EXHIBIT 99.1
FOR IMMEDIATE RELEASE
PRESS RELEASE
CSG Systems INTERNATIONAL reports
FOURTH Quarter AND FULL YEAR 2022 RESULTS
Returned over $120 million to Shareholders in 2022 including Repurchasing 1.5 Million Shares
Increased Dividend Payout in 2023 by 6%; Marks 10th Consecutive Year of Increased Payout
Substantially Completed Charter Subscriber Migration from a Competitor’s System
2023 Revenue Growth Anticipated to Accelerate; Mid-point of Guidance Implies 5.5% YoY Growth
DENVER--(February 1, 2023) — CSG (NASDAQ: CSGS) today reported results for the quarter and year ended December 31, 2022.
Financial Results:
Fourth quarter 2022 financial results:
Full year 2022 financial results:
CSG Systems International, Inc.
February 1, 2023
Page 2
Shareholder Returns:
“After hitting some headwinds in the first half of 2022, Team CSG delivered strong, healthy revenue growth in the second half, including 6.1% sequential quarter-over-quarter growth in Q4. Further, on the back of our timely Operating Margin Improvement Initiative, we reported non-GAAP adjusted operating margin of 16.6% for full-year 2022. Plus, we continue to return capital to shareholders in the form of buybacks and dividends, having delivered over $120 million in shareholder remuneration in 2022. On this front, we are also pleased to announce our 10th consecutive year of increasing dividend payout in 2023,” said Brian Shepherd, President and Chief Executive Officer of CSG. “Looking forward, we anticipate accelerating revenue growth in 2023 coupled with non-GAAP adjusted operating margins in the range of 16.5% to 17.0%.”
Financial Overview (unaudited)
(in thousands, except per share amounts and percentages):
|
| Quarter Ended December 31, |
|
| Year Ended December 31, |
| ||||||||||||||||||
|
|
|
|
|
|
|
|
|
| Percent |
|
|
|
|
|
|
|
|
|
| Percent |
| ||
|
| 2022 |
|
| 2021 |
|
| Changed |
|
| 2022 |
|
| 2021 |
|
| Changed |
| ||||||
GAAP Results: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue |
| $ | 289,876 |
|
| $ | 275,025 |
|
|
| 5.4 | % |
| $ | 1,089,752 |
|
| $ | 1,046,487 |
|
|
| 4.1 | % |
Operating Income |
|
| 35,072 |
|
|
| 27,880 |
|
|
| 25.8 | % |
|
| 78,747 |
|
|
| 124,186 |
|
|
| (36.6 | %) |
Operating Margin Percentage |
|
| 12.1 | % |
|
| 10.1 | % |
|
|
|
|
|
| 7.2 | % |
|
| 11.9 | % |
|
|
|
|
EPS |
| $ | 0.66 |
|
| $ | 0.54 |
|
|
| 22.2 | % |
| $ | 1.41 |
|
| $ | 2.26 |
|
|
| (37.6 | %) |
Non-GAAP Results: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Income |
| $ | 45,157 |
|
| $ | 40,152 |
|
|
| 12.5 | % |
| $ | 168,830 |
|
| $ | 161,713 |
|
|
| 4.4 | % |
Adjusted Operating Margin Percentage |
|
| 16.8 | % |
|
| 15.6 | % |
|
|
|
|
|
| 16.6 | % |
|
| 16.5 | % |
|
|
|
|
EPS |
| $ | 0.84 |
|
| $ | 0.83 |
|
|
| 1.2 | % |
| $ | 3.61 |
|
| $ | 3.35 |
|
|
| 7.8 | % |
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.
CSG Systems International, Inc.
February 1, 2023
Page 3
Results of Operations
GAAP Results: Total revenue for the fourth quarter of 2022 was $289.9 million, a 5.4% increase when compared to revenue of $275.0 million for the fourth quarter of 2021. Total revenue for the full year 2022 was $1,089.8 million, a 4.1% increase when compared to revenue of $1,046.5 million for the full year 2021. The increases in revenue can be primarily attributed to the continued growth of CSG’s revenue management solutions, as the majority of the increases were attributed to organic growth for the full year, resulting mainly from increased payments volumes, conversions of customer accounts onto CSG solutions, and other ancillary services.
GAAP operating income for the fourth quarter of 2022 was $35.1 million, or 12.1% of total revenue, compared to $27.9 million, or 10.1% of total revenue, for the fourth quarter of 2021. GAAP operating income for the full year 2022 was $78.7 million, or 7.2% of total revenue, compared to $124.2 million, or 11.9% of total revenue, for the full year 2021. The decrease in full year operating income can be primarily attributed to the $41.4 million increase in restructuring and reorganization charges related mainly to an operating margin improvement initiative that began in the second quarter of 2022.
GAAP EPS for the fourth quarter of 2022 was $0.66, as compared to $0.54 for the fourth quarter of 2021. GAAP EPS for the full year 2022 was $1.41, compared to $2.26 for the full year 2021. The decrease in full year GAAP EPS is mainly due to the impact of the restructuring and reorganization charges, discussed above.
Non-GAAP Results: Non-GAAP operating income for the fourth quarter of 2022 was $45.2 million, or a non-GAAP adjusted operating margin of 16.8%, compared to $40.2 million, or a non-GAAP adjusted operating margin of 15.6% for the fourth quarter of 2021. Non-GAAP operating income for the full year 2022 was $168.8 million, or a non-GAAP adjusted operating margin of 16.6%, compared to $161.7 million, or a non-GAAP adjusted operating margin of 16.5% for the full year 2021. The increases in non-GAAP operating income and non-GAAP adjusted operating margin can be mainly attributed to the higher revenue along with the margin improvement initiatives, mentioned above.
Non-GAAP EPS for the fourth quarter of 2022 was $0.84 compared to $0.83 for the fourth quarter of 2021. Non-GAAP EPS for the full year 2022 was $3.61 compared to $3.35 for the full year 2021. The increase in full year non-GAAP EPS is mainly due to the higher operating income in 2022, discussed above, favorable foreign currency movements, and lower outstanding shares as a result of share repurchases.
Balance Sheet and Cash Flows
Cash, cash equivalents and short-term investments as of December 31, 2022 were $150.4 million compared to $147.3 million as of September 30, 2022 and $233.7 million as of December 31, 2021. CSG had net cash flows from operations for the fourth quarters ended December 31, 2022 and 2021 of $54.0 million and $51.9 million, respectively, and had non-GAAP free cash flow of $48.6 million and $47.9 million, respectively. For the year ended December 31, 2022 and 2021, CSG generated net cash flows from operations of $63.6 million and $140.2 million, respectively, and had non-GAAP free cash flow of $26.6 million and $113.7 million, respectively.
CSG Systems International, Inc.
February 1, 2023
Page 4
Summary of Financial Guidance
CSG’s financial guidance for the full year 2023 is as follows:
GAAP Measures: |
|
|
Revenue |
| $1,130 - $1,170 million |
Non-GAAP Measures: |
|
|
Adjusted Operating Margin Percentage |
| 16.5% - 17.0% |
EPS |
| $3.35 - $3.65 |
Adjusted EBITDA |
| $231 - $242 million |
Free Cash Flow |
| $80 - $120 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, February 1, 2023 at 5:00 p.m. ET, to discuss CSG’s fourth quarter and full year 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 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 more than 5k-strong experienced global CSG services team.
Want to learn more about how to be a change maker and industry shaper like our 1,000-plus clients? Visit csgi.com to learn more.
CSG Systems International, Inc.
February 1, 2023
Page 5
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:
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.
February 1, 2023
Page 6
CSG SYSTEMS INTERNATIONAL, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS-UNAUDITED
(in thousands)
|
| December 31, |
|
| December 31, |
| ||
|
| 2022 |
|
| 2021 |
| ||
ASSETS |
|
|
|
|
|
|
|
|
Current assets: |
|
|
|
|
|
|
|
|
Cash and cash equivalents |
| $ | 150,365 |
|
| $ | 205,635 |
|
Short-term investments |
|
| 71 |
|
|
| 28,037 |
|
Total cash, cash equivalents and short-term investments |
|
| 150,436 |
|
|
| 233,672 |
|
Settlement and merchant reserve assets |
|
| 238,653 |
|
|
| 186,267 |
|
Trade accounts receivable: |
|
|
|
|
|
|
|
|
Billed, net of allowance of $5,528 and $4,250 |
|
| 274,189 |
|
|
| 244,317 |
|
Unbilled |
|
| 52,830 |
|
|
| 35,802 |
|
Income taxes receivable |
|
| 1,270 |
|
|
| 6,414 |
|
Other current assets |
|
| 48,577 |
|
|
| 41,727 |
|
Total current assets |
|
| 765,955 |
|
|
| 748,199 |
|
Non-current assets: |
|
|
|
|
|
|
|
|
Property and equipment, net of depreciation of $105,466 and $111,244 |
|
| 71,787 |
|
|
| 73,580 |
|
Operating lease right-of-use assets |
|
| 49,687 |
|
|
| 86,034 |
|
Software, net of amortization of $150,337 and $152,283 |
|
| 22,774 |
|
|
| 29,757 |
|
Goodwill |
|
| 304,036 |
|
|
| 321,330 |
|
Acquired customer contracts, net of amortization of $120,080 and $114,166 |
|
| 45,417 |
|
|
| 57,207 |
|
Customer contract costs, net of amortization of $30,601 and $32,410 |
|
| 54,735 |
|
|
| 46,618 |
|
Deferred income taxes |
|
| 26,206 |
|
|
| 8,584 |
|
Other assets |
|
| 7,956 |
|
|
| 15,840 |
|
Total non-current assets |
|
| 582,598 |
|
|
| 638,950 |
|
Total assets |
| $ | 1,348,553 |
|
| $ | 1,387,149 |
|
LIABILITIES AND STOCKHOLDERS' EQUITY |
|
|
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
|
|
Current portion of long-term debt |
| $ | 37,500 |
|
| $ | 237,500 |
|
Operating lease liabilities |
|
| 21,012 |
|
|
| 23,270 |
|
Customer deposits |
|
| 40,472 |
|
|
| 43,546 |
|
Trade accounts payable |
|
| 47,720 |
|
|
| 35,397 |
|
Accrued employee compensation |
|
| 68,321 |
|
|
| 91,115 |
|
Settlement and merchant reserve liabilities |
|
| 237,810 |
|
|
| 185,276 |
|
Deferred revenue |
|
| 46,033 |
|
|
| 53,748 |
|
Income taxes payable |
|
| 5,455 |
|
|
| 398 |
|
Other current liabilities |
|
| 22,886 |
|
|
| 24,852 |
|
Total current liabilities |
|
| 527,209 |
|
|
| 695,102 |
|
Non-current liabilities: |
|
|
|
|
|
|
|
|
Long-term debt, net of unamortized discounts of $2,656 and $3,406 |
|
| 375,469 |
|
|
| 137,219 |
|
Operating lease liabilities |
|
| 53,207 |
|
|
| 70,068 |
|
Deferred revenue |
|
| 21,991 |
|
|
| 19,599 |
|
Income taxes payable |
|
| 3,410 |
|
|
| 4,058 |
|
Deferred income taxes |
|
| 117 |
|
|
| 7,752 |
|
Other non-current liabilities |
|
| 11,901 |
|
|
| 13,107 |
|
Total non-current liabilities |
|
| 466,095 |
|
|
| 251,803 |
|
Total liabilities |
|
| 993,304 |
|
|
| 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; 31,269 and 32,495 shares outstanding |
|
| 708 |
|
|
| 705 |
|
Additional paid-in capital |
|
| 495,189 |
|
|
| 488,303 |
|
Treasury stock, at cost; 38,210 and 36,713 shares |
|
| (1,018,034 | ) |
|
| (930,106 | ) |
Accumulated other comprehensive income (loss): |
|
|
|
|
|
|
|
|
Unrealized gain (loss) on short-term investments, net of tax |
|
| 1 |
|
|
| (6 | ) |
Cumulative foreign currency translation adjustments |
|
| (58,830 | ) |
|
| (38,347 | ) |
Accumulated earnings |
|
| 936,215 |
|
|
| 916,060 |
|
Total CSG stockholders' equity |
|
| 355,249 |
|
|
| 436,609 |
|
Noncontrolling interest |
|
| - |
|
|
| 3,635 |
|
Total stockholders' equity |
|
| 355,249 |
|
|
| 440,244 |
|
Total liabilities and stockholders' equity |
| $ | 1,348,553 |
|
| $ | 1,387,149 |
|
CSG Systems International, Inc.
February 1, 2023
Page 7
CSG SYSTEMS INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME-UNAUDITED
(in thousands, except per share amounts)
| Quarter Ended |
|
| Year Ended |
|
| ||||||||||
| December 31, 2022 |
|
| December 31, 2021 |
|
| December 31, 2022 |
|
| December 31, 2021 |
|
| ||||
Revenue | $ | 289,876 |
|
| $ | 275,025 |
|
| $ | 1,089,752 |
|
| $ | 1,046,487 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of revenue (exclusive of depreciation, shown separately below) |
| 150,154 |
|
|
| 142,026 |
|
|
| 565,168 |
|
|
| 543,211 |
|
|
Other operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development |
| 34,548 |
|
|
| 35,341 |
|
|
| 137,913 |
|
|
| 134,691 |
|
|
Selling, general and administrative |
| 64,185 |
|
|
| 61,706 |
|
|
| 238,018 |
|
|
| 214,694 |
|
|
Depreciation |
| 5,913 |
|
|
| 6,231 |
|
|
| 23,598 |
|
|
| 24,835 |
|
|
Restructuring and reorganization charges |
| 4 |
|
|
| 1,841 |
|
|
| 46,308 |
|
|
| 4,870 |
|
|
Total operating expenses |
| 254,804 |
|
|
| 247,145 |
|
|
| 1,011,005 |
|
|
| 922,301 |
|
|
Operating income |
| 35,072 |
|
|
| 27,880 |
|
|
| 78,747 |
|
|
| 124,186 |
|
|
Other income (expense): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense |
| (6,146 | ) |
|
| (3,708 | ) |
|
| (16,432 | ) |
|
| (14,569 | ) |
|
Amortization of original issue discount |
| - |
|
|
| (671 | ) |
|
| - |
|
|
| (3,021 | ) |
|
Interest and investment income, net |
| 340 |
|
|
| 79 |
|
|
| 877 |
|
|
| 365 |
|
|
Loss on derivative liability upon debt conversion |
| - |
|
|
| - |
|
|
| (7,456 | ) |
|
| - |
|
|
Other, net |
| (999 | ) |
|
| 515 |
|
|
| 5,045 |
|
|
| (6,015 | ) |
|
Total other |
| (6,805 | ) |
|
| (3,785 | ) |
|
| (17,966 | ) |
|
| (23,240 | ) |
|
Income before income taxes |
| 28,267 |
|
|
| 24,095 |
|
|
| 60,781 |
|
|
| 100,946 |
|
|
Income tax provision |
| (8,118 | ) |
|
| (6,846 | ) |
|
| (16,721 | ) |
|
| (28,615 | ) |
|
Net income | $ | 20,149 |
|
| $ | 17,249 |
|
| $ | 44,060 |
|
| $ | 72,331 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average shares outstanding: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
| 30,455 |
|
|
| 31,628 |
|
|
| 31,028 |
|
|
| 31,776 |
|
|
Diluted |
| 30,732 |
|
|
| 31,939 |
|
|
| 31,298 |
|
|
| 32,010 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per common share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic | $ | 0.66 |
|
| $ | 0.55 |
|
| $ | 1.42 |
|
| $ | 2.28 |
|
|
Diluted |
| 0.66 |
|
|
| 0.54 |
|
|
| 1.41 |
|
|
| 2.26 |
|
|
CSG Systems International, Inc.
February 1, 2023
Page 8
CSG SYSTEMS INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS-UNAUDITED
(in thousands)
| Year Ended |
|
| |||||
| December 31, 2022 |
|
| December 31, 2021 |
|
| ||
Cash flows from operating activities: |
|
|
|
|
|
|
|
|
Net income | $ | 44,060 |
|
| $ | 72,331 |
|
|
Adjustments to reconcile net income to net cash provided by operating activities- |
|
|
|
|
|
|
|
|
Depreciation |
| 27,967 |
|
|
| 24,835 |
|
|
Amortization |
| 48,984 |
|
|
| 47,966 |
|
|
Amortization of original issue discount |
| - |
|
|
| 3,021 |
|
|
Asset impairment |
| 31,761 |
|
|
| 1,270 |
|
|
Loss on short-term investments and other |
| 18 |
|
|
| (294 | ) |
|
Loss on derivative liability upon debt conversion |
| 7,456 |
|
|
| - |
|
|
Loss on extinguishment of debt |
| - |
|
|
| 132 |
|
|
Loss on acquisition of controlling interest |
| - |
|
|
| 6,180 |
|
|
Unrealized foreign currency transactions gains, net |
| (103 | ) |
|
| (424 | ) |
|
Deferred income taxes |
| (27,627 | ) |
|
| 2,388 |
|
|
Stock-based compensation |
| 27,243 |
|
|
| 21,400 |
|
|
Subtotal |
| 159,759 |
|
|
| 178,805 |
|
|
Changes in operating assets and liabilities, net of acquired amounts: |
|
|
|
|
|
|
|
|
Trade accounts receivable, net |
| (51,005 | ) |
|
| (10,278 | ) |
|
Other current and non-current assets and liabilities |
| (12,833 | ) |
|
| (1,527 | ) |
|
Income taxes payable/receivable |
| 9,336 |
|
|
| (10,174 | ) |
|
Trade accounts payable and accrued liabilities |
| (36,971 | ) |
|
| (15,607 | ) |
|
Deferred revenue |
| (4,689 | ) |
|
| (996 | ) |
|
Net cash provided by operating activities |
| 63,597 |
|
|
| 140,223 |
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities: |
|
|
|
|
|
|
|
|
Purchases of software, property and equipment |
| (36,991 | ) |
|
| (26,562 | ) |
|
Purchases of short-term investments |
| - |
|
|
| (66,970 | ) |
|
Proceeds from sale/maturity of short-term investments |
| 27,953 |
|
|
| 90,452 |
|
|
Acquisition of and investments in business, net of cash acquired |
| - |
|
|
| (63,626 | ) |
|
Net cash used in investing activities |
| (9,038 | ) |
|
| (66,706 | ) |
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities: |
|
|
|
|
|
|
|
|
Proceeds from issuance of common stock |
| 2,969 |
|
|
| 2,610 |
|
|
Payment of cash dividends |
| (33,475 | ) |
|
| (32,587 | ) |
|
Repurchase of common stock |
| (96,720 | ) |
|
| (42,253 | ) |
|
Deferred acquisition payments |
| (2,314 | ) |
|
| - |
|
|
Proceeds from long-term debt |
| 290,000 |
|
|
| 150,000 |
|
|
Payments on long-term debt |
| (264,801 | ) |
|
| (128,438 | ) |
|
Payments of deferred financing costs |
| - |
|
|
| (3,000 | ) |
|
Settlement and merchant reserve activity |
| 52,656 |
|
|
| 20,277 |
|
|
Net cash used in financing activities |
| (51,685 | ) |
|
| (33,391 | ) |
|
Effect of exchange rate fluctuations on cash, cash equivalents and restricted cash |
| (5,758 | ) |
|
| (2,954 | ) |
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash, cash equivalents and restricted cash |
| (2,884 | ) |
|
| 37,172 |
|
|
|
|
|
|
|
|
|
|
|
Cash, cash equivalents and restricted cash, beginning of period |
| 391,902 |
|
|
| 354,730 |
|
|
Cash, cash equivalents and restricted cash, end of period | $ | 389,018 |
|
| $ | 391,902 |
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosures of cash flow information: |
|
|
|
|
|
|
|
|
Cash paid during the period for- |
|
|
|
|
|
|
|
|
Interest | $ | 18,314 |
|
| $ | 12,882 |
|
|
Income taxes |
| 34,671 |
|
|
| 36,690 |
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of cash, cash equivalents and restricted cash: |
|
|
|
|
|
|
|
|
Cash and cash equivalents | $ | 150,365 |
|
| $ | 205,635 |
|
|
Settlement and merchant reserve assets |
| 238,653 |
|
|
| 186,267 |
|
|
Total cash, cash equivalents and restricted cash | $ | 389,018 |
|
| $ | 391,902 |
|
|
CSG Systems International, Inc.
February 1, 2023
Page 9
EXHIBIT 1
CSG SYSTEMS INTERNATIONAL, INC.
SUPPLEMENTAL REVENUE ANALYSIS
Revenue by Significant Customers: 10% or more of Revenue
|
| Quarter Ended |
|
| Quarter Ended |
|
| Quarter Ended |
| |||||||||||||||
|
| December 31, 2022 |
|
| September 30, 2022 |
|
| December 31, 2021 |
| |||||||||||||||
|
| Amount |
|
| % of Revenue |
|
| Amount |
|
| % of Revenue |
|
| Amount |
|
| % of Revenue |
| ||||||
Charter |
| $ | 58,006 |
|
|
| 20 | % |
| $ | 57,974 |
|
|
| 21 | % |
| $ | 57,332 |
|
|
| 21 | % |
Comcast |
|
| 55,383 |
|
|
| 19 | % |
|
| 53,533 |
|
|
| 20 | % |
|
| 54,861 |
|
|
| 20 | % |
|
| Year Ended |
|
| Year Ended |
|
| ||||||||||
|
| December 31, 2022 |
|
| December 31, 2021 |
|
| ||||||||||
|
| Amount |
|
| % of Revenue |
|
| Amount |
|
| % of Revenue |
|
| ||||
Charter |
| $ | 221,222 |
|
|
| 20 | % |
| $ | 221,148 |
|
|
| 21 | % |
|
Comcast |
|
| 214,359 |
|
|
| 20 | % |
|
| 215,944 |
|
|
| 21 | % |
|
Revenue by Vertical
|
| Quarter Ended |
|
| Quarter Ended |
|
| Quarter Ended |
| |||
|
| December 31, |
|
| September 30, |
|
| December 31, |
| |||
|
| 2022 |
|
| 2022 |
|
| 2021 |
| |||
Broadband/Cable/Satellite |
|
| 53 | % |
|
| 55 | % |
|
| 55 | % |
Telecommunications |
|
| 20 | % |
|
| 20 | % |
|
| 20 | % |
All other |
|
| 27 | % |
|
| 25 | % |
|
| 25 | % |
Total revenue |
|
| 100 | % |
|
| 100 | % |
|
| 100 | % |
|
| Year Ended |
|
| Year Ended |
| ||
|
| December 31, |
|
| December 31, |
| ||
|
| 2022 |
|
| 2021 |
| ||
Broadband/Cable/Satellite |
|
| 54 | % |
|
| 57 | % |
Telecommunications |
|
| 20 | % |
|
| 19 | % |
All other |
|
| 26 | % |
|
| 24 | % |
Total revenue |
|
| 100 | % |
|
| 100 | % |
Revenue by Geography
|
| Quarter Ended |
|
| Quarter Ended |
|
| Quarter Ended |
| |||
|
| December 31, |
|
| September 30, |
|
| December 31, |
| |||
|
| 2022 |
|
| 2022 |
|
| 2021 |
| |||
Americas |
|
| 86 | % |
|
| 86 | % |
|
| 83 | % |
Europe, Middle East and Africa |
|
| 9 | % |
|
| 10 | % |
|
| 13 | % |
Asia Pacific |
|
| 5 | % |
|
| 4 | % |
|
| 4 | % |
Total revenue |
|
| 100 | % |
|
| 100 | % |
|
| 100 | % |
|
| Year Ended |
|
| Year Ended |
| ||
|
| December 31, |
|
| December 31, |
| ||
|
| 2022 |
|
| 2021 |
| ||
Americas |
|
| 85 | % |
|
| 85 | % |
Europe, Middle East and Africa |
|
| 11 | % |
|
| 11 | % |
Asia Pacific |
|
| 4 | % |
|
| 4 | % |
Total revenue |
|
| 100 | % |
|
| 100 | % |
CSG Systems International, Inc.
February 1, 2023
Page 10
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:
These non-GAAP financial measures are provided with the intent of providing investors with the following information:
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:
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 non-GAAP financial measure to the most directly comparable GAAP measure.
CSG Systems International, Inc.
February 1, 2023
Page 11
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 |
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:
CSG Systems International, Inc.
February 1, 2023
Page 12
CSG Systems International, Inc.
February 1, 2023
Page 13
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.
CSG Systems International, Inc.
February 1, 2023
Page 14
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’ non-GAAP adjusted operating margin percentage, for the indicated periods are as follows (in thousands, except percentages):
|
| Quarter Ended December 31, |
|
| Year Ended December 31, |
| ||||||||||
|
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
| ||||
Non-GAAP Operating Income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP operating income |
| $ | 35,072 |
|
| $ | 27,880 |
|
| $ | 78,747 |
|
| $ | 124,186 |
|
Restructuring and reorganization charges (1) |
|
| 4 |
|
|
| 1,841 |
|
|
| 46,308 |
|
|
| 4,870 |
|
Executive transition costs |
|
| - |
|
|
| 443 |
|
|
| 1,302 |
|
|
| 503 |
|
Acquisition-related expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of acquired intangible assets |
|
| 3,338 |
|
|
| 3,573 |
|
|
| 14,355 |
|
|
| 11,645 |
|
Transaction-related costs |
|
| (296 | ) |
|
| 313 |
|
|
| 173 |
|
|
| (1,071 | ) |
Stock-based compensation (1) |
|
| 7,039 |
|
|
| 6,102 |
|
|
| 27,945 |
|
|
| 21,580 |
|
Non-GAAP operating income |
| $ | 45,157 |
|
| $ | 40,152 |
|
| $ | 168,830 |
|
| $ | 161,713 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP Adjusted Operating Margin Percentage |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue |
| $ | 289,876 |
|
| $ | 275,025 |
|
| $ | 1,089,752 |
|
| $ | 1,046,487 |
|
Less: Transaction fees (2) |
|
| (20,751 | ) |
|
| (17,377 | ) |
|
| (75,679 | ) |
|
| (66,722 | ) |
Revenue less transaction fees |
| $ | 269,125 |
|
| $ | 257,648 |
|
| $ | 1,014,073 |
|
| $ | 979,765 |
|
Non-GAAP adjusted operating margin percentage |
|
| 16.8 | % |
|
| 15.6 | % |
|
| 16.6 | % |
|
| 16.5 | % |
CSG Systems International, Inc.
February 1, 2023
Page 15
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 |
| ||||||||||
|
| December 31, 2022 |
|
| December 31, 2021 |
| ||||||||||
|
| Amounts |
|
| EPS (5) |
|
| Amounts |
|
| EPS (5) |
| ||||
GAAP net income |
| $ | 20,149 |
|
| $ | 0.66 |
|
| $ | 17,249 |
|
| $ | 0.54 |
|
GAAP income tax provision (4) |
|
| 8,118 |
|
|
|
|
|
|
| 6,846 |
|
|
|
|
|
GAAP income before income taxes |
|
| 28,267 |
|
|
|
|
|
|
| 24,095 |
|
|
|
|
|
Restructuring and reorganization charges (1) |
|
| 4 |
|
|
|
|
|
|
| 1,841 |
|
|
|
|
|
Executive transition costs |
|
| - |
|
|
|
|
|
|
| 443 |
|
|
|
|
|
Acquisition-related costs: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of acquired intangible assets |
|
| 3,338 |
|
|
|
|
|
|
| 3,573 |
|
|
|
|
|
Transaction-related costs |
|
| (296 | ) |
|
|
|
|
|
| 313 |
|
|
|
|
|
Stock-based compensation (1) |
|
| 7,039 |
|
|
|
|
|
|
| 6,102 |
|
|
|
|
|
Amortization of OID |
|
| - |
|
|
|
|
|
|
| 671 |
|
|
|
|
|
Non-GAAP income before income taxes |
|
| 38,352 |
|
|
|
|
|
|
| 37,038 |
|
|
|
|
|
Non-GAAP income tax provision (4) |
|
| (12,435 | ) |
|
|
|
|
|
| (10,650 | ) |
|
|
|
|
Non-GAAP net income |
| $ | 25,917 |
|
| $ | 0.84 |
|
| $ | 26,388 |
|
| $ | 0.83 |
|
|
| Year Ended |
|
| Year Ended |
| ||||||||||
|
| December 31, 2022 |
|
| December 31, 2021 |
| ||||||||||
|
| Amounts |
|
| EPS (5) |
|
| Amounts |
|
| EPS (5) |
| ||||
GAAP net income |
| $ | 44,060 |
|
| $ | 1.41 |
|
| $ | 72,331 |
|
| $ | 2.26 |
|
GAAP income tax provision (4) |
|
| 16,721 |
|
|
|
|
|
|
| 28,615 |
|
|
|
|
|
GAAP income before income taxes |
|
| 60,781 |
|
|
|
|
|
|
| 100,946 |
|
|
|
|
|
Restructuring and reorganization charges (1) |
|
| 46,308 |
|
|
|
|
|
|
| 4,870 |
|
|
|
|
|
Executive transition costs |
|
| 1,302 |
|
|
|
|
|
|
| 503 |
|
|
|
|
|
Acquisition-related expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of acquired intangible assets |
|
| 14,355 |
|
|
|
|
|
|
| 11,645 |
|
|
|
|
|
Transaction-related costs |
|
| 173 |
|
|
|
|
|
|
| (1,071 | ) |
|
|
|
|
Stock-based compensation (1) |
|
| 27,945 |
|
|
|
|
|
|
| 21,580 |
|
|
|
|
|
Loss on extinguishment of debt |
|
| 7,456 |
|
|
|
|
|
|
| - |
|
|
|
|
|
Amortization of OID |
|
| - |
|
|
|
|
|
|
| 3,021 |
|
|
|
|
|
Loss on acquisition of controlling interest (3) |
|
| - |
|
|
|
|
|
|
| 6,180 |
|
|
|
|
|
Non-GAAP income before income taxes |
|
| 158,320 |
|
|
|
|
|
|
| 147,674 |
|
|
|
|
|
Non-GAAP income tax provision (4) |
|
| (45,427 | ) |
|
|
|
|
|
| (40,522 | ) |
|
|
|
|
Non-GAAP net income |
| $ | 112,893 |
|
| $ | 3.61 |
|
| $ | 107,152 |
|
| $ | 3.35 |
|
CSG Systems International, Inc.
February 1, 2023
Page 16
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 |
|
| Year Ended |
| ||||||||||
|
| December 31, |
|
| December 31, |
| ||||||||||
|
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
| ||||
GAAP net income |
| $ | 20,149 |
|
| $ | 17,249 |
|
| $ | 44,060 |
|
| $ | 72,331 |
|
GAAP income tax provision |
|
| 8,118 |
|
|
| 6,846 |
|
|
| 16,721 |
|
|
| 28,615 |
|
Interest expense (6) |
|
| 6,146 |
|
|
| 3,708 |
|
|
| 16,432 |
|
|
| 14,569 |
|
Amortization of OID |
|
| - |
|
|
| 671 |
|
|
| - |
|
|
| 3,021 |
|
Loss on derivative liability upon debt conversion |
|
| - |
|
|
| - |
|
|
| 7,456 |
|
|
| - |
|
Interest and investment income and other, net (8) |
|
| 659 |
|
|
| (594 | ) |
|
| (5,922 | ) |
|
| 5,650 |
|
GAAP operating income |
|
| 35,072 |
|
|
| 27,880 |
|
|
| 78,747 |
|
|
| 124,186 |
|
Restructuring and reorganization charges (1) |
|
| 4 |
|
|
| 1,841 |
|
|
| 46,308 |
|
|
| 4,870 |
|
Executive transition costs |
|
| - |
|
|
| 443 |
|
|
| 1,302 |
|
|
| 503 |
|
Acquisition-related expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of acquired intangible assets (7) |
|
| 3,338 |
|
|
| 3,573 |
|
|
| 14,355 |
|
|
| 11,645 |
|
Transaction-related costs |
|
| (296 | ) |
|
| 313 |
|
|
| 173 |
|
|
| (1,071 | ) |
Stock-based compensation (1) |
|
| 7,039 |
|
|
| 6,102 |
|
|
| 27,945 |
|
|
| 21,580 |
|
Amortization of other intangible assets (7) |
|
| 3,399 |
|
|
| 3,383 |
|
|
| 14,140 |
|
|
| 13,316 |
|
Amortization of customer contract costs (7) |
|
| 5,588 |
|
|
| 6,247 |
|
|
| 19,738 |
|
|
| 21,218 |
|
Depreciation (1) |
|
| 5,913 |
|
|
| 6,231 |
|
|
| 23,598 |
|
|
| 24,835 |
|
Non-GAAP adjusted EBITDA |
| $ | 60,057 |
|
| $ | 56,013 |
|
| $ | 226,306 |
|
| $ | 221,082 |
|
Non-GAAP adjusted EBITDA as a percentage of revenue less transaction fees (2) |
|
| 22.3 | % |
|
| 21.7 | % |
|
| 22.3 | % |
|
| 22.6 | % |
|
| Quarter Ended |
|
| Year Ended |
| ||||||||||
|
| December 31, |
|
| December 31, |
| ||||||||||
|
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
| ||||
Amortization of acquired intangible assets |
| $ | 3,338 |
|
| $ | 3,573 |
|
| $ | 14,355 |
|
| $ | 11,645 |
|
Amortization of other intangible assets |
|
| 3,399 |
|
|
| 3,383 |
|
|
| 14,140 |
|
|
| 13,316 |
|
Amortization of customer contract costs |
|
| 5,588 |
|
|
| 6,247 |
|
|
| 19,738 |
|
|
| 21,218 |
|
Amortization of deferred financing costs |
|
| 189 |
|
|
| 449 |
|
|
| 751 |
|
|
| 1,787 |
|
Total amortization |
| $ | 12,514 |
|
| $ | 13,652 |
|
| $ | 48,984 |
|
| $ | 47,966 |
|
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 |
|
| Year Ended |
| ||||||||||
|
| December 31, |
|
| December 31, |
| ||||||||||
|
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
| ||||
Cash flows from operating activities |
| $ | 54,024 |
|
| $ | 51,914 |
|
| $ | 63,597 |
|
| $ | 140,223 |
|
Purchases of software, property and equipment |
|
| (5,427 | ) |
|
| (4,031 | ) |
|
| (36,991 | ) |
|
| (26,562 | ) |
Non-GAAP free cash flow |
| $ | 48,597 |
|
| $ | 47,883 |
|
| $ | 26,606 |
|
| $ | 113,661 |
|
CSG Systems International, Inc.
February 1, 2023
Page 17
Non-GAAP Financial Measures – 2023 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 2023 full year financial guidance, is as follows (in thousands, except percentages):
|
| 2023 Guidance Range |
| |||||
|
| Low Range |
|
| High Range |
| ||
Non- GAAP Operating Income |
|
|
|
|
|
|
|
|
GAAP operating income |
| $ | 126,500 |
|
| $ | 137,900 |
|
Acquisition-related expenses: |
|
|
|
|
|
|
|
|
Amortization of acquired intangible assets |
|
| 12,200 |
|
|
| 12,200 |
|
Stock-based compensation |
|
| 34,800 |
|
|
| 34,800 |
|
Non-GAAP operating income |
| $ | 173,500 |
|
| $ | 184,900 |
|
|
|
|
|
|
|
|
|
|
Non-GAAP Operating Margin Percentage |
|
|
|
|
|
|
|
|
Revenue |
| $ | 1,130,000 |
|
| $ | 1,170,000 |
|
Less: Transaction fees (2) |
|
| (78,000 | ) |
|
| (82,000 | ) |
Revenue less transaction fees |
| $ | 1,052,000 |
|
| $ | 1,088,000 |
|
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 2023 full year financial guidance is as follows (in thousands, except per share amounts):
|
| 2023 Guidance Range |
| |||||||||||||||
|
| Low Range |
|
|
|
| High Range |
| ||||||||||
|
| Amounts |
|
| EPS (10) |
|
|
|
| Amounts |
|
| EPS (10) |
| ||||
GAAP net income |
| $ | 70,800 |
|
| $ | 2.28 |
|
|
|
| $ | 79,000 |
|
| $ | 2.55 |
|
GAAP income tax provision (9) |
|
| 28,200 |
|
|
|
|
|
|
|
|
| 31,400 |
|
|
|
|
|
GAAP income before income taxes |
|
| 99,000 |
|
|
|
|
|
|
|
|
| 110,400 |
|
|
|
|
|
Acquisition-related expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of acquired intangible assets |
|
| 12,200 |
|
|
|
|
|
|
|
|
| 12,200 |
|
|
|
|
|
Stock-based compensation |
|
| 34,800 |
|
|
|
|
|
|
|
|
| 34,800 |
|
|
|
|
|
Non-GAAP income before income taxes |
|
| 146,000 |
|
|
|
|
|
|
|
|
| 157,400 |
|
|
|
|
|
Non-GAAP income tax provision (9) |
|
| (42,200 | ) |
|
|
|
|
|
|
|
| (44,100 | ) |
|
|
|
|
Non-GAAP net income |
| $ | 103,800 |
|
| $ | 3.35 |
|
|
|
| $ | 113,300 |
|
| $ | 3.65 |
|
CSG Systems International, Inc.
February 1, 2023
Page 18
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 2023 full year financial guidance (in thousands, except percentages):
|
| 2023 Guidance Range |
| |||||
|
| Low Range |
|
| High Range |
| ||
GAAP net income |
| $ | 70,800 |
|
| $ | 79,000 |
|
GAAP income tax provision (9) |
|
| 28,200 |
|
|
| 31,400 |
|
Interest expense |
|
| 28,800 |
|
|
| 28,800 |
|
Interest and investment income and other, net |
|
| (1,300 | ) |
|
| (1,300 | ) |
GAAP operating income |
|
| 126,500 |
|
|
| 137,900 |
|
Acquisition-related expenses: |
|
|
|
|
|
|
|
|
Amortization of acquired intangible assets |
|
| 12,200 |
|
|
| 12,200 |
|
Stock-based compensation |
|
| 34,800 |
|
|
| 34,800 |
|
Amortization of other intangible assets |
|
| 9,600 |
|
|
| 9,600 |
|
Amortization of client contract costs |
|
| 19,100 |
|
|
| 19,100 |
|
Depreciation |
|
| 28,600 |
|
|
| 28,600 |
|
Non-GAAP adjusted EBITDA |
| $ | 230,800 |
|
| $ | 242,200 |
|
Non-GAAP adjusted EBITDA as a percentage of revenue less transaction fees (2) |
|
| 21.9 | % |
|
| 22.3 | % |
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):
|
| 2023 Guidance Range |
| |||||
|
| Low Range |
|
| High Range |
| ||
Cash flows from operating activities |
| $ | 102,000 |
|
| $ | 148,000 |
|
Purchases of software, property and equipment |
|
| (22,000 | ) |
|
| (28,000 | ) |
Non-GAAP free cash flow |
| $ | 80,000 |
|
| $ | 120,000 |
|