CSGS CSG Systems International Inc

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

PURSUANT TO SECTION 13 or 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of earliest event reported): November, 6, 2024

CSG SYSTEMS INTERNATIONAL, INC.

(Exact name of registrant as specified in its charter)

Delaware		0-27512		47-0783182
(State or other jurisdiction of incorporation)		(Commission File Number)		(IRS Employer Identification No.)
169 Inverness Dr W, Suite 300, Englewood, CO				80112
(Address of principal executive offices)				(Zip Code)

Registrant’s telephone number, including area code: (303) 200-2000

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instructions A.2. below):

 

☐	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
☐	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
☐	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
☐	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
Common Stock, Par Value $0.01 Per Share		CSGS		NASDAQ Stock Market LLC.

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§ 230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§ 240.12b-2 of this chapter).

Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

 

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Item 2.02. Results of Operations and Financial Condition.

The following information is furnished pursuant to Item 2.02 (Results of Operations and Financial Condition). This information shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or incorporated in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.

 

On November 6, 2024, CSG Systems International, Inc. (“CSG”) issued a press release relating to the results of its operations for the quarter and nine months ended September 30, 2024. A copy of such press release is attached to this Form 8-K as Exhibit 99.1 and hereby incorporated by reference.

 

In the attached press release, CSG makes reference to non-GAAP financial measures. 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. There are limitations with the use of non-GAAP financial measures since they are not based on any comprehensive set of accounting rules or principles, and 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. A more detailed discussion of CSG’s use of non-GAAP financial measures, to include reconciliations of the non-GAAP financial measures to the comparable GAAP financial measures, is contained in the attached press release and is posted to the Company’s website at www.csgi.com.

9.01. Financial Statements and Exhibits.

(d) Exhibits

99.1		Press release of CSG Systems International, Inc. dated November 6, 2024
104		Cover Page Interactive Data File (embedded within the Inline XBRL document)

 

 

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

			CSG SYSTEMS INTERNATIONAL, INC.
Date:	November 6, 2024	By:	/s/ Lori J. Szwanek
			Lori J. Szwanek Chief Accounting Officer

 

 

 

 

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FOR IMMEDIATE RELEASE

 

PRESS RELEASE

CSG Systems INTERNATIONAL reports

THIRD Quarter 2024 RESULTS

DENVER--(November 6, 2024) — CSG (NASDAQ: CSGS) today reported results for the quarter ended September 30, 2024.

Announced Watershed Contract Renewal with Comcast through Year-End 2030

Raising 2024 Profitability and Non-GAAP EPS Guidance Targets for Second Consecutive Quarter

Commitment to Return $100+ Million to Shareholders via Dividends and Buybacks in 2024 and 2025

Financial Results:

Third quarter 2024 financial results:

Shareholder Returns:

“We were excited to announce earlier this week a fantastic win-win contract expansion with Comcast that will extend our contract term through year-end 2030,” said Brian Shepherd, President and Chief Executive Officer of CSG. “Regarding Q3 earnings, team CSG posted good operating results in the first nine months of 2024 and we are pleased to raise our 2024 profitability and non-GAAP EPS guidance targets for a second consecutive quarter while reiterating all other guidance metrics. From a shareholder return perspective, we plan on returning $100+ million to shareholders via dividends and share repurchases in each of 2024 and 2025. Returning capital to shareholders remains a cornerstone commitment as we have returned nearly $500 million to shareholders since 2020.”

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Financial Overview (unaudited)

(in thousands, except per share amounts and percentages):

		Quarter Ended September 30,												Nine Months Ended September 30,
		2024				2023				Percent Changed				2024				2023				Percent Changed
GAAP Results:
Revenue		$	295,143			$	286,868				2.9	%		$	880,596			$	871,934				1.0	%
Operating Income			31,822				32,731				(2.8	%)			89,039				99,130				(10.2	%)
Operating Margin Percentage			10.8	%			11.4	%							10.1	%			11.4	%
EPS		$	0.67			$	0.62				8.1	%		$	1.83			$	1.75				4.6	%
Non-GAAP Results:
Operating Income		$	50,076			$	45,203				10.8	%		$	141,085			$	141,664				(0.4	%)
Adjusted Operating Margin     Percentage			18.4	%			17.0	%							17.4	%			17.5	%
EPS		$	1.06			$	0.92				15.2	%		$	3.08			$	2.76				11.6	%

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 third quarter of 2024 was $295.1 million, a 2.9% increase when compared to revenue of $286.9 million for the third quarter of 2023. The increase in revenue can be attributed to the continued growth of our SaaS and related solutions revenue, to include approximately $6 million of revenue generated from the businesses acquired in the second quarter of 2024, which more than offset lower software and services revenue for the quarter.

GAAP operating income for the third quarter of 2024 was $31.8 million, or 10.8% of total revenue, compared to $32.7 million, or 11.4% of total revenue, for the third quarter of 2023. The decrease in operating income is mainly attributed to the increase in acquisition-related expenses in the third quarter of 2024, to include earn-out compensation and amortization of acquired intangible assets.

GAAP EPS for the third quarter of 2024 was $0.67, compared to $0.62 for the third quarter of 2023, with the third quarter of 2024 benefiting from a lower effective income tax rate and a lower share count, partially offset by foreign currency movements.

Non-GAAP Results: Non-GAAP operating income for the third quarter of 2024 was $50.1 million, or a non-GAAP adjusted operating margin of 18.4%, compared to $45.2 million, or a non-GAAP adjusted operating margin of 17.0% for the third quarter of 2023. The increase in non-GAAP operating income and non-GAAP adjusted operating margin can be primarily attributed to the higher revenue discussed above.

Non-GAAP EPS for the third quarter of 2024 was $1.06 compared to $0.92 for the third quarter of 2023. The increase in non-GAAP EPS is mainly due to the higher non-GAAP operating income, discussed above, and the lower share count, partially offset by foreign currency movements.

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Balance Sheet and Cash Flows

Cash and cash equivalents as of September 30, 2024 were $118.4 million compared to $110.4 million as of June 30, 2024 and $186.3 million as of December 31, 2023. CSG had net cash flows provided by operations for the third quarters ended September 30, 2024 and 2023 of $39.5 million and $24.6 million, respectively, and non-GAAP free cash flow of $32.0 million and $18.1 million, respectively.

Summary of Financial Guidance

CSG is revising its financial guidance for the full year 2024, as follows:

		As of November 6, 2024		Previous
GAAP Measures:
Revenue		No change		$1,200 - $1,240 million
Non-GAAP Measures:
Adjusted Operating Margin Percentage		17.7% - 18.1%		17.3% - 17.7%
EPS		$4.25 - $4.55		$4.05 - $4.35
Adjusted EBITDA		$251 - $261 million		$247 - $257 million
Free Cash Flow		No change		$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, November 6, 2024 at 5:00 p.m. ET, to discuss CSG’s third 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.

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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.

For more information, contact:

John Rea, Head Investor Relations, Treasury and ESG Reporting

(210) 687-4409

E-mail: John.Rea@csgi.com

 

Davis Barker, Senior Manager, Investor Relations & Corporate Development

(303) 884-4506

E-mail: Davis.Barker@csgi.com

 

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CSG SYSTEMS INTERNATIONAL, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS-UNAUDITED

(in thousands)

		September 30, 2024				December 31, 2023
ASSETS
Current assets:
Cash and cash equivalents		$	118,444			$	186,264
Settlement and merchant reserve assets			240,755				274,699
Trade accounts receivable:
Billed, net of allowance of $4,810 and $5,432			279,930				267,680
Unbilled			82,585				82,163
Income taxes receivable			13,992				1,345
Other current assets			51,534				50,075
Total current assets			787,240				862,226
Non-current assets:
Property and equipment, net of depreciation of $136,641 and $121,816			58,353				65,545
Operating lease right-of-use assets			25,842				34,283
Software, net of amortization of $168,808 and $157,601			22,953				14,224
Goodwill			323,449				308,596
Acquired customer contracts, net of amortization of $134,742 and $126,469			42,786				35,879
Customer contract costs, net of amortization of $46,641 and $42,094			60,490				54,421
Deferred income taxes			57,831				57,855
Other assets			8,502				10,017
Total non-current assets			600,206				580,820
Total assets		$	1,387,446			$	1,443,046
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt		$	7,500			$	7,500
Operating lease liabilities			14,002				15,946
Customer deposits			37,716				41,035
Trade accounts payable			51,907				46,406
Accrued employee compensation			57,704				84,380
Settlement and merchant reserve liabilities			238,783				273,817
Deferred revenue			62,797				54,199
Income taxes payable			937				4,104
Other current liabilities			28,163				33,449
Total current liabilities			499,509				560,836
Non-current liabilities:
Long-term debt, net of unamortized discounts of $13,014 and $15,628			531,986				534,997
Operating lease liabilities			24,427				34,360
Deferred revenue			22,968				23,447
Income taxes payable			2,684				3,041
Deferred income taxes			120				123
Other non-current liabilities			17,341				12,916
Total non-current liabilities			599,526				608,884
Total liabilities			1,099,035				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; 29,292 and 29,541 shares      outstanding			717				713
Additional paid-in capital			509,294				490,947
Treasury stock, at cost; 41,115 and 40,398 shares			(1,170,118	)			(1,136,055	)
Accumulated other comprehensive income (loss):
Unrealized gain on short-term investments, net of tax			-				1
Cumulative foreign currency translation adjustments			(45,562	)			(50,414	)
Accumulated earnings			994,080				968,134
Total stockholders' equity			288,411				273,326
Total liabilities and stockholders' equity		$	1,387,446			$	1,443,046

 

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CSG SYSTEMS INTERNATIONAL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME-UNAUDITED

(in thousands, except per share amounts)

 

	Quarter Ended								Nine Months Ended
	September 30, 2024				September 30, 2023				September 30, 2024				September 30, 2023
Revenue	$	295,143			$	286,868			$	880,596			$	871,934
Cost of revenue (exclusive of depreciation, shown separately below)		149,487				152,734				460,266				458,897
Other operating expenses:
Research and development		41,665				35,292				116,171				107,401
Selling, general and administrative		63,913				59,097				186,794				180,930
Depreciation		5,313				5,862				16,286				17,155
Restructuring and reorganization charges		2,943				1,152				12,040				8,421
Total operating expenses		263,321				254,137				791,557				772,804
Operating income		31,822				32,731				89,039				99,130
Other income (expense):
Interest expense		(7,778	)			(8,036	)			(22,982	)			(23,092	)
Interest income		1,922				1,175				6,641				2,516
Other, net		(2,187	)			813				(1,455	)			(3,047	)
Total other		(8,043	)			(6,048	)			(17,796	)			(23,623	)
Income before income taxes		23,779				26,683				71,243				75,507
Income tax provision		(4,691	)			(7,989	)			(18,859	)			(21,931	)
Net income	$	19,088			$	18,694			$	52,384			$	53,576
Weighted-average shares outstanding:
Basic		28,362				30,097				28,475				30,381
Diluted		28,468				30,284				28,621				30,540
Earnings per common share:
Basic	$	0.67			$	0.62			$	1.84			$	1.76
Diluted		0.67				0.62				1.83				1.75

 

 

 

 

 

 

 

 

 

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CSG SYSTEMS INTERNATIONAL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS-UNAUDITED

(in thousands)

	Nine Months Ended
	September 30, 2024				September 30, 2023
Cash flows from operating activities:
Net income	$	52,384			$	53,576
Adjustments to reconcile net income to net cash provided by operating activities-
Depreciation		16,724				17,549
Amortization		37,467				34,543
Asset impairment		-				1,689
Gain on lease modifications		-				(4,349	)
Unrealized foreign currency transaction (gain) loss, net		225				(442	)
Deferred income taxes		(189	)			(12,504	)
Stock-based compensation		25,023				21,253
Subtotal		131,634				111,315
Changes in operating assets and liabilities, net of acquired amounts:
Trade accounts receivable, net		(7,873	)			(33,351	)
Other current and non-current assets and liabilities		(12,771	)			(11,449	)
Income taxes payable/receivable		(16,194	)			(4,650	)
Trade accounts payable and accrued liabilities		(48,658	)			(24,158	)
Deferred revenue		7,075				14,658
Net cash provided by operating activities		53,213				52,365
Cash flows from investing activities:
Purchases of software, property, and equipment		(16,528	)			(22,940	)
Proceeds from sale/maturity of short-term investments		-				71
Business combinations, net of cash and settlement assets acquired of $46,432 and zero		17,293				-
Net cash provided by (used in) investing activities		765				(22,869	)
Cash flows from financing activities:
Proceeds from issuance of common stock		2,416				2,541
Payment of cash dividends		(26,598	)			(26,231	)
Repurchase of common stock		(42,439	)			(116,418	)
Deferred acquisition payments		(2,488	)			(3,220	)
Proceeds from long-term debt		15,000				470,000
Payments on long-term debt		(20,625	)			(310,625	)
Purchase of capped call transactions related to convertible notes		-				(34,298	)
Payments of deferred financing costs		-				(13,518	)
Payments on financing obligations		(2,191	)			-
Settlement and merchant reserve activity		(79,606	)			(46,196	)
Net cash used in financing activities		(156,531	)			(77,965	)
Effect of exchange rate fluctuations on cash, cash equivalents, and restricted cash		(337	)			(448	)
Net decrease in cash, cash equivalents, and restricted cash		(102,890	)			(48,917	)
Cash, cash equivalents, and restricted cash, beginning of period		463,876				389,018
Cash, cash equivalents, and restricted cash, end of period	$	360,986			$	340,101
Supplemental disclosures of cash flow information:
Cash paid during the period for-
Interest	$	24,592			$	21,772
Income taxes		35,292				39,136
Non-cash investing and financing activities-
Software, property, and equipment included in current and noncurrent liabilities		9,830				-
Reconciliation of cash, cash equivalents, and restricted cash:
Cash and cash equivalents	$	118,444			$	146,730
Settlement and merchant reserve assets		240,755				193,371
Restricted cash included in current and non-current assets		1,787				-
Total cash, cash equivalents, and restricted cash	$	360,986			$	340,101

 

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EXHIBIT 1

CSG SYSTEMS INTERNATIONAL, INC.

SUPPLEMENTAL REVENUE ANALYSIS

Revenue by Significant Customers: 10% or more of Revenue

 

		Quarter Ended								Quarter Ended								Quarter Ended
		September 30, 2024								June 30, 2024								September 30, 2023
		Amount				% of Revenue				Amount				% of Revenue				Amount				% of Revenue
Charter		$	59,070				20	%		$	60,629				21	%		$	59,432				21	%
Comcast			58,688				20	%			54,576				19	%			53,653				19	%

 

Revenue by Vertical

		Quarter Ended				Quarter Ended				Quarter Ended
		September 30,  2024				June 30, 2024				September 30,  2023
Broadband/Cable/Satellite			53	%			53	%			53	%
Telecommunications			18	%			16	%			20	%
All other			29	%			31	%			27	%
Total revenue			100	%			100	%			100	%

 

Revenue by Geography

		Quarter Ended				Quarter Ended				Quarter Ended
		September 30,  2024				June 30, 2024				September 30, 2023
Americas			88	%			89	%			86	%
Europe, Middle East and Africa			9	%			6	%			9	%
Asia Pacific			3	%			5	%			5	%
Total revenue			100	%			100	%			100	%

 

 

 

 

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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.

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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
Earn-out compensation		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:

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• Acquisition-related expenses include amortization of acquired intangible assets, earn-out compensation, and transaction-related costs. 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.

 

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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 September 30,								Nine Months Ended September 30,
		2024				2023				2024				2023
Non-GAAP Operating Income
GAAP operating income		$	31,822			$	32,731			$	89,039			$	99,130
Restructuring and reorganization charges (1)			2,943				1,152				12,040				8,421
Executive transition costs			-				1,148				352				1,148
Acquisition-related expenses:
Amortization of acquired intangible assets			3,929				2,996				10,174				9,203
Earn-out compensation			2,591				-				3,416				(14	)
Transaction-related costs			32				(40	)			243				2,136
Stock-based compensation (1)			8,759				7,216				25,821				21,640
Non-GAAP operating income		$	50,076			$	45,203			$	141,085			$	141,664
Non-GAAP Adjusted Operating Margin Percentage
Revenue		$	295,143			$	286,868			$	880,596			$	871,934
Less: Transaction fees (2)			(22,524	)			(20,314	)			(71,793	)			(63,463	)
Revenue less transaction fees		$	272,619			$	266,554			$	808,803			$	808,471
Non-GAAP adjusted operating margin percentage			18.4	%			17.0	%			17.4	%			17.5	%

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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
		September 30, 2024								September 30, 2023
		Amounts				EPS (4)				Amounts				EPS (4)
GAAP net income		$	19,088			$	0.67			$	18,694			$	0.62
GAAP income tax provision (3)			4,691								7,989
GAAP income before income taxes			23,779								26,683
Restructuring and reorganization charges (1)			2,943								1,152
Executive transition costs			-								1,148
Acquisition-related costs:
Amortization of acquired intangible assets			3,929								2,996
Earn-out compensation			2,591								-
Transaction-related costs			32								(40	)
Stock-based compensation (1)			8,759								7,216
Non-GAAP income before income taxes			42,033								39,155
Non-GAAP income tax provision (3)			(11,979	)							(11,159	)
Non-GAAP net income		$	30,054			$	1.06			$	27,996			$	0.92

 

		Nine Months Ended								Nine Months Ended
		September 30, 2024								September 30, 2023
		Amounts				EPS (4)				Amounts				EPS (4)
GAAP net income		$	52,384			$	1.83			$	53,576			$	1.75
GAAP income tax provision (3)			18,859								21,931
GAAP income before income taxes			71,243								75,507
Restructuring and reorganization charges (1)			12,040								8,421
Executive transition costs			352								1,148
Acquisition-related expenses:
Amortization of acquired intangible assets			10,174								9,203
Earn-out compensation			3,416								(14	)
Transaction-related costs			243								2,136
Stock-based compensation (1)			25,821								21,640
Non-GAAP income before income taxes			123,289								118,041
Non-GAAP income tax provision (3)			(35,137	)							(33,642	)
Non-GAAP net income		$	88,152			$	3.08			$	84,399			$	2.76

(3) The GAAP effective income tax rates for the third quarters of 2024 and 2023 were approximately 20% and 30%, respectively, and for the nine months ended September 30, 2024 and 2023 were approximately 26% and 29%, respectively. The year-over-year decreases in the GAAP effective income tax rates is due primarily to the revaluation of deferred taxes in the third quarter of 2024.

The non-GAAP effective income tax rates for the third quarters of 2024 and 2023 were 28.5% for both periods, and for the nine months ended September 30, 2024 and 2023 were 28.5% for both periods.

(4) The outstanding diluted shares for the third quarter and nine months ended September 30, 2024 were 28.5 million and 28.6 million, respectively, and for the third quarter and nine months ended September 30, 2023 were 30.3 and 30.5 million, respectively.

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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								Nine Months Ended
		September 30,								September 30,
		2024				2023				2024				2023
GAAP net income		$	19,088			$	18,694			$	52,384			$	53,576
GAAP income tax provision			4,691				7,989				18,859				21,931
Interest expense (5)			7,778				8,036				22,982				23,092
Interest and investment income and other, net			265				(1,988	)			(5,186	)			531
GAAP operating income			31,822				32,731				89,039				99,130
Restructuring and reorganization charges (1)			2,943				1,152				12,040				8,421
Executive transition costs			-				1,148				352				1,148
Acquisition-related expenses:
Amortization of acquired intangible assets (6)			3,929				2,996				10,174				9,203
Earn-out compensation			2,591				-				3,416				(14	)
Transaction-related costs			32				(40	)			243				2,136
Stock-based compensation (1)			8,759				7,216				25,821				21,640
Amortization of other intangible assets (6)			3,139				3,438				8,584				10,274
Amortization of customer contract costs (6)			5,373				4,997				16,095				14,390
Depreciation (1)			5,313				5,862				16,286				17,155
Non-GAAP adjusted EBITDA		$	63,901			$	59,500			$	182,050			$	183,483
Non-GAAP adjusted EBITDA as a percentage of revenue less transaction fees (2)			23.4	%			22.3	%			22.5	%			22.7	%

(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								Nine Months Ended
		September 30,								September 30,
		2024				2023				2024				2023
Amortization of acquired intangible assets		$	3,929			$	2,996			$	10,174			$	9,203
Amortization of other intangible assets			3,139				3,438				8,584				10,274
Amortization of customer contract costs			5,373				4,997				16,095				14,390
Amortization of deferred financing costs			879				304				2,614				676
Total amortization		$	13,320			$	11,735			$	37,467			$	34,543

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								Nine Months Ended
		September 30,								September 30,
		2024				2023				2024				2023
Cash flows from operating activities		$	39,459			$	24,582			$	53,213			$	52,365
Purchases of software, property and equipment			(7,455	)			(6,512	)			(16,528	)			(22,940	)
Non-GAAP free cash flow		$	32,004			$	18,070			$	36,685			$	29,425

 

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Non-GAAP Financial Measures – 2024 Financial Guidance

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 non-GAAP adjusted operating margin percentage, as included in CSG’s 2024 full year financial guidance, is as follows (in thousands, except percentages):

		2024 Guidance Range
		Low Range				High Range
Non-GAAP Operating Income
GAAP operating income		$	129,300			$	139,300
Restructuring and reorganization charges			12,000				12,000
Executive transition costs			400				400
Acquisition-related expenses:
Amortization of acquired intangible assets			14,000				14,000
Earn-out compensation			5,600				5,600
Transaction-related costs			400				400
Stock-based compensation			33,600				33,600
Non-GAAP operating income		$	195,300			$	205,300
Non-GAAP Operating Margin Percentage
Revenue		$	1,200,000			$	1,240,000
Less: Transaction fees			(98,000	)			(103,000	)
Revenue less transaction fees		$	1,102,000			$	1,137,000
Non-GAAP adjusted operating margin percentage			17.7	%			18.1	%

 

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Non-GAAP EPS:

The reconciliation of GAAP EPS to non-GAAP EPS as included in CSG’s 2024 full year financial guidance is as follows (in thousands, except per share amounts):

		2024 Guidance Range
		Low Range								High Range
		Amounts				EPS (8)				Amounts				EPS (8)
GAAP net income		$	76,500			$	2.64			$	83,700			$	2.91
GAAP income tax provision (7)			30,400								33,200
GAAP income before income taxes			106,900								116,900
Restructuring and reorganization charges			12,000								12,000
Executive transition costs			400								400
Acquisition-related expenses:
Amortization of acquired intangible assets			14,000								14,000
Earn-out compensation			5,600								5,600
Transaction-related costs			400								400
Stock-based compensation			33,600								33,600
Non-GAAP income before income taxes			172,900								182,900
Non-GAAP income tax provision (7)			(49,300	)							(52,200	)
Non-GAAP net income		$	123,600			$	4.25			$	130,700			$	4.55

 

(7) For 2024, the estimated effective income tax rates for GAAP and non-GAAP purposes are expected to be approximately 28% and 29%, respectively.

(8) The weighted-average diluted shares outstanding are expected to be approximately 29 million.

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 CSG’s 2024 full year financial guidance (in thousands, except percentages):

		2024 Guidance Range
		Low Range				High Range
GAAP net income		$	76,500			$	83,700
GAAP income tax provision (7)			30,400				33,200
Interest expense			30,700				30,700
Interest and investment income			(8,300	)			(8,300	)
GAAP operating income			129,300				139,300
Restructuring and reorganization charges			12,000				12,000
Executive transition costs			400				400
Acquisition-related expenses:
Amortization of acquired intangible assets			14,000				14,000
Earn-out compensation			5,600				5,600
Transaction-related costs			400				400
Stock-based compensation			33,600				33,600
Amortization of other intangible assets			11,400				11,400
Amortization of client contract costs			22,000				22,000
Depreciation			22,300				22,300
Non-GAAP adjusted EBITDA		$	251,000			$	261,000
Non-GAAP adjusted EBITDA as a percentage of revenue less     transaction fees (2)			22.8	%			23.0	%

 

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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 is provided below for CSG’s 2024 full year financial guidance (in thousands):

		2024 Guidance Range
		Low Range				High Range
Cash flows from operating activities		$	120,000			$	170,000
Purchases of software, property and equipment			(25,000	)			(35,000	)
Non-GAAP free cash flow		$	95,000			$	135,000

 

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v3.24.3

Document and Entity Information	Nov. 06, 2024
Cover [Abstract]
Document Type	8-K
Amendment Flag	false
Document Period End Date	Nov. 06, 2024
Entity Registrant Name	CSG SYSTEMS INTERNATIONAL, INC.
Entity Central Index Key	0001005757
Entity Emerging Growth Company	false
Title of 12(b) Security	Common Stock, Par Value $0.01 Per Share
Trading Symbol	CSGS
Security Exchange Name	NASDAQ
Entity File Number	0-27512
Entity Incorporation, State or Country Code	DE
Entity Tax Identification Number	47-0783182
Entity Address, Address Line One	169 Inverness Dr W
Entity Address, Address Line Two	Suite 300
Entity Address, City or Town	Englewood
Entity Address, State or Province	CO
Entity Address, Postal Zip Code	80112
City Area Code	303
Local Phone Number	200-2000
Written Communications	false
Soliciting Material	false
Pre-commencement Tender Offer	false
Pre-commencement Issuer Tender Offer	false

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