Q2 2022 CSG Systems International Inc Earnings Call

New sales wins each quarter in the first half of the year are closed in one sales bookings as measured by annual contract value grew more than 10% year over year, when compared to our record setting 2021 on the back of these very good sales results.

Reiterating our full year 2022 revenue and non-GAAP EPS guidance.

On the less positive side, we felt some of the same macro inflationary challenges in Q2 that most global businesses are facing right now.

A combination of increased labor and supply chain cost to staff and deliver some of the exciting new sales wins, we announced in recent quarters were key drivers near erosion of our non-GAAP adjusted operating margin by over one percentage point coming in at 15, 1% in Q2 and $15 seven <unk>.

<unk> for the first half 2022 and.

In order to quickly reversed the margin erosion, we experienced this quarter and to combat future macro pressures. The CFC management team has already begun implementing a meaningful margin improvement initiatives in Q2 across all aspects of our business to ensure we deliver both Q3 and Q4 at <unk>.

Even above the mid to upper end of our original target of 16, 5% to 17% non-GAAP adjusted operating margin range.

This margin improvement initiatives will help us capitalize on the strong market demand and ensure we consistently operate at or above our historically strong profitability levels by relentlessly prioritizing every resource and every dollar of investment towards delivering on the significant new customer expansion and market share opportunities that.

We see in front of US we anticipate that the timely actions, we are taking to offset any inflationary headwinds will enable us to quickly capture millions of dollars in margin improvement across our business in Q3, and Q4 2022, so we deliver at or above our target non-GAAP operating margin ranges in both.

<unk> during the second half of the year.

We believe that the winners of the future will be the companies who can most quickly adjust how they lead and grow in an inflationary business environment by embracing a scarcity mindset as a way to develop competitive advantages based on agility creativity and innovation and most importantly to us at PSG, we believe that a D.

Disciplined growth mindset unleashed and a culture that puts our people and our customers first requires us to constantly improve how we prioritize and how we measure return on investments organically and inorganically to ensure that team's DSG delivers fantastic results in both the short and longer terms.

Turning to highlights for Q2 in the first half on slide five we are energized to <unk> business momentum continue as demonstrated by the fact that ACB annual contract value sales bookings grew more than 10% year over year. These sales wins will contribute to good revenue growth in the second half of the year.

And for years to come as the sales wins generated more second half revenue. It will further benefit our non-GAAP adjusted operating margin in both Q3 and Q4 financially we grew both revenue and non-GAAP EPS by three 6% year over year in the first half.

We improved our industry, leading market share in the cable industry and won several fantastic new deals, but I will talk about shortly and we continue to give money back to our shareholders in the form of $55 million spent on share buybacks and dividends through the first half of the year.

Historically large sales wins, we are consistently announced over the last three to four quarters come increased frontloaded expenses needed to deploy our cutting edge solutions to our new customers. These costs, which primarily come in the form of hiring new employees in advance of large deployments, but could then smoothed out over the <unk>.

<unk> of the project along with higher labor costs to staff. These projects impacted our margins during the quarter. Additionally, we saw margin pressure from a couple of other areas, which high will share more detail on shortly.

We remain extremely confident in our business and our ability to deliver strong CST like financial results, even in todays current business environment as such we are reaffirming our full year guidance of $1 zero 7 billion to $1 1 billion and adjusted revenue guidance of one.

1 billion to $1 zero $3 billion.

We are adjusting slightly downward our full year 2022, adjusted operating margin percentage to a range of 16 that 2% to $16 7%.

Given our lower margin in the first half of the year. This means we expect to perform at or above the mid to upper end of our guidance of $16, 5% to 17% in both Q3 and Q4 as we start to see the benefits from our recent sales wins customer conversions and meaningful margin improvement initiatives.

That began in Q2.

We are modifying our adjusted EBITDA target to range from $220 million to $230 million, we are reiterating our non-GAAP EPS expectations of between $3 44 to.

The $3 68 per share.

We now expect our free cash flow for 2022 to range from $80 million to $90 million. The primary drivers for the decrease in our free cash flow guidance is related to higher tax obligations, primarily driven by section 174 of the 2017 tax cuts and job acts.

Which deals with the amortization of R&D spending beginning in 2022 as a result of this ESG did not get the anticipated tax deduction benefit related to our R&D investments that we anticipated when we set the original 2022 full year guidance.

Additionally, we are seeing significant timing differences in our crude and employee related costs as planned in our original guidance targets in February which I will discuss next.

In addition to elevating every part of ESG and improving our quarterly financial results. We are committed to make a more lasting impact in the communities and the industries in which we operate across the wider environmental social and governmental spectrum, while we still have much important work to do we are very proud of the leading.

<unk> are beginning to recognize the meaningful commitment <unk> has and will continue to make on the ESG and diversity equity and inclusion fronts last quarter. We mentioned that we received our first prime ESG rating from institutional shareholder services, one of the leading ESG rating agencies in the world.

And we continued our momentum on the ESG front by releasing our inaugural sustainability accounting standards Board report, which you can find on the ESG section of the Investor Relations tab on our website, we are fully committed to providing investors business partners and customers with access to <unk>.

<unk> ESG data and making meaningful progress in this important area.

From a technology and innovation perspective earlier this year, we launched ESG exponent are bold and innovative multi vertical market offering in the digital customer engagement space. We are delighted to announce that we have received multiple industry accolades from top analyst research firms like Forrester wave and spark nature.

Specifically, we are viewed as a leader in providing intelligent automation to deliver personalized relevant and interactive experiences in real time across the entire customer lifecycle are best in class <unk> suite of Omnichannel solutions are helping great customer brands win big in the market by delivering.

<unk> extraordinary customer experiences and exciting new industry verticals.

Turning to slide six I will revisit the five strategic objectives that formed the foundation of <unk> long term future success.

Objectives have not changed and should be familiar to everyone who has followed our progress.

<unk> aspires to deliver long term organic revenue growth rate in the 2% to 6% range. We aim to add operating scale and expand our operating leverage by growing to at least $1 $5 billion in revenue by year end 2025, with a stretch goal of $2 billion in revenue.

We strive to be the number one SaaS provider of choice for global communication service providers by providing the most value, adding technology solution and by being easier to do business with than our competitors. We plan to diversify our revenue even more as we expand and big faster growth industry verticals with more direct sales.

And channel partners success in retail government financial services Health care technology, and more and finally, we will complement our accelerated organic growth with disciplined value enhancing M&A to turbocharge the value, we bring our customers and our shareholders, while higher interest rates and higher cost of capital.

Requires to be even more disciplined as we execute our M&A strategy the reduction in valuation multiples across many companies also means that we believe there will likely be attractive and accretive inorganic growth opportunities for us to execute against in the coming quarters and years.

Moving to slide seven you can see that we performed well in the first half of the year against the five strategic objectives first on revenue growth, we reported $527 million in total first half revenue, resulting in three 6% year over year growth, despite giving 3% to 5% discounts.

The two out of our three largest customers on the backs of the good renewals, we signed late last year.

For those who have known <unk> for some time think about how much stronger <unk> is today, even in the face of renewal discounts and macroeconomic headwinds CFT grew revenue three 6% and we consider this to be softer than expected results. We absolutely believe that we can and will deliver strong results.

In the quarters ahead on the right hand side of slide seven we believe that the current economic environment benefits <unk> high recurring revenue SaaS business model, and our strong healthy balance sheet, creating attractive organic and inorganic market opportunities and our march to $2 billion and beyond.

As a reminder, by 2025, we aspire to gain scale in the markets, where we compete to exceed $1 5 billion to $2 billion in annual revenue, we aspire to expand <unk> operating leverage and use our strong healthy balance sheet to deliver EPS growth that meets or exceeds revenue growth exactly as we did in Q2.

Two even with the margin erosion faced in the quarter.

Our base case, we aspire to exceed $1 $5 billion in revenue, which means even if we come up short against our stretch.

This ambition CST will still grow revenue by over 50% and add over $500 million and profitable recurring revenue by 2025.

To reach the $2 billion stretch case revenue aspiration, we will continue to allocate capital to its most value, adding use and to eventually close bigger scale acquisition that become even more transformational for <unk> and for the industry.

The last point I will continually reinforced.

<unk> message shared on almost every analyst and Investor call. This management team is laser focused on creating shareholder value and growing profitable revenue not building empires, we will remain disciplined and open to a wide range of strategic moves to unlock greater shareholder value.

Turning to slide eight we had good success in Q2 on our goal to become the number one technology provider of choice for communication service providers globally, and our continued success with both North American and global Csp's proved that we are executing well against the strategic priority in the cable market we have long.

Term guaranteed contracts to be the revenue management for monetization provider of choice for many of the largest U S cable companies, including Comcast and charter the two largest and we are pleased that working hand in hand with charter the migration of subscribers from our competitors billing system is continuing as expected.

With approximately 75% of the new subscribers, having been migrated to our platform with the remaining subscribers is expected to be migrated over the next nine months.

Our success is not limited to North America, and the global Telecom market, we continue to grow with exciting new wins and contract extensions with leading telecom operators all around the world in Q2, we signed one of our largest telecom wins in our history with a leading telecom operator in Latin America and the Caribbean.

In addition to being a fantastic new telco win this deal also highlights the power of our holistic offering for global CSP. This deal includes our leading revenue management solution <unk> encompass product catalog and our <unk> exponent customer engagement offering there is a powerful example of how.

We are truly helping the world's largest CSP solve not only they are back in BSS needs, but also their front end needs to ensure they deliver fantastic customer experiences. We look forward to sharing more details as we fully deploy our suite of products in 25 countries, where this customer operates in the quarters ahead.

In sub Saharan Africa, we also extended our contract to enable the digital transformation of a leading telecom operator, our solutions now serve over 90% of the entire Namibian mobile market.

Turning to slide nine since 2017, <unk> grown revenue from exciting new industry verticals like retail government financial services and healthcare from 7% of total 2017, <unk> revenue to over 24% of total revenue at year end 2021, and while this metric can.

Very a little bit from quarter to quarter. It is extremely encouraging to see approximately 26% of our Q2 and first half of the year of 2022 revenue come from new industry verticals.

Being a partner of choice for some of the biggest brands in higher growth industry verticals, where CST helps them digitize and modernize their customer engagement and cloud payments continues to be a big game changer for us and our customers.

During the quarter, we landed a new digital engagement contract with AARP, a major U S nonprofit organization, where serves people ages 50 years and older through advocacy information insurance and other resources, we are thrilled that AARP or use <unk> exponent to <unk>.

Proved the Onboarding and support experience for its 38 million members by connecting channels and personalizing all communications specific to each member's individual needs.

RFP chose <unk> because of the open nature of our systems.

Wanted to integrate our solutions in a broader ecosystem with solutions from the likes of Salesforce and Adobe are real time in Omnichannel digital engagement offerings will enable.

To enhance their digital engagement capabilities.

Another great industry vertical win in Q2 was with a leader in the recreational camping industry, who specializes in selling recreation of vehicles recreational auto parts and camping supplies <unk> SaaS platform was chosen to revolutionize their digital presence and help categorize tracking.

Sell additional value added services, such as trailer insurance camping ground discounts and camping equipment accessories.

And the payments market last quarter I highlighted how we returned to double digit revenue growth in the last two months of Q1 and I'm delighted that this momentum continued into Q2 as we delivered meaningful double digit revenue growth for the quarter our growth in the payments market is a testament to our industry, leading recurring revenue SaaS.

Integrated payment platform CST Forte provides award women payment platform to over 90000 active merchants and ISP partners, who need CH credit payment gateway and payment processing capabilities, serving a wide range of recurring revenue industry verticals as a leader in <unk>.

It's processing, we continue to add scale by signing ISP partners and fast growing industry verticals like property management, and we're thrilled to be recognized for the second consecutive year by the straw Hacker group and their best of breed API assessment. This annual report ranks payment gateways for overall API.

And receiving this honor.

Reinforces that our team's dedication and work ethic and expertise.

<unk> to make a difference for our current and future customers. Looking ahead, we built an exciting sales pipeline in our payments business across multiple verticals that are contributing to our double digit revenue growth.

Moving to the right hand side of slide nine we continue to execute against our disciplined value creation M&A playbook late last year, we expanded our offering in the digital customer engagement market with the purchase of SaaS based recurring revenue company that supports real time interaction management through Omnichannel journey orchestration.

In analytics this transaction form the foundation of our new CSP exponent launch, our bold and innovative multi vertical market offering in the digital engagement space and you've heard us talk about the acquisitions of Tango Telecom and digital last year that are included in our innovative <unk> encompass market offering.

This quarter, we wanted to provide a little more color on how we think about M&A in short we look at several different factors when evaluating an M&A target is a good strategic and value, adding acquisition for us to move forward with first we invest significant time in due diligence to ensure each acquisition is a strong strategic fit fit.

Natural fit and cultural fit all combined with a healthy risk return profile.

Secondly, we believe that several different types of M&A deals.

<unk> long term value for CFT, our customers and our shareholders scale.

<unk> are one type of M&A that can unlock shareholder value for the company for us to move forward with our scale consolidation deal it must bring csgo sticky customer revenue high cost synergies and be quickly accretive with an attractive purchase price.

New higher growth SaaS capability acquisitions, or a second type of deal. We look forward to expand our <unk> product suite. The three largest deals we did last year tie will tango telecom and digit all fall into this category, which focus on CST, bringing greater value to the global customers, we serve to expand our.

Addressable market, new verticals and geographic market expansion is the third area, where we look to acquire higher growth SaaS companies that can expand how CSP helps great brands monetize and deliver exceptional customer experiences across a wide range of industry verticals.

As I wrap up on slide 10, CSP is building meaningful momentum and elevating every part of our business that we fully expect will fuel our continued long term growth and transformation.

We are making timely decisions that we believe will help us achieve both our short and long term objectives as we closed for US what was a very light Q2 and build momentum for a much stronger second half of 2022, we asked ourselves two key questions to see where we can more quickly adjust to deliver.

The results, we and our shareholders expect of <unk>, each and every quarter.

One are we seeing any softness in market demand for our industry, leading solutions Fortunately the data and our own ongoing sales wins prove that the answer to this question is an emphatic no the market demand combined with our sales progress and revenue growth for all our strong and healthy as ever.

Question two are the softer Q2, adjusted non-GAAP operating margin and cash flow results in Q2 anomalies or they are a new normal for <unk>.

Fortunately for us and our investors, we believe that our software Q2 operating margin was an anomaly that we can quickly correct with ongoing good revenue growth and the timely implementation of our meaningful margin improvement plan that we anticipate will enable us to deliver at or above the mid to upper end of our prior $16.

5% to 17% range <unk> is laser focused on delivering much better results in Q3, Q4 and in 2023 and beyond we will continue to prioritize and invest in operating costs that deliver more customer value accelerate our growth and ensure that we deliver strong operating profit and <unk>.

Cash flow in the quarters and years ahead as a result of all this we hope youll see the same things that we do when we analyze our business psg's growth and innovation are clearly resonating in the market with existing and new customers all around the world, including in many exciting new industry vertical our strategic vision and agile execution positions.

<unk> as well to adjust quickly and whether the current macro inflationary environment and our customers continue to tell us that our people and our customer first culture for what differentiate us and our technology in the market.

Couldn't be more grateful to <unk> employees and leaders all around the world, who everyday term market challenges in the fantastic new wins on our March to build a bigger faster growing and more purpose driven <unk> with that I will turn it over to high to provide more detail on our Q2 results and our full year outlook for FIS.

Full year 2022.

Thanks, Brian , let's walk through our second quarter and first half financial results and then I'll wrap it up with some key conclusions.

Starting on slide 12, we generated $527 million of revenue and $490 million or non-GAAP adjusted revenue in the first half of 2022.

These results represent three 6% and three 1% year over year growth respectively.

Over half of this year to date increase can be attributed to organic revenue growth.

For the first half of the year.

Increase in revenue and non-GAAP adjusted revenue was primarily driven by the continued growth of our revenue management solutions, where we serve many of the largest communication service providers in the world and.

In addition, we are seeing nice growth in our non CSP offering where we serve customers in large high growth industry verticals, such as healthcare retail financial services and government as Brian mentioned this growth was in the face of 3% to 5% discount headwinds for two of our three largest customers.

First half non-GAAP operating income was $77 million or 15, 7% of non-GAAP adjusted revenue as compared to $80 million or 16, 8% in the same prior year period.

In addition to increased expenses related to the key sales wins, Brian highlighted earlier, we also saw pressure on our adjusted operating margin from the SaaS businesses. We acquired in 2021, as we integrate them and launch new products with their capability that we believe will contribute to <unk> revenue growth in the quarters and years ahead.

General wage inflation for existing and new hires to excite and retain our best talent.

Head count increases year over year to deliver on many of the new sales wins closed in prior quarters and to build a stronger CST.

Increased travel and entertainment expenses to build deeper relationships with our current customers executives that recently won new logo and new sales prospects as companies start to meet more in person again.

Inflationary in supply chain related cost pressures and other non blades inputs business.

And increased investments in items, such as cyber security and in our ESG initiatives, including the Eni that makes CSC, a strong and better company now and in the future.

To address these cost pressures, we began implementing a meaningful margin improvement initiatives in.

In the second quarter aimed at driving near term and longer term efficiencies.

One of the first initiatives to come out of this exercise was the decision to dissolve a controlling interest in mobile card.

Latin American business that was focused on creating solutions for the underbanked.

That region.

Current challenging inflationary environment means we must relentlessly prioritize every investment we make and be disciplined in the allocation of our resources, including those around our new business ventures.

Innovation.

Adherence to a risk reward framework with continuous learning are two cornerstones of how we run the business.

We remain devoted to a disciplined approach to managing our capital and steadfast and driving consistent returns that create shareholder value over the long term.

Moving on.

non-GAAP adjusted EBITDA was $106 million for the first half or 21, 7% of non-GAAP adjusted revenue.

Compared to $109 million or 22, 9% in the same prior year period.

Lastly, our first half non-GAAP EPS was $1 71 a.

A three 6% year over year increase as compared to $1 65 in the prior year period.

Turning to slide 13, I'll go through the balance sheet our.

Cash flow generation and shareholder returns for the first half of the year.

First half 2022 cash outflow used in operation was $13 million as compared to cash flow from operations of $42 million in the prior year period.

Further we had non-GAAP free cash outflow of $32 million in the first half of 2022.

Third to $27 million of free cash flow generated in the first half of 2021.

The main drivers of the year over year variance are higher tax obligations of which the primary negative impact with some section 174 of the 2017 tax cuts and jobs Act, which deals with the amortization of R&D spending beginning in 2022.

As a result of the CSC did not get the anticipated deduction benefit related to our R&D investment in 2022.

Had previously expected this legislation to be repealed, but because the legislation was not repealed we now anticipate higher cash taxes going forward.

The cash tax impact has been included in our refresh free cash flow guidance, we laid out today.

Unfavorable swing in our working capital was the other driver, which we believe are primarily timing related over the medium to long term, including differences in the expected accrual for employee bonus program.

In the first half of 2022 cash flows generated from operations before changes in working capital.

$87 million compared to $92 million in the first half of 2021 importantly.

Importantly, absent the aforementioned impacts from section 174, we would have shown positive growth in cash flow from operations before changes in working capital during the first half of 2022 on a year over year basis.

Further because of high visibility and recurring nature of our revenue and cash flows. We continue to expect robust PSG like cash flow generation and the SEC.

Second half of 2022.

Moving on we ended the second quarter with $135 million.

Cash and short term investments.

That along with our outstanding debt as of June 32022 resulted in $254 million of net debt and our net debt leverage ratio sits at one three times.

As we have mentioned before we are currently reviewing ways to enhance our capital structure and look to execute a thoughtful plan in the coming quarters.

Moving to the bottom right of the slide we declared $17 million in dividend during the first half of the year in.

In addition, we repurchased $38 million of common stock under our stock repurchase program.

In total we returned $55 million to our shareholders in the first half of 2022.

On the right hand side of slide 14, we're showing a refreshed guidance outlook for 2022.

As Brian mentioned, we are reaffirming our revenue guidance of $1 7 billion to.

The $1 1 billion with a corresponding adjusted revenue to range from 1.0 billion to $1 3 billion.

Adjusting our non-GAAP adjusted operating margin percentage to now range between 16, 2% and 16, 7%.

Which as Brian explained.

We expect Q3 and Q4 non-GAAP adjusted operating margin to be at or above the mid to upper end of our prior guidance of 16, 5% to 17%.

Adjusting our adjusted EBITDA target to range from $220 million to $230 million.

Reiterating our non-GAAP EPS.

We are now expecting a free cash flow to range from 80 million to $90 million.

The decrease in our free cash flow guidance is related to higher tax obligations that represents approximately half of the change of which the primary driver is due to the negative impact from section 174 of the 2017 tax cuts and jobs Act.

Also as previously mentioned the other primary driver of the change of free cash flow relates to differences in the expected accrual for our employee bonus program compared to when we laid out our original guidance targets in February .

Specifically as a result of a lower adjusted operating margin targets for 2022, the year to date accrual for our employee bonus program is materially lower than the 130% payout achieved and accrued for last year.

We believe the lower bonus accruals thus far.

Appropriate as it reflects a strong pay for performance alignment of CSC management and its employees.

With our investors when we fall short of our financial targets.

In closing our business is well positioned with a strong sales pipeline.

Robust sales bookings momentum and extremely high quality customer base and a very high percentage of committed revenue.

We remain committed to accelerating our revenue growth and diversifying our industry vertical revenue, which may include closing and integrating disciplined value adding acquisition. Additionally.

Additionally, we expect our margin improvement efforts to have a very favorable impact on our second half of 2022 non-GAAP adjusted operating margin as we drive increased operating leverage we believe this approach combined with our consistent capital distribution in the form both dividends and share buybacks will serve our shareholders well.

With that alternative to the operator to facilitate the question and answer session.

Thank you if you would like to ask a question on the phone lines. Today, you can press star one on your telephone keypad.

We will take our first question from Maggie Nolan with William Blair.

Hi, guys. This is jesse on for Maggie first.

Can we talk about how the pipeline for new business looks in terms of.

Maybe industry vertical and what would be your expectations heading into this tougher economic environment.

Yeah, Hi, Jessica Thanks for the question Thanks for joining.

Maybe I'll give you a little bit of color in different so first the overall before I break it out by some degree industry vertical.

First we continue to see the biggest sales pipeline in terms of both total contract value <unk> and ACD that we've added continues to grow the shape of the pipeline is strong and healthy with more wave a six stage sales pipeline and we love what we see in it and it continues to kick out a high win rate.

As.

Supported by the double digit sales wins that we had year over year in the first half of 2022, even over a strong 2021 overall, we like it I would say if we break it out and you think about what we do in those new verticals like financial services healthcare retail tech government et cetera that tends to be more of our.

Digital payment offer and more of our digital customer engagement solutions and both of those businesses are operating at or close to double digits. So that's in reflects the shape of the pipeline the size of the pipeline and the number of deals that we have and we love what we're seeing there and when we think about.

Then more of our core telecom and cable base, we again see good good things in both those those businesses. They are larger they are still growing even with the renewals, but at a slower rate than we would see in some of those other industry verticals. That's why we've also gone up to 26% of our revenue in those other verticals.

Because they are just faster growing even though it's a smaller percentage today of our overall revenue.

Okay.

Got it that's helpful. And then my one follow up you guys provided some color on.

Your activity in Latin America in the quarter, but could you share any information on your expansion progress in EMEA.

Maybe talking about the competitive environment, there and signs that you are winning market share.

Yes.

EMEA if you go back over the last couple of years have actually been continued to be a good growth rate for us we have announced a lot of wins in South Africa and sub Sahara Africa, We had another one this quarter, we announced the big win.

In Saudi Arabia in the Middle East we see.

Lot of good deal flow that same thing in central Europe . So we like what we're seeing in EMEA a lot I.

I would say the competitive intensity is pretty much the same in all regions of the world.

You got to work hard and you've got to perform well to win these deals in every region. So I wouldn't describe one is more intense or less but we like what we see in EMEA market. Both in terms of selling our monetization revenue management solutions, but the other thing we're really gearing up for that as part of the investment in sales and marketing we have been.

Making more of our digital customer engagement wins have come in North America, and you've seen some of those announcements like the bigger.

<unk> when we had this quarter, but there is no reason that we can serve large banks large insurance companies large governments large retailers in EMEA or other regions of the world. So we're really looking at accelerating sales both through direct sales, but also getting more leverage with a channel partner pull through strategy.

By expanding that offer a multi vertical into EMEA and and also South America in Asia Pacific.

That's helpful color. Thank you.

Thanks Jesse.

We'll take our next question from Greg Burns with Sidoti.

Okay.

Was there any.

One particular acquisition that is causing problems in terms of margins or was it just.

Handful of the sum total of the ones you've done over the last year or so.

Yes, I mean I think.

Great. Good to hear you on the call. This is high the acquisitions with but but.

A part of the contributor to the margin pressure.

Pressure that we saw I think as I mentioned, there is a list of others.

Including us hiring in advance of some of the big wins that were announced.

And we view that as temporary transitory pressure on the margins until the revenue comes in the.

So we have a better matching of costs and revenue at that point in time, but acquisitions in and of itself.

But a small part of the challenge and from my perspective, it's a timing issue. They will take some time for us to integrate them and launch new products and capabilities and <unk>.

Fundamentally believe they will contribute to our revenue growth for years to come.

Okay.

And then the revenue was down.

A few million dollars sequentially.

Was there any.

Particular part of the business driving that is there any area of weakness.

No we like what we're seeing on both the revenue and the sales bookings, Greg Hope you're doing well appreciate you joining us.

You followed us for quite a while historically Q2 is tends to be the soft part of our four quarters and I would say, it's really more timing not anything specific to any one part of the business, we really like what we're seeing from revenue. Obviously, we're watching all the macroeconomic things going on that everybody else is that we look.

At the cable business the telecom business the multi vertical we look at the regions of the world. We look at the different offerings, we like what we're seeing and we like the outlook and the forecast for Q3, and Q4, which is why we reiterated full year guidance kind of across the board on revenue and we just now have to do it.

She does which is keep executing the sales pipeline and deliver the strong Q3, and Q4 and show that growth.

<unk>.

Slightly softer Q2.

Okay.

The women in Latin America or was that a net new logo.

Yes, it was.

We've done some very small things with them around digital wholesale, but it was kind of a rounding error. The prior work we had this as a meaningful big deal across our entire suite of solutions from revenue management monetization and including our new <unk> encompass and <unk>.

Exponents. So this is a big new win for us in the telecom space.

So typically.

Non trivial to replace the incumbent so why do you think that.

They were willing to.

Take that step and move onto your platforms.

Yes, it's similar to what we've talked about with the wins that MTN with mobile with some of our other really strong <unk> really strong telecom wins, we've had in the last couple of years typically what we see is a lot of these operators. They are under a lot of cost pressure right data invoices is to some degree coming under.

Price pressure their customers want eight improved digital experience and they are spending too much money on change orders theyre not agile enough they could improve and make it easier to do business with and so the solutions. We've brought to market, which is let's simplify the business process, let's take cost out of the business, let's enable a more.

<unk> based platform and wrap that not just with back office monetization, but actually significant analytic driven customer engagement to make it easier to do business. It's all of those reasons I would say for all of these telco wins, we're having.

Kind of across the board and that would that's exactly true for this one as well.

Okay.

And when I.

First picked up.

The company our coverage does the story on the telecom was kind of the conversion of the existing base.

To managed services now it seems like that's evolved a little bit to where you know we're looking at market share.

Gain opportunities can you just talk about kind of the evolution of.

Your strategy or your <unk>.

Our goals in the telecom market over the last few years and where we're at now in terms of the opportunities you see there.

It's a great question Gregg.

Youre right. So a couple of things first our historical strength for CSC, which is exciting and good news for the long term growth prospects is actually in the enterprise side of Telecom, that's where we had a lot of wins and when we deployed our product based approach many of our customers MTN and Telstra said could you take on more and do more.

Managed service and therefore help us improve both business processing cost wrapped around our products and so we were doing more and we will still do.

Deals like that but what we're finding increasingly as enterprises one of the fastest growing most profitable theyre wanting to launch more marketplaces and goods and services, So thats, where a center, that's where CST encompass with a configure price quote order management catalog can get in there and help them drive new revenue you've seen.

As announced wins in those spaces, and I think our real focus that a lot of the industries on globally simplify business processes become more agile lowered your cost to serve and you need to do that with better processes and a more simplified technology stack that is also focused.

Around digital engagement and so I think now we're seeing even more of that the BDC wins. In addition to our strength in enterprise and it is taking more of a product focused but we still have a lot of services as we talked about in the quarter were adding a lot of people to staff up to do the implementation and the migrations and that hit our <unk>.

Margins on this quarter. So that's just part of it's a combination but it is not about managed service. It is it is about a broader play around platforms and lowering cost to serve and improving digital engagement.

Alright, great. Thanks.

Thanks, Greg.

And that does conclude the question and answer session I would like to turn the call back over to Brian Shepherd for any additional or closing remarks.

Yes, I'd just say thank you to the global CSU team for working hard everyday to deliver value to our customers and deliver on our commitments were excited about the growth. We're excited about continuing to execute on our sales wins and putting these big projects into production and every quarter, we're focused on delivering <unk>.

And we're looking forward to a strong Q3 and Q4, that's up to the team to execute that's fully what we expect to do so thank you for joining us today.

And that concludes today's presentation. Thank you for your participation and you may now disconnect.

Yes.

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