CSG (NASDAQ: CSGS), the trusted partner to simplify the
complexity of business transformation in the digital age, today
reported results for the quarter ended March 31, 2020.
Financial Results:
- First quarter 2020 financial results:
- Total revenue was $245.6 million and total non-GAAP
adjusted revenue was $227.3 million.
- GAAP operating income was $33.2 million, or 13.5%
of total revenue, and non-GAAP operating income was $42.2
million, or 18.5% of non-GAAP adjusted revenue.
- GAAP earnings per diluted share (EPS) was $0.66 and
non-GAAP EPS was $0.87.
- Cash flows used in operations were ($7.2) million, with
non-GAAP free cash flow deficit of ($12.0) million.
Shareholder Returns:
- CSG declared its quarterly cash dividend of $0.235 per
share of common stock, or a total of approximately $8
million, to shareholders.
- During the first quarter of 2020, CSG repurchased under its
stock repurchase program, approximately 142,000 shares of
its common stock for approximately $6 million.
“Our first quarter results were solid, illustrating that, while
CSG is not immune from the impact of this pandemic, we are in a
good position to weather this storm,” said Bret Griess, president
and chief executive officer for CSG International. “We provide
business-critical solutions that help service providers acquire,
monetize, engage and retain their customers. We do business with
some of the largest and most well-established brands. Our solutions
are well-entrenched in these companies’ operations. We have
long-term recurring contracts that provide us with over 90%
visibility entering every year.
“And, throughout our 35-plus year history, we’ve demonstrated
that our business model is resilient. We have a healthy balance
sheet with low debt levels and access to more funding if necessary,
providing us with strength and staying power during challenging
times and lots of options during normal times.”
Financial
Overview (unaudited)
(in thousands, except per share amounts
and percentages):
Quarter Ended March
31,
Percent
2020
2019
Changed
GAAP Results:
Revenue
$
245,617
$
244,793
0
%
Operating Income
33,159
32,093
3
%
Operating Margin Percentage
13.5
%
13.1
%
EPS
$
0.66
$
0.59
12
%
Non-GAAP Results:
Adjusted Revenue
$
227,293
$
227,661
0
%
Operating Income
42,154
41,313
2
%
Adjusted Operating Margin Percentage
18.5
%
18.1
%
EPS
$
0.87
$
0.82
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
first quarter of 2020 was $245.6 million, a slight increase when
compared to revenue of $244.8 million for the first quarter of
2019, and a 4% decrease when compared to $254.7 million for the
fourth quarter of 2019. The sequential quarterly decrease can be
mainly attributed to the higher level of revenue CSG typically
experiences in the fourth quarter and the pricing adjustments
provided to Comcast in conjunction with the five-year extension
signed in December 2019 that became effective January 1, 2020.
GAAP operating income for the first quarter of 2020 was $33.2
million, or 13.5% of total revenue, compared to $32.1 million, or
13.1% of total revenue, for the first quarter of 2019, and $30.3
million, or 11.9% of total revenue, for the fourth quarter of 2019.
The sequential quarterly increase in operating income can be mainly
attributed to lower employee-related compensation costs in the
first quarter of 2020.
GAAP EPS for the first quarter of 2020 was $0.66 as compared to
$0.59 for the first quarter of 2019, and $0.70 for the fourth
quarter of 2019. The year-over-year quarterly increase in GAAP EPS
is primarily due to lower non-operating expense for the first
quarter of 2020. In addition, GAAP EPS for the fourth quarter of
2019 was positively impacted by a 7% effective income tax rate for
the quarter resulting primarily from an approximate $4 million net
income tax benefit related to Comcast’s exercise of 0.4 million
vested common stock warrants in December 2019.
Non-GAAP Results: Non-GAAP adjusted
revenue for the first quarter of 2020 was $227.3 million,
relatively consistent when compared to $227.7 million for the first
quarter of 2019, and a 4% decrease when compared to $236.9 million
for the fourth quarter of 2019.
Non-GAAP operating income for the first quarter of 2020 was
$42.2 million, or 18.5% of total non-GAAP adjusted revenue,
compared to $41.3 million, or 18.1% of total non-GAAP adjusted
revenue for the first quarter of 2019, and $41.5 million, or 17.5%
of total non-GAAP adjusted revenue for the fourth quarter of
2019.
Non-GAAP EPS for the first quarter of 2020 was $0.87, compared
to $0.82 for the first quarter of 2019, and $0.98 for the fourth
quarter of 2019.
The changes in non-GAAP adjusted revenue, non-GAAP operating
income, and non-GAAP EPS between quarters are primarily due to the
factors discussed above.
Balance Sheet and Cash
Flows
Cash, cash equivalents and short-term investments as of March
31, 2020 were $131.3 million compared to $182.7 million as of
December 31, 2019. CSG had net cash flows from operations for the
first quarters ended March 31, 2020 and 2019 of ($7.2) million and
$12.8 million, respectively, and had non-GAAP free cash flow of
($12.0) million and $4.5 million, respectively. Cash flows for the
first quarter of 2020 were negatively impacted by the timing of two
key client payments, totaling approximately $33 million, that were
delayed and received shortly after quarter-end, and the payment of
2019 year-end accrued employee incentive compensation.
Summary of 2020
Financial Guidance
As a result of CSG’s current expectations
related to the impact of the COVID-19 pandemic on its business, CSG
is updating its financial guidance for the full year 2020, as
follows:
As of
May 6, 2020
Previous
GAAP Measures:
Revenue
$960 - $1,000 million
$990 - $1,030 million
Operating Margin Percentage
11.4% - 11.9%
11.5% - 12.5%
EPS
$2.04 - $2.27
$2.13 - $2.46
Cash Flows from Operating Activities
$110 - $135 million
$130 - $155 million
Non-GAAP Measures:
Adjusted Revenue
$891 - $924 million
$917 - $950 million
Adjusted Operating Margin Percentage
16.0% - 16.5%
16.0% - 17.0%
EPS
$2.87 - $3.10
$2.96 - $3.29
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 6, 2020 at
5:00 p.m. EDT, to discuss CSG’s first quarter results for 2020. 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,
dial 1-888-204-4368 and ask the operator for the CSG conference
call and David Banks, chairperson.
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
For more than 35 years, CSG has simplified the complexity of
business, delivering innovative customer engagement solutions that
help companies acquire, monetize, engage and retain customers.
Operating across more than 120 countries worldwide, CSG manages
billions of critical customer interactions annually, and its
award-winning suite of software and services allow companies across
dozens of industries to tackle their biggest business challenges
and thrive in an ever-changing marketplace. CSG is the trusted
partner for driving digital innovation for hundreds of leading
global brands, including AT&T, Charter Communications, Comcast,
DISH, Eastlink, Formula One, Maximus, MTN and Telstra. To learn
more, visit our website at csgi.com and connect with us on
LinkedIn, Twitter and Facebook.
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’s business may be disrupted and its results of operations
and cash flows adversely affected by the COVID-19 pandemic;
- CSG derives approximately forty percent of its revenue from its
two largest clients;
- 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 maintain a reliable, secure computing
environment;
- 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
- Fluctuations in credit market conditions, general global
economic and political conditions, and foreign currency exchange
rates.
This list is not exhaustive, and readers are encouraged to
review the additional risks and important factors described in
CSG’s reports on Forms 10-K and 10-Q and other filings made with
the SEC.
CSG SYSTEMS INTERNATIONAL,
INC.
CONDENSED CONSOLIDATED BALANCE
SHEETS-UNAUDITED
(in thousands, except per
share amounts)
March 31,
December 31,
2020
2019
ASSETS
Current assets:
Cash and cash equivalents
$
107,744
$
156,548
Short-term investments
23,529
26,109
Total cash, cash equivalents and
short-term investments
131,273
182,657
Settlement assets
122,624
169,327
Trade accounts receivable:
Billed, net of allowance of $3,888 and
$3,735
260,713
244,058
Unbilled
35,557
33,450
Income taxes receivable
5,435
4,297
Other current assets
42,702
35,293
Total current assets
598,304
669,082
Non-current assets:
Property and equipment, net of
depreciation of $97,700 and $98,029
80,754
84,429
Operating lease right-of-use assets
107,009
94,847
Software, net of amortization of $128,662
and $125,437
30,645
32,526
Goodwill
262,833
259,164
Acquired client contracts, net of
amortization of $93,866 and $93,767
55,329
55,105
Client contract costs, net of amortization
of $34,644 and $31,526
51,967
50,746
Deferred income taxes
8,653
9,392
Other assets
28,963
27,739
Total non-current assets
626,153
613,948
Total assets
$
1,224,457
$
1,283,030
LIABILITIES AND STOCKHOLDERS'
EQUITY
Current liabilities:
Current portion of long-term debt
$
11,250
$
10,313
Operating lease liabilities
22,085
22,442
Client deposits
36,717
38,687
Trade accounts payable
37,960
32,704
Accrued employee compensation
46,448
77,527
Settlement liabilities
121,416
168,342
Deferred revenue
50,320
45,094
Income taxes payable
1,155
2,806
Other current liabilities
17,452
20,778
Total current liabilities
344,803
418,693
Non-current liabilities:
Long-term debt, net of unamortized
discounts of $8,897 and $10,053
344,853
346,509
Operating lease liabilities
91,620
78,936
Deferred revenue
18,575
18,552
Income taxes payable
2,651
2,543
Deferred income taxes
15,786
6,376
Other non-current liabilities
19,338
14,759
Total non-current liabilities
492,823
467,675
Total liabilities
837,626
886,368
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; 33,075 and 32,891 shares outstanding
699
696
Additional paid-in capital
452,524
454,663
Treasury stock, at cost; 35,498 and 35,356
shares
(874,225
)
(867,817
)
Accumulated other comprehensive income
(loss):
Unrealized gain (loss) on short-term
investments, net of tax
(8
)
16
Cumulative foreign currency translation
adjustments
(54,603
)
(39,519
)
Accumulated earnings
862,444
848,623
Total stockholders' equity
386,831
396,662
Total liabilities and stockholders'
equity
$
1,224,457
$
1,283,030
CSG SYSTEMS INTERNATIONAL,
INC.
CONDENSED CONSOLIDATED
STATEMENTS OF INCOME-UNAUDITED
(in thousands, except per
share amounts)
Quarter Ended
March 31,
2020
March 31,
2019
Revenue
$
245,617
$
244,793
Cost of revenue (exclusive of
depreciation, shown separately below)
131,206
128,963
Other operating expenses:
Research and development
30,337
32,591
Selling, general and administrative
44,384
45,918
Depreciation
5,565
5,113
Restructuring and reorganization
charges
966
115
Total operating expenses
212,458
212,700
Operating income
33,159
32,093
Other income (expense):
Interest expense
(4,213
)
(4,560
)
Amortization of original issue
discount
(730
)
(690
)
Interest and investment income, net
529
519
Other, net
(69
)
(1,511
)
Total other
(4,483
)
(6,242
)
Income before income taxes
28,676
25,851
Income tax provision
(7,162
)
(6,600
)
Net income
$
21,514
$
19,251
Weighted-average shares outstanding:
Basic
31,994
32,128
Diluted
32,358
32,438
Earnings per common share:
Basic
$
0.67
$
0.60
Diluted
0.66
0.59
CSG SYSTEMS INTERNATIONAL,
INC.
CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS-UNAUDITED
(in thousands)
Quarter Ended
March 31,
2020
March 31,
2019
Cash flows from operating activities:
Net income
$
21,514
$
19,251
Adjustments to reconcile net income to net
cash provided by (used in) operating activities-
Depreciation
5,565
5,113
Amortization
10,788
11,949
Amortization of original issue
discount
730
690
Asset impairment
259
69
Gain on short-term investments and
other
(85
)
(157
)
Deferred income taxes
9,310
1,395
Stock-based compensation
4,857
3,693
Subtotal
52,938
42,003
Changes in operating assets and
liabilities, net of acquired amounts:
Trade accounts receivable, net
(23,304
)
(12,018
)
Other current and non-current assets and
liabilities
(8,452
)
(1,575
)
Income taxes payable/receivable
(3,092
)
3,886
Trade accounts payable and accrued
liabilities
(32,455
)
(25,594
)
Deferred revenue
7,152
6,124
Net cash provided by (used in)
operating activities
(7,213
)
12,826
Cash flows from investing activities:
Purchases of software, property and
equipment
(4,822
)
(8,286
)
Purchases of short-term investments
(16,037
)
(14,168
)
Proceeds from sale/maturity of short-term
investments
18,670
19,619
Acquisition of and investments in
business, net of cash acquired
(9,991
)
(4,000
)
Net cash used in investing
activities
(12,180
)
(6,835
)
Cash flows from financing activities:
Proceeds from issuance of common stock
564
512
Payment of cash dividends
(8,277
)
(7,641
)
Repurchase of common stock
(13,876
)
(13,568
)
Payments on long-term debt
(1,875
)
(1,875
)
Net cash used in financing activities
(23,464
)
(22,572
)
Effect of exchange rate fluctuations on
cash
(5,947
)
876
Net decrease in cash and cash
equivalents
(48,804
)
(15,705
)
Cash and cash equivalents, beginning of
period
156,548
139,277
Cash and cash equivalents, end of
period
$
107,744
$
123,572
Supplemental disclosures of cash flow
information:
Cash paid during the period for-
Interest
$
6,194
$
6,506
Income taxes
857
1,374
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,
2020
December 31,
2019
March 31,
2019
Amount
% of Revenue
Amount
% of Revenue
Amount
% of Revenue
Comcast
$
52,679
21
%
$
60,049
24
%
$
55,027
22
%
Charter
50,712
21
%
50,617
20
%
46,347
19
%
Revenue by
Vertical
Quarter Ended
Quarter Ended
Quarter Ended
March 31,
December 31,
March 31,
2020
2019
2019
Broadband/Cable/Satellite
58
%
59
%
58
%
Telecommunications
17
%
18
%
19
%
All other
25
%
23
%
23
%
Total revenue
100
%
100
%
100
%
Revenue by
Geography
Quarter Ended
Quarter Ended
Quarter Ended
March 31,
December 31,
March 31,
2020
2019
2019
Americas
88
%
88
%
86
%
Europe, Middle East and Africa
9
%
8
%
10
%
Asia Pacific
3
%
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
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 extinguishment of debt
—
—
—
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 clients 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 client 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 core 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.
- 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 core
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 of debt are a
result of the refinancing of CSG’s credit agreement and/or
repurchase of CSG’s convertible notes. These activities are not
considered reflective of CSG’s recurring core business operating
results. Any resulting gain or loss is generally non-cash income or
expense, and therefore, the exclusion of this item allows investors
to further evaluate the cash impact of these repurchases 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,
and gains and losses related to the extinguishment of debt, 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,
2020
2019
GAAP revenue
$
245,617
$
244,793
Less: Transaction fees
(18,324
)
(17,132
)
Non-GAAP adjusted revenue
$
227,293
$
227,661
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,
2020
2019
GAAP operating income
$
33,159
$
32,093
Restructuring and reorganization charges
(1)
966
115
Acquisition-related expenses:
Amortization of acquired intangible
assets
3,051
3,181
Earn-out compensation
-
1,260
Transaction-related costs
53
-
Stock-based compensation (1)
4,925
4,664
Non-GAAP operating income
$
42,154
$
41,313
Non-GAAP adjusted revenue
$
227,293
$
227,661
Non-GAAP adjusted operating margin
percentage
18.5
%
18.1
%
(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, 2020
March 31, 2019
Amounts
EPS (3)
Amounts
EPS (3)
GAAP net income
$
21,514
$
0.66
$
19,251
$
0.59
GAAP income tax provision (2)
7,162
6,600
GAAP income before income taxes
28,676
25,851
Restructuring and reorganization charges
(1)
966
115
Acquisition-related costs:
Amortization of acquired intangible
assets
3,051
3,181
Earn-out compensation
-
1,260
Transaction-related costs
53
-
Stock-based compensation (1)
4,925
4,664
Amortization of OID
730
690
Non-GAAP income before income taxes
38,401
35,761
Non-GAAP income tax provision (2)
(10,176
)
(9,298
)
Non-GAAP net income
$
28,225
$
0.87
$
26,463
$
0.82
(2) For the quarter ended March 31, 2020
and 2019 the GAAP effective income tax rates were approximately 25%
and 26%, respectively, and the non-GAAP effective income tax rates
were approximately 27% and 26%, respectively.
(3) The outstanding diluted shares for the
quarter ended March 31, 2020 and 2019 were 32.3 million and 32.4
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,
2020
2019
GAAP net income
$
21,514
$
19,251
GAAP income tax provision (2)
7,162
6,600
Interest expense (4)
4,213
4,560
Amortization of OID
730
690
Loss on extinguishment of debt
-
-
Interest and investment income and other,
net
(460
)
992
GAAP operating income
33,159
32,093
Restructuring and reorganization charges
(1)
966
115
Acquisition-related expenses:
3,051
3,181
-
1,260
53
-
Stock-based compensation (1)
4,925
4,664
Amortization of other intangible assets
(5)
3,285
2,374
Amortization of client contract costs
(5)
4,026
5,979
Depreciation
5,565
5,113
Non-GAAP adjusted EBITDA
$
55,030
$
54,779
Non-GAAP adjusted EBITDA as a percentage
of non-GAAP adjusted revenue
24
%
24
%
(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,
2020
2019
Amortization of acquired intangible
assets
$
3,051
$
3,181
Amortization of other intangible
assets
3,285
2,374
Amortization of client contract costs
4,026
5,979
Amortization of deferred financing
costs
426
415
Total amortization
$
10,788
$
11,949
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,
2020
2019
Cash flows from (used in) operating
activities
$
(7,213
)
$
12,826
Purchases of software, property and
equipment
(4,822
)
(8,286
)
Non-GAAP free cash flow
$
(12,035
)
$
4,540
Non-GAAP Financial Measures – 2020
Financial Guidance
Non-GAAP Adjusted Revenue:
The reconciliation of GAAP revenue to non-GAAP adjusted revenue,
as included in CSG’s 2020 full year financial guidance, is as
follows:
2020 Guidance Range
Low Range
High Range
GAAP revenues
$
960,000
$
1,000,000
Less: Transaction fees
(69,000
)
(76,000
)
Non-GAAP adjusted revenues
$
891,000
$
924,000
Non-GAAP Operating Income:
The reconciliation of GAAP operating income to non-GAAP
operating income, as included in CSG’s 2020 full year financial
guidance, is as follows (in thousands, except percentages):
2020 Guidance Range
Low Range
High Range
Operating Income
GAAP operating income
$
109,000
$
119,200
Restructuring and reorganization
charges
1,000
1,000
Acquisition-related expenses:
Amortization of acquired intangible
assets
11,400
11,400
Transaction-related costs
100
100
Stock-based compensation
20,800
20,800
Non-GAAP operating income
$
142,300
$
152,500
Operating Margin Percentage
GAAP revenue
$
960,000
$
1,000,000
GAAP operating margin percentage
11.4
%
11.9
%
Non-GAAP adjusted revenue
$
891,000
$
924,000
Non-GAAP adjusted operating margin
percentage
16.0
%
16.5
%
Non-GAAP EPS:
The reconciliation of GAAP EPS to non-GAAP EPS as included in
CSG’s 2020 full year financial guidance is as follows (in
thousands, except per share amounts):
2020 Guidance Range
Low Range
High Range
Amounts
EPS (7)
Amounts
EPS (7)
GAAP net income
$
65,700
$
2.04
$
73,100
$
2.27
GAAP income tax provision (6)
23,900
26,700
GAAP income before income taxes
89,600
99,800
Restructuring and reorganization
charges
1,000
1,000
Acquisition-related expenses:
Amortization of acquired intangible
assets
11,400
11,400
Transaction-related costs
100
100
Stock-based compensation
20,800
20,800
Amortization of OID
3,000
3,000
Non-GAAP income before income taxes
125,900
136,100
Non-GAAP income tax provision (6)
(33,400
)
(36,100
)
Non-GAAP net income
$
92,500
$
2.87
$
100,000
$
3.10
(6) For 2020, the estimated effective
income tax rate for GAAP and non-GAAP purposes is expected to be
approximately 27%.
(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 2020 full year financial
guidance (in thousands, except percentages):
2020 Guidance Range
Low Range
High Range
GAAP net income
$
65,700
$
73,100
GAAP income tax provision (6)
23,900
26,700
Interest expense
16,900
16,900
Amortization of OID
3,000
3,000
Interest and investment income and other,
net
(500
)
(500
)
GAAP operating income
109,000
119,200
Restructuring and reorganization
charges
1,000
1,000
Acquisition-related expenses:
Amortization of acquired intangible
assets
11,400
11,400
Transaction-related costs
100
100
Stock-based compensation
20,800
20,800
Amortization of other intangible
assets
10,900
10,900
Amortization of client contract costs
18,700
18,700
Depreciation
25,600
25,600
Non-GAAP adjusted EBITDA
$
197,500
$
207,700
Non-GAAP adjusted EBITDA as a percentage
of non-GAAP adjusted revenues
22
%
22
%
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):
2020 Guidance Range
Low Range
High Range
Cash flows from operating activities
$
110,000
$
135,000
Purchases of software, property and
equipment
(25,000
)
(35,000
)
Non-GAAP free cash flow
$
85,000
$
100,000
View source
version on businesswire.com: https://www.businesswire.com/news/home/20200506005838/en/
Liz Bauer, Chief Communications and Investor Relations Officer
(303) 804-4065 E-mail: liz.bauer@csgi.com
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