Recent Quotes View Full List My Watchlist Create Watchlist Indicators DJI Nasdaq Composite SPX Gold Crude Oil EL&P Market Index Markets Stocks ETFs Tools Overview News Currencies International Treasuries CSG Systems International Reports Third Quarter 2023 Results By: CSG via Business Wire November 01, 2023 at 16:05 PM EDT YTD Organic Revenue Up 9.0% YoY Representing CSG’s Best YTD Results in Nearly Two Decades Raising Non-GAAP EPS Guidance & Reiterating All Other Financial Guidance Metrics Repurchased $107 Million of Shares in Q3, Most Quarterly Share Repurchases Since Q3 2007 Successfully Executed $425 Million Convertible Debt Raise in Q3 CSG (NASDAQ: CSGS) today reported results for the quarter ended September 30, 2023. Financial Results: Third quarter 2023 financial results: Total revenue was $286.9 million. GAAP operating income was $32.7 million, or an operating margin of 11.4%, and non-GAAP operating income was $45.2 million, or a non-GAAP adjusted operating margin of 17.0%. GAAP earnings per diluted share (EPS) was $0.62 and non-GAAP EPS was $0.92. Cash flows from operations were $24.6 million, with non-GAAP free cash flow of $18.1 million. Shareholder Returns: CSG declared its quarterly cash dividend of $0.28 per share of common stock, or a total of approximately $9 million, to shareholders. During the third quarter of 2023, CSG repurchased under its stock repurchase program, approximately 1,991,000 shares of its common stock for approximately $107 million. Business Activities: In September 2023, CSG issued $425.0 million of convertible notes (2023 Convertible Notes) due in 2028. “Team CSG had a fantastic first nine months of 2023. We delivered strong financial results across the board highlighted by 9.0% year-over-year organic revenue growth, our strongest first nine-month results in nearly two decades,” said Brian Shepherd, President and Chief Executive Officer of CSG. “During the quarter we completed a successful $425 million convertible debt raise, which lowered our interest rate to 3.875% and significantly decreased our exposure to floating rate debt. We also completed our previously announced $100 million stock repurchase program in the quarter, as we bought back $107 million shares in Q3. Finally, we are raising our non-GAAP EPS guidance and reiterating all other financial targets.” Financial Overview (unaudited) (in thousands, except per share amounts and percentages): Quarter Ended September 30, Nine Months Ended September 30, Percent Percent 2023 2022 Changed 2023 2022 Changed GAAP Results: Revenue $ 286,868 $ 273,308 5.0 % $ 871,934 $ 799,876 9.0 % Operating Income 32,731 19,977 63.8 % 99,130 43,675 127.0 % Operating Margin Percentage 11.4 % 7.3 % 11.4 % 5.5 % EPS $ 0.62 $ 0.40 55.0 % $ 1.75 $ 0.76 130.3 % Non-GAAP Results: Operating Income $ 45,203 $ 46,747 (3.3 %) $ 141,664 $ 123,673 14.5 % Adjusted Operating Margin Percentage 17.0 % 18.3 % 17.5 % 16.6 % EPS $ 0.92 $ 1.06 (13.2 %) $ 2.76 $ 2.76 0.0 % For additional information and reconciliations regarding CSG’s use of non-GAAP financial measures, please refer to the attached Exhibit 2 and the Investor Relations section of CSG’s website at csgi.com. Results of Operations GAAP Results: Total revenue for the third quarter of 2023 was $286.9 million, a 5.0% increase when compared to revenue of $273.3 million for the third quarter of 2022. The year-over-year increase can be mainly attributed to the continued growth of CSG’s revenue management solutions, to include the conversion of customer accounts on CSG solutions, other ancillary services and increased payments volumes. GAAP operating income for the third quarter of 2023 was $32.7 million, or 11.4% of total revenue, compared to $20.0 million, or 7.3% of total revenue, for the third quarter of 2022. The increase in operating income can be mainly attributed to the $13.0 million decrease in restructuring and reorganization charges between years. GAAP EPS for the third quarter of 2023 was $0.62, as compared to $0.40 for the third quarter of 2022. The increase in GAAP EPS is mainly due to the higher operating income in the third quarter of 2023, discussed above, partially offset by higher interest expense and foreign currency movements. Non-GAAP Results: Non-GAAP operating income for the third quarter of 2023 was $45.2 million, or a non-GAAP adjusted operating margin of 17.0%, compared to $46.7 million, or a non-GAAP adjusted operating margin of 18.3% for the third quarter of 2022. Non-GAAP EPS for the third quarter of 2023 was $0.92 compared to $1.06 for the third quarter of 2022. The decrease in non-GAAP EPS is mainly due to higher interest expense and foreign currency movements. Balance Sheet and Cash Flows Cash, cash equivalents, and short-term investments as of September 30, 2023 were $146.7 million compared to $146.2 million as of June 30, 2023 and $150.4 million as of December 31, 2022. CSG had net cash flows provided by operations for the third quarters ended September 30, 2023 and 2022 of $24.6 million and $22.8 million, respectively, and had non-GAAP free cash flow of $18.1 million and $10.9 million, respectively. Summary of Financial Guidance CSG is revising its financial guidance for the full year 2023, as follows: As of November 1, 2023 Previous GAAP Measures: Revenue No change $1,150 - $1,175 million Non-GAAP Measures: Adjusted Operating Margin Percentage No change 16.75% - 17.1% EPS $3.50 - $3.70 $3.42 - $3.58 Adjusted EBITDA No change $238 - $245 million Free Cash Flow No change $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, November 1, 2023 at 5:00 p.m. ET, to discuss CSG’s third quarter 2023 earnings results. The call will be carried live and archived on the Internet. A link to the conference call is available at http://ir.csgi.com. In addition, to reach the conference by phone, call 1-888-412-4131 and use the passcode 2327393. Additional Information For information about CSG, please visit CSG’s web site at csgi.com. Additional information can be found in the Investor Relations section of the website. About CSG CSG empowers companies to build unforgettable experiences, making it easier for people and businesses to connect with, use and pay for the services they value most. Our customer experience, billing and payments solutions help companies of any size make money and make a difference. With our SaaS solutions, company leaders can take control of their future and tap into guidance along the way from our fiercely committed and forward-thinking CSGers around the world. Want to be future-ready and a change-maker like the global brands that trust CSG? Visit csgi.com to learn more. Forward-Looking Statements This news release contains forward-looking statements as defined under the Securities Act of 1933, as amended, that are based on assumptions about a number of important factors and involve risks and uncertainties that could cause actual results to differ materially from what appears in this news release. Some of these key factors include, but are not limited to the following items: CSG derives approximately forty percent of its revenue from its two largest customers; Fluctuations in credit market conditions, general global economic and political conditions, and foreign currency exchange rates; CSG’s ability to maintain a reliable, secure computing environment; Continued market acceptance of CSG’s products and services; CSG’s ability to continuously develop and enhance products in a timely, cost-effective, technically advanced and competitive manner; CSG’s ability to deliver its solutions in a timely fashion within budget, particularly large and complex software implementations; CSG’s dependency on the global telecommunications industry, and in particular, the North American telecommunications industry; CSG’s ability to meet its financial expectations; Increasing competition in CSG’s market from companies of greater size and with broader presence; CSG’s ability to successfully integrate and manage acquired businesses or assets to achieve expected strategic, operating and financial goals; CSG’s ability to protect its intellectual property rights; CSG’s ability to conduct business in the international marketplace; CSG’s ability to comply with applicable U.S. and International laws and regulations; and CSG’s business may be disrupted, and its results of operations and cash flows adversely affected by a global pandemic. This list is not exhaustive, and readers are encouraged to review the additional risks and important factors described in CSG’s reports on Forms 10-K and 10-Q and other filings made with the SEC. CSG SYSTEMS INTERNATIONAL, INC. CONDENSED CONSOLIDATED BALANCE SHEETS-UNAUDITED (in thousands) September 30, 2023 December 31, 2022 ASSETS Current assets: Cash and cash equivalents $ 146,730 $ 150,365 Short-term investments - 71 Total cash, cash equivalents, and short-term investments 146,730 150,436 Settlement and merchant reserve assets 193,371 238,653 Trade accounts receivable: Billed, net of allowance of $4,731 and $5,528 275,161 274,189 Unbilled 83,612 52,830 Income taxes receivable 2,492 1,270 Other current assets 58,701 48,577 Total current assets 760,067 765,955 Non-current assets: Property and equipment, net of depreciation of $118,424 and $105,466 68,029 71,787 Operating lease right-of-use assets 37,196 49,687 Software, net of amortization of $159,451 and $150,337 16,741 22,774 Goodwill 302,996 304,036 Acquired customer contracts, net of amortization of $127,490 and $120,080 37,932 45,417 Customer contract costs, net of amortization of $38,174 and $30,601 53,336 54,735 Deferred income taxes 46,271 26,206 Other assets 7,034 7,956 Total non-current assets 569,535 582,598 Total assets $ 1,329,602 $ 1,348,553 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Current portion of long-term debt $ 22,500 $ 37,500 Operating lease liabilities 16,915 21,012 Customer deposits 33,084 40,472 Trade accounts payable 42,623 47,720 Accrued employee compensation 64,313 68,321 Settlement and merchant reserve liabilities 191,637 237,810 Deferred revenue 61,419 46,033 Income taxes payable 2,211 5,455 Other current liabilities 26,831 22,886 Total current liabilities 461,533 527,209 Non-current liabilities: Long-term debt, net of unamortized discounts of $16,502 and $2,656 535,998 375,469 Operating lease liabilities 37,574 53,207 Deferred revenue 20,828 21,991 Income taxes payable 3,243 3,410 Deferred income taxes 128 117 Other non-current liabilities 9,807 11,901 Total non-current liabilities 607,578 466,095 Total liabilities 1,069,111 993,304 Stockholders' equity: Preferred stock, par value $.01 per share; 10,000 shares authorized; zero shares issued and outstanding - - Common stock, par value $.01 per share; 100,000 shares authorized; 29,726 and 31,269 shares outstanding 713 708 Additional paid-in capital 483,063 495,189 Treasury stock, at cost; 40,202 and 38,210 shares (1,125,897 ) (1,018,034 ) Accumulated other comprehensive income (loss): Unrealized gain on short-term investments, net of tax 1 1 Cumulative foreign currency translation adjustments (60,773 ) (58,830 ) Accumulated earnings 963,384 936,215 Total stockholders' equity 260,491 355,249 Total liabilities and stockholders' equity $ 1,329,602 $ 1,348,553 CSG SYSTEMS INTERNATIONAL, INC. CONDENSED CONSOLIDATED STATEMENTS OF INCOME-UNAUDITED (in thousands, except per share amounts) Quarter Ended Nine Months Ended September 30, 2023 September 30, 2022 September 30, 2023 September 30, 2022 Revenue $ 286,868 $ 273,308 $ 871,934 $ 799,876 Cost of revenue (exclusive of depreciation, shown separately below) 152,734 138,462 458,897 415,014 Other operating expenses: Research and development 35,292 35,754 107,401 103,365 Selling, general and administrative 59,097 59,026 180,930 173,833 Depreciation 5,862 5,896 17,155 17,685 Restructuring and reorganization charges 1,152 14,193 8,421 46,304 Total operating expenses 254,137 253,331 772,804 756,201 Operating income 32,731 19,977 99,130 43,675 Other income (expense): Interest expense (8,036 ) (4,328 ) (23,092 ) (10,286 ) Interest and investment income, net 1,175 281 2,516 537 Loss on derivative liability upon debt conversion - - - (7,456 ) Other, net 813 2,790 (3,047 ) 6,044 Total other (6,048 ) (1,257 ) (23,623 ) (11,161 ) Income before income taxes 26,683 18,720 75,507 32,514 Income tax provision (7,989 ) (6,239 ) (21,931 ) (8,603 ) Net income $ 18,694 $ 12,481 $ 53,576 $ 23,911 Weighted-average shares outstanding: Basic 30,097 30,941 30,381 31,219 Diluted 30,284 31,159 30,540 31,487 Earnings per common share: Basic $ 0.62 $ 0.40 $ 1.76 $ 0.77 Diluted 0.62 0.40 1.75 0.76 CSG SYSTEMS INTERNATIONAL, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS-UNAUDITED (in thousands) Nine Months Ended September 30, 2023 September 30, 2022 Cash flows from operating activities: Net income $ 53,576 $ 23,911 Adjustments to reconcile net income to net cash provided by operating activities- Depreciation 17,549 21,817 Amortization 34,543 36,470 Asset impairment 1,689 30,126 Gain on lease modifications (4,349 ) - Loss on short-term investments and other - 19 Loss on derivative liability upon debt conversion - 7,456 Unrealized foreign currency transactions gain, net (442 ) (1,700 ) Deferred income taxes (12,504 ) (16,457 ) Stock-based compensation 21,253 20,778 Subtotal 111,315 122,420 Changes in operating assets and liabilities, net of acquired amounts: Trade accounts receivable, net (33,351 ) (22,026 ) Other current and non-current assets and liabilities (11,449 ) (16,430 ) Income taxes payable/receivable (4,650 ) (7,188 ) Trade accounts payable and accrued liabilities (24,158 ) (67,053 ) Deferred revenue 14,658 (150 ) Net cash provided by operating activities 52,365 9,573 Cash flows from investing activities: Purchases of software, property and equipment (22,940 ) (31,564 ) Proceeds from sale/maturity of short-term investments 71 27,447 Net cash used in investing activities (22,869 ) (4,117 ) Cash flows from financing activities: Proceeds from issuance of common stock 2,541 2,217 Payment of cash dividends (26,231 ) (25,396 ) Repurchase of common stock (116,418 ) (73,380 ) Deferred acquisition payments (3,220 ) (1,959 ) Proceeds from long-term debt 470,000 290,000 Payments on long-term debt (310,625 ) (247,926 ) Purchase of capped call transactions related to convertible notes (34,298 ) - Payments of deferred financing costs (13,518 ) - Settlement and merchant reserve activity (46,196 ) (13,931 ) Net cash used in financing activities (77,965 ) (70,375 ) Effect of exchange rate fluctuations on cash, cash equivalents, and restricted cash (448 ) (7,689 ) Net decrease in cash, cash equivalents, and restricted cash (48,917 ) (72,608 ) Cash, cash equivalents, and restricted cash, beginning of period 389,018 391,902 Cash, cash equivalents, and restricted cash, end of period $ 340,101 $ 319,294 Supplemental disclosures of cash flow information: Cash paid during the period for- Interest $ 21,772 $ 12,367 Income taxes 39,136 31,817 Reconciliation of cash, cash equivalents, and restricted cash: Cash and cash equivalents $ 146,730 $ 146,685 Settlement and merchant reserve assets 193,371 172,609 Total cash, cash equivalents, and restricted cash $ 340,101 $ 319,294 EXHIBIT 1 CSG SYSTEMS INTERNATIONAL, INC. SUPPLEMENTAL REVENUE ANALYSIS Revenue by Significant Customers: 10% or more of Revenue Quarter Ended Quarter Ended Quarter Ended September 30, 2023 June 30, 2023 September 30, 2022 Amount % of Revenue Amount % of Revenue Amount % of Revenue Charter $ 59,432 21 % $ 60,175 21 % $ 57,974 21 % Comcast 53,653 19 % 53,757 19 % 53,533 20 % Revenue by Vertical Quarter Ended Quarter Ended Quarter Ended September 30, June 30, September 30, 2023 2023 2022 Broadband/Cable/Satellite 53 % 54 % 55 % Telecommunications 20 % 18 % 20 % All other 27 % 28 % 25 % Total revenue 100 % 100 % 100 % Revenue by Geography Quarter Ended Quarter Ended Quarter Ended September 30, June 30, September 30, 2023 2023 2022 Americas 86 % 87 % 86 % Europe, Middle East and Africa 9 % 9 % 10 % Asia Pacific 5 % 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 operating income, non-GAAP adjusted operating margin percentage, non-GAAP EPS, non-GAAP adjusted EBITDA, and non-GAAP free cash flow. CSG believes that these non-GAAP financial measures, when reviewed in conjunction with its GAAP financial measures, provide investors with greater transparency to the information used by CSG’s management in its financial and operational decision making. CSG uses these non-GAAP financial measures for the following purposes: Certain internal financial planning, reporting, and analysis; Forecasting and budgeting; Certain management compensation incentives; and Communications with CSG’s Board of Directors, stockholders, financial analysts, and investors. These non-GAAP financial measures are provided with the intent of providing investors with the following information: A more complete understanding of CSG’s underlying operational results, trends, and cash generating capabilities; Consistency and comparability with CSG’s historical financial results; and Comparability to similar companies, many of which present similar non-GAAP financial measures to investors. Non-GAAP financial measures are not measures of performance under GAAP, and therefore should not be considered in isolation or as a substitute for GAAP financial information. Limitations with the use of non-GAAP financial measures include the following items: Non-GAAP financial measures are not based on any comprehensive set of accounting rules or principles; The way in which CSG calculates non-GAAP financial measures may differ from the way in which other companies calculate similar non-GAAP financial measures; Non-GAAP financial measures do not include all items of income and expense that affect CSG’s operations and that are required by GAAP to be included in financial statements; Certain adjustments to CSG’s non-GAAP financial measures result in the exclusion of items that are recurring and will be reflected in CSG’s financial statements in future periods; and Certain charges excluded from CSG’s non-GAAP financial measures are cash expenses, and therefore do impact CSG’s cash position. CSG compensates for these limitations by relying primarily on its GAAP results and using non-GAAP financial measures as a supplement only. Additionally, CSG provides specific information regarding the treatment of GAAP amounts considered in preparing the non-GAAP financial measures and reconciles each n on-GAAP financial measure to the most directly comparable GAAP measure. Non-GAAP Financial Measures: Basis of Presentation The table below outlines the exclusions from CSG’s non-GAAP financial measures: Non-GAAP Exclusions Operating Income Adjusted Operating Margin Percentage EPS Transaction fees — X — Restructuring and reorganization charges X X X Executive transition costs X X X Acquisition-related expenses: Amortization of acquired intangible assets X X X Transaction-related costs X X X Stock-based compensation X X X Gain (loss) on debt extinguishment/conversion — — X Gain (loss) on acquisitions or dispositions — — X Unusual income tax matters — — X CSG believes that excluding certain items in calculating its non-GAAP financial measures provides meaningful supplemental information regarding CSG’s performance and these items are excluded for the following reasons: Transaction fees are primarily comprised of fees paid to third-party payment processors and financial institutions and interchange fees under CSG’s payment services contracts. Transaction fees are included in revenue in CSG’s Income Statement (and not netted against revenue) because CSG maintains control and acts as principal over the integrated service provided under its payment services customer contracts. However, CSG excludes expense associated with transaction fees from the numerator and denominator in calculating its non-GAAP adjusted operating margin percentage in order to provide comparability with historical and future periods and with its peer group and competitors. Restructuring and reorganization charges are expenses that result from cost reduction initiatives and/or significant changes to CSG’s business, to include such things as involuntary employee terminations, changes in management structure, divestitures of businesses, facility consolidations and abandonments, and fundamental reorganizations impacting operational focus and direction. These charges are not considered reflective of CSG’s recurring business operating results. The exclusion of these items in calculating CSG’s non-GAAP financial measures allows management and investors an additional means to compare CSG’s current financial results with historical and future periods. Executive transition costs include expenses incurred related to a departure of a CSG executive officer under the terms of the related separation agreement. These types of costs are not considered reflective of CSG’s recurring business operating results. The exclusion of these costs in calculating CSG’s non-GAAP financial measures allows management and investors an additional means to compare CSG’s current financial results with historical and future periods. Acquisition-related expenses include amortization of acquired intangible assets and transaction-related costs, to include earn-out compensation. Transaction-related costs, which typically include expenses related to legal, accounting, and other professional services, are direct and incremental expenses related to business acquisitions, and thus, are not considered reflective of CSG’s recurring business operating results. The total amount of acquisition-related expenses can vary significantly between periods based on the number and size of acquisition activities, previously acquired intangible assets becoming fully amortized, and ultimate realization of earn-out compensation. In addition, the timing of these expenses may not directly correlate with underlying performance of the CSG’s operations. Therefore, the exclusion of acquisition-related expenses in calculating CSG’s non-GAAP financial measures allows management and investors an additional means to compare CSG’s current financial results with historical and future periods. Stock-based compensation results from CSG’s issuance of equity awards to its employees under incentive compensation programs. The amount of this incentive compensation in any period is not generally linked to the level of performance by employees or CSG. The exclusion of these expenses in calculating CSG’s non-GAAP financial measures allows management and investors an additional means to evaluate the non-cash expense related to compensation included in CSG’s results of operations, and therefore, the exclusion of this item allows investors to further evaluate the cash generating capabilities of CSG’s business. Gains and losses related to the extinguishment/conversion of debt can be as a result of the refinancing of CSG’s credit agreement and/or repurchase, conversion, or settlement of CSG’s convertible notes. These activities, to include any derivative activity related to debt conversions, are not considered reflective of CSG’s recurring business operating results. Any resulting gain or loss is generally non-cash income or expense, and therefore, the exclusion of these items allows investors to further evaluate the cash impact of these activities for cash flow and liquidity purposes. In addition, the exclusion of these gains and losses in calculating CSG’s non-GAAP EPS allows management and investors an additional means to compare CSG’s current operating results with historical and future periods. Gains or losses related to the acquisition or disposition of certain of CSG’s business activities are not considered reflective of CSG’s recurring business operating results. Any resulting gain or loss is generally non-cash income or expense, and therefore, the exclusion of these items allows investors to further evaluate the cash impact of these activities for cash flow and liquidity purposes. In addition, the exclusion of these gains and losses in calculating CSG’s non-GAAP EPS allows management and investors an additional means to compare CSG’s current operating results with historical and future periods. Unusual items within CSG’s quarterly and/or annual income tax expense can occur from such things as income tax accounting timing matters, income taxes related to unusual events, or as a result of different treatment of certain items for book accounting and income tax purposes. Consideration of such items in calculating CSG’s non-GAAP financial measures allows management and investors an additional means to compare CSG’s current financial results with historical and future periods. CSG also reports non-GAAP adjusted EBITDA and non-GAAP free cash flow. Management believes non-GAAP adjusted EBITDA is a useful measure to investors in evaluating CSG’s operating performance, debt servicing capabilities, and enterprise valuation. CSG defines non-GAAP adjusted EBITDA as income before interest, income taxes, depreciation, amortization, stock-based compensation, foreign currency transaction adjustments, acquisition-related expenses, and unusual items, such as restructuring and reorganization charges, executive transition costs, gains and losses related to the extinguishment of debt, and gains and losses on acquisitions or dispositions, as discussed above. Additionally, management uses non-GAAP free cash flow, among other measures, to assess its financial performance and cash generating capabilities, and believes that it is useful to investors because it shows CSG’s cash available to service debt, make strategic acquisitions and investments, repurchase its common stock, pay cash dividends, and fund ongoing operations. CSG defines non-GAAP free cash flow as net cash flows from operating activities less the purchases of software, property and equipment. Non-GAAP Financial Measures Non-GAAP Operating Income and Non-GAAP Adjusted Operating Margin Percentage: The reconciliation of GAAP operating income to non-GAAP operating income, and calculation of CSG’s non- GAAP adjusted operating margin percentage, for the indicated periods are as follows (in thousands, except percentages): Quarter Ended September 30, Nine Months Ended September 30, 2023 2022 2023 2022 Non-GAAP Operating Income GAAP operating income $ 32,731 $ 19,977 $ 99,130 $ 43,675 Restructuring and reorganization charges (1) 1,152 14,193 8,421 46,304 Executive transition costs 1,148 27 1,148 1,302 Acquisition-related expenses: Amortization of acquired intangible assets 2,996 3,405 9,203 11,017 Transaction-related costs (40 ) 495 2,122 469 Stock-based compensation (1) 7,216 8,650 21,640 20,906 Non-GAAP operating income $ 45,203 $ 46,747 $ 141,664 $ 123,673 Non-GAAP Adjusted Operating Margin Percentage Revenue $ 286,868 $ 273,308 $ 871,934 $ 799,876 Less: Transaction fees (2) (20,314 ) (18,177 ) (63,463 ) (54,928 ) Revenue less transaction fees $ 266,554 $ 255,131 $ 808,471 $ 744,948 Non-GAAP adjusted operating margin percentage 17.0 % 18.3 % 17.5 % 16.6 % (1) Restructuring and reorganization charges include stock-based compensation, which is not included in the stock-based compensation line in the tables above and following, and depreciation, which has not been recorded to the depreciation line item on CSG’s Income Statement. (2) Transaction fees are primarily comprised of fees paid to third-party payment processors and financial institutions and interchange fees under CSG’s payment services contracts. Transaction fees are included in revenue in CSG's Income Statement (and not netted against revenue) because CSG maintains control and acts as principal over the integrated service provided under its payment services customer contracts. However, CSG excludes expense associated with transaction fees from the numerator and denominator in calculating its non-GAAP adjusted operating margin percentage in order to provide comparability with historical and future periods and with its peer group and competitors. Non-GAAP EPS: The reconciliations of GAAP EPS to non-GAAP EPS for the indicated periods are as follows (in thousands, except per share amounts): Quarter Ended Quarter Ended September 30, 2023 September 30, 2022 Amounts EPS (4) Amounts EPS (4) GAAP net income $ 18,694 $ 0.62 $ 12,481 $ 0.40 GAAP income tax provision (3) 7,989 6,239 GAAP income before income taxes 26,683 18,720 Restructuring and reorganization charges 1,152 14,193 Executive transition costs 1,148 27 Acquisition-related costs: Amortization of acquired intangible assets 2,996 3,405 Transaction-related costs (40 ) 495 Stock-based compensation (1) 7,216 8,650 Non-GAAP income before income taxes 39,155 45,490 Non-GAAP income tax provision (3) (11,159 ) (12,510 ) Non-GAAP net income $ 27,996 $ 0.92 $ 32,980 $ 1.06 Nine Months Ended Nine Months Ended September 30, 2023 September 30, 2022 Amounts EPS (4) Amounts EPS (4) GAAP net income $ 53,576 $ 1.75 $ 23,911 $ 0.76 GAAP income tax provision (3) 21,931 8,603 GAAP income before income taxes 75,507 32,514 Restructuring and reorganization charges 8,421 46,304 Executive transition costs 1,148 1,302 Acquisition-related expenses: Amortization of acquired intangible assets 9,203 11,017 Transaction-related costs 2,122 469 Stock-based compensation (1) 21,640 20,906 Loss on extinguishment of debt - 7,456 Non-GAAP income before income taxes 118,041 119,968 Non-GAAP income tax provision (3) (33,642 ) (32,991 ) Non-GAAP net income $ 84,399 $ 2.76 $ 86,977 $ 2.76 (3) For the third quarter and nine months ended September 30, 2023, the GAAP effective income tax rates were approximately 30% and 29%, respectively, and the non-GAAP effective income tax rates were 28.5% for both periods. For the third quarter and nine months ended September 30, 2022 the GAAP effective income tax rates were approximately 33% and 26%, respectively, and the non-GAAP effective income tax rates were 27.5% for both periods. (4) The outstanding diluted shares for the third quarter and nine months ended September 30, 2023 were 30.3 million and 30.5, respectively, and for the third quarter and nine months ended September 30, 2022 were 31.2 million and 31.5 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 Nine Months Ended September 30, September 30, 2023 2022 2023 2022 GAAP net income $ 18,694 $ 12,481 $ 53,576 $ 23,911 GAAP income tax provision 7,989 6,239 21,931 8,603 Interest expense (5) 8,036 4,328 23,092 10,286 Loss on derivative liability upon debt conversion - - - 7,456 Interest and investment income and other, net (1,988 ) (3,071 ) 531 (6,581 ) GAAP operating income 32,731 19,977 99,130 43,675 Restructuring and reorganization charges (1) 1,152 14,193 8,421 46,304 Executive transition costs 1,148 27 1,148 1,302 Acquisition-related expenses: Amortization of acquired intangible assets (6) 2,996 3,405 9,203 11,017 Transaction-related costs (40 ) 495 2,122 469 Stock-based compensation (1) 7,216 8,650 21,640 20,906 Amortization of other intangible assets (6) 3,438 3,530 10,274 10,741 Amortization of customer contract costs (6) 4,997 3,829 14,390 14,150 Depreciation (1) 5,862 5,896 17,155 17,685 Non-GAAP adjusted EBITDA $ 59,500 $ 60,002 $ 183,483 $ 166,249 Non-GAAP adjusted EBITDA as a percentage of revenue less transaction fees (2) 22.3 % 23.5 % 22.7 % 22.3 % (5) Interest expense includes amortization of deferred financing costs as provided in Note 6 below. (6) Amortization on the statement of cash flows is made up of the following items for the indicated periods (in thousands): Quarter Ended Nine Months Ended September 30, September 30, 2023 2022 2023 2022 Amortization of acquired intangible assets $ 2,996 $ 3,405 $ 9,203 $ 11,017 Amortization of other intangible assets 3,438 3,530 10,274 10,741 Amortization of customer contract costs 4,997 3,829 14,390 14,150 Amortization of deferred financing costs 304 186 676 562 Total amortization $ 11,735 $ 10,950 $ 34,543 $ 36,470 Non-GAAP Free Cash Flow: CSG’s calculation of non-GAAP free cash flow and the reconciliation of CSG’s non-GAAP free cash flow measure to cash flows from operating activities are provided below for the indicated periods (in thousands): Quarter Ended Nine Months Ended September 30, September 30, 2023 2022 2023 2022 Cash flows from operating activities $ 24,582 $ 22,838 $ 52,365 $ 9,573 Purchases of software, property and equipment (6,512 ) (11,917 ) (22,940 ) (31,564 ) Non-GAAP free cash flow $ 18,070 $ 10,921 $ 29,425 $ (21,991 ) 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 $ 124,200 $ 131,400 Restructuring and reorganization charges 8,400 8,400 Executive Transition Costs 1,300 1,300 Acquisition-related expenses: Amortization of acquired intangible assets 12,200 12,200 Transaction-related costs 2,100 2,100 Stock-based compensation 30,700 30,700 Non-GAAP operating income $ 178,900 $ 186,100 Non-GAAP Operating Margin Percentage Revenue $ 1,150,000 $ 1,175,000 Less: Transaction fees (82,000 ) (87,000 ) Revenue less transaction fees $ 1,068,000 $ 1,088,000 Non-GAAP adjusted operating margin percentage 16.75 % 17.1 % 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 (8) Amounts EPS (8) GAAP net income $ 66,200 $ 2.19 $ 71,200 $ 2.35 GAAP income tax provision (7) 27,200 29,400 GAAP income before income taxes 93,400 100,600 Restructuring and reorganization charges 8,400 8,400 Executive Transition Costs 1,300 1,300 Acquisition-related expenses: Amortization of acquired intangible assets 12,200 12,200 Transaction-related costs 2,100 2,100 Stock-based compensation 30,700 30,700 Non-GAAP income before income taxes 148,100 155,300 Non-GAAP income tax provision (7) (42,200 ) (43,400 ) Non-GAAP net income $ 105,900 $ 3.50 $ 111,900 $ 3.70 (7) For 2023, the estimated GAAP and non-GAAP effective income tax rates are expected to be approximately 29% and approximately 28% - 28.5%, respectively. (8) The weighted-average diluted shares outstanding are expected to be approximately 30 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 2023 full year financial guidance (in thousands, except percentages): 2023 Guidance Range Low Range High Range GAAP net income $ 66,200 $ 71,200 GAAP income tax provision (7) 27,200 29,400 Interest expense 30,900 30,900 Interest and investment income (3,100 ) (3,100 ) Other, net 3,000 3,000 GAAP operating income 124,200 131,400 Restructuring and reorganization charges 8,400 8,400 Executive transition costs 1,300 1,300 Acquisition-related expenses: Amortization of acquired intangible assets 12,200 12,200 Transaction-related costs 2,100 2,100 Stock-based compensation 30,700 30,700 Amortization of other intangible assets 13,500 13,500 Amortization of client contract costs 20,300 20,300 Depreciation 24,800 24,800 Non-GAAP adjusted EBITDA $ 237,500 $ 244,700 Non-GAAP adjusted EBITDA as a percentage of revenue less transaction fees (2) 22.2 % 22.5 % Non-GAAP Free Cash Flow: CSG’s calculation of non-GAAP free cash flow and the reconciliation of CSG’s non-GAAP free cash flow measure to cash flows from operating activities is provided below for CSG’s 2023 full year financial guidance (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 View source version on businesswire.com: https://www.businesswire.com/news/home/20231101121909/en/Contacts John Rea, Investor Relations (210) 687-4409 E-mail: john.rea@csgi.com Data & News supplied by www.cloudquote.io Stock quotes supplied by Barchart Quotes delayed at least 20 minutes. 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CSG Systems International Reports Third Quarter 2023 Results By: CSG via Business Wire November 01, 2023 at 16:05 PM EDT YTD Organic Revenue Up 9.0% YoY Representing CSG’s Best YTD Results in Nearly Two Decades Raising Non-GAAP EPS Guidance & Reiterating All Other Financial Guidance Metrics Repurchased $107 Million of Shares in Q3, Most Quarterly Share Repurchases Since Q3 2007 Successfully Executed $425 Million Convertible Debt Raise in Q3 CSG (NASDAQ: CSGS) today reported results for the quarter ended September 30, 2023. Financial Results: Third quarter 2023 financial results: Total revenue was $286.9 million. GAAP operating income was $32.7 million, or an operating margin of 11.4%, and non-GAAP operating income was $45.2 million, or a non-GAAP adjusted operating margin of 17.0%. GAAP earnings per diluted share (EPS) was $0.62 and non-GAAP EPS was $0.92. Cash flows from operations were $24.6 million, with non-GAAP free cash flow of $18.1 million. Shareholder Returns: CSG declared its quarterly cash dividend of $0.28 per share of common stock, or a total of approximately $9 million, to shareholders. During the third quarter of 2023, CSG repurchased under its stock repurchase program, approximately 1,991,000 shares of its common stock for approximately $107 million. Business Activities: In September 2023, CSG issued $425.0 million of convertible notes (2023 Convertible Notes) due in 2028. “Team CSG had a fantastic first nine months of 2023. We delivered strong financial results across the board highlighted by 9.0% year-over-year organic revenue growth, our strongest first nine-month results in nearly two decades,” said Brian Shepherd, President and Chief Executive Officer of CSG. “During the quarter we completed a successful $425 million convertible debt raise, which lowered our interest rate to 3.875% and significantly decreased our exposure to floating rate debt. We also completed our previously announced $100 million stock repurchase program in the quarter, as we bought back $107 million shares in Q3. Finally, we are raising our non-GAAP EPS guidance and reiterating all other financial targets.” Financial Overview (unaudited) (in thousands, except per share amounts and percentages): Quarter Ended September 30, Nine Months Ended September 30, Percent Percent 2023 2022 Changed 2023 2022 Changed GAAP Results: Revenue $ 286,868 $ 273,308 5.0 % $ 871,934 $ 799,876 9.0 % Operating Income 32,731 19,977 63.8 % 99,130 43,675 127.0 % Operating Margin Percentage 11.4 % 7.3 % 11.4 % 5.5 % EPS $ 0.62 $ 0.40 55.0 % $ 1.75 $ 0.76 130.3 % Non-GAAP Results: Operating Income $ 45,203 $ 46,747 (3.3 %) $ 141,664 $ 123,673 14.5 % Adjusted Operating Margin Percentage 17.0 % 18.3 % 17.5 % 16.6 % EPS $ 0.92 $ 1.06 (13.2 %) $ 2.76 $ 2.76 0.0 % For additional information and reconciliations regarding CSG’s use of non-GAAP financial measures, please refer to the attached Exhibit 2 and the Investor Relations section of CSG’s website at csgi.com. Results of Operations GAAP Results: Total revenue for the third quarter of 2023 was $286.9 million, a 5.0% increase when compared to revenue of $273.3 million for the third quarter of 2022. The year-over-year increase can be mainly attributed to the continued growth of CSG’s revenue management solutions, to include the conversion of customer accounts on CSG solutions, other ancillary services and increased payments volumes. GAAP operating income for the third quarter of 2023 was $32.7 million, or 11.4% of total revenue, compared to $20.0 million, or 7.3% of total revenue, for the third quarter of 2022. The increase in operating income can be mainly attributed to the $13.0 million decrease in restructuring and reorganization charges between years. GAAP EPS for the third quarter of 2023 was $0.62, as compared to $0.40 for the third quarter of 2022. The increase in GAAP EPS is mainly due to the higher operating income in the third quarter of 2023, discussed above, partially offset by higher interest expense and foreign currency movements. Non-GAAP Results: Non-GAAP operating income for the third quarter of 2023 was $45.2 million, or a non-GAAP adjusted operating margin of 17.0%, compared to $46.7 million, or a non-GAAP adjusted operating margin of 18.3% for the third quarter of 2022. Non-GAAP EPS for the third quarter of 2023 was $0.92 compared to $1.06 for the third quarter of 2022. The decrease in non-GAAP EPS is mainly due to higher interest expense and foreign currency movements. Balance Sheet and Cash Flows Cash, cash equivalents, and short-term investments as of September 30, 2023 were $146.7 million compared to $146.2 million as of June 30, 2023 and $150.4 million as of December 31, 2022. CSG had net cash flows provided by operations for the third quarters ended September 30, 2023 and 2022 of $24.6 million and $22.8 million, respectively, and had non-GAAP free cash flow of $18.1 million and $10.9 million, respectively. Summary of Financial Guidance CSG is revising its financial guidance for the full year 2023, as follows: As of November 1, 2023 Previous GAAP Measures: Revenue No change $1,150 - $1,175 million Non-GAAP Measures: Adjusted Operating Margin Percentage No change 16.75% - 17.1% EPS $3.50 - $3.70 $3.42 - $3.58 Adjusted EBITDA No change $238 - $245 million Free Cash Flow No change $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, November 1, 2023 at 5:00 p.m. ET, to discuss CSG’s third quarter 2023 earnings results. The call will be carried live and archived on the Internet. A link to the conference call is available at http://ir.csgi.com. In addition, to reach the conference by phone, call 1-888-412-4131 and use the passcode 2327393. Additional Information For information about CSG, please visit CSG’s web site at csgi.com. Additional information can be found in the Investor Relations section of the website. About CSG CSG empowers companies to build unforgettable experiences, making it easier for people and businesses to connect with, use and pay for the services they value most. Our customer experience, billing and payments solutions help companies of any size make money and make a difference. With our SaaS solutions, company leaders can take control of their future and tap into guidance along the way from our fiercely committed and forward-thinking CSGers around the world. Want to be future-ready and a change-maker like the global brands that trust CSG? Visit csgi.com to learn more. Forward-Looking Statements This news release contains forward-looking statements as defined under the Securities Act of 1933, as amended, that are based on assumptions about a number of important factors and involve risks and uncertainties that could cause actual results to differ materially from what appears in this news release. Some of these key factors include, but are not limited to the following items: CSG derives approximately forty percent of its revenue from its two largest customers; Fluctuations in credit market conditions, general global economic and political conditions, and foreign currency exchange rates; CSG’s ability to maintain a reliable, secure computing environment; Continued market acceptance of CSG’s products and services; CSG’s ability to continuously develop and enhance products in a timely, cost-effective, technically advanced and competitive manner; CSG’s ability to deliver its solutions in a timely fashion within budget, particularly large and complex software implementations; CSG’s dependency on the global telecommunications industry, and in particular, the North American telecommunications industry; CSG’s ability to meet its financial expectations; Increasing competition in CSG’s market from companies of greater size and with broader presence; CSG’s ability to successfully integrate and manage acquired businesses or assets to achieve expected strategic, operating and financial goals; CSG’s ability to protect its intellectual property rights; CSG’s ability to conduct business in the international marketplace; CSG’s ability to comply with applicable U.S. and International laws and regulations; and CSG’s business may be disrupted, and its results of operations and cash flows adversely affected by a global pandemic. This list is not exhaustive, and readers are encouraged to review the additional risks and important factors described in CSG’s reports on Forms 10-K and 10-Q and other filings made with the SEC. CSG SYSTEMS INTERNATIONAL, INC. CONDENSED CONSOLIDATED BALANCE SHEETS-UNAUDITED (in thousands) September 30, 2023 December 31, 2022 ASSETS Current assets: Cash and cash equivalents $ 146,730 $ 150,365 Short-term investments - 71 Total cash, cash equivalents, and short-term investments 146,730 150,436 Settlement and merchant reserve assets 193,371 238,653 Trade accounts receivable: Billed, net of allowance of $4,731 and $5,528 275,161 274,189 Unbilled 83,612 52,830 Income taxes receivable 2,492 1,270 Other current assets 58,701 48,577 Total current assets 760,067 765,955 Non-current assets: Property and equipment, net of depreciation of $118,424 and $105,466 68,029 71,787 Operating lease right-of-use assets 37,196 49,687 Software, net of amortization of $159,451 and $150,337 16,741 22,774 Goodwill 302,996 304,036 Acquired customer contracts, net of amortization of $127,490 and $120,080 37,932 45,417 Customer contract costs, net of amortization of $38,174 and $30,601 53,336 54,735 Deferred income taxes 46,271 26,206 Other assets 7,034 7,956 Total non-current assets 569,535 582,598 Total assets $ 1,329,602 $ 1,348,553 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Current portion of long-term debt $ 22,500 $ 37,500 Operating lease liabilities 16,915 21,012 Customer deposits 33,084 40,472 Trade accounts payable 42,623 47,720 Accrued employee compensation 64,313 68,321 Settlement and merchant reserve liabilities 191,637 237,810 Deferred revenue 61,419 46,033 Income taxes payable 2,211 5,455 Other current liabilities 26,831 22,886 Total current liabilities 461,533 527,209 Non-current liabilities: Long-term debt, net of unamortized discounts of $16,502 and $2,656 535,998 375,469 Operating lease liabilities 37,574 53,207 Deferred revenue 20,828 21,991 Income taxes payable 3,243 3,410 Deferred income taxes 128 117 Other non-current liabilities 9,807 11,901 Total non-current liabilities 607,578 466,095 Total liabilities 1,069,111 993,304 Stockholders' equity: Preferred stock, par value $.01 per share; 10,000 shares authorized; zero shares issued and outstanding - - Common stock, par value $.01 per share; 100,000 shares authorized; 29,726 and 31,269 shares outstanding 713 708 Additional paid-in capital 483,063 495,189 Treasury stock, at cost; 40,202 and 38,210 shares (1,125,897 ) (1,018,034 ) Accumulated other comprehensive income (loss): Unrealized gain on short-term investments, net of tax 1 1 Cumulative foreign currency translation adjustments (60,773 ) (58,830 ) Accumulated earnings 963,384 936,215 Total stockholders' equity 260,491 355,249 Total liabilities and stockholders' equity $ 1,329,602 $ 1,348,553 CSG SYSTEMS INTERNATIONAL, INC. CONDENSED CONSOLIDATED STATEMENTS OF INCOME-UNAUDITED (in thousands, except per share amounts) Quarter Ended Nine Months Ended September 30, 2023 September 30, 2022 September 30, 2023 September 30, 2022 Revenue $ 286,868 $ 273,308 $ 871,934 $ 799,876 Cost of revenue (exclusive of depreciation, shown separately below) 152,734 138,462 458,897 415,014 Other operating expenses: Research and development 35,292 35,754 107,401 103,365 Selling, general and administrative 59,097 59,026 180,930 173,833 Depreciation 5,862 5,896 17,155 17,685 Restructuring and reorganization charges 1,152 14,193 8,421 46,304 Total operating expenses 254,137 253,331 772,804 756,201 Operating income 32,731 19,977 99,130 43,675 Other income (expense): Interest expense (8,036 ) (4,328 ) (23,092 ) (10,286 ) Interest and investment income, net 1,175 281 2,516 537 Loss on derivative liability upon debt conversion - - - (7,456 ) Other, net 813 2,790 (3,047 ) 6,044 Total other (6,048 ) (1,257 ) (23,623 ) (11,161 ) Income before income taxes 26,683 18,720 75,507 32,514 Income tax provision (7,989 ) (6,239 ) (21,931 ) (8,603 ) Net income $ 18,694 $ 12,481 $ 53,576 $ 23,911 Weighted-average shares outstanding: Basic 30,097 30,941 30,381 31,219 Diluted 30,284 31,159 30,540 31,487 Earnings per common share: Basic $ 0.62 $ 0.40 $ 1.76 $ 0.77 Diluted 0.62 0.40 1.75 0.76 CSG SYSTEMS INTERNATIONAL, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS-UNAUDITED (in thousands) Nine Months Ended September 30, 2023 September 30, 2022 Cash flows from operating activities: Net income $ 53,576 $ 23,911 Adjustments to reconcile net income to net cash provided by operating activities- Depreciation 17,549 21,817 Amortization 34,543 36,470 Asset impairment 1,689 30,126 Gain on lease modifications (4,349 ) - Loss on short-term investments and other - 19 Loss on derivative liability upon debt conversion - 7,456 Unrealized foreign currency transactions gain, net (442 ) (1,700 ) Deferred income taxes (12,504 ) (16,457 ) Stock-based compensation 21,253 20,778 Subtotal 111,315 122,420 Changes in operating assets and liabilities, net of acquired amounts: Trade accounts receivable, net (33,351 ) (22,026 ) Other current and non-current assets and liabilities (11,449 ) (16,430 ) Income taxes payable/receivable (4,650 ) (7,188 ) Trade accounts payable and accrued liabilities (24,158 ) (67,053 ) Deferred revenue 14,658 (150 ) Net cash provided by operating activities 52,365 9,573 Cash flows from investing activities: Purchases of software, property and equipment (22,940 ) (31,564 ) Proceeds from sale/maturity of short-term investments 71 27,447 Net cash used in investing activities (22,869 ) (4,117 ) Cash flows from financing activities: Proceeds from issuance of common stock 2,541 2,217 Payment of cash dividends (26,231 ) (25,396 ) Repurchase of common stock (116,418 ) (73,380 ) Deferred acquisition payments (3,220 ) (1,959 ) Proceeds from long-term debt 470,000 290,000 Payments on long-term debt (310,625 ) (247,926 ) Purchase of capped call transactions related to convertible notes (34,298 ) - Payments of deferred financing costs (13,518 ) - Settlement and merchant reserve activity (46,196 ) (13,931 ) Net cash used in financing activities (77,965 ) (70,375 ) Effect of exchange rate fluctuations on cash, cash equivalents, and restricted cash (448 ) (7,689 ) Net decrease in cash, cash equivalents, and restricted cash (48,917 ) (72,608 ) Cash, cash equivalents, and restricted cash, beginning of period 389,018 391,902 Cash, cash equivalents, and restricted cash, end of period $ 340,101 $ 319,294 Supplemental disclosures of cash flow information: Cash paid during the period for- Interest $ 21,772 $ 12,367 Income taxes 39,136 31,817 Reconciliation of cash, cash equivalents, and restricted cash: Cash and cash equivalents $ 146,730 $ 146,685 Settlement and merchant reserve assets 193,371 172,609 Total cash, cash equivalents, and restricted cash $ 340,101 $ 319,294 EXHIBIT 1 CSG SYSTEMS INTERNATIONAL, INC. SUPPLEMENTAL REVENUE ANALYSIS Revenue by Significant Customers: 10% or more of Revenue Quarter Ended Quarter Ended Quarter Ended September 30, 2023 June 30, 2023 September 30, 2022 Amount % of Revenue Amount % of Revenue Amount % of Revenue Charter $ 59,432 21 % $ 60,175 21 % $ 57,974 21 % Comcast 53,653 19 % 53,757 19 % 53,533 20 % Revenue by Vertical Quarter Ended Quarter Ended Quarter Ended September 30, June 30, September 30, 2023 2023 2022 Broadband/Cable/Satellite 53 % 54 % 55 % Telecommunications 20 % 18 % 20 % All other 27 % 28 % 25 % Total revenue 100 % 100 % 100 % Revenue by Geography Quarter Ended Quarter Ended Quarter Ended September 30, June 30, September 30, 2023 2023 2022 Americas 86 % 87 % 86 % Europe, Middle East and Africa 9 % 9 % 10 % Asia Pacific 5 % 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 operating income, non-GAAP adjusted operating margin percentage, non-GAAP EPS, non-GAAP adjusted EBITDA, and non-GAAP free cash flow. CSG believes that these non-GAAP financial measures, when reviewed in conjunction with its GAAP financial measures, provide investors with greater transparency to the information used by CSG’s management in its financial and operational decision making. CSG uses these non-GAAP financial measures for the following purposes: Certain internal financial planning, reporting, and analysis; Forecasting and budgeting; Certain management compensation incentives; and Communications with CSG’s Board of Directors, stockholders, financial analysts, and investors. These non-GAAP financial measures are provided with the intent of providing investors with the following information: A more complete understanding of CSG’s underlying operational results, trends, and cash generating capabilities; Consistency and comparability with CSG’s historical financial results; and Comparability to similar companies, many of which present similar non-GAAP financial measures to investors. Non-GAAP financial measures are not measures of performance under GAAP, and therefore should not be considered in isolation or as a substitute for GAAP financial information. Limitations with the use of non-GAAP financial measures include the following items: Non-GAAP financial measures are not based on any comprehensive set of accounting rules or principles; The way in which CSG calculates non-GAAP financial measures may differ from the way in which other companies calculate similar non-GAAP financial measures; Non-GAAP financial measures do not include all items of income and expense that affect CSG’s operations and that are required by GAAP to be included in financial statements; Certain adjustments to CSG’s non-GAAP financial measures result in the exclusion of items that are recurring and will be reflected in CSG’s financial statements in future periods; and Certain charges excluded from CSG’s non-GAAP financial measures are cash expenses, and therefore do impact CSG’s cash position. CSG compensates for these limitations by relying primarily on its GAAP results and using non-GAAP financial measures as a supplement only. Additionally, CSG provides specific information regarding the treatment of GAAP amounts considered in preparing the non-GAAP financial measures and reconciles each n on-GAAP financial measure to the most directly comparable GAAP measure. Non-GAAP Financial Measures: Basis of Presentation The table below outlines the exclusions from CSG’s non-GAAP financial measures: Non-GAAP Exclusions Operating Income Adjusted Operating Margin Percentage EPS Transaction fees — X — Restructuring and reorganization charges X X X Executive transition costs X X X Acquisition-related expenses: Amortization of acquired intangible assets X X X Transaction-related costs X X X Stock-based compensation X X X Gain (loss) on debt extinguishment/conversion — — X Gain (loss) on acquisitions or dispositions — — X Unusual income tax matters — — X CSG believes that excluding certain items in calculating its non-GAAP financial measures provides meaningful supplemental information regarding CSG’s performance and these items are excluded for the following reasons: Transaction fees are primarily comprised of fees paid to third-party payment processors and financial institutions and interchange fees under CSG’s payment services contracts. Transaction fees are included in revenue in CSG’s Income Statement (and not netted against revenue) because CSG maintains control and acts as principal over the integrated service provided under its payment services customer contracts. However, CSG excludes expense associated with transaction fees from the numerator and denominator in calculating its non-GAAP adjusted operating margin percentage in order to provide comparability with historical and future periods and with its peer group and competitors. Restructuring and reorganization charges are expenses that result from cost reduction initiatives and/or significant changes to CSG’s business, to include such things as involuntary employee terminations, changes in management structure, divestitures of businesses, facility consolidations and abandonments, and fundamental reorganizations impacting operational focus and direction. These charges are not considered reflective of CSG’s recurring business operating results. The exclusion of these items in calculating CSG’s non-GAAP financial measures allows management and investors an additional means to compare CSG’s current financial results with historical and future periods. Executive transition costs include expenses incurred related to a departure of a CSG executive officer under the terms of the related separation agreement. These types of costs are not considered reflective of CSG’s recurring business operating results. The exclusion of these costs in calculating CSG’s non-GAAP financial measures allows management and investors an additional means to compare CSG’s current financial results with historical and future periods. Acquisition-related expenses include amortization of acquired intangible assets and transaction-related costs, to include earn-out compensation. Transaction-related costs, which typically include expenses related to legal, accounting, and other professional services, are direct and incremental expenses related to business acquisitions, and thus, are not considered reflective of CSG’s recurring business operating results. The total amount of acquisition-related expenses can vary significantly between periods based on the number and size of acquisition activities, previously acquired intangible assets becoming fully amortized, and ultimate realization of earn-out compensation. In addition, the timing of these expenses may not directly correlate with underlying performance of the CSG’s operations. Therefore, the exclusion of acquisition-related expenses in calculating CSG’s non-GAAP financial measures allows management and investors an additional means to compare CSG’s current financial results with historical and future periods. Stock-based compensation results from CSG’s issuance of equity awards to its employees under incentive compensation programs. The amount of this incentive compensation in any period is not generally linked to the level of performance by employees or CSG. The exclusion of these expenses in calculating CSG’s non-GAAP financial measures allows management and investors an additional means to evaluate the non-cash expense related to compensation included in CSG’s results of operations, and therefore, the exclusion of this item allows investors to further evaluate the cash generating capabilities of CSG’s business. Gains and losses related to the extinguishment/conversion of debt can be as a result of the refinancing of CSG’s credit agreement and/or repurchase, conversion, or settlement of CSG’s convertible notes. These activities, to include any derivative activity related to debt conversions, are not considered reflective of CSG’s recurring business operating results. Any resulting gain or loss is generally non-cash income or expense, and therefore, the exclusion of these items allows investors to further evaluate the cash impact of these activities for cash flow and liquidity purposes. In addition, the exclusion of these gains and losses in calculating CSG’s non-GAAP EPS allows management and investors an additional means to compare CSG’s current operating results with historical and future periods. Gains or losses related to the acquisition or disposition of certain of CSG’s business activities are not considered reflective of CSG’s recurring business operating results. Any resulting gain or loss is generally non-cash income or expense, and therefore, the exclusion of these items allows investors to further evaluate the cash impact of these activities for cash flow and liquidity purposes. In addition, the exclusion of these gains and losses in calculating CSG’s non-GAAP EPS allows management and investors an additional means to compare CSG’s current operating results with historical and future periods. Unusual items within CSG’s quarterly and/or annual income tax expense can occur from such things as income tax accounting timing matters, income taxes related to unusual events, or as a result of different treatment of certain items for book accounting and income tax purposes. Consideration of such items in calculating CSG’s non-GAAP financial measures allows management and investors an additional means to compare CSG’s current financial results with historical and future periods. CSG also reports non-GAAP adjusted EBITDA and non-GAAP free cash flow. Management believes non-GAAP adjusted EBITDA is a useful measure to investors in evaluating CSG’s operating performance, debt servicing capabilities, and enterprise valuation. CSG defines non-GAAP adjusted EBITDA as income before interest, income taxes, depreciation, amortization, stock-based compensation, foreign currency transaction adjustments, acquisition-related expenses, and unusual items, such as restructuring and reorganization charges, executive transition costs, gains and losses related to the extinguishment of debt, and gains and losses on acquisitions or dispositions, as discussed above. Additionally, management uses non-GAAP free cash flow, among other measures, to assess its financial performance and cash generating capabilities, and believes that it is useful to investors because it shows CSG’s cash available to service debt, make strategic acquisitions and investments, repurchase its common stock, pay cash dividends, and fund ongoing operations. CSG defines non-GAAP free cash flow as net cash flows from operating activities less the purchases of software, property and equipment. Non-GAAP Financial Measures Non-GAAP Operating Income and Non-GAAP Adjusted Operating Margin Percentage: The reconciliation of GAAP operating income to non-GAAP operating income, and calculation of CSG’s non- GAAP adjusted operating margin percentage, for the indicated periods are as follows (in thousands, except percentages): Quarter Ended September 30, Nine Months Ended September 30, 2023 2022 2023 2022 Non-GAAP Operating Income GAAP operating income $ 32,731 $ 19,977 $ 99,130 $ 43,675 Restructuring and reorganization charges (1) 1,152 14,193 8,421 46,304 Executive transition costs 1,148 27 1,148 1,302 Acquisition-related expenses: Amortization of acquired intangible assets 2,996 3,405 9,203 11,017 Transaction-related costs (40 ) 495 2,122 469 Stock-based compensation (1) 7,216 8,650 21,640 20,906 Non-GAAP operating income $ 45,203 $ 46,747 $ 141,664 $ 123,673 Non-GAAP Adjusted Operating Margin Percentage Revenue $ 286,868 $ 273,308 $ 871,934 $ 799,876 Less: Transaction fees (2) (20,314 ) (18,177 ) (63,463 ) (54,928 ) Revenue less transaction fees $ 266,554 $ 255,131 $ 808,471 $ 744,948 Non-GAAP adjusted operating margin percentage 17.0 % 18.3 % 17.5 % 16.6 % (1) Restructuring and reorganization charges include stock-based compensation, which is not included in the stock-based compensation line in the tables above and following, and depreciation, which has not been recorded to the depreciation line item on CSG’s Income Statement. (2) Transaction fees are primarily comprised of fees paid to third-party payment processors and financial institutions and interchange fees under CSG’s payment services contracts. Transaction fees are included in revenue in CSG's Income Statement (and not netted against revenue) because CSG maintains control and acts as principal over the integrated service provided under its payment services customer contracts. However, CSG excludes expense associated with transaction fees from the numerator and denominator in calculating its non-GAAP adjusted operating margin percentage in order to provide comparability with historical and future periods and with its peer group and competitors. Non-GAAP EPS: The reconciliations of GAAP EPS to non-GAAP EPS for the indicated periods are as follows (in thousands, except per share amounts): Quarter Ended Quarter Ended September 30, 2023 September 30, 2022 Amounts EPS (4) Amounts EPS (4) GAAP net income $ 18,694 $ 0.62 $ 12,481 $ 0.40 GAAP income tax provision (3) 7,989 6,239 GAAP income before income taxes 26,683 18,720 Restructuring and reorganization charges 1,152 14,193 Executive transition costs 1,148 27 Acquisition-related costs: Amortization of acquired intangible assets 2,996 3,405 Transaction-related costs (40 ) 495 Stock-based compensation (1) 7,216 8,650 Non-GAAP income before income taxes 39,155 45,490 Non-GAAP income tax provision (3) (11,159 ) (12,510 ) Non-GAAP net income $ 27,996 $ 0.92 $ 32,980 $ 1.06 Nine Months Ended Nine Months Ended September 30, 2023 September 30, 2022 Amounts EPS (4) Amounts EPS (4) GAAP net income $ 53,576 $ 1.75 $ 23,911 $ 0.76 GAAP income tax provision (3) 21,931 8,603 GAAP income before income taxes 75,507 32,514 Restructuring and reorganization charges 8,421 46,304 Executive transition costs 1,148 1,302 Acquisition-related expenses: Amortization of acquired intangible assets 9,203 11,017 Transaction-related costs 2,122 469 Stock-based compensation (1) 21,640 20,906 Loss on extinguishment of debt - 7,456 Non-GAAP income before income taxes 118,041 119,968 Non-GAAP income tax provision (3) (33,642 ) (32,991 ) Non-GAAP net income $ 84,399 $ 2.76 $ 86,977 $ 2.76 (3) For the third quarter and nine months ended September 30, 2023, the GAAP effective income tax rates were approximately 30% and 29%, respectively, and the non-GAAP effective income tax rates were 28.5% for both periods. For the third quarter and nine months ended September 30, 2022 the GAAP effective income tax rates were approximately 33% and 26%, respectively, and the non-GAAP effective income tax rates were 27.5% for both periods. (4) The outstanding diluted shares for the third quarter and nine months ended September 30, 2023 were 30.3 million and 30.5, respectively, and for the third quarter and nine months ended September 30, 2022 were 31.2 million and 31.5 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 Nine Months Ended September 30, September 30, 2023 2022 2023 2022 GAAP net income $ 18,694 $ 12,481 $ 53,576 $ 23,911 GAAP income tax provision 7,989 6,239 21,931 8,603 Interest expense (5) 8,036 4,328 23,092 10,286 Loss on derivative liability upon debt conversion - - - 7,456 Interest and investment income and other, net (1,988 ) (3,071 ) 531 (6,581 ) GAAP operating income 32,731 19,977 99,130 43,675 Restructuring and reorganization charges (1) 1,152 14,193 8,421 46,304 Executive transition costs 1,148 27 1,148 1,302 Acquisition-related expenses: Amortization of acquired intangible assets (6) 2,996 3,405 9,203 11,017 Transaction-related costs (40 ) 495 2,122 469 Stock-based compensation (1) 7,216 8,650 21,640 20,906 Amortization of other intangible assets (6) 3,438 3,530 10,274 10,741 Amortization of customer contract costs (6) 4,997 3,829 14,390 14,150 Depreciation (1) 5,862 5,896 17,155 17,685 Non-GAAP adjusted EBITDA $ 59,500 $ 60,002 $ 183,483 $ 166,249 Non-GAAP adjusted EBITDA as a percentage of revenue less transaction fees (2) 22.3 % 23.5 % 22.7 % 22.3 % (5) Interest expense includes amortization of deferred financing costs as provided in Note 6 below. (6) Amortization on the statement of cash flows is made up of the following items for the indicated periods (in thousands): Quarter Ended Nine Months Ended September 30, September 30, 2023 2022 2023 2022 Amortization of acquired intangible assets $ 2,996 $ 3,405 $ 9,203 $ 11,017 Amortization of other intangible assets 3,438 3,530 10,274 10,741 Amortization of customer contract costs 4,997 3,829 14,390 14,150 Amortization of deferred financing costs 304 186 676 562 Total amortization $ 11,735 $ 10,950 $ 34,543 $ 36,470 Non-GAAP Free Cash Flow: CSG’s calculation of non-GAAP free cash flow and the reconciliation of CSG’s non-GAAP free cash flow measure to cash flows from operating activities are provided below for the indicated periods (in thousands): Quarter Ended Nine Months Ended September 30, September 30, 2023 2022 2023 2022 Cash flows from operating activities $ 24,582 $ 22,838 $ 52,365 $ 9,573 Purchases of software, property and equipment (6,512 ) (11,917 ) (22,940 ) (31,564 ) Non-GAAP free cash flow $ 18,070 $ 10,921 $ 29,425 $ (21,991 ) 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 $ 124,200 $ 131,400 Restructuring and reorganization charges 8,400 8,400 Executive Transition Costs 1,300 1,300 Acquisition-related expenses: Amortization of acquired intangible assets 12,200 12,200 Transaction-related costs 2,100 2,100 Stock-based compensation 30,700 30,700 Non-GAAP operating income $ 178,900 $ 186,100 Non-GAAP Operating Margin Percentage Revenue $ 1,150,000 $ 1,175,000 Less: Transaction fees (82,000 ) (87,000 ) Revenue less transaction fees $ 1,068,000 $ 1,088,000 Non-GAAP adjusted operating margin percentage 16.75 % 17.1 % 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 (8) Amounts EPS (8) GAAP net income $ 66,200 $ 2.19 $ 71,200 $ 2.35 GAAP income tax provision (7) 27,200 29,400 GAAP income before income taxes 93,400 100,600 Restructuring and reorganization charges 8,400 8,400 Executive Transition Costs 1,300 1,300 Acquisition-related expenses: Amortization of acquired intangible assets 12,200 12,200 Transaction-related costs 2,100 2,100 Stock-based compensation 30,700 30,700 Non-GAAP income before income taxes 148,100 155,300 Non-GAAP income tax provision (7) (42,200 ) (43,400 ) Non-GAAP net income $ 105,900 $ 3.50 $ 111,900 $ 3.70 (7) For 2023, the estimated GAAP and non-GAAP effective income tax rates are expected to be approximately 29% and approximately 28% - 28.5%, respectively. (8) The weighted-average diluted shares outstanding are expected to be approximately 30 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 2023 full year financial guidance (in thousands, except percentages): 2023 Guidance Range Low Range High Range GAAP net income $ 66,200 $ 71,200 GAAP income tax provision (7) 27,200 29,400 Interest expense 30,900 30,900 Interest and investment income (3,100 ) (3,100 ) Other, net 3,000 3,000 GAAP operating income 124,200 131,400 Restructuring and reorganization charges 8,400 8,400 Executive transition costs 1,300 1,300 Acquisition-related expenses: Amortization of acquired intangible assets 12,200 12,200 Transaction-related costs 2,100 2,100 Stock-based compensation 30,700 30,700 Amortization of other intangible assets 13,500 13,500 Amortization of client contract costs 20,300 20,300 Depreciation 24,800 24,800 Non-GAAP adjusted EBITDA $ 237,500 $ 244,700 Non-GAAP adjusted EBITDA as a percentage of revenue less transaction fees (2) 22.2 % 22.5 % Non-GAAP Free Cash Flow: CSG’s calculation of non-GAAP free cash flow and the reconciliation of CSG’s non-GAAP free cash flow measure to cash flows from operating activities is provided below for CSG’s 2023 full year financial guidance (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 View source version on businesswire.com: https://www.businesswire.com/news/home/20231101121909/en/Contacts John Rea, Investor Relations (210) 687-4409 E-mail: john.rea@csgi.com
YTD Organic Revenue Up 9.0% YoY Representing CSG’s Best YTD Results in Nearly Two Decades Raising Non-GAAP EPS Guidance & Reiterating All Other Financial Guidance Metrics Repurchased $107 Million of Shares in Q3, Most Quarterly Share Repurchases Since Q3 2007 Successfully Executed $425 Million Convertible Debt Raise in Q3
CSG (NASDAQ: CSGS) today reported results for the quarter ended September 30, 2023. Financial Results: Third quarter 2023 financial results: Total revenue was $286.9 million. GAAP operating income was $32.7 million, or an operating margin of 11.4%, and non-GAAP operating income was $45.2 million, or a non-GAAP adjusted operating margin of 17.0%. GAAP earnings per diluted share (EPS) was $0.62 and non-GAAP EPS was $0.92. Cash flows from operations were $24.6 million, with non-GAAP free cash flow of $18.1 million. Shareholder Returns: CSG declared its quarterly cash dividend of $0.28 per share of common stock, or a total of approximately $9 million, to shareholders. During the third quarter of 2023, CSG repurchased under its stock repurchase program, approximately 1,991,000 shares of its common stock for approximately $107 million. Business Activities: In September 2023, CSG issued $425.0 million of convertible notes (2023 Convertible Notes) due in 2028. “Team CSG had a fantastic first nine months of 2023. We delivered strong financial results across the board highlighted by 9.0% year-over-year organic revenue growth, our strongest first nine-month results in nearly two decades,” said Brian Shepherd, President and Chief Executive Officer of CSG. “During the quarter we completed a successful $425 million convertible debt raise, which lowered our interest rate to 3.875% and significantly decreased our exposure to floating rate debt. We also completed our previously announced $100 million stock repurchase program in the quarter, as we bought back $107 million shares in Q3. Finally, we are raising our non-GAAP EPS guidance and reiterating all other financial targets.” Financial Overview (unaudited) (in thousands, except per share amounts and percentages): Quarter Ended September 30, Nine Months Ended September 30, Percent Percent 2023 2022 Changed 2023 2022 Changed GAAP Results: Revenue $ 286,868 $ 273,308 5.0 % $ 871,934 $ 799,876 9.0 % Operating Income 32,731 19,977 63.8 % 99,130 43,675 127.0 % Operating Margin Percentage 11.4 % 7.3 % 11.4 % 5.5 % EPS $ 0.62 $ 0.40 55.0 % $ 1.75 $ 0.76 130.3 % Non-GAAP Results: Operating Income $ 45,203 $ 46,747 (3.3 %) $ 141,664 $ 123,673 14.5 % Adjusted Operating Margin Percentage 17.0 % 18.3 % 17.5 % 16.6 % EPS $ 0.92 $ 1.06 (13.2 %) $ 2.76 $ 2.76 0.0 % For additional information and reconciliations regarding CSG’s use of non-GAAP financial measures, please refer to the attached Exhibit 2 and the Investor Relations section of CSG’s website at csgi.com. Results of Operations GAAP Results: Total revenue for the third quarter of 2023 was $286.9 million, a 5.0% increase when compared to revenue of $273.3 million for the third quarter of 2022. The year-over-year increase can be mainly attributed to the continued growth of CSG’s revenue management solutions, to include the conversion of customer accounts on CSG solutions, other ancillary services and increased payments volumes. GAAP operating income for the third quarter of 2023 was $32.7 million, or 11.4% of total revenue, compared to $20.0 million, or 7.3% of total revenue, for the third quarter of 2022. The increase in operating income can be mainly attributed to the $13.0 million decrease in restructuring and reorganization charges between years. GAAP EPS for the third quarter of 2023 was $0.62, as compared to $0.40 for the third quarter of 2022. The increase in GAAP EPS is mainly due to the higher operating income in the third quarter of 2023, discussed above, partially offset by higher interest expense and foreign currency movements. Non-GAAP Results: Non-GAAP operating income for the third quarter of 2023 was $45.2 million, or a non-GAAP adjusted operating margin of 17.0%, compared to $46.7 million, or a non-GAAP adjusted operating margin of 18.3% for the third quarter of 2022. Non-GAAP EPS for the third quarter of 2023 was $0.92 compared to $1.06 for the third quarter of 2022. The decrease in non-GAAP EPS is mainly due to higher interest expense and foreign currency movements. Balance Sheet and Cash Flows Cash, cash equivalents, and short-term investments as of September 30, 2023 were $146.7 million compared to $146.2 million as of June 30, 2023 and $150.4 million as of December 31, 2022. CSG had net cash flows provided by operations for the third quarters ended September 30, 2023 and 2022 of $24.6 million and $22.8 million, respectively, and had non-GAAP free cash flow of $18.1 million and $10.9 million, respectively. Summary of Financial Guidance CSG is revising its financial guidance for the full year 2023, as follows: As of November 1, 2023 Previous GAAP Measures: Revenue No change $1,150 - $1,175 million Non-GAAP Measures: Adjusted Operating Margin Percentage No change 16.75% - 17.1% EPS $3.50 - $3.70 $3.42 - $3.58 Adjusted EBITDA No change $238 - $245 million Free Cash Flow No change $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, November 1, 2023 at 5:00 p.m. ET, to discuss CSG’s third quarter 2023 earnings results. The call will be carried live and archived on the Internet. A link to the conference call is available at http://ir.csgi.com. In addition, to reach the conference by phone, call 1-888-412-4131 and use the passcode 2327393. Additional Information For information about CSG, please visit CSG’s web site at csgi.com. Additional information can be found in the Investor Relations section of the website. About CSG CSG empowers companies to build unforgettable experiences, making it easier for people and businesses to connect with, use and pay for the services they value most. Our customer experience, billing and payments solutions help companies of any size make money and make a difference. With our SaaS solutions, company leaders can take control of their future and tap into guidance along the way from our fiercely committed and forward-thinking CSGers around the world. Want to be future-ready and a change-maker like the global brands that trust CSG? Visit csgi.com to learn more. Forward-Looking Statements This news release contains forward-looking statements as defined under the Securities Act of 1933, as amended, that are based on assumptions about a number of important factors and involve risks and uncertainties that could cause actual results to differ materially from what appears in this news release. Some of these key factors include, but are not limited to the following items: CSG derives approximately forty percent of its revenue from its two largest customers; Fluctuations in credit market conditions, general global economic and political conditions, and foreign currency exchange rates; CSG’s ability to maintain a reliable, secure computing environment; Continued market acceptance of CSG’s products and services; CSG’s ability to continuously develop and enhance products in a timely, cost-effective, technically advanced and competitive manner; CSG’s ability to deliver its solutions in a timely fashion within budget, particularly large and complex software implementations; CSG’s dependency on the global telecommunications industry, and in particular, the North American telecommunications industry; CSG’s ability to meet its financial expectations; Increasing competition in CSG’s market from companies of greater size and with broader presence; CSG’s ability to successfully integrate and manage acquired businesses or assets to achieve expected strategic, operating and financial goals; CSG’s ability to protect its intellectual property rights; CSG’s ability to conduct business in the international marketplace; CSG’s ability to comply with applicable U.S. and International laws and regulations; and CSG’s business may be disrupted, and its results of operations and cash flows adversely affected by a global pandemic. This list is not exhaustive, and readers are encouraged to review the additional risks and important factors described in CSG’s reports on Forms 10-K and 10-Q and other filings made with the SEC. CSG SYSTEMS INTERNATIONAL, INC. CONDENSED CONSOLIDATED BALANCE SHEETS-UNAUDITED (in thousands) September 30, 2023 December 31, 2022 ASSETS Current assets: Cash and cash equivalents $ 146,730 $ 150,365 Short-term investments - 71 Total cash, cash equivalents, and short-term investments 146,730 150,436 Settlement and merchant reserve assets 193,371 238,653 Trade accounts receivable: Billed, net of allowance of $4,731 and $5,528 275,161 274,189 Unbilled 83,612 52,830 Income taxes receivable 2,492 1,270 Other current assets 58,701 48,577 Total current assets 760,067 765,955 Non-current assets: Property and equipment, net of depreciation of $118,424 and $105,466 68,029 71,787 Operating lease right-of-use assets 37,196 49,687 Software, net of amortization of $159,451 and $150,337 16,741 22,774 Goodwill 302,996 304,036 Acquired customer contracts, net of amortization of $127,490 and $120,080 37,932 45,417 Customer contract costs, net of amortization of $38,174 and $30,601 53,336 54,735 Deferred income taxes 46,271 26,206 Other assets 7,034 7,956 Total non-current assets 569,535 582,598 Total assets $ 1,329,602 $ 1,348,553 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Current portion of long-term debt $ 22,500 $ 37,500 Operating lease liabilities 16,915 21,012 Customer deposits 33,084 40,472 Trade accounts payable 42,623 47,720 Accrued employee compensation 64,313 68,321 Settlement and merchant reserve liabilities 191,637 237,810 Deferred revenue 61,419 46,033 Income taxes payable 2,211 5,455 Other current liabilities 26,831 22,886 Total current liabilities 461,533 527,209 Non-current liabilities: Long-term debt, net of unamortized discounts of $16,502 and $2,656 535,998 375,469 Operating lease liabilities 37,574 53,207 Deferred revenue 20,828 21,991 Income taxes payable 3,243 3,410 Deferred income taxes 128 117 Other non-current liabilities 9,807 11,901 Total non-current liabilities 607,578 466,095 Total liabilities 1,069,111 993,304 Stockholders' equity: Preferred stock, par value $.01 per share; 10,000 shares authorized; zero shares issued and outstanding - - Common stock, par value $.01 per share; 100,000 shares authorized; 29,726 and 31,269 shares outstanding 713 708 Additional paid-in capital 483,063 495,189 Treasury stock, at cost; 40,202 and 38,210 shares (1,125,897 ) (1,018,034 ) Accumulated other comprehensive income (loss): Unrealized gain on short-term investments, net of tax 1 1 Cumulative foreign currency translation adjustments (60,773 ) (58,830 ) Accumulated earnings 963,384 936,215 Total stockholders' equity 260,491 355,249 Total liabilities and stockholders' equity $ 1,329,602 $ 1,348,553 CSG SYSTEMS INTERNATIONAL, INC. CONDENSED CONSOLIDATED STATEMENTS OF INCOME-UNAUDITED (in thousands, except per share amounts) Quarter Ended Nine Months Ended September 30, 2023 September 30, 2022 September 30, 2023 September 30, 2022 Revenue $ 286,868 $ 273,308 $ 871,934 $ 799,876 Cost of revenue (exclusive of depreciation, shown separately below) 152,734 138,462 458,897 415,014 Other operating expenses: Research and development 35,292 35,754 107,401 103,365 Selling, general and administrative 59,097 59,026 180,930 173,833 Depreciation 5,862 5,896 17,155 17,685 Restructuring and reorganization charges 1,152 14,193 8,421 46,304 Total operating expenses 254,137 253,331 772,804 756,201 Operating income 32,731 19,977 99,130 43,675 Other income (expense): Interest expense (8,036 ) (4,328 ) (23,092 ) (10,286 ) Interest and investment income, net 1,175 281 2,516 537 Loss on derivative liability upon debt conversion - - - (7,456 ) Other, net 813 2,790 (3,047 ) 6,044 Total other (6,048 ) (1,257 ) (23,623 ) (11,161 ) Income before income taxes 26,683 18,720 75,507 32,514 Income tax provision (7,989 ) (6,239 ) (21,931 ) (8,603 ) Net income $ 18,694 $ 12,481 $ 53,576 $ 23,911 Weighted-average shares outstanding: Basic 30,097 30,941 30,381 31,219 Diluted 30,284 31,159 30,540 31,487 Earnings per common share: Basic $ 0.62 $ 0.40 $ 1.76 $ 0.77 Diluted 0.62 0.40 1.75 0.76 CSG SYSTEMS INTERNATIONAL, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS-UNAUDITED (in thousands) Nine Months Ended September 30, 2023 September 30, 2022 Cash flows from operating activities: Net income $ 53,576 $ 23,911 Adjustments to reconcile net income to net cash provided by operating activities- Depreciation 17,549 21,817 Amortization 34,543 36,470 Asset impairment 1,689 30,126 Gain on lease modifications (4,349 ) - Loss on short-term investments and other - 19 Loss on derivative liability upon debt conversion - 7,456 Unrealized foreign currency transactions gain, net (442 ) (1,700 ) Deferred income taxes (12,504 ) (16,457 ) Stock-based compensation 21,253 20,778 Subtotal 111,315 122,420 Changes in operating assets and liabilities, net of acquired amounts: Trade accounts receivable, net (33,351 ) (22,026 ) Other current and non-current assets and liabilities (11,449 ) (16,430 ) Income taxes payable/receivable (4,650 ) (7,188 ) Trade accounts payable and accrued liabilities (24,158 ) (67,053 ) Deferred revenue 14,658 (150 ) Net cash provided by operating activities 52,365 9,573 Cash flows from investing activities: Purchases of software, property and equipment (22,940 ) (31,564 ) Proceeds from sale/maturity of short-term investments 71 27,447 Net cash used in investing activities (22,869 ) (4,117 ) Cash flows from financing activities: Proceeds from issuance of common stock 2,541 2,217 Payment of cash dividends (26,231 ) (25,396 ) Repurchase of common stock (116,418 ) (73,380 ) Deferred acquisition payments (3,220 ) (1,959 ) Proceeds from long-term debt 470,000 290,000 Payments on long-term debt (310,625 ) (247,926 ) Purchase of capped call transactions related to convertible notes (34,298 ) - Payments of deferred financing costs (13,518 ) - Settlement and merchant reserve activity (46,196 ) (13,931 ) Net cash used in financing activities (77,965 ) (70,375 ) Effect of exchange rate fluctuations on cash, cash equivalents, and restricted cash (448 ) (7,689 ) Net decrease in cash, cash equivalents, and restricted cash (48,917 ) (72,608 ) Cash, cash equivalents, and restricted cash, beginning of period 389,018 391,902 Cash, cash equivalents, and restricted cash, end of period $ 340,101 $ 319,294 Supplemental disclosures of cash flow information: Cash paid during the period for- Interest $ 21,772 $ 12,367 Income taxes 39,136 31,817 Reconciliation of cash, cash equivalents, and restricted cash: Cash and cash equivalents $ 146,730 $ 146,685 Settlement and merchant reserve assets 193,371 172,609 Total cash, cash equivalents, and restricted cash $ 340,101 $ 319,294 EXHIBIT 1 CSG SYSTEMS INTERNATIONAL, INC. SUPPLEMENTAL REVENUE ANALYSIS Revenue by Significant Customers: 10% or more of Revenue Quarter Ended Quarter Ended Quarter Ended September 30, 2023 June 30, 2023 September 30, 2022 Amount % of Revenue Amount % of Revenue Amount % of Revenue Charter $ 59,432 21 % $ 60,175 21 % $ 57,974 21 % Comcast 53,653 19 % 53,757 19 % 53,533 20 % Revenue by Vertical Quarter Ended Quarter Ended Quarter Ended September 30, June 30, September 30, 2023 2023 2022 Broadband/Cable/Satellite 53 % 54 % 55 % Telecommunications 20 % 18 % 20 % All other 27 % 28 % 25 % Total revenue 100 % 100 % 100 % Revenue by Geography Quarter Ended Quarter Ended Quarter Ended September 30, June 30, September 30, 2023 2023 2022 Americas 86 % 87 % 86 % Europe, Middle East and Africa 9 % 9 % 10 % Asia Pacific 5 % 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 operating income, non-GAAP adjusted operating margin percentage, non-GAAP EPS, non-GAAP adjusted EBITDA, and non-GAAP free cash flow. CSG believes that these non-GAAP financial measures, when reviewed in conjunction with its GAAP financial measures, provide investors with greater transparency to the information used by CSG’s management in its financial and operational decision making. CSG uses these non-GAAP financial measures for the following purposes: Certain internal financial planning, reporting, and analysis; Forecasting and budgeting; Certain management compensation incentives; and Communications with CSG’s Board of Directors, stockholders, financial analysts, and investors. These non-GAAP financial measures are provided with the intent of providing investors with the following information: A more complete understanding of CSG’s underlying operational results, trends, and cash generating capabilities; Consistency and comparability with CSG’s historical financial results; and Comparability to similar companies, many of which present similar non-GAAP financial measures to investors. Non-GAAP financial measures are not measures of performance under GAAP, and therefore should not be considered in isolation or as a substitute for GAAP financial information. Limitations with the use of non-GAAP financial measures include the following items: Non-GAAP financial measures are not based on any comprehensive set of accounting rules or principles; The way in which CSG calculates non-GAAP financial measures may differ from the way in which other companies calculate similar non-GAAP financial measures; Non-GAAP financial measures do not include all items of income and expense that affect CSG’s operations and that are required by GAAP to be included in financial statements; Certain adjustments to CSG’s non-GAAP financial measures result in the exclusion of items that are recurring and will be reflected in CSG’s financial statements in future periods; and Certain charges excluded from CSG’s non-GAAP financial measures are cash expenses, and therefore do impact CSG’s cash position. CSG compensates for these limitations by relying primarily on its GAAP results and using non-GAAP financial measures as a supplement only. Additionally, CSG provides specific information regarding the treatment of GAAP amounts considered in preparing the non-GAAP financial measures and reconciles each n on-GAAP financial measure to the most directly comparable GAAP measure. Non-GAAP Financial Measures: Basis of Presentation The table below outlines the exclusions from CSG’s non-GAAP financial measures: Non-GAAP Exclusions Operating Income Adjusted Operating Margin Percentage EPS Transaction fees — X — Restructuring and reorganization charges X X X Executive transition costs X X X Acquisition-related expenses: Amortization of acquired intangible assets X X X Transaction-related costs X X X Stock-based compensation X X X Gain (loss) on debt extinguishment/conversion — — X Gain (loss) on acquisitions or dispositions — — X Unusual income tax matters — — X CSG believes that excluding certain items in calculating its non-GAAP financial measures provides meaningful supplemental information regarding CSG’s performance and these items are excluded for the following reasons: Transaction fees are primarily comprised of fees paid to third-party payment processors and financial institutions and interchange fees under CSG’s payment services contracts. Transaction fees are included in revenue in CSG’s Income Statement (and not netted against revenue) because CSG maintains control and acts as principal over the integrated service provided under its payment services customer contracts. However, CSG excludes expense associated with transaction fees from the numerator and denominator in calculating its non-GAAP adjusted operating margin percentage in order to provide comparability with historical and future periods and with its peer group and competitors. Restructuring and reorganization charges are expenses that result from cost reduction initiatives and/or significant changes to CSG’s business, to include such things as involuntary employee terminations, changes in management structure, divestitures of businesses, facility consolidations and abandonments, and fundamental reorganizations impacting operational focus and direction. These charges are not considered reflective of CSG’s recurring business operating results. The exclusion of these items in calculating CSG’s non-GAAP financial measures allows management and investors an additional means to compare CSG’s current financial results with historical and future periods. Executive transition costs include expenses incurred related to a departure of a CSG executive officer under the terms of the related separation agreement. These types of costs are not considered reflective of CSG’s recurring business operating results. The exclusion of these costs in calculating CSG’s non-GAAP financial measures allows management and investors an additional means to compare CSG’s current financial results with historical and future periods. Acquisition-related expenses include amortization of acquired intangible assets and transaction-related costs, to include earn-out compensation. Transaction-related costs, which typically include expenses related to legal, accounting, and other professional services, are direct and incremental expenses related to business acquisitions, and thus, are not considered reflective of CSG’s recurring business operating results. The total amount of acquisition-related expenses can vary significantly between periods based on the number and size of acquisition activities, previously acquired intangible assets becoming fully amortized, and ultimate realization of earn-out compensation. In addition, the timing of these expenses may not directly correlate with underlying performance of the CSG’s operations. Therefore, the exclusion of acquisition-related expenses in calculating CSG’s non-GAAP financial measures allows management and investors an additional means to compare CSG’s current financial results with historical and future periods. Stock-based compensation results from CSG’s issuance of equity awards to its employees under incentive compensation programs. The amount of this incentive compensation in any period is not generally linked to the level of performance by employees or CSG. The exclusion of these expenses in calculating CSG’s non-GAAP financial measures allows management and investors an additional means to evaluate the non-cash expense related to compensation included in CSG’s results of operations, and therefore, the exclusion of this item allows investors to further evaluate the cash generating capabilities of CSG’s business. Gains and losses related to the extinguishment/conversion of debt can be as a result of the refinancing of CSG’s credit agreement and/or repurchase, conversion, or settlement of CSG’s convertible notes. These activities, to include any derivative activity related to debt conversions, are not considered reflective of CSG’s recurring business operating results. Any resulting gain or loss is generally non-cash income or expense, and therefore, the exclusion of these items allows investors to further evaluate the cash impact of these activities for cash flow and liquidity purposes. In addition, the exclusion of these gains and losses in calculating CSG’s non-GAAP EPS allows management and investors an additional means to compare CSG’s current operating results with historical and future periods. Gains or losses related to the acquisition or disposition of certain of CSG’s business activities are not considered reflective of CSG’s recurring business operating results. Any resulting gain or loss is generally non-cash income or expense, and therefore, the exclusion of these items allows investors to further evaluate the cash impact of these activities for cash flow and liquidity purposes. In addition, the exclusion of these gains and losses in calculating CSG’s non-GAAP EPS allows management and investors an additional means to compare CSG’s current operating results with historical and future periods. Unusual items within CSG’s quarterly and/or annual income tax expense can occur from such things as income tax accounting timing matters, income taxes related to unusual events, or as a result of different treatment of certain items for book accounting and income tax purposes. Consideration of such items in calculating CSG’s non-GAAP financial measures allows management and investors an additional means to compare CSG’s current financial results with historical and future periods. CSG also reports non-GAAP adjusted EBITDA and non-GAAP free cash flow. Management believes non-GAAP adjusted EBITDA is a useful measure to investors in evaluating CSG’s operating performance, debt servicing capabilities, and enterprise valuation. CSG defines non-GAAP adjusted EBITDA as income before interest, income taxes, depreciation, amortization, stock-based compensation, foreign currency transaction adjustments, acquisition-related expenses, and unusual items, such as restructuring and reorganization charges, executive transition costs, gains and losses related to the extinguishment of debt, and gains and losses on acquisitions or dispositions, as discussed above. Additionally, management uses non-GAAP free cash flow, among other measures, to assess its financial performance and cash generating capabilities, and believes that it is useful to investors because it shows CSG’s cash available to service debt, make strategic acquisitions and investments, repurchase its common stock, pay cash dividends, and fund ongoing operations. CSG defines non-GAAP free cash flow as net cash flows from operating activities less the purchases of software, property and equipment. Non-GAAP Financial Measures Non-GAAP Operating Income and Non-GAAP Adjusted Operating Margin Percentage: The reconciliation of GAAP operating income to non-GAAP operating income, and calculation of CSG’s non- GAAP adjusted operating margin percentage, for the indicated periods are as follows (in thousands, except percentages): Quarter Ended September 30, Nine Months Ended September 30, 2023 2022 2023 2022 Non-GAAP Operating Income GAAP operating income $ 32,731 $ 19,977 $ 99,130 $ 43,675 Restructuring and reorganization charges (1) 1,152 14,193 8,421 46,304 Executive transition costs 1,148 27 1,148 1,302 Acquisition-related expenses: Amortization of acquired intangible assets 2,996 3,405 9,203 11,017 Transaction-related costs (40 ) 495 2,122 469 Stock-based compensation (1) 7,216 8,650 21,640 20,906 Non-GAAP operating income $ 45,203 $ 46,747 $ 141,664 $ 123,673 Non-GAAP Adjusted Operating Margin Percentage Revenue $ 286,868 $ 273,308 $ 871,934 $ 799,876 Less: Transaction fees (2) (20,314 ) (18,177 ) (63,463 ) (54,928 ) Revenue less transaction fees $ 266,554 $ 255,131 $ 808,471 $ 744,948 Non-GAAP adjusted operating margin percentage 17.0 % 18.3 % 17.5 % 16.6 % (1) Restructuring and reorganization charges include stock-based compensation, which is not included in the stock-based compensation line in the tables above and following, and depreciation, which has not been recorded to the depreciation line item on CSG’s Income Statement. (2) Transaction fees are primarily comprised of fees paid to third-party payment processors and financial institutions and interchange fees under CSG’s payment services contracts. Transaction fees are included in revenue in CSG's Income Statement (and not netted against revenue) because CSG maintains control and acts as principal over the integrated service provided under its payment services customer contracts. However, CSG excludes expense associated with transaction fees from the numerator and denominator in calculating its non-GAAP adjusted operating margin percentage in order to provide comparability with historical and future periods and with its peer group and competitors. Non-GAAP EPS: The reconciliations of GAAP EPS to non-GAAP EPS for the indicated periods are as follows (in thousands, except per share amounts): Quarter Ended Quarter Ended September 30, 2023 September 30, 2022 Amounts EPS (4) Amounts EPS (4) GAAP net income $ 18,694 $ 0.62 $ 12,481 $ 0.40 GAAP income tax provision (3) 7,989 6,239 GAAP income before income taxes 26,683 18,720 Restructuring and reorganization charges 1,152 14,193 Executive transition costs 1,148 27 Acquisition-related costs: Amortization of acquired intangible assets 2,996 3,405 Transaction-related costs (40 ) 495 Stock-based compensation (1) 7,216 8,650 Non-GAAP income before income taxes 39,155 45,490 Non-GAAP income tax provision (3) (11,159 ) (12,510 ) Non-GAAP net income $ 27,996 $ 0.92 $ 32,980 $ 1.06 Nine Months Ended Nine Months Ended September 30, 2023 September 30, 2022 Amounts EPS (4) Amounts EPS (4) GAAP net income $ 53,576 $ 1.75 $ 23,911 $ 0.76 GAAP income tax provision (3) 21,931 8,603 GAAP income before income taxes 75,507 32,514 Restructuring and reorganization charges 8,421 46,304 Executive transition costs 1,148 1,302 Acquisition-related expenses: Amortization of acquired intangible assets 9,203 11,017 Transaction-related costs 2,122 469 Stock-based compensation (1) 21,640 20,906 Loss on extinguishment of debt - 7,456 Non-GAAP income before income taxes 118,041 119,968 Non-GAAP income tax provision (3) (33,642 ) (32,991 ) Non-GAAP net income $ 84,399 $ 2.76 $ 86,977 $ 2.76 (3) For the third quarter and nine months ended September 30, 2023, the GAAP effective income tax rates were approximately 30% and 29%, respectively, and the non-GAAP effective income tax rates were 28.5% for both periods. For the third quarter and nine months ended September 30, 2022 the GAAP effective income tax rates were approximately 33% and 26%, respectively, and the non-GAAP effective income tax rates were 27.5% for both periods. (4) The outstanding diluted shares for the third quarter and nine months ended September 30, 2023 were 30.3 million and 30.5, respectively, and for the third quarter and nine months ended September 30, 2022 were 31.2 million and 31.5 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 Nine Months Ended September 30, September 30, 2023 2022 2023 2022 GAAP net income $ 18,694 $ 12,481 $ 53,576 $ 23,911 GAAP income tax provision 7,989 6,239 21,931 8,603 Interest expense (5) 8,036 4,328 23,092 10,286 Loss on derivative liability upon debt conversion - - - 7,456 Interest and investment income and other, net (1,988 ) (3,071 ) 531 (6,581 ) GAAP operating income 32,731 19,977 99,130 43,675 Restructuring and reorganization charges (1) 1,152 14,193 8,421 46,304 Executive transition costs 1,148 27 1,148 1,302 Acquisition-related expenses: Amortization of acquired intangible assets (6) 2,996 3,405 9,203 11,017 Transaction-related costs (40 ) 495 2,122 469 Stock-based compensation (1) 7,216 8,650 21,640 20,906 Amortization of other intangible assets (6) 3,438 3,530 10,274 10,741 Amortization of customer contract costs (6) 4,997 3,829 14,390 14,150 Depreciation (1) 5,862 5,896 17,155 17,685 Non-GAAP adjusted EBITDA $ 59,500 $ 60,002 $ 183,483 $ 166,249 Non-GAAP adjusted EBITDA as a percentage of revenue less transaction fees (2) 22.3 % 23.5 % 22.7 % 22.3 % (5) Interest expense includes amortization of deferred financing costs as provided in Note 6 below. (6) Amortization on the statement of cash flows is made up of the following items for the indicated periods (in thousands): Quarter Ended Nine Months Ended September 30, September 30, 2023 2022 2023 2022 Amortization of acquired intangible assets $ 2,996 $ 3,405 $ 9,203 $ 11,017 Amortization of other intangible assets 3,438 3,530 10,274 10,741 Amortization of customer contract costs 4,997 3,829 14,390 14,150 Amortization of deferred financing costs 304 186 676 562 Total amortization $ 11,735 $ 10,950 $ 34,543 $ 36,470 Non-GAAP Free Cash Flow: CSG’s calculation of non-GAAP free cash flow and the reconciliation of CSG’s non-GAAP free cash flow measure to cash flows from operating activities are provided below for the indicated periods (in thousands): Quarter Ended Nine Months Ended September 30, September 30, 2023 2022 2023 2022 Cash flows from operating activities $ 24,582 $ 22,838 $ 52,365 $ 9,573 Purchases of software, property and equipment (6,512 ) (11,917 ) (22,940 ) (31,564 ) Non-GAAP free cash flow $ 18,070 $ 10,921 $ 29,425 $ (21,991 ) 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 $ 124,200 $ 131,400 Restructuring and reorganization charges 8,400 8,400 Executive Transition Costs 1,300 1,300 Acquisition-related expenses: Amortization of acquired intangible assets 12,200 12,200 Transaction-related costs 2,100 2,100 Stock-based compensation 30,700 30,700 Non-GAAP operating income $ 178,900 $ 186,100 Non-GAAP Operating Margin Percentage Revenue $ 1,150,000 $ 1,175,000 Less: Transaction fees (82,000 ) (87,000 ) Revenue less transaction fees $ 1,068,000 $ 1,088,000 Non-GAAP adjusted operating margin percentage 16.75 % 17.1 % 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 (8) Amounts EPS (8) GAAP net income $ 66,200 $ 2.19 $ 71,200 $ 2.35 GAAP income tax provision (7) 27,200 29,400 GAAP income before income taxes 93,400 100,600 Restructuring and reorganization charges 8,400 8,400 Executive Transition Costs 1,300 1,300 Acquisition-related expenses: Amortization of acquired intangible assets 12,200 12,200 Transaction-related costs 2,100 2,100 Stock-based compensation 30,700 30,700 Non-GAAP income before income taxes 148,100 155,300 Non-GAAP income tax provision (7) (42,200 ) (43,400 ) Non-GAAP net income $ 105,900 $ 3.50 $ 111,900 $ 3.70 (7) For 2023, the estimated GAAP and non-GAAP effective income tax rates are expected to be approximately 29% and approximately 28% - 28.5%, respectively. (8) The weighted-average diluted shares outstanding are expected to be approximately 30 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 2023 full year financial guidance (in thousands, except percentages): 2023 Guidance Range Low Range High Range GAAP net income $ 66,200 $ 71,200 GAAP income tax provision (7) 27,200 29,400 Interest expense 30,900 30,900 Interest and investment income (3,100 ) (3,100 ) Other, net 3,000 3,000 GAAP operating income 124,200 131,400 Restructuring and reorganization charges 8,400 8,400 Executive transition costs 1,300 1,300 Acquisition-related expenses: Amortization of acquired intangible assets 12,200 12,200 Transaction-related costs 2,100 2,100 Stock-based compensation 30,700 30,700 Amortization of other intangible assets 13,500 13,500 Amortization of client contract costs 20,300 20,300 Depreciation 24,800 24,800 Non-GAAP adjusted EBITDA $ 237,500 $ 244,700 Non-GAAP adjusted EBITDA as a percentage of revenue less transaction fees (2) 22.2 % 22.5 % Non-GAAP Free Cash Flow: CSG’s calculation of non-GAAP free cash flow and the reconciliation of CSG’s non-GAAP free cash flow measure to cash flows from operating activities is provided below for CSG’s 2023 full year financial guidance (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 View source version on businesswire.com: https://www.businesswire.com/news/home/20231101121909/en/