Core Viewpoint - CSG Systems (CSGS) reported quarterly earnings of $1.14 per share, exceeding the Zacks Consensus Estimate of $1 per share, and showing an increase from $1.01 per share a year ago [1] Financial Performance - The quarterly earnings surprise was 14%, with a previous quarter surprise of 36.36% when actual earnings were $1.65 compared to an expected $1.21 [2] - CSG Systems generated revenues of $271.55 million for the quarter, surpassing the Zacks Consensus Estimate by 0.25%, and showing a slight increase from $270.07 million year-over-year [3] Stock Performance - CSG Systems shares have increased approximately 18.3% since the beginning of the year, contrasting with a decline of 4.7% in the S&P 500 [4] Future Outlook - The company's earnings outlook is crucial for investors, with current consensus EPS estimates at $1.08 for the upcoming quarter and $4.69 for the current fiscal year, with revenues expected to be $274.03 million and $1.12 billion respectively [5][8] - The estimate revisions trend for CSG Systems is currently mixed, resulting in a Zacks Rank 3 (Hold), indicating expected performance in line with the market [7] Industry Context - The Computer - Services industry, to which CSG Systems belongs, is currently ranked in the top 22% of over 250 Zacks industries, suggesting a favorable outlook compared to lower-ranked industries [9]

Financial Data and Key Metrics Changes - CSG generated $299 million in revenue for Q1 2025, a slight increase from $295 million in the same period last year, marking the highest first-quarter revenue in the company's history [22] - Non-GAAP operating income for Q1 2025 was $51 million, resulting in a non-GAAP adjusted operating margin of 19%, compared to $45 million and 16.6% in Q1 2024 [23] - Non-GAAP adjusted EBITDA was $64 million, or 23.7% of revenue, up from $58 million or 21.5% in the prior year [23] - Non-GAAP EPS increased by 13% to $1.14 from $1.01 in the prior year [24] - Non-GAAP adjusted free cash flow was $7 million, a significant improvement from a negative $34 million in Q1 2024, representing the strongest Q1 performance in seven years [25] Business Line Data and Key Metrics Changes - CSG's revenue diversification improved, with 33% of Q1 revenue coming from faster-growing industry verticals outside of cable and telecom, up from 30% in the same quarter last year [8] - The company reported a 13% year-over-year growth in its payments merchant base, reaching 135,000 merchants in Q1 [16] Market Data and Key Metrics Changes - CSG's top two customers, Charter and Comcast, represented 37% of total Q1 revenue, down from 49% in 2017, indicating improved revenue concentration [8] - The annual revenue from Charter and Comcast grew by approximately $76 million from 2017 to 2024, reflecting a 2.6% compound annual growth rate [8] Company Strategy and Development Direction - CSG aims for 2% to 6% organic revenue growth and to diversify revenue from faster-growing verticals to over 35% of total revenue by 2026 [10] - The company is committed to expanding non-GAAP adjusted operating margins to a long-term range of 18% to 20% [10] - CSG plans to return over $100 million in share repurchases and dividends combined in 2025, having already returned $32 million in Q1 [11] Management's Comments on Operating Environment and Future Outlook - Management noted ongoing global macroeconomic uncertainty but expressed confidence in the company's ability to navigate challenges and continue growth [33] - The company is focused on becoming a more asset-light SaaS provider, aiming for greater profitability and cash flow generation [17] - Management highlighted a strong sales pipeline and ongoing demand for solutions, with expectations for continued revenue growth [27][76] Other Important Information - CSG's balance sheet remains strong, with $136 million in cash and cash equivalents and a net debt leverage ratio of 1.6 times adjusted EBITDA [26] - The company has entered a new five-year revolving credit facility, consolidating its term loan and revolver into a $600 million facility [26] Q&A Session Summary Question: Insights on customer feedback towards the end of the quarter - Management noted that there was nothing unique in Q1 or the first month of the new quarter, but global macroeconomic uncertainty continues to affect customer decision-making [33][34] Question: Discussion on margin optimization - Management emphasized the importance of operational discipline and continuous improvement in processes to enhance margins, alongside a shift towards higher-margin SaaS solutions [37][40] Question: Revenue trends for Charter and Comcast - Management explained that fluctuations in revenue from these customers are normal and attributed to various factors, including contract terms and new solutions [43][45] Question: M&A strategy and ideal candidates - Management expressed a disciplined approach to M&A, focusing on acquiring companies that enhance CSG's capabilities in integrated solutions and recurring revenue [51][53] Question: Dynamics in the telco vertical - Management indicated that the challenges faced are part of a broader transformation in the global telco market, with a focus on SaaS solutions and cost reduction [66][68]

Financial Data and Key Metrics Changes - The company reported Q1 2025 revenue of $299 million, a slight increase from $295 million in Q1 2024, marking the highest first-quarter revenue in its history [22] - Non-GAAP operating income for Q1 2025 was $51 million, resulting in a non-GAAP adjusted operating margin of 19%, up from $45 million and 16.6% in the prior year [23] - Non-GAAP adjusted EBITDA increased to $64 million, representing 23.7% of revenue, compared to $58 million or 21.5% in the prior year [23] - Non-GAAP EPS rose to $1.14, a 13% increase from $1.01 in the prior year [24] - Non-GAAP adjusted free cash flow was $7 million, a significant improvement from a negative $34 million in Q1 2024, marking the strongest Q1 performance in seven years [25] Business Line Data and Key Metrics Changes - The company diversified its revenue, with 33% of Q1 revenue coming from faster-growing industry verticals outside of cable and telecom, up from 30% in the same quarter last year [6] - The annual revenue from top customers, Charter and Comcast, grew by approximately $76 million from 2017 to 2024, representing a 2.6% compound annual growth rate [7] Market Data and Key Metrics Changes - The company noted that the global macroeconomic uncertainty continues to affect customer decision-making, leading to some belt-tightening across various industry verticals [35] - The company is experiencing a shift towards more SaaS solutions, which are less service-heavy and offer lower costs, indicating a strategic pivot in the telecom market [66] Company Strategy and Development Direction - The company aims for 2% to 6% organic revenue growth and to diversify revenue from faster-growing verticals to over 35% of total revenue by 2026 [9] - The management is focused on becoming a more asset-light SaaS company, aiming for non-GAAP adjusted operating margins in the range of 18% to 20% by 2026 [17] - The company is committed to disciplined M&A activity, seeking to acquire companies that enhance its capabilities in integrated customer engagement and monetization [54] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving improved profitability metrics and strong double-digit free cash flow growth in 2025 and 2026 [18] - The company anticipates that macroeconomic uncertainties will continue to influence customer behavior, but it remains optimistic about long-term growth opportunities [35][66] Other Important Information - The company announced a 7% annual dividend increase for the twelfth consecutive year and repurchased $22 million worth of shares in Q1 [8] - The company has a strong balance sheet with $610 million in liquidity and a net debt leverage ratio of 1.6 times adjusted EBITDA [26] Q&A Session Summary Question: Insights on customer feedback towards the end of the quarter - Management noted that there was nothing unique in Q1, but global macroeconomic uncertainty continues to influence customer decision-making, leading to cautious spending [34][35] Question: Discussion on margin optimization - Management emphasized the importance of operational discipline and continuous improvement in cost management, alongside innovation to drive margin expansion [37][39] Question: Revenue trends with major customers - Management explained that fluctuations in revenue from Charter and Comcast are influenced by contract terms and new solutions, with a long-term growth outlook remaining positive [43][45] Question: M&A strategy and ideal candidates - Management indicated a disciplined approach to M&A, focusing on acquiring companies that enhance integrated solutions and have strong growth potential [52][54] Question: Dynamics in the telecom vertical - Management acknowledged ongoing transformations in the telecom sector, with a focus on SaaS solutions and cost reduction strategies to remain competitive [64][66]

CSG Q1 2025 Earnings Presentation Brian Shepherd CEO & President Hai Tran CFO Safe Harbor Forward-Looking Statements + Disclaimers This presentation contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. In this context, forward-looking statements often address expected future business and financial performance and financial condition, and often contain words such as "expect," "anticipate," "intend," "plan," "believe," "seek," "see," "will," "would," ...

[Q1 2025 Financial Performance Overview](index=1&type=section&id=Q1%202025%20Financial%20Performance%20Overview) CSG reported strong Q1 2025 results, raising its full-year non-GAAP profitability and EPS guidance while achieving record revenue diversification and returning capital to shareholders [Financial and Operational Highlights](index=1&type=section&id=Financial%20and%20Operational%20Highlights) CSG reported Q1 2025 revenue of $299.5 million and raised its 2025 non-GAAP profitability and EPS guidance, achieving record revenue diversification with 33% from outside its core Communication Service Provider (CSP) market Q1 2025 Financial Highlights (in millions) | Metric | Value | | :--- | :--- | | Total Revenue | $299.5 | | GAAP Operating Income | $29.4 | | Non-GAAP Operating Income | $51.5 | | GAAP EPS (diluted) | $0.57 | | Non-GAAP EPS | $1.14 | | Cash Flows from Operations | $11.5 | | Non-GAAP Adjusted Free Cash Flow | $7.1 | Q1 2025 Shareholder Returns (in millions, except per share) | Activity | Value | | :--- | :--- | | Quarterly Dividend per Share | $0.32 | | Total Dividends Paid | ~$9 | | Shares Repurchased | ~357,000 | | Total Share Repurchase Cost | ~$22 | - The company achieved record revenue diversification, with **33% of revenue** now originating from industry verticals outside of Communication Service Providers (CSPs)[3](index=3&type=chunk) - In March 2025, CSG entered into a new five-year credit agreement for a **$600.0 million revolving credit facility**, replacing its existing agreement[3](index=3&type=chunk) [Management Commentary](index=2&type=section&id=Management%20Commentary) CEO Brian Shepherd highlighted strong Q1 results driven by operating discipline and a growing revenue mix from faster-growing industry verticals, leading to increased 2025 non-GAAP profitability and EPS guidance - The non-GAAP adjusted operating margin expanded by over **240 basis points** to **19.0%** in Q1 2025 compared to **16.6%** in Q1 2024, driven by operating discipline and improved revenue mix[5](index=5&type=chunk)[6](index=6&type=chunk) - The midpoint of the 2025 cash flow guidance represents a **15% year-over-year growth**[5](index=5&type=chunk) - CSG is committed to returning **over $100 million** in capital to shareholders in 2025[5](index=5&type=chunk) [Summary of Financial Guidance for 2025](index=3&type=section&id=Summary%20of%20Financial%20Guidance) CSG raised its full-year 2025 guidance for non-GAAP adjusted operating margin, non-GAAP EPS, and non-GAAP adjusted EBITDA, while revenue and non-GAAP adjusted free cash flow guidance remain unchanged Revised 2025 Financial Guidance | Metric | As of May 7, 2025 | Previous | | :--- | :--- | :--- | | **GAAP Measures:** | | | | Revenue | No change ($1,210 - $1,250 million) | $1,210 - $1,250 million | | **Non-GAAP Measures:** | | | | Adjusted Operating Margin % | 18.4% - 18.8% | 18.1% - 18.5% | | EPS | $4.65 - $4.90 | $4.55 - $4.80 | | Adjusted EBITDA | $258 - $269 million | $256 - $267 million | | Adjusted Free Cash Flow | No change ($110 - $150 million) | $110 - $150 million | [Financial Results](index=2&type=section&id=Financial%20Results) This section details CSG's Q1 2025 financial performance, including revenue growth driven by acquisitions, changes in operating income due to restructuring, and improvements in cash flow [Results of Operations](index=2&type=section&id=Results%20of%20Operations) In Q1 2025, total revenue increased 1.5% year-over-year to $299.5 million due to acquisitions, while GAAP operating income decreased 7.6% to $29.4 million due to higher restructuring charges, and non-GAAP operating income grew 14.7% to $51.5 million from cost efficiencies Q1 2025 vs. Q1 2024 Performance (in millions, except EPS) | Metric | Q1 2025 | Q1 2024 | % Change | | :--- | :--- | :--- | :--- | | **GAAP Results** | | | | | Revenue | $299.5 | $295.1 | 1.5% | | Operating Income | $29.4 | $31.8 | (7.6%) | | EPS | $0.57 | $0.68 | (16.2%) | | **Non-GAAP Results** | | | | | Operating Income | $51.5 | $44.9 | 14.7% | | EPS | $1.14 | $1.01 | 12.9% | - The increase in total revenue was mainly attributed to revenue generated from businesses acquired during 2024[7](index=7&type=chunk) - The decrease in GAAP operating margin was primarily due to a **$5.4 million increase** in restructuring and reorganization charges related to cost efficiency actions[8](index=8&type=chunk) - The increase in non-GAAP operating margin was mainly attributed to cost efficiency actions taken in 2024 to optimize capacity and align resources[10](index=10&type=chunk) [Balance Sheet and Cash Flow Analysis](index=3&type=section&id=Balance%20Sheet%20and%20Cash%20Flows) As of March 31, 2025, CSG held $136.0 million in cash and cash equivalents, a decrease from year-end 2024, while generating $11.5 million in cash from operations and $7.1 million in non-GAAP adjusted free cash flow, a significant improvement year-over-year Cash Position (in millions) | Date | Cash and Cash Equivalents | | :--- | :--- | | March 31, 2025 | $136.0 | | December 31, 2024 | $161.8 | Q1 Cash Flow Comparison (YoY, in millions) | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Cash Flows from Operations | $11.5 | ($29.4) | | Non-GAAP Adjusted Free Cash Flow | $7.1 | ($34.1) | [Supplemental Information](index=8&type=section&id=Supplemental%20Information) This section provides detailed analysis of CSG's revenue by customer, vertical, and geography, along with explanations and reconciliations of non-GAAP financial measures [Revenue Analysis](index=8&type=section&id=Revenue%20Analysis) CSG's revenue is concentrated, with its top two customers, Charter and Comcast, accounting for 37% of total revenue in Q1 2025, while the company diversifies with 33% of revenue from non-traditional CSP verticals, and the Americas remain the dominant region at 87% [Revenue by Significant Customers](index=8&type=section&id=Revenue%20by%20Significant%20Customers) In Q1 2025, Charter and Comcast were the two largest customers, contributing 19% and 18% of total revenue respectively, representing a combined concentration of 37%, down from 39% in Q1 2024 Revenue from Major Customers (% of Total Revenue) | Customer | Q1 2025 | Q4 2024 | Q1 2024 | | :--- | :--- | :--- | :--- | | Charter | 19% | 19% | 21% | | Comcast | 18% | 19% | 18% | [Revenue by Vertical](index=8&type=section&id=Revenue%20by%20Vertical) Revenue from industry verticals outside of traditional CSPs ('All other') grew to 33% of total revenue in Q1 2025, up from 30% in Q1 2024, with Broadband/Cable/Satellite accounting for 50% and Telecommunications for 17% Revenue Mix by Vertical (% of Total Revenue) | Vertical | Q1 2025 | Q4 2024 | Q1 2024 | | :--- | :--- | :--- | :--- | | Broadband/Cable/Satellite | 50% | 51% | 51% | | Telecommunications | 17% | 20% | 19% | | All other | 33% | 29% | 30% | [Revenue by Geography](index=8&type=section&id=Revenue%20by%20Geography) The Americas region continues to be the primary source of revenue, accounting for 87% in Q1 2025, with Europe, Middle East and Africa (EMEA) contributing 9%, and Asia Pacific (APAC) contributing 4% Revenue Mix by Geography (% of Total Revenue) | Geography | Q1 2025 | Q4 2024 | Q1 2024 | | :--- | :--- | :--- | :--- | | Americas | 87% | 84% | 86% | | Europe, Middle East and Africa | 9% | 10% | 9% | | Asia Pacific | 4% | 6% | 5% | [Non-GAAP Financial Measures](index=9&type=section&id=Non-GAAP%20Financial%20Measures) This section details CSG's use of non-GAAP financial measures, including operating income, EPS, adjusted EBITDA, and adjusted free cash flow, providing transparency into operational performance by excluding specific items and offering detailed reconciliations to GAAP equivalents [Explanation of Non-GAAP Measures](index=9&type=section&id=Explanation%20of%20Non-GAAP%20Measures) CSG uses non-GAAP measures to supplement GAAP financials, believing they offer a better understanding of underlying operational trends and cash generation, while acknowledging limitations and providing detailed reconciliations - Non-GAAP measures are used for internal financial planning, forecasting, management compensation incentives, and communications with the Board of Directors and investors[30](index=30&type=chunk)[32](index=32&type=chunk) - Key exclusions from non-GAAP financial measures include: restructuring and reorganization charges, acquisition-related expenses (e.g., amortization of intangible assets, earn-out compensation), stock-based compensation, and gains/losses on debt extinguishment[33](index=33&type=chunk) [Reconciliation of GAAP to Non-GAAP Measures (Q1 2025)](index=12&type=section&id=Reconciliation%20of%20GAAP%20to%20Non-GAAP%20Measures%20(Q1%202025)) For Q1 2025, CSG provides detailed reconciliations: GAAP operating income of $29.4 million to non-GAAP operating income of $51.5 million; GAAP net income of $16.1 million ($0.57 per share) to non-GAAP net income of $32.1 million ($1.14 per share); GAAP net income to non-GAAP adjusted EBITDA of $64.3 million; and cash from operations of $11.5 million to non-GAAP adjusted free cash flow of $7.1 million Reconciliation: GAAP to Non-GAAP Operating Income (Q1 2025 vs Q1 2024, in thousands) | Description | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | **GAAP operating income** | **$29,383** | **$31,797** | | Restructuring charges | $7,368 | $1,998 | | Executive transition costs | $0 | $352 | | Amortization of acquired intangibles | $3,453 | $2,852 | | Earn-out compensation | $2,559 | $0 | | Stock-based compensation | $8,712 | $7,869 | | **Non-GAAP operating income** | **$51,475** | **$44,868** | Reconciliation: GAAP to Non-GAAP EPS (Q1 2025) | Description | Net Income (in thousands) | EPS | | :--- | :--- | :--- | | **GAAP** | **$16,130** | **$0.57** | | Adjustments (pre-tax) | $22,545 | - | | Tax effect of adjustments | ($6,529) | - | | **Non-GAAP** | **$32,146** | **$1.14** | [Reconciliation of GAAP to Non-GAAP Measures (2025 Guidance)](index=14&type=section&id=Reconciliation%20of%20GAAP%20to%20Non-GAAP%20Measures%20(2025%20Guidance)) CSG provides reconciliations for its full-year 2025 financial guidance, including GAAP operating income of $134.7-$145.7 million to non-GAAP operating income of $203.1-$214.1 million, GAAP EPS of $2.86-$3.13 to non-GAAP EPS of $4.65-$4.90, GAAP net income to non-GAAP adjusted EBITDA of $258-$269 million, and cash from operations to non-GAAP adjusted free cash flow of $110-$150 million Reconciliation: FY2025 Guided GAAP to Non-GAAP EPS | Description | Low Range | High Range | | :--- | :--- | :--- | | **GAAP EPS** | **$2.86** | **$3.13** | | Restructuring, Acquisition, Stock Comp, etc. (per share) | $1.79 | $1.77 | | **Non-GAAP EPS** | **$4.65** | **$4.90** | Reconciliation: FY2025 Guided Operating Cash Flow to Adjusted Free Cash Flow (in thousands) | Description | Low Range | High Range | | :--- | :--- | :--- | | Cash flows from operating activities | $122,100 | $172,100 | | Earn-out compensation payments | $7,900 | $7,900 | | Purchases of software, property, and equipment | ($20,000) | ($30,000) | | **Non-GAAP adjusted free cash flow** | **$110,000** | **$150,000** | [Consolidated Financial Statements (Unaudited)](index=5&type=section&id=Consolidated%20Financial%20Statements%20(Unaudited)) This section presents the unaudited condensed consolidated financial statements for the period ended March 31, 2025, including the Balance Sheets, Statements of Income, and Statements of Cash Flows, with comparative data for prior periods [Condensed Consolidated Balance Sheets](index=5&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) As of March 31, 2025, CSG reported total assets of $1.42 billion and total liabilities of $1.14 billion, with total stockholders' equity at $283.1 million, compared to total assets of $1.50 billion and total equity of $282.6 million at year-end 2024 Key Balance Sheet Items (in thousands) | Account | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Cash and cash equivalents | $136,024 | $161,789 | | Total Assets | $1,419,004 | $1,500,687 | | Total Liabilities | $1,135,909 | $1,218,118 | | Total Stockholders' Equity | $283,095 | $282,569 | [Condensed Consolidated Statements of Income](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Income) For Q1 2025, CSG generated revenue of $299.5 million and reported net income of $16.1 million ($0.57 per diluted share), a decrease from Q1 2024's revenue of $295.1 million and net income of $19.5 million ($0.68 per diluted share), primarily due to higher restructuring charges Key Income Statement Items (in thousands, except per share data) | Account | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Revenue | $299,453 | $295,135 | | Operating Income | $29,383 | $31,797 | | Net Income | $16,130 | $19,467 | | Diluted EPS | $0.57 | $0.68 | [Condensed Consolidated Statements of Cash Flows](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) For Q1 2025, net cash provided by operating activities was $11.5 million, a significant turnaround from the $29.4 million used in Q1 2024, with net cash used in investing activities at $4.2 million and in financing activities at $104.5 million, largely due to share repurchases and dividend payments Key Cash Flow Items (in thousands) | Activity | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net cash from operating activities | $11,469 | ($29,351) | | Net cash used in investing activities | ($4,249) | ($4,774) | | Net cash used in financing activities | ($104,460) | ($111,145) | [Other Information](index=4&type=section&id=Other%20Information) This section provides an overview of CSG's business and a standard safe harbor statement regarding forward-looking statements and associated risks [About CSG](index=4&type=section&id=About%20CSG) CSG provides customer experience, billing, and payment solutions through a Software-as-a-Service (SaaS) model, enabling companies to manage and monetize their services and emphasizing their commitment to helping clients become 'future-ready' - CSG offers SaaS solutions for customer experience, billing, and payments to help companies of any size monetize their services[16](index=16&type=chunk) [Forward-Looking Statements](index=4&type=section&id=Forward-Looking%20Statements) This section contains a standard safe harbor statement, warning that the press release includes forward-looking statements subject to various risks and uncertainties, including revenue concentration, market competition, and dependency on the telecommunications industry - A significant portion of revenue (approximately **40%**) is derived from its two largest customers, representing a key risk factor[19](index=19&type=chunk) - Other major risks include dependency on the global telecommunications industry, market competition, ability to integrate acquisitions, and maintaining a secure computing environment[19](index=19&type=chunk)

Group 1 - CSG Systems (CSGS) is currently outperforming the Computer and Technology sector, with a year-to-date return of approximately 19.6%, while the sector has lost about 10.4% on average [4] - The Zacks Consensus Estimate for CSGS' full-year earnings has increased by 4.1% over the past three months, indicating improved analyst sentiment and a stronger earnings outlook [4] - CSG Systems holds a Zacks Rank of 2 (Buy), suggesting it has characteristics that may lead to outperformance in the market over the next one to three months [3] Group 2 - CSG Systems is part of the Computer - Services industry, which consists of 9 companies and is currently ranked 87 in the Zacks Industry Rank, with an average loss of 5.2% this year [6] - Another stock in the Computer and Technology sector, Neonode (NEON), has also outperformed the sector with a year-to-date return of 4.4% and a Zacks Rank of 2 (Buy) [5] - The Computer - Software industry, which includes Neonode, has 32 stocks and is ranked 69, with a year-to-date performance of -5.2% [6]

Part I [Business](index=4&type=section&id=Item%201.%20Business) CSG is a SaaS platform company providing solutions for revenue management, digital monetization, customer experience, and payments across various industries - CSG is a purpose-driven, SaaS platform company that enables global companies to simplify customer engagement and monetization in the digital age, managing billions of critical customer interactions annually[19](index=19&type=chunk) - The company serves a wide range of industries including telecom, broadband cable, media, retail, healthcare, financial services, insurance, and government[21](index=21&type=chunk) - CSG's solutions are categorized into three main areas: Revenue Management and Digital Monetization, Transformational Customer Experiences, and Payments[24](index=24&type=chunk)[26](index=26&type=chunk)[30](index=30&type=chunk) - Key growth strategies include accelerating revenue growth through organic means and disciplined acquisitions, leading with category-defining technology, delivering exceptional customer experiences, becoming the SaaS provider of choice for CSPs, and expanding into high-growth industry verticals[41](index=41&type=chunk)[42](index=42&type=chunk)[43](index=43&type=chunk)[44](index=44&type=chunk)[45](index=45&type=chunk) Significant Customer Revenue Concentration (2023-2024) | Customer | 2024 Revenue (millions) | 2024 % of Revenue | 2023 Revenue (millions) | 2023 % of Revenue | | :--- | :--- | :--- | :--- | :--- | | Charter | $240 | 20% | $241 | 21% | | Comcast | $225 | 19% | $215 | 18% | - The company's main competitors include Amdocs, NEC Netcracker, Salesforce, Adobe, Ericsson, Accenture, FIS, Stripe, and Square[52](index=52&type=chunk) - As of December 31, 2024, CSG employed over **5,800 people globally**, with the largest concentrations in Asia-Pacific/Australia (46%) and North America (36%)[64](index=64&type=chunk) - CSG has a sustainability goal to be **carbon neutral for Scope 1 and 2 greenhouse emissions by 2035**[67](index=67&type=chunk) [Risk Factors](index=15&type=section&id=Item%201A.%20Risk%20Factors) The company faces significant risks from customer concentration, cybersecurity, technological change, global operations, and regulatory compliance - **Customer Concentration:** A significant portion of revenue is derived from a few large customers, notably Charter and Comcast, which together account for about **40% of total revenue**[78](index=78&type=chunk)[79](index=79&type=chunk) - **Cybersecurity and System Availability:** The delivery of solutions depends on complex computing systems and networks that are vulnerable to interruptions, outages, and security breaches like ransomware attacks[82](index=82&type=chunk)[83](index=83&type=chunk)[84](index=84&type=chunk) - **Technological Change and AI:** The market demands rapid technological innovation, and failure to develop and enhance solutions, including the ethical and effective implementation of AI, could hurt competitiveness[88](index=88&type=chunk)[90](index=90&type=chunk) - **Global Operations:** Conducting business internationally exposes the company to risks such as foreign currency fluctuations, compliance with varied legal and regulatory requirements, political instability, and trade barriers[93](index=93&type=chunk) - **Payments Business Risks:** The payments business is susceptible to fraud, chargebacks, and non-fulfillment by merchants, which could lead to financial losses[94](index=94&type=chunk) - **Intellectual Property:** The company relies on trade secret, copyright, and contractual arrangements to protect its IP, and failure to do so or facing infringement claims could substantially harm the business[96](index=96&type=chunk)[97](index=97&type=chunk)[98](index=98&type=chunk) - **Regulatory Compliance:** The business is subject to evolving data privacy laws (e.g., GDPR, CCPA), payment regulations, and anti-money laundering laws, with non-compliance risking substantial fines[107](index=107&type=chunk)[108](index=108&type=chunk)[111](index=111&type=chunk)[114](index=114&type=chunk) [Unresolved Staff Comments](index=32&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) The company reports that it has no unresolved staff comments from the SEC - None[125](index=125&type=chunk) [Cybersecurity](index=33&type=section&id=Item%201C.%20Cybersecurity) CSG manages cybersecurity risks through a program aligned with the ISO 27001 framework, overseen by a dedicated committee and the Board of Directors - The company's cybersecurity program is aligned with the **ISO 27001 framework**, SEC regulations, and industry best practices[127](index=127&type=chunk) - A cross-functional Information Security Steering Committee (ISSC), chaired by the CISO, oversees the cybersecurity program's direction and effectiveness[132](index=132&type=chunk) - The Board of Directors is responsible for overseeing the cybersecurity program, with a standing Cybersecurity Committee advising on strategic guidance[135](index=135&type=chunk)[137](index=137&type=chunk) - As of the filing date, CSG is not aware of any material risks from cybersecurity threats that have materially affected or are reasonably likely to materially affect the company[128](index=128&type=chunk) [Properties](index=35&type=section&id=Item%202.%20Properties) CSG leases its corporate headquarters in Denver, Colorado, and is reducing its global real estate footprint following a flexible work approach - Corporate headquarters is located in Denver, Colorado, under a lease expiring in **2033**[138](index=138&type=chunk) - The company leases three design and delivery centers in the U.S, with leases expiring between **2026 and 2029**[140](index=140&type=chunk) - CSG has been reducing its real estate footprint since 2022 due to a flexible work approach[139](index=139&type=chunk) [Legal Proceedings](index=35&type=section&id=Item%203.%20Legal%20Proceedings) The company states that it is not currently a party to any material pending or threatened legal proceedings - In the opinion of management, CSG is not presently a party to any material pending or threatened legal proceedings[142](index=142&type=chunk) [Mine Safety Disclosures](index=35&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company - Not applicable[143](index=143&type=chunk) Part II [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=39&type=section&id=Item%205.%20Market%20for%20Registrant's%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) CSG's common stock (CSGS) trades on Nasdaq, and the company actively repurchased shares in Q4 2024 under an authorized program - The company's common stock is listed on the Nasdaq Stock Market LLC under the symbol **'CSGS'**[153](index=153&type=chunk) Issuer Purchases of Equity Securities (Q4 2024) | Period | Total Number of Shares Purchased | Average Price Paid Per Share | Maximum Dollar Value that May Yet Be Purchased Under the Program | | :--- | :--- | :--- | :--- | | Oct 1 - Oct 31 | 181,841 | $48.18 | $153,400,374 | | Nov 1 - Nov 30 | 142,915 | $53.58 | $145,863,553 | | Dec 1 - Dec 31 | 149,320 | $53.18 | $137,950,850 | | **Total** | **474,076** | **$51.38** | | - In August 2024, the Board authorized an additional **$100.0 million** for the Stock Repurchase Program, with all repurchases to be completed by **December 31, 2025**[157](index=157&type=chunk) [[Reserved]](index=40&type=section&id=Item%206.%20%5BReserved%5D) This item is reserved [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=41&type=section&id=Item%207.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Fiscal year 2024 saw revenue growth of 2.4% to $1,197.2 million, driven by SaaS solutions, with improved operating margins and higher diluted EPS Key Financial Results (2023 vs. 2024) | Metric | 2024 | 2023 | | :--- | :--- | :--- | | Revenue | $1,197.2M | $1,169.3M | | Operating Income | $131.3M | $123.9M | | Operating Margin | 11.0% | 10.6% | | Diluted EPS | $3.03 | $2.20 | - Revenue growth in 2024 was primarily driven by continued expansion of **SaaS and related solutions revenue**, including contributions from businesses acquired in Q2 2024[158](index=158&type=chunk) - The company renewed its agreement with Comcast in October 2024, extending the relationship through **December 31, 2030**[164](index=164&type=chunk) - Cash flow from operating activities increased to **$135.7 million** in 2024 from $131.9 million in 2023[161](index=161&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=59&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) CSG is exposed to market risks from interest rates on its variable-rate debt, the market value of its convertible debt, and foreign currency fluctuations - The company is exposed to interest rate risk on its 2021 Credit Agreement, which has a variable interest rate based on **SOFR**[238](index=238&type=chunk) - The fair value of the company's convertible debt is exposed to market risk, and as of Dec 31, 2024, the fair value of the 2023 Convertible Notes was **$429.1 million**[242](index=242&type=chunk) - Foreign currency exchange risk exists due to global operations, but approximately **89% of 2024 revenue** was generated in U.S. dollars[243](index=243&type=chunk)[244](index=244&type=chunk) [Financial Statements and Supplementary Data](index=60&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section presents the company's audited consolidated financial statements, management's report on internal controls, and the independent auditor's unqualified opinion - Management assessed the company's internal control over financial reporting as **effective** as of December 31, 2024, based on the COSO framework[250](index=250&type=chunk) - The independent registered public accounting firm, KPMG LLP, issued an **unqualified opinion** on both the consolidated financial statements and the effectiveness of internal control over financial reporting[254](index=254&type=chunk)[262](index=262&type=chunk) Consolidated Balance Sheet Summary (As of Dec 31) | (in thousands) | 2024 | 2023 | | :--- | :--- | :--- | | **Total Assets** | **$1,500,687** | **$1,443,046** | | Total Current Assets | $900,882 | $862,226 | | Total Non-Current Assets | $599,805 | $580,820 | | **Total Liabilities** | **$1,218,118** | **$1,169,720** | | Total Current Liabilities | $615,209 | $560,836 | | Total Non-Current Liabilities | $602,909 | $608,884 | | **Total Stockholders' Equity** | **$282,569** | **$273,326** | Consolidated Statement of Income Summary (Year Ended Dec 31) | (in thousands) | 2024 | 2023 | 2022 | | :--- | :--- | :--- | :--- | | Revenue | $1,197,248 | $1,169,258 | $1,089,752 | | Operating Income | $131,333 | $123,877 | $78,747 | | **Net Income** | **$86,852** | **$66,246** | **$44,060** | Consolidated Statement of Cash Flows Summary (Year Ended Dec 31) | (in thousands) | 2024 | 2023 | 2022 | | :--- | :--- | :--- | :--- | | Net cash provided by operating activities | $135,717 | $131,896 | $63,597 | | Net cash used in investing activities | ($5,128) | ($27,906) | ($9,038) | | Net cash used in financing activities | ($79,923) | ($31,305) | ($51,685) | [Changes in and Disagreements with Accountants on Accounting and Financial Disclosure](index=110&type=section&id=Item%209.%20Changes%20in%20and%20Disagreements%20with%20Accountants%20on%20Accounting%20and%20Financial%20Disclosure) The company reports no changes in or disagreements with its accountants on accounting principles, practices, or financial statement disclosure - None[434](index=434&type=chunk) [Controls and Procedures](index=110&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management concluded that the company's disclosure controls and procedures were effective as of December 31, 2024, with no material changes in the fourth quarter - The CEO and CFO concluded that the company's disclosure controls and procedures were **effective** as of the end of the reporting period[435](index=435&type=chunk) - There were **no changes** in internal control over financial reporting during the fourth quarter of 2024 that materially affected, or are reasonably likely to materially affect, internal controls[438](index=438&type=chunk) [Other Information](index=110&type=section&id=Item%209B.%20Other%20Information) No directors or officers adopted, modified, or terminated any Rule 10b5-1 or other non-Rule 10b5-1 trading arrangements in Q4 2024 - No directors or officers adopted, modified, or terminated any Rule 10b5-1 trading plans or non-Rule 10b5-1 trading arrangements in Q4 2024[439](index=439&type=chunk) [Disclosure Regarding Foreign Jurisdictions that Prevent Inspections](index=110&type=section&id=Item%209C.%20Disclosure%20Regarding%20Foreign%20Jurisdictions%20that%20Prevent%20Inspections) This item is not applicable to the company - Not applicable[440](index=440&type=chunk) Part III [Directors, Executive Officers and Corporate Governance](index=111&type=section&id=Item%2010.%20Directors%2C%20Executive%20Officers%20and%20Corporate%20Governance) Information regarding directors and executive officers is incorporated by reference from the company's 2025 Annual Meeting Proxy Statement - Information for this item is incorporated by reference from the registrant's Definitive Proxy Statement for its 2025 Annual Meeting of Stockholders[442](index=442&type=chunk) [Executive Compensation](index=111&type=section&id=Item%2011.%20Executive%20Compensation) Information regarding executive compensation is incorporated by reference from the company's 2025 Annual Meeting Proxy Statement - Information for this item is incorporated by reference from the registrant's Definitive Proxy Statement for its 2025 Annual Meeting of Stockholders[443](index=443&type=chunk) [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=111&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters) Information regarding security ownership is incorporated by reference from the company's 2025 Annual Meeting Proxy Statement - Information for this item is incorporated by reference from the registrant's Definitive Proxy Statement for its 2025 Annual Meeting of Stockholders[444](index=444&type=chunk) [Certain Relationships and Related Transactions, and Director Independence](index=111&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Transactions%2C%20and%20Director%20Independence) Information regarding related transactions and director independence is incorporated by reference from the company's 2025 Annual Meeting Proxy Statement - Information for this item is incorporated by reference from the registrant's Definitive Proxy Statement for its 2025 Annual Meeting of Stockholders[445](index=445&type=chunk) [Principal Accounting Fees and Services](index=111&type=section&id=Item%2014.%20Principal%20Accounting%20Fees%20and%20Services) Information regarding principal accounting fees and services is incorporated by reference from the company's 2025 Annual Meeting Proxy Statement - Information for this item is incorporated by reference from the registrant's Definitive Proxy Statement for its 2025 Annual Meeting of Stockholders[446](index=446&type=chunk) Part IV [Exhibits, Financial Statement Schedules](index=111&type=section&id=Item%2015.%20Exhibits%2C%20Financial%20Statement%20Schedules) This section lists the financial statements and provides a detailed index of all exhibits filed with the Form 10-K - The financial statements are listed in the Index to Consolidated Financial Statements on page 37[448](index=448&type=chunk) - No financial statement schedules are filed with this report[448](index=448&type=chunk) - A comprehensive list of exhibits, including governance documents, material contracts, and certifications, is provided in the Exhibit Index[448](index=448&type=chunk)[451](index=451&type=chunk) [Form 10-K Summary](index=111&type=section&id=Item%2016.%20Form%2010-K%20Summary) The company has not provided a Form 10-K summary - None[450](index=450&type=chunk)

CSG Q4 & Full Year 2024 Earnings Presentation Brian Shepherd CEO & President Hai Tran CFO Safe Harbor Forward-Looking Statements + Disclaimers This presentation contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. In this context, forward-looking statements often address expected future business and financial performance and financial condition, and often contain words such as "expect," "anticipate," "intend," "plan," "believe," "seek," "see," "will ...

Financial Data and Key Metrics Changes - In Q4, the company achieved a record quarterly revenue of $317 million, representing a 7% year-over-year growth and a 5% organic revenue growth [7][35] - Non-GAAP adjusted operating income increased by 32% year-over-year to $58 million, with a non-GAAP adjusted operating margin of 20.1% [36] - Non-GAAP adjusted EBITDA grew 21% year-over-year to $72 million, achieving a margin of 24.8% [36] - Non-GAAP EPS saw a significant increase of 79% year-over-year, reaching $1.65 [38] - Non-GAAP adjusted free cash flow improved by 9% year-over-year to $113 million [39] Business Line Data and Key Metrics Changes - The growth in revenue was attributed to the SaaS and related solutions, alongside approximately $6 million from acquired businesses [35] - The top two customers, Comcast and Charter, reported a 3% year-over-year revenue increase in Q4 [35] Market Data and Key Metrics Changes - The company is diversifying its revenue streams, targeting new industry verticals to exceed 35% of total revenue by 2026 [11] - The company has expanded its presence in various sectors, including media, financial services, healthcare, and retail, indicating a broadening market reach [15][70] Company Strategy and Development Direction - The company aims to achieve 2% to 6% organic revenue growth and expand its non-GAAP operating margin to a long-term range of 18% to 20% [12][27] - The strategy includes becoming more asset-light to enhance free cash flow growth in 2025 and 2026, with a target of $110 million to $150 million in adjusted free cash flow for 2025 [13][28] - The company is committed to returning over $100 million to shareholders through share repurchases and dividends in 2025 [28] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to expand profitability and operating leverage, with expectations for continued improvement in profitability metrics [37][46] - Despite a tough market environment, management noted a healthier sales pipeline entering 2025 compared to the previous year [54][112] - The company anticipates organic revenue growth of 2% to 4% for 2025, with potential for higher performance if the year starts strong [58][114] Other Important Information - The company completed two smaller, highly accretive acquisitions in 2024, contributing to recurring revenue [30] - The company is leveraging AI to enhance customer engagement and operational efficiency, focusing on practical applications rather than hype [79][84] Q&A Session Summary Question: Can you talk about the pipeline entering 2025 compared to a year ago? - Management indicated that the pipeline has grown and is healthier, with opportunities distributed across various prospects [54][50] Question: Any notable dynamics in the quarter regarding deals or budget flush? - Management noted nothing out of the ordinary, with typical delays in large, complex opportunities [56] Question: How do you see operating margin expansion in 2025 compared to 2026? - Management expects modest expansion in 2025, with further improvements anticipated in 2026 due to operational efficiencies and revenue mix [61][66] Question: What is the outlook for CXM payments and growth in those segments? - Management reported robust growth in both segments, with expectations for double-digit organic growth [92][93] Question: How is the company leveraging AI for growth and efficiency? - Management emphasized a pragmatic approach to AI, focusing on specific use cases that drive customer engagement and operational efficiency [79][84] Question: Concerns regarding governmental business and FX volatility? - Management stated minimal exposure to governmental contracts and no concerns regarding revenue guidance for 2025 [88][89]

CSG Systems (CSGS) came out with quarterly earnings of $1.65 per share, beating the Zacks Consensus Estimate of $1.21 per share. This compares to earnings of $0.92 per share a year ago. These figures are adjusted for non-recurring items.This quarterly report represents an earnings surprise of 36.36%. A quarter ago, it was expected that this provider of support services for the communications industry would post earnings of $1.08 per share when it actually produced earnings of $1.06, delivering a surprise of ...