Q4 2022 CSG Systems International Inc Earnings Call
Good morning, My name is Devon, and I will be your conference operator today at this time I would like to welcome everyone to the Q4 2022 C. S. G system International Inc. Earnings Conference call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. If you will.
I'd like to ask a question. During this time simply press star followed by the number one on your telephone keypad and if you would like to withdraw your question anytime again press star followed by the number one.
Thank you for your patience head of Investor Relations Mr. John <unk>, you may begin the conference.
Okay.
Thank you operator, and thanks to everyone for joining us like last quarter, we will be working from our slide deck, which can be found on the investor Relations section of our website. Please take a moment to locate these slides today's discussion will contain a number of forward looking statements. These include but are not limited to statements regarding our projected fine.
Actual results our ability to meet our clients' needs through our products services and performance.
Our ability to successfully integrate and manage acquired businesses in order to achieve their expected strategic operating and financial goals.
While these risks reflect our best current judgment they are subject to risks and uncertainties that could cause our actual results to differ materially. Please note that these forward looking statements reflect our opinions only as of the date of this call and we undertake no obligation to revise or publicly release any revision to these forward looking statements.
In light of new or future events.
In addition to factors noted during this call a more comprehensive discussion of our risk factors can be found in today's press release as well as our most recently filed 10-K and 10-Q, which are all available in the Investor Relations section of our website.
Also we will discuss certain financial information that is not prepared in accordance with GAAP. We believe that these non-GAAP financial measures when reviewed in conjunction with our GAAP financial measures provide investors with greater transparency to the information used by our management team in our financial and operational decision, making for more information.
Regarding our use of non-GAAP financial measures. We refer you to today's earnings release, and non-GAAP reconciliation tables on our website, which will also be furnished to the SEC on form 8-K with me today on the phone or Brian Shepherd, Chief Executive Officer, and high Tran Chief Financial Officer with that.
I'd like to now turn the call over to Brian .
John Hi, everyone. We appreciate you joining the call today as we get started on slide four with a choppy macroeconomic environment as the backdrop 2020 to showcase the strengths of <unk> and a recurring revenue business model, we delivered four 1% year over year revenue growth.
<unk> result, especially when factoring in the discount headwinds from two of our top three customers coming from long term renewals that we signed in late 2020, what historically <unk> revenue has been flat to down in the year. Following a top three customer renewal, let alone two customer renewables James <unk>.
Also proved to be agile and resilient manner with which we will continue to run our business after facing some inflationary cost pressures in Q2, we took timely action on our margin improvement plan.
<unk> good profitability in both Q3 and Q4 as a result, we finished 2022 with adjusted operating margins of 16, 6% up from 15, 7% in H. One 2022. In addition, as a result of this increased profitability.
Favorable foreign currency movements and increased share repurchases, we delivered $3 61 of non-GAAP EPS.
Seven 8% year over year increase as we have said many times over the medium to long run we aim to have the bottom line growing as fast or faster than our top line and that is exactly what we accomplished in 2022.
At the end of the day, our revenue growth success is fueled by exciting ongoing market demand for <unk> industry, leading SaaS products and our impressive sales results, we continue to win and Wow Big new customers in a wide variety of faster growth industry verticals, James DSG group Andrew.
Contract value sales bookings, a strong double digit year over year in both Q4 and full year of 2022. These sales wins bode well for <unk> continued revenue growth into 2023.
Our 2023 guidance should prove that we see our strong business momentum continuing into the new year I will go into more details on our 2023 guidance, but we are expecting organic revenue growth above the midpoint of our long term, 2% to 6% with a revenue range between one point.
One three and $1.17 billion this year put differently. The midpoint of this guidance represents year over year revenue organic growth of approximately five 5%.
Further we foresee profitability as measured by our adjusted operating margin percentage remaining strong at a range of 16, 5% to 17%.
Tied to 2022 success and 2023 outlook. We're pleased to announce we are raising our dividend by 6% with a quarterly payout of 28 per share. We're also proud to announce that this will be our 10th consecutive year of increasing our dividend payout.
At the heart of our success is what <unk> is all over the globe are doing on a daily basis because of their dedication and innovation, we're taking <unk> to heights unseen in our company's rich 40 year history. Thank you team <unk> for delivering fantastic 2022 results for our customers and for CSC.
We will continue investing in our people our products and our customer to grow faster and to while leading brands all around the world as we do this we will also demand a higher and more disciplined return on every dollar we invest this combination is what will enable <unk> to expand our operating leverage and access.
<unk>, our profitable revenue growth in the years to come.
During Q4, we had several exciting customer wins and success stories by year end, we have successfully migrated substantially all of the charter subscribers. We wanted in our November 2021 contract renewal and extension of a competitor's billing system globally, we expanded our relationship with a leading UK.
Activity provider and landed sizable new deals with large telecom providers in Asia Pacific and West Africa and on the customer engagement front. We won our first global <unk> exponent customer with standard life. The Uk's largest long term savings and retirement business I'll provide.
More color on these wins in a few moments.
Turning to slide five I wanted to reiterate our four strategic objectives that will help CSC create more shareholder value and allow followers of our story to track our progress ESG aspires to deliver long term organic revenue growth in the 2% to 6% range striving to consistently be at or above the midpoint.
Of this range combined with highly disciplined accretive and strategic inorganic growth.
Tad operating scale and expand our operating leverage by growing top and bottom line to $1 $5 billion in revenue by year end 2025 <unk>.
We strive to be the number one SaaS provider of choice for global communication service providers by providing the most value, adding technology platforms and by being easier to do business with than our competitors and finally, we plan to diversify revenue even more as we expand and big faster growth industry verticals.
More direct sales and channel partner success in retail government financial services health care technology and more.
Moving to slide six you can see that 2022 was a great year in delivering against all four objectives.
Strategic revenue growth, we reported one dot zero $9 billion of revenue during the full year of 2022, resulting in four 1% year over year growth.
The right hand side of slide six we believe the CSC is high recurring revenue SaaS business model and our strong healthy balance sheet make us safe attractive harbor in the midst of macroeconomic uncertainty.
By 2025, we aspire to gain scale in the markets, where we compete and generate greater than $1 5 billion in annual revenue, which implies that CSC will add over $400 million and profitable recurring revenue by 2025 over the medium to long term, we aspire to expand <unk> operate.
Leverage and use our strong balance sheet to deliver non-GAAP EPS growth that meets or exceeds revenue growth exactly as we did in 2022, even with the margin pressure we faced in the first half of the year.
On the last point I will continually reinforce a key principle for the CSC board of directors and management team investors can be assured that <unk> is laser focused on creating shareholder value and growing profitable revenue not building empires, nor adding empty calories, we will maintain a disciplined and high return on invested <unk>.
Capital mindset as we explore wide range of strategic moves to create more value.
Turning to slide seven we had good success in 2022 on our goal to be 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 this strategic priority.
It is great to see that <unk> grew revenue year over year combined at our two largest north American cable broadband customers in Q4 2022, despite the approximate 5% discount headwind to charter following our long term renewal in late 2021 with respect to charter the migrations.
Of subscribers from our competitors billing system are largely complete as we successfully migrated another pool of charter customers to our platform in November and.
And during the quarter, we closed a new deal with one of the six largest cable providers in the United States to help them streamline and modernize their operations specifically, we are deploying our field service management tools as well as certain components of our customer engagement portfolio.
We also won more business in the global Telecom market.
In Q4, we expanded our relationship with a leading UK connectivity provider to digitally transform their BSS stack.
<unk> solution will simplify their architecture by consolidating CRM collections payments management's product catalog and billing into a single ESG hosted and managed solution. The new stack will reduce their time to market significantly and enable them to increase competitiveness in the UK.
Connectivity market.
We also signed a new deal with a leading telecommunications operator in the Asia Pacific region to digitize their revenue management and digital monetization efforts. This new customer has operations in six specific island nations with approximately 4 million subscribers, specifically, we were able to provide solutions that will help.
This customer bring new services to market quickly gain better insights into their customer base to enhance customer satisfaction and provide improved business resilience through a fully supported BSS platform.
And finally, we were pleased to announce that we won a significant deal with move Africa volatile the leading converged operator in Mali West Africa led Tallahassee.
<unk> has selected <unk> to improve its time to market and to provide new service offerings with an easier to use and more moderate tooled application.
Turning to slide eight since 2017, CSC has grown revenue from exciting new industry verticals from 7% of total 2017, CSC revenue to 26% in 2020 to being a partner of choice for big brands in higher growth industry verticals, where we help them digitize that modern.
And is their customer engagement and integrated payments continues to be a game changer for CSC and for our customers last fall, we launched ESG exponent of ignite, which brings over 100 pre package customer experience journey templates connectors and reports that will turbocharge unforgettable out.
Comes for communication service providers financial services retail healthcare and life Sciences.
Leading SaaS platform leads to Quantifiably better business results with improved customer conversion engagement and loyalty across the brands digital channels. What does this mean for brands and wide range of industry verticals low entry points rapid launch of 90 days or less turning customer data into powerful Lindsay.
Right and faster return on investment was fantastic to see team <unk> win our first CSC exponent deal outside of North America Standard line. The Uk's largest long term savings and retirement business standard LIBOR use our customer journey orchestration tool to offer a dynamic.
Contextual and more personalized customer experience across all channels also we signed a <unk> deal with one of the world's leading government contractors. This customer will use our exponent smart notifications so that they can simply.
Communications with Medicaid enrollees for one of the largest states in the U S.
In the payments market our growth is a testament to our industry, leading SaaS integrated payments platform.
<unk> provides award winning payment platforms to approximately 98000 active merchants and Isd partners, who need ACTH credit payment gateway and payment processing capabilities, serving a wide range of recurring revenue industry verticals as a leader in <unk>.
Processing, we continue to add scale by signing Isd partners and fast growing industry verticals like property management.
Looking ahead, we built an exciting sales pipeline in our payments business that we believe will continue strong double digit organic revenue growth in 2023 and beyond.
Before I turn it over to high let me provide some high level color on our 2023 guidance and a few closing thoughts.
Fiscal year 2023, we expect organic revenue growth at or above the midpoint of our long term, 2% to 6% range as evidenced by our anticipated revenue range of $1, one three to $1 $1 7 billion.
This range translates into an expected year over year revenue growth range of three 7% to seven 4% with the midpoint equating to a five 5% year over year growth rate. This revenue growth was 100% organic with any acquisitions, we do in 2023 big added.
This strong revenue growth put simply <unk> is built meaningful revenue growth acceleration heading into the new year. We expect good non-GAAP adjusted operating margin performance in 2023 with a range of 16, 5% to 17% I will provide more details on all of our 2012.
Q3 guidance.
To wrap up on slide nine I hope you can see why teams ESG is excited by our outlook. We continue to turn today's challenges into Tomorrow's breakthrough business results CSC is building meaningful momentum and elevating every aspect of our business that we fully expect will fuel our continued long term growth.
And transformation, we hope you see the same things we do when we analyze our business, we are attracting retaining and developing the best and most diverse talent in the industry. We are helping transform the industries, we serve whether that be global Csp's financial services healthcare retail our government customers.
Our very strong sales win rate proves that the market wants more of what <unk> has to offer and.
And what any part of our business Underperforms, our lofty expectations. When you see <unk> operating intensity kick into high gear, just like we did mid year as we turned our disappointing first half $15, 7% adjusted operating margin into a solid full year result of 16, 6% in 2020.
Two and we built even faster revenue growth momentum heading into an exciting challenging and growth oriented 2023 with that I will turn it over to high to provide more detail on Q4 full year 2020 to business results and 2023 guidance targets.
Thanks, Brian Let's walk through our 2022 financial results and then I'll wrap it up with some key conclusions.
Starting on slide 11, we generated $1.09 billion of revenue, which represents four 1% year over year growth.
For the year the increase in revenue was mainly attributed to the continued growth of our revenue management solution as the majority of the increase was attributed to organic growth.
This growth was in the face of 3% to 5% discount headwinds for two of our three largest customers.
Our 2022, non-GAAP operating income was $169 million or non-GAAP adjusted operating margin of 16, 6%.
As compared to $162 million or 16, 5% in the prior year.
The increase in non-GAAP operating income and non-GAAP adjusted operating income margin percentage can be mainly attributed to higher revenue along with the timely operating margin improvement initiatives. We took in Q2 and the beginning of Q3.
Specifically, we have seen margin benefits from our decision to dissolve our controlling interest in our Latin American business, but.
The continued streamlining of our office space footprint.
The rationalization of our head count and hiring practices and the strengthening of the U S dollar to most global currencies.
Moving on our non-GAAP adjusted EBITDA was $226 million for 2022, or 22, 3% of revenue excluding transaction fees.
Compared to $221 million or 22, 6% in the prior year.
Lastly, our 2022 non-GAAP EPS was $3 61.
A seven 8% year over year increase as compared to $3 35 in the prior year. The increase in non-GAAP EPS is mainly due to the higher operating income in 2022 favorable foreign currency movement and share repurchase activity over the last 12 months offset by higher tax.
Right and increasing interest expense due to increasing interest rates as our debt is primarily floating rate in nature at this point in time.
Turning to slide 12, I'll go through the balance sheet, our cash flow generation and shareholder returns.
Our 2020 cash flow from operations was $64 million as compared to cash flow from operations of $140 million in the prior year.
Further we had non-GAAP free cash flow of $27 million in 2022, as compared to $114 million of free cash flow generated in 2021.
The main drivers of the year over year decrease in free cash flow are primarily timing related and include.
Unfavorable changes in working capital, resulting primarily from the accrual of 2020 to annual employee bonuses, which are significantly lower than the previous year.
Higher tax obligations of which the primary negative impact was from section 174 of the 2017 tax cuts and jobs.
Which deals with the amortization of R&D spending beginning in 2022.
As a result of this we will not get the previously anticipated amount of the tax deduction benefit related to our R&D investment in 2022.
We had previously expected this legislation to be repealed, but because the legislation would not reveal we now anticipate higher cash taxes going forward.
Over a five year period, we believe this tax change will be neutral to our free cash flow generation.
Further we experience higher taxation related to our profit mix and some of our global locations, which caused our tax rate to marginally increase.
Slightly elongated cash conversion cycle from a couple of our recently signed large global telecom new logo wins that will result in good long term profitable revenue as we continue to gain market share from competitors.
The negative cash impact of our operating margin improvement plan that we initiated in Q2 that included increased restructuring charges.
Streamlining of our office space footprint head.
Head count reduction and enhanced scrutiny regarding new hires.
Cash flow generated from operations before changes in working capital in 2022 was $160 million compared to $179 million in 2021 importantly.
Importantly, absent the aforementioned impact from section 174, we would have shown slight growth in cash flow from operations before changes in working capital during 2022 on a year over year basis.
And as we communicated on our last earnings call. Our Q4 free cash flow of $49 million in 2022 was slightly better than our 2021 result of $48 million.
Moving on we ended the fourth quarter with $150 million of cash and short term investments.
That along with our outstanding debt at December 31, 2022 resulted in $265 million of net debt and.
And our net debt leverage ratio stood at one one times.
Moving to the bottom right of the slide we declared $34 million in dividends during 2022 and.
In addition, we repurchased $88 million of common stock under our stock repurchase program.
In total we returned $122 million to our shareholders in 2022.
Turning to page, let me lay out our 2023 guidance starting with the topline.
We expect our revenue range to range from 113 billion.
One $1 7 billion.
Transaction fee to range from $78 million to $82 million.
We are currently forecasting a first and second half 2020 through revenue could be split relatively equally.
Further we anticipate Q1 revenue to be the strongest of the year due to the timing of a few opportunity, which moved out of Q4 and that we anticipate to close in Q1.
Similar to 2022, we also expect our non-GAAP adjusted operating margin percentage to range between 16, 5% to 17% well within our long term target range of 16% to 18%.
Consistent with the revenue trend above we also expect Q1 to be our strongest quarter in terms of our non-GAAP adjusted operating margin.
Further we anticipate Q2 being the low point of the year on this metric as our annual merit increases begin to have an impact.
On the next metrics, we anticipate our non-GAAP EPS to range between $3 35.
$3 65.
Based on our non-GAAP tax rate of approximately 28, 5% and a share count of 31 million shares for the year.
The midpoint of our non-GAAP EPS range is below our 2022 performance of $3 61.
Primarily due to the projected higher effective tax rate and increase in the borrowing cost of our debt in 2023 first one is what we incurred in 2022 as a result of the full year impact of higher interest rates.
As a reminder, we currently have a predominantly floating rate capital structure, but continue to explore potential ways to maximize our balance sheet efficiency.
Moving on non-GAAP adjusted EBITDA is expected to range between $231 million to $242 million.
And finally, we expect the range of free cash flow to be between $80 million to $120 million with capital expenditures expected to come in between 22 million to $28 million.
Going forward the current challenging inflationary environment means we must relentlessly prioritize every investment we make and be disciplined in the allocation of resources.
Innovation, and then adherence to a risk reward framework with continuous learning are two cornerstones of how we run our business.
We remain devoted to a disciplined approach to managing our capital.
In closing our business is well positioned with a strong sales pipeline.
Robust sales bookings momentum.
High quality customer base and visibility into 90 plus percent of our expected 2023 revenue.
We remain committed to accelerating and diversifying our revenue growth, which may include closing and integrating disciplined value adding acquisitions.
Additionally, we are pleased with the results of our operating margin improvement initiatives in 2022 and will continue to be very careful stewards of our capital, especially in this uncertain environment.
We believe this approach combined with our consistent capital distribution will serve our shareholders well.
That I will turn it over to the operator to facilitate the question and answer session.
At this time I would like to remind everyone in order to ask a question. Please press star and then the number one on your telephone keypad.
Our first question comes from Greg Burns with Sidoti.
Good afternoon.
Hi, Greg just to start off.
Good tax rate for next year.
I think what we guided to roughly 28, 5%.
Okay perfect.
Okay, and then when we look at the the guide.
Obviously solid revenue growth acceleration, but what's holding back.
Yes, the operating Leverages. It just kind of external still inflationary environment or are you spending in certain areas for growth.
Why won't.
Why are we going to see the operating margin expand a little bit next year.
I think you hit the nail on that there are still inflationary pressures that will feel.
Going into going into 2023.
We're being fairly conservative middle of the road actually in terms of our expectations of how those costs are relative to the outperformance for 2023, I think Youll, Hey, Greg Hope Youre doing well the only thing I would add to that is we saw a weaker first half of the year last year. This team is laser focused on having a strong Q1 and Q2.
To top line growth and on the profitability side. So we still see some of those pressures around wage supply chain, others, but we want to we want to have a strong start to the year and then see how we progress from there.
Okay.
And then the.
The <unk> win.
You announced in the UK.
Now.
I don't know if you.
It gives us information, but how much revenue are you generating from exponent or your broader customer engagement solutions in North America.
And what's the what's the pipeline.
Rest of the world be as big as your North American revenue stream and what's the pipeline of those global opportunities look like for those services.
It's a great question, Greg so thanks for that.
What excites us about this product line. So much is just the applicability to all these industry verticals in terms of the value we can bring being personalized around journey experiences at an individual customer whether that's a consumer enterprise level and the other side is the range of revenue that we could actually.
We announced last quarter in the previous quarter, a big win with one of the large U S pharmacy retailers that could be tens of millions.
Revenue.
Comes from that but we also see we can go into an individual use case and we can deploy for hundreds of thousands or low single digit millions add a lot of value cross sell into other lines of business. They have another vertical so it really does run the gamut in terms of size because we have this modern modular SaaS solution and it can really.
Land and expand wells, we proved so if a customer has a bigger need across the entire enterprise it can be a much larger.
Annual revenue number we could also get in with a lower price point that speeds sales and thats kind of what we're seeing in the market specifically on your question around geography, we wanted to prove this out to be effective and efficient with our resources in North America. We think we have tons of headroom in the North America market.
But this has applicability in every country in almost every industry vertical all around the world, we have a huge expectation and global globally, we could see that be as big or bigger than our north American business. Obviously, we think it will have to scale up both in terms of direct sales and channel partner sales, but has huge.
<unk> opportunity to drive revenue growth.
Alright, Great and then lastly, the $1 $5 billion target by 25.
So that's going to require some acquisitions to get there so.
What are you looking for or is it technology or some maybe some broader scale acquisitions and what's the market for acquisitions looking like right now.
Yes, it's really that combination that we've been talking about we're pushing hard to perform at the upper level of organic growth. That's what drives this earn the right to grow with operating leverage and operating margin expansion to your first question and then just layering on goods smart acquisitions. So what we really look for from an acquisition and we.
Thank the market is turning in our favor with a strong balance sheet. We don't have to do a deal which means we can stay highly disciplined and be quite selective in terms of strategic bet paying the right price with the financial accretive Ness of deals we do but it's pretty much the same as our strategic focus winning big into the number one technology provider of choice.
And telecom globally. So we're going to look at scale and rounding out our portfolio to bring more value to our north American broadband cable or a global telecom customers.
Look for opportunities in that digital CX, where again like we did when we acquired <unk> and then we did announced our <unk> launch a couple of quarters. After that it can really turbocharge the value we bring great brands all around the world you could see us do something in the payment space, but it really is strategic fit financial fit.
Read the right risk return profile, and we like where pricing is coming on some of these potential deals as you know we didn't do a deal last year, because we wanted to stay disciplined we did three or four the year before and we think it could be a good opportunity, but it's all around that discipline and paying the right price.
Alright, perfect. Thank you.
Thanks, Greg.
If you would like to ask a question. Please press Star then the number one hour.
Our next question comes from.
Maggie Nolan.
With William Blair one moment.
Hi, Thank you congrats.
Congrats on the growth.
Another question on some of those goals around global expansion are you expecting the global growth to be heavier for you in cable and telecom are.
Equal weight and other verticals how are you thinking about that.
Hi, Maggie glad glad to hear you back and I hope Youre doing well I would say near term in terms of where we are just the wins, we continue to announcing global telecom I would say, that's first and foremost that I would add I mean.
The three really really strong deals we announced in global Telecom this quarter in different regions of the world. One in Africa, one in APAC one in the UK and then we also had a good deal that moved into the early part of Q1.
So we think that's just going to continue to drive nice growth in the telecom space. The digital CX, though like we talked about Amit answered Greg's question. We think it's got a lot of opportunities and it was great to see the standard life when in the UK market and get the ball rolling around that we think it will take a little bit of time to both.
Build the channel partnerships and the reason we're focused heavily on channel is to be efficient and leverage their rolodex. They are proven brand recognition with other partners in those different geographies in those verticals and we think we can get a lot of pull through as we also build out direct sales and marketing as a secondary approach. So we like what will come from.
But we think that will probably take time to build out with their focus I would say initially in the EMEA market to start.
Got it. Thank you and then you know we've been talking about this charter migration for some time now with that fully ramped can can you maybe kind of give us a recap the detail on the impact of that in 2022, and then how youre thinking about the impact on the year over year comparisons.
Yeah I'll hit the first part and then I'll, let hi, just provided a few of the financials. So I mean just.
Fantastic effort by the team to work with our colleagues at charter to convert $14 billion subscribers and do that in a way.
And a good timeframe that also just brought a lot of value that fit the business need of our biggest add strong customer of charter so grateful to our colleagues on the charter side that work with us on that that came on the heels of after converting.
11 million subscribers off of Amdocs at Comcast. So now from a triple play standpoint, we have all the business and our platforms run all the subscribers at both Comcast and charter tie you will provide some of the financial.
Perspectives on that yes, I mean, I think one of the tailwind we benefited some and it contributes to our guidance range towards the higher end of our hour.
Long term guidance is that we have full year impact of those migrations, but.
In addition that the other real benefit we have is over 90% visibility into the business. As a result, so that gives us good confidence and good visibility in terms of our ability to generate that.
Strong organic growth that we highlighted.
That's helpful. That's all for me. Thank you.
Thanks Maggie.
Our next question comes from Timothy Horan with Oppenheimer.
Thanks, guys.
<unk> looks like it's gone through a fairly aggressive network and technology upgrades and around the world and here in the United States kind of converging wireless with wireline a lot more do you think this is an opportunity as they do these upgrades and do you think it's.
You can kind of gain some market share during this process or maybe just how do you fit into the whole thing.
No. Thanks for the question, Tim Hope Youre doing great.
Obviously, it changes some quarter to quarter, we tend to look at it having serve these big players for going on three decades over a slightly longer period of time, we'd love to see the broadband adds 105000 getting added back of charter this quarter, we love to see the investment we're hearing in the infrastructure to expand the homes past, 2% to 3%.
A year at both charter and Comcast I've been Comcast if you normalize out the hurricane that added about 4000, but yes, there is going to be technology evolution and disruption around this and so that's why we're just focused on how can we bring more value stay mission critical to what theyre doing be easier to do business with and then try to give them reasons why.
They might look at at expanding some of the parts of the portfolio. We don't have with some of those other providers. The other thing that we want to continue to focus on it's not lost on us when we see a competitor announced 50% of their revenue comes from two customers in the U S and those are big customers and some of them are having some success on fixed wireless and that's going to.
Continue to have some.
Wins in the market in terms of the net broadband adds in North America, we'd love to own the right over time to actually take some of our telecom wins outside of North America and see if we could do more in the local obviously that may be a longer term play, but that is where our R&D investment in technology is going to try to really be.
Grain more around that convergence. So we could serve both sides of that equation and.
I think it is going to continue to evolve because as you know and report on quite a bit.
<unk> approach is being taken by different large service providers.
Round, how they buy when in different segments of the market.
That's for sure.
Open AI and <unk> been in the news quite a bit here lately.
AI in general can you talk a little bit about how you can kind of leverage AI with your product suite going forward and do you think you can integrate <unk> into your products.
Yes, we do a lot with natural language processing and AI and have for the last two or three years I would say the couple of areas that it's the biggest right now and we work with several large and mid size innovative partners to do that.
Around some of our solutions around digital <unk>, where we can actually help take the mountains of data they have and drive personalized journeys and experiences for those individual customers, we see AI and natural language processing, giving our solutions a huge leg up or we can then help. These large brands can you just give more targeted.
Improved experience in a more cost effective way and on the telecom side, we see it around both <unk>, but also in some of the network fraud detection things, where we use our technology combined with others to detect what might be fraudulent activity on an interconnector roaming aspect and I think we're just kind of getting.
Started chat GPT, we've looked at I mean, it is kind of it's.
It's almost.
It's hard to fathom, what theyre doing and some of the use cases that are coming out we started to experiment. We don't have any live active integrations today, but I think that's likely to change and evolve quite a bit in the coming quarters.
Just on what's coming out and it was some of that.
It's going to be fascinating and fun to watch.
Hello.
Typically there is going to be a lot of winners and losers.
You have to execute but do you think this is.
A positive opportunity for you.
I think it I think AI in general I, probably won't get to pick the winner today and.
And it's likely that that could change over time in terms of how did just like cloud evolved a lot over the last five or six seven years, but AI is a cornerstone of driving efficiency and automation in terms of how brands do work and make it easier for them to predict and give channels of choice for their customers consumer or.
So I think it's you just it's hard to imagine that Chad GPT isn't going to both challenge and threatening and potentially create some displacement opportunities with some of the existing AI and natural language processors that are out there again, we haven't we haven't moved in their direction, yet doesn't mean that we won't so we're still still analyze.
<unk> been doing with AI as a core is essential to award winning digital cost effective digital customer experience in our mind.
And then lastly on what interest rate are you assuming.
Next year, our interest expense with your EPS guidance.
It's about mid 6% revenue think about.
Our floating rate debt is generally based on LIBOR LIBOR has gone up north of four 5% in 12 months.
So right now we're projecting mid 6%.
Thank you.
Okay.
Thanks, Tim.
Our last question comes from Matthew Harrigan with benchmark.
Thank you I have two questions and one follow up you didn't touch that much on the payment.
Other than the illusion.
M&A discussion, but particularly on the <unk> side, how does that affect you in the current economic environment and then on the.
On <unk> and <unk>.
All of that how are you.
How much resistance are you getting from your corporate clients on the marketing side of the economy or do you feel like you really have a pretty coherent.
Selling strategy, saying look this is just very high ROI and what sorts of Rois are you looking I'm sure you've got a pretty broad.
Broad range there.
Yes.
Matt Hope you're doing well I'll take.
The first one on the payment side, we took a meaningful ahead as we talked about going back a couple of years ago. When we saw the early to mid stages of Covid, we lost about 8% to 12% of our transaction volume with just some of the recurring charges on the ACA and even the credit kind of get turned.
Down, including some of the property taxes were state government stopped charging for credit card fees and others and we kind of grew through that as we kind of stayed flat. We saw good double digit growth to return in 2022, and we expect strong double digit growth in that business, we like the demand signals, we're seeing across the board.
In our payments business, both on the ACA and on the credit side and so we think that there is we've kind of weathered. The storm. If you will in 2020 in 2021 and now it's back to grow back to margin expansion and just add scale in that business, we're pretty excited around what's what's going to come in the front windshield with that.
Part of the business.
On the second side on the second part of your question was more around.
Let me make sure I'm sort of.
Roy you pick your customers can see on exponent ignite.
The economy, hindering that are actually pushing them to be a little bit more efficient.
At this stage.
Want to make sure I guess it could change but at this stage, we see it being a board level decision with a hard ROI. So what we're seeing in the market and the reason there is so much traction right. Now is there is an immediate payback usually can get deployed in 60 to 90 days there can be a payback within less than 12 months in terms of where it is.
And the payback really comes in three forms one often moving from a physical channel to a digital channel is actually going to reduce costs and if you can take steps out by orchestrating the journeys better in a more efficient way. So it's a cost reduction that can pay for itself to upsell and cross sell and what we're seeing in <unk>.
These areas like we talked about on promotion roll off with a large cable or a telecom customer. If we can help them reduce the customers that churn during a promotion ending period or around some of the appointment of notifications, where theres over 100 billion loss in the healthcare industry alone by missed appointments.
Again Thats. Another example of driving revenue and paying for itself and then third just the retention and loyalty benefit that comes from an improved ease of doing business in a digital world.
That's actually what we're seeing is just fantastic momentum in the market and we just got to take advantage of it and respond sell more sell faster cross sell and up sell the existing new logo wins, we get and we love what we're seeing but we also don't take it for granted we know that can change so, let's let's push hard and make sure that we keep rolling into new <unk>.
<unk>.
And if you tip towards the upper end or the bottom end of the revenue guidance range, which isn't really all that all that why do you think it's more likely to be a function of having more.
Selling opportunities.
And innovation or do you think it's more likely to be affected by wherever the macro goes both in the U S and euro.
Sure.
I'll give a high level, then I'll add to agile.
It might have on it.
I mean, I think we are seeing and this is we're seeing a hot market and a big demand, which is driving that level of growth last year, and even bigger organic growth in 2023. So we love the demand signals in terms of where the market is both in global telecom in our North American business and in digital CX and payments.
But we have seen I mean every company is trying to shave some discretionary spending so we actually felt that throughout the core of the last six or seven quarters. So it's not like that cost pressure is not there. We grew through it which is a rural gives us a lot of optimism in terms of that the upside will brands continue to try to squeeze cost the answer.
Is yes, they have been they will continue to do that so to be at the upper end, where we've got to do is continue to have that strong win rate. The strong successful conversions and deployments of our solutions and continue to just win in that double digit sales growth that will help us grow at the upper end EBIT as we offset some of the discretionary spending.
That is definitely have having I think to be at the lower end you would need to see a lot of things happen, but again, it's still a tough market. So that's why we give that range that we do and we really want to see that strong start in Q1 and Q2, but are there other comments and color from you yes.
I would echo what Brian said.
I might add is that.
Consistent with the question about ROI I think what we need to do is do a really good job of highlighting the up tunica.
In terms of driving urgency for our customers around.
A delay in them, making decision right because some of our solutions, particularly as you highlight in the CX side, they are really driving some meaningful value.
Financial value to the customers and so to.
To the extent that we can bring that to life for them and drive urgency will be able to affect the timing and an active plays into even the current economic environment.
Thanks, Brian Thanks, sorry.
Thanks, so much Matt.
There are no further questions at this time I will now turn the call over it back over to CEO , Brian Shepherd.
Well thanks, everyone for joining we're proud of the 2022 the team <unk> put on the board we have an even bigger 2023 that we need to deliver we're going to be laser focused on doing that look forward to talking to you next quarter.
Okay.
That concludes today's presentation. Thank you for attending you may now disconnect.
Yes.