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, 2017.
Key Highlights:
-
Fourth quarter 2017 financial results:
-
Total revenues grew five percent year-over-year to $205.2
million, a record quarterly revenue level for CSG.
-
GAAP operating income was $26.0 million, or 12.7% of
total revenues and non-GAAP operating income was $36.3
million, or 17.7% of total revenues.
-
GAAP earnings per diluted share (EPS) was $0.45. Non-GAAP
EPS was $0.62.
-
Cash flows from operations were $24.4 million.
-
Full year 2017 financial results:
-
Total revenues grew four percent year-over-year to a record high
of $789.6 million, exceeding expectations.
-
GAAP operating income was $105.7 million, or 13.4% of
total revenues and non-GAAP operating income was $142.1
million, or 18.0% of total revenues.
-
GAAP EPS was $1.87 Non-GAAP EPS was $2.51, in line
with expectations.
-
Cash flows from operations were $127.2 million, exceeding
expectations.
-
CSG declared its quarterly cash dividend of $0.1975 per share
of common stock, or a total of approximately $7 million, to
shareholders, bringing the total 2017 dividends to approximately $27
million.
-
In February 2018, CSG’s Board of Directors approved an approximately 6%
increase in CSG’s cash dividend, effective with the first quarterly
payment of $0.21 per share of common stock.
-
During the fourth quarter, CSG converted over 700,000 customer
accounts onto its cloud solutions for a total of approximately 4.2
million conversions for the year.
“We executed well against our plan in 2017 and have put ourselves in a
strong position for 2018 and beyond,” said Bret Griess, president and
chief executive officer for CSG. “We grew four times faster than the
market, extended and expanded our relationships with two of our largest
clients, consolidated the remaining Comcast residential customers that
were on a competitor’s solution onto our hybrid cloud platform, doubled
the revenues that we generate from our managed services offering and
still returned 50 percent of our free cash flows to shareholders. Our
investments in our solutions and our people uniquely position us to help
service providers successfully undertake their digital transformation so
that they can thrive with new business models going forward.”
Financial Overview (unaudited)
(in thousands, except per share amounts and percentages):
|
|
Quarter Ended December 31,
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
|
|
|
|
|
|
|
|
Percent
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percent
|
|
|
|
2017
|
|
|
2016
|
|
|
Changed
|
|
|
|
|
|
2017
|
|
|
2016
|
|
|
Changed
|
|
Revenues
|
|
$
|
205,204
|
|
|
$
|
195,169
|
|
|
|
5
|
%
|
|
|
|
|
$
|
789,582
|
|
|
$
|
760,958
|
|
|
|
4
|
%
|
GAAP Results:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Income
|
|
$
|
26,048
|
|
|
$
|
25,366
|
|
|
|
3
|
%
|
|
|
|
|
$
|
105,685
|
|
|
$
|
132,629
|
|
|
|
(20
|
%)
|
Operating Margin
|
|
|
12.7
|
%
|
|
|
13.0
|
%
|
|
—
|
|
|
|
|
|
|
13.4
|
%
|
|
|
17.4
|
%
|
|
—
|
|
EPS
|
|
$
|
0.45
|
|
|
$
|
0.38
|
|
|
|
18
|
%
|
|
|
|
|
$
|
1.87
|
|
|
$
|
1.90
|
|
|
|
(2
|
%)
|
Non-GAAP Results:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Income
|
|
$
|
36,343
|
|
|
$
|
33,789
|
|
|
|
8
|
%
|
|
|
|
|
$
|
142,127
|
|
|
$
|
164,329
|
|
|
|
(14
|
%)
|
Operating Margin
|
|
|
17.7
|
%
|
|
|
17.3
|
%
|
|
—
|
|
|
|
|
|
|
18.0
|
%
|
|
|
21.6
|
%
|
|
—
|
|
EPS
|
|
$
|
0.62
|
|
|
$
|
0.57
|
|
|
|
9
|
%
|
|
|
|
|
$
|
2.51
|
|
|
$
|
2.79
|
|
|
|
(10
|
%)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
Revenues: Total revenues for the
fourth quarter of 2017 were $205.2 million, a 5% increase when compared
to revenues of $195.2 million for the fourth quarter of 2016, and a 3%
increase when compared to revenues of $199.2 million for the third
quarter of 2017. Total revenues for the full year 2017 were $789.6
million, a 4% increase when compared to revenues of $761.0 million for
the full year 2016.
The increases in revenues can be mainly attributed to the growth in
CSG’s cloud and related solutions revenues, resulting primarily from the
conversion of customer accounts onto our cloud solutions over the past
year and increases in revenues from recurring managed services
arrangements, with these year-over-year increases reduced by lower
software and services revenues generated during those periods.
GAAP Results: GAAP operating income
for the fourth quarter of 2017 was $26.0 million, or 12.7% of total
revenues, compared to $25.4 million, or 13.0% of total revenues, for the
fourth quarter of 2016, and $28.4 million, or 14.2% of total revenues,
for the third quarter of 2017. The sequential quarterly decrease in GAAP
operating income is mainly due to higher restructuring and
reorganization charges incurred during the current quarter.
GAAP EPS for the fourth quarter of 2017 was $0.45, as compared to $0.38
for the fourth quarter of 2016, and $0.44 for the third quarter of 2017.
The year-over-year increase in GAAP EPS is primarily due to decreased
non-operating expense, due mainly to foreign currency, and a lower
effective income tax rate. The sequential quarterly increase in GAAP EPS
is primarily attributed to a lower effective income tax rate, resulting
from the enactment of the US Tax Cut and Jobs Act (US Tax Reform)
executed in the fourth quarter of 2017 (see additional discussion below).
GAAP operating income for the full year 2017 was $105.7 million, or
13.4% of total revenues, compared to $132.6 million, or 17.4% of total
revenues for the full year 2016. GAAP EPS for the full year 2017 was
$1.87 compared to $1.90 for the full year 2016. The year-over-year
decreases in GAAP operating income margin and GAAP EPS are primarily due
to lower operating results, driven mainly by the increase in planned
investments that began late in 2016 and continued through 2017, aimed at
generating future long-term growth in our business.
Non-GAAP Results: Non-GAAP operating
income for the fourth quarter of 2017 was $36.3 million, or 17.7% of
total revenues, compared to $33.8 million, or 17.3% of total revenues,
for the fourth quarter of 2016, and $36.5 million, or 18.3% of total
revenues for the third quarter of 2017. The year-over-year increase in
operating income is driven primarily by the higher revenues in the
fourth quarter of 2017.
Non-GAAP EPS for the fourth quarter of 2017 was $0.62, compared to $0.57
for the fourth quarter of 2016, and $0.64 for the third quarter of 2017.
The year-over-year increase in non-GAAP EPS was driven primarily by
higher revenues and decreased non-operating expense, due mainly to
foreign currency.
Non-GAAP operating income for the full year 2017 was $142.3 million, or
18.0% of total revenues, compared to $164.3 million, or 21.6% of total
revenues for the full year 2016. Non-GAAP EPS for the full year 2017 was
$2.51 compared to $2.79 for the full year 2016. The decreases in the
full year 2017 non-GAAP operating income and non-GAAP EPS are primarily
due to lower operating results, driven mainly by the increase in planned
investments that began late in 2016 and continued through 2017, aimed at
generating future long-term growth in our business.
Balance Sheet and Cash Flows
Cash, cash equivalents and short-term investments at December 31, 2017
were $261.4 million, compared to $258.5 million as of September 30, 2017
and $276.5 million at December 31, 2016.
CSG generated net cash flows from operations for the fourth quarters
ended December 31, 2017 and 2016 of $24.4 million and $24.7 million,
respectively, and had non-GAAP free cash flow of $18.8 million and $22.0
million, respectively. CSG generated net cash flows from operations for
the years ended December 31, 2017 and 2016 of $127.2 million and $84.2
million, respectively, and had non-GAAP free cash flow of $98.3 million
and $69.9 million, respectively.
US Tax Reform
CSG recorded an income tax benefit of approximately $2 million in the
fourth quarter from the remeasurement of US-based net deferred tax
liabilities as required under the US Tax Reform enacted in December
2017, which provided approximately $0.06 of GAAP EPS benefit for both
the current quarter and full year results. This tax benefit did not
impact our non-GAAP EPS for either the quarter or the full year as this
benefit was excluded from our non-GAAP results as an unusual, one-time
income tax benefit.
In addition, we currently expect both our GAAP and non-GAAP effective
income tax rates for 2018 to be in the range of 26%-28% as a result of
the US Tax Reform, an improvement of 10 to 11 percentage points for 2018
had the new legislation not been enacted.
Summary of 2018 Financial Guidance
CSG’s financial guidance for the full year 2018 is as follows:
GAAP Measures:
|
|
|
|
|
Revenues
|
|
|
|
$795 - $815 million
|
Operating Margin Percentage
|
|
|
|
14.5%
|
EPS
|
|
|
|
$2.15 - $2.28
|
Cash Flows from Operating Activities
|
|
|
|
$120 - $140 million
|
Non-GAAP Measures:
|
|
|
|
|
Operating Margin Percentage
|
|
|
|
17.5%
|
EPS
|
|
|
|
$2.76 - $2.89
|
|
|
|
|
|
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, February 7, 2018 at 5:00
p.m. Eastern Time, to discuss CSG’s fourth quarter and full year results
for 2017. 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 1-888-587-0615 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:
-
CSG derives approximately sixty percent of its revenues from its three
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 sales, which are subject to greater volatility;
-
Increasing competition in CSG’s market from companies of greater size
and with broader presence in the communications sector;
-
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)
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
December 31,
|
|
|
|
|
2017
|
|
|
|
2016
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
|
$
|
122,243
|
|
|
|
$
|
126,351
|
|
Short-term investments
|
|
|
|
139,117
|
|
|
|
|
150,147
|
|
Total cash, cash equivalents and short-term investments
|
|
|
|
261,360
|
|
|
|
|
276,498
|
|
Trade accounts receivable:
|
|
|
|
|
|
|
|
|
|
|
Billed, net of allowance of $4,149 and $3,080
|
|
|
|
219,531
|
|
|
|
|
208,930
|
|
Unbilled
|
|
|
|
31,187
|
|
|
|
|
30,828
|
|
Income taxes receivable
|
|
|
|
13,839
|
|
|
|
|
11,931
|
|
Other current assets
|
|
|
|
28,349
|
|
|
|
|
30,386
|
|
Total current assets
|
|
|
|
554,266
|
|
|
|
|
558,573
|
|
Non-current assets:
|
|
|
|
|
|
|
|
|
|
|
Property and equipment, net of depreciation of $123,126 and $122,866
|
|
|
|
44,651
|
|
|
|
|
33,116
|
|
Software, net of amortization of $108,986 and $99,316
|
|
|
|
26,906
|
|
|
|
|
30,427
|
|
Goodwill
|
|
|
|
210,080
|
|
|
|
|
201,094
|
|
Client contracts, net of amortization of $97,109 and $96,723
|
|
|
|
43,626
|
|
|
|
|
40,675
|
|
Deferred income taxes
|
|
|
|
14,057
|
|
|
|
|
14,218
|
|
Other assets
|
|
|
|
10,948
|
|
|
|
|
13,776
|
|
Total non-current assets
|
|
|
|
350,268
|
|
|
|
|
333,306
|
|
Total assets
|
|
|
$
|
904,534
|
|
|
|
$
|
891,879
|
|
LIABILITIES, CURRENT PORTION OF LONG-TERM
DEBT CONVERSION OBLIGATION AND STOCKHOLDERS' EQUITY
|
|
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
|
|
Current portion of long-term debt, net of unamortized discounts of
zero and $296
|
|
|
$
|
22,500
|
|
|
|
$
|
49,426
|
|
Client deposits
|
|
|
|
31,053
|
|
|
|
|
33,916
|
|
Trade accounts payable
|
|
|
|
38,420
|
|
|
|
|
35,118
|
|
Accrued employee compensation
|
|
|
|
62,984
|
|
|
|
|
65,341
|
|
Deferred revenue
|
|
|
|
41,885
|
|
|
|
|
45,064
|
|
Income taxes payable
|
|
|
|
1,216
|
|
|
|
|
822
|
|
Other current liabilities
|
|
|
|
24,535
|
|
|
|
|
22,342
|
|
Total current liabilities
|
|
|
|
222,593
|
|
|
|
|
252,029
|
|
Non-current liabilities:
|
|
|
|
|
|
|
|
|
|
|
Long-term debt, net of unamortized discounts of $18,264 and $23,007
|
|
|
|
309,236
|
|
|
|
|
326,993
|
|
Deferred revenue
|
|
|
|
12,346
|
|
|
|
|
6,694
|
|
Income taxes payable
|
|
|
|
2,415
|
|
|
|
|
2,245
|
|
Deferred income taxes
|
|
|
|
4,584
|
|
|
|
|
99
|
|
Other non-current liabilities
|
|
|
|
10,614
|
|
|
|
|
12,618
|
|
Total non-current liabilities
|
|
|
|
339,195
|
|
|
|
|
348,649
|
|
Total liabilities
|
|
|
|
561,788
|
|
|
|
|
600,678
|
|
Current portion of long-term debt conversion obligation
|
|
|
|
-
|
|
|
|
|
39,841
|
|
Stockholders' equity:
|
|
|
|
|
|
|
|
|
|
|
Preferred stock, par value $.01 per share; 10,000 shares authorized;
zero shares issued and outstanding
|
|
|
|
-
|
|
|
|
|
-
|
|
Common stock, par value $.01 per share; 100,000 shares authorized;
33,516 and 32,261 shares outstanding
|
|
|
|
689
|
|
|
|
|
672
|
|
Common stock warrants; 439 and 1,426 warrants vested; 1,425 and
2,851 issued
|
|
|
|
9,082
|
|
|
|
|
16,007
|
|
Additional paid-in capital
|
|
|
|
427,091
|
|
|
|
|
391,209
|
|
Treasury stock, at cost; 34,075 and 34,919 shares
|
|
|
|
(814,732
|
)
|
|
|
|
(826,002
|
)
|
Accumulated other comprehensive income (loss):
|
|
|
|
|
|
|
|
|
|
|
Unrealized loss on short-term investments, net of tax
|
|
|
|
(88
|
)
|
|
|
|
(159
|
)
|
Cumulative foreign currency translation adjustments
|
|
|
|
(28,734
|
)
|
|
|
|
(45,213
|
)
|
Accumulated earnings
|
|
|
|
749,438
|
|
|
|
|
714,846
|
|
Total stockholders' equity
|
|
|
|
342,746
|
|
|
|
|
251,360
|
|
Total liabilities, current portion of long-term debt conversion
obligation and stockholders' equity
|
|
|
$
|
904,534
|
|
|
|
$
|
891,879
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CSG SYSTEMS INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME-UNAUDITED
(in thousands, except per share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter Ended
|
|
|
|
Year Ended
|
|
|
|
|
December 31, 2017
|
|
|
|
December 31, 2016
|
|
|
|
December 31, 2017
|
|
|
|
December 31, 2016
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cloud and related solutions
|
|
|
$
|
169,565
|
|
|
|
$
|
155,913
|
|
|
|
$
|
651,010
|
|
|
|
$
|
606,936
|
|
Software and services
|
|
|
|
16,212
|
|
|
|
|
20,436
|
|
|
|
|
62,892
|
|
|
|
|
79,400
|
|
Maintenance
|
|
|
|
19,427
|
|
|
|
|
18,820
|
|
|
|
|
75,680
|
|
|
|
|
74,622
|
|
Total revenues
|
|
|
|
205,204
|
|
|
|
|
195,169
|
|
|
|
|
789,582
|
|
|
|
|
760,958
|
|
Cost of revenues (exclusive of depreciation, shown separately below):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cloud and related solutions
|
|
|
|
81,812
|
|
|
|
|
76,374
|
|
|
|
|
315,006
|
|
|
|
|
282,952
|
|
Software and services
|
|
|
|
7,614
|
|
|
|
|
12,145
|
|
|
|
|
39,018
|
|
|
|
|
49,202
|
|
Maintenance
|
|
|
|
10,300
|
|
|
|
|
10,942
|
|
|
|
|
40,787
|
|
|
|
|
42,993
|
|
Total cost of revenues
|
|
|
|
99,726
|
|
|
|
|
99,461
|
|
|
|
|
394,811
|
|
|
|
|
375,147
|
|
Other operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development
|
|
|
|
28,112
|
|
|
|
|
27,204
|
|
|
|
|
113,215
|
|
|
|
|
98,683
|
|
Selling, general and administrative
|
|
|
|
43,714
|
|
|
|
|
38,928
|
|
|
|
|
153,695
|
|
|
|
|
140,467
|
|
Depreciation
|
|
|
|
3,405
|
|
|
|
|
3,193
|
|
|
|
|
13,380
|
|
|
|
|
13,616
|
|
Restructuring and reorganization charges
|
|
|
|
4,199
|
|
|
|
|
1,017
|
|
|
|
|
8,796
|
|
|
|
|
416
|
|
Total operating expenses
|
|
|
|
179,156
|
|
|
|
|
169,803
|
|
|
|
|
683,897
|
|
|
|
|
628,329
|
|
Operating income
|
|
|
|
26,048
|
|
|
|
|
25,366
|
|
|
|
|
105,685
|
|
|
|
|
132,629
|
|
Other income (expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
|
|
(4,156
|
)
|
|
|
|
(4,386
|
)
|
|
|
|
(16,794
|
)
|
|
|
|
(16,262
|
)
|
Amortization of original issue discount
|
|
|
|
(643
|
)
|
|
|
|
(1,010
|
)
|
|
|
|
(2,790
|
)
|
|
|
|
(4,866
|
)
|
Interest and investment income, net
|
|
|
|
936
|
|
|
|
|
759
|
|
|
|
|
3,246
|
|
|
|
|
2,457
|
|
Loss on repurchase of convertible notes
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
(8,651
|
)
|
Other, net
|
|
|
|
(514
|
)
|
|
|
|
(1,268
|
)
|
|
|
|
(1,637
|
)
|
|
|
|
(5,308
|
)
|
Total other
|
|
|
|
(4,377
|
)
|
|
|
|
(5,905
|
)
|
|
|
|
(17,975
|
)
|
|
|
|
(32,630
|
)
|
Income before income taxes
|
|
|
|
21,671
|
|
|
|
|
19,461
|
|
|
|
|
87,710
|
|
|
|
|
99,999
|
|
Income tax provision
|
|
|
|
(6,705
|
)
|
|
|
|
(6,814
|
)
|
|
|
|
(26,346
|
)
|
|
|
|
(37,117
|
)
|
Net income
|
|
|
$
|
14,966
|
|
|
|
$
|
12,647
|
|
|
|
$
|
61,364
|
|
|
|
$
|
62,882
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
|
32,512
|
|
|
|
|
31,107
|
|
|
|
|
32,415
|
|
|
|
|
30,968
|
|
Diluted
|
|
|
|
32,983
|
|
|
|
|
32,935
|
|
|
|
|
32,865
|
|
|
|
|
33,014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per common share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
$
|
0.46
|
|
|
|
$
|
0.41
|
|
|
|
$
|
1.89
|
|
|
|
$
|
2.03
|
|
Diluted
|
|
|
|
0.45
|
|
|
|
|
0.38
|
|
|
|
|
1.87
|
|
|
|
|
1.90
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CSG SYSTEMS INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS-UNAUDITED
(in thousands)
|
|
|
|
|
|
|
|
|
Year Ended
|
|
|
|
|
December 31, 2017
|
|
|
|
December 31, 2016
|
|
Cash flows from operating activities:
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
$
|
61,364
|
|
|
|
$
|
62,882
|
|
Adjustments to reconcile net income to net cash provided by
operating activities-
|
|
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
|
13,380
|
|
|
|
|
13,616
|
|
Amortization
|
|
|
|
29,501
|
|
|
|
|
27,626
|
|
Amortization of original issue discount
|
|
|
|
2,790
|
|
|
|
|
4,866
|
|
Asset impairment
|
|
|
|
3,135
|
|
|
|
|
-
|
|
Gain on short-term investments and other
|
|
|
|
(184
|
)
|
|
|
|
(83
|
)
|
Loss on repurchase of convertible notes
|
|
|
|
-
|
|
|
|
|
8,651
|
|
Gain on disposition of business operations
|
|
|
|
-
|
|
|
|
|
(6,611
|
)
|
Deferred income taxes
|
|
|
|
7,112
|
|
|
|
|
(2,811
|
)
|
Excess tax benefit of stock-based compensation awards
|
|
|
|
-
|
|
|
|
|
(4,729
|
)
|
Stock-based compensation
|
|
|
|
21,049
|
|
|
|
|
22,715
|
|
Subtotal
|
|
|
|
138,147
|
|
|
|
|
126,122
|
|
|
|
|
|
|
|
|
|
|
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
|
|
Trade accounts receivable, net
|
|
|
|
(6,421
|
)
|
|
|
|
(23,243
|
)
|
Other current and non-current assets
|
|
|
|
2,875
|
|
|
|
|
255
|
|
Income taxes payable/receivable
|
|
|
|
(2,729
|
)
|
|
|
|
(14,167
|
)
|
Trade accounts payable and accrued liabilities
|
|
|
|
(4,377
|
)
|
|
|
|
(5,738
|
)
|
Deferred revenue
|
|
|
|
(300
|
)
|
|
|
|
957
|
|
Net cash provided by operating activities
|
|
|
|
127,195
|
|
|
|
|
84,186
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
|
|
Purchases of property and equipment
|
|
|
|
(28,942
|
)
|
|
|
|
(14,263
|
)
|
Purchases of short-term investments
|
|
|
|
(182,247
|
)
|
|
|
|
(196,967
|
)
|
Proceeds from sale/maturity of short-term investments
|
|
|
|
193,465
|
|
|
|
|
157,825
|
|
Acquisition of and investments in client contracts
|
|
|
|
(12,180
|
)
|
|
|
|
(7,587
|
)
|
Proceeds from the disposition of business operations
|
|
|
|
-
|
|
|
|
|
8,850
|
|
Net cash used in investing activities
|
|
|
|
(29,904
|
)
|
|
|
|
(52,142
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
|
|
Proceeds from issuance of common stock
|
|
|
|
1,776
|
|
|
|
|
1,547
|
|
Payment of cash dividends
|
|
|
|
(26,850
|
)
|
|
|
|
(24,110
|
)
|
Repurchase of common stock
|
|
|
|
(30,649
|
)
|
|
|
|
(25,196
|
)
|
Proceeds from long-term debt
|
|
|
|
-
|
|
|
|
|
230,000
|
|
Payments on long-term debt
|
|
|
|
(15,000
|
)
|
|
|
|
(7,500
|
)
|
Repurchase of convertible notes
|
|
|
|
-
|
|
|
|
|
(215,676
|
)
|
Settlement of convertible notes
|
|
|
|
(34,771
|
)
|
|
|
|
-
|
|
Payments of deferred financing costs
|
|
|
|
-
|
|
|
|
|
(6,744
|
)
|
Excess tax benefit of stock-based compensation awards
|
|
|
|
-
|
|
|
|
|
4,729
|
|
Net cash used in financing activities
|
|
|
|
(105,494
|
)
|
|
|
|
(42,950
|
)
|
Effect of exchange rate fluctuations on cash
|
|
|
|
4,095
|
|
|
|
|
4,626
|
|
|
|
|
|
|
|
|
|
|
|
|
Net decrease in cash and cash equivalents
|
|
|
|
(4,108
|
)
|
|
|
|
(6,280
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents, beginning of period
|
|
|
|
126,351
|
|
|
|
|
132,631
|
|
Cash and cash equivalents, end of period
|
|
|
$
|
122,243
|
|
|
|
$
|
126,351
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosures of cash flow information:
|
|
|
|
|
|
|
|
|
|
|
Cash paid during the period for-
|
|
|
|
|
|
|
|
|
|
|
Interest
|
|
|
$
|
14,729
|
|
|
|
$
|
12,191
|
|
Income taxes
|
|
|
|
22,144
|
|
|
|
|
53,020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EXHIBIT 1
CSG SYSTEMS INTERNATIONAL, INC.
SUPPLEMENTAL REVENUE ANALYSIS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues by Geography
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter Ended
|
|
|
|
Quarter Ended
|
|
|
|
Quarter Ended
|
|
|
|
|
December 31,
|
|
|
|
September 30,
|
|
|
|
December 31,
|
|
|
|
|
2017
|
|
|
|
2017
|
|
|
|
2016
|
|
Americas
|
|
|
|
84
|
%
|
|
|
|
85
|
%
|
|
|
|
85
|
%
|
Europe, Middle East and Africa
|
|
|
|
10
|
%
|
|
|
|
8
|
%
|
|
|
|
10
|
%
|
Asia Pacific
|
|
|
|
6
|
%
|
|
|
|
7
|
%
|
|
|
|
5
|
%
|
Total Revenues
|
|
|
|
100
|
%
|
|
|
|
100
|
%
|
|
|
|
100
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
|
|
Year Ended
|
|
|
|
|
December 31,
|
|
|
|
December 31,
|
|
|
|
|
2017
|
|
|
|
2016
|
|
Americas
|
|
|
|
85
|
%
|
|
|
|
86
|
%
|
Europe, Middle East and Africa
|
|
|
|
9
|
%
|
|
|
|
9
|
%
|
Asia Pacific
|
|
|
|
6
|
%
|
|
|
|
5
|
%
|
Total Revenues
|
|
|
|
100
|
%
|
|
|
|
100
|
%
|
|
|
|
|
|
|
|
|
|
|
|
Revenues by Significant Customers: 10% or more
of Revenues
|
|
|
Quarter Ended
|
|
|
|
Quarter Ended
|
|
|
|
Quarter Ended
|
|
|
|
|
December 31,
|
|
|
|
September 30,
|
|
|
|
December 31,
|
|
|
|
|
2017
|
|
|
|
2017
|
|
|
|
2016
|
|
Comcast
|
|
|
|
29
|
%
|
|
|
|
28
|
%
|
|
|
|
26
|
%
|
Charter
|
|
|
|
21
|
%
|
|
|
|
23
|
%
|
|
|
|
20
|
%
|
DISH
|
|
|
|
10
|
%
|
|
|
|
11
|
%
|
|
|
|
12
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
|
|
Year Ended
|
|
|
|
|
December 31,
|
|
|
|
December 31,
|
|
|
|
|
2017
|
|
|
|
2016
|
|
Comcast
|
|
|
|
28
|
%
|
|
|
|
26
|
%
|
Charter
|
|
|
|
22
|
%
|
|
|
|
21
|
%
|
DISH
|
|
|
|
11
|
%
|
|
|
|
13
|
%
|
|
|
|
|
|
|
|
|
|
|
|
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 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
|
|
|
Operating Income
|
|
|
|
EPS
|
Restructuring and reorganization charges
|
|
|
|
X
|
|
|
|
|
X
|
Acquisition-related charges
|
|
|
|
X
|
|
|
|
|
X
|
Stock-based compensation
|
|
|
|
X
|
|
|
|
|
X
|
Amortization of acquired intangible assets
|
|
|
|
X
|
|
|
|
|
X
|
Amortization of original issue discount (“OID”)
|
|
|
|
—
|
|
|
|
|
X
|
Gain (loss) on repurchase of convertible notes
|
|
|
|
—
|
|
|
|
|
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:
-
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 charges relate to direct and incremental expenses
related to business acquisitions, and thus, are not considered
reflective of CSG’s recurring core business operating results. These
charges typically include expenses related to legal, accounting, and
other professional services. The exclusion of these charges 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.
-
Amortization of acquired intangible assets is the result of business
acquisitions. A portion of the purchase price in an acquisition is
allocated to acquired intangible assets (e.g., software, client
relationships, etc.), which are then amortized to expense over their
estimated useful lives. This annual amortization expense is generally
unchanged from the initial estimates, regardless of performance of the
acquired business in any one period. Also, the value assigned to
acquired intangible assets in a business combination is based on
various estimates and valuation techniques, and does not necessarily
represent the costs CSG would incur to develop such capabilities
internally. Additionally, amortization of acquired intangible assets
can be inconsistent in amount and frequency, and can be significantly
affected by the timing and size of an acquisition. 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 acquisitions 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 repurchase of CSG’s convertible notes
are not considered reflective of CSG’s recurring core business
operating results. Any resulting gain or loss on the repurchase of
CSG’s convertible notes is 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, and unusual items, such as restructuring and reorganization
charges, and gains and losses related to the repurchase of CSG’s
convertible notes, 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):
|
|
|
Quarter Ended
|
|
|
|
Quarter Ended
|
|
|
|
|
December 31, 2017
|
|
|
|
December 31, 2016
|
|
|
|
|
|
|
|
|
% of
|
|
|
|
|
|
|
|
% of
|
|
|
|
|
Amounts
|
|
|
Revenues
|
|
|
|
Amounts
|
|
|
Revenues
|
|
GAAP operating income
|
|
|
$
|
26,048
|
|
|
|
12.7
|
%
|
|
|
$
|
25,366
|
|
|
|
13.0
|
%
|
Restructuring and reorganization charges (1)
|
|
|
|
4,199
|
|
|
|
2.0
|
%
|
|
|
|
1,017
|
|
|
|
0.5
|
%
|
Stock-based compensation (1)
|
|
|
|
4,438
|
|
|
|
2.2
|
%
|
|
|
|
5,443
|
|
|
|
2.8
|
%
|
Amortization of acquired intangible assets
|
|
|
|
1,658
|
|
|
|
0.8
|
%
|
|
|
|
1,963
|
|
|
|
1.0
|
%
|
Non-GAAP operating income
|
|
|
$
|
36,343
|
|
|
|
17.7
|
%
|
|
|
$
|
33,789
|
|
|
|
17.3
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
|
|
Year Ended
|
|
|
|
|
December 31, 2017
|
|
|
|
December 31, 2016
|
|
|
|
|
|
|
|
|
% of
|
|
|
|
|
|
|
|
% of
|
|
|
|
|
Amounts
|
|
|
Revenues
|
|
|
|
Amounts
|
|
|
Revenues
|
|
GAAP operating income
|
|
|
$
|
105,685
|
|
|
|
13.4
|
%
|
|
|
$
|
132,629
|
|
|
|
17.4
|
%
|
Restructuring and reorganization charges (1)
|
|
|
|
8,796
|
|
|
|
1.1
|
%
|
|
|
|
416
|
|
|
|
0.1
|
%
|
Stock-based compensation (1)
|
|
|
|
20,782
|
|
|
|
2.6
|
%
|
|
|
|
22,795
|
|
|
|
3.0
|
%
|
Amortization of acquired intangible assets
|
|
|
|
6,864
|
|
|
|
0.9
|
%
|
|
|
|
8,489
|
|
|
|
1.1
|
%
|
Non-GAAP operating income
|
|
|
$
|
142,127
|
|
|
|
18.0
|
%
|
|
|
$
|
164,329
|
|
|
|
21.6
|
%
|
(1)
|
|
Stock-based compensation included in the tables above and following
excludes amounts that have been recorded in restructuring and
reorganization charges. In addition, restructuring and
reorganization charges include the impact of a gain of $6.6 million
on the disposition of business operations for the year ended
December 31, 2016.
|
|
|
|
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, 2017
|
|
|
|
December 31, 2016
|
|
|
|
Amounts
|
|
|
EPS (3)
|
|
|
|
Amounts
|
|
|
EPS (3)
|
GAAP net income
|
|
|
$
|
14,966
|
|
|
$
|
0.45
|
|
|
|
$
|
12,647
|
|
|
$
|
0.38
|
GAAP income tax provision (2)
|
|
|
|
6,705
|
|
|
|
|
|
|
|
|
6,814
|
|
|
|
|
GAAP income before income taxes
|
|
|
|
21,671
|
|
|
|
|
|
|
|
|
19,461
|
|
|
|
|
Restructuring and reorganization charges (1)
|
|
|
|
4,199
|
|
|
|
|
|
|
|
|
1,017
|
|
|
|
|
Stock-based compensation (1)
|
|
|
|
4,438
|
|
|
|
|
|
|
|
|
5,443
|
|
|
|
|
Amortization of acquired intangible assets
|
|
|
|
1,658
|
|
|
|
|
|
|
|
|
1,963
|
|
|
|
|
Amortization of OID
|
|
|
|
643
|
|
|
|
|
|
|
|
|
1,010
|
|
|
|
|
Non-GAAP income before income taxes
|
|
|
|
32,609
|
|
|
|
|
|
|
|
|
28,894
|
|
|
|
|
Non-GAAP income tax provision (2)
|
|
|
|
(12,036
|
)
|
|
|
|
|
|
|
|
(10,037
|
)
|
|
|
|
Non-GAAP net income
|
|
|
$
|
20,573
|
|
|
$
|
0.62
|
|
|
|
$
|
18,857
|
|
|
$
|
0.57
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
|
|
Year Ended
|
|
|
|
December 31, 2017
|
|
|
|
December 31, 2016
|
|
|
|
Amounts
|
|
|
EPS (3)
|
|
|
|
Amounts
|
|
|
EPS (3)
|
GAAP net income
|
|
|
$
|
61,364
|
|
|
$
|
1.87
|
|
|
|
$
|
62,882
|
|
|
$
|
1.90
|
GAAP income tax provision (2)
|
|
|
|
26,346
|
|
|
|
|
|
|
|
|
37,117
|
|
|
|
|
GAAP income before income taxes
|
|
|
|
87,710
|
|
|
|
|
|
|
|
|
99,999
|
|
|
|
|
Restructuring and reorganization charges (1)
|
|
|
|
8,796
|
|
|
|
|
|
|
|
|
416
|
|
|
|
|
Stock-based compensation (1)
|
|
|
|
20,782
|
|
|
|
|
|
|
|
|
22,795
|
|
|
|
|
Amortization of acquired intangible assets
|
|
|
|
6,864
|
|
|
|
|
|
|
|
|
8,489
|
|
|
|
|
Loss on repurchase of convertible notes
|
|
|
|
-
|
|
|
|
|
|
|
|
|
8,651
|
|
|
|
|
Amortization of OID
|
|
|
|
2,790
|
|
|
|
|
|
|
|
|
4,866
|
|
|
|
|
Non-GAAP income before income taxes
|
|
|
|
126,942
|
|
|
|
|
|
|
|
|
145,216
|
|
|
|
|
Non-GAAP income tax provision (2)
|
|
|
|
(44,430
|
)
|
|
|
|
|
|
|
|
(53,076
|
)
|
|
|
|
Non-GAAP net income
|
|
|
$
|
82,512
|
|
|
$
|
2.51
|
|
|
|
$
|
92,140
|
|
|
$
|
2.79
|
(2)
|
|
For the fourth quarter and year ended December 31, 2017 the GAAP
effective income tax rates were approximately 31% and 30%,
respectively, and the non-GAAP effective income tax rates were
approximately 37% and 35%, respectively.
|
|
|
|
|
|
The difference between the GAAP and non-GAAP effective income tax
rates relates primarily to: (i) an income tax benefit of
approximately $2 million recorded in the fourth quarter from the
remeasurement of US-based net deferred tax liabilities as required
under the US Tax Reform legislation enacted in December 2017, which
was not included in the non-GAAP effective income tax rate; and (ii)
the timing treatment of the net income tax benefit from Comcast’s
exercise of their vested stock warrants in January 2017. The net
income tax benefit from the exercise of the warrants was spread
ratably across 2017 in the non-GAAP effective income tax rate;
however, the entire amount of the benefit was recorded as a discrete
item, as required by GAAP, in the first quarter.
|
|
|
|
|
|
For the fourth quarter and year ended December 31, 2016 the GAAP and
non-GAAP effective income tax rates were approximately 35% and 37%,
respectively.
|
|
|
|
(3)
|
|
The outstanding diluted shares for the fourth quarter and year ended
December 31, 2017 were 33.0 million and 32.9 million, respectively,
and for the fourth quarter and year ended December 31, 2016 were
32.9 million 33.0 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,
|
|
|
|
|
2017
|
|
|
2016
|
|
|
|
2017
|
|
|
2016
|
|
GAAP net income
|
|
|
$
|
14,966
|
|
|
$
|
12,647
|
|
|
|
$
|
61,364
|
|
|
$
|
62,882
|
|
GAAP income tax provision
|
|
|
|
6,705
|
|
|
|
6,814
|
|
|
|
|
26,346
|
|
|
|
37,117
|
|
Interest expense (4)
|
|
|
|
4,156
|
|
|
|
4,386
|
|
|
|
|
16,794
|
|
|
|
16,262
|
|
Amortization of OID
|
|
|
|
643
|
|
|
|
1,010
|
|
|
|
|
2,790
|
|
|
|
4,866
|
|
Loss on repurchase of convertible notes
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
8,651
|
|
Interest and investment income and other, net
|
|
|
|
(422
|
)
|
|
|
509
|
|
|
|
|
(1,609
|
)
|
|
|
2,851
|
|
GAAP operating income
|
|
|
|
26,048
|
|
|
|
25,366
|
|
|
|
|
105,685
|
|
|
|
132,629
|
|
Restructuring and reorganization charges (1)
|
|
|
|
4,199
|
|
|
|
1,017
|
|
|
|
|
8,796
|
|
|
|
416
|
|
Stock-based compensation (1)
|
|
|
|
4,438
|
|
|
|
5,443
|
|
|
|
|
20,782
|
|
|
|
22,795
|
|
Amortization of acquired intangible assets (5)
|
|
|
|
1,658
|
|
|
|
1,963
|
|
|
|
|
6,864
|
|
|
|
8,489
|
|
Amortization of other intangible assets (5)
|
|
|
|
5,618
|
|
|
|
5,150
|
|
|
|
|
20,388
|
|
|
|
16,856
|
|
Depreciation
|
|
|
|
3,405
|
|
|
|
3,193
|
|
|
|
|
13,380
|
|
|
|
13,616
|
|
Non-GAAP adjusted EBITDA
|
|
|
$
|
45,366
|
|
|
$
|
42,132
|
|
|
|
$
|
175,895
|
|
|
$
|
194,801
|
|
Non-GAAP adjusted EBITDA as a percentage of revenues
|
|
|
|
22
|
%
|
|
|
22
|
%
|
|
|
|
22
|
%
|
|
|
26
|
%
|
(4)
|
|
Interest expense includes amortization of deferred financing costs
as provided in Note 5 below.
|
|
|
|
(5)
|
|
Amortization on the statement of cash flows is made up of the
following items for the indicated periods (in thousands):
|
|
|
|
|
|
|
Quarter Ended
|
|
|
|
Year Ended
|
|
|
|
December 31,
|
|
|
|
December 31,
|
|
|
|
2017
|
|
|
2016
|
|
|
|
2017
|
|
|
2016
|
Amortization of acquired intangible assets
|
|
|
$
|
1,658
|
|
|
$
|
1,963
|
|
|
|
$
|
6,864
|
|
|
$
|
8,489
|
Amortization of other intangible assets
|
|
|
|
5,618
|
|
|
|
5,150
|
|
|
|
|
20,388
|
|
|
|
16,856
|
Amortization of deferred financing costs
|
|
|
|
555
|
|
|
|
592
|
|
|
|
|
2,249
|
|
|
|
2,281
|
Total amortization
|
|
|
$
|
7,831
|
|
|
$
|
7,705
|
|
|
|
$
|
29,501
|
|
|
$
|
27,626
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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,
|
|
|
|
|
2017
|
|
|
2016
|
|
|
|
2017
|
|
|
2016
|
|
Cash flows from operating activities
|
|
|
$
|
24,373
|
|
|
$
|
24,680
|
|
|
|
$
|
127,195
|
|
|
$
|
84,186
|
|
Purchases of property and equipment
|
|
|
|
(5,572
|
)
|
|
|
(2,721
|
)
|
|
|
|
(28,942
|
)
|
|
|
(14,263
|
)
|
Non-GAAP free cash flow
|
|
|
$
|
18,801
|
|
|
$
|
21,959
|
|
|
|
$
|
98,253
|
|
|
$
|
69,923
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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:
|
|
|
2018
|
|
|
|
|
Guidance
|
|
GAAP operating margin percentage
|
|
|
|
14.5
|
%
|
Stock-based compensation (6)
|
|
|
|
2.5
|
%
|
Amortization of acquired intangible assets (7)
|
|
|
|
0.5
|
%
|
Non-GAAP operating margin percentage
|
|
|
|
17.5
|
%
|
(6)
|
|
This represents the pretax impact of stock-based compensation
expense of an estimated $20 million on CSG’s operating income margin
as a percentage of the midpoint of 2018 revenue guidance.
|
|
|
|
(7)
|
|
This represents the pretax impact of amortization of acquired
intangible assets expense of an estimated $4.7 million on CSG’s
operating income margin as a percentage of the midpoint of 2018
revenue guidance.
|
|
|
|
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):
|
|
|
2018 Guidance Range
|
|
|
|
Low Range
|
|
|
|
High Range
|
|
|
|
Amounts
|
|
|
EPS (9)
|
|
|
|
Amounts
|
|
|
EPS (9)
|
GAAP net income
|
|
|
$
|
71,100
|
|
|
$
|
2.15
|
|
|
|
$
|
75,200
|
|
|
$
|
2.28
|
GAAP income tax provision (8)
|
|
|
|
26,600
|
|
|
|
|
|
|
|
|
27,500
|
|
|
|
|
GAAP income before income taxes
|
|
|
|
97,700
|
|
|
|
|
|
|
|
|
102,700
|
|
|
|
|
Restructuring and reorganization charges
|
|
|
|
100
|
|
|
|
|
|
|
|
|
100
|
|
|
|
|
Stock-based compensation
|
|
|
|
20,000
|
|
|
|
|
|
|
|
|
20,000
|
|
|
|
|
Amortization of acquired intangible assets
|
|
|
|
4,700
|
|
|
|
|
|
|
|
|
4,700
|
|
|
|
|
Amortization of OID
|
|
|
|
2,700
|
|
|
|
|
|
|
|
|
2,700
|
|
|
|
|
Non-GAAP income before income taxes
|
|
|
|
125,200
|
|
|
|
|
|
|
|
|
130,200
|
|
|
|
|
Non-GAAP income tax provision (8)
|
|
|
|
(34,000
|
)
|
|
|
|
|
|
|
|
(34,900
|
)
|
|
|
|
Non-GAAP net income
|
|
|
$
|
91,200
|
|
|
$
|
2.76
|
|
|
|
$
|
95,300
|
|
|
$
|
2.89
|
(8)
|
|
For 2018, the estimated effective income tax rate for GAAP and
non-GAAP purposes are expected to be approximately 27%.
|
|
|
|
(9)
|
|
The weighted-average diluted shares outstanding are expected to be
approximately 33 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 2018 full year financial guidance at the mid-point (in
thousands, except percentages):
|
|
|
2018
|
|
GAAP net income
|
|
|
$
|
73,200
|
|
GAAP income tax provision
|
|
|
|
27,000
|
|
Interest expense
|
|
|
|
16,500
|
|
Amortization of OID
|
|
|
|
2,700
|
|
Interest and investment income and other, net
|
|
|
|
(2,500
|
)
|
GAAP operating income
|
|
|
|
116,900
|
|
Restructuring and reorganization charges
|
|
|
|
100
|
|
Stock-based compensation
|
|
|
|
20,000
|
|
Amortization of acquired intangible assets
|
|
|
|
4,700
|
|
Amortization of other intangible assets
|
|
|
|
27,300
|
|
Depreciation
|
|
|
|
16,000
|
|
Non-GAAP adjusted EBITDA
|
|
|
$
|
185,000
|
|
Non-GAAP adjusted EBITDA as a percentage of revenues
|
|
|
|
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):
|
|
|
2018
|
|
Cash flows from operating activities
|
|
|
$
|
130,000
|
|
Purchases of property and equipment
|
|
|
|
(30,000
|
)
|
Non-GAAP free cash flow
|
|
|
$
|
100,000
|
|
|
|
|
|
|
|
View source version on businesswire.com: http://www.businesswire.com/news/home/20180207006005/en/
Source: CSG Systems International, Inc.