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CSG Systems International Reports First Quarter 2022 Results

·30-min read

CSG
CSG Systems International Reports First Quarter 2022 Results
04-May-2022 / 22:01 CET/CEST

Confirming All 2022 Financial Guidance Targets

Delivered 4.5% YoY Revenue Growth and 4.9% YoY Non-GAAP EPS Growth in Q1

Launched 5G-Ready, SaaS-Based CSG Encompass for Global Telecom Customers

CSG (NASDAQ: CSGS) today reported results for the quarter ended March 31, 2022.

Financial Results:

First quarter 2022 financial results:

  • Total revenue was $264.4 million and total non-GAAP adjusted revenue was $246.4 million.

  • GAAP operating income was $16.4 million, or 6.2% of total revenue, and non-GAAP operating income was $40.2 million, or 16.3% of non-GAAP adjusted revenue.

  • GAAP earnings per diluted share (EPS) was $0.19 and non-GAAP EPS was $0.86.

  • Cash flows used in operations were ($5.5) million, with a non-GAAP free cash flow deficit of ($15.9) million.

Shareholder Returns:

  • CSG declared its quarterly cash dividend of $0.265 per share of common stock, or a total of approximately $9 million, to shareholders.

  • During the first quarter of 2022, CSG repurchased under its stock repurchase program, approximately 266,000 shares of its common stock for approximately $16 million.

“CSG continued to build off our excellent 2021 momentum by delivering 4.5% year-over-year revenue growth and 4.9% year-over-year non-GAAP EPS growth in Q1, despite the discounts related to our Charter Communications and DISH contract renewals,” said Brian Shepherd, President and Chief Executive Officer of CSG. “These good first quarter results prove that our strategy is paying dividends as we continue to deliver for our customers. As a result, we are pleased to confirm all 2022 financial guidance targets. Looking ahead, we remain well positioned to lengthen and strengthen our relationships with existing customers, organically grow our revenue, close good value-adding strategic acquisitions, and diversify into faster growth industry verticals.”

Financial Overview (unaudited)

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

Quarter Ended March 31,

Percent

2022

2021

Changed

GAAP Results:

Revenue

$

264,400

$

253,119

%

4.5

Operating Income

16,415

31,377

(47.7

%)

Operating Margin Percentage

%

6.2

%

12.4

EPS

$

0.19

$

0.61

(68.9

%)

Non-GAAP Results:

Adjusted Revenue

$

246,362

$

236,669

%

4.1

Operating Income

40,186

40,207

(0.1

%)

Adjusted Operating Margin Percentage

%

16.3

%

17.0

EPS

$

0.86

$

0.82

%

4.9

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 2022 was $264.4 million, a 4.5% increase when compared to revenue of $253.1 million for the first quarter of 2021. The increase in revenue can be primarily attributed to the continued growth of CSG’s revenue management solutions, as approximately two-thirds of the increase was attributed to organic growth.

GAAP operating income for the first quarter of 2022 was $16.4 million, or 6.2% of total revenue, compared to $31.4 million, or 12.4% of total revenue, for the first quarter of 2021. The decrease in operating income is mainly a result of a $12 million increase in restructuring and reorganization charges related primarily to real estate restructurings in the first quarter of 2022 as CSG rationalizes its real estate footprint to reflect a flexible work approach.

GAAP EPS for the first quarter of 2022 was $0.19, as compared to $0.61 for the first quarter of 2021. The decrease in GAAP EPS can be mainly attributed to the increase restructuring and reorganization charges, discussed above, and a $7.5 million loss incurred on a derivative liability upon conversion of our 2016 Convertible Notes, discussed below.

Non-GAAP Results: Non-GAAP adjusted revenue for the first quarter of 2022 was $246.4 million, a 4.1% increase when compared to non-GAAP adjusted revenue of $236.7 million for the first quarter of 2021. The increase in non-GAAP adjusted revenue between periods is due to the factors discussed above.

Non-GAAP operating income for the first quarter of 2022 was $40.2 million, or 16.3% of total non-GAAP adjusted revenue, compared to $40.2 million, or 17.0% of total non-GAAP adjusted revenue for the first quarter of 2021.

Non-GAAP EPS for the first quarter of 2022 was $0.86 compared to $0.82 for the first quarter of 2021.

Balance Sheet and Cash Flows

Cash, cash equivalents and short-term investments as of March 31, 2022 were $187.6 million compared to $233.7 million as of December 31, 2021. CSG had net cash flows used in operations for the first quarters ended March 31, 2022 and 2021 of ($5.5) million and ($2.2) million, respectively, and had non-GAAP free cash flow deficits of ($15.9) million and ($10.5) million, respectively. Cash flows for the first quarters of 2022 and 2021 were negatively impacted by the payment of year-end accrued employee incentive compensation.

During the first quarter of 2022, CSG borrowed $245 million on its 2021 Revolving Credit Facility to settle the 2016 Convertible Notes for approximately $242 million in cash. As a result of the conversions of the Notes in March 2022, CSG recognized a $7.5 million loss on a derivative liability related to the change in CSG’s stock price over the observation period prior to settlement.

Summary of Financial Guidance

CSG is reaffirming its financial guidance for the full year 2022, as follows:

GAAP Measures:

Revenue

$

1,070 - $1,110 million

Non-GAAP Measures:

Adjusted Revenue

$

1,000 - $1,033 million

Adjusted Operating Margin Percentage

16.5% - 17.0%

EPS

$

3.44 - $3.68

Adjusted EBITDA

$

225 - $236 million

Free Cash Flow

$

115 - $125 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 4, 2022 at 5:00 p.m. ET, to discuss CSG’s first quarter results for 2022. 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 is a leader in innovative customer engagement, revenue management and payments solutions that make ordinary customer experiences extraordinary. Our cloud-first architecture and customer-obsessed mindset help companies around the world launch new digital services, expand into new markets, and create dynamic experiences that capture new customers and build brand loyalty. For 40 years, CSG’s technologies and people have helped some of the world’s most recognizable brands solve their toughest business challenges and evolve to meet the demands of today’s digital economy with future-ready solutions that drive exceptional customer experiences. With over 5,000 employees in over 20 countries, CSG is the trusted technology provider for leading global brands in telecommunications, retail, financial services, and healthcare. Our solutions deliver real world outcomes to more than 900 customers in over 120 countries.

To learn more, visit us at csgi.com and connect with us on LinkedIn and Twitter.

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 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 the COVID-19 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, Investor Relations

(210) 687-4409

E-mail: john.rea@csgi.com

CSG SYSTEMS INTERNATIONAL, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS-UNAUDITED

(in thousands)

March 31,

December 31,

2022

2021

ASSETS

Current assets:

Cash and cash equivalents

$

181,457

$

205,635

Short-term investments

6,133

28,037

Total cash, cash equivalents and short-term investments

187,590

233,672

Settlement and merchant reserve assets

163,145

186,267

Trade accounts receivable:

Billed, net of allowance of $4,924 and $4,250

238,368

244,317

Unbilled

42,379

35,802

Income taxes receivable

8,617

6,414

Other current assets

46,676

41,727

Total current assets

686,775

748,199

Non-current assets:

Property and equipment, net of depreciation of $114,393 and $111,244

70,803

73,580

Operating lease right-of-use assets

71,850

86,034

Software, net of amortization of $156,490 and $152,283

29,234

29,757

Goodwill

319,034

321,330

Acquired customer contracts, net of amortization of $115,726 and $114,166

54,480

57,207

Customer contract costs, net of amortization of $35,860 and $32,410

47,025

46,618

Deferred income taxes

8,755

8,584

Other assets

15,378

15,840

Total non-current assets

616,559

638,950

Total assets

$

1,303,334

$

1,387,149

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:

Current portion of long-term debt

$

252,500

$

237,500

Operating lease liabilities

22,832

23,270

Customer deposits

40,324

43,546

Trade accounts payable

35,193

35,397

Accrued employee compensation

61,516

91,115

Settlement and merchant reserve liabilities

161,782

185,276

Deferred revenue

51,990

53,748

Income taxes payable

800

398

Other current liabilities

19,940

24,852

Total current liabilities

646,877

695,102

Non-current liabilities:

Long-term debt, net of unamortized discounts of $3,218 and $3,406

135,532

137,219

Operating lease liabilities

64,750

70,068

Deferred revenue

16,156

19,599

Income taxes payable

4,148

4,058

Deferred income taxes

7,729

7,752

Other non-current liabilities

13,970

13,107

Total non-current liabilities

242,285

251,803

Total liabilities

889,162

946,905

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; 32,560 and 32,495 shares outstanding

709

705

Additional paid-in capital

472,078

488,303

Treasury stock, at cost; 36,979 and 36,713 shares

(946,102

)

(930,106

)

Accumulated other comprehensive income (loss):

Unrealized gains on short-term investments, net of tax

(8

)

(6

)

Cumulative foreign currency translation adjustments

(39,529

)

(38,347

)

Accumulated earnings

923,389

916,060

Total CSG stockholders' equity

410,537

436,609

Noncontrolling interest

3,635

3,635

Total stockholders' equity

414,172

440,244

Total liabilities and stockholders' equity

$

1,303,334

$

1,387,149

CSG SYSTEMS INTERNATIONAL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME-UNAUDITED

(in thousands, except per share amounts)

Quarter Ended

March 31,

2022

March 31,

2021

Revenue

$

264,400

$

253,119

Cost of revenue (exclusive of depreciation, shown separately below)

138,418

133,542

Other operating expenses:

Research and development

32,981

32,212

Selling, general and administrative

57,342

48,815

Depreciation

6,138

6,113

Restructuring and reorganization charges

13,106

1,060

Total operating expenses

247,985

221,742

Operating income

16,415

31,377

Other income (expense):

Interest expense

(3,272

)

(3,592

)

Amortization of original issue discount

-

(772

)

Interest and investment income, net

130

124

Loss on derivative liability upon debt conversion

(7,456

)

-

Other, net

812

(555

)

Total other

(9,786

)

(4,795

)

Income before income taxes

6,629

26,582

Income tax provision

(516

)

(6,951

)

Net income

$

6,113

$

19,631

Weighted-average shares outstanding:

Basic

31,416

31,844

Diluted

31,810

32,146

Earnings per common share:

Basic

$

0.19

$

0.62

Diluted

0.19

0.61

CSG SYSTEMS INTERNATIONAL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS-UNAUDITED

(in thousands)

Quarter Ended

March 31,

2022

March 31,

2021

Cash flows from operating activities:

Net income

$

6,113

$

19,631

Adjustments to reconcile net income to net cash provided by operating activities-

Depreciation

6,138

6,113

Amortization

13,870

10,737

Amortization of original issue discount

-

772

Asset impairment

10,705

102

Loss on short-term investments and other

15

15

Loss on derivative liability upon debt conversion

7,456

-

Deferred income taxes

(55

)

6,508

Stock-based compensation

5,581

5,395

Subtotal

49,823

49,273

Changes in operating assets and liabilities, net of acquired amounts:

Trade accounts receivable, net

46

(23,874

)

Other current and non-current assets and liabilities

(6,069

)

(414

)

Income taxes payable/receivable

(1,735

)

(1,022

)

Trade accounts payable and accrued liabilities

(42,550

)

(28,101

)

Deferred revenue

(5,064

)

1,914

Net cash used in operating activities

(5,549

)

(2,224

)

Cash flows from investing activities:

Purchases of software, property and equipment

(10,375

)

(8,239

)

Purchases of short-term investments

-

(32,304

)

Proceeds from sale/maturity of short-term investments

21,887

29,340

Acquisition of and investments in business, net of cash acquired

-

(648

)

Net cash provided by (used in) investing activities

11,512

(11,851

)

Cash flows from financing activities:

Proceeds from issuance of common stock

650

619

Payment of cash dividends

(8,885

)

(8,635

)

Repurchase of common stock

(23,660

)

(11,738

)

Proceeds from long-term debt

245,000

-

Payments on long-term debt

(244,176

)

(2,813

)

Settlement and merchant reserve activity

(23,543

)

(41,492

)

Net cash used in financing activities

(54,614

)

(64,059

)

Effect of exchange rate fluctuations on cash, cash equivalents and restricted cash

1,351

(851

)

Net decrease in cash, cash equivalents and restricted cash

(47,300

)

(78,985

)

Cash, cash equivalents and restricted cash, beginning of period

391,902

354,730

Cash, cash equivalents and restricted cash, end of period

$

344,602

$

275,745

Supplemental disclosures of cash flow information:

Cash paid during the period for-

Interest

$

5,876

$

5,661

Income taxes

2,230

1,468

Reconciliation of cash, cash equivalents and restricted cash:

Cash and cash equivalents

$

181,457

$

150,609

Settlement and merchant reserve assets

163,145

125,136

Total cash, cash equivalents and restricted cash

$

344,602

$

275,745

(1) Beginning with the second quarter of 2021, CSG reclassified certain cash flows related to settlement and merchant reserve assets and liabilities from cash flows from operating activities to cash flows from financing activities within the Condensed Consolidated Statements of Cash Flows. Prior period amounts have been reclassified to conform to the current period presentation.

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, 2022

December 31, 2021

March 31, 2021

Amount

% of Revenue

Amount

% of Revenue

Amount

% of Revenue

Comcast

$

52,524

%

20

$

54,861

%

20

$

53,454

%

21

Charter

52,069

%

20

57,332

%

21

53,382

%

21

Revenue by Vertical

Quarter Ended

Quarter Ended

Quarter Ended

March 31,

December 31,

March 31,

2022

2021

2021

Broadband/Cable/Satellite

%

54

%

55

%

57

Telecommunications

%

19

%

20

%

18

All other

%

27

%

25

%

25

Total revenue

%

100

%

100

%

100

Revenue by Geography

Quarter Ended

Quarter Ended

Quarter Ended

March 31,

December 31,

March 31,

2022

2021

2021

Americas

%

84

%

83

%

86

Europe, Middle East and Africa

%

12

%

13

%

10

Asia Pacific

%

4

%

4

%

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 adjusted revenue, 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

Adjusted Revenue

Operating Income

Adjusted Operating Margin Percentage

EPS

Transaction fees

X

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

Amortization of original issue discount (“OID”)

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 interchange and other payment-related fees paid, in conjunction with the delivery of service to customers under CSG’s payment services contracts, to third-party payment processors and financial institutions by CSG. Because CSG controls the integrated service provided under its payment services customer contracts, these transaction fees are presented gross, and not netted against revenue; however, other payments companies who do not provide and/or control an integrated service present their revenue net of transaction fees. The exclusion of these fees in calculating CSG’s non-GAAP adjusted revenue provides management and investors an additional means to use to compare CSG’s current revenue with historical and future periods, as well as with other payments companies.

  • 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, 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.

  • The convertible notes OID is the result of allocating a portion of the principal balance of the debt at issuance to the equity component of the instrument, as required under current accounting rules. This OID is then amortized to interest expense over the life of the respective convertible debt instrument. The interest expense related to the amortization of the OID is a non-cash expense, and therefore, the exclusion of this item allows investors to further evaluate the cash interest costs of CSG’s convertible notes for cash flow, liquidity, and debt service purposes.

  • 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 Adjusted Revenue:

The reconciliations of GAAP revenue to non-GAAP adjusted revenue for the indicated periods are as follows (in thousands):

Quarter Ended March 31,

2022

2021

GAAP revenue

$

264,400

$

253,119

Less: Transaction fees

(18,038

)

(16,450

)

Non-GAAP adjusted revenue

$

246,362

$

236,669

Non-GAAP Operating Income:

The reconciliations of GAAP operating income to non-GAAP operating income for the indicated periods are as follows (in thousands, except percentages):

Quarter Ended March 31,

2022

2021

GAAP operating income

$

16,415

$

31,377

Restructuring and reorganization charges (1)

13,106

1,060

Executive transition costs

1,275

55

Acquisition-related expenses:

Amortization of acquired intangible assets

3,656

2,241

Transaction-related costs

13

79

Stock-based compensation (1)

5,721

5,395

Non-GAAP operating income

$

40,186

$

40,207

Non-GAAP adjusted revenue

$

246,362

$

236,669

Non-GAAP adjusted operating margin percentage

%

16.3

%

17.0

(1) Stock-based compensation included in the tables above and following excludes amounts that have been recorded in restructuring and reorganization charges.

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, 2022

March 31, 2021

Amounts

EPS (3)

Amounts

EPS (3)

GAAP net income

$

6,113

$

0.19

$

19,631

$

0.61

GAAP income tax provision (2)

516

6,951

GAAP income before income taxes

6,629

26,582

Restructuring and reorganization charges (1)

13,106

1,060

Executive transition costs

1,275

55

Acquisition-related costs:

Amortization of acquired intangible assets

3,656

2,241

Transaction-related costs

13

79

Stock-based compensation (1)

5,721

5,395

Amortization of OID

-

772

Loss on debt extinguishment/conversion

7,456

-

Non-GAAP income before income taxes

37,856

36,184

Non-GAAP income tax provision (2)

(10,410

)

(9,770

)

Non-GAAP net income

$

27,446

$

0.86

$

26,414

$

0.82

(2) For the quarters ended March 31, 2022 and 2021 the GAAP effective income tax rates were approximately 8% and 26%, respectively, and the non-GAAP effective income tax rates were approximately 27.5% and 27%, respectively. The first quarter of 2022 GAAP effective income tax rate was impacted by the combination of lower net income and a discrete tax benefit related to the vesting of equity-awards during the quarter.

(3) The outstanding diluted shares for the quarters ended March 31, 2022 and 2021 were 31.8 million and 32.1 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,

2022

2021

GAAP net income

$

6,113

$

19,631

GAAP income tax provision

516

6,951

Interest expense (4)

3,272

3,592

Amortization of OID

-

772

Loss on derivative liability upon debt conversion

7,456

-

Interest and investment income and other, net

(942

)

431

GAAP operating income

16,415

31,377

Restructuring and reorganization charges

13,106

1,060

Executive transition costs

1,275

55

Acquisition-related expenses:

Amortization of acquired intangible assets (5)

3,656

2,241

Transaction-related costs

13

79

Stock-based compensation (1)

5,721

5,395

Amortization of other intangible assets (5)

3,488

3,336

Amortization of customer contract costs (5)

6,537

4,722

Depreciation

6,138

6,113

Non-GAAP adjusted EBITDA

$

56,349

$

54,378

Non-GAAP adjusted EBITDA as a percentage of non-GAAP adjusted revenue

%

22.9

%

23.0

(4) Interest expense includes amortization of deferred financing costs as provided in Note 5 below.

(5) Amortization on the statement of cash flows is made up of the following items for the indicated periods (in thousands):

Quarter Ended

March 31,

2022

2021

Amortization of acquired intangible assets

$

3,656

$

2,241

Amortization of other intangible assets

3,488

3,336

Amortization of customer contract costs

6,537

4,722

Amortization of deferred financing costs

189

438

Total amortization

$

13,870

$

10,737

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,

2022

2021

Cash flows from operating activities

$

(5,549

)

$

(2,224

)

Purchases of software, property and equipment

(10,375

)

(8,239

)

Non-GAAP free cash flow

$

(15,924

)

$

(10,463

)

Non-GAAP Financial Measures – 2022 Financial Guidance

Non-GAAP Adjusted Revenue:

The reconciliation of GAAP revenue to non-GAAP adjusted revenue, as included in CSG’s 2022 full year preliminary financial outlook, is as follows:

2022 Guidance Range

Low Range

High Range

GAAP revenue

$

1,070,000

$

1,110,000

Less: Transaction fees

(70,000

)

(77,000

)

Non-GAAP adjusted revenue

$

1,000,000

$

1,033,000

Non-GAAP Operating Income:

The reconciliation of GAAP operating income to non-GAAP operating income, as included in CSG’s 2022 full year financial guidance, is as follows (in thousands, except percentages):

2022 Guidance Range

Low Range

High Range

Operating Income

GAAP operating income

$

106,400

$

116,900

Restructuring and reorganization charges

14,500

14,500

Executive transition costs

1,300

1,300

Acquisition-related expenses:

Amortization of acquired intangible assets

14,600

14,600

Stock-based compensation

28,300

28,300

Non-GAAP operating income

$

165,100

$

175,600

Operating Margin Percentage

Non-GAAP adjusted revenue

$

1,000,000

$

1,033,000

Non-GAAP adjusted operating margin percentage

%

16.5

%

17.0

Non-GAAP EPS:

The reconciliation of GAAP EPS to non-GAAP EPS as included in CSG’s 2022 full year financial guidance is as follows (in thousands, except per share amounts):

2022 Guidance Range

Low Range

High Range

Amounts

EPS (7)

Amounts

EPS (7)

GAAP net income

$

63,200

$

1.98

$

70,800

$

2.21

GAAP income tax provision (6)

22,200

25,100

GAAP income before income taxes

85,400

95,900

Restructuring and reorganization charges

14,500

14,500

Executive transition costs

1,300

1,300

Acquisition-related expenses:

Amortization of acquired intangible assets

14,600

14,600

Stock-based compensation

28,300

28,300

Loss on debt extinguishment/conversion

7,500

7,500

Non-GAAP income before income taxes

151,600

162,100

Non-GAAP income tax provision (6)

(41,500

)

(44,500

)

Non-GAAP net income

$

110,100

$

3.44

$

117,600

$

3.68

(6) For 2022, the estimated effective income tax rate for GAAP and non-GAAP purposes is expected to be approximately 26% and 27%, respectively.

(7) The weighted-average diluted shares outstanding are expected to be approximately 32 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 2022 full year financial guidance (in thousands, except percentages):

2022 Guidance Range

Low Range

High Range

GAAP net income

$

63,200

$

70,800

GAAP income tax provision (6)

22,200

25,100

Interest expense

13,800

13,800

Loss on derivative liability upon debt conversion

7,500

7,500

Interest and investment income and other, net

(300

)

(300

)

GAAP operating income

106,400

116,900

Restructuring and reorganization charges

14,500

14,500

Executive transition costs

1,300

1,300

Acquisition-related expenses:

Amortization of acquired intangible assets

14,600

14,600

Stock-based compensation

28,300

28,300

Amortization of other intangible assets

12,300

12,300

Amortization of client contract costs

19,600

19,600

Depreciation

28,300

28,300

Non-GAAP adjusted EBITDA

$

225,300

$

235,800

Non-GAAP adjusted EBITDA as a percentage of non-GAAP adjusted revenue

%

22.5

%

22.8

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 the indicated period (in thousands):

2022 Guidance Range

Low Range

High Range

Cash flows from operating activities

$

150,000

$

170,000

Purchases of software, property and equipment

(35,000

)

(45,000

)

Non-GAAP free cash flow

$

115,000

$

125,000

Contact Details

CSG

John Rea

+1 210-687-4409

tammy.hovey@csgi.com

Company Website

https://www.csgi.com


News Source: News Direct


Dissemination of a CORPORATE NEWS, transmitted by EQS Group.
The issuer is solely responsible for the content of this announcement.

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