Summary of CSG's Earnings Call Company Overview - CSG is a leader in the US cable broadband market, serving over 75% of the market share alongside major players like Comcast and Charter [doc id='7'][doc id='8'] - The company has diversified its revenue streams, with non-cable and non-telco revenue growing from 7% in 2017 to 32% in the last quarter [doc id='11'] Key Financial Highlights - CSG reported double-digit growth in operating margin, EBITDA, and EPS year-over-year, with nearly 20% growth in free cash flow for the first half of the year [doc id='3'] - The company expects organic revenue growth to stabilize between 2% to 4% in the coming quarters, down from a historical average of 5.3% [doc id='5'] Business Segments and Growth Strategy - CSG operates in multiple segments, including cable broadband, global telecom, and various industry verticals such as financial services, healthcare, and retail [doc id='11'][doc id='46] - The company aims to simplify business processes and enhance customer experience through its SaaS platforms, which are designed to be agile and cost-effective [doc id='22'] - CSG has made significant inroads in global telecom, winning contracts with major players like MTN and Telstra, and sees substantial growth potential in this sector [doc id='19'] Market Dynamics and Competitive Landscape - The company acknowledges headwinds from competitive pressures in the US broadband market, particularly from Comcast and Charter, which may impact revenue growth [doc id='35'] - CSG is focused on expanding its market share in global telecom and other verticals, leveraging its established relationships and proven solutions [doc id='20'][doc id='37] AI and Technological Advancements - CSG is investing in AI to enhance operational efficiency and drive new revenue opportunities, with expectations of significant impacts on profitability and cash flow in the coming years [doc id='75'] - The company is currently in the early stages of adopting AI technologies, with plans to integrate these advancements across various business functions [doc id='78] Customer Engagement and Use Cases - CSG has developed solutions for various industries, including media, financial services, and healthcare, focusing on improving customer engagement and operational efficiency [doc id='46'][doc id='49'] - The company has successfully implemented data-driven solutions that have led to significant cost savings and improved customer experiences for its clients [doc id='53] Future Outlook - CSG is optimistic about its growth trajectory, particularly in the global telecom sector and its diversified verticals, while remaining disciplined in capital deployment for acquisitions [doc id='40][doc id='39] - The company believes that the ongoing digital transformation in telecom and other industries presents substantial opportunities for growth [doc id='42] Conclusion - CSG is well-positioned to capitalize on growth opportunities across its various business segments, driven by its strong market presence, innovative solutions, and commitment to leveraging technology for operational excellence [doc id='70]

Core Insights - CSG Systems' international operations are crucial for assessing its financial strength and growth potential [1][2] - The company's reliance on global markets presents both opportunities and challenges, making the analysis of international revenue trends essential for forecasting [9][10] Financial Performance - CSG Systems reported total revenue of $271.26 million for the quarter, reflecting a 1.9% increase [4] - Revenue from Europe, Middle East, and Africa was $31.86 million, accounting for 11.7% of total revenue, which was a decrease of 1.16% from expectations [5] - Asia-Pacific generated $12.11 million, representing 4.5% of total revenue, exceeding projections by 3.32% [6] Future Projections - Analysts anticipate total revenue of $284.85 million for the current fiscal quarter, a 4.5% increase year-over-year, with contributions from Europe, Middle East, and Africa expected to be 12% and Asia-Pacific at 4.4% [7] - For the full year, total revenue is projected to reach $1.14 billion, a 4% increase from the previous year, with regional contributions of 11.3% from Europe, Middle East, and Africa and 4.3% from Asia-Pacific [8] Market Context - The interconnected global economy necessitates understanding a company's international market engagement for consistent earnings and growth potential [2][3] - Geopolitical risks and currency fluctuations are challenges that accompany participation in global markets [3]

Part I - FINANCIAL INFORMATION This section provides the unaudited condensed consolidated financial statements and related notes for the reporting period [Item 1. Financial Information](index=3&type=section&id=Item%201%2E%20Financial%20Information) This section presents the unaudited condensed consolidated financial statements for the quarter and six months ended June 30, 2025, along with detailed notes on accounting policies and key financial items [Condensed Consolidated Balance Sheets](index=3&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) This section provides a snapshot of the company's financial position, detailing assets, liabilities, and stockholders' equity at specific dates Condensed Consolidated Balance Sheets (in thousands) | Metric | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | | :-------------------------------- | :----------------------------- | :----------------------------- | | Total Assets | $1,421,238 | $1,500,687 | | Total Liabilities | $1,130,517 | $1,218,118 | | Total Stockholders' Equity | $290,721 | $282,569 | - Total assets decreased by **$79.4 million** from December 31, 2024, to June 30, 2025, primarily driven by a decrease in current assets, notably cash and cash equivalents and settlement and merchant reserve assets[9](index=9&type=chunk) - Total liabilities decreased by **$87.6 million**, mainly due to a reduction in current liabilities, including current portion of long-term debt and settlement and merchant reserve liabilities[9](index=9&type=chunk) - Stockholders' equity increased by **$8.1 million**, driven by accumulated earnings and additional paid-in capital, partially offset by treasury stock repurchases[9](index=9&type=chunk) [Condensed Consolidated Statements of Income](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Income) This section presents the company's revenues, expenses, and net income over specific reporting periods Condensed Consolidated Statements of Income (in thousands) | Metric | Quarter Ended June 30, 2025 (in thousands) | Quarter Ended June 30, 2024 (in thousands) | Six Months Ended June 30, 2025 (in thousands) | Six Months Ended June 30, 2024 (in thousands) | | :-------------------------------- | :--------------------------------------- | :--------------------------------------- | :-------------------------------------- | :-------------------------------------- | | Revenue | $297,128 | $290,318 | $596,581 | $585,453 | | Cost of Revenue | $150,140 | $152,892 | $304,638 | $310,779 | | Operating Income | $29,857 | $25,420 | $59,240 | $57,217 | | Net Income | $12,267 | $13,829 | $28,397 | $33,296 | | Basic EPS | $0.44 | $0.48 | $1.02 | $1.17 | | Diluted EPS | $0.44 | $0.48 | $1.01 | $1.16 | - Revenue increased by **2.3%** for the quarter and **1.9%** for the six months ended June 30, 2025, compared to the prior year periods[11](index=11&type=chunk) - Operating income increased by **17.4%** for the quarter and **3.5%** for the six months ended June 30, 2025, reflecting improved operating efficiency[11](index=11&type=chunk) - Net income decreased by **11.3%** for the quarter and **14.7%** for the six months ended June 30, 2025, primarily due to higher income tax provision and other net expenses[11](index=11&type=chunk) [Condensed Consolidated Statements of Comprehensive Income](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income) This section details net income and other comprehensive income items, reflecting the total change in equity from non-owner sources Condensed Consolidated Statements of Comprehensive Income (in thousands) | Metric | Quarter Ended June 30, 2025 (in thousands) | Quarter Ended June 30, 2024 (in thousands) | Six Months Ended June 30, 2025 (in thousands) | Six Months Ended June 30, 2024 (in thousands) | | :-------------------------------- | :--------------------------------------- | :--------------------------------------- | :-------------------------------------- | :-------------------------------------- | | Net Income | $12,267 | $13,829 | $28,397 | $33,296 | | Foreign currency translation adjustments | $13,575 | $(241) | $20,398 | $(5,216) | | Total Comprehensive Income | $25,842 | $13,588 | $48,795 | $28,080 | - Total comprehensive income significantly increased for both the quarter and six months ended June 30, 2025, primarily driven by positive foreign currency translation adjustments[13](index=13&type=chunk) [Condensed Consolidated Statements of Stockholders' Equity](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Stockholders%27%20Equity) This section outlines changes in stockholders' equity, including net income, stock repurchases, and dividends Condensed Consolidated Statements of Stockholders' Equity (in thousands) | Metric | June 30, 2025 (in thousands) | January 1, 2025 (in thousands) | | :-------------------------------- | :----------------------------- | :----------------------------- | | Total Stockholders' Equity | $290,721 | $282,569 | | Net Income | $28,397 | $16,130 (Q1 2025) | | Repurchase of common stock | $(40,545) (6 months) | $(22,236) (Q1 2025) | | Dividends | $(18,583) (6 months) | $(9,364) (Q1 2025) | | Stock-based compensation expense | $16,953 (6 months) | $8,404 (Q1 2025) | - Stockholders' equity increased from **$282.6 million** at January 1, 2025, to **$290.7 million** at June 30, 2025, reflecting net income and stock-based compensation, partially offset by common stock repurchases and dividends[14](index=14&type=chunk) - The company repurchased **647,000 shares** of common stock for **$40.5 million** during the six months ended June 30, 2025, including shares for tax withholdings[14](index=14&type=chunk) - Cash dividends totaling **$18.6 million** were declared for the six months ended June 30, 2025[14](index=14&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) This section reports cash generated and used by operating, investing, and financing activities Cash Flow Activity (in thousands) | Cash Flow Activity | Six Months Ended June 30, 2025 (in thousands) | Six Months Ended June 30, 2024 (in thousands) | | :-------------------------------- | :------------------------------------------ | :------------------------------------------ | | Net cash provided by operating activities | $48,795 | $13,754 | | Net cash provided by (used in) investing activities | $(7,000) | $8,220 | | Net cash used in financing activities | $(152,111) | $(137,823) | | Net decrease in cash, cash equivalents, and restricted cash | $(102,941) | $(118,287) | | Cash, cash equivalents, and restricted cash, end of period | $403,822 | $345,589 | - Net cash provided by operating activities significantly increased to **$48.8 million** for the six months ended June 30, 2025, from **$13.8 million** in the prior year, primarily due to favorable changes in operating assets and liabilities[15](index=15&type=chunk) - Investing activities shifted from providing **$8.2 million** in cash in 2024 to using **$7.0 million** in 2025, mainly due to the absence of business combinations in 2025[15](index=15&type=chunk) - Net cash used in financing activities increased to **$152.1 million**, driven by higher payments on long-term debt and increased common stock repurchases[15](index=15&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) This section provides detailed explanations and disclosures supporting the condensed consolidated financial statements [1. GENERAL](index=9&type=section&id=1%2E%20GENERAL) This note outlines the basis of presentation for the unaudited interim financial statements - The unaudited condensed consolidated financial statements are prepared in accordance with U.S. GAAP for interim financial information and SEC rules, and should be read with the 2024 10-K[16](index=16&type=chunk) [2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES](index=9&type=section&id=2%2E%20SUMMARY%20OF%20SIGNIFICANT%20ACCOUNTING%20POLICIES) This note details the key accounting principles and estimates used in preparing the financial statements - As of June 30, 2025, the aggregate transaction price allocated to remaining performance obligations is approximately **$1.7 billion**, with about **70%** expected to be recognized by the end of 2027[18](index=18&type=chunk) Revenue by Type (in thousands) | Revenue Type | Quarter Ended June 30, 2025 | Quarter Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :----------------------- | :-------------------------- | :-------------------------- | :----------------------------- | :----------------------------- | | SaaS and related solutions | $269,548 | $262,658 | $539,488 | $524,353 | | Software and services | $16,290 | $14,681 | $34,913 | $37,075 | | Maintenance | $11,290 | $12,979 | $22,180 | $24,025 | | **Total Revenue** | **$297,128** | **$290,318** | **$596,581** | **$585,453** | Revenue by Geographic Region (Percentage of Total Revenue) | Geographic Region | Quarter Ended June 30, 2025 | Quarter Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------------- | :-------------------------- | :-------------------------- | :----------------------------- | :----------------------------- | | Americas | 85% | 89% | 86% | 87% | | Europe, Middle East, and Africa | 11% | 6% | 10% | 8% | | Asia Pacific | 4% | 5% | 4% | 5% | | **Total Revenue** | **100%** | **100%** | **100%** | **100%** | Revenue by Customer Vertical (Percentage of Total Revenue) | Customer Vertical | Quarter Ended June 30, 2025 | Quarter Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------ | :-------------------------- | :-------------------------- | :----------------------------- | :----------------------------- | | Broadband/Cable/Satellite | 51% | 53% | 50% | 52% | | Telecommunications | 18% | 16% | 18% | 17% | | Other | 31% | 31% | 32% | 31% | | **Total Revenue** | **100%** | **100%** | **100%** | **100%** | - The company holds settlement and merchant reserve assets and liabilities, which represent cash collected on behalf of merchants and deposits to mitigate risk, totaling **$256.1 million** in assets and **$253.1 million** in liabilities as of June 30, 2025[25](index=25&type=chunk) - New tax legislation, the One Big Beautiful Bill Act (OBBBA), enacted July 4, 2025, is being assessed for potential impact on deferred tax balances and cash flows, but is not currently expected to materially impact the effective tax rate[27](index=27&type=chunk) [3. SEGMENT REPORTING AND CUSTOMER CONCENTRATION](index=13&type=section&id=3%2E%20SEGMENT%20REPORTING%20AND%20CUSTOMER%20CONCENTRATION) This note describes the company's operating segments and revenue concentration from major customers - The company operates as one reportable segment, with the President and CEO serving as the Chief Operating Decision Maker (CODM) managing all business activities on a consolidated basis[30](index=30&type=chunk)[31](index=31&type=chunk) - Consolidated net income is used by the CODM to assess performance, allocate resources, and monitor actual results against budgets[31](index=31&type=chunk) [4. GOODWILL AND INTANGIBLE ASSETS](index=14&type=section&id=4%2E%20GOODWILL%20AND%20INTANGIBLE%20ASSETS) This note provides details on the carrying value and changes in goodwill and other intangible assets Goodwill (in thousands) | Date | Balance | | :------------------- | :-------- | | January 1, 2025 | $316,041 | | June 30, 2025 | $325,773 | - Goodwill increased by **$9.7 million** during the six months ended June 30, 2025, primarily due to the effects of changes in foreign currency exchange rates[34](index=34&type=chunk) Other Intangible Assets (Net Carrying Value in thousands) | Asset Type | June 30, 2025 | December 31, 2024 | | :------------------------ | :------------ | :---------------- | | Acquired customer contracts | $34,071 | $39,377 | | Software | $21,677 | $19,927 | | **Total** | **$55,748** | **$59,304** | - Total amortization expense for other intangible assets was **$13.3 million** for the six months ended June 30, 2025, up from **$11.7 million** in the prior year[35](index=35&type=chunk) - Estimated total amortization expense for intangible assets for the remainder of 2025 is **$26.0 million**, decreasing to **$3.6 million** by 2029[35](index=35&type=chunk) [5. DEBT](index=16&type=section&id=5%2E%20DEBT) This note outlines the company's long-term debt obligations, including credit agreements and convertible notes Long-Term Debt (Net of Unamortized Discounts, in thousands) | Debt Type | June 30, 2025 | December 31, 2024 | | :------------------------ | :------------ | :---------------- | | 2025 Credit Agreement | $122,041 | $- | | 2023 Convertible Notes | $415,726 | $414,382 | | 2021 Credit Agreement | $- | $124,115 | | **Total Long-Term Debt** | **$537,767** | **$530,997** | - In March 2025, the company entered into a new **$600.0 million** 2025 Credit Agreement, replacing the 2021 Credit Agreement, consisting of a five-year revolving loan facility[37](index=37&type=chunk) - Upon execution, **$140.6 million** was drawn from the 2025 Revolver to repay the outstanding balances of the 2021 Term Loan and 2021 Revolver, and for general corporate purposes[38](index=38&type=chunk) - As of June 30, 2025, **$125.0 million** was outstanding on the 2025 Revolver, with **$475.0 million** available[42](index=42&type=chunk) - The 2023 Convertible Notes have a principal amount of **$425.0 million**, due September 2028, with a cash interest rate of **3.875%** and an initial conversion price of **$71.05 per share**[44](index=44&type=chunk)[45](index=45&type=chunk) [6. ACQUISITIONS](index=19&type=section&id=6%2E%20ACQUISITIONS) This note details recent business acquisitions, including purchase prices and earn-out provisions - The company acquired iCheckGateway.com, LLC (iCG) in June 2024 for **$17.6 million** in cash, with provisions for up to **$15.0 million** in future earn-out payments through June 2027[51](index=51&type=chunk)[52](index=52&type=chunk) - During Q2 2025, **$5.0 million** in earn-out payments were made for iCG, and **$3.5 million** is accrued as of June 30, 2025[52](index=52&type=chunk) - The DGIT Systems Pty Ltd (DGIT) acquisition (October 2021) includes provisions for up to **$12 million** in earn-out payments through December 2026; **$0.1 million** was paid in Q1 2025, and **$8.0 million** is accrued as of June 30, 2025[53](index=53&type=chunk)[54](index=54&type=chunk) [7. RESTRUCTURING AND REORGANIZATION CHARGES](index=19&type=section&id=7%2E%20RESTRUCTURING%20AND%20REORGANIZATION%20CHARGES) This note reports on charges incurred for restructuring and reorganization activities, including workforce reductions Restructuring and Reorganization Charges (in thousands) | Period | 2025 | 2024 | | :------------------------ | :----- | :----- | | Quarter Ended June 30 | $4,588 | $7,099 | | Six Months Ended June 30 | $11,956 | $9,097 | - Restructuring charges for the six months ended June 30, 2025, primarily relate to a workforce reduction of approximately **150 employees** (**$7.7 million** in involuntary terminations) and the planned closure of a design and delivery center in Crawfordville, Florida (**$3.2 million** incurred to date, with total estimated cost of **$5 million**)[55](index=55&type=chunk) [8. COMMITMENTS, GUARANTEES AND CONTINGENCIES](index=21&type=section&id=8%2E%20COMMITMENTS%2C%20GUARANTEES%20AND%20CONTINGENCIES) This note discloses the company's contractual commitments, guarantees, and potential contingent liabilities - The company extended its outsourced computing services agreement with Ensono, Inc. through December 31, 2032, resulting in a finance lease right-of-use asset of **$10.6 million** as of June 30, 2025[58](index=58&type=chunk) - As of June 30, 2025, the company had **$1.8 million** in restricted assets collateralizing bank and performance guarantees, and **$3.8 million** in off-balance sheet performance guarantees (surety bonds and standby letters of credit)[59](index=59&type=chunk)[60](index=60&type=chunk) - Total aggregate money transmitter bonds outstanding were **$23.7 million** as of June 30, 2025, to comply with state financial requirements[60](index=60&type=chunk) [9. EARNINGS PER COMMON SHARE](index=23&type=section&id=9%2E%20EARNINGS%20PER%20COMMON%20SHARE) This note provides the calculation of basic and diluted earnings per common share Weighted-Average Common Shares (in thousands) | Share Type | Quarter Ended June 30, 2025 | Quarter Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------------- | :-------------------------- | :-------------------------- | :----------------------------- | :----------------------------- | | Basic weighted-average common shares | 27,843 | 28,546 | 27,829 | 28,531 | | Diluted weighted-average common shares | 28,132 | 28,600 | 28,199 | 28,698 | - The dilutive effect of the 2023 Convertible Notes is computed using the if-converted method and only impacts periods where the average stock price exceeds the effective conversion price[68](index=68&type=chunk) [10. STOCKHOLDERS' EQUITY AND EQUITY COMPENSATION PLANS](index=23&type=section&id=10%2E%20STOCKHOLDERS%27%20EQUITY%20AND%20EQUITY%20COMPENSATION%20PLANS) This note details changes in stockholders' equity and information on equity compensation plans - Under the Stock Repurchase Program, the company repurchased approximately **275,000 shares** for **$17.1 million** in Q2 2025 and **428,000 shares** for **$26.7 million** in the six months ended June 30, 2025[70](index=70&type=chunk) - As of June 30, 2025, **$111.3 million** remained authorized for repurchase under the program, to be completed by December 31, 2025[71](index=71&type=chunk) - Cash dividends of **$0.32 per share** (**$9.2 million** total) were approved for Q2 2025, with total dividends declared for the six months ended June 30, 2025, amounting to **$18.6 million**[73](index=73&type=chunk)[74](index=74&type=chunk) - Stock-based compensation expense was **$8.6 million** for Q2 2025 and **$17.0 million** for the six months ended June 30, 2025[77](index=77&type=chunk) [11. SUBSEQUENT EVENT](index=25&type=section&id=11%2E%20SUBSEQUENT%20EVENT) This note describes significant events occurring after the balance sheet date but before financial statement issuance - On July 5, 2025, CSG terminated a master services agreement (MSA) for an implementation project in Latin America due to the customer's unlawful renunciation of obligations[78](index=78&type=chunk) - The project recognized **$1.4 million** in revenue during the six months ended June 30, 2025, and had **$18.5 million** in accounts receivable (**$1.4 million** billed, **$17.1 million** unbilled) as of June 30, 2025[79](index=79&type=chunk) - CSG intends to pursue all available remedies and does not believe there has been an impairment to asset carrying values, expecting amounts to be recoverable[79](index=79&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=26&type=section&id=Item%202%2E%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on the company's financial condition, results of operations, liquidity, and capital resources, highlighting key trends and risks [Company Overview](index=26&type=section&id=Company%20Overview) This section describes CSG's business model as a SaaS platform company focused on customer engagement and monetization - CSG is a purpose-driven SaaS platform company focused on simplifying customer engagement and monetization for global companies across various industry verticals[82](index=82&type=chunk) - The company's solutions include revenue management, digital monetization, customer experience, and payments, built on a cloud-first architecture[82](index=82&type=chunk) - R&D and acquisition investments are focused on expanding offerings, including new AI capabilities, to address complex customer needs and improve profitability[84](index=84&type=chunk)[106](index=106&type=chunk) [Macroeconomic Outlook](index=26&type=section&id=Macroeconomic%20Outlook) This section discusses potential impacts of global economic uncertainties on the company's business operations - Current geopolitical and economic uncertainties, including inflation, tariffs, supply chain disruptions, and labor shortages, could adversely affect the business[86](index=86&type=chunk) - The company cannot predict the full impact of these events and may not be able to fully mitigate related financial and competitive impacts[86](index=86&type=chunk) [Management Overview of Quarterly Results](index=27&type=section&id=Management%20Overview%20of%20Quarterly%20Results) This section provides a high-level summary of the company's financial performance for the recent quarter Second Quarter Highlights (in thousands, except per share amounts and percentages) | Metric | Quarter Ended June 30, 2025 | Quarter Ended June 30, 2024 | | :-------------------------------- | :-------------------------- | :-------------------------- | | Revenue | $297,128 | $290,318 | | Transaction fees | $25,866 | $24,207 | | Operating income | $29,857 | $25,420 | | Operating margin percentage | 10.0% | 8.8% | | Diluted EPS | $0.44 | $0.48 | | Restructuring and reorganization charges | $4,588 | $7,099 | | Amortization of acquired intangible assets | $3,458 | $3,393 | | Earn-out compensation | $7,806 | $- | | Transaction-related costs | $- | $1,036 | | Stock-based compensation | $8,762 | $9,193 | - Revenue increased by **2.3%** in Q2 2025, driven by growth in SaaS and related solutions, including revenue from the iCG acquisition[87](index=87&type=chunk) - Operating income rose to **$29.9 million** (**10.0% margin**) in Q2 2025 from **$25.4 million** (**8.8% margin**) in Q2 2024, due to decreased restructuring charges and benefits from cost efficiency actions[88](index=88&type=chunk) - Diluted EPS decreased to **$0.44** in Q2 2025 from **$0.48** in Q2 2024, mainly due to a higher effective income tax rate related to DGIT earn-out compensation[89](index=89&type=chunk) [Significant Customer Relationships](index=27&type=section&id=Significant%20Customer%20Relationships) This section highlights revenue concentration from key customers and associated risks - A large percentage of revenue is generated from a limited number of customers, with Charter and Comcast exceeding **10%** of total revenue[91](index=91&type=chunk) Customer Revenue Concentration (Percentage of Total Revenue) | Customer | Quarter Ended June 30, 2025 | Quarter Ended June 30, 2024 | | :------- | :-------------------------- | :-------------------------- | | Charter | 19% | 21% | | Comcast | 17% | 19% | - The company faces inherent risks from customer concentration, including potential adverse effects on financial position and results of operations if a significant customer terminates contracts, reduces services, or experiences financial difficulties[94](index=94&type=chunk) [Contract Termination](index=29&type=section&id=Contract%20Termination) This section details the termination of a master services agreement and its financial implications - On July 5, 2025, CSG terminated a master services agreement (MSA) for an implementation project in Latin America due to the customer's unlawful renunciation of obligations[96](index=96&type=chunk) - The project generated **$1.4 million** in revenue during the six months ended June 30, 2025, and had **$18.5 million** in accounts receivable (**$1.4 million** billed, **$17.1 million** unbilled)[97](index=97&type=chunk) - CSG does not expect a material impact on 2025 revenue and believes the accounts receivable are recoverable, but an impairment is possible if collection efforts are unsuccessful[97](index=97&type=chunk) [Critical Accounting Policies and Estimates](index=29&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) This section discusses the key accounting policies and estimates requiring significant management judgment - Key critical accounting policies and estimates include revenue recognition, income taxes, and loss contingencies, which involve complex judgments and assumptions[99](index=99&type=chunk) [Results of Operations](index=29&type=section&id=Results%20of%20Operations) This section provides a detailed analysis of revenue, expenses, and profitability trends Revenue by Type (in thousands) | Revenue Type | Quarter Ended June 30, 2025 | Quarter Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :----------------------- | :-------------------------- | :-------------------------- | :----------------------------- | :----------------------------- | | SaaS and related solutions | $269,548 | $262,658 | $539,488 | $524,353 | | Software and services | $16,290 | $14,681 | $34,913 | $37,075 | | Maintenance | $11,290 | $12,979 | $22,180 | $24,025 | | **Total Revenue** | **$297,128** | **$290,318** | **$596,581** | **$585,453** | - Revenue growth was primarily driven by SaaS and related solutions, including contributions from 2024 acquisitions, and approximately **$6 million** from a software license arrangement in Q2 2025[102](index=102&type=chunk) Revenue by Geographic Region (in thousands) | Geographic Region | Quarter Ended June 30, 2025 | Quarter Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------------- | :-------------------------- | :-------------------------- | :----------------------------- | :----------------------------- | | Americas | $253,164 | $258,035 | $512,511 | $512,573 | | Europe, Middle East, and Africa | $31,855 | $18,989 | $58,890 | $45,818 | | Asia Pacific | $12,109 | $13,294 | $25,180 | $27,062 | | **Total Revenue** | **$297,128** | **$290,318** | **$596,581** | **$585,453** | - Total operating expenses increased by **0.9%** for the quarter and **1.7%** for the six months, mainly due to acquisition-related expenses (DGIT earn-out compensation) and acquired businesses, partially offset by cost efficiency actions[103](index=103&type=chunk) - Cost of revenue decreased by **1.8%** for the quarter and **2.0%** for the six months, attributed to lower employee-related costs and cost efficiency actions, despite increased SaaS revenue[105](index=105&type=chunk) - R&D expense increased by **5.2%** for the quarter and **9.1%** for the six months, reflecting increased investments in faster-growing SaaS solutions and acquisitions[106](index=106&type=chunk) - SG&A expense increased by **10.4%** for the quarter and **5.7%** for the six months, primarily due to **$7 million** of DGIT earn-out compensation in Q2 2025[107](index=107&type=chunk) - Operating income increased to **$29.9 million** (**10.0% of revenue**) for Q2 2025 and **$59.2 million** (**9.9% of revenue**) for the six months, benefiting from cost efficiency actions[110](index=110&type=chunk) - Interest income decreased due to lower cash balances swept into overnight money market accounts[111](index=111&type=chunk) - A **$0.5 million** loss on debt extinguishment was recognized in March 2025 due to the replacement of the 2021 Credit Agreement[112](index=112&type=chunk) - Other, net shifted from income to expense, primarily due to foreign currency movements[113](index=113&type=chunk) - The effective income tax rate increased to **38%** for Q2 2025 and **31%** for the six months, mainly due to DGIT earn-out compensation for which a valuation allowance was established[114](index=114&type=chunk) [Liquidity](index=33&type=section&id=Liquidity) This section assesses the company's ability to meet short-term obligations using available cash and credit facilities - As of June 30, 2025, cash and cash equivalents were **$145.9 million**, with **$475.0 million** available under the 2025 Revolver[115](index=115&type=chunk)[116](index=116&type=chunk) Cash and Cash Equivalents by Geographical Region (in thousands) | Region | June 30, 2025 | December 31, 2024 | | :-------------------------------- | :------------ | :---------------- | | Americas | $89,023 | $102,417 | | Europe, Middle East, and Africa | $41,089 | $43,609 | | Asia Pacific | $15,763 | $15,763 | | **Total** | **$145,875** | **$161,789** | - Restricted cash totaled **$1.8 million**, and settlement and merchant reserve assets were **$256.1 million** as of June 30, 2025[118](index=118&type=chunk) - Net cash provided by operating activities for the six months ended June 30, 2025, was **$48.8 million**, a significant increase from **$13.8 million** in the prior year, primarily due to changes in operating assets and liabilities[121](index=121&type=chunk) - Days Billings Outstanding (DBO) remained consistent at **66 days** for Q2 2025 and Q2 2024, indicating stable collection performance[123](index=123&type=chunk) - Unbilled trade accounts receivable increased by **$10.6 million** to **$90.8 million**, with **$17.1 million** related to the recently terminated Latin America project[127](index=127&type=chunk) [Cash Flows from Investing Activities](index=37&type=section&id=Cash%20Flows%20from%20Investing%20Activities) This section details cash flows related to the acquisition and disposal of long-term assets and businesses - Capital expenditures for software, property, and equipment were **$7.2 million** for the six months ended June 30, 2025, a decrease from **$9.1 million** in the prior year[131](index=131&type=chunk) - Net cash provided by business combinations was **$17.3 million** for the six months ended June 30, 2024, with no significant business combination cash flows in 2025[132](index=132&type=chunk) [Cash Flows from Financing Activities](index=37&type=section&id=Cash%20Flows%20from%20Financing%20Activities) This section reports cash flows from debt, equity transactions, and dividend payments - Cash dividends paid totaled **$18.5 million** for the six months ended June 30, 2025, up from **$18.1 million** in the prior year[133](index=133&type=chunk) - The company repurchased **$26.7 million** of common stock under its Stock Repurchase Program and an additional **$13.8 million** for tax withholdings during the six months ended June 30, 2025[134](index=134&type=chunk)[135](index=135&type=chunk) - Long-term debt activities included borrowing **$140.6 million** from the new 2025 Revolver and repaying **$135.6 million** of the previous 2021 Credit Agreement debt[137](index=137&type=chunk) - Net settlement and merchant reserve activity resulted in **$(89.1) million** cash used in financing activities for the six months ended June 30, 2025[139](index=139&type=chunk) [Off-Balance Sheet Arrangements](index=39&type=section&id=Off-Balance%20Sheet%20Arrangements) This section discloses contractual obligations not recognized on the balance sheet - Off-balance sheet arrangements are primarily limited to money transmitter bonds and performance bonds, which are not expected to have a material impact on financial condition or results of operations[141](index=141&type=chunk) [Capital Resources](index=39&type=section&id=Capital%20Resources) This section outlines the company's available capital, including cash, credit, and planned uses - Current capital sources include **$145.9 million** in cash and cash equivalents (**58%** in U.S. dollars) and **$475.0 million** available under the 2025 Revolver[142](index=142&type=chunk) - Expected uses of capital include common stock repurchases (**$111.3 million** authorized remaining for 2025), cash dividends (expected quarterly), and potential acquisitions[143](index=143&type=chunk)[146](index=146&type=chunk) - The company expects to return over **$100.0 million** to shareholders through combined common stock repurchases and cash dividends in 2025[146](index=146&type=chunk) - Long-term debt obligations include **$125.0 million** from the 2025 Credit Agreement and **$425.0 million** in 2023 Convertible Notes, with expected interest payments of **$7.3 million** and **$16.5 million**, respectively, over the next twelve months[149](index=149&type=chunk)[150](index=150&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=41&type=section&id=Item%203%2E%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section discusses the company's exposure to various market risks, including interest rate risk, market risk related to cash and debt, and foreign currency exchange rate risk [Interest Rate Risk](index=41&type=section&id=Interest%20Rate%20Risk) This section analyzes the company's exposure to fluctuations in interest rates on its debt obligations - The 2023 Convertible Notes have a fixed interest rate, limiting exposure to interest rate changes for this debt[154](index=154&type=chunk) - Interest rates on the 2025 Credit Agreement are variable, based on adjusted SOFR plus an applicable margin[154](index=154&type=chunk) - A hypothetical **10%** adverse change in the adjusted SOFR rate would not materially impact results of operations[155](index=155&type=chunk) [Market Risk](index=41&type=section&id=Market%20Risk) This section assesses the company's exposure to market value changes in financial instruments - The company has minimal market risk for cash and cash equivalents (**$145.9 million** as of June 30, 2025) due to short maturities of instruments[156](index=156&type=chunk) - Market risk is associated with settlement and merchant reserve assets (**$256.1 million** as of June 30, 2025), held in accounts with major financial institutions[157](index=157&type=chunk) - The fair value of the 2023 Convertible Notes was estimated at **$481.3 million** as of June 30, 2025, influenced by interest rates and common stock price/volatility[158](index=158&type=chunk) [Foreign Currency Exchange Rate Risk](index=43&type=section&id=Foreign%20Currency%20Exchange%20Rate%20Risk) This section discusses the impact of foreign currency fluctuations on the company's financial results - The company is exposed to foreign currency exchange risk from operations in various currencies, including the British Pound, Euro, Australian Dollar, Saudi Riyal, and South African Rand[159](index=159&type=chunk) - Approximately **88%** of revenue was generated in U.S. dollars during the six months ended June 30, 2025[160](index=160&type=chunk) - A hypothetical **10%** adverse change in exchange rates as of June 30, 2025, would not have a material impact on results of operations[160](index=160&type=chunk) [Item 4. Controls and Procedures](index=43&type=section&id=Item%204%2E%20Controls%20and%20Procedures) This section confirms the effectiveness of the company's disclosure controls and procedures and reports no material changes to internal control over financial reporting during the quarter [Disclosure Controls and Procedures](index=43&type=section&id=Disclosure%20Controls%20and%20Procedures) This section confirms the effectiveness of controls ensuring timely and accurate financial disclosures - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of June 30, 2025[161](index=161&type=chunk) [Internal Control Over Financial Reporting](index=43&type=section&id=Internal%20Control%20Over%20Financial%20Reporting) This section reports on any material changes to the company's internal controls over financial reporting - The CEO and CFO concluded that there has been no material change in the company's internal control over financial reporting during the quarter ended June 30, 2025[162](index=162&type=chunk) Part II - OTHER INFORMATION This section provides additional information not covered in the financial statements, including legal, risk, and equity matters [Item 1. Legal Proceedings](index=44&type=section&id=Item%201%2E%20Legal%20Proceedings) This section states that the company is not currently a party to any material pending legal proceedings - The company is not presently a party to any material pending legal proceedings[164](index=164&type=chunk) [Item 1A. Risk Factors](index=44&type=section&id=Item%201A%2E%20Risk%20Factors) This section refers to the risk factors disclosed in the company's 2024 10-K and notes no material changes during the second quarter of 2025, while also referencing the macroeconomic outlook discussed in MD&A - There were no material changes to the risk factors disclosed in the 2024 10-K during the second quarter of 2025[165](index=165&type=chunk) - Reference is made to the 'Macroeconomic Outlook' in Item 2 for additional potential risks and uncertainties[165](index=165&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=44&type=section&id=Item%202%2E%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section details the company's common stock repurchases during the second quarter of 2025, including those under publicly announced plans and for tax withholdings Common Stock Repurchases (Q2 2025) | Period | Total Number of Shares Purchased | Average Price Paid per Share | Total Number of Shares Purchased as Part of Publicly Announced Plans or Program | Maximum Dollar Value of Shares that May Yet Be Purchased Under the Plans or Program | | :---------------- | :----------------------------- | :--------------------------- | :---------------------------------------------------------------- | :---------------------------------------------------------------- | | April 1 - April 30 | 98,959 | $59.07 | 97,830 | $122,571,557 | | May 1 - May 31 | 98,474 | $64.14 | 90,834 | $116,760,007 | | June 1 - June 30 | 91,962 | $64.05 | 85,690 | $111,275,656 | | **Total** | **289,395** | **$62.38** | **274,354** | | - The total number of shares purchased includes **15,041 shares** not part of a publicly announced plan, which were purchased and cancelled for stock incentive plans[167](index=167&type=chunk) - As of June 30, 2025, **$111.3 million** remained authorized for repurchase under the Stock Repurchase Program, to be completed by December 31, 2025[167](index=167&type=chunk) [Item 5. Other Information](index=44&type=section&id=Item%205%2E%20Other%20Information) This section reports that no directors or officers adopted, modified, or terminated any Rule 10b5-1 trading plans during the second quarter of 2025 - No directors or officers adopted, modified, or terminated any Rule 10b5-1 trading plans during the second quarter of 2025[170](index=170&type=chunk) [Item 6. Exhibits](index=44&type=section&id=Item%206%2E%20Exhibits) This section lists the exhibits filed or incorporated by reference with the Form 10-Q, including amendments to agreements, certifications, and XBRL documents - Exhibits include the Twenty-Fifth Amendment to the CSG Master Subscriber Management System Agreement with Comcast Cable Communications Management, LLC, and various certifications (302 and 906 of Sarbanes-Oxley Act)[173](index=173&type=chunk) - XBRL documents (Instance, Taxonomy Extension Schema, and Cover Page Interactive Data File) are also included[173](index=173&type=chunk)

There are no easy answers to this key question, but one reliable measure that can help investors address this is the company's earnings outlook. Not only does this include current consensus earnings expectations for the coming quarter(s), but also how these expectations have changed lately. Empirical research shows a strong correlation between near-term stock movements and trends in earnings estimate revisions. Investors can track such revisions by themselves or rely on a tried-and-tested rating tool like t ...

Financial Data and Key Metrics Changes - The company reported a record high revenue of $597 million in the first half of 2025, compared to $585 million in the same period of 2024, marking the highest revenue in the first half of the year in the company's history [19] - Non-GAAP operating income for the first half of 2025 was $106 million, with a non-GAAP adjusted operating margin of 19.5%, up from $91 million and 17% in the prior year [20] - Non-GAAP adjusted EBITDA was $132 million for the first half of 2025, representing 24.4% of revenue, compared to $118 million or 22% in the prior year [20] - Non-GAAP EPS increased to $2.29, a 13% rise from $2.20 in the prior year, primarily due to higher non-GAAP adjusted operating income [21] Business Line Data and Key Metrics Changes - The company achieved a non-GAAP operating margin of 19.5% in the first half of 2025, reflecting a 250 basis point improvement from the same period last year [5] - Revenue diversification improved, with 32% of total revenue coming from industries outside of cable and telecom, up from 31% in the prior year [6] - The company reported a 14% year-over-year growth in its merchant base, reaching 142,000 merchants in Q2 [14] Market Data and Key Metrics Changes - The company anticipates revenue growth in the 2% to 3% range for 2025, primarily due to headwinds in the North American broadband market and elongated sales cycles [23] - The termination of a contract with a Latin American telecommunications customer is expected to have a minimal impact on overall revenue, accounting for $1.4 million in the first half of 2025 [24] Company Strategy and Development Direction - The company aims to diversify revenue from faster-growing new industry verticals to over 35% of total revenue by 2026 [9] - The leadership team is focused on evolving into a more asset-light SaaS business to generate higher profit and cash flow from investments [15] - The company is committed to maintaining a disciplined approach to M&A, targeting acquisitions that enhance its capabilities in core verticals [16][62] Management's Comments on Operating Environment and Future Outlook - Management noted a cautious approach among customers regarding discretionary spending, impacting decision-making processes [30] - The company remains optimistic about its sales pipeline and expects continued growth despite current market challenges [88] - Management highlighted the importance of simplifying business processes for telecom operators to remain competitive in a digital landscape [51] Other Important Information - The company has returned over $600 million to shareholders since 2020 and is on track to exceed its commitment of $100 million in share repurchases and dividends for 2025 [10] - The company is leveraging AI to enhance its product offerings and operational efficiencies, with expectations for significant impacts on profitability [46] Q&A Session Summary Question: Insights on the broader macro environment - Management observed a cautiousness in discretionary spending but noted ongoing strategic decisions and technology deployments by customers [30] Question: Impact of recent M&A activity within the customer base - Management indicated that historical consolidation trends in the cable broadband and telco sectors have generally benefited the company [32] Question: Opportunities in the global telecom space - Management emphasized their differentiated capabilities in complex enterprise solutions, which have led to successful engagements with Tier one operators [38] Question: AI's impact on profitability and competition - Management acknowledged the growing importance of AI in enhancing operational efficiency and product offerings, while not seeing direct competition from AI-enabled firms [82] Question: New business pipeline and sales cycles - Management reported a healthy sales pipeline but noted elongated sales cycles due to cautious customer behavior [88]

Financial Performance - CSG achieved record H1 revenue of $597 million, a 1.9% year-over-year increase[32] - The company's H1 non-GAAP adjusted operating margin was 19.5%, a 16% year-over-year increase[32] - H1 non-GAAP EPS increased by 13% year-over-year, driven by strong non-GAAP operating income[32] - Non-GAAP adjusted free cash flow for H1 was $47 million, the best H1 performance in a decade[10, 36] - CSG is raising certain 2025 financial guidance targets, with adjusted free cash flow now projected between $120 million and $150 million[10, 37] Strategic Priorities - CSG is focused on achieving 2% - 6% organic revenue growth, with >35% revenue diversification from faster-growth industry verticals[11] - The company is targeting an 18% - 20% non-GAAP adjusted operating margin[20] - CSG is committed to returning $100+ million in capital to shareholders in 2025 through dividends and share repurchases[11, 36] Capital Allocation - CSG returned $59 million to shareholders in H1 through dividends and share buybacks[10, 36] - The company is on track to deliver on its 2025 $100M+ shareholder remuneration target[10] - CSG has returned ~$600+ million to shareholders since 2020[23]

[Executive Summary and Q2 2025 Highlights](index=1&type=section&id=1.%20Executive%20Summary%20and%20Q2%202025%20Highlights) CSG reported strong Q2 2025 results, leading to raised full-year guidance and significant operating income growth [Key Financial and Operational Highlights](index=1&type=section&id=1.1%20Key%20Financial%20and%20Operational%20Highlights) CSG reported strong Q2 2025 results, raising full-year profitability and non-GAAP adjusted free cash flow guidance, achieving significant operating income growth and highest first-half free cash flow in a decade * CSG is raising its 2025 full-year profitability and non-GAAP adjusted free cash flow guidance targets[2](index=2&type=chunk) * The company achieved strong operating income growth, with a **19.5% H1 non-GAAP operating margin**, up **250 basis points year-over-year**[2](index=2&type=chunk) * CSG reported strong cash flow from operations, marking its highest first-half non-GAAP adjusted free cash flow in a decade[2](index=2&type=chunk) Q2 2025 Key Financial Results | Metric | Value | | :-------------------------------- | :------------------- | | Total Revenue | $297.1 million | | GAAP Operating Income | $29.9 million | | GAAP Operating Margin | 10.0% | | Non-GAAP Operating Income | $54.5 million | | Non-GAAP Adjusted Operating Margin | 20.1% | | GAAP EPS (diluted) | $0.44 | | Non-GAAP EPS | $1.16 | | Cash Flows from Operations | $37.3 million | | Non-GAAP Adjusted Free Cash Flow | $39.6 million | * CSG declared a quarterly cash dividend of **$0.32 per share** and repurchased approximately **289,000 shares for $18 million** during Q2 2025[4](index=4&type=chunk) [CEO's Strategic Commentary](index=2&type=section&id=1.2%20CEO's%20Strategic%20Commentary) CEO Brian Shepherd highlighted strong first-half performance, enabling raised profitability and free cash flow targets, emphasizing efficiency, SaaS strategy, and customer wins * Team CSG's strong first-half results led to raised profitability targets for the second consecutive quarter and an increased full-year non-GAAP adjusted free cash flow target[5](index=5&type=chunk) * The **19.5% non-GAAP operating margin** reflects continued success in unlocking efficiency gains across the business[5](index=5&type=chunk) * CSG is executing on its commitment to deliver **double-digit free cash flow growth year-over-year** in both 2025 and 2026, supporting its strategy to become a more asset-light SaaS company[5](index=5&type=chunk) * New wins and expanded long-term relationships with Orange Business and Liberty Puerto Rico, combined with a strong balance sheet and commitment to return over **$100 million in capital to shareholders in 2025**, position CSG as a compelling investment[5](index=5&type=chunk) [Condensed Consolidated Financial Results](index=2&type=section&id=2.%20Condensed%20Consolidated%20Financial%20Results) This section provides a detailed breakdown of CSG's GAAP and non-GAAP financial performance for Q2 2025 [GAAP Results](index=2&type=section&id=2.1%20GAAP%20Results) CSG's GAAP Q2 2025 results showed revenue growth from SaaS, increased operating income from efficiencies, but decreased EPS due to a higher tax rate [Revenue Analysis](index=2&type=section&id=2.1.1%20Revenue%20Analysis) This section analyzes CSG's GAAP revenue performance for Q2 2025 and the first half of 2025 GAAP Revenue (in thousands) | Period | 2025 | 2024 | Change (%) | | :------------------- | :--------- | :--------- | :--------- | | Quarter Ended June 30 | $297,128 | $290,318 | 2.3% | | Six Months Ended June 30 | $596,581 | $585,453 | 1.9% | * The increase in revenue is mainly attributed to the continued growth of CSG's SaaS and related solutions, including revenue from the acquired iCG business, and approximately **$6 million** from a software license arrangement in Q2 2025, partially offset by lower professional services revenue[7](index=7&type=chunk) [Operating Income and Margin](index=2&type=section&id=2.1.2%20Operating%20Income%20and%20Margin) This section details CSG's GAAP operating income and margin performance for Q2 2025 and the first half of 2025 GAAP Operating Income and Margin (in thousands) | Period | 2025 Operating Income | 2024 Operating Income | Change (%) | 2025 Operating Margin | 2024 Operating Margin | | :------------------- | :-------------------- | :-------------------- | :--------- | :-------------------- | :-------------------- | | Quarter Ended June 30 | $29,857 | $25,420 | 17.5% | 10.0% | 8.8% | | Six Months Ended June 30 | $59,240 | $57,217 | 3.5% | 9.9% | 9.8% | * The increase in GAAP operating margin is mainly due to a decrease in restructuring and reorganization charges and benefits from cost efficiency actions taken in 2024 and H1 2025[8](index=8&type=chunk) [Earnings Per Share (EPS)](index=2&type=section&id=2.1.3%20Earnings%20Per%20Share%20(EPS)) This section presents CSG's GAAP diluted Earnings Per Share for Q2 2025 and the first half of 2025 GAAP EPS (diluted) | Period | 2025 EPS | 2024 EPS | Change (%) | | :------------------- | :------- | :------- | :--------- | | Quarter Ended June 30 | $0.44 | $0.48 | (8.3%) | | Six Months Ended June 30 | $1.01 | $1.16 | (12.9%) | * The decrease in GAAP EPS for Q2 2025 is mainly attributed to a higher effective income tax rate due to an increase in earn-out compensation related to a prior acquisition[9](index=9&type=chunk) [Cash Flows from Operating Activities](index=2&type=section&id=2.1.4%20Cash%20Flows%20from%20Operating%20Activities) This section outlines CSG's GAAP cash flows from operating activities for Q2 2025 and the first half of 2025 GAAP Cash Flows from Operating Activities (in thousands) | Period | 2025 | 2024 | Change (%) | | :------------------- | :--------- | :--------- | :--------- | | Quarter Ended June 30 | $37,326 | $43,105 | (13.4%) | | Six Months Ended June 30 | $48,795 | $13,754 | 254.8% | [Non-GAAP Results](index=2&type=section&id=2.2%20Non-GAAP%20Results) CSG's non-GAAP Q2 2025 results showed strong growth in operating income, EPS, EBITDA, and free cash flow, driven by cost efficiencies [Non-GAAP Operating Income and Margin](index=2&type=section&id=2.2.1%20Non-GAAP%20Operating%20Income%20and%20Margin) This section details CSG's non-GAAP operating income and adjusted operating margin for Q2 2025 and the first half of 2025 Non-GAAP Operating Income and Adjusted Operating Margin (in thousands) | Period | 2025 Operating Income | 2024 Operating Income | Change (%) | 2025 Adjusted Operating Margin | 2024 Adjusted Operating Margin | | :------------------- | :-------------------- | :-------------------- | :--------- | :----------------------------- | :----------------------------- | | Quarter Ended June 30 | $54,472 | $46,141 | 18.1% | 20.1% | 17.3% | | Six Months Ended June 30 | $105,947 | $91,009 | 16.4% | 19.5% | 17.0% | * The increase in non-GAAP operating margin is mainly attributed to cost efficiency actions[10](index=10&type=chunk) [Non-GAAP EPS](index=2&type=section&id=2.2.2%20Non-GAAP%20EPS) This section presents CSG's non-GAAP Earnings Per Share for Q2 2025 and the first half of 2025 Non-GAAP EPS | Period | 2025 EPS | 2024 EPS | Change (%) | | :------------------- | :------- | :------- | :--------- | | Quarter Ended June 30 | $1.16 | $1.02 | 13.7% | | Six Months Ended June 30 | $2.29 | $2.02 | 13.4% | * The increase in non-GAAP EPS is mainly due to higher non-GAAP operating income, partially offset by foreign currency movements[11](index=11&type=chunk) [Non-GAAP Adjusted EBITDA](index=2&type=section&id=2.2.3%20Non-GAAP%20Adjusted%20EBITDA) This section details CSG's non-GAAP Adjusted EBITDA for Q2 2025 and the first half of 2025 Non-GAAP Adjusted EBITDA (in thousands) | Period | 2025 | 2024 | Change (%) | | :------------------- | :--------- | :--------- | :--------- | | Quarter Ended June 30 | $67,980 | $60,052 | 13.2% | | Six Months Ended June 30 | $132,317 | $118,149 | 12.0% | [Non-GAAP Adjusted Free Cash Flow](index=2&type=section&id=2.2.4%20Non-GAAP%20Adjusted%20Free%20Cash%20Flow) This section outlines CSG's non-GAAP Adjusted Free Cash Flow for Q2 2025 and the first half of 2025 Non-GAAP Adjusted Free Cash Flow (in thousands) | Period | 2025 | 2024 | Change (%) | | :------------------- | :--------- | :--------- | :--------- | | Quarter Ended June 30 | $39,575 | $38,806 | 2.0% | | Six Months Ended June 30 | $46,643 | $4,681 | 896.4% | [Balance Sheet and Cash Flow Statements](index=3&type=section&id=3.%20Balance%20Sheet%20and%20Cash%20Flow%20Statements) This section presents CSG's condensed consolidated balance sheets and statements of cash flows [Condensed Consolidated Balance Sheets](index=5&type=section&id=3.1%20Condensed%20Consolidated%20Balance%20Sheets) CSG's total assets decreased to $1,421.2 million as of June 30, 2025, driven by lower settlement assets and cash, while liabilities also decreased and equity increased Key Balance Sheet Items (in thousands) | Item | June 30, 2025 | December 31, 2024 | | :-------------------------------- | :-------------- | :---------------- | | Cash and cash equivalents | $145,875 | $161,789 | | Settlement and merchant reserve assets | $256,145 | $343,235 | | Total Current Assets | $804,094 | $900,882 | | Goodwill | $325,773 | $316,041 | | Total Assets | $1,421,238 | $1,500,687 | | Total Current Liabilities | $515,962 | $615,209 | | Long-term debt, net | $537,767 | $530,997 | | Total Liabilities | $1,130,517 | $1,218,118 | | Total Stockholders' Equity | $290,721 | $282,569 | * Cash and cash equivalents decreased from **$161.8 million** at December 31, 2024, to **$145.9 million** at June 30, 2025[12](index=12&type=chunk)[21](index=21&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=7&type=section&id=3.2%20Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Net cash from operating activities significantly increased for the six months ended June 30, 2025, with investing and financing activities remaining net cash outflows Key Cash Flow Items (Six Months Ended June 30, in thousands) | Item | 2025 | 2024 | | :-------------------------------- | :--------- | :--------- | | Net cash provided by operating activities | $48,795 | $13,754 | | Net cash provided by (used in) investing activities | $(7,000) | $8,220 | | Net cash used in financing activities | $(152,111) | $(137,823) | | Net decrease in cash, cash equivalents, and restricted cash | $(102,941) | $(118,287) | | Cash, cash equivalents, and restricted cash, end of period | $403,822 | $345,589 | * The substantial increase in net cash provided by operating activities for the six months ended June 30, 2025, was driven by various adjustments to reconcile net income, including higher amortization and stock-based compensation, and favorable changes in operating assets and liabilities[24](index=24&type=chunk) * Financing activities included significant proceeds from long-term debt (**$150.6 million**) and payments on long-term debt (**$151.3 million**), as well as **$40.5 million** in common stock repurchases[24](index=24&type=chunk) [Supplemental Revenue Analysis](index=8&type=section&id=4.%20Supplemental%20Revenue%20Analysis) This section provides a detailed breakdown of CSG's revenue by significant customers, vertical, and geography [Revenue by Significant Customers](index=8&type=section&id=4.1%20Revenue%20by%20Significant%20Customers) In Q2 2025, Charter and Comcast remained CSG's two largest customers, collectively accounting for 36% of total revenue, a slight decrease from Q2 2024 Revenue by Significant Customers (Quarter Ended June 30, 2025, in thousands) | Customer | Amount | % of Revenue | | :------- | :------- | :----------- | | Charter | $57,667 | 19% | | Comcast | $51,415 | 17% | * Charter's revenue contribution decreased from **21% in Q2 2024 to 19% in Q2 2025**, while Comcast's decreased from **19% to 17%** over the same period[26](index=26&type=chunk) [Revenue by Vertical](index=8&type=section&id=4.2%20Revenue%20by%20Vertical) CSG's Q2 2025 revenue by vertical shows Broadband/Cable/Satellite as the largest segment, with Telecommunications seeing a slight increase Revenue by Vertical (Quarter Ended June 30, 2025) | Vertical | June 30, 2025 | March 31, 2025 | June 30, 2024 | | :------------------------ | :-------------- | :--------------- | :-------------- | | Broadband/Cable/Satellite | 51% | 50% | 53% | | Telecommunications | 18% | 17% | 16% | | All other | 31% | 33% | 31% | [Revenue by Geography](index=8&type=section&id=4.3%20Revenue%20by%20Geography) The Americas remains CSG's dominant revenue source, with its share slightly decreasing in Q2 2025, while EMEA showed growth Revenue by Geography (Quarter Ended June 30, 2025) | Geography | June 30, 2025 | March 31, 2025 | June 30, 2024 | | :-------------------------- | :-------------- | :--------------- | :-------------- | | Americas | 85% | 87% | 89% | | Europe, Middle East and Africa | 11% | 9% | 6% | | Asia Pacific | 4% | 4% | 5% | [Full Year 2025 Financial Guidance](index=3&type=section&id=5.%20Full%20Year%202025%20Financial%20Guidance) CSG provides its revised full-year 2025 financial guidance and detailed non-GAAP reconciliations [Revised Guidance Targets](index=3&type=section&id=5.1%20Revised%20Guidance%20Targets) CSG revised its full-year 2025 financial guidance, raising non-GAAP adjusted operating margin, Adjusted EBITDA, and Adjusted Free Cash Flow targets while maintaining revenue and GAAP EPS Revised Full Year 2025 Financial Guidance | Metric | As of August 6, 2025 | Previous | | :-------------------------- | :------------------- | :------------------- | | GAAP Revenue | No change | $1,210 - $1,250 million | | Non-GAAP Adjusted Operating Margin Percentage | 18.6% - 19.0% | 18.4% - 18.8% | | GAAP EPS | No change | $4.65 - $4.90 | | Non-GAAP Adjusted EBITDA | $261 - $272 million | $258 - $269 million | | Non-GAAP Adjusted Free Cash Flow | $120 - $150 million | $110 - $150 million | [Non-GAAP Guidance Reconciliations](index=15&type=section&id=5.2%20Non-GAAP%20Guidance%20Reconciliations) CSG provides detailed reconciliations for its full-year 2025 non-GAAP financial guidance, outlining specific adjustments from GAAP measures for key metrics * The guidance for non-GAAP adjusted operating margin percentage is **18.6% - 19.0%**, calculated by adjusting GAAP operating income for items like restructuring charges, acquisition-related expenses, and stock-based compensation, and then dividing by revenue less transaction fees[43](index=43&type=chunk) * Non-GAAP EPS guidance is **$4.65 - $4.90**, derived by adjusting GAAP net income for various non-recurring and non-cash items and applying a non-GAAP effective income tax rate of approximately **27%**[44](index=44&type=chunk) * Non-GAAP adjusted EBITDA guidance is **$261 - $272 million**, which includes adjustments for interest, taxes, depreciation, amortization, stock-based compensation, and other specific non-GAAP exclusions[45](index=45&type=chunk) * Non-GAAP adjusted free cash flow guidance is **$120 - $150 million**, calculated by adjusting cash flows from operating activities for earn-out compensation payments and purchases of software, property, and equipment[46](index=46&type=chunk) [Company Information and Non-GAAP Disclosures](index=3&type=section&id=6.%20Company%20Information%20and%20Non-GAAP%20Disclosures) This section outlines CSG's business, forward-looking statement caveats, and non-GAAP financial measure disclosures [About CSG](index=4&type=section&id=6.1%20About%20CSG) CSG provides customer experience, billing, and payments SaaS solutions, empowering businesses and offering guidance for long-term success * CSG's core business involves empowering companies to build unforgettable experiences through customer experience, billing, and payments solutions[16](index=16&type=chunk) * The company offers SaaS solutions to help leaders take control of their future and benefit from the guidance of CSG's global team[16](index=16&type=chunk) [Forward-Looking Statements](index=4&type=section&id=6.2%20Forward-Looking%20Statements) This news release contains forward-looking statements subject to risks and uncertainties, including customer concentration, market conditions, security, product development, and regulatory compliance * The news release includes forward-looking statements based on assumptions that involve risks and uncertainties, which could cause actual results to differ materially[18](index=18&type=chunk) * Key risk factors include reliance on a limited number of customers (approximately **40% of revenue from two largest customers**), fluctuations in credit markets, global economic/political conditions, foreign currency exchange rates, and the ability to maintain a reliable computing environment[19](index=19&type=chunk) * Other significant risks involve market acceptance of products, continuous product development, timely solution delivery, dependency on the global telecommunications industry, competition, successful integration of acquisitions, intellectual property protection, international business conduct, and compliance with laws and regulations[19](index=19&type=chunk) [Disclosures for Non-GAAP Financial Measures](index=9&type=section&id=6.3%20Disclosures%20for%20Non-GAAP%20Financial%20Measures) CSG uses non-GAAP financial measures for transparency in financial and operational decision-making, internal planning, and investor communications, acknowledging their limitations compared to GAAP * CSG uses non-GAAP financial measures (non-GAAP operating income, adjusted operating margin percentage, EPS, adjusted EBITDA, and adjusted free cash flow) to supplement GAAP results, providing greater transparency for management and investors[30](index=30&type=chunk) * These non-GAAP measures are used for internal financial planning, forecasting, management compensation, and communications with stakeholders, aiming to provide a clearer understanding of operational results, trends, and cash generation[30](index=30&type=chunk)[32](index=32&type=chunk) * Limitations of non-GAAP measures include their non-adherence to comprehensive accounting rules, potential differences in calculation compared to other companies, exclusion of certain recurring income/expense items, and the fact that some excluded charges are cash expenses[30](index=30&type=chunk)[32](index=32&type=chunk) * Key exclusions from non-GAAP measures include restructuring and reorganization charges, acquisition-related expenses (amortization of acquired intangibles, earn-out compensation, transaction costs), stock-based compensation, and certain gains/losses on debt extinguishment or acquisitions/dispositions[33](index=33&type=chunk)[34](index=34&type=chunk) * Non-GAAP adjusted EBITDA is defined as income before interest, income taxes, depreciation, amortization, stock-based compensation, foreign currency adjustments, acquisition-related expenses, and unusual items. Non-GAAP adjusted free cash flow is net cash flows from operating activities before earn-out compensation payments less purchases of software, property, and equipment[35](index=35&type=chunk)

Group 1 - CSG Systems (CSGS) is currently outperforming its peers in the Computer and Technology sector, with a year-to-date return of approximately 24.7%, compared to the sector average of 10.2% [4] - The Zacks Rank for CSG Systems is 2 (Buy), indicating a positive earnings outlook, with the consensus estimate for full-year earnings having increased by 1.4% over the past 90 days [3] - CSG Systems belongs to the Computer - Services industry, which is ranked 96 in the Zacks Industry Rank, and this industry has gained an average of 2.1% so far this year [5] Group 2 - The Computer and Technology sector includes 605 companies and is currently ranked 5 in the Zacks Sector Rank, which measures the strength of individual sector groups [2] - Fabrinet (FN) is another stock in the Computer and Technology sector that has outperformed, with a year-to-date return of 38.8% and a Zacks Rank of 2 (Buy) [4][6] - The Electronics - Miscellaneous Components industry, to which Fabrinet belongs, is ranked 67 and has increased by 15.1% this year [6]

Group 1 - Fabrinet (FN) is currently outperforming its peers in the Computer and Technology sector, with a year-to-date gain of approximately 30.4% compared to the sector's average return of 7% [4][5] - The Zacks Rank system, which emphasizes earnings estimates and revisions, has assigned Fabrinet a Zacks Rank of 2 (Buy), indicating a positive earnings outlook [3] - The consensus estimate for Fabrinet's full-year earnings has increased by 1.5% over the past quarter, reflecting improving analyst sentiment [3] Group 2 - Fabrinet belongs to the Electronics - Miscellaneous Components industry, which is ranked 72 in the Zacks Industry Rank, and has outperformed the average gain of 4.5% in this group [5] - Another stock in the Computer and Technology sector, CSG Systems (CSGS), has also shown strong performance with a year-to-date return of 28.4% and a Zacks Rank of 2 (Buy) [4][6] - The Computer - Services industry, to which CSG Systems belongs, is ranked 210 and has seen a gain of 5% this year, indicating a weaker performance compared to Fabrinet [6]

Core Insights - WidePoint Corporation (WYY) and CSG Systems International, Inc. (CSGS) are both benefiting from digital transformation trends impacting enterprise and government IT priorities [1] - WidePoint focuses on federal IT contracts and cybersecurity, while CSG Systems is transitioning to a diversified SaaS platform with a presence in fintech and healthcare [2][8] Group 1: WidePoint Corporation - WidePoint is a government IT solutions provider specializing in mobile telecom lifecycle management and secure identity management, serving critical federal agencies [4] - The company achieved FedRAMP authorization for its Intelligent Technology Management System (ITMS), enhancing visibility among federal agencies [5] - WidePoint has secured three task orders under Spiral 4 and anticipates increased awards as Spiral 3 concludes, while investing in a Device-as-a-Service (DaaS) model and smart city initiatives [6] - Revenue growth for WidePoint is inconsistent due to the nature of government contracts and procurement delays, with recent accounting adjustments raising concerns [7][24] Group 2: CSG Systems International, Inc. - CSG Systems has evolved from a telecom billing provider to a diversified SaaS operator, generating over one-third of its revenue from fast-growing sectors like financial services and healthcare [8] - The company is focused on a capital-light model, reducing working capital needs and pursuing high-margin acquisitions to enhance its SaaS platform [9] - CSG Systems aims for a long-term operating margin of 18-20%, supported by a growing base of recurring, high-margin SaaS revenues [9] - CSG Systems returned $32 million to shareholders in Q1 2025 and plans to return over $100 million in 2025, showcasing strong cash generation and shareholder-friendly practices [11] Group 3: Financial Performance and Valuation - The Zacks Consensus Estimate for WidePoint suggests a 10.5% increase in sales and a 33.3% increase in EPS for 2025, with earnings estimates remaining unchanged [13] - CSG Systems is projected to see a 6% increase in sales and a 1.1% increase in EPS for 2025, with earnings estimates rising by 1.7% in the past 60 days [17] - WidePoint's stock has declined 5.7% over the past year, underperforming the industry and S&P 500, while CSG Systems shares have gained 55.5% [20] - WidePoint trades at a forward P/S ratio of 0.20X, significantly below the industry average of 1.77X, while CSG Systems has a forward P/S ratio of 1.56X [22] Group 4: Investment Outlook - WidePoint's niche in federal IT services and FedRAMP certification provide growth opportunities, but its smaller scale and revenue volatility may deter investors [24] - CSG Systems offers a more diversified SaaS model with disciplined capital allocation and high-margin recurring revenue, positioning it as a stronger investment choice [25][26]