Confirming All 2024 Financial Guidance Targets
Revenue Coming from Industry Verticals Outside of CSPs
Exceeds 30% for the First Time
Returned Over $160 Million to Shareholders in the Last
Twelve Months, including $19 Million in Q1
Continued Strong Sales Performance with Many Key Wins
in Q1, including MTN and Banglalink
CSG (NASDAQ: CSGS) today reported results for the quarter ended
March 31, 2024.
Financial Results:
First quarter 2024 financial results:
- Total revenue was $295.1 million.
- GAAP operating income was $31.8 million, or an operating
margin of 10.8%, and non-GAAP operating income was $44.9
million, or a non-GAAP adjusted operating margin of
16.6%.
- GAAP earnings per diluted share (EPS) was $0.68 and
non-GAAP EPS was $1.01.
- Cash flows used in operations were ($29.4) million, with
a non-GAAP free cash flow deficit of ($34.1) million.
Shareholder Returns:
- CSG declared its quarterly cash dividend of $0.30 per
share of common stock, or a total of approximately $9
million, to shareholders.
- During the first quarter of 2024, CSG repurchased under its
stock repurchase program, approximately 185,000 shares of
its common stock for approximately $10 million.
“Team CSG got off to a good start in the first quarter. For the
first time in CSG’s history, 30% of our revenue is coming from
industry verticals outside of the Communication Service Providers
(“CSPs”) space. For context, we generated only 7% of our revenue
from these other industry verticals in 2017,” said Brian Shepherd,
President and Chief Executive Officer of CSG. “From a financial
perspective, we are pleased to confirm all 2024 financial guidance
targets. Plus, we continue to return capital to shareholders in the
form of buybacks and dividends, having delivered over $160 million
in shareholder remuneration over the last twelve months.”
Financial Overview
(unaudited)
(in thousands, except per share amounts and percentages):
Quarter Ended March
31,
Percent
2024
2023
Changed
GAAP Results:
Revenue
$
295,135
$
298,739
(1.2
%)
Operating Income
31,797
38,193
(16.7
%)
Operating Margin Percentage
10.8
%
12.8
%
EPS
$
0.68
$
0.68
-
Non-GAAP Results:
Operating Income
$
44,868
$
53,511
(16.2
%)
Adjusted Operating Margin Percentage
16.6
%
19.3
%
EPS
$
1.01
$
1.04
(2.9
%)
For additional information and reconciliations regarding CSG’s
use of non-GAAP financial measures, please refer to the attached
Exhibit 2 and the Investor Relations section of CSG’s website at
csgi.com.
Results of Operations
GAAP Results: Total revenue for the
first quarter of 2024 was $295.1 million, a 1.2% decrease when
compared to revenue of $298.7 million for the first quarter of
2023. The decrease in revenue is primarily attributed to lower
software and services revenue, resulting from the closure of
approximately $10 million of software license upgrades in the first
quarter of 2023. This was offset to a certain degree by the
continued growth of CSG’s cloud revenue, to include its payments
solutions.
GAAP operating income for the first quarter of 2024 was $31.8
million, or 10.8% of total revenue, compared to $38.2 million, or
12.8% of total revenue, for the first quarter of 2023. The decrease
in operating income is mainly attributed to the higher software and
services revenue recognized in the first quarter of 2023, discussed
above, as the costs associated with this revenue is not generally
dependent upon on the timing of the deal closure, offset to a
certain degree by lower restructuring and reorganization
charges.
GAAP EPS for the first quarter of 2024 was $0.68, consistent
with the first quarter of 2023, with the first quarter of 2024
benefiting primarily from foreign currency movements and a lower
share count.
Non-GAAP Results: Non-GAAP
operating income for the first quarter of 2024 was $44.9 million,
or a non-GAAP adjusted operating margin of 16.6%, compared to $53.5
million, or a non-GAAP adjusted operating margin of 19.3% for the
first quarter of 2023. The decrease in non-GAAP operating income
and non-GAAP adjusted operating margin is mainly attributed to the
higher software and services revenue recognized in the first
quarter of 2023, discussed above.
Non-GAAP EPS for the first quarter of 2024 was $1.01 compared to
$1.04 for the first quarter of 2023. The decrease in non-GAAP EPS
is mainly due to the lower non-GAAP operating income, partially
offset by foreign currency movements and a lower share count.
Balance Sheet and Cash
Flows
Cash and cash equivalents as of March 31, 2024 were $120.8
million compared to $186.3 million as of December 31, 2023. CSG had
net cash flows provided by (used in) operations for the first
quarters ended March 31, 2024 and 2023 of ($29.4) million and $15.4
million, respectively, and had non-GAAP free cash flow (deficit) of
($34.1) million and $6.7 million, respectively. Cash flows for the
first quarter of 2024 were negatively impacted by unfavorable
working capital changes, to include the payment of 2023 accrued
employee incentive compensation.
Summary of Financial
Guidance
CSG is reaffirming its financial guidance for the full year
2024, as follows:
As of May 1, 2024
GAAP Measures:
Revenue
$1,200 - $1,240 million
Non-GAAP Measures:
Adjusted Operating Margin Percentage
17.0% - 17.4%
EPS
$3.85 - $4.15
Adjusted EBITDA
$245 - $255 million
Free Cash Flow
$95 - $135 million
For additional information and reconciliations regarding CSG’s
use of non-GAAP financial measures, please refer to the attached
Exhibit 2 and the Investor Relations section of CSG’s website at
csgi.com.
Conference Call
CSG will host a conference call on Wednesday, May 1, 2024 at
5:00 p.m. ET, to discuss CSG’s first quarter of 2024 earnings
results. The call will be carried live and archived on the
Internet. A link to the conference call is available at
http://ir.csgi.com. In addition, to reach the conference by phone,
call 1-888-412-4131 and use the passcode 2327393.
Additional Information
For information about CSG, please visit CSG’s web site at
csgi.com. Additional information can be found in the Investor
Relations section of the website.
About CSG
CSG empowers companies to build unforgettable experiences,
making it easier for people and businesses to connect with, use and
pay for the services they value most. Our customer experience,
billing and payments solutions help companies of any size make
money and make a difference. With our SaaS solutions, company
leaders can take control of their future and tap into guidance
along the way from our fiercely committed and forward-thinking
CSGers around the world.
Want to be future-ready and a change-maker like the global
brands that trust CSG? Visit csgi.com to learn more.
Forward-Looking
Statements
This news release contains forward-looking statements as defined
under the Securities Act of 1933, as amended, that are based on
assumptions about a number of important factors and involve risks
and uncertainties that could cause actual results to differ
materially from what appears in this news release. Some of these
key factors include, but are not limited to the following
items:
- CSG derives a significant portion of its revenue from a limited
number of customers, with approximately forty percent of its
revenue from its two largest customers;
- Fluctuations in credit market conditions, general global
economic and political conditions, and foreign currency exchange
rates;
- CSG’s ability to maintain a reliable, secure computing
environment;
- Continued market acceptance of CSG’s products and
services;
- CSG’s ability to continuously develop and enhance products in a
timely, cost-effective, technically advanced and competitive
manner;
- CSG’s ability to deliver its solutions in a timely fashion
within budget, particularly large and complex software
implementations;
- CSG’s dependency on the global telecommunications industry, and
in particular, the North American telecommunications industry;
- CSG’s ability to meet its financial expectations;
- Increasing competition in CSG’s market from companies of
greater size and with broader presence;
- CSG’s ability to successfully integrate and manage acquired
businesses or assets to achieve expected strategic, operating and
financial goals;
- CSG’s ability to protect its intellectual property rights;
- CSG’s ability to conduct business in the international
marketplace;
- CSG’s ability to comply with applicable U.S. and International
laws and regulations; and
- CSG’s business may be disrupted, and its results of operations
and cash flows adversely affected by a global pandemic.
This list is not exhaustive, and readers are encouraged to
review the additional risks and important factors described in
CSG’s reports on Forms 10-K and 10-Q and other filings made with
the SEC.
CSG SYSTEMS INTERNATIONAL,
INC.
CONDENSED CONSOLIDATED BALANCE
SHEETS-UNAUDITED
(in thousands)
March 31,
2024
December 31,
2023
ASSETS
Current assets:
Cash and cash equivalents
$
120,810
$
186,264
Settlement and merchant reserve assets
192,962
274,699
Trade accounts receivable:
Billed, net of allowance of $5,692 and
$5,432
275,359
267,680
Unbilled
84,347
82,163
Income taxes receivable
2,364
1,345
Other current assets
57,960
50,075
Total current assets
733,802
862,226
Non-current assets:
Property and equipment, net of
depreciation of $126,435 and $121,816
60,834
65,545
Operating lease right-of-use assets
31,472
34,283
Software, net of amortization of $160,580
and $157,601
13,406
14,224
Goodwill
306,581
308,596
Acquired customer contracts, net of
amortization of $127,773 and $126,469
33,477
35,879
Customer contract costs, net of
amortization of $39,539 and $42,094
54,535
54,421
Deferred income taxes
49,552
57,855
Other assets
9,293
10,017
Total non-current assets
559,150
580,820
Total assets
$
1,292,952
$
1,443,046
LIABILITIES AND STOCKHOLDERS’
EQUITY
Current liabilities:
Current portion of long-term debt
$
7,500
$
7,500
Operating lease liabilities
15,400
15,946
Customer deposits
36,967
41,035
Trade accounts payable
43,768
46,406
Accrued employee compensation
44,006
84,380
Settlement and merchant reserve
liabilities
191,498
273,817
Deferred revenue
56,404
54,199
Income taxes payable
1,886
4,104
Other current liabilities
23,738
33,449
Total current liabilities
421,167
560,836
Non-current liabilities:
Long-term debt, net of unamortized
discounts of $14,764 and $15,628
533,986
534,997
Operating lease liabilities
31,099
34,360
Deferred revenue
23,382
23,447
Income taxes payable
3,117
3,041
Deferred income taxes
124
123
Other non-current liabilities
10,737
12,916
Total non-current liabilities
602,445
608,884
Total liabilities
1,023,612
1,169,720
Stockholders’ equity:
Preferred stock, par value $.01 per share;
10,000 shares authorized; zero shares issued and
outstanding
-
-
Common stock, par value $.01 per share;
100,000 shares authorized; 29,779 and 29,541 shares outstanding
717
713
Additional paid-in capital
491,005
490,947
Treasury stock, at cost; 40,583 and 40,398
shares
(1,145,738
)
(1,136,055
)
Accumulated other comprehensive income
(loss):
Unrealized gain on short-term investments,
net of tax
-
1
Cumulative foreign currency translation
adjustments
(55,388
)
(50,414
)
Accumulated earnings
978,744
968,134
Total stockholders' equity
269,340
273,326
Total liabilities and
stockholders' equity
$
1,292,952
$
1,443,046
CSG SYSTEMS INTERNATIONAL,
INC.
CONDENSED CONSOLIDATED
STATEMENTS OF INCOME-UNAUDITED
(in thousands, except per
share amounts)
Quarter Ended
March 31, 2024
March 31, 2023
Revenue
$
295,135
$
298,739
Cost of revenue (exclusive of
depreciation, shown separately below)
157,887
155,021
Other operating expenses:
Research and development
36,095
35,464
Selling, general and administrative
61,722
59,147
Depreciation
5,636
5,720
Restructuring and reorganization
charges
1,998
5,194
Total operating expenses
263,338
260,546
Operating income
31,797
38,193
Other income (expense):
Interest expense
(7,506
)
(7,219
)
Interest income
2,616
569
Other, net
558
(2,432
)
Total other
(4,332
)
(9,082
)
Income before income taxes
27,465
29,111
Income tax provision
(7,998
)
(8,183
)
Net income
$
19,467
$
20,928
Weighted-average shares outstanding:
Basic
28,516
30,418
Diluted
28,797
30,609
Earnings per common share:
Basic
$
0.68
$
0.69
Diluted
0.68
0.68
CSG SYSTEMS INTERNATIONAL,
INC.
CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS-UNAUDITED
(in thousands)
Quarter Ended
March 31, 2024
March 31, 2023
Cash flows from operating activities:
Net income
$
19,467
$
20,928
Adjustments to reconcile net income to net
cash provided by (used in) operating activities-
Depreciation
5,636
5,757
Amortization
11,309
11,471
Asset impairment
-
1,595
Gain on lease modifications
-
(125
)
Unrealized foreign currency transaction
(gain) loss, net
(352
)
41
Deferred income taxes
7,859
4,079
Stock-based compensation
7,736
6,412
Subtotal
51,655
50,158
Changes in operating assets and
liabilities, net of acquired amounts:
Trade accounts receivable, net
(10,959
)
(1,825
)
Other current and non-current assets and
liabilities
(9,827
)
(6,871
)
Income taxes payable/receivable
(3,158
)
1,647
Trade accounts payable and accrued
liabilities
(59,581
)
(36,071
)
Deferred revenue
2,519
8,359
Net cash provided by (used in) operating
activities
(29,351
)
15,397
Cash flows from investing activities:
Purchases of software, property, and
equipment
(4,774
)
(8,700
)
Proceeds from sale/maturity of short-term
investments
-
71
Net cash used in investing activities
(4,774
)
(8,629
)
Cash flows from financing activities:
Proceeds from issuance of common stock
866
893
Payment of cash dividends
(9,463
)
(9,088
)
Repurchase of common stock
(17,973
)
(9,306
)
Deferred acquisition payments
(488
)
(274
)
Proceeds from long-term debt
-
30,000
Payments on long-term debt
(1,875
)
(1,875
)
Settlement and merchant reserve
activity
(82,212
)
(61,482
)
Net cash used in financing activities
(111,145
)
(51,132
)
Effect of exchange rate fluctuations on
cash, cash equivalents, and restricted cash
(1,962
)
327
Net decrease in cash, cash equivalents,
and restricted cash
(147,232
)
(44,037
)
Cash, cash equivalents, and restricted
cash, beginning of period
463,876
389,018
Cash, cash equivalents, and restricted
cash, end of period
$
316,644
$
344,981
Supplemental disclosures of cash flow
information:
Cash paid during the period for-
Interest
$
10,898
$
7,005
Income taxes
3,288
2,211
Reconciliation of cash, cash equivalents,
and restricted cash:
Cash and cash equivalents
$
120,810
$
167,681
Settlement and merchant reserve assets
192,962
177,300
Restricted cash included in current and
non-current assets
2,872
-
Total cash, cash equivalents, and
restricted cash
$
316,644
$
344,981
EXHIBIT 1
CSG SYSTEMS INTERNATIONAL,
INC.
SUPPLEMENTAL REVENUE
ANALYSIS
Revenue by
Significant Customers: 10% or more of Revenue
Quarter Ended
Quarter Ended
Quarter Ended
March 31, 2024
December 31, 2023
March 31, 2023
Amount
% of Revenue
Amount
% of Revenue
Amount
% of Revenue
Charter
$
60,849
21
%
$
60,128
20
%
$
61,532
21
%
Comcast
52,804
18
%
54,651
18
%
53,415
18
%
Revenue by
Vertical
Quarter Ended
Quarter Ended
Quarter Ended
March 31, 2024
December 31, 2023
March 31, 2023
Broadband/Cable/Satellite
51
%
51
%
52
%
Telecommunications
19
%
21
%
20
%
All other
30
%
28
%
28
%
Total revenue
100
%
100
%
100
%
Revenue by
Geography
Quarter Ended
Quarter Ended
Quarter Ended
March 31, 2024
December 31, 2023
March 31, 2023
Americas
86
%
85
%
84
%
Europe, Middle East and Africa
9
%
10
%
12
%
Asia Pacific
5
%
5
%
4
%
Total revenue
100
%
100
%
100
%
EXHIBIT 2 CSG SYSTEMS INTERNATIONAL,
INC. DISCLOSURES FOR NON-GAAP FINANCIAL MEASURES
Use of Non-GAAP Financial Measures and
Limitations
To supplement its condensed consolidated financial statements
presented in accordance with generally accepted accounting
principles (GAAP), CSG uses non-GAAP operating income, non-GAAP
adjusted operating margin percentage, non-GAAP EPS, non-GAAP
adjusted EBITDA, and non-GAAP free cash flow. CSG believes that
these non-GAAP financial measures, when reviewed in conjunction
with its GAAP financial measures, provide investors with greater
transparency to the information used by CSG’s management in its
financial and operational decision making. CSG uses these non-GAAP
financial measures for the following purposes:
- Certain internal financial planning, reporting, and
analysis;
- Forecasting and budgeting;
- Certain management compensation incentives; and
- Communications with CSG’s Board of Directors, stockholders,
financial analysts, and investors.
These non-GAAP financial measures are provided with the intent
of providing investors with the following information:
- A more complete understanding of CSG’s underlying operational
results, trends, and cash generating capabilities;
- Consistency and comparability with CSG’s historical financial
results; and
- Comparability to similar companies, many of which present
similar non-GAAP financial measures to investors.
Non-GAAP financial measures are not measures of performance
under GAAP, and therefore should not be considered in isolation or
as a substitute for GAAP financial information. Limitations with
the use of non-GAAP financial measures include the following
items:
- Non-GAAP financial measures are not based on any comprehensive
set of accounting rules or principles;
- The way in which CSG calculates non-GAAP financial measures may
differ from the way in which other companies calculate similar
non-GAAP financial measures;
- Non-GAAP financial measures do not include all items of income
and expense that affect CSG’s operations and that are required by
GAAP to be included in financial statements;
- Certain adjustments to CSG’s non-GAAP financial measures result
in the exclusion of items that are recurring and will be reflected
in CSG’s financial statements in future periods; and
- Certain charges excluded from CSG’s non-GAAP financial measures
are cash expenses, and therefore do impact CSG’s cash
position.
CSG compensates for these limitations by relying primarily on
its GAAP results and using non-GAAP financial measures as a
supplement only. Additionally, CSG provides specific information
regarding the treatment of GAAP amounts considered in preparing the
non-GAAP financial measures and reconciles each n on-GAAP financial
measure to the most directly comparable GAAP measure.
Non-GAAP Financial Measures: Basis of
Presentation
The table below outlines the exclusions from CSG’s non-GAAP
financial measures:
Non-GAAP Exclusions
Operating Income
Adjusted Operating Margin
Percentage
EPS
Transaction fees
—
X
—
Restructuring and reorganization
charges
X
X
X
Executive transition costs
X
X
X
Acquisition-related expenses:
Amortization of acquired intangible
assets
X
X
X
Transaction-related costs
X
X
X
Stock-based compensation
X
X
X
Gain (loss) on debt
extinguishment/conversion
—
—
X
Gain (loss) on acquisitions or
dispositions
—
—
X
Unusual income tax matters
—
—
X
CSG believes that excluding certain items in calculating its
non-GAAP financial measures provides meaningful supplemental
information regarding CSG’s performance and these items are
excluded for the following reasons:
- Transaction fees are primarily comprised of fees paid to
third-party payment processors and financial institutions and
interchange fees under CSG’s payment services contracts.
Transaction fees are included in revenue in CSG’s Income Statement
(and not netted against revenue) because CSG maintains control and
acts as principal over the integrated service provided under its
payment services customer contracts. However, CSG excludes expense
associated with transaction fees from the numerator and denominator
in calculating its non-GAAP adjusted operating margin percentage in
order to provide comparability with historical and future periods
and with its peer group and competitors.
- Restructuring and reorganization charges are expenses that
result from cost reduction initiatives and/or significant changes
to CSG’s business, to include such things as involuntary employee
terminations, changes in management structure, divestitures of
businesses, facility consolidations and abandonments, and
fundamental reorganizations impacting operational focus and
direction. These charges are not considered reflective of CSG’s
recurring business operating results. The exclusion of these items
in calculating CSG’s non-GAAP financial measures allows management
and investors an additional means to compare CSG’s current
financial results with historical and future periods.
- Executive transition costs include expenses incurred related to
a departure of a CSG executive officer under the terms of the
related separation agreement. These types of costs are not
considered reflective of CSG’s recurring business operating
results. The exclusion of these costs in calculating CSG’s non-GAAP
financial measures allows management and investors an additional
means to compare CSG’s current financial results with historical
and future periods.
- Acquisition-related expenses include amortization of acquired
intangible assets and transaction-related costs, to include
earn-out compensation. Transaction-related costs, which typically
include expenses related to legal, accounting, and other
professional services, are direct and incremental expenses related
to business acquisitions, and thus, are not considered reflective
of CSG’s recurring business operating results. The total amount of
acquisition-related expenses can vary significantly between periods
based on the number and size of acquisition activities, previously
acquired intangible assets becoming fully amortized, and ultimate
realization of earn-out compensation. In addition, the timing of
these expenses may not directly correlate with underlying
performance of the CSG’s operations. Therefore, the exclusion of
acquisition-related expenses in calculating CSG’s non-GAAP
financial measures allows management and investors an additional
means to compare CSG’s current financial results with historical
and future periods.
- Stock-based compensation results from CSG’s issuance of equity
awards to its employees under incentive compensation programs. The
amount of this incentive compensation in any period is not
generally linked to the level of performance by employees or CSG.
The exclusion of these expenses in calculating CSG’s non-GAAP
financial measures allows management and investors an additional
means to evaluate the non-cash expense related to compensation
included in CSG’s results of operations, and therefore, the
exclusion of this item allows investors to further evaluate the
cash generating capabilities of CSG’s business.
- Gains and losses related to the extinguishment/conversion of
debt can be as a result of the refinancing of CSG’s credit
agreement and/or repurchase, conversion, or settlement of CSG’s
convertible notes. These activities, to include any derivative
activity related to debt conversions, are not considered reflective
of CSG’s recurring business operating results. Any resulting gain
or loss is generally non-cash income or expense, and therefore, the
exclusion of these items allows investors to further evaluate the
cash impact of these activities for cash flow and liquidity
purposes. In addition, the exclusion of these gains and losses in
calculating CSG’s non-GAAP EPS allows management and investors an
additional means to compare CSG’s current operating results with
historical and future periods.
- Gains or losses related to the acquisition or disposition of
certain of CSG’s business activities are not considered reflective
of CSG’s recurring business operating results. Any resulting gain
or loss is generally non-cash income or expense, and therefore, the
exclusion of these items allows investors to further evaluate the
cash impact of these activities for cash flow and liquidity
purposes. In addition, the exclusion of these gains and losses in
calculating CSG’s non-GAAP EPS allows management and investors an
additional means to compare CSG’s current operating results with
historical and future periods.
- Unusual items within CSG’s quarterly and/or annual income tax
expense can occur from such things as income tax accounting timing
matters, income taxes related to unusual events, or as a result of
different treatment of certain items for book accounting and income
tax purposes. Consideration of such items in calculating CSG’s
non-GAAP financial measures allows management and investors an
additional means to compare CSG’s current financial results with
historical and future periods
CSG also reports non-GAAP adjusted EBITDA and non-GAAP free cash
flow. Management believes non-GAAP adjusted EBITDA is a useful
measure to investors in evaluating CSG’s operating performance,
debt servicing capabilities, and enterprise valuation. CSG defines
non-GAAP adjusted EBITDA as income before interest, income taxes,
depreciation, amortization, stock-based compensation, foreign
currency transaction adjustments, acquisition-related expenses, and
unusual items, such as restructuring and reorganization charges,
executive transition costs, gains and losses related to the
extinguishment of debt, and gains and losses on acquisitions or
dispositions, as discussed above. Additionally, management uses
non-GAAP free cash flow, among other measures, to assess its
financial performance and cash generating capabilities, and
believes that it is useful to investors because it shows CSG’s cash
available to service debt, make strategic acquisitions and
investments, repurchase its common stock, pay cash dividends, and
fund ongoing operations. CSG defines non-GAAP free cash flow as net
cash flows from operating activities less the purchases of
software, property and equipment.
Non-GAAP Financial
Measures
Non-GAAP Operating Income and Non-GAAP
Adjusted Operating Margin Percentage:
The reconciliation of GAAP operating income to non-GAAP
operating income, and calculation of CSG’s non- GAAP adjusted
operating margin percentage, for the indicated periods are as
follows (in thousands, except percentages):
Quarter Ended March
31,
2024
2023
Non-GAAP Operating Income
GAAP operating income
$
31,797
$
38,193
Restructuring and reorganization charges
(1)
1,998
5,194
Executive transition costs
352
-
Acquisition-related expenses:
Amortization of acquired intangible
assets
2,852
3,209
Transaction-related costs
-
158
Stock-based compensation (1)
7,869
6,757
Non-GAAP operating income
$
44,868
$
53,511
Non-GAAP Adjusted Operating Margin
Percentage
Revenue
$
295,135
$
298,739
Less: Transaction fees (2)
(25,062
)
(21,973
)
Revenue less transaction fees
$
270,073
$
276,766
Non-GAAP adjusted operating margin
percentage
16.6
%
19.3
%
(1)
Restructuring and reorganization charges
include stock-based compensation, which is not included in the
stock-based compensation line in the tables above and following,
and depreciation, which has not been recorded to the depreciation
line item on CSG’s Income Statement.
(2)
Transaction fees are primarily comprised of fees paid to
third-party payment processors and financial institutions and
interchange fees under CSG’s payment services contracts.
Transaction fees are included in revenue in CSG's Income Statement
(and not netted against revenue) because CSG maintains control and
acts as principal over the integrated service provided under its
payment services customer contracts. However, CSG excludes expense
associated with transaction fees from the numerator and denominator
in calculating its non-GAAP adjusted operating margin percentage in
order to provide comparability with historical and future periods
and with its peer group and competitors.
Non-GAAP EPS:
The reconciliations of GAAP EPS to non-GAAP EPS for the
indicated periods are as follows (in thousands, except per share
amounts):
Quarter Ended
Quarter Ended
March 31, 2024
March 31, 2023
Amounts
EPS (4)
Amounts
EPS (4)
GAAP net income
$
19,467
$
0.68
$
20,928
$
0.68
GAAP income tax provision (3)
7,998
8,183
GAAP income before income taxes
27,465
29,111
Restructuring and reorganization charges
(1)
1,998
5,194
Executive transition costs
352
-
Acquisition-related costs:
Amortization of acquired intangible
assets
2,852
3,209
Transaction-related costs
-
158
Stock-based compensation (1)
7,869
6,757
Non-GAAP income before income taxes
40,536
44,429
Non-GAAP income tax provision (3)
(11,553
)
(12,662
)
Non-GAAP net income
$
28,983
$
1.01
$
31,767
$
1.04
(3)
For the quarters ended March 31, 2024 and 2023, the GAAP effective
income tax rates were approximately 29% and 28%, respectively, and
the non-GAAP effective income tax rates were 28.5% for both
periods.
(4)
The outstanding diluted shares for the quarters ended March 31,
2024 and 2023 were 28.8 million and 30.6 million, respectively.
Non-GAAP Adjusted EBITDA:
CSG’s calculation of non-GAAP adjusted EBITDA and the
reconciliation of CSG’s non-GAAP adjusted EBITDA measure to GAAP
net income is provided below for the indicated periods (in
thousands, except percentages):
Quarter Ended
March 31,
2024
2023
GAAP net income
$
19,467
$
20,928
GAAP income tax provision
7,998
8,183
Interest expense (5)
7,506
7,219
Interest and investment income and other,
net
(3,174
)
1,863
GAAP operating income
31,797
38,193
Restructuring and reorganization charges
(1)
1,998
5,194
Executive transition costs
352
-
Acquisition-related expenses:
Amortization of acquired intangible assets
(6)
2,852
3,209
Transaction-related costs
-
158
Stock-based compensation (1)
7,869
6,757
Amortization of other intangible assets
(6)
2,565
3,453
Amortization of customer contract costs
(6)
5,028
4,622
Depreciation (1)
5,636
5,720
Non-GAAP adjusted EBITDA
$
58,097
$
67,306
Non-GAAP adjusted EBITDA as a percentage
of revenue less transaction fees (2)
21.5
%
24.3
%
(5)
Interest expense includes
amortization of deferred financing costs as provided in Note 6
below.
(6)
Amortization on the statement of
cash flows is made up of the following items for the indicated
periods (in thousands):
Quarter Ended
March 31,
2024
2023
Amortization of acquired intangible
assets
$
2,852
$
3,209
Amortization of other intangible
assets
2,565
3,453
Amortization of customer contract
costs
5,028
4,622
Amortization of deferred financing
costs
864
187
Total amortization
$
11,309
$
11,471
Non-GAAP Free Cash Flow:
CSG’s calculation of non-GAAP free cash flow and the
reconciliation of CSG’s non-GAAP free cash flow measure to cash
flows from operating activities are provided below for the
indicated periods (in thousands):
Quarter Ended
March 31,
2024
2023
Cash flows from operating activities
$
(29,351
)
$
15,397
Purchases of software, property and
equipment
(4,774
)
(8,700
)
Non-GAAP free cash flow (deficit)
$
(34,125
)
$
6,697
Non-GAAP Financial Measures – 2024
Financial Guidance
Refer to the “Non-GAAP Financial Measures – 2024 Financial
Guidance” in Exhibit 2 to CSG’s earnings release dated February 7,
2024, which can be found on the Investor Relations page of CSG’s
website at csgi.com for the reconciliation of CSG’s 2024 financial
guidance.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20240501307515/en/
For more information, contact: John Rea, Investor Relations
(210) 687-4409 E-mail: john.rea@csgi.com
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