Q3 2020 CSG Systems International Inc Earnings Call
Plus all four of their satellite verticals government radiation Maritime and Enterprise next companies around the world continue to look for ways to communicate with their customer in more personalized and relevant ways and as important through their Communications channel of choice, whether that be text voice email or other channels, for example, our customer engagement team green line to the collection experience. In addition. Our solution will help them improve collection rates lower the number of overall touch points with the customer.
And the cost of service that customer we were pleased with our continued efforts to land and expand our presence within this organization.
Finally the volumes from our Payment Solutions is stabilized, but we have not yet fully recovered to the processing levels that we were happy for the pandemic is important to remind everyone that we have not experienced severe declines that other Global Payments providers have thanks to the markets that we serve which includes governmental agencies Early Education Services retail and small-to-medium businesses off all in all. I'm pleased with the progress that we're making in particular in a year in which there have been so many obstacles.
We are at executing. Well across a broad set of metrics.
We are adding new logos from a diverse set of clients ranging from Wireless to health care to detail to technology. We are diversifying our revenue from the new verticals while at the same time growing are ranging from the cable Market. We are widening our business moved by lengthening and strengthening our relationships with existing customers and earning more of their business. In addition. We are continuously evolving our College structure to stay competitive in the market and last but not least. We're Distributing Capital to shareholders while investing in new initiatives and Acquisitions to drive longer-term top-line growth in summary. We're delivering even in these very challenging times.
Before I close out as most of you know, I will be leaving c s g at the end of the year and handing the reins to Brian Sheppard by recruit it in 2016 to join our leadership team. I am right in to help me further our growth mindset and then bishins he along with the very talented team of leaders throughout the company had delivered. I'm proud of what we have built and I'm confident that our customer employees shareholders and communities in which we operate will benefit from Brian's leadership. In addition. I'd like to take this opportunity to thank our investors and analysts for your continued interest in a company over the years. We've had some constructive conversations that have helped us to understand how you look at our business and what you believe is best for creating long-term value.
Finally, I'd like to thank our clients for their trust in us and think are talented and dedicated employees across the globe. We're committed to helping our clients and our company achieved greatness with that. I'll turn it over to Brian to say a few words. Thanks Brett first on behalf of our forty six hundred employees our customers and our shareholders. Thank you Brad for all that you've done for me personally and for all of us over your fantastic 24-year career here at CSG you help CSG build into a sustainable industry leading company where Quark values are the heart of what we do and just as importantly how we do it when you and I first met five years ago you shared with me for parties that you wanted to accomplish and CEO. I first you wanted to become more Market focused and responsive as we unleashed the full potential of our people II you wanted to regain csg's growth mindset. Third. You plan to invest money.
Our people and our Innovative technology so that CSG could bring even greater value to our customers.
Because you clearly saw the gap between companies with average Solutions and those companies like CSG who provide industry-leading resilient product platforms that deliver on our commitments to our customer and finally you wanted to strengthen our values and our culture as you do these are key differentiators for CSG to attract and retain great talent who then humbly serve our customers better off looking back bread. Everyone sees that you clearly succeeded in all four over the last six weeks. I've had the great opportunity to meet with many of our investors and one question has been off the top of everyone's list. What is going to change under my leadership as I take the range from Brett and try to fill his shoes. My response has been consistent. You're not going to see any took turns just to share determination to accelerate CFCs growth what bread and the executive team set out to do five years ago has laid the foundation for us to continue to build wage.
It's faster growing healthier more future ready and more sustainable CSG that always delivers with this strong Foundation. There's a phrase that you'll hear me and us talk about CSG has and will continue to earn the right to earn the right every day to accelerate our growth and the momentum we're creating in the marketplace see if she is not in the enviable position of having highly talented highly engaged leaders and employees all around the globe who wake up every single day with one Crystal Clear goal in life Minds CSG will do whatever it takes to help our customers solve their toughest business challenges. We could not be more grateful turn the right to search so many of the most Innovative bands in the world because we know our customers have choices and every day I can guarantee you that CSG teams in every geography are working relentlessly and creative wage.
To win and retain the trust and The Business of both our existing and new logo customers. So Brett, thank you for leading the way so well for so long for all of us are $4,600 plus employees or as committed as ever to continue your legacy of bringing Great Value to CSG our customers and our shareholders. It's been an honor pleasure to work and learn from your Brett with that'll headed over to Raleigh to provide the CSG Financial update. Thanks Brian before I get into the financials. I just want to say what a pleasure has been working with you side-by-side over these last few years and I wish you all the best you will certainly be missed.
So welcome everyone to the call today to discuss our financial results for the third quarter and our outlook for the remainder of 2020. Our business is operating. Well at Mid the economic challenges of This Global pandemic as highlighted are resilient business model continues to generate strong cash flows in the face of a pandemic which provides us with the stability necessary to agent in you to deliver on our strategic initiatives and create shareholder value both now and into the future, so let's walk through our financial results.
Holding revenue of 244 million dollars and non-gaap adjusted revenue of $228 which excludes transaction fees of $16 for the quarter both decreases of approximately 3% from the prior-year these year-over-year fluctuations are not unexpected when considering the pricing adjustments associated with the contest extension the continued on page Bowl movements and foreign currency any impacts COVID-19. How ever when compared to the second quarter of 2020 Revenue increased 2% with a 1% wage increase to non-gaap adjusted Revenue, which reflects the stabilization that we are beginning to see in our sales and implementation Cycles along with the rebound in our processing volumes.
So moving on.
Yep, income was $39 or 17.2% of non-gaap adjusted Revenue bringing. Our year-to-date non-gaap adjusted operating income $200,000 or 16.5% on Gap adjusted Revenue.
9 p.m. Is $52 for the quarter representing 23% of non-gaap adjusted Revenue non-gaap EPS for the current quarter was Seventy-Six cents wage. Gap effective. Income tax rate was approximately 27% for the quarter.
Anything under the balance sheet cash flow. We ended the quarter with $212 of cash and short-term Investments which generated $65 billion dollars of cash flow from operations. I'm I'm fifty-five million dollars of free cash flow for the quarter.
Are you today cash flow from operations and free cash flow or $116 and $91 respectable year-to-date. We paid twenty-three million dollars of dividends and repurchased twelve million dollars of common stock under our stock repurchase program, which was resumed during the third quarter. We remain committed to balancing our use of cash return on invested Capital focusing on internal investment in organic growth opportunities and providing a return to shareholders. So moving on to our financial outlook for the remainder of 2020.
In spite of the lingering effects of COVID-19. We remain confident in our financial outlook for 2020 SX am pleased to report that we are increasing our 2020 Cash for Life In addition our 2029. Yeah, guidance remains unchanged we are however updating the 2020 gaap operating margin percentage and EPS guidance to age like the inclusion of executive transition costs related to Brett's departure under the terms of his separation agreement. These costs are excluded from our non-gaap results as they are not reflective of our recurring operating results with that said our guidance is as follows.
Revenue
A non-gaap adjusted Revenue remain unchanged as we continue to expect Revenue in the range of 960 million dollars to 1 billion dollars and non-gaap adjusted Revenue excluding transaction fees in the range of $891 to $924 million dollars. We are maintaining our non-gaap adjusted operating margin percentage in the range of 16 to 16 and half percent consistent with our year-to-date performance and within our long-term range of 16 to 18%
Non-gaap EPS also remains unchanged and range of $2.87 to $3.10 based on a non-gaap tax rate of approximately 27% off the Share account all about $32 million shares for the year.
We continue to expect adjusted ebitda in the range of $198 to $208. And finally after a solid third-quarter of cash flows were increasing our national expectation to arrange of a hundred to a hundred and ten million dollars based on expected operating cash flows of $125 to $145 with Catholics still expected to be in the twenty-five to thirty five million dollar range in summary. We are pleased with this quarter's operating results in this challenging environment with our continued strong cash flows demonstrate the resiliency of our business allowing us to continue to execute on our long-term business objectives and return value to our shareholders off with that. I'll turn it over to the operator to facilitate the question and answer session.
Thank you. If you'd like to ask a question, please take my pressing star one on your telephone keypad. If you're using a speaker phone, please make sure that your information is turned off to let your signal to reach our equipment. Once again, that is star one if you'd like to ask a question and pause for just a moment to allow everyone an opportunity to signal.
Once again, that is star one if you'd like to ask a question.
We'll take our first question from Tom Roderick with stifel please go ahead. Hey guys, it's Max on for Tom. I know you said.
The payment bills is pretty steady, but I just wanted to see if you could talk a bit more about what you're seeing if like small businesses that may have more code exposure and if she worried about turn right sticking up as the year and comes closer.
Yeah, you know as we said that our payments business was impacted but not to the level that we see so many others in the retail space it have as with some of the businesses that where we focus our energies and efforts around government Early Child Daycare type activities in school programs. It's it's leveled off nicely. Now as we go and is heading back to the in the positive direction not to our long-term plans, but that's to be expected. We'll get there soon Brian. Do you have more to share on that with your go-to-market closer activities with the payments business?
No, you hit it while driving.
1 or 2% sequential quarter-over-quarter growth we like transaction volume, but we just got to keep selling and Performing well and see the volumes come back.
Great. Thanks. And then just I guess talking again about the economy starting to come back in the cost structure not necessary payments or just overall are there certain components of the variable spend that you think will come back sooner than others.
You know that broke up a little bit Max but I think what I heard you ask is about the more macro economy. And if there were sectors are parts that would come back quicker. Is that was that the question or can you repeat it? Yes. Sorry. I jumped in exactly in macro just in terms of your cost structure like the variable spending is there parts that you think will come back quicker as the economy does come back with covery. Yeah, as as the as the economy evolves, we do see variances that are happening, you know with the the health care crisis and the dishes some of the financial challenges that are happening as we said we have an extremely strong cash flow quarter and a raising that cash flow guidance because of the stability in the business the incredibly stable business model that we do have and have built over the years with the long-term Revenue. We see things in the digital transformation world where some of the huge you know, major transformational things that may be moved to the right a bit but still as we discussed. Yep.
Pipeline is as healthy and as large as it's been in my career at CSG, there are sectors that will continue to evolve as we move through that as we said the bit of the payments front there. We should see a lot of things where as the pandemic is hit what it's led to is digital models win. It's just easier to go online with the separation that process so we continue to see activities on that front as we move forward. I hope I've got your question. Yeah, that's good. Thank you.
Thank you at this time that appears there are no additional questions and thank you.
Well, thank you. We appreciate it Cody and everyone for taking the time. Once again, we'd like to thank everyone for your time today and continuing to care about CSG. We're proud of our performance for the three the three quarters of the Year. We're very optimistic about what the future holds and this being my last call as CEO CSG. I just like to again I always in these in a grateful fashion because I have been so grateful for the phenomenal customers that have allowed us to help them solve their toughest business problems an incredible board that it continues to evolve and provide helpful and valuable input to us as a leadership team, and of course our employees the employees that have just made CST a wonderful place for me a blessing and an honor to get a lead because these employees continue to learn grow evolve and improve as individuals both of which lists CST in the whole. So thank you for everybody for your time. We appreciate it. Have a great rest of your day.
Thank you. That does conclude today's conference make you all for your participation. You may not disconnect.
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