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]

Revenue and Growth - As of March 31, 2025, the total revenue was $299.5 million, a slight increase from $295.1 million in the same quarter of 2024, representing a year-over-year growth of approximately 1.1%[20] - Revenue from SaaS and related solutions was $269.9 million for the quarter ended March 31, 2025, compared to $261.7 million in the prior year, indicating a growth of about 3.4%[20] - The Americas accounted for 87% of total revenue in Q1 2025, slightly up from 86% in Q1 2024[20] - Approximately 89% of the company's revenue was generated in U.S. dollars during the first quarter of 2025, with expectations to maintain a high percentage in the foreseeable future[151] Financial Position - The company has approximately $1.8 billion in remaining performance obligations, with over 70% expected to be recognized by the end of 2027[18] - The company reported total settlement assets of $263.5 million and total liabilities of $271.8 million as of March 31, 2025[26] - As of March 31, 2025, the total carrying amount of goodwill increased to $319.371 million from $316.041 million, reflecting a $3.330 million impact from foreign currency exchange rates[33] - As of March 31, 2025, the total long-term debt was $537.554 million, slightly up from $530.997 million as of December 31, 2024[36] - Long-term debt as of March 31, 2025, included $125.6 million in revolver borrowings and $425.0 million in convertible notes[147] Expenses and Income - Segment net income for the quarter ended March 31, 2025, was $16.1 million, down from $19.5 million in the prior year, reflecting a decrease of approximately 17.9%[32] - Research and development expenses for the quarter were $39.8 million, an increase from $36.1 million in the same quarter of 2024, representing a growth of about 7.5%[32] - The total amortization expense for other intangible assets in Q1 2025 was $6.6 million, compared to $5.4 million in Q1 2024, indicating a year-over-year increase of approximately 22.2%[33] - Stock-based compensation expense for Q1 2025 was $8.4 million, compared to $7.7 million in Q1 2024[76] Cash Management - As of March 31, 2025, cash and cash equivalents were $136.0 million, down from $161.8 million at the end of 2024[146] - The company held $274.2 million in cash collected on behalf of merchants, down from $343.2 million as of December 31, 2024, indicating significant fluctuations in cash reserves[148] - Cash held on behalf of merchants is maintained in accounts equal to at least 100% of the aggregate amount owed to them, reflecting a strong liquidity position[148] - Settlement assets are swept into overnight money market accounts daily, indicating active cash management practices[148] Debt and Financing - The company entered into a $600 million 2025 Credit Agreement in March 2025, which includes a $600 million revolving loan facility due in March 2030[36] - The company withdrew $140.6 million from the 2025 Revolver to repay existing debts and cover fees, leaving $474.1 million available under the 2025 Revolver as of March 31, 2025[42] - The fair value of the 2023 Convertible Notes was estimated at $460.1 million as of March 31, 2025, compared to a carrying value of $425 million[27] - The 2023 Convertible Notes have an initial conversion rate of 14.0753 shares per $1,000 principal amount, equating to a conversion price of $71.05 per share[45] Acquisitions and Restructuring - The company acquired iCheckGateway.com, LLC for $17.6 million in cash on June 3, 2024, with potential future earn-out payments of up to $15 million based on performance[51][52] - The acquisition of DGIT Systems Pty Ltd was completed for approximately $16 million, with a final deferred payment of $0.3 million made in Q1 2025[53] - As of March 31, 2025, the company accrued $1.3 million related to potential future earn-out payments from the DGIT acquisition[54] - Restructuring and reorganization charges for Q1 2025 totaled $7.4 million, compared to $2.0 million in Q1 2024[55] - The company reduced its global workforce by approximately 125 employees, incurring $6.6 million in restructuring charges related to involuntary terminations[57] - The closure of the Crawfordville, Florida design and delivery center is expected to eliminate approximately 100 employees and incur total costs of around $5 million, primarily in 2025[57] Accounting and Reporting - The company is evaluating the impact of new accounting standards issued by FASB, which may affect future disclosures but are not expected to materially impact financial statements[28][29] - The company does not carry convertible debt at fair value but provides fair value estimates for disclosure, highlighting transparency in financial reporting[149] - Fluctuations in interest rates and stock price volatility impact the fair value of the company's convertible debt, indicating market sensitivity[149] Foreign Currency Exposure - The company is exposed to foreign currency exchange risk due to operations in multiple currencies, including the British Pound, Euro, and Australian Dollar[150] - The company attempts to maximize natural hedges by incurring expenses in the same currency as revenue, although mismatches can occur[150] - A hypothetical adverse change of 10% in exchange rates as of March 31, 2025, would not have had a material impact on the company's results of operations[151]

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]