DJ CSG Systems International Reports Second Quarter 2021 Results
CSG CSG Systems International Reports Second Quarter 2021 Results 04-Aug-2021 / 22:01 CET/CEST -----------------------------------------------------------------------------------------------------------------------
Raising All 2021 Financial Guidance Targets on the Back of Strong H1 2021 Result
Robust Q2 2021 Revenue & Adjusted Revenue Growth; Each up 6.2% Year-Over-Year
Successful Conversion of 300,000 Charter Communications Customers in Kansas City
CSG (NASDAQ: CSGS) today reported results for the quarter ended June 30, 2021.
Financial Results:
Second quarter 2021 financial results: . Total revenue was $255.1 million and total non-GAAP adjusted revenue was $238.5 million. . GAAP operating income was $32.2 million, or 12.6% of total revenue, and non-GAAP operating income was $39.8 million
, or 16.7% of non-GAAP adjusted revenue. . GAAP earnings per diluted share (EPS) was $0.60 and non-GAAP EPS was $0.82. . Cash flows used in operations were $44.5 million, with a non-GAAP free cash flow of $37.5 million.
Shareholder Returns: . In May 2021, CSG declared its quarterly cash dividend of $0.25 per share of common stock, or a total of
approximately $8 million, to shareholders. . During the second quarter of 2021, CSG repurchased under its stock repurchase program, approximately 153,000 shares
of its common stock for approximately $7 million.
'CSG continued to build off our Q1 momentum and delivered 6.2% year-over-year revenue and adjusted revenue growth in Q2, which was predominantly all organic growth,' said Brian Shepherd, President and Chief Executive Officer of CSG. 'On the back of our strong first half performance, we are boosting all 2021 financial guidance targets, including revenue, adjusted operating margin and EPS. Additionally, we are thrilled to expand our relationship with Charter Communications as we successfully converted approximately 300,000 of their Kansas City market subscribers from a competitor's billing platform to CSG during the quarter. Looking ahead, we remain well positioned to lengthen and strengthen our relationships with existing customers, accelerate our organic revenue growth, close good new strategic acquisitions, and diversify into higher growth industry verticals.'
Financial Overview (unaudited)
(in thousands, except per share amounts and percentages):
Quarter Ended June 30, Six Months Ended June 30,
Percent Percent
2021 2020 2021 2020
Changed Changed
GAAP Results:
$ $ % $ $ %
Revenue
255,134 240,321 6.2 508,253 485,938 4.6
Operating % % Income 32,166 19,775 63,543 52,934
62.7 20.0
Operating % % % % Margin Percentage 12.6 8.2 12.5 10.9
$ $ % $ $ %
EPS
0.60 0.32 87.5 1.21 0.99 22.2
Non-GAAP Results:
Adjusted $ $ % $ $ % Revenue
238,479 224,626 6.2 475,148 451,919 5.1
Operating % % Income 39,789 30,633 79,996 72,787
29.9 9.9
Adjusted % % % % Operating Margin 16.7 13.6 16.8 16.1 Percentage
$ $ % $ $ %
EPS
0.82 0.59 39.0 1.65 1.46 13.0
For additional information and reconciliations regarding CSG's use of non-GAAP financial measures, please refer to the attached Exhibit 2 and the Investor Relations section of CSG's website at csgi.com.
Results of Operations
GAAP Results: Total revenue for the second quarter of 2021 was $255.1 million, a 6.2% increase when compared to revenue of $240.3 million for the second quarter of 2020, and a 0.8% increase when compared to revenue of $253.1 million for the first quarter of 2021. The year-over-year increase in revenue can be primarily attributed to continued growth of CSG's revenue management solutions, favorable foreign currency movements, and to a lesser extent, the negative impact the COVID-19 pandemic had on CSG's second quarter of 2020 revenue. The sequential quarterly increase is mainly due to the continued growth of CSG's revenue management solutions.
GAAP operating income for the second quarter of 2021 was $32.2 million, or 12.6% of total revenue, compared to $19.8 million, or 8.2% of total revenue, for the second quarter of 2020, and $31.4 million, or 12.4% of total revenue, for the first quarter of 2021. The increase in operating income can be primarily attributed to the revenue growth in 2021 and an approximately $10 million impairment charge for the write-off of capitalized customer contract costs related to a discontinued project implementation in the second quarter of 2020.
GAAP EPS for the second quarter of 2021 was $0.60, as compared to $0.32 for the second quarter of 2020, and $0.61 for the first quarter of 2021. The year-over-year increase in GAAP EPS is mainly due to the increase in operating results, discussed above.
Non-GAAP Results: Non-GAAP adjusted revenue for the second quarter of 2021 was $238.5 million, a 6.2% increase when compared to non-GAAP adjusted revenue of $224.6 million for the second quarter of 2020, and a 0.8% increase when compared to $236.7 million for the first quarter of 2021.
Non-GAAP operating income for the second quarter of 2021 was $39.8 million, or 16.7% of total non-GAAP adjusted revenue, compared to $30.6 million, or 13.6% of total non-GAAP adjusted revenue for the second quarter of 2020, and $40.2 million, or 17.0% of total non-GAAP adjusted revenue for the first quarter of 2021.
Non-GAAP EPS for the second quarter of 2021 was $0.82 compared to $0.59 for the second quarter of 2020, and $0.82 for the first quarter of 2021.
The changes in non-GAAP adjusted revenue, non-GAAP operating income, and non-GAAP EPS between quarters are primarily due to the factors discussed above.
Balance Sheet and Cash Flows
Cash, cash equivalents and short-term investments as of June 30, 2021 were $212.1 million compared to $205.1 million as of March 31, 2021 and $240.3 million as of December 31, 2020. CSG had net cash flows from operations for the second quarters ended June 30, 2021 and 2020 of $44.5 million and $57.8 million, respectively, and had non-GAAP free cash flow of $37.5 million and $48.3 million, respectively.
Summary of 2021 Financial Guidance
CSG is updating its financial guidance for the full year 2021, as follows:
As of August 4,
Previous
2021
GAAP Measures:
$ $
Revenue
1,015 - $1,045 million 995 - $1,035 million
Operating Margin Percentage 12.3% - 12.7% 12.2% - 12.7%
$ $
EPS
2.35 - $2.53 2.30 - $2.53
$ $
Cash Flows from Operating Activities
140 - $160 million 135 - $155 million
Non-GAAP Measures:
$ $
Adjusted Revenue
946 - $964 million 922 - $954 million
Adjusted Operating Margin Percentage 16.5% - 17.0% 16.25% - 16.75%
$ $
EPS
3.16 - $3.34 3.02 - $3.24
$ $
Adjusted EBITDA
217 - $225 million 212 - $222 million
$ $
Free Cash Flow
115 - $125 million 110 - $120 million
For additional information and reconciliations regarding CSG's use of non-GAAP financial measures, please refer to the attached Exhibit 2 and the Investor Relations section of CSG's website at csgi.com.
Conference Call
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DJ CSG Systems International Reports Second Quarter -2-
CSG will host a conference call on Wednesday, August 4, 2021 at 5:00 p.m. EDT, to discuss CSG's second quarter results for 2021. 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, call 1-833-921-1665 and use the passcode 4290448.
Additional Information
For information about CSG, please visit CSG's web site at csgi.com. Additional information can be found in the Investor Relations section of the website.
About CSG
For more than 35 years, CSG has simplified the complexity of business, delivering innovative customer engagement solutions that help companies acquire, monetize, engage and retain customers. Operating across more than 120 countries worldwide, CSG manages billions of critical customer interactions annually, and its award-winning suite of software and services allow companies across dozens of industries to tackle their biggest business challenges and thrive in an ever-changing marketplace. CSG is the trusted partner for driving digital innovation for hundreds of leading global brands, including AT&T, Charter Communications, Comcast, DISH, Eastlink, Formula One, Maximus, MTN and Telstra. To learn more, visit our website at csgi.com and connect with us on LinkedIn, Twitter and Facebook.
Forward-Looking Statements
This news release contains forward-looking statements as defined under the Securities Act of 1933, as amended, that are based on assumptions about a number of important factors and involve risks and uncertainties that could cause actual results to differ materially from what appears in this news release. Some of these key factors include, but are not limited to the following items: . CSG's business may be disrupted, and its results of operations and cash flows adversely affected by the COVID-19
pandemic; . CSG derives over forty percent of its revenue from its two largest customers; . 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; . 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)
June 30, December
31,
2021 2020
ASSETS
Current assets:
$ $
Cash and cash equivalents
163,768 188,699
Short-term investments
48,325 51,598
Total cash, cash equivalents and short-term investments
212,093 240,297
Settlement and merchant reserve assets
142,684 166,031
Trade accounts receivable:
Billed, net of allowance of $3,546 and $3,628
223,228 226,623
Unbilled
43,583 37,785
Income taxes receivable 8,170 2,167
Other current assets
48,186 41,688
Total current assets
677,944 714,591
Non-current assets:
Property and equipment, net of depreciation of $117,113 and $105,073
81,261 81,759
Operating lease right-of-use assets
100,881 110,756
Software, net of amortization of $147,369 and $139,836
23,818 26,453
Goodwill
274,843 272,322
Acquired customer contracts, net of amortization of $110,438 and $105,778 52,995 48,012
Customer contract costs, net of amortization of $46,370 and $39,893
46,799 47,238
Deferred income taxes 9,500
10,205
Other assets
23,643 20,664
Total non-current assets
613,740 617,409
$ $
Total assets
1,291,684 1,332,000
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt, net of unamortized discounts of $ $ $2,032 and zero
242,968 14,063
Operating lease liabilities
23,303 22,651
Customer deposits
32,418 39,992
Trade accounts payable
31,852 29,834
Accrued employee compensation
76,851 86,289
Settlement and merchant reserve liabilities
141,130 165,064
Deferred revenue
54,956 52,357
Income taxes payable 937 6,627
Other current liabilities
18,824 19,383
Total current liabilities
623,239 436,260
Non-current liabilities:
Long-term debt, net of unamortized discounts of $880 and $5,346
104,120 337,154
Operating lease liabilities
85,599 95,926
Deferred revenue
14,288 17,275
Income taxes payable 2,508 2,436
Deferred income taxes 5,109
10,941
Other non-current liabilities
11,209 15,445
Total non-current liabilities
228,665 473,345
Total liabilities
851,904 909,605
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; 704 700 32,797 and 32,713 shares outstanding
Additional paid-in capital
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