CSG Systems International Reports Record Revenues for Fourth Quarter and Full Year 2019
GREENWOOD VILLAGE, Colo.--(BUSINESS WIRE)-- CSG (NASDAQ: CSGS), the trusted partner to simplify the complexity of business transformation in the digital age, today reported results for the quarter and year ended December 31, 2019.
Financial Results:
-
Fourth quarter 2019 financial results:
- Total revenues were $254.7 million and total non-GAAP adjusted revenues were $236.9 million.
- GAAP operating income was $30.3 million, or 11.9% of total revenues, and non-GAAP operating income was $41.5 million, or 17.5% of non-GAAP adjusted revenues.
- GAAP earnings per diluted share (EPS) was $0.70 and non-GAAP EPS was $0.98.
- Cash flows from operations were $43.5 million, with non-GAAP free cash flow of $33.9 million.
-
Full year 2019 financial results:
- Total revenues grew 14% year-over-year to a record high of $996.8 million and non-GAAP adjusted revenues were $927.7 million.
- GAAP operating income was $126.1 million, or 12.7% of total revenues, and non-GAAP operating income was $165.7 million, or 17.9% of non-GAAP adjusted revenues.
- GAAP EPS was $2.55 and non-GAAP EPS was $3.53.
- Cash flows from operations were $151.1 million, with non-GAAP free cash flow of $113.8 million.
Shareholder Returns:
- CSG declared its quarterly cash dividend of $0.2225 per share of common stock, or a total of approximately $7 million, to shareholders, bringing total 2019 dividends to approximately $29 million.
- In February 2020, CSG’s Board of Directors approved an approximately 6% increase in CSG’s cash dividend, with quarterly payments of $0.235 per share of common stock to be paid in March 2020.
- During the quarter and full year 2019, CSG repurchased under its stock repurchase program, approximately 91,000 shares of its common stock for approximately $5 million and approximately 576,000 shares of its common stock for approximately $26 million, respectively.
Business Activities:
- In December 2019, CSG entered into a five-year extension with Comcast, extending its partnership through December 31, 2025, as the provider of billing services for Comcast’s residential broadband, video, home, and voice customers.
- On January 2, 2020, CSG acquired certain assets of Tekzenit, Inc., based in Dallas, Texas, that provides strategy, design engineering, and technology enablement to improve client experiences across all communication channels, for approximately $10 million.
“This was a solid quarter and year for CSG, with record revenue highlighting the quality of our execution,” said Bret Griess, president and chief executive officer for CSG. “This past year has helped further position CSG as a trusted provider of solutions that help our clients better acquire, monetize, engage, and retain their customers.”
“The long-term contract extension we signed with our largest customer in December was a great affirmation of the value we are delivering to the broad communications and entertainment marketplace but was just one among many key sales wins. We added many new logos to our mix of customers worldwide, further diversifying our base, and strengthening our competitive position. Importantly, we remain well positioned to deliver even greater value in 2020 and beyond.”
Financial Overview (unaudited) |
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(in thousands, except per share amounts and percentages): |
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|
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Quarter Ended December 31, |
|
|
Year Ended December 31, |
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|
|
|
|
|
|
|
|
|
|
Percent |
|
|
|
|
|
|
|
|
|
|
Percent |
|
||
|
|
2019 |
|
|
2018 |
|
|
Changed |
|
|
2019 |
|
|
2018 |
|
|
Changed |
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||||||
GAAP Results: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues |
|
$ |
254,747 |
|
|
$ |
247,267 |
|
|
|
3 |
% |
|
$ |
996,810 |
|
|
$ |
875,059 |
|
|
|
14 |
% |
Operating Income |
|
|
30,258 |
|
|
|
29,425 |
|
|
|
3 |
% |
|
|
126,109 |
|
|
|
104,932 |
|
|
|
20 |
% |
Operating Margin Percentage |
|
|
11.9 |
% |
|
|
11.9 |
% |
|
|
|
|
|
|
12.7 |
% |
|
|
12.0 |
% |
|
|
|
|
EPS |
|
$ |
0.70 |
|
|
$ |
0.64 |
|
|
|
9 |
% |
|
$ |
2.55 |
|
|
$ |
2.01 |
|
|
|
27 |
% |
Non-GAAP Results: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted Revenues |
|
$ |
236,907 |
|
|
$ |
231,665 |
|
|
|
2 |
% |
|
$ |
927,696 |
|
|
$ |
859,457 |
|
|
|
8 |
% |
Operating Income |
|
|
41,540 |
|
|
|
41,400 |
|
|
|
0 |
% |
|
|
165,702 |
|
|
|
147,855 |
|
|
|
12 |
% |
Adjusted Operating Margin Percentage |
|
|
17.5 |
% |
|
|
17.9 |
% |
|
|
|
|
|
|
17.9 |
% |
|
|
17.2 |
% |
|
|
|
|
EPS |
|
$ |
0.98 |
|
|
$ |
0.95 |
|
|
|
3 |
% |
|
$ |
3.53 |
|
|
$ |
3.06 |
|
|
|
15 |
% |
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 revenues for the fourth quarter of 2019 were $254.7 million, a 3% increase when compared to revenues of $247.3 million for the fourth quarter of 2018, and a 1% increase when compared to $251.4 million for the third quarter of 2019. These increases can be mainly attributed to the continued growth in our cloud solutions. Total revenues for the full year 2019 were $996.8 million, a 14% increase when compared to revenues of $875.1 million for the full year 2018. The full year-over-year increase in revenues is primarily due to the acquisitions of Business Ink on February 28, 2018 and Forte on October 1, 2018, and to a lesser degree, the continued growth in our cloud solutions and managed services arrangements.
GAAP operating income for the fourth quarter of 2019 was $30.3 million, or 11.9% of total revenues, compared to $29.4 million, or 11.9% of total revenues, for the fourth quarter of 2018, and $33.4 million, or 13.3% of total revenues, for the third quarter of 2019. GAAP operating income for the full year 2019 was $126.1 million, or 12.7% of total revenues, compared to $104.9 million, or 12.0% of total revenues, for the full year 2018.
GAAP EPS for the fourth quarter of 2019 was $0.70 as compared to $0.64 for the fourth quarter of 2018, and $0.66 for the third quarter of 2019. GAAP EPS for the fourth quarter of 2019 was positively impacted by a 7% effective income tax rate for the quarter resulting primarily from an approximate $4 million net income tax benefit related to Comcast’s exercise of 0.4 million vested common stock warrants in December 2019. CSG net settled Comcast’s exercise by paying cash of $12.9 million. GAAP EPS for the full year 2019 was $2.55, compared to $2.01 for the full year 2018. The increase in the full year GAAP EPS is reflective of the higher operating income for 2019, mainly due to the higher revenues, and to a much lesser degree, the lower effective income tax rate between years.
Non-GAAP Results: Non-GAAP adjusted revenues for the fourth quarter of 2019 were $236.9 million, a 2% increase when compared to $231.7 million for the fourth quarter of 2018, and a 1% increase when compared to $235.1 million for the third quarter of 2019. Total non-GAAP adjusted revenues for the full year 2019 were $927.7 million, an 8% increase when compared to $859.5 million for the full year 2018.
Non-GAAP operating income for the fourth quarter of 2019 was $41.5 million, or 17.5% of total non-GAAP adjusted revenues, compared to $41.4 million, or 17.9% of total non-GAAP adjusted revenues for the fourth quarter of 2018, and $42.7 million, or 18.2% of total non-GAAP adjusted revenues for the third quarter of 2019. Non-GAAP operating income for the full year 2019 was $165.7 million, or 17.9% of total non-GAAP adjusted revenues, compared to $147.9 million, or 17.2% of total non-GAAP adjusted revenues for the full year 2018.
Non-GAAP EPS for the fourth quarter of 2019 was $0.98, compared to $0.95 for the fourth quarter of 2018, and $0.88 for the third quarter of 2019. Non-GAAP EPS for the full year 2019 was $3.53 compared to $3.06 for the full year 2018.
The increases in non-GAAP adjusted revenues and non-GAAP EPS between years are primarily due to the factors discussed above.
Balance Sheet and Cash Flows
Cash, cash equivalents and short-term investments as of December 31, 2019 were $182.7 million compared to $172.0 million as of September 30, 2019 and $162.9 million as of December 31, 2018. CSG had net cash flows from operations for the fourth quarters ended December 31, 2019 and 2018 of $43.5 million and $70.1 million, respectively, and had non-GAAP free cash flow of $33.9 million and $57.0 million, respectively. For the year ended December 31, 2019 and 2018, CSG generated net cash flows from operations of $151.1 million and $143.3 million, respectively, and had non-GAAP free cash flow of $113.8 million and $86.2 million, respectively.
Summary of 2020 Financial Guidance
CSG is updating its initial financial guidance for the full year 2020, provided on December 17, 2019, following the announcement of its contract extension with Comcast, as follows:
|
|
As of
|
|
Previous |
GAAP Measures: |
|
|
|
|
Revenues |
|
$990 - $1,030 million |
|
$980 - $1,020 million |
Operating Margin Percentage |
|
No change |
|
11.5% - 12.5% |
EPS |
|
$2.13 - $2.46 |
|
N/A |
Cash Flows from Operating Activities |
|
$130 - $155 million |
|
N/A |
Non-GAAP Measures: |
|
|
|
|
Adjusted Revenues |
|
$917 - $950 million |
|
$907 - $940 million |
Adjusted Operating Margin Percentage |
|
No change |
|
16.0% - 17.0% |
EPS |
|
$2.96 - $3.29 |
|
N/A |
For additional information and reconciliations regarding CSG’s use of non-GAAP financial measures, please refer to the attached Exhibit 2 and the Investor Relations section of CSG’s website at csgi.com.
Conference Call
CSG will host a conference call on Wednesday, February 5, 2020 at 5:00 p.m. EST, to discuss CSG’s fourth quarter and full year results for 2019. The call will be carried live and archived on the Internet. A link to the conference call is available at http://ir.csgi.com. In addition, to reach the conference by phone, dial 1-888-254-3590 and ask the operator for the CSG conference call and David Banks, chairperson.
Additional Information
For information about CSG, please visit CSG’s web site at csgi.com. Additional information can be found in the Investor Relations section of the website.
About CSG
For more than 35 years, CSG has simplified the complexity of business, delivering innovative customer engagement solutions that help companies acquire, monetize, engage and retain customers. Operating across more than 120 countries worldwide, CSG manages billions of critical customer interactions annually, and its award-winning suite of software and services allow companies across dozens of industries to tackle their biggest business challenges and thrive in an ever-changing marketplace. CSG is the trusted partner for driving digital innovation for hundreds of leading global brands, including AT&T, Charter Communications, Comcast, DISH, Eastlink, Formula One, iflix, Maximus, MTN and Telstra. To learn more, visit our website at csgi.com and connect with us on LinkedIn, Twitter and Facebook.
Forward-Looking Statements
This news release contains forward-looking statements as defined under the Securities Act of 1933, as amended, that are based on assumptions about a number of important factors and involve risks and uncertainties that could cause actual results to differ materially from what appears in this news release. Some of these key factors include, but are not limited to the following items:
• CSG derives approximately forty percent of its revenues from its two largest clients;
• Continued market acceptance of CSG’s products and services;
• CSG’s ability to continuously develop and enhance products in a timely, cost-effective, technically advanced and competitive manner;
• CSG’s ability to deliver its solutions in a timely fashion within budget, particularly large and complex software implementations;
• CSG’s dependency on the global telecommunications industry, and in particular, the North American telecommunications industry;
• CSG’s ability to meet its financial expectations as a result of its dependency on software solution sales, which are subject to greater volatility;
• Increasing competition in CSG’s market from companies of greater size and with broader presence;
• CSG’s ability to successfully integrate and manage acquired businesses or assets to achieve expected strategic, operating and financial goals;
• CSG’s ability to protect its intellectual property rights;
• CSG’s ability to maintain a reliable, secure computing environment;
• CSG’s ability to conduct business in the international marketplace;
• CSG’s ability to comply with applicable U.S. and International laws and regulations; and
• Fluctuations in credit market conditions, general global economic and political conditions, and foreign currency exchange rates.
This list is not exhaustive, and readers are encouraged to review the additional risks and important factors described in CSG’s reports on Forms 10-K and 10-Q and other filings made with the SEC.
CSG SYSTEMS INTERNATIONAL, INC. CONDENSED CONSOLIDATED BALANCE SHEETS-UNAUDITED (in thousands, except per share amounts) |
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|
|
December 31, |
|
|
December 31, |
|
||
|
|
2019 |
|
|
2018 |
|
||
ASSETS |
|
|
|
|
|
|
|
|
Current assets: |
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
156,548 |
|
|
$ |
139,277 |
|
Short-term investments |
|
|
26,109 |
|
|
|
23,603 |
|
Total cash, cash equivalents and short-term investments |
|
|
182,657 |
|
|
|
162,880 |
|
Settlement assets |
|
|
169,327 |
|
|
|
124,627 |
|
Trade accounts receivable: |
|
|
|
|
|
|
|
|
Billed, net of allowance of $3,735 and $3,115 |
|
|
244,058 |
|
|
|
235,827 |
|
Unbilled |
|
|
33,450 |
|
|
|
37,227 |
|
Income taxes receivable |
|
|
4,297 |
|
|
|
6,720 |
|
Other current assets |
|
|
35,293 |
|
|
|
32,286 |
|
Total current assets |
|
|
669,082 |
|
|
|
599,567 |
|
Non-current assets: |
|
|
|
|
|
|
|
|
Property and equipment, net of depreciation of $98,029 and $93,278 |
|
|
84,429 |
|
|
|
81,813 |
|
Operating lease right-of-use assets |
|
|
94,847 |
|
|
|
- |
|
Software, net of amortization of $125,437 and $119,381 |
|
|
32,526 |
|
|
|
36,400 |
|
Goodwill |
|
|
259,164 |
|
|
|
255,816 |
|
Acquired client contracts, net of amortization of $93,767 and $82,692 |
|
|
55,105 |
|
|
|
65,456 |
|
Client contract costs, net of amortization of $31,526 and $43,051 |
|
|
50,746 |
|
|
|
37,289 |
|
Deferred income taxes |
|
|
9,392 |
|
|
|
11,087 |
|
Other assets |
|
|
27,739 |
|
|
|
26,934 |
|
Total non-current assets |
|
|
613,948 |
|
|
|
514,795 |
|
Total assets |
|
$ |
1,283,030 |
|
|
$ |
1,114,362 |
|
LIABILITIES AND STOCKHOLDERS' EQUITY |
|
|
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
|
|
Current portion of long-term debt |
|
$ |
10,313 |
|
|
$ |
7,500 |
|
Operating lease liabilities |
|
|
22,442 |
|
|
|
- |
|
Client deposits |
|
|
38,687 |
|
|
|
36,889 |
|
Trade accounts payable |
|
|
32,704 |
|
|
|
45,386 |
|
Accrued employee compensation |
|
|
77,527 |
|
|
|
61,107 |
|
Settlement liabilities |
|
|
168,342 |
|
|
|
123,613 |
|
Deferred revenue |
|
|
45,094 |
|
|
|
40,236 |
|
Income taxes payable |
|
|
2,806 |
|
|
|
218 |
|
Other current liabilities |
|
|
20,778 |
|
|
|
35,442 |
|
Total current liabilities |
|
|
418,693 |
|
|
|
350,391 |
|
Non-current liabilities: |
|
|
|
|
|
|
|
|
Long-term debt, net of unamortized discounts of $10,053 and $14,549 |
|
|
346,509 |
|
|
|
352,326 |
|
Operating lease liabilities |
|
|
78,936 |
|
|
|
- |
|
Deferred revenue |
|
|
18,552 |
|
|
|
17,527 |
|
Income taxes payable |
|
|
2,543 |
|
|
|
2,284 |
|
Deferred income taxes |
|
|
6,376 |
|
|
|
8,205 |
|
Other non-current liabilities |
|
|
14,759 |
|
|
|
22,605 |
|
Total non-current liabilities |
|
|
467,675 |
|
|
|
402,947 |
|
Total liabilities |
|
|
886,368 |
|
|
|
753,338 |
|
Stockholders' equity: |
|
|
|
|
|
|
|
|
Preferred stock, par value $.01 per share; 10,000 shares authorized; zero shares issued and outstanding |
|
|
- |
|
|
|
- |
|
Common stock, par value $.01 per share; 100,000 shares authorized; 32,891 and 33,158 shares outstanding |
|
|
696 |
|
|
|
693 |
|
Common stock warrants; zero and 439 warrants vested; 950 and 1,425 warrants issued |
|
|
- |
|
|
|
9,082 |
|
Additional paid-in capital |
|
|
454,663 |
|
|
|
441,417 |
|
Treasury stock, at cost; 35,356 and 34,779 shares |
|
|
(867,817 |
) |
|
|
(842,360 |
) |
Accumulated other comprehensive income (loss): |
|
|
|
|
|
|
|
|
Unrealized gains on short-term investments, net of tax |
|
|
16 |
|
|
|
2 |
|
Cumulative foreign currency translation adjustments |
|
|
(39,519 |
) |
|
|
(42,937 |
) |
Accumulated earnings |
|
|
848,623 |
|
|
|
795,127 |
|
Total stockholders' equity |
|
|
396,662 |
|
|
|
361,024 |
|
Total liabilities and stockholders' equity |
$ |
1,283,030 |
$ |
1,114,362 |
|
|||
CSG SYSTEMS INTERNATIONAL, INC. CONDENSED CONSOLIDATED STATEMENTS OF INCOME-UNAUDITED (in thousands, except per share amounts) |
||||||||||||||||
|
Quarter Ended |
|
|
Year Ended |
|
|
||||||||||
|
December 31,
|
|
|
December 31,
|
|
|
December 31,
|
|
|
December 31,
|
|
|
||||
Revenues |
$ |
254,747 |
|
|
$ |
247,267 |
|
|
$ |
996,810 |
|
|
$ |
875,059 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of revenues (exclusive of depreciation, shown separately below) |
|
131,871 |
|
|
|
130,180 |
|
|
|
525,122 |
|
|
|
449,820 |
|
|
Other operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development |
|
32,207 |
|
|
|
32,225 |
|
|
|
127,994 |
|
|
|
124,034 |
|
|
Selling, general and administrative |
|
53,345 |
|
|
|
48,793 |
|
|
|
191,329 |
|
|
|
169,308 |
|
|
Depreciation |
|
5,503 |
|
|
|
5,011 |
|
|
|
21,422 |
|
|
|
18,304 |
|
|
Restructuring and reorganization charges |
|
1,563 |
|
|
|
1,633 |
|
|
|
4,834 |
|
|
|
8,661 |
|
|
Total operating expenses |
|
224,489 |
|
|
|
217,842 |
|
|
|
870,701 |
|
|
|
770,127 |
|
|
Operating income |
|
30,258 |
|
|
|
29,425 |
|
|
|
126,109 |
|
|
|
104,932 |
|
|
Other income (expense): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense |
|
(4,300 |
) |
|
|
(4,465 |
) |
|
|
(17,748 |
) |
|
|
(17,667 |
) |
|
Amortization of original issue discount |
|
(720 |
) |
|
|
(680 |
) |
|
|
(2,819 |
) |
|
|
(2,664 |
) |
|
Interest and investment income, net |
|
457 |
|
|
|
390 |
|
|
|
1,785 |
|
|
|
2,646 |
|
|
Loss on extinguishment of debt |
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(810 |
) |
|
Other, net |
|
(1,481 |
) |
|
|
897 |
|
|
|
(1,604 |
) |
|
|
550 |
|
|
Total other |
|
(6,044 |
) |
|
|
(3,858 |
) |
|
|
(20,386 |
) |
|
|
(17,945 |
) |
|
Income before income taxes |
|
24,214 |
|
|
|
25,567 |
|
|
|
105,723 |
|
|
|
86,987 |
|
|
Income tax provision |
|
(1,633 |
) |
|
|
(4,669 |
) |
|
|
(22,953 |
) |
|
|
(20,857 |
) |
|
Net income |
$ |
22,581 |
|
|
$ |
20,898 |
|
|
$ |
82,770 |
|
|
$ |
66,130 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average shares outstanding: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
31,967 |
|
|
|
32,329 |
|
|
|
32,051 |
|
|
|
32,488 |
|
|
Diluted |
|
32,443 |
|
|
|
32,602 |
|
|
|
32,465 |
|
|
|
32,855 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per common share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
$ |
0.71 |
|
|
$ |
0.65 |
|
|
$ |
2.58 |
|
|
$ |
2.04 |
|
|
Diluted |
|
0.70 |
|
|
|
0.64 |
|
|
|
2.55 |
|
|
|
2.01 |
|
|
CSG SYSTEMS INTERNATIONAL, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS-UNAUDITED (in thousands) |
||||||||
|
Year Ended |
|
|
|||||
|
December 31,
|
|
|
December 31,
|
|
|
||
Cash flows from operating activities: |
|
|
|
|
|
|
|
|
Net income |
$ |
82,770 |
|
|
$ |
66,130 |
|
|
Adjustments to reconcile net income to net cash provided by operating activities- |
|
|
|
|
|
|
|
|
Depreciation |
|
21,422 |
|
|
|
18,304 |
|
|
Amortization |
|
45,700 |
|
|
|
44,328 |
|
|
Amortization of original issue discount |
|
2,819 |
|
|
|
2,664 |
|
|
Asset impairment |
|
438 |
|
|
|
1,851 |
|
|
Gain on short-term investments and other |
|
(364 |
) |
|
|
(101 |
) |
|
Loss on extinguishment of debt |
|
- |
|
|
|
810 |
|
|
Deferred income taxes |
|
(77 |
) |
|
|
4,913 |
|
|
Stock-based compensation |
|
19,919 |
|
|
|
19,358 |
|
|
Subtotal |
|
172,627 |
|
|
|
158,257 |
|
|
Changes in operating assets and liabilities, net of acquired amounts: |
|
|
|
|
|
|
|
|
Trade accounts receivable, net |
|
(4,015 |
) |
|
|
(138 |
) |
|
Other current and non-current assets and liabilities |
|
(17,727 |
) |
|
|
(23,179 |
) |
|
Income taxes payable/receivable |
|
4,771 |
|
|
|
5,055 |
|
|
Trade accounts payable and accrued liabilities |
|
(10,317 |
) |
|
|
(7,146 |
) |
|
Deferred revenue |
|
5,737 |
|
|
|
10,492 |
|
|
Net cash provided by operating activities |
|
151,076 |
|
|
|
143,341 |
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities: |
|
|
|
|
|
|
|
|
Purchases of software, property and equipment |
|
(37,319 |
) |
|
|
(57,104 |
) |
|
Purchases of short-term investments |
|
(54,258 |
) |
|
|
(75,022 |
) |
|
Proceeds from sale/maturity of short-term investments |
|
52,135 |
|
|
|
190,778 |
|
|
Acquisition of and investments in business, net of cash acquired |
|
(17,194 |
) |
|
|
(144,791 |
) |
|
Net cash used in investing activities |
|
(56,636 |
) |
|
|
(86,139 |
) |
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities: |
|
|
|
|
|
|
|
|
Proceeds from issuance of common stock |
|
2,227 |
|
|
|
2,311 |
|
|
Payment of cash dividends |
|
(29,126 |
) |
|
|
(27,979 |
) |
|
Repurchase of common stock |
|
(30,918 |
) |
|
|
(34,726 |
) |
|
Exercise of common stock warrants |
|
(12,911 |
) |
|
|
- |
|
|
Proceeds from long-term debt |
|
- |
|
|
|
150,000 |
|
|
Payments on long-term debt |
|
(7,500 |
) |
|
|
(125,625 |
) |
|
Payments of deferred financing costs |
|
- |
|
|
|
(1,490 |
) |
|
Net cash used in financing activities |
|
(78,228 |
) |
|
|
(37,509 |
) |
|
Effect of exchange rate fluctuations on cash |
|
1,059 |
|
|
|
(2,659 |
) |
|
|
|
|
|
|
|
|
|
|
Net increase in cash and cash equivalents |
|
17,271 |
|
|
|
17,034 |
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents, beginning of period |
|
139,277 |
|
|
|
122,243 |
|
|
Cash and cash equivalents, end of period |
$ |
156,548 |
|
|
$ |
139,277 |
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosures of cash flow information: |
|
|
|
|
|
|
|
|
Cash paid during the period for- |
|
|
|
|
|
|
|
|
Interest |
$ |
16,064 |
|
|
$ |
15,857 |
|
|
Income taxes |
|
18,358 |
|
|
|
10,426 |
|
|
EXHIBIT 1 CSG SYSTEMS INTERNATIONAL, INC. SUPPLEMENTAL REVENUE ANALYSIS |
||||||||||||
Components of Revenues |
||||||||||||
|
|
Quarter Ended |
|
|
Quarter Ended |
|
|
Quarter Ended |
|
|||
|
|
December 31, |
|
|
September 30, |
|
|
December 31, |
|
|||
|
|
2019 |
|
|
2019 |
|
|
2018 |
|
|||
Cloud and related solutions |
|
$ |
230,044 |
|
|
$ |
224,347 |
|
|
$ |
214,987 |
|
Software and services |
|
|
12,757 |
|
|
|
14,406 |
|
|
|
18,528 |
|
Maintenance |
|
|
11,946 |
|
|
|
12,661 |
|
|
|
13,752 |
|
Total revenues |
|
$ |
254,747 |
|
|
$ |
251,414 |
|
|
$ |
247,267 |
|
|
|
Year Ended |
|
|
Year Ended |
|
||
|
|
December 31, |
|
|
December 31, |
|
||
|
|
2019 |
|
|
2018 |
|
||
Cloud and related solutions |
|
$ |
896,164 |
|
|
$ |
766,377 |
|
Software and services |
|
|
52,364 |
|
|
|
58,101 |
|
Maintenance |
|
|
48,282 |
|
|
|
50,581 |
|
Total revenues |
|
$ |
996,810 |
|
|
$ |
875,059 |
|
Revenues by Significant Customers: 10% or more of Revenues |
||||||||||||
|
|
Quarter Ended |
|
|
Quarter Ended |
|
|
Quarter Ended |
|
|||
|
|
December 31, |
|
|
September 30, |
|
|
December 31, |
|
|||
|
|
2019 |
|
|
2019 |
|
|
2018 |
|
|||
Comcast |
|
|
24 |
% |
|
|
23 |
% |
|
|
22 |
% |
Charter |
|
|
20 |
% |
|
|
20 |
% |
|
|
18 |
% |
|
|
Year Ended |
|
|
Year Ended |
|
||
|
|
December 31, |
|
|
December 31, |
|
||
|
|
2019 |
|
|
2018 |
|
||
Comcast |
|
|
23 |
% |
|
|
25 |
% |
Charter |
|
|
20 |
% |
|
|
20 |
% |
Revenues by Geography |
||||||||||||
|
|
Quarter Ended |
|
|
Quarter Ended |
|
|
Quarter Ended |
|
|||
|
|
December 31, |
|
|
September 30, |
|
|
December 31, |
|
|||
|
|
2019 |
|
|
2019 |
|
|
2018 |
|
|||
Americas |
|
|
88 |
% |
|
|
87 |
% |
|
|
85 |
% |
Europe, Middle East and Africa |
|
|
8 |
% |
|
|
9 |
% |
|
|
10 |
% |
Asia Pacific |
|
|
4 |
% |
|
|
4 |
% |
|
|
5 |
% |
Total revenues |
|
|
100 |
% |
|
|
100 |
% |
|
|
100 |
% |
|
|
Year Ended |
|
|
Year Ended |
|
||
|
|
December 31, |
|
|
December 31, |
|
||
|
|
2019 |
|
|
2018 |
|
||
Americas |
|
|
87 |
% |
|
|
85 |
% |
Europe, Middle East and Africa |
|
|
9 |
% |
|
|
10 |
% |
Asia Pacific |
|
|
4 |
% |
|
|
5 |
% |
Total revenues |
|
|
100 |
% |
|
|
100 |
% |
EXHIBIT 2
CSG SYSTEMS INTERNATIONAL, INC.
DISCLOSURES FOR NON-GAAP FINANCIAL MEASURES
Use of Non-GAAP Financial Measures and Limitations
To supplement its condensed consolidated financial statements presented in accordance with generally accepted accounting principles (GAAP), CSG uses non-GAAP adjusted revenues, 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 non-GAAP financial measure to the most directly comparable GAAP measure.
Non-GAAP Financial Measures: Basis of Presentation
The table below outlines the exclusions from CSG’s non-GAAP financial measures:
Non-GAAP Exclusions |
|
Adjusted
|
|
Operating
|
|
Adjusted
|
|
EPS |
Transaction fees |
|
X |
|
— |
|
X |
|
— |
Restructuring and reorganization charges |
|
— |
|
X |
|
X |
|
X |
Acquisition-related expenses: |
|
|
|
|
|
|
|
|
Amortization of acquired intangible assets |
|
— |
|
X |
|
X |
|
X |
Earn-out compensation |
|
— |
|
X |
|
X |
|
X |
Transaction-related costs |
|
— |
|
X |
|
X |
|
X |
Stock-based compensation |
|
— |
|
X |
|
X |
|
X |
Amortization of original issue discount (“OID”) |
|
— |
|
— |
|
— |
|
X |
Gain (loss) on extinguishment of debt |
|
— |
|
— |
|
— |
|
X |
Unusual income tax matters |
|
— |
|
— |
|
— |
|
X |
CSG believes that excluding certain items in calculating its non-GAAP financial measures provides meaningful supplemental information regarding CSG’s performance and these items are excluded for the following reasons:
- Transaction fees are primarily comprised of interchange and other payment-related fees paid, in conjunction with the delivery of service to clients under CSG’s payment services contracts, to third-party payment processors and financial institutions by CSG. Because CSG controls the integrated service provided under its payment services client contracts, these transaction fees are presented gross, and not netted against revenues; however, other payments companies who do not provide and/or control an integrated service present their revenues net of transaction fees. The exclusion of these fees in calculating CSG’s non-GAAP adjusted revenues provides management and investors an additional means to use to compare CSG’s current revenues with historical and future periods, as well as with other payments companies.
- Restructuring and reorganization charges are expenses that result from cost reduction initiatives and/or significant changes to CSG’s business, to include such things as involuntary employee terminations, changes in management structure, divestitures of businesses, facility consolidations and abandonments, and fundamental reorganizations impacting operational focus and direction. These charges are not considered reflective of CSG’s recurring core business operating results. The exclusion of these items in calculating CSG’s non-GAAP financial measures allows management and investors an additional means to compare CSG’s current financial results with historical and future periods.
- Acquisition-related expenses include amortization of acquired intangible assets, earn-out compensation, and transaction-related costs. Transaction-related costs, which typically include expenses related to legal, accounting, and other professional services, are direct and incremental expenses related to business acquisitions, and thus, are not considered reflective of CSG’s recurring core business operating results. The total amount of acquisition-related expenses can vary significantly between periods based on the number and size of acquisition activities, previously acquired intangible assets becoming fully amortized, and ultimate realization of earn-out compensation. In addition, the timing of these expenses may not directly correlate with underlying performance of the CSG’s operations. Therefore, the exclusion of acquisition-related expenses in calculating CSG’s non-GAAP financial measures allows management and investors an additional means to compare CSG’s current financial results with historical and future periods.
- Stock-based compensation results from CSG’s issuance of equity awards to its employees under incentive compensation programs. The amount of this incentive compensation in any period is not generally linked to the level of performance by employees or CSG. The exclusion of these expenses in calculating CSG’s non-GAAP financial measures allows management and investors an additional means to evaluate the non-cash expense related to compensation included in CSG’s results of operations, and therefore, the exclusion of this item allows investors to further evaluate the cash generating capabilities of CSG’s business.
- The convertible notes OID is the result of allocating a portion of the principal balance of the debt at issuance to the equity component of the instrument, as required under current accounting rules. This OID is then amortized to interest expense over the life of the respective convertible debt instrument. The interest expense related to the amortization of the OID is a non-cash expense, and therefore, the exclusion of this item allows investors to further evaluate the cash interest costs of CSG’s convertible notes for cash flow, liquidity, and debt service purposes.
- Gains and losses related to the extinguishment of debt are a result of the refinancing of CSG’s credit agreement and/or repurchase of CSG’s convertible notes. These activities are not considered reflective of CSG’s recurring core business operating results. Any resulting gain or loss is generally non-cash income or expense, and therefore, the exclusion of this item allows investors to further evaluate the cash impact of these repurchases for cash flow and liquidity purposes. In addition, the exclusion of these gains and losses in calculating CSG’s non-GAAP EPS allows management and investors an additional means to compare CSG’s current operating results with historical and future periods.
- Unusual items within CSG’s quarterly and/or annual income tax expense can occur from such things as income tax accounting timing matters, income taxes related to unusual events, or as a result of different treatment of certain items for book accounting and income tax purposes. Consideration of such items in calculating CSG’s non-GAAP financial measures allows management and investors an additional means to compare CSG’s current financial results with historical and future periods.
CSG also reports non-GAAP adjusted EBITDA and non-GAAP free cash flow. Management believes non-GAAP adjusted EBITDA is a useful measure to investors in evaluating CSG’s operating performance, debt servicing capabilities, and enterprise valuation. CSG defines non-GAAP adjusted EBITDA as income before interest, income taxes, depreciation, amortization, stock-based compensation, foreign currency transaction adjustments, acquisition-related expenses, and unusual items, such as restructuring and reorganization charges, and gains and losses related to the extinguishment of debt, as discussed above. Additionally, management uses non-GAAP free cash flow, among other measures, to assess its financial performance and cash generating capabilities, and believes that it is useful to investors because it shows CSG’s cash available to service debt, make strategic acquisitions and investments, repurchase its common stock, pay cash dividends, and fund ongoing operations. CSG defines non-GAAP free cash flow as net cash flows from operating activities less the purchases of software, property and equipment.
Non-GAAP Financial Measures
Non-GAAP Adjusted Revenues:
The reconciliations of GAAP revenues to non-GAAP adjusted revenues for the indicated periods are as follows (in thousands):
|
|
Quarter Ended December 31, |
|
|
Year Ended December 31, |
|
||||||||||
|
|
2019 |
|
|
2018 |
|
|
2019 |
|
|
2018 |
|
||||
GAAP revenues |
|
$ |
254,747 |
|
|
$ |
247,267 |
|
|
$ |
996,810 |
|
|
$ |
875,059 |
|
Less: Transaction fees |
|
|
(17,840 |
) |
|
|
(15,602 |
) |
|
|
(69,114 |
) |
|
|
(15,602 |
) |
Non-GAAP adjusted revenues (1) |
|
$ |
236,907 |
|
|
$ |
231,665 |
|
|
$ |
927,696 |
|
|
$ |
859,457 |
|
(1) |
Non-GAAP adjusted revenues are defined as GAAP revenues less transaction fees. Transaction fees are primarily comprised of interchange and other payment-related fees paid, in conjunction with the delivery of service to clients under CSG’s payment services contracts, to third-party payment processors and financial institutions by CSG. Because CSG controls the integrated service provided under its payment services client contracts, these transaction fees are presented gross, and not netted against revenues; however, other payments companies who do not provide and/or control an integrated service present their revenues net of transaction fees. |
Non-GAAP Operating Income:
The reconciliations of GAAP operating income to non-GAAP operating income for the indicated periods are as follows (in thousands, except percentages):
|
|
Quarter Ended
|
|
|
Year Ended
|
|
||||||||||
|
|
2019 |
|
|
2018 |
|
|
2019 |
|
|
2018 |
|
||||
GAAP operating income |
|
$ |
30,258 |
|
|
$ |
29,425 |
|
|
$ |
126,109 |
|
|
$ |
104,932 |
|
Restructuring and reorganization charges (2) |
|
|
1,563 |
|
|
|
1,633 |
|
|
|
4,834 |
|
|
|
8,661 |
|
Acquisition-related expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of acquired intangible assets |
|
|
3,095 |
|
|
|
3,326 |
|
|
|
12,603 |
|
|
|
9,699 |
|
Earn-out compensation |
|
|
- |
|
|
|
1,260 |
|
|
|
1,260 |
|
|
|
1,260 |
|
Transaction-related costs |
|
|
- |
|
|
|
1,034 |
|
|
|
- |
|
|
|
3,653 |
|
Stock-based compensation (2) |
|
|
6,624 |
|
|
|
4,722 |
|
|
|
20,896 |
|
|
|
19,650 |
|
Non-GAAP operating income |
|
$ |
41,540 |
|
|
$ |
41,400 |
|
|
$ |
165,702 |
|
|
$ |
147,855 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP adjusted revenues (1) |
|
$ |
236,907 |
|
|
$ |
231,665 |
|
|
$ |
927,696 |
|
|
$ |
859,457 |
|
Non-GAAP adjusted operating margin percentage |
|
|
17.5 |
% |
|
|
17.9 |
% |
|
|
17.9 |
% |
|
|
17.2 |
% |
(2) |
Stock-based compensation included in the tables above and following excludes amounts that have been recorded in restructuring and reorganization charges. |
Non-GAAP EPS:
The reconciliations of GAAP EPS to non-GAAP EPS for the indicated periods are as follows (in thousands, except per share amounts):
|
|
Quarter Ended |
|
|
Quarter Ended |
|
||||||||||
|
|
December 31, 2019 |
|
|
December 31, 2018 |
|
||||||||||
|
|
Amounts |
|
|
EPS (4) |
|
|
Amounts |
|
|
EPS (4) |
|
||||
GAAP net income |
|
$ |
22,581 |
|
|
$ |
0.70 |
|
|
$ |
20,898 |
|
|
$ |
0.64 |
|
GAAP income tax provision (3) |
|
|
1,633 |
|
|
|
|
|
|
|
4,669 |
|
|
|
|
|
GAAP income before income taxes |
|
|
24,214 |
|
|
|
|
|
|
|
25,567 |
|
|
|
|
|
Restructuring and reorganization charges (2) |
|
|
1,563 |
|
|
|
|
|
|
|
1,633 |
|
|
|
|
|
Acquisition-related costs: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of acquired intangible assets |
|
|
3,095 |
|
|
|
|
|
|
|
3,326 |
|
|
|
|
|
Earn-out compensation |
|
|
- |
|
|
|
|
|
|
|
1,260 |
|
|
|
|
|
Transaction-related costs |
|
|
- |
|
|
|
|
|
|
|
1,034 |
|
|
|
|
|
Stock-based compensation (2) |
|
|
6,624 |
|
|
|
|
|
|
|
4,722 |
|
|
|
|
|
Amortization of OID |
|
|
720 |
|
|
|
|
|
|
|
680 |
|
|
|
|
|
Non-GAAP income before income taxes |
|
|
36,216 |
|
|
|
|
|
|
|
38,222 |
|
|
|
|
|
Non-GAAP income tax provision (3) |
|
|
(4,306 |
) |
|
|
|
|
|
|
(7,247 |
) |
|
|
|
|
Non-GAAP net income |
|
$ |
31,910 |
|
|
$ |
0.98 |
|
|
$ |
30,975 |
|
|
$ |
0.95 |
|
|
|
Year Ended |
|
|
Year Ended |
|
||||||||||
|
|
December 31, 2019 |
|
|
December 31, 2018 |
|
||||||||||
|
|
Amounts |
|
|
EPS (4) |
|
|
Amounts |
|
|
EPS (4) |
|
||||
GAAP net income |
|
$ |
82,770 |
|
|
$ |
2.55 |
|
|
$ |
66,130 |
|
|
$ |
2.01 |
|
GAAP income tax provision (3) |
|
|
22,953 |
|
|
|
|
|
|
|
20,857 |
|
|
|
|
|
GAAP income before income taxes |
|
|
105,723 |
|
|
|
|
|
|
|
86,987 |
|
|
|
|
|
Restructuring and reorganization charges (2) |
|
|
4,834 |
|
|
|
|
|
|
|
8,661 |
|
|
|
|
|
Acquisition-related expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of acquired intangible assets |
|
|
12,603 |
|
|
|
|
|
|
|
9,699 |
|
|
|
|
|
Earn-out compensation |
|
|
1,260 |
|
|
|
|
|
|
|
1,260 |
|
|
|
|
|
Transaction-related costs |
|
|
- |
|
|
|
|
|
|
|
3,653 |
|
|
|
|
|
Stock-based compensation (2) |
|
|
20,896 |
|
|
|
|
|
|
|
19,650 |
|
|
|
|
|
Loss on extinguishment of debt |
|
|
- |
|
|
|
|
|
|
|
810 |
|
|
|
|
|
Amortization of OID |
|
|
2,819 |
|
|
|
|
|
|
|
2,664 |
|
|
|
|
|
Non-GAAP income before income taxes |
|
|
148,135 |
|
|
|
|
|
|
|
133,384 |
|
|
|
|
|
Non-GAAP income tax provision (3) |
|
|
(33,404 |
) |
|
|
|
|
|
|
(32,786 |
) |
|
|
|
|
Non-GAAP net income |
|
$ |
114,731 |
|
|
$ |
3.53 |
|
|
$ |
100,598 |
|
|
$ |
3.06 |
|
(3) |
For the fourth quarter and year ended December 31, 2019 the GAAP effective income tax rates were approximately 7% and 22%, respectively, and the non-GAAP effective income tax rates were approximately 12% and 23%, respectively. |
|
|
For the fourth quarter and year ended December 31, 2018, the GAAP effective income tax rates were approximately 18% and 24%, respectively, and the non-GAAP effective income tax rates were approximately 19% and 25%, respectively. |
|
(4) |
The outstanding diluted shares for the fourth quarter and year ended December 31, 2019 were 32.4 million and 32.5 million, respectively, and for the fourth quarter and year ended December 31, 2018 were 32.6 million and 32.9 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 |
|
|
Year Ended |
|
||||||||||
|
|
December 31, |
|
|
December 31, |
|
||||||||||
|
|
2019 |
|
|
2018 |
|
|
2019 |
|
|
2018 |
|
||||
GAAP net income |
|
$ |
22,581 |
|
|
$ |
20,898 |
|
|
$ |
82,770 |
|
|
$ |
66,130 |
|
GAAP income tax provision (3) |
|
|
1,633 |
|
|
|
4,669 |
|
|
|
22,953 |
|
|
|
20,857 |
|
Interest expense (5) |
|
|
4,300 |
|
|
|
4,465 |
|
|
|
17,748 |
|
|
|
17,667 |
|
Amortization of OID |
|
|
720 |
|
|
|
680 |
|
|
|
2,819 |
|
|
|
2,664 |
|
Loss on extinguishment of debt |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
810 |
|
Interest and investment income and other, net |
|
|
1,024 |
|
|
|
(1,287 |
) |
|
|
(181 |
) |
|
|
(3,196 |
) |
GAAP operating income |
|
|
30,258 |
|
|
|
29,425 |
|
|
|
126,109 |
|
|
|
104,932 |
|
Restructuring and reorganization charges (2) |
|
|
1,563 |
|
|
|
1,633 |
|
|
|
4,834 |
|
|
|
8,661 |
|
Acquisition-related expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of acquired intangible assets (6) |
|
|
3,095 |
|
|
|
3,326 |
|
|
|
12,603 |
|
|
|
9,699 |
|
Earn-out compensation |
|
|
- |
|
|
|
1,260 |
|
|
|
1,260 |
|
|
|
1,260 |
|
Transaction-related costs |
|
|
- |
|
|
|
1,034 |
|
|
|
- |
|
|
|
3,653 |
|
Stock-based compensation (2) |
|
|
6,624 |
|
|
|
4,722 |
|
|
|
20,896 |
|
|
|
19,650 |
|
Amortization of other intangible assets (6) |
|
|
2,897 |
|
|
|
2,521 |
|
|
|
10,641 |
|
|
|
9,517 |
|
Amortization of client contract costs (6) |
|
|
4,705 |
|
|
|
6,096 |
|
|
|
20,779 |
|
|
|
23,381 |
|
Depreciation |
|
|
5,503 |
|
|
|
5,011 |
|
|
|
21,422 |
|
|
|
18,304 |
|
Non-GAAP adjusted EBITDA |
|
$ |
54,645 |
|
|
$ |
55,028 |
|
|
$ |
218,544 |
|
|
$ |
199,057 |
|
Non-GAAP adjusted EBITDA as a percentage of non-GAAP adjusted revenues |
|
|
23 |
% |
|
|
24 |
% |
|
|
24 |
% |
|
|
23 |
% |
(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 |
|
|
Year Ended |
|
||||||||||
|
|
December 31, |
|
|
December 31, |
|
||||||||||
|
|
2019 |
|
|
2018 |
|
|
2019 |
|
|
2018 |
|
||||
Amortization of acquired intangible assets |
|
$ |
3,095 |
|
|
$ |
3,326 |
|
|
$ |
12,603 |
|
|
$ |
9,699 |
|
Amortization of other intangible assets |
|
|
2,897 |
|
|
|
2,521 |
|
|
|
10,641 |
|
|
|
9,517 |
|
Amortization of client contract costs |
|
|
4,705 |
|
|
|
6,096 |
|
|
|
20,779 |
|
|
|
23,381 |
|
Amortization of deferred financing costs |
|
|
424 |
|
|
|
411 |
|
|
|
1,677 |
|
|
|
1,731 |
|
Total amortization |
|
$ |
11,121 |
|
|
$ |
12,354 |
|
|
$ |
45,700 |
|
|
$ |
44,328 |
|
Non-GAAP Free Cash Flow:
CSG’s calculation of non-GAAP free cash flow and the reconciliation of CSG’s non-GAAP free cash flow measure to cash flows from operating activities are provided below for the indicated periods (in thousands):
|
|
Quarter Ended |
|
|
Year Ended |
|
||||||||||
|
|
December 31, |
|
|
December 31, |
|
||||||||||
|
|
2019 |
|
|
2018 |
|
|
2019 |
|
|
2018 |
|
||||
Cash flows from operating activities |
|
$ |
43,549 |
|
|
$ |
70,072 |
|
|
$ |
151,076 |
|
|
$ |
143,341 |
|
Purchases of software, property and equipment |
|
|
(9,613 |
) |
|
|
(13,057 |
) |
|
|
(37,319 |
) |
|
|
(57,104 |
) |
Non-GAAP free cash flow |
|
$ |
33,936 |
|
|
$ |
57,015 |
|
|
$ |
113,757 |
|
|
$ |
86,237 |
|
Non-GAAP Financial Measures – 2020 Financial Guidance
Non-GAAP Adjusted Revenues:
The reconciliation of GAAP revenues to non-GAAP adjusted revenues, as included in CSG’s 2020 full year financial guidance, is as follows:
|
|
2020 Guidance Range |
|
|||||
|
|
Low Range |
|
|
High Range |
|
||
GAAP revenues |
|
$ |
990,000 |
|
|
$ |
1,030,000 |
|
Less: Transaction fees |
|
|
(73,000 |
) |
|
|
(80,000 |
) |
Non-GAAP adjusted revenues |
|
$ |
917,000 |
|
|
$ |
950,000 |
|
Non-GAAP Operating Income:
The reconciliation of GAAP operating income to non-GAAP operating income, as included in CSG’s 2020 full year financial guidance, is as follows (in thousands, except percentages):
|
|
2020 Guidance Range |
|
|||||
|
|
Low Range |
|
|
High Range |
|
||
Operating Income |
|
|
|
|
|
|
|
|
GAAP operating income |
|
$ |
114,000 |
|
|
$ |
128,600 |
|
Restructuring and reorganization charges |
|
|
100 |
|
|
|
100 |
|
Acquisition-related expenses: |
|
|
|
|
|
|
|
|
Amortization of acquired intangible assets |
|
|
11,400 |
|
|
|
11,400 |
|
Stock-based compensation |
|
|
21,500 |
|
|
|
21,500 |
|
Non-GAAP operating income |
|
$ |
147,000 |
|
|
$ |
161,600 |
|
|
|
|
|
|
|
|
|
|
Operating Margin Percentage |
|
|
|
|
|
|
|
|
GAAP revenues |
|
$ |
990,000 |
|
|
$ |
1,030,000 |
|
GAAP operating margin percentage |
|
|
11.5 |
% |
|
|
12.5 |
% |
|
|
|
|
|
|
|
|
|
Non-GAAP adjusted revenues |
|
$ |
917,000 |
|
|
$ |
950,000 |
|
Non-GAAP adjusted operating margin percentage |
|
|
16.0 |
% |
|
|
17.0 |
% |
Non-GAAP EPS:
The reconciliation of GAAP EPS to non-GAAP EPS as included in CSG’s 2020 full year financial guidance is as follows (in thousands, except per share amounts):
|
|
2020 Guidance Range |
|
|||||||||||||
|
|
Low Range |
|
|
High Range |
|
||||||||||
|
|
Amounts |
|
|
EPS (8) |
|
|
Amounts |
|
|
EPS (8) |
|
||||
GAAP net income |
|
$ |
68,800 |
|
|
$ |
2.13 |
|
|
$ |
79,500 |
|
|
$ |
2.46 |
|
GAAP income tax provision (7) |
|
|
25,500 |
|
|
|
|
|
|
|
29,400 |
|
|
|
|
|
GAAP income before income taxes |
|
|
94,300 |
|
|
|
|
|
|
|
108,900 |
|
|
|
|
|
Restructuring and reorganization charges |
|
|
100 |
|
|
|
|
|
|
|
100 |
|
|
|
|
|
Acquisition-related expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of acquired intangible assets |
|
|
11,400 |
|
|
|
|
|
|
|
11,400 |
|
|
|
|
|
Stock-based compensation |
|
|
21,500 |
|
|
|
|
|
|
|
21,500 |
|
|
|
|
|
Amortization of OID |
|
|
3,000 |
|
|
|
|
|
|
|
3,000 |
|
|
|
|
|
Non-GAAP income before income taxes |
|
|
130,300 |
|
|
|
|
|
|
|
144,900 |
|
|
|
|
|
Non-GAAP income tax provision (7) |
|
|
(34,500 |
) |
|
|
|
|
|
|
(38,400 |
) |
|
|
|
|
Non-GAAP net income |
|
$ |
95,800 |
|
|
$ |
2.96 |
|
|
$ |
106,500 |
|
|
$ |
3.29 |
|
(7) |
For 2020, the estimated effective income tax rate for GAAP and non-GAAP purposes is expected to be approximately 27%. |
|
(8) |
The weighted-average diluted shares outstanding are expected to be approximately 32 million. |
Non-GAAP Adjusted EBITDA:
CSG’s calculation of non-GAAP adjusted EBITDA and the reconciliation of CSG’s non-GAAP adjusted EBITDA measure to GAAP net income is provided below for CSG’s 2020 full year financial guidance (in thousands, except percentages):
|
|
2020 Guidance Range |
|
|||||
|
|
Low Range |
|
|
High Range |
|
||
GAAP net income |
|
$ |
68,800 |
|
|
$ |
79,500 |
|
GAAP income tax provision (7) |
|
|
25,500 |
|
|
|
29,400 |
|
Interest expense |
|
|
16,800 |
|
|
|
16,800 |
|
Amortization of OID |
|
|
3,000 |
|
|
|
3,000 |
|
Interest and investment income and other, net |
|
|
(100 |
) |
|
|
(100 |
) |
GAAP operating income |
|
|
114,000 |
|
|
|
128,600 |
|
Restructuring and reorganization charges |
|
|
100 |
|
|
|
100 |
|
Acquisition-related expenses: |
|
|
|
|
|
|
|
|
Amortization of acquired intangible assets |
|
|
11,400 |
|
|
|
11,400 |
|
Stock-based compensation |
|
|
21,500 |
|
|
|
21,500 |
|
Amortization of other intangible assets |
|
|
9,000 |
|
|
|
9,000 |
|
Amortization of client contract costs |
|
|
18,700 |
|
|
|
18,700 |
|
Depreciation |
|
|
27,700 |
|
|
|
27,700 |
|
Non-GAAP adjusted EBITDA |
|
$ |
202,400 |
|
|
$ |
217,000 |
|
Non-GAAP adjusted EBITDA as a percentage of non-GAAP adjusted revenues |
|
|
22 |
% |
|
|
23 |
% |
Non-GAAP Free Cash Flow:
CSG’s calculation of non-GAAP free cash flow and the reconciliation of CSG’s non-GAAP free cash flow measure to cash flows from operating activities is provided below for the indicated period (in thousands):
|
|
2020 Guidance Range |
|
|||||
|
|
Low Range |
|
|
High Range |
|
||
Cash flows from operating activities |
|
$ |
130,000 |
|
|
$ |
155,000 |
|
Purchases of software, property and equipment |
|
|
(25,000 |
) |
|
|
(35,000 |
) |
Non-GAAP free cash flow |
|
$ |
105,000 |
|
|
$ |
120,000 |
|
View source version on businesswire.com: https://www.businesswire.com/news/home/20200205005829/en/
Liz Bauer, Chief Communications and Investor Relations Officer
(303) 804-4065
E-mail: [email protected]
Source: CSG Systems International