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, 2018.
Key Highlights:
-
Fourth quarter 2018 financial results:
-
Total revenues were $247.3 million and total non-GAAP
adjusted revenues were $231.7 million.
-
GAAP operating income was $29.4 million, or 11.9% of
total revenues, and non-GAAPoperating income was $41.4
million, or 17.9% of non-GAAP adjusted revenues.
-
GAAP earnings per diluted share (EPS) was $0.64 and
non-GAAP EPS was $0.95.
-
Cash flows from operations were $70.1 million.
-
Full year 2018 financial results:
-
Total revenues grew eleven percent year-over-year to a record high
of $875.1 million and non-GAAP adjusted revenues were $859.5
million, at the high end of expectations.
-
GAAP operating income was $104.9 million, or 12.0% of
total revenues and non-GAAPoperating income was $147.9
million, or 17.2% of non-GAAP adjusted revenues,
exceeding expectations.
-
GAAP EPS was $2.01 and non-GAAP EPS was $3.06, exceeding
expectations.
-
Cash flows from operations were $143.3million, exceeding
expectations.
-
CSG declared its quarterly cash dividend of $0.21 per share of
common stock, or a total of approximately $7 million, to
shareholders, bringing the total 2018 dividends to approximately $28
million.
-
In February 2019, CSG’s Board of Directors approved an approximately 6%
increase in CSG’s cash dividend, effective with the first quarterly
payment of $0.2225 per share of common stock.
“We executed very well this quarter, hitting on all cylinders from a
sales, delivery and expense management standpoint,” said Bret Griess,
president and chief executive officer of CSG. “And while, I’m proud of
the record revenues and earnings that we generated this year, I’m most
proud of the work that we have done over the past several years to
strongly position ourselves as a trusted, dependable and reliable
partner for our customers around the world.
“Over the past several years we have increased our investments to help
power our customers’ digital transformation journeys, put our cash flows
to work to help strengthen and diversify our business while at the same
time being shareholder friendly, and expanded our footprint outside of
the cable industry. We are seeing the impact of these investments and
focus in our results.”
Financial Overview (unaudited)
(in thousands, except per share amounts and percentages):
|
|
|
Quarter Ended December 31,
|
|
|
|
|
Year Ended December 31,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percent
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percent
|
|
|
|
|
2018
|
|
|
|
2017
|
|
|
Changed
|
|
|
|
|
2018
|
|
|
|
2017
|
|
|
Changed
|
|
GAAP Results:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
|
$
|
247,267
|
|
|
|
$
|
205,204
|
|
|
|
20
|
%
|
|
|
|
$
|
875,059
|
|
|
|
$
|
789,582
|
|
|
|
11
|
%
|
Operating Income
|
|
|
|
29,425
|
|
|
|
|
26,048
|
|
|
|
13
|
%
|
|
|
|
|
104,932
|
|
|
|
|
105,685
|
|
|
|
(1
|
%)
|
Operating Margin Percentage
|
|
|
|
11.9
|
%
|
|
|
|
12.7
|
%
|
|
—
|
|
|
|
|
|
12.0
|
%
|
|
|
|
13.4
|
%
|
|
—
|
|
EPS
|
|
|
$
|
0.64
|
|
|
|
$
|
0.45
|
|
|
|
42
|
%
|
|
|
|
$
|
2.01
|
|
|
|
$
|
1.87
|
|
|
|
7
|
%
|
Non-GAAP Results:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted Revenues
|
|
|
$
|
231,665
|
|
|
|
$
|
205,204
|
|
|
|
13
|
%
|
|
|
|
$
|
859,457
|
|
|
|
$
|
789,582
|
|
|
|
9
|
%
|
Operating Income
|
|
|
|
41,400
|
|
|
|
|
36,343
|
|
|
|
14
|
%
|
|
|
|
|
147,855
|
|
|
|
|
142,127
|
|
|
|
4
|
%
|
Adjusted Operating Margin
Percentage
|
|
|
|
17.9
|
%
|
|
|
|
17.7
|
%
|
|
—
|
|
|
|
|
|
17.2
|
%
|
|
|
|
18.0
|
%
|
|
|
|
|
EPS
|
|
|
$
|
0.95
|
|
|
|
$
|
0.62
|
|
|
|
53
|
%
|
|
|
|
$
|
3.06
|
|
|
|
$
|
2.51
|
|
|
|
22
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
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|
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
GAAP Results:
Total revenues
for the fourth quarter of 2018 were $247.3 million, a 20% increase when
compared to revenues of $205.2 million for the fourth quarter of 2017,
and a 16% increase when compared to revenues of $213.1 million for the
third quarter of 2018. Total revenues for the full year 2018 were $875.1
million, an 11% increase when compared to revenues of $789.6 million for
the full year 2017. The increases in revenues can be mainly attributed
to the acquisitions of Business Ink on February 28, 2018 and Forte on
October 1, 2018. For the fourth quarter and full year of 2018, these
acquisitions generated approximately $39 million and $74 million,
respectively.
GAAP operating income for the fourth quarter of 2018 was $29.4 million,
or 11.9% of total revenues, compared to $26.0 million, or 12.7% of total
revenues, for the fourth quarter of 2017, and $25.7 million, or 12.0% of
total revenues, for the third quarter of 2018. GAAP operating income for
the full year 2018 was $104.9 million, or 12.0% of total revenues,
compared to $105.7 million, or 13.4% of total revenues, for the full
year 2017.
GAAP EPS for the fourth quarter of 2018 was $0.64, as compared to $0.45
for the fourth quarter of 2017, and $0.49 for the third quarter of 2018.
GAAP EPS for the full year 2018 was $2.01, compared to $1.87 for the
full year 2017. These increases in GAAP EPS are due to a combination of
increased operating income and a lower effective tax rate, resulting
primarily from the U.S. Tax Reform enacted in December 2017.
Non-GAAP Results:
Non-GAAP adjusted
revenues for the fourth quarter of 2018 were $231.7 million, a 13%
increase when compared to $205.2 million for the fourth quarter of 2017,
and a 9% increase when compared to $213.1 million for the third quarter
of 2018. Total non-GAAP adjusted revenues for the full year 2018 were
$859.5 million, a 9% increase when compared to $789.6 million for the
full year 2017. These increases in non-GAAP adjusted revenues are
primarily due to the acquisition activities, discussed above.
Non-GAAP operating income for the fourth quarter of 2018 was $41.4
million, or 17.9% of total non-GAAP adjusted revenues, compared to $36.3
million, or 17.7% of total non-GAAP adjusted revenues for the fourth
quarter of 2017, and $35.6 million, or 16.7% of total non-GAAP adjusted
revenues for the third quarter of 2018. Non-GAAP operating income for
the full year 2018 was $147.9 million, or 17.2% of total non-GAAP
adjusted revenues, compared to $142.1 million, or 18.0% of total
non-GAAP adjusted revenues for the full year 2017.
Non-GAAP EPS for the fourth quarter of 2018 was $0.95 compared to $0.62
for the fourth quarter of 2017, and $0.70 for the third quarter of 2018.
Non-GAAP EPS for the full year 2018 was $3.06 compared to $2.51 for the
full year 2017. The year-over-year increases in non-GAAP EPS are
primarily due to a combination of a lower effective tax rate, resulting
primarily from the U.S. Tax Reform enacted in December 2017, and higher
operating income.
Balance Sheet and Cash Flows
Cash, cash equivalents and short-term investments at December 31, 2018
were $162.9 million, compared to $199.3 million as of September 30, 2018
and $261.4 million as of December 31, 2017. These decreases can be
mainly attributed to the cash acquisitions of Business Ink and Forte for
approximately $155 million during the year.
CSG had net cash flows from operations for the fourth quarters ended
December 31, 2018 and 2017 of $70.1 million and $24.4 million,
respectively, and had non-GAAP free cash flow of $57.0 million and $18.8
million, respectively. For the year ended December 31, 2018 and 2017,
CSG generated net cash flows from operations of $143.3 million and
$127.2 million, respectively, and had non-GAAP free cash flow of $86.2
million and $98.3 million, respectively. These increases in cash flows
from operations can be primarily attributed to positive working capital
changes during the fourth quarter of 2018.
Summary of 2019 Financial Guidance
CSG’s financial guidance for the full year 2019 is as follows:
GAAP Measures:
|
|
|
|
Revenues
|
|
|
$965 - $995 million
|
Operating Margin Percentage
|
|
|
11.7%
|
EPS
|
|
|
$2.17 - $2.27
|
Cash Flows from Operating Activities
|
|
|
$125 - $145 million
|
Non-GAAP Measures:
|
|
|
|
Adjusted Revenues
|
|
|
$903 - $920 million
|
Adjusted Operating Margin Percentage
|
|
|
17.0%
|
EPS
|
|
|
$3.15 - $3.27
|
|
|
|
|
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 6, 2019 at 5:00
p.m. EST, to discuss CSG’s fourth quarter and full year 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 1-888-254-3590 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 fifty-five 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 solution sales, which are subject to greater
volatility;
-
Increasing competition in CSG’s market from companies of greater size
and with broader presence;
-
CSG’s ability to successfully integrate and manage acquired businesses
or assets to achieve expected strategic, operating and financial goals;
-
CSG’s ability to protect its intellectual property rights;
-
CSG’s ability to maintain a reliable, secure computing environment;
-
CSG’s ability to conduct business in the international marketplace;
-
CSG’s ability to comply with applicable U.S. and International laws
and regulations; and
-
Fluctuations in credit market conditions, general global economic and
political conditions, and foreign currency exchange rates.
This list is not exhaustive, and readers are encouraged to review the
additional risks and important factors described in CSG’s reports on
Forms 10-K and 10-Q and other filings made with the SEC.
|
|
|
|
|
|
|
|
|
CSG SYSTEMS INTERNATIONAL, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS-UNAUDITED
(in thousands, except per share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
December 31,
|
|
|
|
|
2018
|
|
|
|
2017
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
|
$
|
139,277
|
|
|
|
$
|
122,243
|
|
Short-term investments
|
|
|
|
23,603
|
|
|
|
|
139,117
|
|
Total cash, cash equivalents and short-term investments
|
|
|
|
162,880
|
|
|
|
|
261,360
|
|
Settlement assets
|
|
|
|
124,627
|
|
|
|
|
-
|
|
Trade accounts receivable:
|
|
|
|
|
|
|
|
|
|
|
Billed, net of allowance of $3,115 and $4,149
|
|
|
|
235,827
|
|
|
|
|
219,531
|
|
Unbilled
|
|
|
|
37,227
|
|
|
|
|
31,187
|
|
Income taxes receivable
|
|
|
|
6,720
|
|
|
|
|
13,839
|
|
Other current assets
|
|
|
|
32,286
|
|
|
|
|
28,349
|
|
Total current assets
|
|
|
|
599,567
|
|
|
|
|
554,266
|
|
Non-current assets:
|
|
|
|
|
|
|
|
|
|
|
Property and equipment, net of depreciation of $93,278 and $123,126
|
|
|
|
81,813
|
|
|
|
|
44,651
|
|
Software, net of amortization of $119,381 and $108,986
|
|
|
|
36,400
|
|
|
|
|
26,906
|
|
Goodwill
|
|
|
|
255,816
|
|
|
|
|
210,080
|
|
Client contracts, net of amortization of zero and $97,109
|
|
|
|
-
|
|
|
|
|
43,626
|
|
Acquired client contracts, net of amortization of $82,692 and zero
|
|
|
|
65,456
|
|
|
|
|
-
|
|
Client contract costs, net of amortization of $43,051 and zero
|
|
|
|
37,289
|
|
|
|
|
-
|
|
Deferred income taxes
|
|
|
|
11,087
|
|
|
|
|
14,057
|
|
Other assets
|
|
|
|
26,934
|
|
|
|
|
10,948
|
|
Total non-current assets
|
|
|
|
514,795
|
|
|
|
|
350,268
|
|
Total assets
|
|
|
$
|
1,114,362
|
|
|
|
$
|
904,534
|
|
LIABILITIES AND STOCKHOLDERS' EQUITY
|
|
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
|
|
Current portion of long-term debt
|
|
|
$
|
7,500
|
|
|
|
$
|
22,500
|
|
Client deposits
|
|
|
|
36,889
|
|
|
|
|
31,053
|
|
Trade accounts payable
|
|
|
|
45,386
|
|
|
|
|
38,420
|
|
Accrued employee compensation
|
|
|
|
61,107
|
|
|
|
|
62,984
|
|
Settlement liabilities
|
|
|
|
123,613
|
|
|
|
|
-
|
|
Deferred revenue
|
|
|
|
40,236
|
|
|
|
|
41,885
|
|
Income taxes payable
|
|
|
|
218
|
|
|
|
|
1,216
|
|
Other current liabilities
|
|
|
|
35,442
|
|
|
|
|
24,535
|
|
Total current liabilities
|
|
|
|
350,391
|
|
|
|
|
222,593
|
|
Non-current liabilities:
|
|
|
|
|
|
|
|
|
|
|
Long-term debt, net of unamortized discounts of $14,549 and $18,264
|
|
|
|
352,326
|
|
|
|
|
309,236
|
|
Deferred revenue
|
|
|
|
17,527
|
|
|
|
|
12,346
|
|
Income taxes payable
|
|
|
|
2,284
|
|
|
|
|
2,415
|
|
Deferred income taxes
|
|
|
|
8,205
|
|
|
|
|
4,584
|
|
Other non-current liabilities
|
|
|
|
22,605
|
|
|
|
|
10,614
|
|
Total non-current liabilities
|
|
|
|
402,947
|
|
|
|
|
339,195
|
|
Total liabilities
|
|
|
|
753,338
|
|
|
|
|
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;
33,158 and 33,516 shares outstanding
|
|
|
|
693
|
|
|
|
|
689
|
|
Common stock warrants; 439 warrants vested; 1,425 issued
|
|
|
|
9,082
|
|
|
|
|
9,082
|
|
Additional paid-in capital
|
|
|
|
441,417
|
|
|
|
|
427,091
|
|
Treasury stock, at cost; 34,779 and 34,075 shares
|
|
|
|
(842,360
|
)
|
|
|
|
(814,732
|
)
|
Accumulated other comprehensive income (loss):
|
|
|
|
|
|
|
|
|
|
|
Unrealized loss on short-term investments, net of tax
|
|
|
|
2
|
|
|
|
|
(88
|
)
|
Cumulative foreign currency translation adjustments
|
|
|
|
(42,937
|
)
|
|
|
|
(28,734
|
)
|
Accumulated earnings
|
|
|
|
795,127
|
|
|
|
|
749,438
|
|
Total stockholders' equity
|
|
|
|
361,024
|
|
|
|
|
342,746
|
|
Total liabilities and stockholders' equity
|
|
|
$
|
1,114,362
|
|
|
|
$
|
904,534
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CSG SYSTEMS INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME-UNAUDITED
(in thousands, except per share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter Ended
|
|
|
|
Year Ended
|
|
|
|
|
December 31,
2018
|
|
|
|
December 31,
2017
|
|
|
|
December 31,
2018
|
|
|
|
December 31,
2017
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cloud and related solutions
|
|
|
$
|
214,987
|
|
|
|
$
|
169,565
|
|
|
|
$
|
766,377
|
|
|
|
$
|
651,010
|
|
Software and services
|
|
|
|
18,528
|
|
|
|
|
16,212
|
|
|
|
|
58,101
|
|
|
|
|
62,892
|
|
Maintenance
|
|
|
|
13,752
|
|
|
|
|
19,427
|
|
|
|
|
50,581
|
|
|
|
|
75,680
|
|
Total revenues
|
|
|
|
247,267
|
|
|
|
|
205,204
|
|
|
|
|
875,059
|
|
|
|
|
789,582
|
|
Cost of revenues (exclusive of depreciation, shown separately below):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cloud and related solutions
|
|
|
|
115,589
|
|
|
|
|
81,812
|
|
|
|
|
392,801
|
|
|
|
|
315,006
|
|
Software and services
|
|
|
|
9,054
|
|
|
|
|
7,614
|
|
|
|
|
34,870
|
|
|
|
|
39,018
|
|
Maintenance
|
|
|
|
5,537
|
|
|
|
|
10,300
|
|
|
|
|
22,149
|
|
|
|
|
40,787
|
|
Total cost of revenues
|
|
|
|
130,180
|
|
|
|
|
99,726
|
|
|
|
|
449,820
|
|
|
|
|
394,811
|
|
Other operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development
|
|
|
|
32,225
|
|
|
|
|
28,112
|
|
|
|
|
124,034
|
|
|
|
|
113,215
|
|
Selling, general and administrative
|
|
|
|
48,793
|
|
|
|
|
43,714
|
|
|
|
|
169,308
|
|
|
|
|
153,695
|
|
Depreciation
|
|
|
|
5,011
|
|
|
|
|
3,405
|
|
|
|
|
18,304
|
|
|
|
|
13,380
|
|
Restructuring and reorganization charges
|
|
|
|
1,633
|
|
|
|
|
4,199
|
|
|
|
|
8,661
|
|
|
|
|
8,796
|
|
Total operating expenses
|
|
|
|
217,842
|
|
|
|
|
179,156
|
|
|
|
|
770,127
|
|
|
|
|
683,897
|
|
Operating income
|
|
|
|
29,425
|
|
|
|
|
26,048
|
|
|
|
|
104,932
|
|
|
|
|
105,685
|
|
Other income (expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
|
|
(4,465
|
)
|
|
|
|
(4,156
|
)
|
|
|
|
(17,667
|
)
|
|
|
|
(16,794
|
)
|
Amortization of original issue discount
|
|
|
|
(680
|
)
|
|
|
|
(643
|
)
|
|
|
|
(2,664
|
)
|
|
|
|
(2,790
|
)
|
Interest and investment income, net
|
|
|
|
390
|
|
|
|
|
936
|
|
|
|
|
2,646
|
|
|
|
|
3,246
|
|
Loss on extinguishment of debt
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
(810
|
)
|
|
|
|
-
|
|
Other, net
|
|
|
|
897
|
|
|
|
|
(514
|
)
|
|
|
|
550
|
|
|
|
|
(1,637
|
)
|
Total other
|
|
|
|
(3,858
|
)
|
|
|
|
(4,377
|
)
|
|
|
|
(17,945
|
)
|
|
|
|
(17,975
|
)
|
Income before income taxes
|
|
|
|
25,567
|
|
|
|
|
21,671
|
|
|
|
|
86,987
|
|
|
|
|
87,710
|
|
Income tax provision
|
|
|
|
(4,669
|
)
|
|
|
|
(6,705
|
)
|
|
|
|
(20,857
|
)
|
|
|
|
(26,346
|
)
|
Net income
|
|
|
$
|
20,898
|
|
|
|
$
|
14,966
|
|
|
|
$
|
66,130
|
|
|
|
$
|
61,364
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
|
32,329
|
|
|
|
|
32,512
|
|
|
|
|
32,488
|
|
|
|
|
32,415
|
|
Diluted
|
|
|
|
32,602
|
|
|
|
|
32,983
|
|
|
|
|
32,855
|
|
|
|
|
32,865
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per common share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
$
|
0.65
|
|
|
|
$
|
0.46
|
|
|
|
$
|
2.04
|
|
|
|
$
|
1.89
|
|
Diluted
|
|
|
|
0.64
|
|
|
|
|
0.45
|
|
|
|
|
2.01
|
|
|
|
|
1.87
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CSG SYSTEMS INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS-UNAUDITED
(in thousands)
|
|
|
|
|
|
|
|
|
Year Ended
|
|
|
|
|
December 31,
2018
|
|
|
|
December 31,
2017
|
|
Cash flows from operating activities:
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
$
|
66,130
|
|
|
|
$
|
61,364
|
|
Adjustments to reconcile net income to net cash provided by
operating activities-
|
|
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
|
18,304
|
|
|
|
|
13,380
|
|
Amortization
|
|
|
|
44,328
|
|
|
|
|
29,501
|
|
Amortization of original issue discount
|
|
|
|
2,664
|
|
|
|
|
2,790
|
|
Asset impairment
|
|
|
|
1,851
|
|
|
|
|
3,135
|
|
Gain on short-term investments and other
|
|
|
|
(101
|
)
|
|
|
|
(184
|
)
|
Loss on extinguishment of debt
|
|
|
|
810
|
|
|
|
|
-
|
|
Deferred income taxes
|
|
|
|
4,913
|
|
|
|
|
7,112
|
|
Stock-based compensation
|
|
|
|
19,358
|
|
|
|
|
21,049
|
|
Subtotal
|
|
|
|
158,257
|
|
|
|
|
138,147
|
|
Changes in operating assets and liabilities, net of acquired amounts:
|
|
|
|
|
|
|
|
|
|
|
Trade accounts receivable, net
|
|
|
|
(138
|
)
|
|
|
|
(6,421
|
)
|
Other current and non-current assets and liabilities
|
|
|
|
(23,179
|
)
|
|
|
|
2,875
|
|
Income taxes payable/receivable
|
|
|
|
5,055
|
|
|
|
|
(2,729
|
)
|
Trade accounts payable and accrued liabilities
|
|
|
|
(7,146
|
)
|
|
|
|
(4,377
|
)
|
Deferred revenue
|
|
|
|
10,492
|
|
|
|
|
(300
|
)
|
Net cash provided by operating activities
|
|
|
|
143,341
|
|
|
|
|
127,195
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
|
|
Purchases of software, property and equipment
|
|
|
|
(57,104
|
)
|
|
|
|
(28,942
|
)
|
Purchases of short-term investments
|
|
|
|
(75,022
|
)
|
|
|
|
(182,247
|
)
|
Proceeds from sale/maturity of short-term investments
|
|
|
|
190,778
|
|
|
|
|
193,465
|
|
Acquisition of and investments in business, net of cash acquired
|
|
|
|
(144,791
|
)
|
|
|
|
-
|
|
Acquisition of and investments in client contracts
|
|
|
|
-
|
|
|
|
|
(12,180
|
)
|
Net cash used in investing activities
|
|
|
|
(86,139
|
)
|
|
|
|
(29,904
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
|
|
Proceeds from issuance of common stock
|
|
|
|
2,311
|
|
|
|
|
1,776
|
|
Payment of cash dividends
|
|
|
|
(27,979
|
)
|
|
|
|
(26,850
|
)
|
Repurchase of common stock
|
|
|
|
(34,726
|
)
|
|
|
|
(30,649
|
)
|
Proceeds from long-term debt
|
|
|
|
150,000
|
|
|
|
|
-
|
|
Payments on long-term debt
|
|
|
|
(125,625
|
)
|
|
|
|
(15,000
|
)
|
Settlement of convertible notes
|
|
|
|
-
|
|
|
|
|
(34,771
|
)
|
Payments of deferred financing costs
|
|
|
|
(1,490
|
)
|
|
|
|
-
|
|
Net cash used in financing activities
|
|
|
|
(37,509
|
)
|
|
|
|
(105,494
|
)
|
Effect of exchange rate fluctuations on cash
|
|
|
|
(2,659
|
)
|
|
|
|
4,095
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash and cash equivalents
|
|
|
|
17,034
|
|
|
|
|
(4,108
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents, beginning of period
|
|
|
|
122,243
|
|
|
|
|
126,351
|
|
Cash and cash equivalents, end of period
|
|
|
$
|
139,277
|
|
|
|
$
|
122,243
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosures of cash flow information:
|
|
|
|
|
|
|
|
|
|
|
Cash paid during the period for-
|
|
|
|
|
|
|
|
|
|
|
Interest
|
|
|
$
|
15,857
|
|
|
|
$
|
14,729
|
|
Income taxes
|
|
|
|
10,426
|
|
|
|
|
22,144
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EXHIBIT 1
CSG SYSTEMS INTERNATIONAL, INC.
SUPPLEMENTAL REVENUE ANALYSIS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Revenues by Geography
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter Ended
|
|
|
|
Quarter Ended
|
|
|
|
Quarter Ended
|
|
|
|
|
December 31,
|
|
|
|
September 30,
|
|
|
|
December 31,
|
|
|
|
|
2018
|
|
|
|
2018
|
|
|
|
2017
|
|
Americas
|
|
|
|
85
|
%
|
|
|
|
85
|
%
|
|
|
|
84
|
%
|
Europe, Middle East and Africa
|
|
|
|
10
|
%
|
|
|
|
10
|
%
|
|
|
|
10
|
%
|
Asia Pacific
|
|
|
|
5
|
%
|
|
|
|
5
|
%
|
|
|
|
6
|
%
|
Total Revenues
|
|
|
|
100
|
%
|
|
|
|
100
|
%
|
|
|
|
100
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
|
|
Year Ended
|
|
|
|
|
December 31,
|
|
|
|
December 31,
|
|
|
|
|
2018
|
|
|
|
2017
|
|
Americas
|
|
|
|
85
|
%
|
|
|
|
85
|
%
|
Europe, Middle East and Africa
|
|
|
|
10
|
%
|
|
|
|
9
|
%
|
Asia Pacific
|
|
|
|
5
|
%
|
|
|
|
6
|
%
|
Total Revenues
|
|
|
|
100
|
%
|
|
|
|
100
|
%
|
|
|
|
|
|
|
|
|
|
|
|
Revenues by Significant Customers: 10% or more
of Total Revenues
|
|
|
Quarter Ended
|
|
|
|
Quarter Ended
|
|
|
|
Quarter Ended
|
|
|
|
|
December 31,
|
|
|
|
September 30,
|
|
|
|
December 31,
|
|
|
|
|
2018
|
|
|
|
2018
|
|
|
|
2017
|
|
Comcast
|
|
|
|
22
|
%
|
|
|
|
26
|
%
|
|
|
|
29
|
%
|
Charter
|
|
|
|
18
|
%
|
|
|
|
21
|
%
|
|
|
|
21
|
%
|
DISH
|
|
|
|
8
|
%
|
|
|
|
9
|
%
|
|
|
|
10
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
|
|
Year Ended
|
|
|
|
|
December 31,
|
|
|
|
December 31,
|
|
|
|
|
2018
|
|
|
|
2017
|
|
Comcast
|
|
|
|
25
|
%
|
|
|
|
28
|
%
|
Charter
|
|
|
|
20
|
%
|
|
|
|
22
|
%
|
DISH
|
|
|
|
9
|
%
|
|
|
|
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 adjusted revenues, non-GAAP operating income and margin,
non-GAAP adjusted operating margin percentage, non-GAAP EPS, non-GAAP
adjusted EBITDA, and non-GAAP free cash flow. CSG believes that these
non-GAAP financial measures, when reviewed in conjunction with its GAAP
financial measures, provide investors with greater transparency to the
information used by CSG’s management in its financial and operational
decision making. CSG uses these non-GAAP financial measures for the
following purposes:
-
Certain internal financial planning, reporting, and analysis;
-
Forecasting and budgeting;
-
Certain management compensation incentives; and
-
Communications with CSG’s Board of Directors, stockholders, financial
analysts, and investors.
These non-GAAP financial measures are provided with the intent of
providing investors with the following information:
-
A more complete understanding of CSG’s underlying operational results,
trends, and cash generating capabilities;
-
Consistency and comparability with CSG’s historical financial results;
and
-
Comparability to similar companies, many of which present similar
non-GAAP financial measures to investors.
Non-GAAP financial measures are not measures of performance under GAAP,
and therefore should not be considered in isolation or as a substitute
for GAAP financial information. Limitations with the use of non-GAAP
financial measures include the following items:
-
Non-GAAP financial measures are not based on any comprehensive set of
accounting rules or principles;
-
The way in which CSG calculates non-GAAP financial measures may differ
from the way in which other companies calculate similar non-GAAP
financial measures;
-
Non-GAAP financial measures do not include all items of income and
expense that affect CSG’s operations and that are required by GAAP to
be included in financial statements;
-
Certain adjustments to CSG’s non-GAAP financial measures result in the
exclusion of items that are recurring and will be reflected in CSG’s
financial statements in future periods; and
-
Certain charges excluded from CSG’s non-GAAP financial measures are
cash expenses, and therefore do impact CSG’s cash position.
CSG compensates for these limitations by relying primarily on its GAAP
results and using non-GAAP financial measures as a supplement only.
Additionally, CSG provides specific information regarding the treatment
of GAAP amounts considered in preparing the non-GAAP financial measures
and reconciles each n on-GAAP financial measure to the most directly
comparable GAAP measure.
Non-GAAP Financial Measures: Basis of
Presentation
The table below outlines the exclusions from CSG’s non-GAAP financial
measures:
Non-GAAP Exclusions
|
|
|
|
Adjusted
Revenue
|
|
|
|
Operating
Income
|
|
|
|
Adjusted
Operating
Margin
Percentage
|
|
|
|
EPS
|
|
Transaction fees
|
|
|
|
X
|
|
|
|
—
|
|
|
|
X
|
|
|
|
—
|
|
Restructuring and reorganization charges
|
|
|
|
—
|
|
|
|
X
|
|
|
|
X
|
|
|
|
X
|
|
Acquisition-related expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of acquired intangible assets
|
|
|
|
—
|
|
|
|
X
|
|
|
|
X
|
|
|
|
X
|
|
Earn-out compensation
|
|
|
|
—
|
|
|
|
X
|
|
|
|
X
|
|
|
|
X
|
|
Transaction-related costs
|
|
|
|
—
|
|
|
|
X
|
|
|
|
X
|
|
|
|
X
|
|
Stock-based compensation
|
|
|
|
—
|
|
|
|
X
|
|
|
|
X
|
|
|
|
X
|
|
Amortization of original issue discount (“OID”)
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
X
|
|
Gain (loss) on extinguishment of debt
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
X
|
|
Unusual income tax matters
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
X
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CSG believes that excluding certain items in calculating its non-GAAP
financial measures provides meaningful supplemental information
regarding CSG’s performance and these items are excluded for the
following reasons:
-
Transaction fees are primarily comprised of interchange and other
payment-related fees paid in conjunction with the delivery of service
to clients under CSG’s payment services contracts, to third-party
payment processors and financial institutions by 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. The
exclusion of these fees in calculating CSG’s non-GAAP adjusted
revenues provides management and investors an additional means to use
to compare CSG’s current revenues with historical and future periods,
as well as with other payments companies.
-
Restructuring and reorganization charges are expenses that result from
cost reduction initiatives and/or significant changes to CSG’s
business, to include such things as involuntary employee terminations,
changes in management structure, divestitures of businesses, facility
consolidations and abandonments, and fundamental reorganizations
impacting operational focus and direction. These charges are not
considered reflective of CSG’s recurring core business operating
results. The exclusion of these items in calculating CSG’s non-GAAP
financial measures allows management and investors an additional means
to compare CSG’s current financial results with historical and future
periods.
-
Acquisition-related expenses include amortization of acquired
intangible assets, earn-out compensation, and transaction-related
costs. Transaction-related costs, which typically include expenses
related to legal, accounting, and other professional services, are
direct and incremental expenses related to business acquisitions, and
thus, are not considered reflective of CSG’s recurring core business
operating results. The total amount of acquisition-related expenses
can vary significantly between periods based on the number and size of
acquisition activities, previously acquired intangible assets becoming
fully amortized, and ultimate realization of earn-out compensation. In
addition, the timing of these expenses may not directly correlate with
underlying performance of the CSG’s operations. Therefore, the
exclusion of acquisition-related expenses in calculating CSG’s
non-GAAP financial measures allows management and investors an
additional means to compare CSG’s current financial results with
historical and future periods.
-
Stock-based compensation results from CSG’s issuance of equity awards
to its employees under incentive compensation programs. The amount of
this incentive compensation in any period is not generally linked to
the level of performance by employees or CSG. The exclusion of these
expenses in calculating CSG’s non-GAAP financial measures allows
management and investors an additional means to evaluate the non-cash
expense related to compensation included in CSG’s results of
operations, and therefore, the exclusion of this item allows investors
to further evaluate the cash generating capabilities of CSG’s business.
-
The convertible notes OID is the result of allocating a portion of the
principal balance of the debt at issuance to the equity component of
the instrument, as required under current accounting rules. This OID
is then amortized to interest expense over the life of the respective
convertible debt instrument. The interest expense related to the
amortization of the OID is a non-cash expense, and therefore, the
exclusion of this item allows investors to further evaluate the cash
interest costs of CSG’s convertible notes for cash flow, liquidity,
and debt service purposes.
-
Gains and losses related to the extinguishment of debt are a result of
the refinancing of CSG’s credit agreement and/or repurchase of CSG’s
convertible notes. These activities are not considered reflective of
CSG’s recurring core business operating results. Any resulting gain or
loss is generally non-cash income or expense, and therefore, the
exclusion of this item allows investors to further evaluate the cash
impact of these repurchases for cash flow and liquidity purposes. In
addition, the exclusion of these gains and losses in calculating CSG’s
non-GAAP EPS allows management and investors an additional means to
compare CSG’s current operating results with historical and future
periods.
-
Unusual items within CSG’s quarterly and/or annual income tax expense
can occur from such things as income tax accounting timing matters,
income taxes related to unusual events, or as a result of different
treatment of certain items for book accounting and income tax
purposes. Consideration of such items in calculating CSG’s non-GAAP
financial measures allows management and investors an additional means
to compare CSG’s current financial results with historical and future
periods.
CSG also reports non-GAAP adjusted EBITDA and non-GAAP free cash flow.
Management believes non-GAAP adjusted EBITDA is a useful measure to
investors in evaluating CSG’s operating performance, debt servicing
capabilities, and enterprise valuation. CSG defines non-GAAP adjusted
EBITDA as income before interest, income taxes, depreciation,
amortization, stock-based compensation, foreign currency transaction
adjustments, acquisition-related expenses, and unusual items, such as
restructuring and reorganization charges, and gains and losses related
to the extinguishment of debt, as discussed above. Additionally,
management uses non-GAAP free cash flow, among other measures, to assess
its financial performance and cash generating capabilities, and believes
that it is useful to investors because it shows CSG’s cash available to
service debt, make strategic acquisitions and investments, repurchase
its common stock, pay cash dividends, and fund ongoing operations. CSG
defines non-GAAP free cash flow as net cash flows from operating
activities less the purchases of property and equipment.
Non-GAAP Financial Measures
Non-GAAP Adjusted Revenues:
The reconciliations of GAAP revenues to non-GAAP adjusted revenues for
the indicated periods are as follows (in thousands):
|
|
|
Quarter Ended
|
|
|
|
Year Ended
|
|
|
|
December 31,
|
|
|
|
December 31,
|
|
|
|
2018
|
|
|
|
2017
|
|
|
|
2018
|
|
|
|
2017
|
GAAP revenues
|
|
|
$
|
247,267
|
|
|
|
$
|
205,204
|
|
|
|
$
|
875,059
|
|
|
|
$
|
789,582
|
Less: Transaction fees
|
|
|
|
(15,602
|
)
|
|
|
|
—
|
|
|
|
|
(15,602
|
)
|
|
|
|
—
|
Non-GAAP adjusted revenues (1)
|
|
|
$
|
231,665
|
|
|
|
$
|
205,204
|
|
|
|
$
|
859,457
|
|
|
|
$
|
789,582
|
(1)
|
|
Non-GAAP adjusted revenues are defined as GAAP revenues less
transaction fees. Transaction fees are primarily comprised of
interchange and other payment-related fees paid, in conjunction with
the delivery of service to clients under CSG’s payment services
contracts, to third-party payment processors and financial
institutions by 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.
|
|
|
|
Non-GAAP Operating Income:
The reconciliations of GAAP operating income to non-GAAP operating
income for the indicated periods are as follows (in thousands, except
percentages):
|
|
|
Quarter Ended
|
|
|
|
Year Ended
|
|
|
|
|
December 31,
|
|
|
|
December 31,
|
|
|
|
|
2018
|
|
|
|
2017
|
|
|
|
2018
|
|
|
|
2017
|
|
GAAP operating income
|
|
|
$
|
29,425
|
|
|
|
$
|
26,048
|
|
|
|
$
|
104,932
|
|
|
|
$
|
105,685
|
|
Restructuring and reorganization charges (2)
|
|
|
|
1,633
|
|
|
|
|
4,199
|
|
|
|
|
8,661
|
|
|
|
|
8,796
|
|
Acquisition-related expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of acquired intangible assets
|
|
|
|
3,326
|
|
|
|
|
1,658
|
|
|
|
|
9,699
|
|
|
|
|
6,864
|
|
Earn-out compensation
|
|
|
|
1,260
|
|
|
|
|
-
|
|
|
|
|
1,260
|
|
|
|
|
-
|
|
Transaction-related costs
|
|
|
|
1,034
|
|
|
|
|
-
|
|
|
|
|
3,653
|
|
|
|
|
-
|
|
Stock-based compensation (2)
|
|
|
|
4,722
|
|
|
|
|
4,438
|
|
|
|
|
19,650
|
|
|
|
|
20,782
|
|
Non-GAAP operating income
|
|
|
$
|
41,400
|
|
|
|
$
|
36,343
|
|
|
|
$
|
147,855
|
|
|
|
$
|
142,127
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP adjusted revenues
|
|
|
$
|
231,665
|
|
|
|
$
|
205,204
|
|
|
|
$
|
859,457
|
|
|
|
$
|
789,582
|
|
Non-GAAP adjusted operating margin percentage
|
|
|
|
17.9
|
%
|
|
|
|
17.7
|
%
|
|
|
|
17.2
|
%
|
|
|
|
18.0
|
%
|
(2)
|
|
Stock-based compensation included in the tables above and following
excludes amounts that have been recorded in restructuring and
reorganization charges.
|
|
|
|
Non-GAAP EPS:
The reconciliations of GAAP EPS to non-GAAP EPS for the indicated
periods are as follows (in thousands, except per share amounts):
|
|
|
Quarter Ended
|
|
|
|
Quarter Ended
|
|
|
|
December 31, 2018
|
|
|
|
December 31, 2017
|
|
|
|
Amounts
|
|
|
|
EPS (4)
|
|
|
|
Amounts
|
|
|
|
EPS (4)
|
GAAP net income
|
|
|
$
|
20,898
|
|
|
|
$
|
0.64
|
|
|
|
$
|
14,966
|
|
|
|
$
|
0.45
|
GAAP income tax provision (3)
|
|
|
|
4,669
|
|
|
|
|
|
|
|
|
|
6,705
|
|
|
|
|
|
GAAP income before income taxes
|
|
|
|
25,567
|
|
|
|
|
|
|
|
|
|
21,671
|
|
|
|
|
|
Restructuring and reorganization charges (2)
|
|
|
|
1,633
|
|
|
|
|
|
|
|
|
|
4,199
|
|
|
|
|
|
Acquisition-related expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of acquired intangible assets
|
|
|
|
3,326
|
|
|
|
|
|
|
|
|
|
1,658
|
|
|
|
|
|
Earn-out compensation
|
|
|
|
1,260
|
|
|
|
|
|
|
|
|
|
-
|
|
|
|
|
|
Transaction-related costs
|
|
|
|
1,034
|
|
|
|
|
|
|
|
|
|
-
|
|
|
|
|
|
Stock-based compensation (2)
|
|
|
|
4,722
|
|
|
|
|
|
|
|
|
|
4,438
|
|
|
|
|
|
Amortization of OID
|
|
|
|
680
|
|
|
|
|
|
|
|
|
|
643
|
|
|
|
|
|
Non-GAAP income before income taxes
|
|
|
|
38,222
|
|
|
|
|
|
|
|
|
|
32,609
|
|
|
|
|
|
Non-GAAP income tax provision (3)
|
|
|
|
(7,247
|
)
|
|
|
|
|
|
|
|
|
(12,036
|
)
|
|
|
|
|
Non-GAAP net income
|
|
|
$
|
30,975
|
|
|
|
$
|
0.95
|
|
|
|
$
|
20,573
|
|
|
|
$
|
0.62
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
|
|
Year Ended
|
|
|
|
December 31, 2018
|
|
|
|
December 31, 2017
|
|
|
|
Amounts
|
|
|
|
EPS (4)
|
|
|
|
Amounts
|
|
|
|
EPS (4)
|
GAAP net income
|
|
|
$
|
66,130
|
|
|
|
$
|
2.01
|
|
|
|
$
|
61,364
|
|
|
|
$
|
1.87
|
GAAP income tax provision (3)
|
|
|
|
20,857
|
|
|
|
|
|
|
|
|
|
26,346
|
|
|
|
|
|
GAAP income before income taxes
|
|
|
|
86,987
|
|
|
|
|
|
|
|
|
|
87,710
|
|
|
|
|
|
Restructuring and reorganization charges (2)
|
|
|
|
8,661
|
|
|
|
|
|
|
|
|
|
8,796
|
|
|
|
|
|
Acquisition-related expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of acquired intangible assets
|
|
|
|
9,699
|
|
|
|
|
|
|
|
|
|
6,864
|
|
|
|
|
|
Earn-out compensation
|
|
|
|
1,260
|
|
|
|
|
|
|
|
|
|
-
|
|
|
|
|
|
Transaction-related costs
|
|
|
|
3,653
|
|
|
|
|
|
|
|
|
|
-
|
|
|
|
|
|
Stock-based compensation (2)
|
|
|
|
19,650
|
|
|
|
|
|
|
|
|
|
20,782
|
|
|
|
|
|
Loss on extinguishment of debt
|
|
|
|
810
|
|
|
|
|
|
|
|
|
|
-
|
|
|
|
|
|
Amortization of OID
|
|
|
|
2,664
|
|
|
|
|
|
|
|
|
|
2,790
|
|
|
|
|
|
Non-GAAP income before income taxes
|
|
|
|
133,384
|
|
|
|
|
|
|
|
|
|
126,942
|
|
|
|
|
|
Non-GAAP income tax provision (3)
|
|
|
|
(32,786
|
)
|
|
|
|
|
|
|
|
|
(44,430
|
)
|
|
|
|
|
Non-GAAP net income
|
|
|
$
|
100,598
|
|
|
|
$
|
3.06
|
|
|
|
$
|
82,512
|
|
|
|
$
|
2.51
|
(3)
|
|
For the fourth quarter and year ended December 31, 2018 the GAAP
effective income tax rates were approximately 18% and 24%,
respectively, and the non-GAAP effective income tax rates were
approximately 19% and 25%, respectively.
|
|
|
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.
|
(4)
|
|
The outstanding diluted shares for the fourth quarter and year ended
December 31, 2018 were 32.6 million and 32.9 million, respectively,
and for the fourth quarter and year ended December 31, 2017 were
33.0 million and 32.9 million, respectively.
|
|
|
|
Non-GAAP Adjusted EBITDA:
CSG’s calculation of non-GAAP adjusted EBITDA and the reconciliation of
CSG’s non-GAAP adjusted EBITDA measure to GAAP net income is provided
below for the indicated periods (in thousands, except percentages):
|
|
|
Quarter Ended
|
|
|
|
Year Ended
|
|
|
|
|
December 31,
|
|
|
|
December 31,
|
|
|
|
|
2018
|
|
|
|
2017
|
|
|
|
2018
|
|
|
|
2017
|
|
GAAP net income
|
|
|
$
|
20,898
|
|
|
|
$
|
14,966
|
|
|
|
$
|
66,130
|
|
|
|
$
|
61,364
|
|
GAAP income tax provision
|
|
|
|
4,669
|
|
|
|
|
6,705
|
|
|
|
|
20,857
|
|
|
|
|
26,346
|
|
Interest expense (5)
|
|
|
|
4,465
|
|
|
|
|
4,156
|
|
|
|
|
17,667
|
|
|
|
|
16,794
|
|
Amortization of OID
|
|
|
|
680
|
|
|
|
|
643
|
|
|
|
|
2,664
|
|
|
|
|
2,790
|
|
Loss on extinguishment of debt
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
810
|
|
|
|
|
-
|
|
Interest and investment income and other, net
|
|
|
|
(1,287
|
)
|
|
|
|
(422
|
)
|
|
|
|
(3,196
|
)
|
|
|
|
(1,609
|
)
|
GAAP operating income
|
|
|
|
29,425
|
|
|
|
|
26,048
|
|
|
|
|
104,932
|
|
|
|
|
105,685
|
|
Restructuring and reorganization charges (2)
|
|
|
|
1,633
|
|
|
|
|
4,199
|
|
|
|
|
8,661
|
|
|
|
|
8,796
|
|
Acquisition-related expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of acquired intangible assets (6)
|
|
|
|
3,326
|
|
|
|
|
1,658
|
|
|
|
|
9,699
|
|
|
|
|
6,864
|
|
Earn-out compensation
|
|
|
|
1,260
|
|
|
|
|
-
|
|
|
|
|
1,260
|
|
|
|
|
-
|
|
Transaction-related costs
|
|
|
|
1,034
|
|
|
|
|
-
|
|
|
|
|
3,653
|
|
|
|
|
-
|
|
Stock-based compensation (2)
|
|
|
|
4,722
|
|
|
|
|
4,438
|
|
|
|
|
19,650
|
|
|
|
|
20,782
|
|
Amortization of other intangible assets (6)
|
|
|
|
2,521
|
|
|
|
|
5,618
|
|
|
|
|
9,517
|
|
|
|
|
20,388
|
|
Amortization of client contract costs (6)
|
|
|
|
6,096
|
|
|
|
|
-
|
|
|
|
|
23,381
|
|
|
|
|
-
|
|
Depreciation
|
|
|
|
5,011
|
|
|
|
|
3,405
|
|
|
|
|
18,304
|
|
|
|
|
13,380
|
|
Non-GAAP adjusted EBITDA
|
|
|
$
|
55,028
|
|
|
|
$
|
45,366
|
|
|
|
$
|
199,057
|
|
|
|
$
|
175,895
|
|
Non-GAAP adjusted EBITDA as a percentage of non-GAAP adjusted
revenues
|
|
|
|
24
|
%
|
|
|
|
22
|
%
|
|
|
|
23
|
%
|
|
|
|
22
|
%
|
(5)
|
|
Interest expense includes amortization of deferred financing costs
as provided in Note 6 below.
|
(6)
|
|
Amortization on the statement of cash flows is made up of the
following items for the indicated periods (in thousands):
|
|
|
|
|
|
|
Quarter Ended
|
|
|
|
Year Ended
|
|
|
|
December 31,
|
|
|
|
December 31,
|
|
|
|
2018
|
|
|
|
2017
|
|
|
|
2018
|
|
|
|
2017
|
Amortization of acquired intangible assets
|
|
|
$
|
3,326
|
|
|
|
$
|
1,658
|
|
|
|
$
|
9,699
|
|
|
|
$
|
6,864
|
Amortization of other intangible assets
|
|
|
|
2,521
|
|
|
|
|
5,618
|
|
|
|
|
9,517
|
|
|
|
|
20,388
|
Amortization of client contract costs
|
|
|
|
6,096
|
|
|
|
|
—
|
|
|
|
|
23,381
|
|
|
|
|
—
|
Amortization of deferred financing costs
|
|
|
|
411
|
|
|
|
|
555
|
|
|
|
|
1,731
|
|
|
|
|
2,249
|
Total amortization
|
|
|
$
|
12,354
|
|
|
|
$
|
7,831
|
|
|
|
$
|
44,328
|
|
|
|
$
|
29,501
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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,
|
|
|
|
|
2018
|
|
|
|
2017
|
|
|
|
2018
|
|
|
|
2017
|
|
Cash flows from operating activities
|
|
|
$
|
70,072
|
|
|
|
$
|
24,373
|
|
|
|
$
|
143,341
|
|
|
|
$
|
127,195
|
|
Purchases of property and equipment
|
|
|
|
(13,057
|
)
|
|
|
|
(5,572
|
)
|
|
|
|
(57,104
|
)
|
|
|
|
(28,942
|
)
|
Non-GAAP free cash flow
|
|
|
$
|
57,015
|
|
|
|
$
|
18,801
|
|
|
|
$
|
86,237
|
|
|
|
$
|
98,253
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP Financial Measures – 2019 Financial
Guidance
Non-GAAP Adjusted Revenues:
The reconciliation of GAAP revenues to non-GAAP adjusted revenues, as
included in CSG’s 2019 full year financial guidance, is as follows:
|
|
|
2019 Guidance Range
|
|
|
|
|
Low Range
|
|
|
|
|
High Range
|
|
GAAP revenues
|
|
|
$
|
965,000
|
|
|
|
|
$
|
995,000
|
|
Less: Transaction fees
|
|
|
|
(62,000
|
)
|
|
|
|
|
(75,000
|
)
|
Non-GAAP adjusted revenues
|
|
|
$
|
903,000
|
|
|
|
|
$
|
920,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP Operating Income and Adjusted
Operating Margin Percentage:
The reconciliation of GAAP operating income to non-GAAP operating
income, and the resulting GAAP operating margin percentage and non-GAAP
adjusted operating margin percentage, as included in CSG’s 2019 full
year financial guidance at the midpoint, is as follows:
|
|
2019
|
|
|
|
Guidance
|
|
Operating Income
|
|
|
|
|
GAAP operating income
|
|
$
|
115,000
|
|
Restructuring and reorganization charges
|
|
|
300
|
|
Acquisition-related expenses:
|
|
|
|
|
Amortization of acquired intangible assets
|
|
|
12,500
|
|
Earn-out compensation
|
|
|
5,100
|
|
Stock-based compensation
|
|
|
22,000
|
|
Non-GAAP operating income
|
|
$
|
154,900
|
|
|
|
|
|
|
Operating Margin Percentage
|
|
|
|
|
GAAP revenues (mid-point)
|
|
$
|
980,000
|
|
GAAP operating margin percentage
|
|
|
11.7
|
%
|
|
|
|
|
|
Non-GAAP adjusted revenues (mid-point)
|
|
$
|
911,500
|
|
Non-GAAP adjusted operating margin percentage
|
|
|
17.0
|
%
|
|
|
|
|
|
Non-GAAP EPS:
The reconciliation of GAAP EPS to non-GAAP EPS as included in CSG’s 2019
full year financial guidance is as follows (in thousands, except per
share amounts):
|
|
|
2019 Guidance Range
|
|
|
|
Low Range
|
|
|
|
High Range
|
|
|
|
Amounts
|
|
|
|
EPS (8)
|
|
|
|
Amounts
|
|
|
|
EPS (8)
|
GAAP net income
|
|
|
$
|
69,600
|
|
|
|
$
|
2.17
|
|
|
|
$
|
73,000
|
|
|
|
$
|
2.27
|
GAAP income tax provision (7)
|
|
|
|
24,300
|
|
|
|
|
|
|
|
|
|
25,600
|
|
|
|
|
|
GAAP income before income taxes
|
|
|
|
93,900
|
|
|
|
|
|
|
|
|
|
98,600
|
|
|
|
|
|
Restructuring and reorganization charges
|
|
|
|
300
|
|
|
|
|
|
|
|
|
|
300
|
|
|
|
|
|
Acquisition-related expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of acquired intangible assets
|
|
|
|
12,500
|
|
|
|
|
|
|
|
|
|
12,500
|
|
|
|
|
|
Earn-out compensation
|
|
|
|
5,100
|
|
|
|
|
|
|
|
|
|
5,100
|
|
|
|
|
|
Stock-based compensation
|
|
|
|
22,000
|
|
|
|
|
|
|
|
|
|
22,000
|
|
|
|
|
|
Amortization of OID
|
|
|
|
2,800
|
|
|
|
|
|
|
|
|
|
2,800
|
|
|
|
|
|
Non-GAAP income before income taxes
|
|
|
|
136,600
|
|
|
|
|
|
|
|
|
|
141,300
|
|
|
|
|
|
Non-GAAP income tax provision (7)
|
|
|
|
(35,500
|
)
|
|
|
|
|
|
|
|
|
(36,400
|
)
|
|
|
|
|
Non-GAAP net income
|
|
|
$
|
101,100
|
|
|
|
$
|
3.15
|
|
|
|
$
|
104,900
|
|
|
|
$
|
3.27
|
(7)
|
|
For 2019, the estimated effective income tax rate for GAAP and
non-GAAP purposes is expected to be approximately 26%.
|
(8)
|
|
The weighted-average diluted shares outstanding are expected to be
approximately 32 million.
|
|
|
|
Non-GAAP Adjusted EBITDA:
CSG’s calculation of non-GAAP adjusted EBITDA and the reconciliation of
CSG’s non-GAAP adjusted EBITDA measure to GAAP net income is provided
below for CSG’s 2019 full year financial guidance at the mid-point (in
thousands, except percentages):
|
|
|
2019
|
|
GAAP net income
|
|
|
$
|
71,300
|
|
GAAP income tax provision
|
|
|
|
25,000
|
|
Interest expense
|
|
|
|
18,500
|
|
Amortization of OID
|
|
|
|
2,800
|
|
Interest and investment income and other, net
|
|
|
|
(2,600
|
)
|
GAAP operating income
|
|
|
|
115,000
|
|
Restructuring and reorganization charges
|
|
|
|
300
|
|
Acquisition-related expenses:
|
|
|
|
|
|
Amortization of acquired intangible assets
|
|
|
|
12,500
|
|
Earn-out compensation
|
|
|
|
5,100
|
|
Stock-based compensation
|
|
|
|
22,000
|
|
Amortization of other intangible assets
|
|
|
|
7,700
|
|
Amortization of client contract costs
|
|
|
|
18,100
|
|
Depreciation
|
|
|
|
23,800
|
|
Non-GAAP adjusted EBITDA
|
|
|
$
|
204,500
|
|
Non-GAAP adjusted EBITDA as a percentage of non-GAAP adjusted
revenues
|
|
|
|
22
|
%
|
|
|
|
|
|
|
Non-GAAP Free Cash Flow:
CSG’s calculation of non-GAAP free cash flow and the reconciliation of
CSG’s non-GAAP free cash flow measure to cash flows from operating
activities is provided below for CSG’s 2019 full year financial guidance
at the mid-point (in thousands):
|
|
|
2019
|
|
Cash flows from operating activities
|
|
|
$
|
135,000
|
|
Purchases of property and equipment
|
|
|
|
(30,000
|
)
|
Non-GAAP free cash flow
|
|
|
$
|
105,000
|
|
|
|
|
|
|
|
View source version on businesswire.com:
https://www.businesswire.com/news/home/20190206005654/en/
CSG Systems International
Liz Bauer, Chief Communications
and Investor Relations Officer
303-804-4065
liz.bauer@csgi.com
Source: CSG