CSG (NASDAQ: CSGS), the trusted partner to simplify the complexity of business
transformation in the digital age, today reported results for the
quarter ended June 30, 2018.
Key Highlights:
“We delivered another solid quarter demonstrating the progress that we
are making on our strategic initiatives aimed at driving revenue growth
and profits,” said Bret Griess, president and chief executive officer
for CSG. “We grew our Ascendon, managed services and total revenues by
double digits. We expanded our footprint in the telecom and financial
services verticals, helping to diversify our revenue streams. And
importantly, we continue to get broader and deeper within our clients’
businesses. We remain focused on our continued execution of our plan
aimed at creating long-term value for our shareholders, clients and
employees.”
Financial Overview (unaudited)
(in thousands, except per share amounts and percentages):
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 www.csgi.com.
Results of Operations
Total Revenues: Total revenues for
the second quarter of 2018 were $213.0 million, an 11% increase when
compared to revenues of $192.7 million for the second quarter of 2017,
and a 6% increase when compared to revenues of $201.7 million for the
first quarter of 2018. The year-over-year increase in revenues can be
primarily attributed to the acquisition of Business Ink on February 28,
2018, which generated approximately $16 million of revenue for the
second quarter of 2018, and the continued growth in CSG’s cloud
solutions and managed services offerings. The sequential quarterly
increase is mainly due to the second quarter of 2018 having a full
quarter of Business Ink revenues as compared to only one month of
revenues in the first quarter of 2018.
GAAP Results: GAAP operating income
for the second quarter of 2018 was $24.1 million, or 11.3% of total
revenues, compared to $24.2 million, or 12.6% of total revenues, for the
second quarter of 2017, and $25.8 million, or 12.8% of total revenues,
for the first quarter of 2018.
GAAP EPS for the second quarter of 2018 was $0.46, as compared to $0.35
for the second quarter of 2017, and $0.42 for the first quarter of 2018.
The year-over-year increase in GAAP EPS is primarily due to a lower
effective tax rate resulting primarily from the U.S. Tax Reform enacted
in December 2017.
Non-GAAP Results: Non-GAAP operating
income for the second quarter of 2018 was $35.6 million, or 16.7% of
total revenues, compared to $34.7 million, or 18.0% of total revenues,
for the second quarter of 2017, and $35.3 million, or 17.5% of total
revenues for the first quarter of 2018. Non-GAAP EPS for the second
quarter of 2018 was $0.73, compared to $0.62 for the second quarter of
2017, and $0.69 for the first quarter of 2018.
The higher non-GAAP EPS for the second quarter of 2018 when compared to
the second quarter of 2017 is primarily the result of a lower non-GAAP
effective income tax rate of 27%, compared to 34% for the second quarter
of 2017. The lower non-GAAP effective income tax rate is due to the U.S.
Tax Reform enacted in December 2017.
Balance Sheet and Cash Flows
Cash, cash equivalents and short-term investments at June 30, 2018 were
$186.4 million, compared to $222.1 million as of March 31, 2018 and
$261.4 million as of December 31, 2017. CSG had net cash flows from
operations for the second quarters ended June 30, 2018 and 2017 of
negative $(3.6) million and $34.5 million, respectively, and had
non-GAAP free cash flow of negative $(18.1) million and $25.3 million,
respectively. Cash flows from operations for the second quarter of 2018
were negatively impacted by an increase in accounts receivable,
primarily related to the timing around a recurring client payment that
was delayed and received subsequent to quarter-end.
Summary of 2018 Financial Guidance
CSG is updating its financial guidance for the full year 2018 as follows:
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 www.csgi.com.
Conference Call
CSG will host a conference call on Wednesday, August 1, 2018 at 5:00
p.m. Eastern Time, to discuss CSG’s second quarter results for 2018. 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 1-877-260-1479 and
ask the operator for the CSG conference call and Liz Bauer, chairperson.
Additional Information
For information about CSG, please visit CSG’s web site at www.csgi.com.
Additional information can be found in the Investor Relations section of
the website.
About CSG
CSG simplifies the complexity of business transformation in the digital
age for the most respected communications, media and entertainment
service providers worldwide. With over 35 years of experience, CSG
delivers revenue
management, customer
experience and digital
monetization solutions for every stage of the customer lifecycle.
The company is the trusted partner driving digital transformation for
leading global brands, including Arrow Electronics, AT&T, Bharti Airtel,
Charter Communications, Comcast, DISH, Eastlink, iflix, MTN, TalkTalk,
Telefonica, Telstra and Verizon.
At CSG, we have one vision: flexible, seamless, limitless
communications, information and content services for everyone. For more
information, visit our website at csgi.com
and follow 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:
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.
ASSETS
LIABILITIES AND STOCKHOLDERS’ EQUITY
June 30,2018
June 30,2017
June 30,2018
June 30,2017
EXHIBIT 1CSG SYSTEMS INTERNATIONAL, INC.SUPPLEMENTAL
REVENUE ANALYSIS
Revenues by Geography
Revenues by Significant Customers: 10% or
more of Revenues
EXHIBIT 2CSG 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 EPS, non-GAAP adjusted EBITDA,
and non-GAAP free cash flow. CSG believes that these non-GAAP financial
measures, when reviewed in conjunction with its GAAP financial measures,
provide investors with greater transparency to the information used by
CSG’s management in its financial and operational decision making. CSG
uses these non-GAAP financial measures for the following purposes:
These non-GAAP financial measures are provided with the intent of
providing investors with the following information:
Non-GAAP financial measures are not measures of performance under GAAP,
and therefore should not be considered in isolation or as a substitute
for GAAP financial information. Limitations with the use of non-GAAP
financial measures include the following items:
CSG compensates for these limitations by relying primarily on its GAAP
results and using non-GAAP financial measures as a supplement only.
Additionally, CSG provides specific information regarding the treatment
of GAAP amounts considered in preparing the non-GAAP financial measures
and reconciles each non-GAAP financial measure to the most directly
comparable GAAP measure.
Non-GAAP Financial Measures: Basis of
Presentation
The table below outlines the exclusions from CSG’s non-GAAP financial
measures:
CSG believes that excluding certain items in calculating its non-GAAP
financial measures provides meaningful supplemental information
regarding CSG’s performance and these items are excluded for the
following reasons:
CSG 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, 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
property and equipment.
Non-GAAP Financial Measures
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):
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):
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):
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):
Non-GAAP Financial Measures – 2018 Financial
Guidance
Non-GAAP Operating Income Margin:
The reconciliation of GAAP operating income margin to non-GAAP operating
income margin, as included in CSG’s 2018 full year financial guidance,
is as follows:
Non-GAAP EPS:
The reconciliation of GAAP EPS to non-GAAP EPS as included in CSG’s 2018
full year financial guidance is as follows (in thousands, except per
share amounts):
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 2018 full year financial guidance at the mid-point (in
thousands, except percentages):
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):
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