CSG Systems International(US:CSGS)2021-05-09 04:01Financial Data and Key Metrics Changes - CSG generated $253 million in revenue for Q1 2021, representing a 3.1% year-over-year organic growth, the best quarterly organic growth since Q3 2019 [11][23] - Adjusted revenue for Q1, excluding transaction fees, was $237 million, reflecting a 4.1% year-over-year organic growth [11][23] - Non-GAAP operating income was $40 million, or 17% of non-GAAP adjusted revenue, compared to $42 million or 18.5% in the prior year [25] - Non-GAAP EPS for the quarter was $0.82, down $0.05 year-over-year [26] - Non-GAAP adjusted EBITDA was $54 million for Q1, or 23% of non-GAAP adjusted revenue, down 1% compared to the prior year [26] Business Line Data and Key Metrics Changes - The North American cable and satellite business saw revenue increases of 5.3% and 1.5% year-over-year from top customers Charter and Comcast, respectively [13] - The global communication business continued to grow, with significant wins including Cincinnati Bell Technology Solutions and Maxis [14][15] - The cloud payments business experienced a high single-digit reduction in transaction volumes but showed improved results in the last month of Q1 [19] Market Data and Key Metrics Changes - CSG increased the percentage of revenue from higher growth, non-CSP industry verticals by 16 percentage points [17] - The company expanded its business with major customers in the retail and healthcare sectors, indicating a diversification of its customer base [18] Company Strategy and Development Direction - CSG's strategy focuses on three pillars: enhancing customer success, acquiring leading technology, and becoming the preferred technology provider for communication service providers [7][10] - The company aims to diversify its revenue streams while maintaining a strong market position in core areas [10][17] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the business momentum and reaffirmed financial targets for 2021, despite ongoing COVID-related challenges [11][20] - The sales pipeline is larger than ever, with a strong win rate and larger deals in later stages of the sales cycle [12] Other Important Information - CSG returned $8 million to shareholders through dividends and repurchased $7 million in common stock [11][29] - The company ended Q1 with $205 million in cash and short-term investments, resulting in a net debt of $149 million and a net leverage ratio of 0.7 times [28] Q&A Session Summary Question: Discussion on Ascendon as a revenue driver - Management noted that Ascendon is gaining traction in the market, with increased adoption and interest, although it remains a smaller part of overall revenue [33][35] Question: Challenges in the payments business - The decline in transaction volumes was primarily due to reduced activity rather than customer churn, with cautious optimism for recovery in the second half of the year [36][38] Question: Acquisition strategy and leveraging debt - Management indicated a willingness to increase leverage for strategic acquisitions, while remaining disciplined in evaluating potential targets [40][42] Question: Full year guidance and margin expectations - Despite a strong start, management maintained that the current guidance remains appropriate, with expectations for potential headwinds impacting margins [45][46]