CSG Systems International(US:CSGS)2023-05-06 10:11Financial 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]