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
(MORE TO FOLLOW) Dow Jones Newswires
August 04, 2021 16:01 ET (20:01 GMT)
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
(MORE TO FOLLOW) Dow Jones Newswires
August 04, 2021 16:01 ET (20:01 GMT)
DJ CSG Systems International Reports Second Quarter -3-
477,010 470,557
Treasury stock, at cost; 36,275 and 35,980 shares ) )
(907,601 (894,126
Accumulated other comprehensive income (loss):
Unrealized gains on short-term investments, net of tax - 13
Cumulative foreign currency translation adjustments ) )
(29,294 (31,151
Accumulated earnings
898,961 876,402
Total stockholders' equity
439,780 422,395
$ $
Total liabilities and stockholders' equity
1,291,684 1,332,000
CSG SYSTEMS INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME-UNAUDITED
(in thousands, except per share amounts)
Quarter Ended Six Months Ended
June 30, June 30, June 30, June 30,
2021 2020 2021 2020
$ $ $ $
Revenue
255,134 240,321 508,253 485,938
Cost of revenue (exclusive of depreciation, shown separately 132,938 138,153 266,480 269,359 below)
Other operating expenses:
Research and development
32,754 29,263 64,966 59,600
Selling, general and administrative 49,250 44,999 98,065 89,383
Depreciation
6,266 5,634 12,379 11,199
Restructuring and reorganization charges 1,760 2,497 2,820 3,463
Total operating expenses
222,968 220,546 444,710 433,004
Operating income
32,166 19,775 63,543 52,934
Other income (expense):
Interest expense ) ) ) )
(3,633 (4,040 (7,225 (8,253
Amortization of original issue (784 ) (740 ) ) ) discount (1,556 (1,470
Interest and investment income, 84 303 208 832 net
Other, net (100 ) ) (655 ) )
(1,048 (1,117
Total other ) ) ) )
(4,433 (5,525 (9,228 (10,008
Income before income taxes
27,733 14,250 54,315 42,926
Income tax provision ) ) ) )
(8,412 (3,884 (15,363 (11,046
$ $ $ $
Net income
19,321 10,366 38,952 31,880
Weighted-average shares outstanding:
Basic
31,875 32,100 31,859 32,047
Diluted
31,993 32,258 32,070 32,308
Earnings per common share:
$ $ $ $
Basic
0.61 0.32 1.22 0.99
Diluted 0.60 0.32 1.21 0.99
CSG SYSTEMS INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS-UNAUDITED
(in thousands)
Six Months Ended
June 30, June 30,
2021 2020
Cash flows from operating activities^(1):
$ $
Net income
38,952 31,880
Adjustments to reconcile net income to net cash provided by operating activities-
Depreciation 12,379 11,199
Amortization 22,018 22,043
Amortization of original issue discount 1,556 1,470
Asset impairment 415 10,595
(Gain)/loss on short-term investments 32 (110 )
Deferred income taxes 6,434 6,771
Stock-based compensation 10,417 10,112
Subtotal 92,203 93,960
Changes in operating assets and liabilities, net of acquired amounts:
Trade accounts receivable, net 1,128 (6,286 )
Other current and non-current assets and liabilities (7,623 ) (8,568 )
Income taxes payable/receivable ) 1,332
(11,620
Trade accounts payable and accrued liabilities ) )
(29,817 (36,381
Deferred revenue.. (2,042 ) 6,803
Net cash provided by operating activities 42,229 50,860
Cash flows from investing activities:
Purchases of software, property and equipment ) )
(15,158 (14,334
Purchases of short-term investments ) )
(46,195 (35,112
Proceeds from sale/maturity of short-term investments 49,419 34,185
Acquisition of and investments in business, net of cash acquired ) (9,991 )
(12,097
Net cash used in investing activities ) )
(24,031 (25,252
Cash flows from financing activities^(1):
Proceeds from issuance of common stock 1,335 1,247
Payment of cash dividends ) )
(16,654 (15,856
Repurchase of common stock ) )
(18,792 (14,515
Payments on long-term debt (6,563 ) (4,687 )
Settlement and merchant reserve activity ) )
(23,967 (28,745
Net cash used in financing activities ) )
(MORE TO FOLLOW) Dow Jones Newswires
August 04, 2021 16:01 ET (20:01 GMT)
DJ CSG Systems International Reports Second Quarter -4-
(64,641 (62,556
Effect of exchange rate fluctuations on cash, cash equivalents and (1,835 ) (3,981 ) restricted cash
Net decrease in cash, cash equivalents and restricted cash ) )
(48,278 (40,929
Cash, cash equivalents and restricted cash, beginning of period
354,730 337,654
$ $
Cash, cash equivalents and restricted cash, end of period
306,452 296,725
Supplemental disclosures of cash flow information:
Cash paid during the period for-
$ $
Interest
6,370 7,327
Income taxes 20,540 2,865
Reconciliation of cash, cash equivalents and restricted cash:
$ $
Cash and cash equivalents
163,768 144,019
Settlement and merchant reserve assets
142,684 152,706
$ $
Total cash, cash equivalents and restricted cash
306,452 296,725 1. Beginning with the second quarter of 2021, CSG reclassified certain cash flows related to settlement and
merchant reserve assets and liabilities from cash flows from operating activities to cash flows from financing
activities within the Condensed Consolidated Statements of Cash Flows. Prior period amounts have been reclassified
to conform to the current period presentation.
EXHIBIT 1
CSG SYSTEMS INTERNATIONAL, INC.
SUPPLEMENTAL REVENUE ANALYSIS
Revenue by Significant Customers: 10% or more of Revenue
Quarter Ended Quarter Ended Quarter Ended
June 30, 2021 March 31, 2021 June 30, 2020
Amount % of Amount % of Amount % of
Revenue Revenue Revenue
$ % $ % $ %
Charter
55,102 53,382 51,364
22 21 21
% % %
Comcast
53,789 53,454 53,282
21 21 22
Revenue by Vertical
Quarter Ended Quarter Ended Quarter Ended
June 30, March 31, June 30,
2021 2021 2020
% % %
Broadband/Cable/Satellite
58 57 60
% % %
Telecommunications
18 18 18
% % %
All other
24 25 22
% % %
Total revenue
100 100 100
Revenue by Geography
Quarter Ended Quarter Ended Quarter Ended
June 30, March 31, June 30,
2021 2021 2020
% % %
Americas
85 86 87
% % %
Europe, Middle East and Africa
11 10 9
% % %
Asia Pacific
4 4 4
% % %
Total revenue
100 100 100
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 revenue, non-GAAP operating income, 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 Operating Adjusted Operating Margin
Income Percentage EPS
Transaction fees - X -
Restructuring and reorganization charges.. X X X
Executive transition costs X X X
Acquisition-related expenses: X X X
(MORE TO FOLLOW) Dow Jones Newswires
August 04, 2021 16:01 ET (20:01 GMT)
DJ CSG Systems International Reports Second Quarter -5-
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 - - X ('OID')
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 customers under CSG's payment services contracts, to third-party payment processors and
financial institutions by CSG. Because CSG controls the integrated service provided under its payment services
customer contracts, these transaction fees are presented gross, and not netted against revenue; however, other
payments companies who do not provide and/or control an integrated service present their revenue net of transaction
fees. The exclusion of these fees in calculating CSG's non-GAAP adjusted revenue provides management and investors
an additional means to use to compare CSG's current revenue 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 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. . Executive transition costs include expenses incurred related to the departure of CSG's former CEO under the terms
of his separation agreement. These costs were primarily recognized during the third and fourth quarters of 2020
(the CEO's remaining term) and were not considered reflective of CSG's recurring business operating results. 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. . 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 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
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, executive transition costs, 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 software, property and equipment.
Non-GAAP Financial Measures
Non-GAAP Adjusted Revenue:
The reconciliations of GAAP revenue to non-GAAP adjusted revenue for the indicated periods are as follows (in thousands):
Quarter Ended Six Months Ended
June 30, June 30,
2021 2020 2021 2020
$ $ $ $
GAAP revenue
255,134 240,321 508,253 485,938
Less: Transaction fees ) ) ) )
(16,655 (15,695 (33,105 (34,019
Non-GAAP adjusted $ $ $ $ revenue
238,479 224,626 475,148 451,919
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 Six Months Ended
June 30, June 30,
2021 2020 2021 2020
$ $ $ $
GAAP operating income
32,166 19,775 63,543 52,934
Restructuring and reorganization charges (1) 1,760 2,497 2,820 3,463
Executive transition costs 5 - 60 -
Acquisition-related expenses:
(MORE TO FOLLOW) Dow Jones Newswires
August 04, 2021 16:01 ET (20:01 GMT)
DJ CSG Systems International Reports Second Quarter -6-
Amortization of acquired intangible assets 2,618 3,033 4,859 6,084
Earn-out compensation ) - ) -
(2,521 (2,521
Transaction-related costs 623 73 702 126
Stock-based compensation (1)
5,138 5,255 10,533 10,180
$ $ $ $
Non-GAAP operating income
39,789 30,633 79,996 72,787
$ $ $ $
Non-GAAP adjusted revenue
238,479 224,626 475,148 451,919
Non-GAAP adjusted operating margin % % % % percentage
16.7 13.6 16.8 16.1
(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
June 30, 2021 June 30, 2020
Amounts EPS Amounts EPS
(3) (3)
$ $ $ $
GAAP net income
19,321 0.60 10,366 0.32
GAAP income tax provision (2) 8,412 3,884
GAAP income before income taxes
27,733 14,250
Restructuring and reorganization 1,760 2,497 charges (1)
Executive transition costs 5 -
Acquisition-related costs:
Amortization of acquired intangible 2,618 3,033 assets
Earn-out compensation ) -
(2,521
Transaction-related costs 623 73
Stock-based compensation (1) 5,138 5,255
Amortization of OID 784 740
Non-GAAP income before income taxes
36,140 25,848
Non-GAAP income tax provision (2) ) )
(9,757 (6,850
$ $ $ $
Non-GAAP net income
26,383 0.82 18,998 0.59
Six Months Ended Six Months Ended
June 30, 2021 June 30, 2020
Amounts EPS Amounts EPS
(3) (3)
$ $ $ $
GAAP net income
38,952 1.21 31,880 0.99
GAAP income tax provision (2)
15,363 11,046
GAAP income before income taxes
54,315 42,926
Restructuring and reorganization 2,820 3,463 charges (1)
Executive transition costs 60 -
Acquisition-related expenses:
Amortization of acquired intangible 4,859 6,084 assets
Earn-out compensation ) -
(2,521
Transaction-related costs 702 126
Stock-based compensation (1)
10,533 10,180
Amortization of OID 1,556 1,470
Non-GAAP income before income taxes
72,324 64,249
Non-GAAP income tax provision (2) ) )
(19,527 (17,026
$ $ $ $
Non-GAAP net income
52,797 1.65 47,223 1.46
(2) For the second quarter and six months ended June 30, 2021 the GAAP effective income tax rates were approximately 30% and 28%, respectively, and the non-GAAP effective income tax rates were approximately 27% for both periods. For the second quarter and six months ended June 30, 2020 the GAAP effective income tax rates were approximately 27% and 26%, respectively, and the non-GAAP effective income tax rates were approximately 27% for both periods.
(3) The outstanding diluted shares for the second quarter and six months ended June 30, 2021 were 32.0 million and 32.1 million, respectively, and for the second quarter and six months ended June 30, 2020 were 32.3 million for both periods.
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 Six Months Ended
June 30, June 30,
2021 2020 2021 2020
$ $ $ $
GAAP net income
19,321 10,366 38,952 31,880
GAAP income tax provision
8,412 3,884 15,363 11,046
Interest expense (4)
3,633 4,040 7,225 8,253
Amortization of OID 784 740
1,556 1,470
Interest and investment income and 16 745 447 285 other, net
GAAP operating income
32,166 19,775 63,543 52,934
Restructuring and reorganization charges (1) 1,760 2,497 2,820 3,463
Executive transition costs 5 - 60 -
Acquisition-related expenses:
Amortization of acquired intangible assets (5) 2,618 3,033 4,859 6,084
Earn-out compensation ) - ) -
(2,521 (2,521
Transaction-related costs 623 73 702 126
Stock-based compensation (1)
5,138 5,255 10,533 10,180
Amortization of other intangible assets (5) 3,267 3,249 6,603 6,534
Amortization of customer contract costs (5) 4,956 4,542 9,678 8,568
Depreciation
6,266 5,634 12,379 11,199
$ $ $ $
Non-GAAP adjusted EBITDA
54,278 44,058 108,656 99,088
(MORE TO FOLLOW) Dow Jones Newswires
August 04, 2021 16:01 ET (20:01 GMT)
