
X
X
X
Acquisition-related expenses:
Amortization of acquired intangible assets
X
X
X
Transaction-related costs
X
X
X
Stock-based compensation
X
X
X
Gain (loss) on debt extinguishment/conversion
—
—
X
Gain (loss) on acquisitions or dispositions
—
—
X
Unusual income tax matters
—
—
X
CSG believes that excluding certain items in calculating its non-GAAP financial measures provides meaningful supplemental information regarding CSG’s performance and these items are excluded for the following reasons:
CSG also reports non-GAAP adjusted EBITDA and non-GAAP free cash flow. Management believes non-GAAP adjusted EBITDA is a useful measure to investors in evaluating CSG’s operating performance, debt servicing capabilities, and enterprise valuation. CSG defines non-GAAP adjusted EBITDA as income before interest, income taxes, depreciation, amortization, stock-based compensation, foreign currency transaction adjustments, acquisition-related expenses, and unusual items, such as restructuring and reorganization charges, executive transition costs, gains and losses related to the extinguishment of debt, and gains and losses on acquisitions or dispositions, as discussed above. Additionally, management uses non-GAAP free cash flow, among other measures, to assess its financial performance and cash generating capabilities, and believes that it is useful to investors because it shows CSG’s cash available to service debt, make strategic acquisitions and investments, repurchase its common stock, pay cash dividends, and fund ongoing operations. CSG defines non-GAAP free cash flow as net cash flows from operating activities less the purchases of software, property and equipment.
Non-GAAP Financial Measures
Non-GAAP Operating Income and Non-GAAP Adjusted Operating Margin Percentage:
The reconciliation of GAAP operating income to non-GAAP operating income, and calculation of CSG’s non- GAAP adjusted operating margin percentage, for the indicated periods are as follows (in thousands, except percentages):
Quarter Ended March 31,
2024
2023
Non-GAAP Operating Income
GAAP operating income
$
31,797
$
38,193
Restructuring and reorganization charges (1)
1,998
5,194
Executive transition costs
352
-
Acquisition-related expenses:
Amortization of acquired intangible assets
2,852
3,209
Transaction-related costs
-
158
Stock-based compensation (1)
7,869
6,757
Non-GAAP operating income
$
44,868
$
53,511
Non-GAAP Adjusted Operating Margin Percentage
Revenue
$
295,135
$
298,739
Less: Transaction fees (2)
(25,062
)
(21,973
)
Revenue less transaction fees
$
270,073
$
276,766
Non-GAAP adjusted operating margin percentage
16.6
%
19.3
%
(1)
Restructuring and reorganization charges include stock-based compensation, which is not included in the stock-based compensation line in the tables above and following, and depreciation, which has not been recorded to the depreciation line item on CSG’s Income Statement.
(2)
Transaction fees are primarily comprised of fees paid to third-party payment processors and financial institutions and interchange fees under CSG’s payment services contracts. Transaction fees are included in revenue in CSG's Income Statement (and not netted against revenue) because CSG maintains control and acts as principal over the integrated service provided under its payment services customer contracts. However, CSG excludes expense associated with transaction fees from the numerator and denominator in calculating its non-GAAP adjusted operating margin percentage in order to provide comparability with historical and future periods and with its peer group and competitors.Non-GAAP EPS:
The reconciliations of GAAP EPS to non-GAAP EPS for the indicated periods are as follows (in thousands, except per share amounts):
Quarter Ended
Quarter Ended
March 31, 2024
March 31, 2023
Amounts
EPS (4)
Amounts
EPS (4)
GAAP net income
$
19,467
$
0.68
$
20,928
$
0.68
GAAP income tax provision (3)
7,998
8,183
GAAP income before income taxes
27,465
29,111
Restructuring and reorganization charges (1)
1,998
5,194
Executive transition costs
352
-
Acquisition-related costs:
Amortization of acquired intangible assets
2,852
3,209
Transaction-related costs
-
158
Stock-based compensation (1)
7,869
6,757
Non-GAAP income before income taxes
40,536
44,429
Non-GAAP income tax provision (3)
(11,553
)
(12,662
)
Non-GAAP net income
$
28,983
$
1.01
$
31,767
$
1.04
(3)
For the quarters ended March 31, 2024 and 2023, the GAAP effective income tax rates were approximately 29% and 28%, respectively, and the non-GAAP effective income tax rates were 28.5% for both periods.(4)
The outstanding diluted shares for the quarters ended March 31, 2024 and 2023 were 28.8 million and 30.6 million, respectively.Non-GAAP Adjusted EBITDA:
CSG’s calculation of non-GAAP adjusted EBITDA and the reconciliation of CSG’s non-GAAP adjusted EBITDA measure to GAAP net income is provided below for the indicated periods (in thousands, except percentages):
Quarter Ended
March 31,
2024
2023
GAAP net income
$
19,467
$
20,928
GAAP income tax provision
7,998
8,183
Interest expense (5)
7,506
7,219
Interest and investment income and other, net
(3,174
)
1,863
GAAP operating income
31,797
38,193
Restructuring and reorganization charges (1)
1,998
5,194
Executive transition costs
352
-
Acquisition-related expenses:
Amortization of acquired intangible assets (6)
2,852
3,209
Transaction-related costs
-
158
Stock-based compensation (1)
7,869
6,757
Amortization of other intangible assets (6)
2,565
3,453
Amortization of customer contract costs (6)
5,028
4,622
Depreciation (1)
5,636
5,720
Non-GAAP adjusted EBITDA
$
58,097
$
67,306
Non-GAAP adjusted EBITDA as a percentage of revenue less transaction fees (2)
21.5
%
24.3
%
(5)
Interest expense includes amortization of deferred financing costs as provided in Note 6 below.
(6)
Amortization on the statement of cash flows is made up of the following items for the indicated periods (in thousands):
Quarter Ended
March 31,
2024
2023
Amortization of acquired intangible assets
$
2,852
$
3,209
Amortization of other intangible assets
2,565
3,453
Amortization of customer contract costs
5,028
4,622
Amortization of deferred financing costs
864
187
Total amortization
$
11,309
$
11,471
Non-GAAP Free Cash Flow:
CSG’s calculation of non-GAAP free cash flow and the reconciliation of CSG’s non-GAAP free cash flow measure to cash flows from operating activities are provided below for the indicated periods (in thousands):
Quarter Ended
March 31,
2024
2023
Cash flows from operating activities
$
(29,351
)
$
15,397
Purchases of software, property and equipment
(4,774
)
(8,700
)
Non-GAAP free cash flow (deficit)
$
(34,125
)
$
6,697
Non-GAAP Financial Measures – 2024 Financial Guidance
Refer to the “Non-GAAP Financial Measures – 2024 Financial Guidance” in Exhibit 2 to CSG’s earnings release dated February 7, 2024, which can be found on the Investor Relations page of CSG’s website at csgi.com for the reconciliation of CSG’s 2024 financial guidance.
View source version on businesswire.com: https://www.businesswire.com/news/home/20240501307515/en/
For more information, contact: John Rea, Investor Relations (210) 687-4409 E-mail: john.rea@csgi.com
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