CSGS CSG Systems International Inc

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

PURSUANT TO SECTION 13 or 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of earliest event reported): August 7, 2024

CSG SYSTEMS INTERNATIONAL, INC.

(Exact name of registrant as specified in its charter)

Delaware		0-27512		47-0783182
(State or other jurisdiction of incorporation)		(Commission File Number)		(IRS Employer Identification No.)
169 Inverness Dr W, Suite 300, Englewood, CO				80112
(Address of principal executive offices)				(Zip Code)

Registrant’s telephone number, including area code: (303) 200-2000

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

 

☐	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
☐	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
☐	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
☐	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
Common Stock, Par Value $0.01 Per Share		CSGS		NASDAQ Stock Market LLC.

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§ 230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§ 240.12b-2 of this chapter).

Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

 

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Item 2.02. Results of Operations and Financial Condition.

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

 

On August 7, 2024, CSG Systems International, Inc. (“CSG”) issued a press release relating to the results of its operations for the quarter and six months ended June 30, 2024. A copy of such press release is attached to this Form 8-K as Exhibit 99.1 and hereby incorporated by reference.

 

In the attached press release, CSG makes reference to non-GAAP financial measures. 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. There are limitations with the use of non-GAAP financial measures since they are not based on any comprehensive set of accounting rules or principles, and the way in which CSG calculates non-GAAP financial measures may differ from the way in which other companies calculate similar non-GAAP financial measures. A more detailed discussion of CSG’s use of non-GAAP financial measures, to include reconciliations of the non-GAAP financial measures to the comparable GAAP financial measures, is contained in the attached press release and is posted to the Company’s website at www.csgi.com.

9.01. Financial Statements and Exhibits.

(d) Exhibits

99.1		Press release of CSG Systems International, Inc. dated August 7, 2024
104		Cover Page Interactive Data File (embedded within the Inline XBRL document)

 

 

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SIGNATURES

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

 

			CSG SYSTEMS INTERNATIONAL, INC.
Date:	August 7, 2024	By:	/s/ Lori J. Szwanek
			Lori J. Szwanek Chief Accounting Officer

 

 

 

 

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FOR IMMEDIATE RELEASE

 

PRESS RELEASE

CSG Systems INTERNATIONAL reports

SECOND Quarter 2024 RESULTS

DENVER--(August 7, 2024) — CSG (NASDAQ: CSGS) today reported results for the quarter ended June 30, 2024.

Exciting Customer Wins including Telenor Denmark, Telstra, One New Zealand & Lyse Norway

Raising 2024 Profitability and Non-GAAP EPS Guidance Targets; Reiterating All Others

Board of Directors Authorized Additional $100 Million Share Repurchase Program

Financial Results:

Second quarter 2024 financial results:

Shareholder Returns:

Business Activities:

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“Team CSG delivered solid results in a challenging macroeconomic environment during the first half of 2024. With this backdrop, we are thrilled to raise our profitability and non-GAAP EPS guidance targets for the full year. Further, we are very excited to announce several important new logo sales wins and deal expansions, including with Telenor Denmark, One New Zealand (formerly Vodafone New Zealand), Lyse Norway, Telstra, and many others. We also achieved another high-water mark on our industry diversification strategy as 31% of our revenue now comes from bigger, faster growing industry verticals outside of the Communication Service Providers (“CSPs”) space versus 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 excited that the new sales wins combined with our proven ability to expand CSG’s operating leverage will enable us to grow profitability and non-GAAP EPS even faster than expected when we started the year, which gives our Board of Directors the confidence to authorize an additional $100 million share repurchase plan on top of the $480 million we have returned to shareholders via dividends and share repurchases since 2020.”

Financial Overview (unaudited)

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

		Quarter Ended June 30,												Six Months Ended June 30,
		2024				2023				Percent Changed				2024				2023				Percent Changed
GAAP Results:
Revenue		$	290,318			$	286,327				1.4	%		$	585,453			$	585,066				0.1	%
Operating Income			25,420				28,206				(9.9	%)			57,217				66,399				(13.8	%)
Operating Margin     Percentage			8.8	%			9.9	%							9.8	%			11.3	%
EPS		$	0.48			$	0.45				6.7	%		$	1.16			$	1.14				1.8	%
Non-GAAP Results:
Operating Income		$	46,141			$	42,950				7.4	%		$	91,009			$	96,461				(5.7	%)
Adjusted Operating Margin     Percentage			17.3	%			16.2	%							17.0	%			17.8	%
EPS		$	1.02			$	0.80				27.5	%		$	2.02			$	1.84				9.8	%

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 second quarter of 2024 was $290.3 million, a 1.4% increase when compared to revenue of $286.3 million for the second quarter of 2023. The increase in revenue can be attributed to the continued growth of our SaaS and related solutions revenue in addition to the approximately $3 million of revenue generated from the acquired businesses which offset lower software and services revenue for the quarter.

GAAP operating income for the second quarter of 2024 was $25.4 million, or 8.8% of total revenue, compared to $28.2 million, or 9.9% of total revenue, for the second quarter of 2023. The decrease in operating income is mainly attributed to the $5 million increase in restructuring and reorganization charges in the second quarter of 2024 related to a reduction in CSG’s global workforce. This workforce reduction is part of initiatives to better align and allocate CSG’s resources to areas of the business where CSG has identified growth opportunities.

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GAAP EPS for the second quarter of 2024 was $0.48, compared to $0.45 for the second quarter of 2023, with the second quarter of 2024 benefiting primarily from a lower share count.

Non-GAAP Results: Non-GAAP operating income for the second quarter of 2024 was $46.1 million, or a non-GAAP adjusted operating margin of 17.3%, compared to $43.0 million, or a non-GAAP adjusted operating margin of 16.2% for the second quarter of 2023. The increase in non-GAAP operating income and non-GAAP adjusted operating margin can be primarily attributed to lower non-GAAP operating expenses.

Non-GAAP EPS for the second quarter of 2024 was $1.02 compared to $0.80 for the second quarter of 2023. The increase in non-GAAP EPS is mainly due to the higher non-GAAP operating income, discussed above, and the lower share count.

Balance Sheet and Cash Flows

Cash and cash equivalents as of June 30, 2024 were $110.4 million compared to $120.8 million as of March 31, 2024 and $186.3 million as of December 31, 2023. CSG had net cash flows provided by operations for the second quarters ended June 30, 2024 and 2023 of $43.1 million and $12.4 million, respectively, and non-GAAP free cash flow of $38.8 million and $4.7 million, respectively.

Summary of Financial Guidance

CSG is revising its financial guidance for the full year 2024, as follows:

		As of August 7, 2024		Previous
GAAP Measures:
Revenue		No change		$1,200 - $1,240 million
Non-GAAP Measures:
Adjusted Operating Margin Percentage		17.3% - 17.7%		17.0% - 17.4%
EPS		$4.05 - $4.35		$3.85 - $4.15
Adjusted EBITDA		$247 - $257 million		$245 - $255 million
Free Cash Flow		No change		$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, August 7, 2024 at 5:00 p.m. ET, to discuss CSG’s second 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.

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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:

• CSG derives a significant portion of its revenue from a limited number of customers, with approximately forty percent of its revenue from its two largest customers;

• Fluctuations in credit market conditions, general global economic and political conditions, and foreign currency exchange rates;

• CSG’s ability to maintain a reliable, secure computing environment;

• Continued market acceptance of CSG’s products and services;

• CSG’s ability to continuously develop and enhance products in a timely, cost-effective, technically advanced and competitive manner;

• CSG’s ability to deliver its solutions in a timely fashion within budget, particularly large and complex software implementations;

• CSG’s dependency on the global telecommunications industry, and in particular, the North American telecommunications industry;

• CSG’s ability to meet its financial expectations;

• Increasing competition in CSG’s market from companies of greater size and with broader presence;

• CSG’s ability to successfully integrate and manage acquired businesses or assets to achieve expected strategic, operating and financial goals;

• CSG’s ability to protect its intellectual property rights;

• CSG’s ability to conduct business in the international marketplace;

• CSG’s ability to comply with applicable U.S. and International laws and regulations; and

• CSG’s business may be disrupted, and its results of operations and cash flows adversely affected by a global pandemic.

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.

For more information, contact:

John Rea, Head Investor Relations, Treasury and ESG Reporting

(210) 687-4409

E-mail: John.Rea@csgi.com

 

Davis Barker, Manager Investor Relations & Corporate Development

(303) 884-4506

E-mail: Davis.Barker@csgi.com

 

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CSG SYSTEMS INTERNATIONAL, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS-UNAUDITED

(in thousands)

		June 30, 2024				December 31, 2023
ASSETS
Current assets:
Cash and cash equivalents		$	110,435			$	186,264
Settlement and merchant reserve assets			232,054				274,699
Trade accounts receivable:
Billed, net of allowance of $4,720 and $5,432			266,214				267,680
Unbilled			84,570				82,163
Income taxes receivable			10,028				1,345
Other current assets			55,740				50,075
Total current assets			759,041				862,226
Non-current assets:
Property and equipment, net of depreciation of $131,573 and $121,816			59,111				65,545
Operating lease right-of-use assets			28,656				34,283
Software, net of amortization of $164,369 and $157,601			21,408				14,224
Goodwill			317,129				308,596
Acquired customer contracts, net of amortization of $128,867 and $126,469			46,818				35,879
Customer contract costs, net of amortization of $44,140 and $42,094			57,128				54,421
Deferred income taxes			54,934				57,855
Other assets			9,063				10,017
Total non-current assets			594,247				580,820
Total assets		$	1,353,288			$	1,443,046
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt		$	7,500			$	7,500
Operating lease liabilities			14,841				15,946
Customer deposits			35,993				41,035
Trade accounts payable			52,862				46,406
Accrued employee compensation			49,765				84,380
Settlement and merchant reserve liabilities			229,636				273,817
Deferred revenue			56,145				54,199
Income taxes payable			645				4,104
Other current liabilities			29,057				33,449
Total current liabilities			476,444				560,836
Non-current liabilities:
Long-term debt, net of unamortized discounts of $13,893 and $15,628			532,982				534,997
Operating lease liabilities			27,722				34,360
Deferred revenue			22,375				23,447
Income taxes payable			3,241				3,041
Deferred income taxes			122				123
Other non-current liabilities			17,073				12,916
Total non-current liabilities			603,515				608,884
Total liabilities			1,079,959				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; 29,591 and 29,541 shares      outstanding			717				713
Additional paid-in capital			499,995				490,947
Treasury stock, at cost; 40,802 and 40,398 shares			(1,155,542	)			(1,136,055	)
Accumulated other comprehensive income (loss):
Unrealized gain on short-term investments, net of tax			-				1
Cumulative foreign currency translation adjustments			(55,629	)			(50,414	)
Accumulated earnings			983,788				968,134
Total stockholders' equity			273,329				273,326
Total liabilities and stockholders' equity		$	1,353,288			$	1,443,046

 

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CSG SYSTEMS INTERNATIONAL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME-UNAUDITED

(in thousands, except per share amounts)

 

	Quarter Ended								Six Months Ended
	June 30, 2024				June 30, 2023				June 30, 2024				June 30, 2023
Revenue	$	290,318			$	286,327			$	585,453			$	585,066
Cost of revenue (exclusive of depreciation, shown separately below)		152,892				151,142				310,779				306,163
Other operating expenses:
Research and development		38,411				36,645				74,506				72,109
Selling, general and administrative		61,159				62,686				122,881				121,833
Depreciation		5,337				5,573				10,973				11,293
Restructuring and reorganization charges		7,099				2,075				9,097				7,269
Total operating expenses		264,898				258,121				528,236				518,667
Operating income		25,420				28,206				57,217				66,399
Other income (expense):
Interest expense		(7,698	)			(7,837	)			(15,204	)			(15,056	)
Interest income		2,103				772				4,719				1,341
Other, net		174				(1,428	)			732				(3,860	)
Total other		(5,421	)			(8,493	)			(9,753	)			(17,575	)
Income before income taxes		19,999				19,713				47,464				48,824
Income tax provision		(6,170	)			(5,759	)			(14,168	)			(13,942	)
Net income	$	13,829			$	13,954			$	33,296			$	34,882
Weighted-average shares outstanding:
Basic		28,546				30,629				28,531				30,524
Diluted		28,600				30,726				28,698				30,668
Earnings per common share:
Basic	$	0.48			$	0.46			$	1.17			$	1.14
Diluted		0.48				0.45				1.16				1.14

 

 

 

 

 

 

 

 

 

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CSG SYSTEMS INTERNATIONAL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS-UNAUDITED

(in thousands)

	Six Months Ended
	June 30, 2024				June 30, 2023
Cash flows from operating activities:
Net income	$	33,296			$	34,882
Adjustments to reconcile net income to net cash provided by operating activities-
Depreciation		11,409				11,506
Amortization		24,147				22,808
Asset impairment		-				1,689
Gain on lease modifications		-				(3,812	)
Unrealized foreign currency transaction (gain) loss, net		(254	)			241
Deferred income taxes		2,311				(4,673	)
Stock-based compensation		16,371				14,056
Subtotal		87,280				76,697
Changes in operating assets and liabilities, net of acquired amounts:
Trade accounts receivable, net		892				(7,789	)
Other current and non-current assets and liabilities		(11,154	)			(16,083	)
Income taxes payable/receivable		(11,937	)			(7,235	)
Trade accounts payable and accrued liabilities		(52,596	)			(26,853	)
Deferred revenue		1,269				9,046
Net cash provided by operating activities		13,754				27,783
Cash flows from investing activities:
Purchases of software, property, and equipment		(9,073	)			(16,428	)
Proceeds from sale/maturity of short-term investments		-				71
Business combinations, net of cash and settlement assets acquired of $46,432 and zero		17,293				-
Net cash provided by (used in) investing activities		8,220				(16,357	)
Cash flows from financing activities:
Proceeds from issuance of common stock		1,618				1,664
Payment of cash dividends		(18,088	)			(17,712	)
Repurchase of common stock		(27,943	)			(9,418	)
Deferred acquisition payments		(488	)			(1,220	)
Proceeds from long-term debt		15,000				30,000
Payments on long-term debt		(18,750	)			(18,750	)
Payments on financing obligations		(469	)			-
Settlement and merchant reserve activity		(88,703	)			(63,107	)
Net cash used in financing activities		(137,823	)			(78,543	)
Effect of exchange rate fluctuations on cash, cash equivalents, and restricted cash		(2,438	)			708
Net decrease in cash, cash equivalents, and restricted cash		(118,287	)			(66,409	)
Cash, cash equivalents, and restricted cash, beginning of period		463,876				389,018
Cash, cash equivalents, and restricted cash, end of period	$	345,589			$	322,609
Supplemental disclosures of cash flow information:
Cash paid during the period for-
Interest	$	13,566			$	14,672
Income taxes		23,822				23,720
Non-cash investing and financing activities:
Software, property, and equipment included in current and noncurrent liabilities		9,017				-
Reconciliation of cash, cash equivalents, and restricted cash:
Cash and cash equivalents	$	110,435			$	146,212
Settlement and merchant reserve assets		232,054				176,397
Restricted cash included in current and non-current assets		3,100				-
Total cash, cash equivalents, and restricted cash	$	345,589			$	322,609

 

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EXHIBIT 1

CSG SYSTEMS INTERNATIONAL, INC.

SUPPLEMENTAL REVENUE ANALYSIS

Revenue by Significant Customers: 10% or more of Revenue

 

		Quarter Ended								Quarter Ended								Quarter Ended
		June 30, 2024								March 31, 2024								June 30, 2023
		Amount				% of Revenue				Amount				% of Revenue				Amount				% of Revenue
Charter		$	60,629				21	%		$	60,849				21	%		$	60,175				21	%
Comcast			54,576				19	%			52,804				18	%			53,757				19	%

 

Revenue by Vertical

		Quarter Ended				Quarter Ended				Quarter Ended
		June 30, 2024				March 31, 2024				June 30, 2023
Broadband/Cable/Satellite			53	%			51	%			54	%
Telecommunications			16	%			19	%			18	%
All other			31	%			30	%			28	%
Total revenue			100	%			100	%			100	%

 

Revenue by Geography

		Quarter Ended				Quarter Ended				Quarter Ended
		June 30, 2024				March 31, 2024				June 30, 2023
Americas			89	%			86	%			87	%
Europe, Middle East and Africa			6	%			9	%			9	%
Asia Pacific			5	%			5	%			4	%
Total revenue			100	%			100	%			100	%

 

 

 

 

 

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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:

• Certain internal financial planning, reporting, and analysis;

• Forecasting and budgeting;

• Certain management compensation incentives; and

• Communications with CSG’s Board of Directors, stockholders, financial analysts, and investors.

These non-GAAP financial measures are provided with the intent of providing investors with the following information:

• A more complete understanding of CSG’s underlying operational results, trends, and cash generating capabilities;

• Consistency and comparability with CSG’s historical financial results; and

• Comparability to similar companies, many of which present similar non-GAAP financial measures to investors.

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:

• Non-GAAP financial measures are not based on any comprehensive set of accounting rules or principles;

• The way in which CSG calculates non-GAAP financial measures may differ from the way in which other companies calculate similar non-GAAP financial measures;

• Non-GAAP financial measures do not include all items of income and expense that affect CSG’s operations and that are required by GAAP to be included in financial statements;

• Certain adjustments to CSG’s non-GAAP financial measures result in the exclusion of items that are recurring and will be reflected in CSG’s financial statements in future periods; and

• Certain charges excluded from CSG’s non-GAAP financial measures are cash expenses, and therefore do impact CSG’s cash position.

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 non-GAAP financial measure to the most directly comparable GAAP measure.

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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:

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• Acquisition-related expenses include amortization of acquired intangible assets and transaction-related costs, to include earn-out compensation. Transaction-related costs, which typically include expenses related to legal, accounting, and other professional services, are direct and incremental expenses related to business acquisitions, and thus, are not considered reflective of CSG’s recurring business operating results. The total amount of acquisition-related expenses can vary significantly between periods based on the number and size of acquisition activities, previously acquired intangible assets becoming fully amortized, and ultimate realization of earn-out compensation. In addition, the timing of these expenses may not directly correlate with underlying performance of the CSG’s operations. Therefore, the exclusion of acquisition-related expenses in calculating CSG’s non-GAAP financial measures allows management and investors an additional means to compare CSG’s current financial results with historical and future periods.

• Stock-based compensation results from CSG’s issuance of equity awards to its employees under incentive compensation programs. The amount of this incentive compensation in any period is not generally linked to the level of performance by employees or CSG. The exclusion of these expenses in calculating CSG’s non-GAAP financial measures allows management and investors an additional means to evaluate the non-cash expense related to compensation included in CSG’s results of operations, and therefore, the exclusion of this item allows investors to further evaluate the cash generating capabilities of CSG’s business.

 

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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 June 30,								Six Months Ended June 30,
		2024				2023				2024				2023
Non-GAAP Operating Income
GAAP operating income		$	25,420			$	28,206			$	57,217			$	66,399
Restructuring and reorganization charges (1)			7,099				2,075				9,097				7,269
Executive transition costs			-				-				352				-
Acquisition-related expenses:
Amortization of acquired intangible assets			3,393				2,998				6,245				6,207
Transaction-related costs			1,036				2,004				1,036				2,162
Stock-based compensation (1)			9,193				7,667				17,062				14,424
Non-GAAP operating income		$	46,141			$	42,950			$	91,009			$	96,461
Non-GAAP Adjusted Operating Margin Percentage
Revenue		$	290,318			$	286,327			$	585,453			$	585,066
Less: Transaction fees (2)			(24,207	)			(21,176	)			(49,269	)			(43,149	)
Revenue less transaction fees		$	266,111			$	265,151			$	536,184			$	541,917
Non-GAAP adjusted operating margin percentage			17.3	%			16.2	%			17.0	%			17.8	%

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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
		June 30, 2024								June 30, 2023
		Amounts				EPS (4)				Amounts				EPS (4)
GAAP net income		$	13,829			$	0.48			$	13,954			$	0.45
GAAP income tax provision (3)			6,170								5,759
GAAP income before income taxes			19,999								19,713
Restructuring and reorganization charges (1)			7,099								2,075
Acquisition-related costs:
Amortization of acquired intangible assets			3,393								2,998
Transaction-related costs			1,036								2,004
Stock-based compensation (1)			9,193								7,667
Non-GAAP income before income taxes			40,720								34,457
Non-GAAP income tax provision (3)			(11,605	)							(9,820	)
Non-GAAP net income		$	29,115			$	1.02			$	24,637			$	0.80

 

		Six Months Ended								Six Months Ended
		June 30, 2024								June 30, 2023
		Amounts				EPS (4)				Amounts				EPS (4)
GAAP net income		$	33,296			$	1.16			$	34,882			$	1.14
GAAP income tax provision (3)			14,168								13,942
GAAP income before income taxes			47,464								48,824
Restructuring and reorganization charges (1)			9,097								7,269
Executive transition costs			352								-
Acquisition-related expenses:
Amortization of acquired intangible assets			6,245								6,207
Transaction-related costs			1,036								2,162
Stock-based compensation (1)			17,062								14,424
Non-GAAP income before income taxes			81,256								78,886
Non-GAAP income tax provision (3)			(23,158	)							(22,483	)
Non-GAAP net income		$	58,098			$	2.02			$	56,403			$	1.84

(3) For the second quarter and six months ended June 30, 2024 the GAAP effective income tax rates were approximately 31% and 30%, respectively, and the non-GAAP effective income tax rates were 28.5% for both periods. For the second quarter and six months ended June 30, 2023 the GAAP effective income tax rates were approximately 29% for both periods, and the non-GAAP effective income tax rates were 28.5% for both periods.

(4) The outstanding diluted shares for the second quarter and six months ended June 30, 2024 were 28.6 million and 28.7 million, respectively, and for the second quarter and six months ended June 30, 2023 were 30.7 million, for both periods.

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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								Six Months Ended
		June 30,								June 30,
		2024				2023				2024				2023
GAAP net income		$	13,829			$	13,954			$	33,296			$	34,882
GAAP income tax provision			6,170				5,759				14,168				13,942
Interest expense (5)			7,698				7,837				15,204				15,056
Interest and investment income and other, net			(2,277	)			656				(5,451	)			2,519
GAAP operating income			25,420				28,206				57,217				66,399
Restructuring and reorganization charges (1)			7,099				2,075				9,097				7,269
Executive transition costs			-				-				352				-
Acquisition-related expenses:
Amortization of acquired intangible assets (6)			3,393				2,998				6,245				6,207
Transaction-related costs			1,036				2,004				1,036				2,162
Stock-based compensation (1)			9,193				7,667				17,062				14,424
Amortization of other intangible assets (6)			2,880				3,383				5,445				6,836
Amortization of customer contract costs (6)			5,694				4,771				10,722				9,393
Depreciation (1)			5,337				5,573				10,973				11,293
Non-GAAP adjusted EBITDA		$	60,052			$	56,677			$	118,149			$	123,983
Non-GAAP adjusted EBITDA as a percentage of revenue less transaction fees (2)			22.6	%			21.4	%			22.0	%			22.9	%

(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								Six Months Ended
		June 30,								June 30,
		2024				2023				2024				2023
Amortization of acquired intangible assets		$	3,393			$	2,998			$	6,245			$	6,207
Amortization of other intangible assets			2,880				3,383				5,445				6,836
Amortization of customer contract costs			5,694				4,771				10,722				9,393
Amortization of deferred financing costs			871				185				1,735				372
Total amortization		$	12,838			$	11,337			$	24,147			$	22,808

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								Six Months Ended
		June 30,								June 30,
		2024				2023				2024				2023
Cash flows from operating activities		$	43,105			$	12,386			$	13,754			$	27,783
Purchases of software, property and equipment			(4,299	)			(7,728	)			(9,073	)			(16,428	)
Non-GAAP free cash flow		$	38,806			$	4,658			$	4,681			$	11,355

 

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Non-GAAP Financial Measures – 2024 Financial Guidance

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 non-GAAP adjusted operating margin percentage, as included in CSG’s 2024 full year financial guidance, is as follows (in thousands, except percentages):

		2024 Guidance Range
		Low Range				High Range
Non-GAAP Operating Income
GAAP operating income		$	131,600			$	141,600
Restructuring and reorganization charges			9,100				9,100
Executive transition costs			400				400
Acquisition-related expenses:
Amortization of acquired intangible assets			14,400				14,400
Transaction-related costs			1,000				1,000
Stock-based compensation			34,200				34,200
Non-GAAP operating income		$	190,700			$	200,700
Non-GAAP Operating Margin Percentage
Revenue		$	1,200,000			$	1,240,000
Less: Transaction fees			(98,000	)			(103,000	)
Revenue less transaction fees		$	1,102,000			$	1,137,000
Non-GAAP adjusted operating margin percentage			17.3	%			17.7	%

Non-GAAP EPS:

The reconciliation of GAAP EPS to non-GAAP EPS as included in CSG’s 2024 full year financial guidance is as follows (in thousands, except per share amounts):

		2024 Guidance Range
		Low Range								High Range
		Amounts				EPS (8)				Amounts				EPS (8)
GAAP net income		$	75,700			$	2.59			$	82,900			$	2.88
GAAP income tax provision (7)			31,500								34,300
GAAP income before income taxes			107,200								117,200
Restructuring and reorganization charges			9,100								9,100
Executive transition costs			400								400
Acquisition-related expenses:
Amortization of acquired intangible assets			14,400								14,400
Transaction-related costs			1,000								1,000
Stock-based compensation			34,200								34,200
Non-GAAP income before income taxes			166,300								176,300
Non-GAAP income tax provision (7)			(48,500	)							(51,000	)
Non-GAAP net income		$	117,800			$	4.05			$	125,300			$	4.35

 

(7) For 2024, the estimated effective income tax rates for GAAP and non-GAAP purposes are expected to be approximately 29%.

(8) The weighted-average diluted shares outstanding are expected to be approximately 29 million.

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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 CSG’s 2024 full year financial guidance (in thousands, except percentages):

		2024 Guidance Range
		Low Range				High Range
GAAP net income		$	75,700			$	82,900
GAAP income tax provision (7)			31,500				34,300
Interest expense			31,100				31,100
Interest and investment income			(6,700	)			(6,700	)
GAAP operating income			131,600				141,600
Restructuring and reorganization charges			9,100				9,100
Executive transition costs			400				400
Acquisition-related expenses:
Amortization of acquired intangible assets			14,400				14,400
Transaction-related costs			1,000				1,000
Stock-based compensation			34,200				34,200
Amortization of other intangible assets			10,000				10,000
Amortization of client contract costs			22,500				22,500
Depreciation			23,800				23,800
Non-GAAP adjusted EBITDA		$	247,000			$	257,000
Non-GAAP adjusted EBITDA as a percentage of revenue less     transaction fees (2)			22.4	%			22.6	%

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 is provided below for CSG’s 2024 full year financial guidance (in thousands):

		2024 Guidance Range
		Low Range				High Range
Cash flows from operating activities		$	120,000			$	170,000
Purchases of software, property and equipment			(25,000	)			(35,000	)
Non-GAAP free cash flow		$	95,000			$	135,000

 

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v3.24.2.u1

Document and Entity Information	Aug. 07, 2024
Cover [Abstract]
Document Type	8-K
Amendment Flag	false
Document Period End Date	Aug. 07, 2024
Entity Registrant Name	CSG SYSTEMS INTERNATIONAL, INC.
Entity Central Index Key	0001005757
Entity Emerging Growth Company	false
Title of 12(b) Security	Common Stock, Par Value $0.01 Per Share
Trading Symbol	CSGS
Security Exchange Name	NASDAQ
Entity File Number	0-27512
Entity Incorporation, State or Country Code	DE
Entity Tax Identification Number	47-0783182
Entity Address, Address Line One	169 Inverness Dr W
Entity Address, Address Line Two	Suite 300
Entity Address, City or Town	Englewood
Entity Address, State or Province	CO
Entity Address, Postal Zip Code	80112
City Area Code	303
Local Phone Number	200-2000
Written Communications	false
Soliciting Material	false
Pre-commencement Tender Offer	false
Pre-commencement Issuer Tender Offer	false

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