DJ CSG Systems International Reports First Quarter 2022 Results
CSG CSG Systems International Reports First Quarter 2022 Results 04-May-2022 / 22:01 CET/CEST
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Confirming All 2022 Financial Guidance Targets
Delivered 4.5% YoY Revenue Growth and 4.9% YoY Non-GAAP EPS Growth in Q1
Launched 5G-Ready, SaaS-Based CSG Encompass for Global Telecom Customers
CSG (NASDAQ: CSGS) today reported results for the quarter ended March 31, 2022.
Financial Results:
First quarter 2022 financial results: . Total revenue was USD264.4 million and total non-GAAP adjusted revenue was USD246.4 million. . GAAP operating income was USD16.4 million, or 6.2% of total revenue, and non-GAAP operating income was USD40.2million, or 16.3% of non-GAAP adjusted revenue. . GAAP earnings per diluted share (EPS) was USD0.19 and non-GAAP EPS was USD0.86. . Cash flows used in operations were (USD5.5) million, with a non-GAAP free cash flow deficit of (USD15.9) million.
Shareholder Returns: . CSG declared its quarterly cash dividend of USD0.265 per share of common stock, or a total of approximatelyUSD9 million, to shareholders. . During the first quarter of 2022, CSG repurchased under its stock repurchase program, approximately266,000 shares of its common stock for approximately USD16 million.
"CSG continued to build off our excellent 2021 momentum by delivering 4.5% year-over-year revenue growth and 4.9% year-over-year non-GAAP EPS growth in Q1, despite the discounts related to our Charter Communications and DISH contract renewals," said Brian Shepherd, President and Chief Executive Officer of CSG. "These good first quarter results prove that our strategy is paying dividends as we continue to deliver for our customers. As a result, we are pleased to confirm all 2022 financial guidance targets. Looking ahead, we remain well positioned to lengthen and strengthen our relationships with existing customers, organically grow our revenue, close good value-adding strategic acquisitions, and diversify into faster growth industry verticals."
Financial Overview (unaudited)
(in thousands, except per share amounts and percentages):
Quarter Ended March 31,
Percent
2022 2021 Changed
GAAP Results:
USD USD %
Revenue
264,400 253,119 4.5
Operating Income 16,415 31,377 (47.7 %)
% %
Operating Margin Percentage
6.2 12.4
USD USD
EPS (68.9 %)
0.19 0.61
Non-GAAP Results:
USD USD %
Adjusted Revenue
246,362 236,669 4.1
Operating Income 40,186 40,207 (0.1 %)
% %
Adjusted Operating Margin Percentage
16.3 17.0
USD USD %
EPS
0.86 0.82 4.9
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 first quarter of 2022 was USD264.4 million, a 4.5% increase when compared to revenue of USD253.1 million for the first quarter of 2021. The increase in revenue can be primarily attributed to the continued growth of CSG's revenue management solutions, as approximately two-thirds of the increase was attributed to organic growth.
GAAP operating income for the first quarter of 2022 was USD16.4 million, or 6.2% of total revenue, compared to USD31.4 million, or 12.4% of total revenue, for the first quarter of 2021. The decrease in operating income is mainly a result of a USD12 million increase in restructuring and reorganization charges related primarily to real estate restructurings in the first quarter of 2022 as CSG rationalizes its real estate footprint to reflect a flexible work approach.
GAAP EPS for the first quarter of 2022 was USD0.19, as compared to USD0.61 for the first quarter of 2021. The decrease in GAAP EPS can be mainly attributed to the increase restructuring and reorganization charges, discussed above, and a USD7.5 million loss incurred on a derivative liability upon conversion of our 2016 Convertible Notes, discussed below.
Non-GAAP Results: Non-GAAP adjusted revenue for the first quarter of 2022 was USD246.4 million, a 4.1% increase when compared to non-GAAP adjusted revenue of USD236.7 million for the first quarter of 2021. The increase in non-GAAP adjusted revenue between periods is due to the factors discussed above.
Non-GAAP operating income for the first quarter of 2022 was USD40.2 million, or 16.3% of total non-GAAP adjusted revenue, compared to USD40.2 million, or 17.0% of total non-GAAP adjusted revenue for the first quarter of 2021.
Non-GAAP EPS for the first quarter of 2022 was USD0.86 compared to USD0.82 for the first quarter of 2021.
Balance Sheet and Cash Flows
Cash, cash equivalents and short-term investments as of March 31, 2022 were USD187.6 million compared to USD233.7 million as of December 31, 2021. CSG had net cash flows used in operations for the first quarters ended March 31, 2022 and 2021 of (USD5.5) million and (USD2.2) million, respectively, and had non-GAAP free cash flow deficits of (USD15.9) million and (USD10.5) million, respectively. Cash flows for the first quarters of 2022 and 2021 were negatively impacted by the payment of year-end accrued employee incentive compensation.
During the first quarter of 2022, CSG borrowed USD245 million on its 2021 Revolving Credit Facility to settle the 2016 Convertible Notes for approximately USD242 million in cash. As a result of the conversions of the Notes in March 2022, CSG recognized a USD7.5 million loss on a derivative liability related to the change in CSG's stock price over the observation period prior to settlement.
Summary of Financial Guidance
CSG is reaffirming its financial guidance for the full year 2022, 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
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 Wednesday, May 4, 2022 at 5:00 p.m. ET, to discuss CSG's first quarter results for 2022. 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 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 over 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 derives approximately forty percent of its revenue from its two largest customers; . Fluctuations in credit market conditions, general global economic and political conditions, and foreigncurrency exchange rates; . CSG's ability to maintain a reliable, secure computing environment; . 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 conduct business in the international marketplace; . CSG's ability to comply with applicable U.S. and International laws and regulations; and . CSG's business may be disrupted, and its results of operations and cash flows adversely affected by theCOVID-19 pandemic.
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)
March 31, December
31,
2022 2021
ASSETS
Current assets:
USD USD
Cash and cash equivalents
181,457 205,635
Short-term investments 6,133 28,037
Total cash, cash equivalents and short-term investments 187,590 233,672
Settlement and merchant reserve assets 163,145 186,267
Trade accounts receivable:
Billed, net of allowance of USD4,924 and USD4,250 238,368 244,317
Unbilled 42,379 35,802
Income taxes receivable 8,617 6,414
Other current assets 46,676 41,727
Total current assets 686,775 748,199
Non-current assets:
Property and equipment, net of depreciation of USD114,393 and USD111,244 70,803 73,580
Operating lease right-of-use assets 71,850 86,034
Software, net of amortization of USD156,490 and USD152,283 29,234 29,757
Goodwill 319,034 321,330
Acquired customer contracts, net of amortization of USD115,726 and USD114,166 54,480 57,207
Customer contract costs, net of amortization of USD35,860 and USD32,410 47,025 46,618
Deferred income taxes 8,755 8,584
Other assets 15,378 15,840
Total non-current assets 616,559 638,950
USD USD
Total assets
1,303,334 1,387,149
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
USD USD
Current portion of long-term debt
252,500 237,500
Operating lease liabilities 22,832 23,270
Customer deposits 40,324 43,546
Trade accounts payable 35,193 35,397
Accrued employee compensation 61,516 91,115
Settlement and merchant reserve liabilities 161,782 185,276
Deferred revenue 51,990 53,748
Income taxes payable 800 398
Other current liabilities 19,940 24,852
Total current liabilities 646,877 695,102
Non-current liabilities:
Long-term debt, net of unamortized discounts of USD3,218 and USD3,406 135,532 137,219
Operating lease liabilities 64,750 70,068
Deferred revenue 16,156 19,599
Income taxes payable 4,148 4,058
Deferred income taxes 7,729 7,752
Other non-current liabilities 13,970 13,107
Total non-current liabilities 242,285 251,803
Total liabilities 889,162 946,905
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; 32,560 and 32,495 shares 709 705
outstanding
Additional paid-in capital 472,078 488,303
Treasury stock, at cost; 36,979 and 36,713 shares (946,102 ) (930,106 )
Accumulated other comprehensive income (loss):
Unrealized gains on short-term investments, net of tax (8 ) (6 )
Cumulative foreign currency translation adjustments (39,529 ) (38,347 )
Accumulated earnings 923,389 916,060
Total CSG stockholders' equity 410,537 436,609
Noncontrolling interest 3,635 3,635
Total stockholders' equity 414,172 440,244
USD USD
Total liabilities and stockholders' equity
1,303,334 1,387,149
CSG SYSTEMS INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME-UNAUDITED
(in thousands, except per share amounts)
Quarter Ended
March 31, March 31,
2022 2021
USD USD
Revenue
264,400 253,119
Cost of revenue (exclusive of depreciation, shown separately below) 138,418 133,542
Other operating expenses:
Research and development 32,981 32,212
Selling, general and administrative 57,342 48,815
Depreciation 6,138 6,113
Restructuring and reorganization charges 13,106 1,060
Total operating expenses 247,985 221,742
Operating income 16,415 31,377
Other income (expense):
Interest expense (3,272 ) (3,592 )
Amortization of original issue discount - (772 )
Interest and investment income, net 130 124
Loss on derivative liability upon debt conversion (7,456 ) -
Other, net 812 (555 )
Total other (9,786 ) (4,795 )
Income before income taxes 6,629 26,582
Income tax provision (516 ) (6,951 )
USD USD
Net income
6,113 19,631
Weighted-average shares outstanding:
Basic 31,416 31,844
Diluted 31,810 32,146
Earnings per common share:
USD USD
Basic
0.19 0.62
Diluted 0.19 0.61
CSG SYSTEMS INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS-UNAUDITED
(in thousands)
Quarter Ended
March 31, March 31,
2022 2021
Cash flows from operating activities:
USD USD
Net income
6,113 19,631
Adjustments to reconcile net income to net cash provided by operating activities-
Depreciation 6,138 6,113
Amortization 13,870 10,737
Amortization of original issue discount - 772
Asset impairment 10,705 102
Loss on short-term investments and other 15 15
Loss on derivative liability upon debt conversion 7,456 -
Deferred income taxes (55 ) 6,508
Stock-based compensation 5,581 5,395
Subtotal 49,823 49,273
Changes in operating assets and liabilities, net of acquired amounts:
Trade accounts receivable, net 46 (23,874 )
Other current and non-current assets and liabilities (6,069 ) (414 )
Income taxes payable/receivable (1,735 ) (1,022 )
Trade accounts payable and accrued liabilities (42,550 ) (28,101 )
Deferred revenue (5,064 ) 1,914
Net cash used in operating activities (5,549 ) (2,224 )
Cash flows from investing activities:
Purchases of software, property and equipment (10,375 ) (8,239 )
Purchases of short-term investments - (32,304 )
Proceeds from sale/maturity of short-term investments 21,887 29,340
Acquisition of and investments in business, net of cash acquired - (648 )
Net cash provided by (used in) investing activities 11,512 (11,851 )
Cash flows from financing activities:
Proceeds from issuance of common stock 650 619
Payment of cash dividends (8,885 ) (8,635 )
Repurchase of common stock (23,660 ) (11,738 )
Proceeds from long-term debt 245,000 -
Payments on long-term debt (244,176 ) (2,813 )
Settlement and merchant reserve activity (23,543 ) (41,492 )
Net cash used in financing activities (54,614 ) (64,059 )
Effect of exchange rate fluctuations on cash, cash equivalents and restricted cash 1,351 (851 )
Net decrease in cash, cash equivalents and restricted cash (47,300 ) (78,985 )
Cash, cash equivalents and restricted cash, beginning of period 391,902 354,730
USD USD
Cash, cash equivalents and restricted cash, end of period
344,602 275,745
Supplemental disclosures of cash flow information:
Cash paid during the period for-
USD USD
Interest
5,876 5,661
Income taxes 2,230 1,468
Reconciliation of cash, cash equivalents and restricted cash:
USD USD
Cash and cash equivalents
181,457 150,609
Settlement and merchant reserve assets 163,145 125,136
USD USD
Total cash, cash equivalents and restricted cash
344,602 275,745
(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
March 31, 2022 December 31, 2021 March 31, 2021
Amount % of Revenue Amount % of Revenue Amount % of Revenue
USD % USD % USD %
Comcast
52,524 20 54,861 20 53,454 21
% % %
Charter 52,069 57,332 53,382
20 21 21
Revenue by Vertical
Quarter Ended Quarter Ended Quarter Ended
March 31, December 31, March 31,
2022 2021 2021
% % %
Broadband/Cable/Satellite
54 55 57
% % %
Telecommunications
19 20 18
% % %
All other
27 25 25
% % %
Total revenue
100 100 100
Revenue by Geography
Quarter Ended Quarter Ended Quarter Ended
March 31, December 31, March 31,
2022 2021 2021
% % %
Americas
84 83 86
% % %
Europe, Middle East and Africa
12 13 10
% % %
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 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 debt extinguishment/ - - - X
conversion
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 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/conversion of debt can be as a result of the refinancingof CSG's credit agreement and/or repurchase, conversion, or settlement of CSG's convertible notes. Theseactivities, to include any derivative activity related to debt conversions, 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 March 31,
2022 2021
USD USD
GAAP revenue
264,400 253,119
Less: Transaction fees (18,038 ) (16,450 )
USD USD
Non-GAAP adjusted revenue
246,362 236,669
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 March 31,
2022 2021
USD USD
GAAP operating income
16,415 31,377
Restructuring and reorganization charges (1) 13,106 1,060
Executive transition costs 1,275 55
Acquisition-related expenses:
Amortization of acquired intangible assets 3,656 2,241
Transaction-related costs 13 79
Stock-based compensation (1) 5,721 5,395
USD USD
Non-GAAP operating income
40,186 40,207
USD USD
Non-GAAP adjusted revenue
246,362 236,669
% %
Non-GAAP adjusted operating margin percentage
16.3 17.0
(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
March 31, 2022 March 31, 2021
Amounts EPS (3) Amounts EPS (3)
USD USD USD USD
GAAP net income
6,113 0.19 19,631 0.61
GAAP income tax provision (2) 516 6,951
GAAP income before income taxes 6,629 26,582
Restructuring and reorganization charges (1) 13,106 1,060
Executive transition costs 1,275 55
Acquisition-related costs:
Amortization of acquired intangible assets 3,656 2,241
Transaction-related costs 13 79
Stock-based compensation (1) 5,721 5,395
Amortization of OID - 772
Loss on debt extinguishment/conversion 7,456 -
Non-GAAP income before income taxes 37,856 36,184
Non-GAAP income tax provision (2) (10,410 ) (9,770 )
USD USD USD USD
Non-GAAP net income
27,446 0.86 26,414 0.82
(2) For the quarters ended March 31, 2022 and 2021 the GAAP effective income tax rates were approximately 8% and 26%, respectively, and the non-GAAP effective income tax rates were approximately 27.5% and 27%, respectively. The first quarter of 2022 GAAP effective income tax rate was impacted by the combination of lower net income and a discrete tax benefit related to the vesting of equity-awards during the quarter.
(3) The outstanding diluted shares for the quarters ended March 31, 2022 and 2021 were 31.8 million and 32.1 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
March 31,
2022 2021
USD USD
GAAP net income
6,113 19,631
GAAP income tax provision 516 6,951
Interest expense (4) 3,272 3,592
Amortization of OID - 772
Loss on derivative liability upon debt conversion 7,456 -
Interest and investment income and other, net (942 ) 431
GAAP operating income 16,415 31,377
Restructuring and reorganization charges 13,106 1,060
Executive transition costs 1,275 55
Acquisition-related expenses:
Amortization of acquired intangible assets (5) 3,656 2,241
Transaction-related costs 13 79
Stock-based compensation (1) 5,721 5,395
Amortization of other intangible assets (5) 3,488 3,336
Amortization of customer contract costs (5) 6,537 4,722
Depreciation 6,138 6,113
USD USD
Non-GAAP adjusted EBITDA
56,349 54,378
% %
Non-GAAP adjusted EBITDA as a percentage of non-GAAP adjusted revenue
22.9 23.0
(4) Interest expense includes amortization of deferred financing costs as provided in Note 5 below.
(5) Amortization on the statement of cash flows is made up of the following items for the indicated periods (in thousands):
Quarter Ended
March 31,
2022 2021
USD USD
Amortization of acquired intangible assets
3,656 2,241
Amortization of other intangible assets 3,488 3,336
Amortization of customer contract costs 6,537 4,722
Amortization of deferred financing costs 189 438
USD USD
Total amortization
13,870 10,737
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
March 31,
2022 2021
USD USD
Cash flows from operating activities ) )
(5,549 (2,224
Purchases of software, property and equipment (10,375 ) (8,239 )
USD USD
Non-GAAP free cash flow ) )
(15,924 (10,463
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:
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
106,400 116,900
Restructuring and reorganization charges 14,500 14,500
Executive transition costs 1,300 1,300
Acquisition-related expenses:
Amortization of acquired intangible assets 14,600 14,600
Stock-based compensation 28,300 28,300
USD USD
Non-GAAP operating income
165,100 175,600
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 (7) Amounts EPS (7)
USD USD USD USD
GAAP net income
63,200 1.98 70,800 2.21
GAAP income tax provision (6) 22,200 25,100
GAAP income before income taxes 85,400 95,900
Restructuring and reorganization charges 14,500 14,500
Executive transition costs 1,300 1,300
Acquisition-related expenses:
Amortization of acquired intangible assets 14,600 14,600
Stock-based compensation 28,300 28,300
Loss on debt extinguishment/conversion 7,500 7,500
Non-GAAP income before income taxes 151,600 162,100
Non-GAAP income tax provision (6) (41,500 ) (44,500 )
USD USD USD USD
Non-GAAP net income
110,100 3.44 117,600 3.68
(6) For 2022, the estimated effective income tax rate for GAAP and non-GAAP purposes is expected to be approximately 26% and 27%, respectively.
(7) 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
63,200 70,800
GAAP income tax provision (6) 22,200 25,100
Interest expense 13,800 13,800
Loss on derivative liability upon debt conversion 7,500 7,500
Interest and investment income and other, net (300 ) (300 )
GAAP operating income 106,400 116,900
Restructuring and reorganization charges 14,500 14,500
Executive transition costs 1,300 1,300
Acquisition-related expenses:
Amortization of acquired intangible assets 14,600 14,600
Stock-based compensation 28,300 28,300
Amortization of other intangible assets 12,300 12,300
Amortization of client contract costs 19,600 19,600
Depreciation 28,300 28,300
USD USD
Non-GAAP adjusted EBITDA
225,300 235,800
% %
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
+1 210-687-4409
tammy.hovey@csgi.com Company Website
https://www.csgi.com News Source: News Direct
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1343985 04-May-2022
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(END) Dow Jones Newswires
May 04, 2022 16:01 ET (20:01 GMT)
