CSG Systems International(CSGS) - 2024 Q4 - Annual Report

Part I Business 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] - The company serves a wide range of industries including telecom, broadband cable, media, retail, healthcare, financial services, insurance, and government[21] - CSG's solutions are categorized into three main areas: Revenue Management and Digital Monetization, Transformational Customer Experiences, and Payments[24][26][30] - 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][42][43][44][45] 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] - 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] - CSG has a sustainability goal to be carbon neutral for Scope 1 and 2 greenhouse emissions by 2035[67] Risk Factors 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][79] - 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][83][84] - 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][90] - 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] - Payments Business Risks: The payments business is susceptible to fraud, chargebacks, and non-fulfillment by merchants, which could lead to financial losses[94] - 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][97][98] - 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][108][111][114] Unresolved Staff Comments The company reports that it has no unresolved staff comments from the SEC - None[125] Cybersecurity 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] - A cross-functional Information Security Steering Committee (ISSC), chaired by the CISO, oversees the cybersecurity program's direction and effectiveness[132] - The Board of Directors is responsible for overseeing the cybersecurity program, with a standing Cybersecurity Committee advising on strategic guidance[135][137] - 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] Properties 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] - The company leases three design and delivery centers in the U.S, with leases expiring between 2026 and 2029[140] - CSG has been reducing its real estate footprint since 2022 due to a flexible work approach[139] Legal Proceedings 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] Mine Safety Disclosures This item is not applicable to the company - Not applicable[143] Part II Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 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] 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] [Reserved] This item is reserved Management's Discussion and Analysis of Financial Condition and Results of Operations 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] - The company renewed its agreement with Comcast in October 2024, extending the relationship through December 31, 2030[164] - Cash flow from operating activities increased to $135.7 million in 2024 from $131.9 million in 2023[161] Quantitative and Qualitative Disclosures About Market Risk 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] - 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] - Foreign currency exchange risk exists due to global operations, but approximately 89% of 2024 revenue was generated in U.S. dollars[243][244] Financial Statements and Supplementary Data 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] - 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][262] 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 The company reports no changes in or disagreements with its accountants on accounting principles, practices, or financial statement disclosure - None[434] Controls and Procedures 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] - 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] Other Information 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] Disclosure Regarding Foreign Jurisdictions that Prevent Inspections This item is not applicable to the company - Not applicable[440] Part III Directors, Executive Officers and Corporate Governance 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] Executive Compensation 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] Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 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] Certain Relationships and Related Transactions, and Director Independence 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] Principal Accounting Fees and Services 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] Part IV Exhibits, Financial Statement Schedules 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] - No financial statement schedules are filed with this report[448] - A comprehensive list of exhibits, including governance documents, material contracts, and certifications, is provided in the Exhibit Index[448][451] Form 10-K Summary The company has not provided a Form 10-K summary - None[450]