8-K
Csg Systems International Inc (CSGS)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 or 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): August 3, 2022
CSG SYSTEMS INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
| Delaware | 0-27512 | 47-0783182 |
|---|---|---|
| (State or other jurisdiction<br><br><br>of incorporation) | (Commission<br><br><br>File Number) | (IRS Employer<br><br><br>Identification No.) |
| 6175 S. Willow Drive, 10^th^ Floor, Greenwood Village, CO | 80111 | |
| (Address of principal executive offices) | (Zip Code) |
Registrant’s telephone number, including area code: (303) 200-2000
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instructions A.2. below):
| ☐ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
|---|---|
| ☐ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| ☐ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| ☐ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading<br><br><br>Symbol(s) | Name of each exchange on which registered |
|---|---|---|
| Common Stock, Par Value $0.01 Per Share | CSGS | NASDAQ Stock Market LLC. |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§ 230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§ 240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Item 2.02. Results of Operations and Financial Condition.
The following information is furnished pursuant to Item 2.02 (Results of Operations and Financial Condition). This information shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or incorporated in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.
On August 3, 2022, CSG Systems International, Inc. (“CSG”) issued a press release relating to the results of its operations for the quarter and six months ended June 30, 2022. A copy of such press release is attached to this Form 8-K as Exhibit 99.1 and hereby incorporated by reference.
In the attached press release, CSG makes reference to non-GAAP financial measures. 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. There are limitations with the use of non-GAAP financial measures since they are not based on any comprehensive set of accounting rules or principles, and 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. A more detailed discussion of CSG’s use of non-GAAP financial measures, to include reconciliations of the non-GAAP financial measures to the comparable GAAP financial measures, is contained in the attached press release and is posted to the Company’s website at www.csgi.com.
9.01. Financial Statements and Exhibits.
(d) Exhibits
| 99.1 | Press release of CSG Systems International, Inc. dated August 3, 2022 |
|---|---|
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
Date: August 3, 2022
| CSG SYSTEMS INTERNATIONAL, INC. | |
|---|---|
| By: | /s/ David N. Schaaf |
| David N. Schaaf | |
| Chief Accounting Officer |
2
csgs-ex991_15.htm
EXHIBIT 99.1
FOR IMMEDIATE RELEASE
PRESS RELEASE
CSG Systems INTERNATIONAL reports
SECOND Quarter 2022 RESULTS
Signed One of the Largest Telecom Wins in CSG History with New Latin American Customer
Successfully Migrated ~75% of New Charter Subscribers Through Q2 2022
Returned $55 Million to Shareholders via Share Repurchases & Dividends in H1 2022
DENVER--(August 3, 2022) — CSG (NASDAQ: CSGS) today reported results for the quarter ended June 30, 2022.
Financial Results:
Second quarter 2022 financial results:
| • | Total revenue was $262.2 million and total non-GAAP adjusted revenue was $243.5 million. |
|---|---|
| • | GAAP operating income was $7.3 million, or 2.8% of total revenue, and non-GAAP operating income was $36.7 million, or 15.1% of non-GAAP adjusted revenue. |
| --- | --- |
| • | GAAP earnings per diluted share (EPS) was $0.17 and non-GAAP EPS was $0.84. |
| --- | --- |
| • | Cash flows used in operations were ($7.7) million, with a non-GAAP free cash flow deficit of ($17.0) million. |
| --- | --- |
Shareholder Returns:
| • | CSG declared its quarterly cash dividend of $0.265 per share of common stock, or a total of approximately $9 million, to shareholders. |
|---|---|
| • | During the second quarter of 2022, CSG repurchased under its stock repurchase program, approximately 360,000 shares of its common stock for approximately $22 million. |
| --- | --- |
“With the backdrop of a turbulent macro-economic environment, Team CSG grew first half sales bookings more than 10% year-over-year, won several exciting new customer deals, and successfully migrated approximately 75% of the new Charter subscribers, paving the way for 3.6% year-over-year growth in both revenue and non-GAAP EPS in the first half,” said Brian Shepherd, President and Chief Executive Officer of CSG. “We also encountered challenges that eroded non-GAAP adjusted operating margin more than 1% point and impacted our cash flow in the quarter which CSG leadership is already addressing with a meaningful margin improvement initiative begun in Q2 to ensure we have strong CSG-like profitability in Q3, Q4, and beyond.”
CSG Systems International, Inc.
August 3, 2022
Page 2
Financial Overview (unaudited)
(in thousands, except per share amounts and percentages):
| Quarter Ended June 30, | Six Months Ended June 30, | |||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Percent | Percent | |||||||||||||||||
| 2022 | 2021 | Changed | 2022 | 2021 | Changed | |||||||||||||
| GAAP Results: | ||||||||||||||||||
| Revenue | $ | 262,168 | $ | 255,134 | 2.8 | % | $ | 526,568 | $ | 508,253 | 3.6 | % | ||||||
| Operating Income | 7,283 | 32,166 | (77.4 | %) | 23,698 | 63,543 | (62.7 | %) | ||||||||||
| Operating Margin Percentage | 2.8 | % | 12.6 | % | 4.5 | % | 12.5 | % | ||||||||||
| EPS | $ | 0.17 | $ | 0.60 | (71.7 | %) | $ | 0.36 | $ | 1.21 | (70.2 | %) | ||||||
| Non-GAAP Results: | ||||||||||||||||||
| Adjusted Revenue | $ | 243,455 | $ | 238,479 | 2.1 | % | $ | 489,817 | $ | 475,148 | 3.1 | % | ||||||
| Operating Income | 36,740 | 39,789 | (7.7 | %) | 76,926 | 79,996 | (3.8 | %) | ||||||||||
| Adjusted Operating Margin Percentage | 15.1 | % | 16.7 | % | 15.7 | % | 16.8 | % | ||||||||||
| EPS | $ | 0.84 | $ | 0.82 | 2.4 | % | $ | 1.71 | $ | 1.65 | 3.6 | % |
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 2022 was $262.2 million, a 2.8% increase when compared to revenue of $255.1 million for the second quarter of 2021. Over half of this increase is due to the revenue generated from the businesses CSG acquired in 2021, with the remaining amount attributed to the continued organic growth of CSG’s revenue management solutions.
GAAP operating income for the second quarter of 2022 was $7.3 million, or 2.8% of total revenue, compared to $32.2 million, or 12.6% of total revenue, for the second quarter of 2021. The decrease in operating income can be primarily attributed to the $17 million increase in restructuring and reorganization charges. The second quarter of 2022 restructuring and reorganization charges related primarily to real estate restructurings as CSG continues to rationalize its real estate footprint to reflect a flexible work approach, and impairments related to the dissolution of CSG’s controlling interest in MobileCard, as the investment was not meeting its projected targets.
GAAP EPS for the second quarter of 2022 was $0.17, as compared to $0.60 for the second quarter of 2021. The decrease in GAAP EPS can be mainly attributed to the factors discussed above.
Non-GAAP Results: Non-GAAP adjusted revenue for the second quarter of 2022 was $243.5 million, a 2.1% increase when compared to non-GAAP adjusted revenue of $238.5 million for the second 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 second quarter of 2022 was $36.7 million, or 15.1% of total non-GAAP adjusted revenue, compared to $39.8 million, or 16.7% of total non-GAAP adjusted revenue for the second quarter of 2021. The decreases in operating income and operating income margin can be mainly attributed to the businesses acquired in 2021, as those businesses are operating at a lower operating margin level than CSG’s organic business and require time to realize the expected synergies, increased staffing related to recently closed large deals and upcoming projects, inflationary and supply chain pressures, and increased travel expenses.
CSG Systems International, Inc.
August 3, 2022
Page 3
Non-GAAP EPS for the second quarter of 2022 was $0.84 compared to $0.82 for the second quarter of 2021.
Balance Sheet and Cash Flows
Cash, cash equivalents and short-term investments as of June 30, 2022 were $135.0 million compared to $187.6 million as of March 31, 2022 and $233.7 million as of December 31, 2021. CSG had net cash flows from operations for the second quarters ended June 30, 2022 and 2021 of ($7.7) million and $44.5 million, respectively, and had non-GAAP free cash flow of ($17.0) million and $37.5 million, respectively. Cash flows for the second quarter of 2022 were negatively impacted by unfavorable changes in working capital.
Summary of Financial Guidance
CSG is updating its financial guidance for the full year 2022, as follows:
| As of August 3, 2022 | Previous | |
|---|---|---|
| GAAP Measures: | ||
| Revenue | No change | $1,070 - $1,110 million |
| Non-GAAP Measures: | ||
| Adjusted Revenue | No change | $1,000 - $1,033 million |
| Adjusted Operating Margin Percentage | 16.2% - 16.7% | 16.5% - 17.0% |
| EPS | No change | $3.44 - $3.68 |
| Adjusted EBITDA | $220 - $230 million | $225 - $236 million |
| Free Cash Flow | $80 - $90 million | $115 - $125 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, August 3, 2022 at 5:00 p.m. ET to discuss CSG’s second quarter 2022 earnings results. The call will be conducted 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.
CSG Systems International, Inc.
August 3, 2022
Page 4
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 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 foreign currency 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, 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 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 the COVID-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.
August 3, 2022
Page 5
CSG SYSTEMS INTERNATIONAL, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS-UNAUDITED
(in thousands)
| December 31, | |||||
|---|---|---|---|---|---|
| 2021 | |||||
| ASSETS | |||||
| Current assets: | |||||
| Cash and cash equivalents | 133,770 | $ | 205,635 | ||
| Short-term investments | 1,265 | 28,037 | |||
| Total cash, cash equivalents and short-term investments | 135,035 | 233,672 | |||
| Settlement and merchant reserve assets | 213,460 | 186,267 | |||
| Trade accounts receivable: | |||||
| Billed, net of allowance of 5,105 and 4,250 | 236,577 | 244,317 | |||
| Unbilled | 46,433 | 35,802 | |||
| Income taxes receivable | 19,563 | 6,414 | |||
| Other current assets | 57,187 | 41,727 | |||
| Total current assets | 708,255 | 748,199 | |||
| Non-current assets: | |||||
| Property and equipment, net of depreciation of 116,948 and 111,244 | 75,676 | 73,580 | |||
| Operating lease right-of-use assets | 58,629 | 86,034 | |||
| Software, net of amortization of 159,879 and 152,283 | 25,855 | 29,757 | |||
| Goodwill | 301,222 | 321,330 | |||
| Acquired customer contracts, net of amortization of 114,995 and 114,166 | 50,968 | 57,207 | |||
| Customer contract costs, net of amortization of 30,578 and 32,410 | 48,530 | 46,618 | |||
| Deferred income taxes | 8,251 | 8,584 | |||
| Other assets | 13,293 | 15,840 | |||
| Total non-current assets | 582,424 | 638,950 | |||
| Total assets | 1,290,679 | $ | 1,387,149 | ||
| LIABILITIES AND STOCKHOLDERS' EQUITY | |||||
| Current liabilities: | |||||
| Current portion of long-term debt | 252,500 | $ | 237,500 | ||
| Operating lease liabilities | 21,387 | 23,270 | |||
| Customer deposits | 32,921 | 43,546 | |||
| Trade accounts payable | 34,182 | 35,397 | |||
| Accrued employee compensation | 52,464 | 91,115 | |||
| Settlement and merchant reserve liabilities | 212,036 | 185,276 | |||
| Deferred revenue | 52,514 | 53,748 | |||
| Income taxes payable | 653 | 398 | |||
| Other current liabilities | 24,780 | 24,852 | |||
| Total current liabilities | 683,437 | 695,102 | |||
| Non-current liabilities: | |||||
| Long-term debt, net of unamortized discounts of 3,030 and 3,406 | 133,845 | 137,219 | |||
| Operating lease liabilities | 59,169 | 70,068 | |||
| Deferred revenue | 19,382 | 19,599 | |||
| Income taxes payable | 4,014 | 4,058 | |||
| Deferred income taxes | 196 | 7,752 | |||
| Other non-current liabilities | 13,614 | 13,107 | |||
| Total non-current liabilities | 230,220 | 251,803 | |||
| Total liabilities | 913,657 | 946,905 | |||
| 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; 32,195 and 32,495 shares outstanding | 709 | 705 | |||
| Additional paid-in capital | 479,271 | 488,303 | |||
| Treasury stock, at cost; 37,339 and 36,713 shares | (967,659 | ) | (930,106 | ) | |
| Accumulated other comprehensive income (loss): | |||||
| Unrealized loss on short-term investments, net of tax | (3 | ) | (6 | ) | |
| Cumulative foreign currency translation adjustments | (55,529 | ) | (38,347 | ) | |
| Accumulated earnings | 920,233 | 916,060 | |||
| Total CSG stockholders' equity | 377,022 | 436,609 | |||
| Noncontrolling interest | - | 3,635 | |||
| Total stockholders' equity | 377,022 | 440,244 | |||
| Total liabilities and stockholders' equity | 1,290,679 | $ | 1,387,149 |
All values are in US Dollars.
CSG Systems International, Inc.
August 3, 2022
Page 6
CSG SYSTEMS INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME-UNAUDITED
(in thousands, except per share amounts)
| Quarter Ended | Six Months Ended | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| June 30,<br><br><br>2022 | June 30,<br><br><br>2021 | June 30,<br><br><br>2022 | June 30,<br><br><br>2021 | |||||||||
| Revenue | $ | 262,168 | $ | 255,134 | $ | 526,568 | $ | 508,253 | ||||
| Cost of revenue (exclusive of depreciation, shown separately below) | 138,134 | 132,938 | 276,552 | 266,480 | ||||||||
| Other operating expenses: | ||||||||||||
| Research and development | 34,630 | 32,754 | 67,611 | 64,966 | ||||||||
| Selling, general and administrative | 57,465 | 49,250 | 114,807 | 98,065 | ||||||||
| Depreciation | 5,651 | 6,266 | 11,789 | 12,379 | ||||||||
| Restructuring and reorganization charges | 19,005 | 1,760 | 32,111 | 2,820 | ||||||||
| Total operating expenses | 254,885 | 222,968 | 502,870 | 444,710 | ||||||||
| Operating income | 7,283 | 32,166 | 23,698 | 63,543 | ||||||||
| Other income (expense): | ||||||||||||
| Interest expense | (2,686 | ) | (3,633 | ) | (5,958 | ) | (7,225 | ) | ||||
| Amortization of original issue discount | - | (784 | ) | - | (1,556 | ) | ||||||
| Interest and investment income, net | 126 | 84 | 256 | 208 | ||||||||
| Loss on derivative liability upon debt conversion | - | - | (7,456 | ) | - | |||||||
| Other, net | 2,442 | (100 | ) | 3,254 | (655 | ) | ||||||
| Total other | (118 | ) | (4,433 | ) | (9,904 | ) | (9,228 | ) | ||||
| Income before income taxes | 7,165 | 27,733 | 13,794 | 54,315 | ||||||||
| Income tax provision | (1,848 | ) | (8,412 | ) | (2,364 | ) | (15,363 | ) | ||||
| Net income | $ | 5,317 | $ | 19,321 | $ | 11,430 | $ | 38,952 | ||||
| Weighted-average shares outstanding: | ||||||||||||
| Basic | 31,301 | 31,875 | 31,358 | 31,859 | ||||||||
| Diluted | 31,492 | 31,993 | 31,651 | 32,070 | ||||||||
| Earnings per common share: | ||||||||||||
| Basic | $ | 0.17 | $ | 0.61 | $ | 0.36 | $ | 1.22 | ||||
| Diluted | 0.17 | 0.60 | 0.36 | 1.21 |
CSG Systems International, Inc.
August 3, 2022
Page 7
CSG SYSTEMS INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS-UNAUDITED
(in thousands)
| Six Months Ended | ||||||
|---|---|---|---|---|---|---|
| June 30,<br><br><br>2022 | June 30,<br><br><br>2021 | |||||
| Cash flows from operating activities: | ||||||
| Net income | $ | 11,430 | $ | 38,952 | ||
| Adjustments to reconcile net income to net cash provided by (used in) operating activities- | ||||||
| Depreciation | 14,210 | 12,379 | ||||
| Amortization | 25,520 | 22,018 | ||||
| Amortization of original issue discount | - | 1,556 | ||||
| Asset impairment | 24,436 | 415 | ||||
| Loss on short-term investments and other | 20 | 32 | ||||
| Loss on derivative liability upon debt conversion | 7,456 | - | ||||
| Deferred income taxes | (7,816 | ) | 6,434 | |||
| Stock-based compensation | 12,117 | 10,417 | ||||
| Subtotal | 87,373 | 92,203 | ||||
| Changes in operating assets and liabilities, net of acquired amounts: | ||||||
| Trade accounts receivable, net | (8,638 | ) | 1,128 | |||
| Other current and non-current assets and liabilities | (16,098 | ) | (7,623 | ) | ||
| Income taxes payable/receivable | (13,157 | ) | (11,620 | ) | ||
| Trade accounts payable and accrued liabilities | (65,537 | ) | (29,817 | ) | ||
| Deferred revenue | 2,792 | (2,042 | ) | |||
| Net cash provided by (used in) operating activities | (13,265 | ) | 42,229 | |||
| Cash flows from investing activities: | ||||||
| Purchases of software, property and equipment | (19,647 | ) | (15,158 | ) | ||
| Purchases of short-term investments | - | (46,195 | ) | |||
| Proceeds from sale/maturity of short-term investments | 26,755 | 49,419 | ||||
| Acquisition of and investments in business, net of cash acquired | - | (12,097 | ) | |||
| Net cash provided by (used in) investing activities | 7,108 | (24,031 | ) | |||
| Cash flows from financing activities: | ||||||
| Proceeds from issuance of common stock | 1,423 | 1,335 | ||||
| Payment of cash dividends | (17,200 | ) | (16,654 | ) | ||
| Repurchase of common stock | (45,113 | ) | (18,792 | ) | ||
| Proceeds from long-term debt | 245,000 | - | ||||
| Payments on long-term debt | (246,051 | ) | (6,563 | ) | ||
| Settlement and merchant reserve activity | 26,754 | (23,967 | ) | |||
| Net cash used in financing activities | (35,187 | ) | (64,641 | ) | ||
| Effect of exchange rate fluctuations on cash, cash equivalents and restricted cash | (3,328 | ) | (1,835 | ) | ||
| Net decrease in cash, cash equivalents and restricted cash | (44,672 | ) | (48,278 | ) | ||
| Cash, cash equivalents and restricted cash, beginning of period | 391,902 | 354,730 | ||||
| Cash, cash equivalents and restricted cash, end of period | $ | 347,230 | $ | 306,452 | ||
| Supplemental disclosures of cash flow information: | ||||||
| Cash paid during the period for- | ||||||
| Interest | $ | 8,323 | $ | 6,370 | ||
| Income taxes | 23,324 | 20,540 | ||||
| Reconciliation of cash, cash equivalents and restricted cash: | ||||||
| Cash and cash equivalents | $ | 133,770 | $ | 163,768 | ||
| Settlement and merchant reserve assets | 213,460 | 142,684 | ||||
| Total cash, cash equivalents and restricted cash | $ | 347,230 | $ | 306,452 |
CSG Systems International, Inc.
August 3, 2022
Page 8
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, 2022 | March 31, 2022 | June 30, 2021 | |||||||||||||
| Amount | % of Revenue | Amount | % of Revenue | Amount | % of Revenue | ||||||||||
| Charter | $ | 53,173 | 20 | % | $ | 52,069 | 20 | % | $ | 55,102 | 22 | % | |||
| Comcast | 52,919 | 20 | % | 52,524 | 20 | % | 53,789 | 21 | % |
Revenue by Vertical
| Quarter Ended | Quarter Ended | Quarter Ended | |||||||
|---|---|---|---|---|---|---|---|---|---|
| June 30, | March 31, | June 30, | |||||||
| 2022 | 2022 | 2021 | |||||||
| Broadband/Cable/Satellite | 55 | % | 54 | % | 58 | % | |||
| Telecommunications | 19 | % | 19 | % | 18 | % | |||
| All other | 26 | % | 27 | % | 24 | % | |||
| Total revenue | 100 | % | 100 | % | 100 | % |
Revenue by Geography
| Quarter Ended | Quarter Ended | Quarter Ended | |||||||
|---|---|---|---|---|---|---|---|---|---|
| June 30, | March 31, | June 30, | |||||||
| 2022 | 2022 | 2021 | |||||||
| Americas | 85 | % | 84 | % | 85 | % | |||
| Europe, Middle East and Africa | 11 | % | 12 | % | 11 | % | |||
| Asia Pacific | 4 | % | 4 | % | 4 | % | |||
| Total revenue | 100 | % | 100 | % | 100 | % |
CSG Systems International, Inc.
August 3, 2022
Page 9
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 non-GAAP financial measure to the most directly comparable GAAP measure.
CSG Systems International, Inc.
August 3, 2022
Page 10
Non-GAAP Financial Measures: Basis of Presentation
The table below outlines the exclusions from CSG’s non-GAAP financial measures:
| Non-GAAP Exclusions | Adjusted Revenue | Operating Income | Adjusted Operating Margin Percentage | EPS |
|---|---|---|---|---|
| Transaction fees | X | — | X | — |
| Restructuring and reorganization charges | — | X | X | X |
| 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 (“OID”) | — | — | — | X |
| Gain (loss) on debt extinguishment/conversion | — | — | — | 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, 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 a departure of a CSG executive officer under the terms of the related separation agreement. These types of costs are 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. |
| --- | --- |
CSG Systems International, Inc.
August 3, 2022
Page 11
| • | 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/conversion of debt can be as a result of the refinancing of CSG’s credit agreement and/or repurchase, conversion, or settlement of CSG’s convertible notes. These activities, to include any derivative activity related to debt conversions, 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 these items allows investors to further evaluate the cash impact of these activities 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. |
| --- | --- |
| • | Gains or losses related to the acquisition or disposition of certain of CSG’s business 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 these items allows investors to further evaluate the cash impact of these activities 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. |
| --- | --- |
CSG Systems International, Inc.
August 3, 2022
Page 12
| • | 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, 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.
CSG Systems International, Inc.
August 3, 2022
Page 13
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<br><br><br>June 30, | Six Months Ended<br><br><br>June 30, | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2022 | 2021 | 2022 | 2021 | |||||||||
| GAAP revenue | $ | 262,168 | $ | 255,134 | $ | 526,568 | $ | 508,253 | ||||
| Less: Transaction fees | (18,713 | ) | (16,655 | ) | (36,751 | ) | (33,105 | ) | ||||
| Non-GAAP adjusted revenue | $ | 243,455 | $ | 238,479 | $ | 489,817 | $ | 475,148 |
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<br><br><br>June 30, | Six Months Ended June 30, | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2022 | 2021 | 2022 | 2021 | |||||||||
| GAAP operating income | $ | 7,283 | $ | 32,166 | $ | 23,698 | $ | 63,543 | ||||
| Restructuring and reorganization charges (1) | 19,005 | 1,760 | 32,111 | 2,820 | ||||||||
| Executive transition costs | - | 5 | 1,275 | 60 | ||||||||
| Acquisition-related expenses: | ||||||||||||
| Amortization of acquired intangible assets | 3,956 | 2,618 | 7,612 | 4,859 | ||||||||
| Earn-out compensation | - | (2,521 | ) | - | (2,521 | ) | ||||||
| Transaction-related costs | (39 | ) | 623 | (26 | ) | 702 | ||||||
| Stock-based compensation (1) | 6,535 | 5,138 | 12,256 | 10,533 | ||||||||
| Non-GAAP operating income | $ | 36,740 | $ | 39,789 | $ | 76,926 | $ | 79,996 | ||||
| Non-GAAP adjusted revenue | $ | 243,455 | $ | 238,479 | $ | 489,817 | $ | 475,148 | ||||
| Non-GAAP adjusted operating margin percentage | 15.1 | % | 16.7 | % | 15.7 | % | 16.8 | % | ||||
| (1) | Restructuring and reorganization charges include stock-based compensation, which is not included in the stock-based compensation line in the tables above and following, and depreciation, which has not been recorded to the depreciation line item on the Income Statement. | |||||||||||
| --- | --- |
CSG Systems International, Inc.
August 3, 2022
Page 14
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, 2022 | June 30, 2021 | |||||||||
| Amounts | EPS (3) | Amounts | EPS (3) | |||||||
| GAAP net income | $ | 5,317 | $ | 0.17 | $ | 19,321 | $ | 0.60 | ||
| GAAP income tax provision (2) | 1,848 | 8,412 | ||||||||
| GAAP income before income taxes | 7,165 | 27,733 | ||||||||
| Restructuring and reorganization charges (1) | 19,005 | 1,760 | ||||||||
| Executive transition costs | - | 5 | ||||||||
| Acquisition-related costs: | ||||||||||
| Amortization of acquired intangible assets | 3,956 | 2,618 | ||||||||
| Earn-out compensation | - | (2,521 | ) | |||||||
| Transaction-related costs | (39 | ) | 623 | |||||||
| Stock-based compensation (1) | 6,535 | 5,138 | ||||||||
| Amortization of OID | - | 784 | ||||||||
| Non-GAAP income before income taxes | 36,622 | 36,140 | ||||||||
| Non-GAAP income tax provision (2) | (10,071 | ) | (9,757 | ) | ||||||
| Non-GAAP net income | $ | 26,551 | $ | 0.84 | $ | 26,383 | $ | 0.82 | ||
| Six Months Ended | Six Months Ended | |||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| June 30, 2022 | June 30, 2021 | |||||||||
| Amounts | EPS (3) | Amounts | EPS (3) | |||||||
| GAAP net income | $ | 11,430 | $ | 0.36 | $ | 38,952 | $ | 1.21 | ||
| GAAP income tax provision (2) | 2,364 | 15,363 | ||||||||
| GAAP income before income taxes | 13,794 | 54,315 | ||||||||
| Restructuring and reorganization charges (1) | 32,111 | 2,820 | ||||||||
| Executive transition costs | 1,275 | 60 | ||||||||
| Acquisition-related expenses: | ||||||||||
| Amortization of acquired intangible assets | 7,612 | 4,859 | ||||||||
| Earn-out compensation | - | (2,521 | ) | |||||||
| Transaction-related costs | (26 | ) | 702 | |||||||
| Stock-based compensation (1) | 12,256 | 10,533 | ||||||||
| Loss on extinguishment of debt | 7,456 | - | ||||||||
| Amortization of OID | - | 1,556 | ||||||||
| Non-GAAP income before income taxes | 74,478 | 72,324 | ||||||||
| Non-GAAP income tax provision (2) | (20,481 | ) | (19,527 | ) | ||||||
| Non-GAAP net income | $ | 53,997 | $ | 1.71 | $ | 52,797 | $ | 1.65 | ||
| (2) | For the second quarter and six months ended June 30, 2022 the GAAP effective income tax rates were approximately 26% and 17%, respectively, and the non-GAAP effective income tax rates were 27.5%, for both periods. 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 27%, for both periods. | |||||||||
| --- | --- | |||||||||
| (3) | The outstanding diluted shares for the second quarter and six months ended June 30, 2022 were 31.5 million and 31.7 million, respectively, and for the second quarter and six months ended June 30, 2021 were 32.0 million and 32.1 million, respectively. | |||||||||
| --- | --- |
CSG Systems International, Inc.
August 3, 2022
Page 15
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, | |||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||
| GAAP net income | $ | 5,317 | $ | 19,321 | $ | 11,430 | $ | 38,952 | ||||
| GAAP income tax provision | 1,848 | 8,412 | 2,364 | 15,363 | ||||||||
| Interest expense (4) | 2,686 | 3,633 | 5,958 | 7,225 | ||||||||
| Amortization of OID | - | 784 | - | 1,556 | ||||||||
| Loss on derivative liability upon debt conversion | - | - | 7,456 | - | ||||||||
| Interest and investment income and other, net | (2,568 | ) | 16 | (3,510 | ) | 447 | ||||||
| GAAP operating income | 7,283 | 32,166 | 23,698 | 63,543 | ||||||||
| Restructuring and reorganization charges (1) | 19,005 | 1,760 | 32,111 | 2,820 | ||||||||
| Executive transition costs | - | 5 | 1,275 | 60 | ||||||||
| Acquisition-related expenses: | ||||||||||||
| Amortization of acquired intangible assets (5) | 3,956 | 2,618 | 7,612 | 4,859 | ||||||||
| Earn-out compensation | - | (2,521 | ) | - | (2,521 | ) | ||||||
| Transaction-related costs | (39 | ) | 623 | (26 | ) | 702 | ||||||
| Stock-based compensation (1) | 6,535 | 5,138 | 12,256 | 10,533 | ||||||||
| Amortization of other intangible assets (5) | 3,723 | 3,267 | 7,211 | 6,603 | ||||||||
| Amortization of customer contract costs (5) | 3,784 | 4,956 | 10,321 | 9,678 | ||||||||
| Depreciation (1) | 5,651 | 6,266 | 11,789 | 12,379 | ||||||||
| Non-GAAP adjusted EBITDA | $ | 49,898 | $ | 54,278 | $ | 106,247 | $ | 108,656 | ||||
| Non-GAAP adjusted EBITDA as a percentage of non-GAAP adjusted revenue | 20.5 | % | 22.8 | % | 21.7 | % | 22.9 | % | ||||
| (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 | Six Months Ended | |||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | ||||
| June 30, | June 30, | |||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||
| Amortization of acquired intangible assets | $ | 3,956 | $ | 2,618 | $ | 7,612 | $ | 4,859 | ||||
| Amortization of other intangible assets | 3,723 | 3,267 | 7,211 | 6,603 | ||||||||
| Amortization of customer contract costs | 3,784 | 4,956 | 10,321 | 9,678 | ||||||||
| Amortization of deferred financing costs | 187 | 440 | 376 | 878 | ||||||||
| Total amortization | $ | 11,650 | $ | 11,281 | $ | 25,520 | $ | 22,018 |
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 | Six Months Ended | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| June 30, | June 30, | |||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||
| Cash flows from operating activities | $ | (7,716 | ) | $ | 44,453 | $ | (13,265 | ) | $ | 42,229 | ||
| Purchases of software, property and equipment | (9,272 | ) | (6,919 | ) | (19,647 | ) | (15,158 | ) | ||||
| Non-GAAP free cash flow | $ | (16,988 | ) | $ | 37,534 | $ | (32,912 | ) | $ | 27,071 |
CSG Systems International, Inc.
August 3, 2022
Page 16
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 financial guidance, is as follows:
| 2022 Guidance Range | ||||||
|---|---|---|---|---|---|---|
| Low Range | High Range | |||||
| GAAP revenue | $ | 1,070,000 | $ | 1,110,000 | ||
| Less: Transaction fees | (70,000 | ) | (77,000 | ) | ||
| 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 | ||||||
| GAAP operating income | $ | 84,600 | $ | 95,100 | ||
| Restructuring and reorganization charges | 34,700 | 34,700 | ||||
| Executive transition costs | 1,300 | 1,300 | ||||
| Acquisition-related expenses: | ||||||
| Amortization of acquired intangible assets | 14,400 | 14,400 | ||||
| Stock-based compensation | 27,300 | 27,300 | ||||
| Non-GAAP operating income | $ | 162,300 | $ | 172,800 | ||
| Operating Margin Percentage | ||||||
| Non-GAAP adjusted revenue | $ | 1,000,000 | $ | 1,033,000 | ||
| Non-GAAP adjusted operating margin percentage | 16.2 | % | 16.7 | % |
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) | |||||||
| GAAP net income | $ | 48,200 | $ | 1.53 | $ | 55,800 | $ | 1.77 | ||
| GAAP income tax provision (6) | 16,300 | 19,200 | ||||||||
| GAAP income before income taxes | 64,500 | 75,000 | ||||||||
| Restructuring and reorganization charges | 34,700 | 34,700 | ||||||||
| Executive transition costs | 1,300 | 1,300 | ||||||||
| Acquisition-related expenses: | ||||||||||
| Amortization of acquired intangible assets | 14,400 | 14,400 | ||||||||
| Stock-based compensation | 27,300 | 27,300 | ||||||||
| Loss on debt extinguishment/conversion | 7,500 | 7,500 | ||||||||
| Non-GAAP income before income taxes | 149,700 | 160,200 | ||||||||
| Non-GAAP income tax provision (6) | (41,100 | ) | (44,000 | ) | ||||||
| Non-GAAP net income | $ | 108,600 | $ | 3.44 | $ | 116,200 | $ | 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 31.6 million. | |||||||||
| --- | --- |
CSG Systems International, Inc.
August 3, 2022
Page 17
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 | |||||
| GAAP net income | $ | 48,200 | $ | 55,800 | ||
| GAAP income tax provision (6) | 16,300 | 19,200 | ||||
| Interest expense | 12,800 | 12,800 | ||||
| Loss on derivative liability upon debt conversion | 7,500 | 7,500 | ||||
| Interest and investment income and other, net | (200 | ) | (200 | ) | ||
| GAAP operating income | 84,600 | 95,100 | ||||
| Restructuring and reorganization charges | 34,700 | 34,700 | ||||
| Executive transition costs | 1,300 | 1,300 | ||||
| Acquisition-related expenses: | ||||||
| Amortization of acquired intangible assets | 14,400 | 14,400 | ||||
| Stock-based compensation | 27,300 | 27,300 | ||||
| Amortization of other intangible assets | 13,600 | 13,600 | ||||
| Amortization of client contract costs | 18,800 | 18,800 | ||||
| Depreciation | 25,000 | 25,000 | ||||
| Non-GAAP adjusted EBITDA | $ | 219,700 | $ | 230,200 | ||
| Non-GAAP adjusted EBITDA as a percentage of non-GAAP adjusted revenue | 22.0 | % | 22.3 | % |
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 | |||||
| Cash flows from operating activities | $ | 110,000 | $ | 130,000 | ||
| Purchases of software, property and equipment | (30,000 | ) | (40,000 | ) | ||
| Non-GAAP free cash flow | $ | 80,000 | $ | 90,000 |