DENVER--(BUSINESS WIRE)--Communication service providers (CSPs) are racing to modernize their operations and deliver dynamic and personalized experiences for their customers. To leverage automation, intelligence and orchestration, they’re working to improve the customer experience across all touchpoints. In 2023, CSG® (NASDAQ: CSGS)’s award-winning solutions and integrated omnichannel approach helped global brands transform their customer experience, earning CSG recognition from leading analyst firms Gartne ...

Financial Data and Key Metrics Changes - The company reported a year-to-date non-GAAP adjusted operating margin of 17.5%, an improvement from 16.6% in the same period of 2022 [5][33] - Year-to-date 2023 non-GAAP EPS was $2.76, unchanged from the prior year, as revenue and operating margin increases were offset by higher interest expenses and foreign currency headwinds [35] - Non-GAAP adjusted EBITDA for the first nine months of 2023 was $183 million, or 22.7% of revenue, compared to $166 million or 22.3% in the first nine months of 2022 [68] Business Line Data and Key Metrics Changes - The company achieved 9% year-over-year revenue growth for the first nine months of 2023, all from organic growth, marking the best results in nearly two decades [8][13] - Revenue management solutions and digital customer experience (CX) solutions contributed significantly to revenue growth, with strong year-over-year growth in payment volumes [32] - The payments market saw continued double-digit revenue growth, with the company providing solutions to 110,000 active merchants and ISV partners [24] Market Data and Key Metrics Changes - The company has diversified its revenue, with over 27% coming from faster-growing industry verticals such as healthcare, financial services, retail, technology, and government [30][54] - The relationship with major clients like Comcast and Charter remains stable, with their residential and SMB customer base staying broadly flat during Q3 despite video subscriber losses [20] Company Strategy and Development Direction - The company aims to grow revenue to $1.5 billion by year-end 2025, with bottom-line growth expected to outpace top-line revenue growth [7] - The strategic focus includes maintaining a disciplined high return on invested capital mindset while exploring various strategic moves to create shareholder value [17] - The integration of AI into business operations is a key focus, with efforts to drive internal efficiencies and enhance customer interactions [26][27] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in sustaining accelerated organic growth, with expectations to perform at or above the midpoint of their 2% to 6% growth range [41] - The company anticipates continued growth potential with major cable customers, despite current short-term challenges in the market [42] - Management emphasized the importance of operational discipline and the potential for margin expansion in the future [87] Other Important Information - The company completed a $100 million share repurchase plan, repurchasing $107 million worth of stock during Q3, marking the largest quarterly share repurchase since Q3 of 2007 [14] - The company is committed to a disciplined approach to M&A, focusing on strategic product capabilities that add value to customers [101] Q&A Session Summary Question: What drove the strong revenue growth rate? - Management highlighted diversification in new industry verticals and strong ongoing market demand for their SaaS products as key drivers of growth [94] Question: What is the outlook for margins in the fourth quarter? - Management indicated that they do not expect a step back in margins and are focused on operational discipline to improve performance [86][87] Question: How does the company view M&A opportunities? - The company sees potential for disciplined acquisitions that align with their strategic goals, particularly in the AI space [100][101] Question: What is the impact of AI on operational efficiency? - Management noted that AI is expected to enhance productivity and efficiency across various departments, potentially leading to headcount avoidance rather than cuts [139] Question: Why was the 2023 guidance not raised despite strong performance? - Management decided to maintain guidance to focus on achieving results that exceed predictions in Q4 [144]

Part I - Financial Information [Item 1. Financial Statements](index=3&type=section&id=Item%201%2E%20Financial%20Statements) This section presents the unaudited condensed consolidated financial statements for CSG Systems International, Inc., including Balance Sheets, Statements of Income, Statements of Cash Flows, and accompanying notes, for the period ended September 30, 2023 [Condensed Consolidated Balance Sheets](index=3&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) As of September 30, 2023, total assets slightly decreased to **$1.33 billion**, while total liabilities increased to **$1.07 billion** due to higher long-term debt, leading to a reduction in stockholders' equity Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | September 30, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Total current assets | $760,067 | $765,955 | | Total assets | $1,329,602 | $1,348,553 | | Total current liabilities | $461,533 | $527,209 | | Long-term debt, net | $535,998 | $375,469 | | Total liabilities | $1,069,111 | $993,304 | | Total stockholders' equity | $260,491 | $355,249 | [Condensed Consolidated Statements of Income](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Income) For Q3 2023, revenue grew **5.0%** to **$286.9 million** with net income increasing to **$18.7 million**, while for the nine months, revenue grew **9.0%** to **$871.9 million** and net income more than doubled to **$53.6 million** Financial Performance Summary (in thousands, except per share data) | Metric | Q3 2023 | Q3 2022 | Nine Months 2023 | Nine Months 2022 | | :--- | :--- | :--- | :--- | :--- | | Revenue | $286,868 | $273,308 | $871,934 | $799,876 | | Operating Income | $32,731 | $19,977 | $99,130 | $43,675 | | Net Income | $18,694 | $12,481 | $53,576 | $23,911 | | Diluted EPS | $0.62 | $0.40 | $1.75 | $0.76 | [Condensed Consolidated Statements of Cash Flows](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) For the nine months ended September 30, 2023, net cash from operations significantly increased to **$52.4 million**, while investing activities used **$22.9 million** and financing activities used **$78.0 million**, primarily for stock repurchases and dividends Cash Flow Summary for Nine Months Ended Sep 30 (in thousands) | Cash Flow Activity | 2023 | 2022 | | :--- | :--- | :--- | | Net cash provided by operating activities | $52,365 | $9,573 | | Net cash used in investing activities | ($22,869) | ($4,117) | | Net cash used in financing activities | ($77,965) | ($70,375) | | Net decrease in cash, cash equivalents, and restricted cash | ($48,917) | ($72,608) | [Notes to Condensed Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) These notes detail critical financial disclosures, including revenue recognition, the issuance of **$425 million** in new convertible notes, significant restructuring activities, and substantial stock repurchase and dividend activities - The aggregate amount of transaction price allocated to remaining performance obligations is **$1.5 billion** as of September 30, 2023, with over **65%** expected to be recognized by the end of 2025[17](index=17&type=chunk) Revenue by Type (Nine Months Ended Sep 30, in thousands) | Revenue Type | 2023 | 2022 | | :--- | :--- | :--- | | SaaS and related solutions | $764,253 | $704,303 | | Software and services | $73,235 | $61,627 | | Maintenance | $34,446 | $33,946 | | **Total Revenue** | **$871,934** | **$799,876** | - In September 2023, the company issued **$425.0 million** of 3.875% senior convertible notes due 2028[60](index=60&type=chunk) - During the nine months ended September 30, 2023, the company recorded restructuring and reorganization charges of **$8.4 million**, a significant decrease from **$46.3 million** in the same period of 2022, including charges for dissolving the Keydok business and workforce reductions[98](index=98&type=chunk)[100](index=100&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A)](index=22&type=section&id=Item%202%2E%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the company's performance, highlighting a **9.0%** revenue increase and substantial operating income growth, while also addressing significant customer concentration, new debt issuance, and capital allocation strategies [Results of Operations](index=25&type=section&id=Results%20of%20Operations) For the nine months ended September 30, 2023, revenue increased **9.0%** to **$871.9 million**, with operating income rising to **$99.1 million** due to higher revenue and reduced restructuring charges, while the Americas region contributed **86%** of total revenue - Revenue for the nine months ended September 30, 2023, increased by **9.0%** year-over-year, primarily attributed to the continued growth of revenue management solutions and strong performance in SaaS and related solutions revenue[122](index=122&type=chunk) - Operating income for the nine months ended September 30, 2023, was **$99.1 million** (**11.4%** of revenue), a significant increase from **$43.7 million** (**5.5%** of revenue) in the same period of 2022, mainly due to lower restructuring charges and higher revenue[127](index=127&type=chunk) Revenue by Geographic Region (Nine Months Ended Sep 30, in thousands) | Region | 2023 | 2022 | | :--- | :--- | :--- | | Americas (principally the U.S.) | $746,299 | $679,002 | | Europe, Middle East, and Africa | $88,795 | $88,878 | | Asia Pacific | $36,840 | $31,996 | | **Total Revenue** | **$871,934** | **$799,876** | [Significant Customer Relationships](index=24&type=section&id=Significant%20Customer%20Relationships) The company's revenue is highly concentrated with Charter and Comcast, accounting for **21%** and **19%** of Q3 2023 revenue respectively, though recent agreement extensions mitigate near-term renewal risk Revenue Concentration from Major Customers (Q3 2023) | Customer | % of Revenue | Revenue (in thousands) | | :--- | :--- | :--- | | Charter | 21% | $59,432 | | Comcast | 19% | $53,653 | - In April 2023, the agreement with Charter was amended and restated, extending the term through March 31, 2028[146](index=146&type=chunk) - In June 2023, Comcast exercised its option to extend its processing and other related solutions agreement through December 31, 2025[147](index=147&type=chunk) [Liquidity and Capital Resources](index=27&type=section&id=Liquidity%20and%20Capital%20Resources) As of September 30, 2023, the company held **$146.7 million** in cash, having issued **$425 million** in convertible notes, repaid **$275 million** on its revolver, repurchased **$197.1 million** in stock, and paid **$26.2 million** in dividends - In September 2023, the company issued **$425.0 million** in 2023 Convertible Notes, using net proceeds to repay **$275.0 million** of its 2021 Revolver, repurchase **$90.1 million** of common stock, and pay **$34.3 million** for Capped Call Transactions[91](index=91&type=chunk)[168](index=168&type=chunk) - During the nine months ended September 30, 2023, the company repurchased approximately **1,991,000 shares** of common stock for **$107.0 million** under its Stock Repurchase Program[191](index=191&type=chunk)[173](index=173&type=chunk) - The Board approved dividends totaling **$26.4 million** during the first nine months of 2023, with **$26.2 million** paid during the period[190](index=190&type=chunk) - As of September 30, 2023, the company had **$15.0 million** outstanding on its **$450.0 million** revolving loan facility, leaving **$435.0 million** available[179](index=179&type=chunk)[197](index=197&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=34&type=section&id=Item%203%2E%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company's primary market risks include interest rate risk from variable-rate debt, market value fluctuations of fixed-rate convertible debt, and foreign currency exchange rate risk, though **88%** of revenue is U.S. dollar-denominated, and management deems these risks immaterial - The company is exposed to interest rate risk on its 2021 Credit Agreement, based on a variable adjusted SOFR rate, where a hypothetical **10%** adverse change is not expected to have a material impact[232](index=232&type=chunk)[205](index=205&type=chunk) - The fair value of the company's convertible debt is exposed to market risk, with the **$425 million** 2023 Convertible Notes estimated at **$414.7 million** as of September 30, 2023[208](index=208&type=chunk) - The company is exposed to foreign currency exchange rate risk, mitigated by approximately **88%** of revenue for the first nine months of 2023 being U.S. dollar-denominated[209](index=209&type=chunk)[235](index=235&type=chunk) [Item 4. Controls and Procedures](index=36&type=section&id=Item%204%2E%20Controls%20and%20Procedures) Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of September 30, 2023, with no material changes to internal control over financial reporting during the quarter - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of the end of the period covered by the report[236](index=236&type=chunk) - Management concluded that there were no changes during the quarter that materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[211](index=211&type=chunk) Part II - Other Information [Item 1. Legal Proceedings](index=37&type=section&id=Item%201%2E%20Legal%20Proceedings) Management believes CSG Systems International, Inc. is not currently involved in any material pending or threatened legal proceedings that would significantly impact its operations or financial condition - In the opinion of management, the company is not presently a party to any material pending or threatened legal proceedings[214](index=214&type=chunk) [Item 1A. Risk Factors](index=37&type=section&id=Item%201A%2E%20Risk%20Factors) No material changes occurred to the risk factors previously disclosed in the company's 2022 Annual Report on Form 10-K during the third quarter of 2023 - No material changes to the risk factors disclosed in the 2022 Form 10-K occurred during the third quarter of 2023[238](index=238&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=37&type=section&id=Item%202%2E%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) During Q3 2023, the company repurchased **1,994,147 shares** at an average price of **$53.73** per share, including shares under its repurchase program, with an additional **$100.0 million** authorized for future repurchases Share Repurchases in Q3 2023 | Period | Total Shares Purchased | Average Price Paid Per Share | | :--- | :--- | :--- | | July 2023 | 810 | $51.92 | | August 2023 | 260,552 | $54.63 | | September 2023 | 1,732,785 | $53.60 | | **Total Q3** | **1,994,147** | **$53.73** | - In August 2023, the Board authorized an additional **$100.0 million** for stock repurchases under the Stock Repurchase Program[216](index=216&type=chunk) [Item 6. Exhibits](index=38&type=section&id=Item%206%2E%20Exhibits) This section indexes all exhibits filed with the Form 10-Q, including the Indenture for the new 3.875% Convertible Senior Notes due 2028, Capped Call Confirmations, and various agreement amendments - Key exhibits filed include the Indenture for the 2023 Convertible Notes, the Second Amendment to the 2021 Credit Agreement, and the form of Capped Call Confirmations[219](index=219&type=chunk)[241](index=241&type=chunk)[246](index=246&type=chunk)

CSG Systems International, Inc. (NASDAQ:CSGS) Q2 2023 Earnings Conference Call August 2, 2023 5:00 PM ET Company Participants John Rea - Head of Investor Relations Brian Shepherd - President & Chief Executive Officer Hai Tran - Chief Financial Officer Conference Call Participants Maggie Nolan - William Blair Nehal Chokshi - Northland Capital Markets Shlomo Rosenbaum - Stifel Matthew Harrigan - The Benchmark Company Brett Knoblauch - Cantor Fitzgerald Dan McDermott - Oppenheimer Operator Good afternoon, ladi ...

[Part I - Financial Information](index=3&type=section&id=Part%20I%20-%20FINANCIAL%20INFORMATION) The first part details the company's financial performance and position, including statements, management's analysis, market risks, and internal controls [Item 1. Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) The unaudited condensed consolidated financial statements for Q2 2023 show decreased total assets and liabilities, with significant increases in revenue and net income [Condensed Consolidated Balance Sheets](index=3&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) As of June 30, 2023, total assets decreased to $1.29 billion from $1.35 billion, while total liabilities also decreased to $909.8 million Balance Sheet Summary (in thousands) | Account | June 30, 2023 | December 31, 2022 | | :--- | :--- | :--- | | **Total Assets** | **$1,293,069** | **$1,348,553** | | Total Current Assets | $725,415 | $765,955 | | **Total Liabilities** | **$909,758** | **$993,304** | | Total Current Liabilities | $431,102 | $527,209 | | Long-term Debt, net | $402,092 | $375,469 | | **Total Stockholders' Equity** | **$383,311** | **$355,249** | [Condensed Consolidated Statements of Income](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Income) For Q2 2023, revenue increased 9.2% to $286.3 million, and net income surged 162.4% to $14.0 million, with diluted EPS rising to $0.45 Q2 2023 vs Q2 2022 Performance (in thousands, except EPS) | Metric | Q2 2023 | Q2 2022 | Change | | :--- | :--- | :--- | :--- | | Revenue | $286,327 | $262,168 | +9.2% | | Operating Income | $28,206 | $7,283 | +287.3% | | Net Income | $13,954 | $5,317 | +162.4% | | Diluted EPS | $0.45 | $0.17 | +164.7% | Six Months 2023 vs 2022 Performance (in thousands, except EPS) | Metric | Six Months 2023 | Six Months 2022 | Change | | :--- | :--- | :--- | :--- | | Revenue | $585,066 | $526,568 | +11.1% | | Operating Income | $66,399 | $23,698 | +180.2% | | Net Income | $34,882 | $11,430 | +205.2% | | Diluted EPS | $1.14 | $0.36 | +216.7% | [Condensed Consolidated Statements of Cash Flows](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Net cash provided by operating activities for the first six months of 2023 was $27.8 million, a significant improvement from a $13.3 million use in the prior year Cash Flow Summary for Six Months Ended June 30 (in thousands) | Cash Flow Activity | 2023 | 2022 | | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | $27,783 | $(13,265) | | Net cash provided by (used in) investing activities | $(16,357) | $7,108 | | Net cash used in financing activities | $(78,543) | $(35,187) | | **Net decrease in cash, cash equivalents, and restricted cash** | **$(66,409)** | **$(44,672)** | [Notes to Condensed Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) The notes detail key accounting policies, including revenue from SaaS solutions, significant reduction in restructuring charges, and increased total debt - The aggregate amount of transaction price allocated to remaining performance obligations is **$1.6 billion** as of June 30, 2023, with approximately **70%** expected to be recognized by the end of 2025[13](index=13&type=chunk) Revenue by Type (in thousands) | Revenue Type | Q2 2023 | Q2 2022 | | :--- | :--- | :--- | | SaaS and related solutions | $255,600 | $230,712 | | Software and services | $18,766 | $20,068 | | Maintenance | $11,961 | $11,388 | | **Total revenue** | **$286,327** | **$262,168** | - Restructuring and reorganization charges for the six months ended June 30, 2023 were **$7.3 million**, significantly lower than the **$32.1 million** recorded in the same period of 2022[56](index=56&type=chunk)[75](index=75&type=chunk) - As of June 30, 2023, total debt stood at **$424.6 million**, consisting of a **$136.9 million** term loan and **$290.0 million** drawn on the revolving loan facility, both with an interest rate of **6.967%**[37](index=37&type=chunk)[54](index=54&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=19&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses Q2 2023 revenue growth driven by revenue management solutions, improved operating income due to lower restructuring charges, significant customer concentration, and strong liquidity [Results of Operations](index=22&type=section&id=Results%20of%20Operations) Q2 2023 revenue increased 9.2% to $286.3 million, while operating expenses rose modestly, leading to a substantial improvement in operating income to $28.2 million - Q2 2023 revenue increased by **9.2%** YoY, primarily attributed to the continued growth of revenue management solutions, conversion of customer accounts, and higher payment volumes[110](index=110&type=chunk) - Operating expenses for Q2 2023 increased by **1.3%** YoY, reflecting higher employee-related costs associated with revenue growth, but were significantly offset by a **$16.9 million** decrease in restructuring and reorganization charges[111](index=111&type=chunk)[133](index=133&type=chunk) - Operating income for Q2 2023 was **$28.2 million** (**9.9% margin**), a significant increase from **$7.3 million** (**2.8% margin**) in Q2 2022, mainly due to lower restructuring charges and higher revenue[134](index=134&type=chunk) [Significant Customer Relationships](index=21&type=section&id=Significant%20Customer%20Relationships) The company maintains significant revenue concentration with Charter and Comcast, which accounted for 21% and 19% of Q2 2023 revenue, respectively, with extended agreements Revenue from Largest Customers (as % of Total Revenue) | Customer | Q2 2023 | Q1 2023 | Q2 2022 | | :--- | :--- | :--- | :--- | | Charter | 21% | 21% | 20% | | Comcast | 19% | 18% | 20% | - In April 2023, the agreement with Charter was amended and restated, extending the term through **March 31, 2028**[103](index=103&type=chunk) - On June 29, 2023, Comcast exercised its option to extend its processing and other related solutions agreement through **December 31, 2025**[104](index=104&type=chunk) [Liquidity and Capital Resources](index=24&type=section&id=Liquidity%20and%20Capital%20Resources) As of June 30, 2023, the company had $146.2 million in cash and equivalents, supported by operating cash flow and a $450 million revolving credit facility - Principal sources of liquidity as of June 30, 2023, included **$146.2 million** in cash and equivalents, and a **$450.0 million** revolving loan facility with **$145.0 million** available as of July 2023[140](index=140&type=chunk)[118](index=118&type=chunk) - Days Billings Outstanding (DBO) was **65 days** at the end of Q2 2023, an improvement from **68 days** at the end of Q1 2023 and **66 days** at the end of Q2 2022[122](index=122&type=chunk) - During the six months ended June 30, 2023, the company paid **$17.7 million** in dividends and used **$9.4 million** to repurchase common stock for tax withholding requirements, with no repurchases under the formal Stock Repurchase Program[150](index=150&type=chunk)[167](index=167&type=chunk)[168](index=168&type=chunk) - In August 2023, the company announced its intention to enter into an approximately **$100 million** share repurchase plan through the end of 2024[193](index=193&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=30&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company faces market risks primarily from variable interest rates on its debt and foreign currency fluctuations, though foreign currency exposure is limited - The company is exposed to interest rate risk as its 2021 Credit Agreement is based on a variable adjusted SOFR rate, which replaced LIBOR in April 2023[181](index=181&type=chunk) - Foreign currency exchange risk exists due to global operations, but is limited as approximately **88%** of revenue for the first six months of 2023 was generated in U.S. dollars[202](index=202&type=chunk)[203](index=203&type=chunk) - As of June 30, 2023, the company held **$176.4 million** in settlement and merchant reserve assets, which are exposed to market risk but are held in accounts with major financial institutions[201](index=201&type=chunk) [Item 4. Controls and Procedures](index=32&type=section&id=Item%204.%20Controls%20and%20Procedures) As of June 30, 2023, the company's CEO and CFO concluded that disclosure controls and procedures were effective, with no material changes to internal control over financial reporting - Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of the end of the period covered by the report[186](index=186&type=chunk) - No changes occurred during the quarter that have materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[205](index=205&type=chunk) [Part II - Other Information](index=33&type=section&id=Part%20II%20-%20OTHER%20INFORMATION) The second part covers other relevant information, including legal proceedings, risk factors, equity sales, and exhibits [Item 1. Legal Proceedings](index=33&type=section&id=Item%201.%20Legal%20Proceedings) The company is not currently a party to any material pending or threatened legal proceedings outside the normal course of business - In the opinion of management, the company is not presently a party to any material pending or threatened legal proceedings[189](index=189&type=chunk) [Item 1A. Risk Factors](index=33&type=section&id=Item%201A.%20Risk%20Factors) There were no material changes to the risk factors previously disclosed in the company's Annual Report on Form 10-K for the year ended December 31, 2022 - There were no material changes to the risk factors disclosed in the 2022 Form 10-K during the second quarter of 2023[190](index=190&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=33&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) During Q2 2023, the company repurchased 2,189 shares for employee stock incentive plans, with 2,107,047 shares remaining available under the authorized program Share Repurchases in Q2 2023 | Period | Total Shares Purchased | Average Price Paid Per Share | Purchased as Part of Public Plan | | :--- | :--- | :--- | :--- | | April 2023 | 563 | $54.17 | - | | May 2023 | 888 | $49.75 | - | | June 2023 | 738 | $50.70 | - | | **Total** | **2,189** | **$51.21** | **-** | - As of the end of Q2 2023, the maximum number of shares that may yet be purchased under the company's publicly announced plan is **2,107,047**[215](index=215&type=chunk) [Item 6. Exhibits](index=33&type=section&id=Item%206.%20Exhibits) This section provides an index of all exhibits filed with or incorporated by reference into the Form 10-Q, including credit agreements and customer contracts - Key exhibits filed include the First Amendment to the Amended and Restated Credit Agreement and amendments to the Master Subscriber Management System Agreement with Comcast[210](index=210&type=chunk)

Safe Harbor 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," "may," "target," and similar expressions and variations or negatives of these words. These forward-looking statements m ...

Financial Data and Key Metrics Changes - The company ended Q1 2023 with $168 million in cash and short-term investments, resulting in a net debt of $276 million and a net debt leverage ratio of 1.0x [1] - Q1 2023 revenue was $299 million, representing a 13% year-over-year growth, all organic [40][44] - Non-GAAP operating income for Q1 2023 was $54 million, with a non-GAAP adjusted operating margin of 19.3%, up from 16.3% in the prior year [41][44] - Non-GAAP adjusted EBITDA was $67 million for Q1 2023, or 24.3% of revenue, compared to 22.9% in Q1 2022 [42] - Non-GAAP EPS for Q1 2023 was $1.04, a 20.9% increase from $0.86 in the prior year [42] Business Line Data and Key Metrics Changes - The digital CX and payments business experienced strong double-digit growth, with a healthy sales pipeline and good conversion rates [12][14] - The payments business delivered excellent topline growth with strong double-digit year-over-year revenue growth, serving approximately 102,000 active merchants [34][36] Market Data and Key Metrics Changes - Revenue from new industry verticals increased from 7% of total revenue in 2017 to 28% in Q1 2023, indicating successful diversification [30] - The company reported a 10% year-over-year revenue growth from its two largest North American cable broadband customers in Q1 2023 [27] Company Strategy and Development Direction - The company aims for long-term organic revenue growth in the 2% to 6% range, with a target of $1.5 billion in revenue by year-end 2025 [20][25] - The strategy includes diversifying revenue by winning in faster growth industry verticals such as retail, government, and healthcare [22][30] - The company is focused on maintaining a disciplined approach to capital management and exploring strategic acquisitions [8][26] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the strong sales pipeline and visibility of over 90% of expected 2023 revenue, despite a challenging inflationary environment [7][8] - The company anticipates Q2 to be a low point for profitability metrics due to annual merit increases and normal revenue timing [6][8] - Management reiterated that the first half of 2023 is expected to be slightly stronger than the second half [4][71] Other Important Information - The company declared $9 million in dividends during Q1 2023 and has repurchased $72 million in stock over the last 12 months [2][3] - The company received a Prime rating from ISS and a AA rating from MSCI for its ESG disclosures, indicating strong performance in sustainability practices [50] Q&A Session Summary Question: Insights on product pipeline and demand - Management noted strong double-digit growth in digital CX and payments, with a growing pipeline and good conversion rates [12][14] Question: Partner ecosystem contribution - Management highlighted a combination of direct sales and partnerships, with a focus on industry-specific solutions [16][18] Question: Guidance consistency despite strong Q1 - Management explained that while Q1 was strong, there are macroeconomic pressures and they want to see continued performance before adjusting guidance [71][78] Question: Customer spending pressures - Management emphasized that customers recognize the value and cost-saving potential of their solutions, which helps maintain spending [82] Question: Consolidation in cable companies - Management confirmed ongoing trends towards digital transformation and the company's readiness to support over-the-top video offerings [86]

[Part I - FINANCIAL INFORMATION](index=3&type=section&id=Part%20I%20-%20FINANCIAL%20INFORMATION) [Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) The unaudited statements show significant growth in net income and EPS for the quarter ended March 31, 2023 Condensed Consolidated Statements of Income (Q1 2023 vs Q1 2022) | Financial Metric | Q1 2023 (in thousands) | Q1 2022 (in thousands) | Change | | :--- | :--- | :--- | :--- | | **Revenue** | $298,739 | $264,400 | +13.0% | | **Operating Income** | $38,193 | $16,415 | +132.7% | | **Net Income** | $20,928 | $6,113 | +242.4% | | **Diluted EPS** | $0.68 | $0.19 | +257.9% | Condensed Consolidated Balance Sheets (Key Items) | Balance Sheet Item | March 31, 2023 (in thousands) | December 31, 2022 (in thousands) | | :--- | :--- | :--- | | Total cash, cash equivalents, and short-term investments | $167,681 | $150,436 | | Total Assets | $1,296,008 | $1,348,553 | | Total Debt (Current + Long-term) | $441,281 | $412,969 | | Total Liabilities | $927,785 | $993,304 | | Total Stockholders' Equity | $368,223 | $355,249 | Condensed Consolidated Statements of Cash Flows | Cash Flow Activity | Q1 2023 (in thousands) | Q1 2022 (in thousands) | | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | $15,397 | $(5,549) | | Net cash provided by (used in) investing activities | $(8,629) | $11,512 | | Net cash used in financing activities | $(51,132) | $(54,614) | [Notes to Condensed Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) Disclosures cover accounting policies, revenue breakdown, debt benchmark transition, and restructuring charges Revenue Breakdown (Q1 2023 vs Q1 2022) | Revenue by Type | Q1 2023 (in thousands) | Q1 2022 (in thousands) | | :--- | :--- | :--- | | SaaS and related solutions | $257,876 | $234,977 | | Software and services | $30,891 | $18,436 | | Maintenance | $9,972 | $10,987 | | **Total Revenue** | **$298,739** | **$264,400** | | Revenue by Geography | Q1 2023 (%) | Q1 2022 (%) | | :--- | :--- | :--- | | Americas | 84% | 84% | | Europe, Middle East, and Africa | 12% | 12% | | Asia Pacific | 4% | 4% | - In April 2023, the company amended its 2021 Credit Agreement to replace the **LIBOR interest rate benchmark with the Secured Overnight Financing Rate (SOFR)**[3](index=3&type=chunk) - The company recorded **restructuring and reorganization charges of $5.2 million** in Q1 2023, including a $1.2 million impairment from the dissolution of the Keydok business[36](index=36&type=chunk)[64](index=64&type=chunk) - As of March 31, 2023, **total debt, net of unamortized discounts, was $441.3 million**, up from $413.0 million at year-end 2022[61](index=61&type=chunk) - In Q1 2023, the company **repurchased approximately 166,000 shares for $9.3 million** for tax withholding on vested restricted stock, with no shares repurchased under the formal program[5](index=5&type=chunk)[70](index=70&type=chunk)[90](index=90&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A)](index=16&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management's analysis highlights a 13% revenue increase, improved operating income, and key business events [Company Overview](index=16&type=section&id=Company%20Overview) CSG provides SaaS solutions for revenue management and customer experience, primarily to the communications industry - The company positions itself as a purpose-driven SaaS platform company focused on **revenue management, digital monetization, customer experience, and payments solutions**[76](index=76&type=chunk) - R&D and acquisition investments are focused on expanding offerings using a **scalable, modular, and flexible solutions architecture**[77](index=77&type=chunk) [Results of Operations](index=19&type=section&id=Results%20of%20Operations) Q1 2023 saw a 13% revenue increase and a surge in operating income, driven by software and SaaS growth - **Revenue grew 13.0% YoY**, primarily due to a $12.5 million (67.6%) increase in software and services revenue and growth in SaaS solutions[208](index=208&type=chunk) - The company **completed the final conversions of Charter's customer accounts** onto its platforms, having converted over nine million accounts in the last twelve months[208](index=208&type=chunk)[217](index=217&type=chunk) - Operating expenses increased by 5.1% to $260.5 million, partially offset by a **$7.9 million decrease in restructuring and reorganization charges**[102](index=102&type=chunk)[122](index=122&type=chunk) - **Interest expense increased by $3.9 million** to $7.2 million due to rising interest rates and a higher average outstanding debt balance[105](index=105&type=chunk) [Significant Customer Relationships](index=18&type=section&id=Significant%20Customer%20Relationships) Revenue is concentrated with Charter and Comcast, with a renewed Charter agreement extending to March 2028 Revenue from Major Customers (% of Total Revenue) | Customer | Q1 2023 | Q1 2022 | | :--- | :--- | :--- | | Charter | 21% | 20% | | Comcast | 18% | 20% | - In April 2023, the company entered into an **Amended and Restated Master Agreement with Charter, extending the term through March 31, 2028**[115](index=115&type=chunk) [Liquidity and Capital Resources](index=20&type=section&id=Liquidity%20and%20Capital%20Resources) The company maintains sufficient liquidity through cash reserves, operating cash flows, and its credit facility - **Cash, cash equivalents, and short-term investments totaled $167.7 million** at March 31, 2023, with approximately 61% held in U.S. dollars in the U.S[138](index=138&type=chunk)[210](index=210&type=chunk) - The company has a **$450.0 million revolving loan facility**, with $305.0 million outstanding and $145.0 million available as of March 31, 2023[108](index=108&type=chunk)[139](index=139&type=chunk) - The Board approved a **quarterly cash dividend of $0.28 per share** in Q1 2023, totaling $8.8 million[91](index=91&type=chunk)[166](index=166&type=chunk) - The company believes **existing cash and credit facilities are sufficient** to meet anticipated capital needs for at least the next twelve months[189](index=189&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=25&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company is exposed to interest rate and foreign currency risks, managed without speculative derivatives - The company is exposed to **interest rate risk** on its 2021 Credit Agreement, with the benchmark recently changed from LIBOR to SOFR[148](index=148&type=chunk) - **Foreign currency exchange risk** exists due to global operations, but its impact is not expected to be material as 86% of Q1 2023 revenue was in U.S. dollars[174](index=174&type=chunk)[151](index=151&type=chunk) - Market risk for cash equivalents and short-term investments is **considered minimal** due to short maturities and high credit quality[149](index=149&type=chunk)[192](index=192&type=chunk) [Controls and Procedures](index=27&type=section&id=Item%204.%20Controls%20and%20Procedures) Management confirmed the effectiveness of disclosure controls and procedures with no material changes in the quarter - The CEO and CFO concluded that the company's **disclosure controls and procedures were effective** as of the end of the period covered by the report[176](index=176&type=chunk) - Management concluded that **no changes occurred during the quarter that have materially affected** the company's internal control over financial reporting[177](index=177&type=chunk) [Part II - OTHER INFORMATION](index=28&type=section&id=Part%20II%20-%20OTHER%20INFORMATION) [Legal Proceedings](index=28&type=section&id=Item%201.%20Legal%20Proceedings) The company is not currently a party to any material legal proceedings - In the opinion of management, the company is **not presently a party to any material pending or threatened legal proceedings**[179](index=179&type=chunk) [Risk Factors](index=28&type=section&id=Item%201A.%20Risk%20Factors) No material changes were reported to the risk factors disclosed in the 2022 Form 10-K - **No material changes** were made to the risk factors disclosed in the 2022 Form 10-K during Q1 2023[180](index=180&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=28&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) Details stock repurchases made during Q1 2023 to satisfy employee tax withholding obligations Common Stock Purchases in Q1 2023 | Month (2023) | Total Shares Purchased | Average Price Paid Per Share | | :--- | :--- | :--- | | January | 10,821 | $58.15 | | February | 64,179 | $60.54 | | March | 91,266 | $52.75 | | **Total** | **166,266** | **$56.11** | - The shares purchased were **not part of the formal Stock Repurchase Program** but were repurchased to cover tax withholding requirements from vested restricted stock[5](index=5&type=chunk)[181](index=181&type=chunk) [Exhibits](index=28&type=section&id=Item%206.%20Exhibits) Lists filed exhibits, including executive agreements and required Sarbanes-Oxley certifications - Filed exhibits include **executive severance plan participation agreements** for Brian A. Shepherd, Kenneth M. Kennedy, and Elizabeth A. Bauer[200](index=200&type=chunk) - **Certifications pursuant to Section 302 and Section 906 of the Sarbanes-Oxley Act** are included as exhibits[200](index=200&type=chunk) [Signatures](index=30&type=section&id=Signatures) The report is duly signed by the company's principal executive and financial officers as of May 4, 2023 - The report was **signed on May 4, 2023**, by Brian A. Shepherd (CEO), Hai Tran (CFO), and David N. Schaaf (Chief Accounting Officer)[202](index=202&type=chunk)

Revenue Performance - Revenue for 2022 was $1,089.8 million, a 4.1% increase from $1,046.5 million in 2021, primarily driven by organic growth in revenue management solutions [27]. - The company reported total revenue of $1,089,752,000 for the year ended December 31, 2022, representing a 4.6% increase from $1,046,487,000 in 2021 [87]. - Total revenue for 2022 was $1,089,752 thousand, an increase from $1,046,487 thousand in 2021, representing a growth of approximately 4.0% [128]. - Revenue from SaaS and related solutions was $956,995 thousand in 2022, up from $926,290 thousand in 2021, indicating a growth of about 3.3% [128]. - The company generated approximately 88% of its revenue in U.S. dollars during the year ended December 31, 2022 [96]. Expenses and Costs - Cost of revenue for 2022 increased 4.0% to $565.2 million, maintaining a cost of revenue as a percentage of revenue at 51.9% for both 2022 and 2021 [35]. - SG&A expense for 2022 rose 10.9% to $238.0 million, with SG&A as a percentage of total revenue increasing to 21.8% from 20.5% in 2021 [36]. - Total operating expenses increased by 9.6% to $1,011.0 million in 2022, up from $922.3 million in 2021, primarily due to restructuring costs and inflationary pressures [215]. - Research and development expenses for 2022 were $137,913,000, up from $134,691,000 in 2021, highlighting continued investment in innovation [87]. - The company incurred asset impairment costs of $31,761 in 2022, significantly higher than $1,270 in 2021 [142]. Profitability and Income - Diluted EPS for 2022 was $1.41, down from $2.26 in 2021, mainly due to increased restructuring and reorganization charges [49]. - Net income for 2022 was $44,060,000, a decrease of 39.2% compared to $72,331,000 in 2021 [88]. - Operating income decreased to $78,747,000 in 2022 from $124,186,000 in 2021, indicating challenges in maintaining profitability [87]. - The company reported total comprehensive income of $23,584,000 for 2022, down from $65,116,000 in 2021, reflecting adverse foreign currency translation adjustments [88]. - Cash flows from operating activities provided $63,597 in 2022, down from $140,223 in 2021, representing a decline of 54.7% [142]. Cash and Liquidity - Cash and liquidity as of December 31, 2022, amounted to $150.4 million, a decrease from $233.7 million in 2021 [59]. - Total cash, cash equivalents, and restricted cash at the end of 2022 was $389,018, slightly down from $391,902 at the end of 2021 [142]. - The company had $1.0 million in restricted cash as of December 31, 2022, down from $1.4 million in 2021, representing a decrease of 28.6% [132]. - Total current assets increased to $765,955,000 in 2022 from $748,199,000 in 2021, primarily driven by an increase in trade accounts receivable [86]. - Total liabilities rose to $993,304,000 in 2022, compared to $946,905,000 in 2021, reflecting an increase in both current and non-current liabilities [86]. Shareholder Returns and Stock Activity - The company expects to pay cash dividends totaling $33.7 million in 2022, with future dividends subject to Board approval [68]. - The company repurchased common stock totaling $(96,604) thousand during the year ended December 31, 2022, compared to $(42,238) thousand in 2021, indicating an increase in repurchase activity [140]. - Stock-based compensation expense for the year ended December 31, 2022, was $27,243 thousand, an increase from $25,237 thousand in 2021, representing an increase of approximately 7.9% [140]. - The company’s stock-based compensation expense was $27,243 in 2022, an increase from $21,400 in 2021, reflecting a 27.3% rise [142]. Business Operations and Strategy - The company dissolved the MobileCard business in June 2022 due to unmet projected targets, impacting overall operating results [26]. - The company migrated approximately nine million customer accounts from a competitor's product onto its platforms in 2022, completing the consolidation of Charter's customer accounts [50]. - The company is continually evaluating potential business acquisitions and market share expansion strategies beyond the global communications market [69]. - The company generated 20% of its net billed accounts receivable from Charter and Comcast in both 2022 and 2021, indicating stable customer concentration [176]. - Revenue from Charter and Comcast represented 22% and 17% of total revenue, respectively, for 2022, down from 23% and 20% in 2021 [197]. Financial Reporting and Controls - The independent auditor, KPMG LLP, expressed an unqualified opinion on the effectiveness of the company's internal control over financial reporting as of December 31, 2022 [106]. - The company assessed the effectiveness of its internal control over financial reporting as of December 31, 2022, using COSO criteria [102]. - The company adopted ASU No. 2020-06, resulting in a $9.8 million cumulative-effect adjustment to accumulated earnings as of January 1, 2022 [194]. Future Outlook - The company expects to continue generating a large percentage of its revenue in U.S. dollars in the foreseeable future [96]. - The company expects to continue generating a significant percentage of future revenue from major customers, highlighting the risks associated with customer concentration [196].

CSG Systems International, Inc. (NASDAQ:CSGS) Q4 2022 Earnings Conference Call February 1, 2023 5:00 PM ET Company Participants John Rea - Head of Investor Relations Brian Shepherd - Chief Executive Officer Hai Tran - Chief Financial Officer Conference Call Participants Greg Burns - Sidoti Maggie Nolan - William Blair Timothy Horan - Oppenheimer Matthew Harrigan - Benchmark Operator Good morning. My name is Devon, and I will be your conference operator today. At this time, I would like to welcome everyone t ...