DJ CSG Systems International Reports Fourth Quarter 2021 Results
CSG CSG Systems International Reports Fourth Quarter 2021 Results 01-Feb-2022 / 22:05 CET/CEST
-----------------------------------------------------------------------------------------------------------------------
CSG Grows Revenue 6% and Surpasses USD1Billion in Annual Revenue in 2021
Issued Growth-Oriented 2022 Financial Guidance Targets
Boosted Dividend by 6% in '22 Representing our 9^th Straight Year of Increased Payout
CSG (NASDAQ: CSGS) today reported results for the quarter and year ended December 31, 2021.
Financial Results:
Fourth quarter 2021 financial results: . Total revenue was USD275.0 million and total non-GAAP adjusted revenue was USD257.6 million. . GAAP operating income was USD27.9 million, or 10.1% of total revenue, and non-GAAP operating income wasUSD40.2 million, or 15.6% of non-GAAP adjusted revenue. . GAAP earnings per diluted share (EPS) was USD0.54 and non-GAAP EPS was USD0.83. . Cash flows from operations were USD51.9 million, with a non-GAAP free cash flow of USD47.9 million.
Full year 2021 financial results: . Total revenue was USD1,046.5 million and non-GAAP adjusted revenue was USD979.8 million. . GAAP operating income was USD124.2 million, or 11.9% of total revenue, and non-GAAP operating income wasUSD161.7 million, or 16.5% of non-GAAP adjusted revenue. . GAAP EPS was USD2.26 and non-GAAP EPS was USD3.35. . Cash flows from operations were USD140.2 million, with non-GAAP free cash flow of USD113.7 million.
Shareholder Returns: . In November 2021, CSG declared its quarterly cash dividend of USD0.25 per share of common stock, or a totalof approximately USD8 million, to shareholders, bringing total 2021 dividends to approximately USD33 million. . In January 2022, CSG's Board of Directors approved a 6% increase in CSG's cash dividend, with quarterlypayments of USD0.265 per share of common stock to be paid in March 2022. . During the quarter and full year 2021, CSG repurchased under its stock repurchase program, approximately295,000 shares of its common stock for approximately USD16 million and approximately 732,000 shares of its commonstock for approximately USD36 million, respectively.
Business Activities: . In November, CSG extended its contract with Charter, its largest client, through December 31, 2027. . In October, CSG extended its contract with DISH through June 30, 2026. . During the year we closed three meaningful acquisitions (Kitewheel, Tango Telecom, and DGIT Systems).
'Over the past year, I have highlighted how CSG will win big in the market and consistently outperform by investing in our culture, talent, and future-ready SaaS platforms,' said Brian Shepherd, President and Chief Executive Officer of CSG. 'Our 2021 results prove that we are delivering on this commitment as we built accelerated momentum across our global business. We reported our best organic revenue growth in over a decade and crossed the USD1 billion annual revenue milestone for the first time in our history. Another highlight of the year was the renewal of our relationship with two long-term CSG customers: DISH and Charter Communications. Specifically, the expansion with Charter represents the largest deal ever signed by CSG as we become the revenue management provider of choice for all 32 million Charter subscribers across their residential and small-and-medium-sized business footprints.'
'With these wins and our continued strong sales success, we are positioned for solid top and bottom-line growth in 2022 and beyond. Looking ahead, CSG is laser focused on creating meaningful value for our customers, our employees and our shareholders, accelerating our organic revenue growth, closing good new strategic acquisitions, and diversifying into larger and faster growth industry verticals,' Shepherd added.
Financial Overview (unaudited)
(in thousands, except per share amounts and percentages):
Quarter Ended December 31, Year Ended December 31,
Percent Percent
2021 2020 Changed 2021 2020 Changed
GAAP Results:
USD USD % USD USD %
Revenue
275,025 260,487 5.6 1,046,487 990,533 5.6
% %
Operating Income 27,880 23,675 124,186 105,556
17.8 17.6
% % % %
Operating Margin Percentage
10.1 9.1 11.9 10.7
USD USD % USD USD %
EPS
0.54 0.41 31.7 2.26 1.82 24.2
Non-GAAP Results:
USD USD % USD USD %
Adjusted Revenue
257,648 243,248 5.9 979,765 922,862 6.2
%
Operating Income 40,152 42,987 (6.6 %) 161,713 154,887
4.4
% % % %
Adjusted Operating Margin Percentage
15.6 17.7 16.5 16.8
USD USD USD USD %
EPS (7.8 %)
0.83 0.90 3.35 3.12 7.4
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 fourth quarter of 2021 was USD275.0 million, a 5.6% increase when compared to revenue of USD260.5 million for the fourth quarter of 2020. Total revenue for the full year 2021 was USD1,046.5 million, a 5.6% increase when compared to revenue of USD990.5 million for the full year 2020. The increases in revenue can be primarily attributed to the continued growth of CSG's revenue management solutions, as the majority of the increase was attributed to organic growth.
GAAP operating income for the fourth quarter of 2021 was USD27.9 million, or 10.1% of total revenue, compared to USD23.7 million, or 9.1% of total revenue, for the fourth quarter of 2020. GAAP operating income for the full year 2021 was USD124.2 million, or 11.9% of total revenue, compared to USD105.6 million, or 10.7% of total revenue, for the full year 2020.
GAAP EPS for the fourth quarter of 2021 was USD0.54, as compared to USD0.41 for the fourth quarter of 2020. GAAP EPS for the full year 2021 was USD2.26, compared to USD1.82 for the full year 2020.
Non-GAAP Results: Non-GAAP adjusted revenue for the fourth quarter of 2021 was USD257.6 million, a 5.9% increase when compared to non-GAAP adjusted revenue of USD243.2 million for the fourth quarter of 2020. Total non-GAAP adjusted revenue for the full year 2021 was USD979.8 million, a 6.2% increase when compared to USD922.9 million for the full year 2020. The increases in non-GAAP adjusted revenue between periods are primarily due to the factors discussed above.
Non-GAAP operating income for the fourth quarter of 2021 was USD40.2 million, or 15.6% of total non-GAAP adjusted revenue, compared to USD43.0 million, or 17.7% of total non-GAAP adjusted revenue for the fourth quarter of 2020. Non-GAAP operating income for the full year 2021 was USD161.7 million, or 16.5% of total non-GAAP adjusted revenue, compared to USD154.9 million, or 16.8% of total non-GAAP adjusted revenue for the full year 2020.
Non-GAAP EPS for the fourth quarter of 2021 was USD0.83 compared to USD0.90 for the fourth quarter of 2020. Non-GAAP EPS for the full year 2021 was USD3.35 compared to USD3.12 for the full year 2020.
Balance Sheet and Cash Flows
Cash, cash equivalents and short-term investments as of December 31, 2021 were USD233.7 million compared to USD224.5 million as of September 30, 2021 and USD240.3 million as of December 31, 2020. CSG had net cash flows from operations for the fourth quarters ended December 31, 2021 and 2020 of USD51.9 million and USD56.9 million, respectively, and had non-GAAP free cash flow of USD47.9 million and USD51.7 million, respectively. For the year ended December 31, 2021 and 2020, CSG generated net cash flows from operations of USD140.2 million and USD173.0 million, respectively, and had non-GAAP free cash flow of USD113.7 million and USD143.6 million, respectively.
Summary of Financial Guidance
CSG's financial guidance for the full year 2022 is as follows:
GAAP Measures:
USD
Revenue
1,070 - USD1,110 million
Non-GAAP Measures:
USD
Adjusted Revenue
1,000 - USD1,033 million
Adjusted Operating Margin Percentage 16.5% - 17.0%
USD
EPS
3.44 - USD3.68
USD
Adjusted EBITDA
225 - USD236 million
USD
Free Cash Flow
115 - USD125 million
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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 csgi.com.
Conference Call
CSG will host a conference call on Tuesday, February 1, 2022 at 5:00 p.m. ET, to discuss CSG's fourth quarter and full year 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 1-888-412-4131 and use the passcode 2327393.
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
CSG is a leader in innovative customer engagement, revenue management and payments solutions that make ordinary customer experiences extraordinary. Our cloud-first architecture and customer-obsessed mindset help companies around the world launch new digital services, expand into new markets, and create dynamic experiences that capture new customers and build brand loyalty. For nearly 40 years, CSG's technologies and people have helped some of the world's most recognizable brands solve their toughest business challenges and evolve to meet the demands of today's digital economy with future-ready solutions that drive exceptional customer experiences. With 5,000 employees in over 20 countries, CSG is the trusted technology provider for leading global brands in telecommunications, retail, financial services and healthcare. Our solutions deliver real world outcomes to more than 900 customers in over 120 countries. To learn more, visit us at csgi.com and connect with us on LinkedIn and Twitter.
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 theCOVID-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, technicallyadvanced and competitive manner; . CSG's ability to deliver its solutions in a timely fashion within budget, particularly large and complexsoftware implementations; . CSG's dependency on the global telecommunications industry, and in particular, the North Americantelecommunications 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 expectedstrategic, 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 foreigncurrency 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.
For more information, contact:
John Rea, Investor Relations
(210) 687-4409
E-mail: john.rea@csgi.com
CSG SYSTEMS INTERNATIONAL, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS-UNAUDITED
(in thousands)
December December
31, 31,
2021 2020
ASSETS
Current assets:
USD USD
Cash and cash equivalents
205,635 188,699
Short-term investments 28,037 51,598
Total cash, cash equivalents and short-term investments 233,672 240,297
Settlement and merchant reserve assets 186,267 166,031
Trade accounts receivable:
Billed, net of allowance of USD4,250 and USD3,628 244,317 226,623
Unbilled 35,802 37,785
Income taxes receivable 6,414 2,167
Other current assets 41,727 41,688
Total current assets 748,199 714,591
Non-current assets:
Property and equipment, net of depreciation of USD111,244 and USD105,073 73,580 81,759
Operating lease right-of-use assets 86,034 110,756
Software, net of amortization of USD152,283 and USD139,836 29,757 26,453
Goodwill 321,330 272,322
Acquired customer contracts, net of amortization of USD114,166 and USD105,778 57,207 48,012
Customer contract costs, net of amortization of USD32,410 and USD39,893 46,618 47,238
Deferred income taxes 8,584 10,205
Other assets 15,840 20,664
Total non-current assets 638,950 617,409
USD USD
Total assets
1,387,149 1,332,000
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
USD USD
Current portion of long-term debt
237,500 14,063
Operating lease liabilities 23,270 22,651
Customer deposits 43,546 39,992
Trade accounts payable 35,397 29,834
Accrued employee compensation 91,115 86,289
Settlement and merchant reserve liabilities 185,276 165,064
Deferred revenue 53,748 52,357
Income taxes payable 398 6,627
Other current liabilities 24,852 19,383
Total current liabilities 695,102 436,260
Non-current liabilities:
Long-term debt, net of unamortized discounts of USD3,406 and USD5,346 137,219 337,154
Operating lease liabilities 70,068 95,926
Deferred revenue 19,599 17,275
Income taxes payable 4,058 2,436
Deferred income taxes 7,752 5,109
Other non-current liabilities 13,107 15,445
Total non-current liabilities 251,803 473,345
Total liabilities 946,905 909,605
Stockholders' equity:
Preferred stock, par value USD.01 per share; 10,000 shares authorized; zero shares issued - -
and outstanding
Common stock, par value USD.01 per share; 100,000 shares authorized; 32,495 and 32,713 705 700
shares outstanding
Additional paid-in capital 488,303 470,557
Treasury stock, at cost; 36,713 and 35,980 shares (930,106 ) (894,126 )
Accumulated other comprehensive income (loss):
Unrealized gains on short-term investments, net of tax (6 ) 13
Cumulative foreign currency translation adjustments (38,347 ) (31,151 )
Accumulated earnings 916,060 876,402
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Total CSG stockholders' equity 436,609 422,395
Noncontrolling interest 3,635 -
Total stockholders' equity 440,244 422,395
USD USD
Total liabilities and stockholders' equity
1,387,149 1,332,000
CSG SYSTEMS INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME-UNAUDITED
(in thousands, except per share amounts)
Quarter Ended Year Ended
December 31, December 31, December 31, December 31,
2021 2020 2021 2020
USD USD USD USD
Revenue
275,025 260,487 1,046,487 990,533
Cost of revenue (exclusive of depreciation, shown 142,026 135,165 543,211 535,597
separately below)
Other operating expenses:
Research and development 35,341 32,822 134,691 122,847
Selling, general and administrative 61,706 61,864 214,694 198,279
Depreciation 6,231 5,910 24,835 22,926
Restructuring and reorganization charges 1,841 1,051 4,870 5,328
Total operating expenses 247,145 236,812 922,301 884,977
Operating income 27,880 23,675 124,186 105,556
Other income (expense):
Interest expense (3,708 ) (3,606 ) (14,569 ) (15,500 )
Amortization of original issue discount (671 ) (762 ) (3,021 ) (2,983 )
Interest and investment income, net 79 158 365 1,244
Other, net 515 223 (6,015 ) (2,961 )
Total other (3,785 ) (3,987 ) (23,240 ) (20,200 )
Income before income taxes 24,095 19,688 100,946 85,356
Income tax provision (6,846 ) (6,423 ) (28,615 ) (26,645 )
USD USD USD USD
Net income
17,249 13,265 72,331 58,711
Weighted-average shares outstanding:
Basic 31,628 31,832 31,776 32,010
Diluted 31,939 32,225 32,010 32,278
Earnings per common share:
USD USD USD USD
Basic
0.55 0.42 2.28 1.83
Diluted 0.54 0.41 2.26 1.82
CSG SYSTEMS INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS-UNAUDITED
(in thousands)
Year Ended
December 31, December 31,
2021 2020
Cash flows from operating activities^(1):
USD USD
Net income
72,331 58,711
Adjustments to reconcile net income to net cash provided by operating
activities-
Depreciation 24,835 22,926
Amortization 47,966 43,947
Amortization of original issue discount 3,021 2,983
Asset impairment 1,270 11,030
(Gain)/loss on short-term investments and other (294 ) (123 )
Loss on extinguishment of debt 132 -
Loss on acquisition of controlling interest 6,180 -
Deferred income taxes 2,388 (1,033 )
Stock-based compensation 21,400 25,237
Subtotal 179,229 163,678
Changes in operating assets and liabilities, net of acquired amounts:
Trade accounts receivable, net (10,702 ) 14,659
Other current and non-current assets and liabilities (1,527 ) (10,715 )
Income taxes payable/receivable (10,174 ) 5,405
Trade accounts payable and accrued liabilities (15,607 ) (5,752 )
Deferred revenue (996 ) 5,718
Net cash provided by operating activities 140,223 172,993
Cash flows from investing activities:
Purchases of software, property and equipment (26,562 ) (29,397 )
Purchases of short-term investments (66,970 ) (81,824 )
Proceeds from sale/maturity of short-term investments 90,452 56,454
Acquisition of and investments in business, net of cash acquired (63,626 ) (11,491 )
Net cash used in investing activities (66,706 ) (66,258 )
Cash flows from financing activities^(1):
Proceeds from issuance of common stock 2,610 2,523
Payment of cash dividends (32,587 ) (31,056 )
Repurchase of common stock (42,253 ) (38,123 )
Proceeds from long-term debt 150,000 -
Payments on long-term debt (128,438 ) (10,313 )
Payments of deferred financing costs (3,000 ) -
Settlement and merchant reserve activity 20,277 (15,144 )
Net cash used in financing activities (33,391 ) (92,113 )
Effect of exchange rate fluctuations on cash, cash equivalents and restricted (2,954 ) 2,454
cash
Net increase in cash, cash equivalents and restricted cash 37,172 17,076
Cash, cash equivalents and restricted cash, beginning of period 354,730 337,654
USD USD
Cash, cash equivalents and restricted cash, end of period
391,902 354,730
Supplemental disclosures of cash flow information:
Cash paid during the period for-
USD USD
Interest
12,882 13,681
Income taxes 36,690 22,431
Reconciliation of cash, cash equivalents and restricted cash:
USD USD
Cash and cash equivalents
205,635 188,699
Settlement and merchant reserve assets 186,267 166,031
USD USD
Total cash, cash equivalents and restricted cash
391,902 354,730 1. Beginning with the second quarter of 2021, CSG reclassified certain cash flows related to settlement andmerchant reserve assets and liabilities from cash flows from operating activities to cash flows from financingactivities within the Condensed Consolidated Statements of Cash Flows. Prior period amounts have been reclassifiedto conform to the current period presentation.
EXHIBIT 1
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CSG SYSTEMS INTERNATIONAL, INC.
SUPPLEMENTAL REVENUE ANALYSIS
Revenue by Significant Customers: 10% or more of Revenue
Quarter Ended Quarter Ended
December 31, 2021 December 31, 2020
Amount % of Amount % of
Revenue Revenue
USD % USD %
Charter
57,332 21 54,121 21
% %
Comcast. 54,861 54,845
20 21
Year Ended Year Ended
December 31, 2021 December 31, 2020
Amount % of Amount % of
Revenue Revenue
USD % USD %
Charter
221,148 21 209,400 21
% %
Comcast 215,944 213,290
21 22
Revenue by Vertical
Quarter Quarter
Ended Ended
December 31, December 31,
2021 2020
% %
Broadband/Cable/Satellite
55 56
% %
Telecommunications
20 22
% %
All other
25 22
% %
Total revenue
100 100
Year Ended Year Ended
December December 31,
31,
2021 2020
% %
Broadband/Cable/Satellite
57 58
% %
Telecommunications
19 19
% %
All other
24 23
% %
Total revenue
100 100
Revenue by Geography
Quarter Quarter
Ended Ended
December 31, December 31,
2021 2020
% %
Americas
83 84
% %
Europe, Middle East and Africa
13 12
% %
Asia Pacific
4 4
% %
Total revenue
100 100
Year Ended Year Ended
December December
31, 31,
2021 2020
% %
Americas
85 86
% %
Europe, Middle East and Africa
11 10
% %
Asia Pacific
4 4
% %
Total revenue
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 generatingcapabilities; . Consistency and comparability with CSG's historical financial results; and . Comparability to similar companies, many of which present similar non-GAAP financial measures toinvestors.
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 othercompanies calculate similar non-GAAP financial measures; . Non-GAAP financial measures do not include all items of income and expense that affect CSG's operationsand 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 arerecurring 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 doimpact 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 Operating Adjusted Operating Margin EPS
Revenue Income Percentage
Transaction fees X - X -
Restructuring and reorganization charges - X X X
Executive transition costs - 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 - - - X
('OID')
Gain (loss) on extinguishment of debt - - - X
Gain (loss) on acquisitions or dispositions - - - 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, inconjunction with the delivery of service to customers under CSG's payment services contracts, to third-partypayment processors and financial institutions by CSG. Because CSG controls the integrated service provided underits payment services customer contracts, these transaction fees are presented gross, and not netted againstrevenue; however, other payments companies who do not provide and/or control an integrated service present theirrevenue net of transaction fees. The exclusion of these fees in calculating CSG's non-GAAP adjusted revenueprovides management and investors an additional means to use to compare CSG's current revenue with historical andfuture periods, as well as with other payments companies. . Restructuring and reorganization charges are expenses that result from cost reduction initiatives and/orsignificant changes to CSG's business, to include such things as involuntary employee terminations, changes inmanagement structure, divestitures of businesses, facility consolidations and
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abandonments, and fundamentalreorganizations impacting operational focus and direction. These charges are not considered reflective of CSG'srecurring business operating results. The exclusion of these items in calculating CSG's non-GAAP financial measuresallows management and investors an additional means to compare CSG's current financial results with historical andfuture periods. . Executive transition costs include expenses incurred related to a departure of a CSG executive officerunder the terms of the related separation agreement. These types of costs are not considered reflective of CSG'srecurring business operating results. The exclusion of these costs in calculating CSG's non-GAAP financial measuresallows management and investors an additional means to compare CSG's current financial results with historical andfuture 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 ofacquisition-related expenses can vary significantly between periods based on the number and size of acquisitionactivities, previously acquired intangible assets becoming fully amortized, and ultimate realization of earn-outcompensation. In addition, the timing of these expenses may not directly correlate with underlying performance ofthe CSG's operations. Therefore, the exclusion of acquisition-related expenses in calculating CSG's non-GAAPfinancial measures allows management and investors an additional means to compare CSG's current financial resultswith historical and future periods. . Stock-based compensation results from CSG's issuance of equity awards to its employees under incentivecompensation programs. The amount of this incentive compensation in any period is not generally linked to the levelof performance by employees or CSG. The exclusion of these expenses in calculating CSG's non-GAAP financialmeasures allows management and investors an additional means to evaluate the non-cash expense related tocompensation included in CSG's results of operations, and therefore, the exclusion of this item allows investors tofurther 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 atissuance to the equity component of the instrument, as required under current accounting rules. This OID is thenamortized to interest expense over the life of the respective convertible debt instrument. The interest expenserelated to the amortization of the OID is a non-cash expense, and therefore, the exclusion of this item allowsinvestors to further evaluate the cash interest costs of CSG's convertible notes for cash flow, liquidity, and debtservice purposes. . Gains and losses related to the extinguishment of debt are a result of the refinancing of CSG's creditagreement and/or repurchase of CSG's convertible notes. These activities are not considered reflective of CSG'srecurring business operating results. Any resulting gain or loss is generally non-cash income or expense, andtherefore, the exclusion of these items allows investors to further evaluate the cash impact of these activitiesfor cash flow and liquidity purposes. In addition, the exclusion of these gains and losses in calculating CSG'snon-GAAP EPS allows management and investors an additional means to compare CSG's current operating results withhistorical and future periods. . Gains or losses related to the acquisition or disposition of certain of CSG's business activities are notconsidered reflective of CSG's recurring business operating results. Any resulting gain or loss is generallynon-cash income or expense, and therefore, the exclusion of these items allows investors to further evaluate thecash impact of these activities for cash flow and liquidity purposes. In addition, the exclusion of these gains andlosses in calculating CSG's non-GAAP EPS allows management and investors an additional means to compare CSG'scurrent operating results with historical and future periods. . Unusual items within CSG's quarterly and/or annual income tax expense can occur from such things asincome tax accounting timing matters, income taxes related to unusual events, or as a result of different treatmentof certain items for book accounting and income tax purposes. Consideration of such items in calculating CSG'snon-GAAP financial measures allows management and investors an additional means to compare CSG's current financialresults 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, gains and losses related to the extinguishment of debt, and gains and losses on acquisitions or dispositions, 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 Year Ended
December 31, December 31,
2021 2020 2021 2020
USD USD USD USD
GAAP revenue
275,025 260,487 1,046,487 990,533
Less: Transaction fees (17,377 ) (17,239 ) (66,722 ) (67,671 )
USD USD USD USD
Non-GAAP adjusted revenue
257,648 243,248 979,765 922,862
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,
2021 2020 2021 2020
USD USD USD USD
GAAP operating income
27,880 23,675 124,186 105,556
Restructuring and reorganization charges (1) 1,841 1,051 4,870 5,328
Executive transition costs (1) 443 11,226 503 13,012
Acquisition-related expenses:
Amortization of acquired intangible assets 3,573 2,681 11,645 11,816
Earn-out compensation - - (2,521 ) -
Transaction-related costs 313 (728 ) 1,450 (587 )
Stock-based compensation (1) 6,102 5,082 21,580 19,762
USD USD USD USD
Non-GAAP operating income
40,152 42,987 161,713 154,887
USD USD USD USD
Non-GAAP adjusted revenue
257,648 243,248 979,765 922,862
% % % %
Non-GAAP adjusted operating margin percentage
15.6 17.7 16.5 16.8
(1) Stock-based compensation included in the tables above and following excludes amounts that have been recorded in restructuring and reorganization charges and executive transition costs.
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, 2021 December 31, 2020
Amounts EPS (4) Amounts EPS (4)
USD USD USD USD
GAAP net income
17,249 0.54 13,265 0.41
GAAP income tax provision (3) 6,846 6,423
GAAP income before income taxes 24,095 19,688
Restructuring and reorganization charges (1) 1,841 1,051
Executive transition costs (1). 443 11,226
Acquisition-related costs:
Amortization of acquired intangible assets 3,573 2,681
Transaction-related costs 313 (728 )
(MORE TO FOLLOW) Dow Jones Newswires
February 01, 2022 16:05 ET (21:05 GMT)
DJ CSG Systems International Reports Fourth Quarter -6-
Stock-based compensation (1) 6,102 5,082
Amortization of OID 671 762
Non-GAAP income before income taxes 37,038 39,762
Non-GAAP income tax provision (3) (10,650 ) (10,864 )
USD USD USD USD
Non-GAAP net income
26,388 0.83 28,898 0.90
Year Ended Year Ended
December 31, 2021 December 31, 2020
Amounts EPS (4) Amounts EPS (4)
USD USD USD USD
GAAP net income
72,331 2.26 58,711 1.82
GAAP income tax provision (3) 28,615 26,645
GAAP income before income taxes 100,946 85,356
Restructuring and reorganization charges (1) 4,870 5,328
Executive transition costs (1) 503 13,012
Acquisition-related expenses:
Amortization of acquired intangible assets 11,645 11,816
Earn-out compensation (2,521 ) -
Transaction-related costs 1,450 (587 )
Stock-based compensation (1) 21,580 19,762
Amortization of OID 3,021 2,983
Loss on acquisition of controlling interest (2) 6,180 -
Non-GAAP income before income taxes 147,674 137,670
Non-GAAP income tax provision (3) (40,522 ) (36,978 )
USD USD USD USD
Non-GAAP net income
107,152 3.35 100,692 3.12
(2) During the third quarter of 2021, CSG acquired a controlling interest in a mobile money fintech payment company that it previously held only an equity interest in. Upon acquisition of the controlling interest, CSG recognized a non-cash loss in other income (expense) related to the fair value remeasurement of the pre-existing equity investment.
(3) For the fourth quarter and year ended December 31, 2021 the GAAP effective income tax rate was approximately 28% for both periods, and the non-GAAP effective income tax rate was approximately 29% and 27%, respectively. For the fourth quarter and year ended December 31, 2020 the GAAP effective income tax rates were approximately 33% and 31%, respectively, and the non-GAAP effective income tax rate was approximately 27% for both periods.
(4) The outstanding diluted shares for the fourth quarter and year ended December 31, 2021 were 31.9 million and 32.0 million, respectively, and for the fourth quarter and year ended December 31, 2020 were 32.2 million and 32.3 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,
2021 2020 2021 2020
USD USD USD USD
GAAP net income
17,249 13,265 72,331 58,711
GAAP income tax provision 6,846 6,423 28,615 26,645
Interest expense (5) 3,708 3,606 14,569 15,500
Amortization of OID 671 762 3,021 2,983
Interest and investment income and other, net (7) (594 ) (381 ) 5,650 1,717
GAAP operating income 27,880 23,675 124,186 105,556
Restructuring and reorganization charges (1) 1,841 1,051 4,870 5,328
Executive transition costs (1) 443 11,226 503 13,012
Acquisition-related expenses:
Amortization of acquired intangible assets (6) 3,573 2,681 11,645 11,816
Earn-out compensation - - (2,521 ) -
Transaction-related costs 313 (728 ) 1,450 (587 )
Stock-based compensation (1) 6,102 5,082 21,580 19,762
Amortization of other intangible assets (6) 3,383 3,400 13,316 13,216
Amortization of customer contract costs (6) 6,247 4,432 21,218 17,190
Depreciation 6,231 5,910 24,835 22,926
USD USD USD USD
Non-GAAP adjusted EBITDA
56,013 56,729 221,082 208,219
% % % %
Non-GAAP adjusted EBITDA as a percentage of non-GAAP adjusted revenue
21.7 23.3 22.6 22.6
(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,
2021 2020 2021 2020
USD USD USD USD
Amortization of acquired intangible assets
3,573 2,681 11,645 11,816
Amortization of other intangible assets 3,383 3,400 13,316 13,216
Amortization of customer contract costs 6,247 4,432 21,218 17,190
Amortization of deferred financing costs 449 436 1,787 1,725
USD USD USD USD
Total amortization
13,652 10,949 47,966 43,947
(7) Included in interest and investment income and other, net for the year ended December 31, 2021, is the USD6.2 million loss on acquisition of controlling interest, discussed above.
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,
2021 2020 2021 2020
USD USD USD USD
Cash flows from operating activities
51,914 56,864 140,223 172,993
Purchases of software, property and equipment (4,031 ) (5,196 ) (26,562 ) (29,397 )
USD USD USD USD
Non-GAAP free cash flow
47,883 51,668 113,661 143,596
Non-GAAP Financial Measures - 2022 Financial Guidance
Non-GAAP Adjusted Revenue:
The reconciliation of GAAP revenue to non-GAAP adjusted revenue, as included in CSG's 2022 full year preliminary financial outlook, is as follows:
2022 Guidance Range
Low Range High Range
USD USD
GAAP revenue
1,070,000 1,110,000
Less: Transaction fees (70,000 ) (77,000 )
USD USD
Non-GAAP adjusted revenue
1,000,000 1,033,000
Non-GAAP Operating Income:
(MORE TO FOLLOW) Dow Jones Newswires
February 01, 2022 16:05 ET (21:05 GMT)
DJ CSG Systems International Reports Fourth Quarter -7-
The reconciliation of GAAP operating income to non-GAAP operating income, as included in CSG's 2022 full year financial guidance, is as follows (in thousands, except percentages):
2022 Guidance Range
Low Range High
Range
Operating Income
USD USD
GAAP operating income
121,200 131,800
Restructuring and reorganization charges 1,400 1,400
Executive transition costs 1,300 1,300
Acquisition-related expenses:
Amortization of acquired intangible assets 11,000 11,000
Stock-based compensation 30,100 30,100
USD USD
Non-GAAP operating income
165,000 175,600
Operating Margin Percentage
USD USD
Non-GAAP adjusted revenue
1,000,000 1,033,000
% %
Non-GAAP adjusted operating margin percentage
16.5 17.0
Non-GAAP EPS:
The reconciliation of GAAP EPS to non-GAAP EPS as included in CSG's 2022 full year financial guidance is as follows (in thousands, except per share amounts):
2022 Guidance Range
Low Range High Range
Amounts EPS (9) Amounts EPS (9)
USD USD USD USD
GAAP net income
78,200 2.44 85,900 2.68
GAAP income tax provision (8) 29,700 32,600
GAAP income before income taxes 107,900 118,500
Restructuring and reorganization charges 1,400 1,400
Executive transition costs 1,300 1,300
Acquisition-related expenses:
Amortization of acquired intangible assets 11,000 11,000
Stock-based compensation 30,100 30,100
Non-GAAP income before income taxes 151,700 162,300
Non-GAAP income tax provision (8) (41,600 ) (44,500 )
USD USD USD USD
Non-GAAP net income
110,100 3.44 117,800 3.68
(8) For 2022, the estimated effective income tax rate for GAAP and non-GAAP purposes is expected to be 27.5% and 27.4%, respectively.
(9) 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 2022 full year financial guidance (in thousands, except percentages):
2022 Guidance Range
Low Range High Range
USD USD
GAAP net income
78,200 85,900
GAAP income tax provision (6) 29,700 32,600
Interest expense 13,500 13,500
Interest and investment income and other, net (200 ) (200 )
GAAP operating income 121,200 131,800
Restructuring and reorganization charges 1,400 1,400
Executive transition costs 1,300 1,300
Acquisition-related expenses:
Amortization of acquired intangible assets 11,000 11,000
Stock-based compensation. 30,100 30,100
Amortization of other intangible assets 9,900 9,900
Amortization of client contract costs 19,200 19,200
Depreciation 31,100 31,100
USD USD
Non-GAAP adjusted EBITDA
225,200 235,800
% %
Non-GAAP adjusted EBITDA as a percentage of non-GAAP adjusted revenue
22.5 22.8
Non-GAAP Free Cash Flow:
CSG's calculation of non-GAAP free cash flow and the reconciliation of CSG's non-GAAP free cash flow measure to cash flows from operating activities is provided below for the indicated period (in thousands):
2022 Guidance Range
Low Range High Range
USD USD
Cash flows from operating activities
150,000 170,000
Purchases of software, property and equipment (35,000 ) (45,000 )
USD USD
Non-GAAP free cash flow
115,000 125,000 Contact Details
CSG
John Rea, Investor Relations
+1 210-687-4409
john.rea@csgi.com Company Website
https://www.csgi.com News Source: News Direct
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(END) Dow Jones Newswires
February 01, 2022 16:05 ET (21:05 GMT)
