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 ended September 30, 2018.
Key Highlights:
-
Third quarter 2018 financial results:
-
Total revenues were $213.1 million.
-
GAAP operating income was $25.7 million, or 12.0% of
total revenues, and non-GAAPoperating income was $35.6
million, or 16.7% of total revenues.
-
GAAP earnings per diluted share (EPS) was $0.49. Non-GAAP
EPS was $0.70.
-
Cash flows from operations were $47.1 million.
-
CSG declared its quarterly cash dividend of $0.21 per share of
common stock, or a total of approximately $7 million, to
shareholders.
-
In September 2018, CSG announced a Board-approved capital allocation
strategy, which included authorization to repurchase up to $150
million of CSG common stock over the next three years.
-
On October 1, 2018, CSG acquired Forte Payment Systems, Inc., a
leading provider of advanced payment solutions, based in Allen, Texas.
“This quarter reflects the balanced approach we took to drive business
and shareholder value,” said Bret Griess, president and chief executive
officer for CSG. “In addition to the ongoing investment and focus that
we have put into our people, our solutions and our clients, we also
enhanced and expanded our addressable market with the acquisition of
Forte Payment Systems, an innovator in the payments space. And, thanks
to the strong cash we generate from our highly visible and recurring
revenues, going forward we will be able to return even more cash to our
shareholders in the form of increased share repurchases. We take these
actions with one goal in mind, which is to increase our revenues and
earnings.”
Financial Overview (unaudited)
(in thousands, except per share amounts and percentages):
|
|
|
|
|
Quarter Ended September 30,
|
|
|
Nine Months Ended September 30,
|
|
|
|
|
|
|
|
|
|
|
|
Percent
|
|
|
|
|
|
|
|
|
|
|
Percent
|
|
|
|
2018
|
|
2017
|
|
Changed
|
|
|
2018
|
|
2017
|
|
Changed
|
Revenues
|
|
|
$
|
213,055
|
|
|
$
|
199,195
|
|
|
7
|
%
|
|
|
$
|
627,792
|
|
|
$
|
584,378
|
|
|
7
|
%
|
GAAP Results:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Income
|
|
|
$
|
25,653
|
|
|
$
|
28,376
|
|
|
(10
|
%)
|
|
|
$
|
75,507
|
|
|
$
|
79,637
|
|
|
(5
|
%)
|
Operating Margin Percentage
|
|
|
|
12.0
|
%
|
|
|
14.2
|
%
|
|
—
|
|
|
|
|
12.0
|
%
|
|
|
13.6
|
%
|
|
—
|
|
EPS
|
|
|
$
|
0.49
|
|
|
$
|
0.44
|
|
|
11
|
%
|
|
|
$
|
1.37
|
|
|
$
|
1.41
|
|
|
(3
|
%)
|
Non-GAAP Results:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Income
|
|
|
$
|
35,578
|
|
|
$
|
36,452
|
|
|
(2
|
%)
|
|
|
$
|
106,455
|
|
|
$
|
105,784
|
|
|
1
|
%
|
Operating Margin Percentage
|
|
|
|
16.7
|
%
|
|
|
18.3
|
%
|
|
—
|
|
|
|
|
17.0
|
%
|
|
|
18.1
|
%
|
|
—
|
|
EPS
|
|
|
$
|
0.70
|
|
|
$
|
0.64
|
|
|
9
|
%
|
|
|
$
|
2.11
|
|
|
$
|
1.89
|
|
|
12
|
%
|
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 third quarter of 2018 were $213.1 million, a 7%
increase when compared to revenues of $199.2 million for the third
quarter of 2017, and consistent with revenues of $213.0 million for the
second quarter of 2018. The year-over-year increase in revenues can be
primarily attributed to the acquisition of Business Ink on February 28,
2018.
GAAP Results:
GAAP operating income
for the third quarter of 2018 was $25.7 million, or 12.0% of total
revenues, compared to $28.4 million, or 14.2% of total revenues, for the
third quarter of 2017, and $24.1 million, or 11.3% of total revenues,
for the second quarter of 2018. GAAP EPS for the third quarter of 2018
was $0.49, as compared to $0.44 for the third quarter of 2017, and $0.46
for the second quarter of 2018.
Non-GAAP Results:
Non-GAAP operating
income for the third quarter of 2018 was $35.6 million, or 16.7% of
total revenues, compared to $36.5 million, or 18.3% of total revenues,
for the third quarter of 2017, and $35.6 million, or 16.7% of total
revenues for the second quarter of 2018. Non-GAAP EPS for the third
quarter of 2018 was $0.70, compared to $0.64 for the third quarter of
2017, and $0.73 for the second quarter of 2018.
The year-over-year increase in GAAP and non-GAAP EPS is primarily due to
a lower effective tax rate resulting primarily from the U.S. Tax Reform
enacted in December 2017.
Balance Sheet and Cash Flows
Cash, cash equivalents and short-term investments at September 30, 2018
were $199.3 million, compared to $186.4 million as of June 30, 2018 and
$261.4 million as of December 31, 2017. CSG had net cash flows from
operations for the third quarters ended September 30, 2018 and 2017 of
$47.1 million and $38.3 million, respectively, and had non-GAAP free
cash flow of $29.7 million and $33.7 million, respectively. For the nine
months ended September 30, 2018 and 2017, CSG generated net cash flows
from operations of $73.3 million and $102.8 million, respectively and
had non-GAAP free cash flow of $29.2 million and $79.5 million,
respectively.
Summary of 2018 Financial Guidance
CSG is updating its financial guidance for the full year 2018, to
include the fourth quarter impact of the acquisition of Forte Payment
Systems, Inc. as follows:
|
|
|
|
|
|
|
|
|
As of
November 7, 2018
|
|
|
|
|
Previous
|
|
|
|
|
GAAP Measures:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
|
|
|
$865 - $875 million
|
|
|
|
|
$845 - $865 million
|
|
|
|
|
Operating Margin Percentage
|
|
|
|
|
11.7%
|
|
|
|
|
12.6%
|
|
|
|
|
EPS
|
|
|
|
|
$1.78 - $1.90
|
|
|
|
|
$1.89 - $2.02
|
|
|
|
|
Cash Flows from Operating Activities
|
|
|
|
|
$105 - $115 million
|
|
|
|
|
$130 - $150 million
|
|
|
|
|
Non-GAAP Measures:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted Revenues
|
|
|
|
|
$853 - $863 million
|
|
|
|
|
N/A
|
|
|
|
|
Operating Margin Percentage
|
|
|
|
|
16.5%
|
|
|
|
|
16.9%
|
|
|
|
|
Adjusted Operating Margin Percentage
|
|
|
|
|
16.7%
|
|
|
|
|
N/A
|
|
|
|
|
EPS
|
|
|
|
|
$2.81 - $2.93
|
|
|
|
|
$2.81 - $2.93
|
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, November 7, 2018 at 5:00
p.m. Eastern Time, to discuss CSG’s third 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 1-800-458-4121 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)
|
|
|
|
|
|
|
|
September 30,
|
|
|
December 31,
|
|
|
|
|
|
2018
|
|
|
2017
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
|
|
|
$
|
197,172
|
|
|
|
$
|
122,243
|
|
Short-term investments
|
|
|
|
|
|
2,130
|
|
|
|
|
139,117
|
|
Total cash, cash equivalents and short-term investments
|
|
|
|
|
|
199,302
|
|
|
|
|
261,360
|
|
Trade accounts receivable:
|
|
|
|
|
|
|
|
|
|
|
|
|
Billed, net of allowance of $4,182 and $4,149
|
|
|
|
|
|
246,731
|
|
|
|
|
219,531
|
|
Unbilled
|
|
|
|
|
|
36,847
|
|
|
|
|
31,187
|
|
Income taxes receivable
|
|
|
|
|
|
7,452
|
|
|
|
|
13,839
|
|
Other current assets
|
|
|
|
|
|
38,706
|
|
|
|
|
28,349
|
|
Total current assets
|
|
|
|
|
|
529,038
|
|
|
|
|
554,266
|
|
Non-current assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
Property and equipment, net of depreciation of $108,266 and $123,126
|
|
|
|
|
|
78,265
|
|
|
|
|
44,651
|
|
Software, net of amortization of $116,761 and $108,986
|
|
|
|
|
|
31,953
|
|
|
|
|
26,906
|
|
Goodwill
|
|
|
|
|
|
210,697
|
|
|
|
|
210,080
|
|
Client contracts, net of amortization of zero and $97,109
|
|
|
|
|
|
-
|
|
|
|
|
43,626
|
|
Acquired client contracts, net of amortization of $81,286 and zero
|
|
|
|
|
|
39,863
|
|
|
|
|
-
|
|
Client contract costs, net of amortization of $37,038 and zero
|
|
|
|
|
|
35,584
|
|
|
|
|
-
|
|
Deferred income taxes
|
|
|
|
|
|
11,011
|
|
|
|
|
14,057
|
|
Other assets
|
|
|
|
|
|
10,898
|
|
|
|
|
10,948
|
|
Total non-current assets
|
|
|
|
|
|
418,271
|
|
|
|
|
350,268
|
|
Total assets
|
|
|
|
|
$
|
947,309
|
|
|
|
$
|
904,534
|
|
LIABILITIES AND STOCKHOLDERS' EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Current portion of long-term debt
|
|
|
|
|
$
|
7,500
|
|
|
|
$
|
22,500
|
|
Client deposits
|
|
|
|
|
|
36,079
|
|
|
|
|
31,053
|
|
Trade accounts payable
|
|
|
|
|
|
39,054
|
|
|
|
|
38,420
|
|
Accrued employee compensation
|
|
|
|
|
|
56,578
|
|
|
|
|
62,984
|
|
Deferred revenue
|
|
|
|
|
|
41,388
|
|
|
|
|
41,885
|
|
Income taxes payable
|
|
|
|
|
|
448
|
|
|
|
|
1,216
|
|
Other current liabilities
|
|
|
|
|
|
21,590
|
|
|
|
|
24,535
|
|
Total current liabilities
|
|
|
|
|
|
202,637
|
|
|
|
|
222,593
|
|
Non-current liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt, net of unamortized discounts of $15,641 and $18,264
|
|
|
|
|
|
353,109
|
|
|
|
|
309,236
|
|
Deferred revenue
|
|
|
|
|
|
13,578
|
|
|
|
|
12,346
|
|
Income taxes payable
|
|
|
|
|
|
2,372
|
|
|
|
|
2,415
|
|
Deferred income taxes
|
|
|
|
|
|
5,881
|
|
|
|
|
4,584
|
|
Other non-current liabilities
|
|
|
|
|
|
11,313
|
|
|
|
|
10,614
|
|
Total non-current liabilities
|
|
|
|
|
|
386,253
|
|
|
|
|
339,195
|
|
Total liabilities
|
|
|
|
|
|
588,890
|
|
|
|
|
561,788
|
|
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;
33,451 and 33,516 shares outstanding
|
|
|
|
|
|
693
|
|
|
|
|
689
|
|
Common stock warrants; 439 warrants vested; 1,425 issued
|
|
|
|
|
|
9,082
|
|
|
|
|
9,082
|
|
Additional paid-in capital
|
|
|
|
|
|
436,412
|
|
|
|
|
427,091
|
|
Treasury stock, at cost; 34,470 and 34,075 shares
|
|
|
|
|
|
(831,585
|
)
|
|
|
|
(814,732
|
)
|
Accumulated other comprehensive income (loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized loss on short-term investments, net of tax
|
|
|
|
|
|
(7
|
)
|
|
|
|
(88
|
)
|
Cumulative foreign currency translation adjustments
|
|
|
|
|
|
(37,364
|
)
|
|
|
|
(28,734
|
)
|
Accumulated earnings
|
|
|
|
|
|
781,188
|
|
|
|
|
749,438
|
|
Total stockholders' equity
|
|
|
|
|
|
358,419
|
|
|
|
|
342,746
|
|
Total liabilities and stockholders' equity
|
|
|
|
|
$
|
947,309
|
|
|
|
$
|
904,534
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CSG SYSTEMS INTERNATIONAL, INC.
|
CONDENSED CONSOLIDATED STATEMENTS OF INCOME-UNAUDITED
|
(in thousands, except per share amounts)
|
|
|
|
|
Quarter Ended
|
|
|
Nine Months Ended
|
|
|
|
September 30,
2018
|
|
|
September 30,
2017
|
|
|
September 30,
2018
|
|
|
September 30,
2017
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cloud and related solutions
|
|
|
$
|
186,473
|
|
|
|
$
|
164,789
|
|
|
|
$
|
551,390
|
|
|
|
$
|
481,445
|
|
Software and services
|
|
|
|
14,283
|
|
|
|
|
15,726
|
|
|
|
|
39,573
|
|
|
|
|
46,680
|
|
Maintenance
|
|
|
|
12,299
|
|
|
|
|
18,680
|
|
|
|
|
36,829
|
|
|
|
|
56,253
|
|
Total revenues
|
|
|
|
213,055
|
|
|
|
|
199,195
|
|
|
|
|
627,792
|
|
|
|
|
584,378
|
|
Cost of revenues (exclusive of depreciation, shown separately below):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cloud and related solutions
|
|
|
|
95,092
|
|
|
|
|
79,856
|
|
|
|
|
277,212
|
|
|
|
|
233,194
|
|
Software and services
|
|
|
|
8,669
|
|
|
|
|
9,725
|
|
|
|
|
25,816
|
|
|
|
|
31,404
|
|
Maintenance
|
|
|
|
5,291
|
|
|
|
|
10,136
|
|
|
|
|
16,612
|
|
|
|
|
30,487
|
|
Total cost of revenues
|
|
|
|
109,052
|
|
|
|
|
99,717
|
|
|
|
|
319,640
|
|
|
|
|
295,085
|
|
Other operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development
|
|
|
|
31,477
|
|
|
|
|
30,324
|
|
|
|
|
91,809
|
|
|
|
|
85,103
|
|
Selling, general and administrative
|
|
|
|
39,243
|
|
|
|
|
35,816
|
|
|
|
|
120,515
|
|
|
|
|
109,981
|
|
Depreciation
|
|
|
|
4,831
|
|
|
|
|
3,344
|
|
|
|
|
13,293
|
|
|
|
|
9,975
|
|
Restructuring and reorganization charges
|
|
|
|
2,799
|
|
|
|
|
1,618
|
|
|
|
|
7,028
|
|
|
|
|
4,597
|
|
Total operating expenses
|
|
|
|
187,402
|
|
|
|
|
170,819
|
|
|
|
|
552,285
|
|
|
|
|
504,741
|
|
Operating income
|
|
|
|
25,653
|
|
|
|
|
28,376
|
|
|
|
|
75,507
|
|
|
|
|
79,637
|
|
Other income (expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
|
|
(4,456
|
)
|
|
|
|
(4,186
|
)
|
|
|
|
(13,202
|
)
|
|
|
|
(12,638
|
)
|
Amortization of original issue discount
|
|
|
|
(671
|
)
|
|
|
|
(634
|
)
|
|
|
|
(1,984
|
)
|
|
|
|
(2,147
|
)
|
Interest and investment income, net
|
|
|
|
675
|
|
|
|
|
800
|
|
|
|
|
2,256
|
|
|
|
|
2,310
|
|
Loss on extinguishment of debt
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
(810
|
)
|
|
|
|
-
|
|
Other, net
|
|
|
|
(709
|
)
|
|
|
|
(970
|
)
|
|
|
|
(347
|
)
|
|
|
|
(1,123
|
)
|
Total other
|
|
|
|
(5,161
|
)
|
|
|
|
(4,990
|
)
|
|
|
|
(14,087
|
)
|
|
|
|
(13,598
|
)
|
Income before income taxes
|
|
|
|
20,492
|
|
|
|
|
23,386
|
|
|
|
|
61,420
|
|
|
|
|
66,039
|
|
Income tax provision
|
|
|
|
(4,391
|
)
|
|
|
|
(8,806
|
)
|
|
|
|
(16,188
|
)
|
|
|
|
(19,641
|
)
|
Net income
|
|
|
$
|
16,101
|
|
|
|
$
|
14,580
|
|
|
|
$
|
45,232
|
|
|
|
$
|
46,398
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
|
32,507
|
|
|
|
|
32,561
|
|
|
|
|
32,541
|
|
|
|
|
32,383
|
|
Diluted
|
|
|
|
32,806
|
|
|
|
|
32,901
|
|
|
|
|
32,939
|
|
|
|
|
32,825
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per common share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
$
|
0.50
|
|
|
|
$
|
0.45
|
|
|
|
$
|
1.39
|
|
|
|
$
|
1.43
|
|
Diluted
|
|
|
|
0.49
|
|
|
|
|
0.44
|
|
|
|
|
1.37
|
|
|
|
|
1.41
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CSG SYSTEMS INTERNATIONAL, INC.
|
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS-UNAUDITED
|
(in thousands)
|
|
|
|
|
Nine Months Ended
|
|
|
|
September 30,
2018
|
|
|
September 30,
2017
|
Cash flows from operating activities:
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
$
|
45,232
|
|
|
|
$
|
46,398
|
|
Adjustments to reconcile net income to net cash provided by
operating activities-
|
|
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
|
13,293
|
|
|
|
|
9,975
|
|
Amortization
|
|
|
|
31,974
|
|
|
|
|
21,670
|
|
Amortization of original issue discount
|
|
|
|
1,984
|
|
|
|
|
2,147
|
|
Asset impairment
|
|
|
|
1,428
|
|
|
|
|
2,135
|
|
Gain on short-term investments and other
|
|
|
|
(65
|
)
|
|
|
|
(76
|
)
|
Loss on extinguishment of debt
|
|
|
|
810
|
|
|
|
|
-
|
|
Deferred income taxes
|
|
|
|
2,150
|
|
|
|
|
1,487
|
|
Stock-based compensation
|
|
|
|
14,805
|
|
|
|
|
16,659
|
|
Subtotal
|
|
|
|
111,611
|
|
|
|
|
100,395
|
|
Changes in operating assets and liabilities, net of acquired amounts:
|
|
|
|
|
|
|
|
|
|
|
Trade accounts receivable, net
|
|
|
|
(15,952
|
)
|
|
|
|
7,567
|
|
Other current and non-current assets
|
|
|
|
(21,763
|
)
|
|
|
|
(1,788
|
)
|
Income taxes payable/receivable
|
|
|
|
5,365
|
|
|
|
|
1,715
|
|
Trade accounts payable and accrued liabilities
|
|
|
|
(13,174
|
)
|
|
|
|
(16,007
|
)
|
Deferred revenue
|
|
|
|
7,182
|
|
|
|
|
10,940
|
|
Net cash provided by operating activities
|
|
|
|
73,269
|
|
|
|
|
102,822
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
|
|
Purchases of property and equipment
|
|
|
|
(44,047
|
)
|
|
|
|
(23,370
|
)
|
Purchases of short-term investments
|
|
|
|
(53,285
|
)
|
|
|
|
(116,203
|
)
|
Proceeds from sale/maturity of short-term investments
|
|
|
|
190,467
|
|
|
|
|
150,768
|
|
Acquisition of and investments in business, net of cash acquired
|
|
|
|
(71,443
|
)
|
|
|
|
-
|
|
Acquisition of and investments in client contracts
|
|
|
|
-
|
|
|
|
|
(10,082
|
)
|
Net cash provided by investing activities
|
|
|
|
21,692
|
|
|
|
|
1,113
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
|
|
Proceeds from issuance of common stock
|
|
|
|
1,701
|
|
|
|
|
1,259
|
|
Payment of cash dividends
|
|
|
|
(21,197
|
)
|
|
|
|
(20,405
|
)
|
Repurchase of common stock
|
|
|
|
(24,034
|
)
|
|
|
|
(24,764
|
)
|
Proceeds from long-term debt
|
|
|
|
150,000
|
|
|
|
|
-
|
|
Payments on long-term debt
|
|
|
|
(123,750
|
)
|
|
|
|
(11,250
|
)
|
Settlement of convertible notes
|
|
|
|
-
|
|
|
|
|
(34,771
|
)
|
Payments of deferred financing costs
|
|
|
|
(1,490
|
)
|
|
|
|
-
|
|
Net cash used in financing activities
|
|
|
|
(18,770
|
)
|
|
|
|
(89,931
|
)
|
Effect of exchange rate fluctuations on cash
|
|
|
|
(1,262
|
)
|
|
|
|
2,396
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase in cash and cash equivalents
|
|
|
|
74,929
|
|
|
|
|
16,400
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents, beginning of period
|
|
|
|
122,243
|
|
|
|
|
126,351
|
|
Cash and cash equivalents, end of period
|
|
|
$
|
197,172
|
|
|
|
$
|
142,751
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosures of cash flow information:
|
|
|
|
|
|
|
|
|
|
|
Cash paid during the period for-
|
|
|
|
|
|
|
|
|
|
|
Interest
|
|
|
$
|
14,181
|
|
|
|
$
|
13,638
|
|
Income taxes
|
|
|
|
8,426
|
|
|
|
|
16,407
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EXHIBIT 1
|
CSG SYSTEMS INTERNATIONAL, INC.
|
SUPPLEMENTAL REVENUE ANALYSIS
|
|
Revenues by Geography
|
|
|
|
|
|
|
Quarter Ended
|
|
|
Quarter Ended
|
|
|
Quarter Ended
|
|
|
|
|
|
September 30,
|
|
|
June 30,
|
|
|
September 30,
|
|
|
|
|
|
2018
|
|
|
2018
|
|
|
2017
|
Americas
|
|
|
|
|
85
|
%
|
|
|
85
|
%
|
|
|
85
|
%
|
Europe, Middle East and Africa
|
|
|
|
|
10
|
%
|
|
|
10
|
%
|
|
|
8
|
%
|
Asia Pacific
|
|
|
|
|
5
|
%
|
|
|
5
|
%
|
|
|
7
|
%
|
Total Revenues
|
|
|
|
|
100
|
%
|
|
|
100
|
%
|
|
|
100
|
%
|
|
Revenues by Significant Customers: 10% or
more of Revenues
|
|
|
|
|
|
|
Quarter Ended
|
|
|
Quarter Ended
|
|
|
Quarter Ended
|
|
|
|
|
|
September 30,
|
|
|
June 30,
|
|
|
September 30,
|
|
|
|
|
|
2018
|
|
|
2018
|
|
|
2017
|
Comcast
|
|
|
|
|
26
|
%
|
|
|
25
|
%
|
|
|
28
|
%
|
Charter
|
|
|
|
|
21
|
%
|
|
|
21
|
%
|
|
|
23
|
%
|
DISH
|
|
|
|
|
9
|
%
|
|
|
10
|
%
|
|
|
11
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 costs
|
|
|
|
X
|
|
|
|
X
|
|
|
|
|
Stock-based compensation
|
|
|
|
X
|
|
|
|
X
|
|
|
|
|
Amortization of acquired intangible assets
|
|
|
|
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:
-
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 costs 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
costs typically include expenses related to legal, accounting, and
other professional services. The exclusion of these costs in
calculating CSG’s non-GAAP financial measures allows management and
investors an additional means to compare CSG’s current financial
results with historical and future periods.
-
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 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, 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):
|
|
|
Quarter Ended
|
|
|
Quarter Ended
|
|
|
|
September 30, 2018
|
|
|
September 30, 2017
|
|
|
|
|
|
|
|
% of
|
|
|
|
|
|
|
% of
|
|
|
|
Amounts
|
|
|
Revenues
|
|
|
Amounts
|
|
|
Revenues
|
GAAP operating income
|
|
|
$
|
25,653
|
|
|
12.0
|
%
|
|
|
$
|
28,376
|
|
|
14.2
|
%
|
Restructuring and reorganization charges (1)
|
|
|
|
2,799
|
|
|
1.4
|
%
|
|
|
|
1,618
|
|
|
0.8
|
%
|
Acquisition-related charges
|
|
|
|
261
|
|
|
0.1
|
%
|
|
|
|
-
|
|
|
-
|
%
|
Stock-based compensation (1)
|
|
|
|
4,695
|
|
|
2.2
|
%
|
|
|
|
4,700
|
|
|
2.4
|
%
|
Amortization of acquired intangible assets
|
|
|
|
2,170
|
|
|
1.0
|
%
|
|
|
|
1,758
|
|
|
0.9
|
%
|
Non-GAAP operating income
|
|
|
$
|
35,578
|
|
|
16.7
|
%
|
|
|
$
|
36,452
|
|
|
18.3
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended
|
|
|
Nine Months Ended
|
|
|
|
September 30, 2018
|
|
|
September 30, 2017
|
|
|
|
|
|
|
|
% of
|
|
|
|
|
|
|
% of
|
|
|
|
Amounts
|
|
|
Revenues
|
|
|
Amounts
|
|
|
Revenues
|
GAAP operating income
|
|
|
$
|
75,507
|
|
|
12.0
|
%
|
|
|
$
|
79,637
|
|
|
13.6
|
%
|
Restructuring and reorganization charges (1)
|
|
|
|
7,028
|
|
|
1.2
|
%
|
|
|
|
4,597
|
|
|
0.8
|
%
|
Acquisition-related charges
|
|
|
|
2,619
|
|
|
0.4
|
%
|
|
|
|
-
|
|
|
-
|
%
|
Stock-based compensation (1)
|
|
|
|
14,928
|
|
|
2.4
|
%
|
|
|
|
16,344
|
|
|
2.8
|
%
|
Amortization of acquired intangible assets
|
|
|
|
6,373
|
|
|
1.0
|
%
|
|
|
|
5,206
|
|
|
0.9
|
%
|
Non-GAAP operating income
|
|
|
$
|
106,455
|
|
|
17.0
|
%
|
|
|
$
|
105,784
|
|
|
18.1
|
%
|
(1)
|
|
Stock-based compensation included in the tables above and following
excludes amounts that have been recorded in restructuring and
reorganization charges.
|
|
|
|
Non-GAAP EPS:
The reconciliations of GAAP EPS to non-GAAP EPS for the indicated
periods are as follows (in thousands, except per share amounts):
|
|
|
Quarter Ended
|
|
|
Quarter Ended
|
|
|
|
September 30, 2018
|
|
|
September 30, 2017
|
|
|
|
Amounts
|
|
|
EPS (3)
|
|
|
Amounts
|
|
|
EPS (3)
|
GAAP net income
|
|
|
$
|
16,101
|
|
|
|
$
|
0.49
|
|
|
$
|
14,580
|
|
|
|
$
|
0.44
|
GAAP income tax provision (2)
|
|
|
|
4,391
|
|
|
|
|
|
|
|
|
8,806
|
|
|
|
|
|
GAAP income before income taxes
|
|
|
|
20,492
|
|
|
|
|
|
|
|
|
23,386
|
|
|
|
|
|
Restructuring and reorganization charges (1)
|
|
|
|
2,799
|
|
|
|
|
|
|
|
|
1,618
|
|
|
|
|
|
Acquisition-related costs
|
|
|
|
261
|
|
|
|
|
|
|
|
|
-
|
|
|
|
|
|
Stock-based compensation (1)
|
|
|
|
4,695
|
|
|
|
|
|
|
|
|
4,700
|
|
|
|
|
|
Amortization of acquired intangible assets
|
|
|
|
2,170
|
|
|
|
|
|
|
|
|
1,758
|
|
|
|
|
|
Amortization of OID
|
|
|
|
671
|
|
|
|
|
|
|
|
|
634
|
|
|
|
|
|
Non-GAAP income before income taxes
|
|
|
|
31,088
|
|
|
|
|
|
|
|
|
32,096
|
|
|
|
|
|
Non-GAAP income tax provision (2)
|
|
|
|
(8,238
|
)
|
|
|
|
|
|
|
|
(11,016
|
)
|
|
|
|
|
Non-GAAP net income
|
|
|
$
|
22,850
|
|
|
|
$
|
0.70
|
|
|
$
|
21,080
|
|
|
|
$
|
0.64
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended
|
|
|
Nine Months Ended
|
|
|
|
September 30, 2018
|
|
|
September 30, 2017
|
|
|
|
Amounts
|
|
|
EPS (3)
|
|
|
Amounts
|
|
|
EPS (3)
|
GAAP net income
|
|
|
$
|
45,232
|
|
|
|
$
|
1.37
|
|
|
$
|
46,398
|
|
|
|
$
|
1.41
|
GAAP income tax provision (2)
|
|
|
|
16,188
|
|
|
|
|
|
|
|
|
19,641
|
|
|
|
|
|
GAAP income before income taxes
|
|
|
|
61,420
|
|
|
|
|
|
|
|
|
66,039
|
|
|
|
|
|
Restructuring and reorganization charges (1)
|
|
|
|
7,028
|
|
|
|
|
|
|
|
|
4,597
|
|
|
|
|
|
Acquisition-related costs
|
|
|
|
2,619
|
|
|
|
|
|
|
|
|
-
|
|
|
|
|
|
Stock-based compensation (1)
|
|
|
|
14,928
|
|
|
|
|
|
|
|
|
16,344
|
|
|
|
|
|
Amortization of acquired intangible assets
|
|
|
|
6,373
|
|
|
|
|
|
|
|
|
5,206
|
|
|
|
|
|
Loss on extinguishment of debt
|
|
|
|
810
|
|
|
|
|
|
|
|
|
-
|
|
|
|
|
|
Amortization of OID
|
|
|
|
1,984
|
|
|
|
|
|
|
|
|
2,147
|
|
|
|
|
|
Non-GAAP income before income taxes
|
|
|
|
95,162
|
|
|
|
|
|
|
|
|
94,333
|
|
|
|
|
|
Non-GAAP income tax provision (2)
|
|
|
|
(25,538
|
)
|
|
|
|
|
|
|
|
(32,394
|
)
|
|
|
|
|
Non-GAAP net income
|
|
|
$
|
69,624
|
|
|
|
$
|
2.11
|
|
|
$
|
61,939
|
|
|
|
$
|
1.89
|
(2)
|
|
For the third quarter and nine months ended September 30, 2018 the
GAAP effective income tax rates were approximately 21% and 26%,
respectively, and the non-GAAP effective income tax rates were
approximately 27% for both periods. The difference between the GAAP
and non-GAAP effective income tax rates relates primarily to certain
discrete items recorded during the third quarter ended September 30,
2018 that were excluded from the calculation of the non-GAAP
effective income tax rate.
|
|
|
|
For the third quarter and nine months ended September 30, 2017 the
GAAP effective income tax rates were approximately 38% and 30%,
respectively, and the non-GAAP effective income tax rates were
approximately 34% for both periods. The difference between the GAAP
and non-GAAP effective income tax rates relates primarily to 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 this item 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.
|
|
(3)
|
|
The outstanding diluted shares for the third quarter and nine months
ended September 30, 2018 were 32.8 million and 32.9 million,
respectively, and for the third quarter and nine months ended
September 30, 2017 were 32.9 million and 32.8 million, respectively.
|
|
|
|
Non-GAAP Adjusted EBITDA:
CSG’s calculation of non-GAAP adjusted EBITDA and the reconciliation of
CSG’s non-GAAP adjusted EBITDA measure to GAAP net income is provided
below for the indicated periods (in thousands, except percentages):
|
|
|
Quarter Ended
|
|
|
Nine Months Ended
|
|
|
|
September 30,
|
|
|
September 30,
|
|
|
|
2018
|
|
|
2017
|
|
|
2018
|
|
|
2017
|
GAAP net income
|
|
|
$
|
16,101
|
|
|
|
$
|
14,580
|
|
|
|
$
|
45,232
|
|
|
|
$
|
46,398
|
|
GAAP income tax provision
|
|
|
|
4,391
|
|
|
|
|
8,806
|
|
|
|
|
16,188
|
|
|
|
|
19,641
|
|
Interest expense (4)
|
|
|
|
4,456
|
|
|
|
|
4,186
|
|
|
|
|
13,202
|
|
|
|
|
12,638
|
|
Amortization of OID
|
|
|
|
671
|
|
|
|
|
634
|
|
|
|
|
1,984
|
|
|
|
|
2,147
|
|
Loss on extinguishment of debt
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
810
|
|
|
|
|
-
|
|
Interest and investment income and other, net
|
|
|
|
34
|
|
|
|
|
170
|
|
|
|
|
(1,909
|
)
|
|
|
|
(1,187
|
)
|
GAAP operating income
|
|
|
|
25,653
|
|
|
|
|
28,376
|
|
|
|
|
75,507
|
|
|
|
|
79,637
|
|
Restructuring and reorganization charges (1)
|
|
|
|
2,799
|
|
|
|
|
1,618
|
|
|
|
|
7,028
|
|
|
|
|
4,597
|
|
Stock-based compensation (1)
|
|
|
|
4,695
|
|
|
|
|
4,700
|
|
|
|
|
14,928
|
|
|
|
|
16,344
|
|
Amortization of acquired intangible assets (5)
|
|
|
|
2,170
|
|
|
|
|
1,758
|
|
|
|
|
6,373
|
|
|
|
|
5,206
|
|
Amortization of other intangible assets (5)
|
|
|
|
2,415
|
|
|
|
|
4,938
|
|
|
|
|
6,996
|
|
|
|
|
14,770
|
|
Amortization of client contract costs (5)
|
|
|
|
6,023
|
|
|
|
|
-
|
|
|
|
|
17,285
|
|
|
|
|
-
|
|
Acquisition-related costs
|
|
|
|
261
|
|
|
|
|
-
|
|
|
|
|
2,619
|
|
|
|
|
-
|
|
Depreciation
|
|
|
|
4,831
|
|
|
|
|
3,344
|
|
|
|
|
13,293
|
|
|
|
|
9,975
|
|
Non-GAAP adjusted EBITDA
|
|
|
$
|
48,847
|
|
|
|
$
|
44,734
|
|
|
|
$
|
144,029
|
|
|
|
$
|
130,529
|
|
Non-GAAP adjusted EBITDA as a percentage of revenues
|
|
|
|
23
|
%
|
|
|
|
22
|
%
|
|
|
|
23
|
%
|
|
|
|
22
|
%
|
(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
|
|
|
Nine Months Ended
|
|
|
|
|
|
|
|
September 30,
|
|
|
September 30,
|
|
|
|
|
|
|
|
2018
|
|
|
2017
|
|
|
2018
|
|
|
2017
|
|
|
|
|
Amortization of acquired intangible assets
|
|
|
$
|
2,170
|
|
|
$
|
1,758
|
|
|
$
|
6,373
|
|
|
$
|
5,206
|
|
|
|
|
Amortization of other intangible assets
|
|
|
|
2,415
|
|
|
|
4,938
|
|
|
|
6,996
|
|
|
|
14,770
|
|
|
|
|
Amortization of client contract costs
|
|
|
|
6,023
|
|
|
|
-
|
|
|
|
17,285
|
|
|
|
-
|
|
|
|
|
Amortization of deferred financing costs
|
|
|
|
409
|
|
|
|
556
|
|
|
|
1,320
|
|
|
|
1,694
|
|
|
|
|
Total amortization
|
|
|
$
|
11,017
|
|
|
$
|
7,252
|
|
|
$
|
31,974
|
|
|
$
|
21,670
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP Free Cash Flow:
CSG’s calculation of non-GAAP free cash flow and the reconciliation of
CSG’s non-GAAP free cash flow measure to cash flows from operating
activities are provided below for the indicated periods (in thousands):
|
|
|
Quarter Ended
|
|
|
Nine Months Ended
|
|
|
|
September 30,
|
|
|
September 30,
|
|
|
|
2018
|
|
|
2017
|
|
|
2018
|
|
|
2017
|
Cash flows from operating activities
|
|
|
$
|
47,055
|
|
|
|
$
|
38,334
|
|
|
|
$
|
73,269
|
|
|
|
$
|
102,822
|
|
Purchases of property and equipment
|
|
|
|
(17,332
|
)
|
|
|
|
(4,632
|
)
|
|
|
|
(44,047
|
)
|
|
|
|
(23,370
|
)
|
Non-GAAP free cash flow
|
|
|
$
|
29,723
|
|
|
|
$
|
33,702
|
|
|
|
$
|
29,222
|
|
|
|
$
|
79,452
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP Financial Measures – 2018 Financial
Guidance
Non-GAAP Adjusted Revenues:
The reconciliation of GAAP revenues to non-GAAP adjusted revenues, as
included in CSG’s 2018 full year financial guidance, is as follows:
|
|
|
|
|
|
|
|
|
2018 Guidance Range
|
|
|
|
|
|
|
|
|
|
Low Range
|
|
|
High Range
|
|
|
|
|
GAAP revenues
|
|
|
|
|
$
|
865,000
|
|
|
|
$
|
875,000
|
|
|
|
|
|
Less: Transaction fees
|
|
|
|
|
|
(12,000
|
)
|
|
|
|
(12,000
|
)
|
|
|
|
|
Non-GAAP adjusted revenues (6)
|
|
|
|
|
$
|
853,000
|
|
|
|
$
|
863,000
|
|
(6)
|
|
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 its payment services
contracts, to third-party payment processors and financial
institutions by Forte, a CSG company acquired in October 2018.
Because Forte 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. We believe
non-GAAP adjusted revenues is a useful financial measure as: (i) it
is a primary metric used by management to measure performance; and
(ii) it provides comparability to other payments companies.
|
|
|
|
Non-GAAP Operating Margin Percentage:
The reconciliation of GAAP operating margin percentage to non-GAAP
adjusted operating margin percentage, as included in CSG’s 2018 full
year financial guidance, is as follows:
|
|
|
|
|
|
|
|
|
2018
|
|
|
|
|
|
|
|
|
|
Guidance
|
|
|
|
|
GAAP operating margin percentage
|
|
|
|
|
11.7
|
%
|
|
|
|
|
Restructuring and reorganization charges (7)
|
|
|
|
|
0.8
|
%
|
|
|
|
|
Acquisition-related costs (8)
|
|
|
|
|
0.3
|
%
|
|
|
|
|
Stock-based compensation (9)
|
|
|
|
|
2.3
|
%
|
|
|
|
|
Amortization of acquired intangible assets (10)
|
|
|
|
|
1.4
|
%
|
|
|
|
|
Non-GAAP operating margin percentage
|
|
|
|
|
16.5
|
%
|
|
|
|
|
Transaction fees (11)
|
|
|
|
|
0.2
|
%
|
|
|
|
|
Non-GAAP adjusted operating margin percentage
|
|
|
|
|
16.7
|
%
|
|
|
|
|
|
|
|
|
|
|
|
(7)
|
|
This represents the pretax impact of restructuring and
reorganization charges of an estimated $7 million on CSG’s GAAP
operating margin percentage based on the midpoint of 2018 GAAP
revenue guidance.
|
|
(8)
|
|
This represents the pretax impact of acquisition-related costs of an
estimated $3 million on CSG’s GAAP operating margin percentage based
on the midpoint of 2018 GAAP revenue guidance.
|
|
(9)
|
|
This represents the pretax impact of stock-based compensation
expense of an estimated $20 million on CSG’s GAAP operating margin
percentage based on the midpoint of 2018 GAAP revenue guidance.
|
|
(10)
|
|
This represents the pretax impact of amortization of acquired
intangible assets expense of an estimated $12 million on CSG’s GAAP
operating margin percentage based on the midpoint of 2018 GAAP
revenue guidance.
|
|
(11)
|
|
This represents the pretax impact of transaction fees of an
estimated $12 million on CSG’s GAAP operating margin percentage
based on the midpoint of 2018 GAAP 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 (13)
|
|
|
Amounts
|
|
|
EPS (13)
|
GAAP net income
|
|
|
$
|
58,700
|
|
|
|
$
|
1.78
|
|
|
$
|
62,500
|
|
|
|
$
|
1.90
|
GAAP income tax provision (12)
|
|
|
|
21,600
|
|
|
|
|
|
|
|
|
23,100
|
|
|
|
|
|
GAAP income before income taxes
|
|
|
|
80,300
|
|
|
|
|
|
|
|
|
85,600
|
|
|
|
|
|
Restructuring and reorganization charges
|
|
|
|
7,000
|
|
|
|
|
|
|
|
|
7,000
|
|
|
|
|
|
Acquisition-related costs
|
|
|
|
2,600
|
|
|
|
|
|
|
|
|
2,600
|
|
|
|
|
|
Stock-based compensation
|
|
|
|
20,000
|
|
|
|
|
|
|
|
|
20,000
|
|
|
|
|
|
Amortization of acquired intangible assets
|
|
|
|
12,400
|
|
|
|
|
|
|
|
|
12,400
|
|
|
|
|
|
Loss on extinguishment of debt
|
|
|
|
800
|
|
|
|
|
|
|
|
|
800
|
|
|
|
|
|
Amortization of OID
|
|
|
|
2,700
|
|
|
|
|
|
|
|
|
2,700
|
|
|
|
|
|
Non-GAAP income before income taxes
|
|
|
|
125,800
|
|
|
|
|
|
|
|
|
131,100
|
|
|
|
|
|
Non-GAAP income tax provision (12)
|
|
|
|
(33,400
|
)
|
|
|
|
|
|
|
|
(34,700
|
)
|
|
|
|
|
Non-GAAP net income
|
|
|
$
|
92,400
|
|
|
|
$
|
2.81
|
|
|
$
|
96,400
|
|
|
|
$
|
2.93
|
(12)
|
|
For 2018, the estimated effective income tax rate for GAAP and
non-GAAP purposes is expected to be approximately 27%.
|
|
(13)
|
|
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
|
|
|
$
|
60,600
|
|
|
|
|
|
GAAP income tax provision
|
|
|
|
22,400
|
|
|
|
|
|
Interest expense
|
|
|
|
17,700
|
|
|
|
|
|
Amortization of OID
|
|
|
|
2,700
|
|
|
|
|
|
Loss on extinguishment of debt
|
|
|
|
800
|
|
|
|
|
|
Interest and investment income and other, net
|
|
|
|
(2,200
|
)
|
|
|
|
|
GAAP operating income
|
|
|
|
102,000
|
|
|
|
|
|
Restructuring and reorganization charges
|
|
|
|
7,000
|
|
|
|
|
|
Acquisition-related costs
|
|
|
|
2,600
|
|
|
|
|
|
Stock-based compensation
|
|
|
|
20,000
|
|
|
|
|
|
Amortization of acquired intangible assets
|
|
|
|
12,400
|
|
|
|
|
|
Amortization of other intangible assets
|
|
|
|
9,300
|
|
|
|
|
|
Amortization of client contract costs
|
|
|
|
23,600
|
|
|
|
|
|
Depreciation
|
|
|
|
18,400
|
|
|
|
|
|
Non-GAAP adjusted EBITDA
|
|
|
$
|
195,300
|
|
|
|
|
|
Non-GAAP adjusted EBITDA as a percentage of non-GAAP adjusted
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
|
|
|
|
|
$
|
110,000
|
|
|
|
|
|
Purchases of property and equipment
|
|
|
|
|
|
(60,000
|
)
|
|
|
|
|
Non-GAAP free cash flow
|
|
|
|
|
$
|
50,000
|
|
View source version on businesswire.com:
https://www.businesswire.com/news/home/20181107005830/en/
CSG Systems International, Inc.
Liz Bauer, 303-804-4065
Chief
Communications and Investor Relations Officer
liz.bauer@csgi.com
Source: CSG Systems International, Inc.