CSG Systems International(CSGS) - 2024 Q4 - Earnings Call Transcript

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