CSG Systems International: Company Profile

Business Overview

CSG Systems International, Inc. (NASDAQ:CSGS) is a purpose-driven, SaaS platform company that enables global businesses across diverse industry verticals to simplify their complex customer engagement and monetization strategies in the digital age. With a cloud-first architecture and a customer-centric approach, CSG empowers companies to deliver seamless, personalized experiences that drive customer loyalty and growth.

Founded in October 1994 and headquartered in Denver, Colorado, CSG has established itself as a trusted technology leader, serving some of the world's biggest and most innovative brands. The company's journey has been marked by continuous innovation, strategic acquisitions, and a relentless focus on helping its clients succeed in the ever-evolving digital landscape. Over the years, CSG has significantly expanded its solution set through targeted research and development (R&D) and strategic acquisitions, evolving from primarily serving the global communications industry to now addressing the complex, transformative needs of customers across various sectors.

Key Milestones and Growth

A key milestone in CSG's growth was the launch of its cloud-native Ascendon platform, which has been instrumental in enabling telecom and cable operators to rapidly deploy new digital services and monetize customer relationships. This platform has driven significant growth for the company, with several new logo wins announced in 2024. Despite facing challenges such as intense market competition and industry consolidation in the global communications sector, CSG has maintained its position as a leading provider of customer engagement and monetization solutions through a focus on innovation and exceptional customer service.

Product Suite and Industry Focus

CSG's comprehensive suite of revenue management, digital monetization, customer experience, and payments solutions cater to the complex needs of industries such as telecommunications, cable, media, retail, healthcare, financial services, insurance, and government. By providing integrated, domain-specific technology, the company enables its clients to acquire, engage, and retain their customers more effectively, ultimately driving profitability and growth.

CSG's operations are organized into a single reportable segment, which includes three main product categories:

1. SaaS and Related Solutions: This category, which accounted for 89% of total revenue in 2024 at $1.07 billion, includes revenue management platform solutions, managed services offerings, and SaaS payments platform solutions. These solutions are typically provided through long-term arrangements with terms ranging from three to five years.

2. Software and Services: This category primarily relates to software license sales and professional services to implement the software. In 2024, software and services revenue was $80.9 million, a decrease from $98.1 million in 2023.

3. Maintenance: This category, which generated $47.0 million in revenue in 2024, relates primarily to support of CSG's software once implemented and placed in service.

Adaptability and Financial Performance

One of the key factors contributing to CSG's success is its ability to adapt to the changing market dynamics. In 2024, the company reported record quarterly revenue of $317 million, representing a 7% year-over-year increase. This growth was driven by the continued expansion of its SaaS and related solutions, which now account for the majority of its revenue. Additionally, the company's strategic acquisitions, such as the 2024 purchases of a customer communication services business and iCheckGateway.com, LLC, have further strengthened its capabilities and diversified its customer base.

Financials

In terms of financial performance, CSG has demonstrated strong profitability and cash flow generation. For the most recent fiscal year, the company reported annual revenue of $1.20 billion and net income of $86.85 million. Annual operating cash flow stood at $135.72 million, while annual free cash flow reached $113.30 million.

In the most recent quarter, CSG reported revenue of $316.65 million and net income of $34.47 million. The company grew revenue by 7% year-over-year in Q4 2024, driven by continued growth in SaaS and related solutions revenue, including revenue from recent acquisitions. Operating income grew 32% year-over-year in Q4 to 20.1% of revenue, and non-GAAP adjusted EBITDA grew 21% to 24.8% margin, demonstrating strong profitability. EPS grew 79% year-over-year in Q4 to a record $1.65.

Geographically, CSG generates a significant portion of its revenue from the Americas (principally the U.S.), which accounted for 87% of total revenue in 2024. Europe, Middle East, and Africa accounted for 9% of revenue, while Asia Pacific made up the remaining 4%.

It's worth noting that CSG has significant customer concentration, with its two largest customers, Charter and Comcast, accounting for 20% and 19% of total revenue in 2024, respectively. The company has long-standing relationships with these key customers, with contract terms extending out several years.

Liquidity

CSG's financial strength has enabled the company to maintain a strong liquidity position. As of December 31, 2024, the company reported:

• Cash and cash equivalents of $161.79 million

• A debt-to-equity ratio of 2.03
• A current ratio of 1.46
• A quick ratio of 1.46

The company also has a $450 million senior secured revolving loan facility, of which $449.7 million was available as of December 31, 2024. This robust cash flow generation and disciplined financial management have contributed to CSG's solid balance sheet, providing flexibility for future investments and capital allocation decisions.

Shareholder Returns

CSG's financial strength has enabled the company to return significant capital to its shareholders. In 2025, the company announced a 7% increase in its quarterly dividend, marking its 12th consecutive year of dividend hikes. Additionally, the company has approved a $100 million+ target for shareholder remuneration through dividends and share buybacks in 2025, underscoring its commitment to enhancing shareholder value.

Future Outlook

Looking ahead, CSG remains well-positioned to capitalize on the growing demand for digital transformation solutions across its diversified customer base. The company's guidance for 2025 reflects its confidence in its ability to drive continued growth and profitability. CSG expects organic revenue to range between $1.21 billion and $1.25 billion, with non-GAAP adjusted operating margin in the 18.1% to 18.5% range and non-GAAP adjusted free cash flow of $110 million to $150 million.

Moreover, the company's strategic focus on expanding its presence in high-growth industry verticals, such as media, financial services, healthcare, and government, is expected to contribute to its long-term diversification and revenue growth. CSG's cloud-native solutions, data-driven analytics capabilities, and commitment to innovation position it as a trusted partner for companies seeking to navigate the complexities of the digital age.

2025 Guidance

CSG's guidance for 2025 includes:

• Organic revenue before acquisitions between $1.21 billion and $1.25 billion
• Transaction fees expected to be $106 million to $111 million
• Non-GAAP adjusted operating margin in the 18.1% to 18.5% range
• Non-GAAP EPS expected to be $4.55 to $4.80
• Non-GAAP adjusted EBITDA expected to be $256 million to $267 million
• Non-GAAP adjusted free cash flow of $110 million to $150 million

Despite the challenges posed by the broader macroeconomic environment, CSG has demonstrated its resilience and ability to adapt. The company's strong financial performance, diversified customer base, and innovative product portfolio suggest that it is well-positioned to continue delivering value to its shareholders in the years to come.